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2015 (7) TMI 80 - ITAT LUCKNOW

2015 (7) TMI 80 - ITAT LUCKNOW - TMI - Addition to the income of the appellant in respect of 4 gold diamonds - Held that:- In the light of the rival submissions and the order of the Tribunal in the case of Income Tax Officer vs. Shri. Gopal Verma, Kanpur we find that the explanations furnished by the assessee in the instant case were examined by the Tribunal in the case of Shri. Gopal Verma, the Director of the assessee-company. Being convinced with the explanations of Shri. Gopal Verma, the Tri .....

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pal Verma had nothing go do with these diamonds in his individual capacity. He was holding these diamonds in the capacity of the Director of Company. It was the onus of M/s Mansingh & Sons Jwellers (P) Ltd. to explain the source of acquisition of diamonds. The nature of possession in his hand was holding the company property in trust, thus legally no addition can be made in the hands of Shri. Gopal Verma. In the present case even on the basis of facts no addition was justified to be made in the .....

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ri Sunil Kumar Yadav and Shri. A. K. Garodia, JJ. For the Petitioner : Shri. Punit Kumar, D.R. For the Respondent : Shri. Rakesh Garg, Advocate ORDER PER SUNIL KUMAR YADAV: This appeal is preferred by the Revenue against the order of the ld. CIT(A) on a solitary ground which is as under:- the ld. CIT(A) has erred in law and on facts by not appreciating the facts as categorically elaborated in the assessment order under section 143(3)/148 of the Income-tax Act, 1961 dated 31.3.2004 and consequent .....

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a, one of the Directors of the Company was in possession of four diamond rings which were sent to the prospective buyers, Shri. Manjeet Singh of M/s. Gyanvashnav Hotel, Swaroop Nagar, Kanpur through one Shri Bhupender Garg of Kanpur. It was further mentioned in the report that said diamond rings were retained unlawfully by said Shri Manjeet Singh and on account of this Shri Gopal Verma lodged an F.I.R. with S.P. (South), Kanpur and eventually the said diamonds were recovered on 07.07.2000 and we .....

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from M/s. Ronak Gems Pvt. Ltd. Surat for consideration of ₹ 16,27,200/- which were subsequently shown to have been sold to the assessee company. In the JDIT(lnv.) report, it has also been mentioned that a survey u/s. 133A of the Act was carried out in the case of said M/s. Om Enterprises, Kolkatta and statement of its partner Shri Om Prakash Dubey was recorded. During the course of survey, it was noticed that the entry in respect of the Diamonds was made in the books of accounts on 07.06. .....

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ngs in May, 2000 well before the said entries were made and vouchers prepared by the assessee company. In the report it was mentioned that there were clear contradiction between the facts as gathered during the course of survey u/s. 133A in the premises of M/s. Om Enterprises , Kolkatta to the effect that after purchasing the diamond from M/s. Ronak Gems Pvt. Ltd. and recording them in books of accounts on 07.06.2000 the same were sent to Kanpur on same date i.e. on 07.06.2000 and the fact revea .....

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books of accounts of Om Enterprises, Kokatta and also the action of showing them transfer to Kanpur on the same day i.e. on 07.06.2000 was only an afterthought and meant to regularize the acquisition of the diamond by the assessee-company which have become necessary due to the fraudulently and unlawfully retention of these very diamonds by Shri Manjeet Singh of Gyanvashnav Hotel, Kanpur while actually assessee was in possession of these diamonds much before the date on which the entries of the s .....

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as not accepted by the Assessing Officer and he accordingly made an addition of ₹ 21,30,372/- on substantive basis in the hands of Shri. Gopal Verma and on protective basis in the hands of the assessee under section 69A of the Act. 5. During the course of hearing, the ld. counsel for the assessee has invited our attention to the order of the Tribunal in the case of Income Tax Officer vs. Shri. Gopal Verma, Kanpur in I.T.A. No. 884/LUC/2006, in which the correctness of the explanations furn .....

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hat the Assessing Officer and the investigation team have demolished the explanations or stand taken by the assessee. The story projected by the assessee is false in the light of the statement of Sunil Karigar. According to Sunil Karigar, the diamonds were shown to him for preparation of ring in the month of May, 2000 even before receipt of actual diamonds as shown by the assessee. Therefore, the assessee was in possession of the diamonds and the Revenue has rightly made addition of the same and .....

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of the assessee-company. Being convinced with the explanations of Shri. Gopal Verma, the Tribunal has deleted the addition made in his hands on substantive basis and there is no evidence on record suggesting that the order of the Tribunal was ever reversed. Therefore, no addition is called for in the hands of the assessee on the basis of same facts. For the sake of reference, we extract the findings of the Tribunal in the case of Income Tax Officer vs. Shri. Gopal Verma, Kanpur (supra) as under: .....

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tatement recorded on 11.07.2000, Shri Gopal Verma promised to produce documentary evidence regarding acquisition of diamonds in question on the next date. It goes to show that he was not in possession of any documentary evidence till 12.06.2000. It is only when the assessee find it difficult to get the diamonds rings back from Shri Manji Singh, reported the matter to Police and started hunting for the evidence. (c)In this connection assertion made by Smt. Surinder Kaur mother of Shri Manjeet Sin .....

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g receipt of diamonds in question from M/s. Om Enterprises Calcutta, is an afterthought and has been arranged to give a colourful device because the same must have been given to the assessee by Shri Hari Shankar Dubey on 07.06.2000 itself and also given to Smt. Surinder Kaur as desired by her. (f) The purchase of diamonds by M/s. Om Enterprises from M/s. Raunak Gems (P) Ltd., Surat was recorded on 07.-6.2000 and the same has reached Kanpur on the same. (g) Form No.31 has been got issued, (h) The .....

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ct, 1961 and cannot be challenged. 6.2 We find from the assessment order of M/s. Om Enterprise a copy of which is placed in paper book page 93 and 94, that this issue has also been discussed and it has been held therein by the AO after enquiry that the 4 diamonds were not sold but were sent for approval to Shri. Man Singh of Kanpur. We find that the AO in the Assessment order has held as under: "The case was received on transfer from ITO, Wd. 38(3), Kolkata and it -was selected for scrutiny .....

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as explained the return. On going through the papers submitted by the AR it is ascertained that the alleged four diamond rings were duly purchased from Ronak Gems Pvt. Ltd. at the cost of ₹ 16,27,200/-. Bills, vouchers, Stock List and mode of payments were duly submitted and produced in support of purchased. It reveals on papers that the said diamond rinss were sent for approval to Sri Man Singh at Kanpur where it was stolen in Dacoity. There is no such evidence in support of sales. The IT .....

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Add : 10% Telephone expenses For personal use 1,505.00 1/3 Motor Car expenses For personal use 8,204.00 General exp. Not duly Vouched 1,073,00 10,782.00 Total income Rs.72,353.00 Rounded off Rs.72,350.00 Assessed u/s 143 (3) as above. Issue D.N. Challan and copy of the order to the assesses firm." 6.3. We find that the Id.CIT(A) in his order from para 2.1 to 2.7 has made elaborate discussion and chronologically narrated the facts. The observations of the Id. CIT(A) is reproduced as under f .....

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e case of the appellant because it was the statement before the CMM and not before the Income tax authorities. It is also clear from facts mentioned in the assessment order that there does not appear to be given any opportunity of cross examination of Smt. Kaur to the appellant. This matter was widely reported in newspapers and a criminal case was filed against Shri Manjeet Singh by the police. The assertion of Smt. Kaur has to be considered in the context in which such assertion was made. The a .....

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urinder Kaur's assertion is accepted then this only indicate that Shri Bhopinder Garg was not having in his possession necessary evidence. It does not prove that the appellant did not have any evidence in his possession with regard to accounted acquisition of these rings. In fact the required evidence had been produced by the appellant before various authorities as well as before the Court of Third Additional Session Judge, Kanpur, in Criminal Revision, No.464 of 2000 is quite relevant. In t .....

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o a proved fact that the value of recovered articles in total was about ₹ 12,48,000/- Shri Gopal Verma had stated in his application that these diamond rings which were recovered, were given by Bhupendra Garg on 12.6.2000 for approval and Bhupendra Garg had informed him that his brother was admitted in the hospital in injured condition and Bhpendra Garg also informed that all the four diamond rings were with Sardar Manjeet Singh and in this raspect he moved an application before S.P. South .....

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and precious stones etc. Annexure-F was approval voucher issued by Om Prakash Enterprises in favour of Man Singh & Sons Jewellers (P) Ltd. Anenxure-(G) was approval voucher of Man Singh & Sons issued in the name of Om Enterprises and there were other papers which were Annexures H.I.J. all these papers -were, pertaining to the diamond rings, which were recovered. All the particulars were given in that papers. So in view of all the above circumstances these rings be given in favour of Gop .....

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ficer so it cannot be said that there was no knowledge about the above papers to it. The inquiry has to be completed within a period of 90 days. They have submitted the report but what is result of the inquiry is not on record. Moreover in this case it is also a fact that income tax department has already submitted report before the Magistrate which has been dismissed by a common order and the Income Tax Department has not moved any revision application against, that order, so it is a proved fac .....

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cles may be given in supurdigi of the applicant". It may be appreciated that the relevant evidence had been produced even before Third Session Judge -who was pleased to order for release of these articles in supurdigi of the applicant. 2.2 Photocopy of the power of attorney given by M/s Om Enterprises has also been filed before me. The contents of this power of attorney are reproduced below: "I Om Prakash Dubey, age about 37 years son of Sri Hari Shanker Dubey partner of Ms Om Enterpri .....

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assessee of Income tax department, having PAN 13(5)/0-547 assessed under the jurisdiction of Calcutta. 4. We have given 4 pcs. Of diamond as per following details to M/s. Man Singh & Sons Jewellers Pvt. Ltd. 59/39, Birhana Road, Kanpur vide approval challan no.349 dt. 7.6.2000. Item No. - item Weight 1. Cut & Polish Diamond 2.00 ct. 2. Cut & Polish Diamond 3.70 ct, 3. Cut & Polish Diamond 2.82 ct. 4. Cut & Polish Diamond 4.16 ct. 5. These diamonds are our property. The approv .....

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the books of accounts is open for verification. The contents for para no. 1 to 6 are true and correct to the best of my knowledge, belief and records. Nothing materials have been concealed. So help me God. " From this affidavit it is clear that M/s. Om Enterprises had accepted the ownership of said diamonds. These diamonds were property of M/s, Om Enterprises. A survey was also conducted u/s 133A of the IT Act, 1961 at the office of M/s. Om Enterprises 4, Banstalla Lane, 2nd floor, Calcutta .....

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scrutiny of books of account it appears that M/s. Om Enterprises has been doing business with M/s. Mansingh & Sons Jewellers (P) Ltd. of Kanpur, Computerised copy of sundry debtors list has been obtained which is enclosed for further verification. The assessee has stated that the diamonds in question was bought by them from M/s. Ronak Gems Pvt. Ltd. 301, River View Apartment, 3rd floor, near Ambika Niketan, Athwa Lines, Surat. The copy of the bill dated 5.6.2000 is also enclosed which may b .....

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of Guwahati and some other concerns also, the names of whom he could not remember exactly. He had also stated that he knew Shri Gopal Verma and his brother Raju of this company for the last 3-4 years. He was asked whether any transactions with M/s. Mansingh & Sons Jewellers (P) Ltd. was made in the current financial year. He replied that Jhey had done some transactions through the firm M/s. OM Enterprses during the current financial year. The ledger copy of sundry debtors was produced for re .....

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and when he replied that they had given the items by way of approval challand no.349 dt. 7.6.2000. It was delivered to Shri Gopal by his father Shri Hari Shankar Dubey on 7.6.2000 at their office 59/69, Birhana Road, Kanpur. He also informed tht in this trade the business was done with trust and faith and with known persons only. He had also stated that diamonds were loose diamonds and not settled in jewellery. He was asked to give details regarding purchases of these items. It was replied that .....

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e goods on 5.6.2000. He replied that he came back to Calcutta with the goods from Bombay on 6h evening with the goods and the goods were entered in their stock register on 7.6.2000. Again on the same day he took them to Lucknow and handed it to his father who in turn handed over it to Shri Gopal of M/s. Mansingh & Sons Jewellers at Kanpur. He had also stated that the diamonds were given to M/s. Mansingh & Sons Jewellers and it was for them to sell either the loose diamonds or after setti .....

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party to whom the diamonds were given for approval. He also clarified that the transaction with M/s. Mansingh & Sons Jewellers (P) Ltd. were entirely by cheque or bank draft only. The Statement of Shri Prem Prakash Dubey was recorded u/s 132A on 20.7.2000 at M/s. Om Enterprises, 4, Banstalla Lane, 2nd floor, Calcutta. He was asked that from the approval challan book as found inventorised as OE/11 it appeared that many of the pages were missing according to SI. No.326 and 331 the pages 327 t .....

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ing and also this was normal practice of this trade. He was required to give the turnover of the firm and the names and addresses of the main customers. He replied that the turnover of the firm was approx. ₹ 45 lakh and the main customers were as under: P. C. Chandra & Sons Pvt. Ltd. Raskla & Brothers Paras Jewellers Modern Guinea House Pvt. Ltd. Mansingh & Sons Jewellers (P) Ltd., Kanpur. B.N.Majitmdar (Karimganj, Assam). He was asked whether any record were kept for sending a .....

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llers Pvt. Ltd. they had received ₹ 3 lakh as advance against this challan. He also clarified that this particular deal was done by his brother Shri O. P. Dubey. 2.3. Inquiry was also made by the ACIT, Range-6, Kanpur. Shri D.P.Agnihotr, ITI was deputed to make on the spot inquiry. The ITI submitted his report to the ACIT06, Kanpur vide letter dated 3.2.2004. In his report he has stated that he had visited the premises no.4, Banstolla Lane, Calcutta on 30.1.2004 at 12.30 PM where Shri Shib .....

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rated these facts. A telephonic discussion was also held between the ACIT, Circle-6 and Shri S.P. Dubey. The ITI has further reported that after seeking directions from ACIT, Circle-6 he took the statement of Shri Shib Narain Pal. In this statement Shri Shib Narain Pal had confirmed the transactions between M/s. Om Enterprises and M/s. Mansingh & Sons Jewellers (P) Ltd., Kampur. He stated that the diamonds were taken by Shri Om prakash Dubey from Calcutta to Benares and his father Shri Haris .....

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he assessment order passed in the case of M/s. Om Enterprises for the assessment year 2001-02. I have gone through this assessment order. It is mentioned in the assessment order (hat the reasons for selection of this case for scrutiny was based on inquiry report received from JD1T (Inv.), Unit-II, Kanpur. The AO in this assessment order has given findings as under : "On going through the papers submitted by the AR it is ascertained that the alleged 4 diamond rings were duly purchased from R .....

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that the alleged 4 diamond rings were sold after purchase. " 2.5. From the facts of the case as discussed above it is clear that the appellant had established its case regarding the diamonds having been received from M./s. Om Enterprises. So far as the statement of Shri Sunil Karigar is concerned the Id. Representative of the appellant has rightly pointed out that at no stage he had stated that he had seen the 4 diamonds under reference. It is also established that he himself had not fitte .....

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It is, therefore clear that he was not a witness of the items recovered by police. He had been made a witness for something for which he could not be a witness. It has been argued that legally the statement given by Shri Suneel Kumar was not admissible as evidence. Even otherwise he had never stated that he had seen the diamonds at any point of time, He was only asked to prepare gold rings. For showing the diamonds to the customers U was convenient, safe and presentable to show these diamonds fi .....

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Gopal Verma as person of M/s.Mansingh & Sons Jewellers (P) Lid. Shri Gopal Verma in his personal capacity had nothing to do with the diamonds. "2.7. Under the facts and circumstances of the case I am of the view that the addition to the income of the appellant in respect of 4 gold diamonds was not justified. There is no evidence that the appellant had made any investment in purchase of these diamonds. The diamonds were property of M/s. Om Enterprises and these findings have been given i .....

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