TMI Blog2019 (9) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... me were made by account payee cheques from disclosed sources. Hence the peak credit theory cannot be made applicable and the addition deserves to be deleted on this count. Addition has been made by the AO u/s 69C - The basic principle of section 69C of the Act is that the incurrence of an expenditure is not in dispute whereas the source for such expenditure is in dispute. In the instant case, since the addition is made u/s 69C of the Act, it could be safely concluded that the purchases has been accepted as genuine by the ld AO and only the source is disputed. We find that the source for such purchases have been explained from the regular books of accounts by making payment by account payee cheques. Hence there cannot be any addition u/s 69C of the Act. Hence the addition deserves to be deleted on that count also. Addition made in the hands of assessee for the Asst Year 2009-10 deserves to be deleted for more than one reason as could be evident from above and has been rightly deleted by the CIT-A. Deletion of addition made on account of alleged disputed purchases, correspondingly, the addition made towards commission at 0.1% also requires to be deleted which was rightly del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -------------------- 3.1. The assessee pleaded that the ld AO had not provided the reason on what basis the Director of Income Tax (Inv.) II Mumbai had come to the conclusion that the said parties Jewel Diam and AW Jewel had been engaged in providing accommodation purchase bills / unsecured loans. The assessee had no transaction of whatsoever nature with Shri Bhanwarlal Jain or his family members. Even the statements recorded from Shri Bhanwarlal Jain and his family members do not mention the name of the assessee by stating that they or their concerns had supplied bogus accommodation bills to the assessee. Their statements did not establish their links with M/s Jewel Diam and M/s A2 Jewel. It was submitted that neither Mr Bhawarlal Jain and Mr Rajesh B Jian nor Mr Manish Jain was partner or proprietor of M/s Jewel Diam and A2 Jewel. The assessee dealt in these concerns through Mr Ritesh Siroya , partner of A2 Jewels and Mr Ghansjyam Vashisth , Proprietor of Jewel Diam. The assessee submitted that the concerns M/s Jewel Diam and M/s A2 Jewel were not related to Bhanwarlal Jain and the same was a third party. The assessee was asked to explain the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounts of the assessee. The exports made by the assessee from the said purchases was through customs department who have verified and certified the quantity and price of the goods. The assessee also produced both the parties before the ld AO for examination who had duly confirmed the fact of supplying goods to the assessee. The assessee produced the corresponding sales invoice evidencing the sale made out of aforesaid purchases. The ld AO sought to examine the genuineness and existence of these purchase parties by issuing notices u/s 133(6) of the Act which were duly replied by those two parties directly before the ld AO. This was in addition to producing themselves before the ld AO for examination. Both the partiies produced the sales invoices, stock statements and their respective bank statements at the time of their physical presence before the ld AO. It was submitted by those two parties that the delivery of goods were acknowledged on the sale invoices itself. They also stated that they did not know Shri Bhanwarlal Jain or Shri Rajesh Jain and Shri Manish Jain and had no links with them. 3.5. Despite the above, the ld AO concluded that the purchases made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmarize : A search action was conducted on Sh. Bhawarlal Jain group of cases by DGIT(lnv.), Mumbai on 03/10/2013. During the course of search action, incriminating documents were seized and statements u/s 132(4) was recorded from Bhawarlal Jain and several other persons who assist Sh. Bhawarlal Jain, wherein it was admitted by them that they, through their various benami concerns, were providing accommodation entries. The documents, details were analyzed by Mumbai investigation wing and vide letter dated 13/03/2014 it was intimated that the assessee firm, M/s. Kedia Trading Co. had taken accommodation entries of ₹ 1,31,99,794/- from Bhanwarlal Jain group from F.Y 2006-07 in the form of purchases from their benami concerns, M/s. Jewel Diam (Mr. Ritesh Siroya) (PAN: AAMFA7751J) of ₹ 81,14,182/- and from M/s A2 Jewel, a proprietorship concern of Mr. Vashishta Ghanshyam A (PAN: ABUPV3494J) of ₹ 50,85,612/-. Since the assessee had not disclosed all the material facts fully and truly, necessary for assessment in respect of purchase made from above parties, permission was sought from the Commissioner of Income Tax -14. Mumbai to reopen the case. The sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the manner in which the whole transaction of bogus purchases has taken place. In any case, the onus is on the assessee to prove genuineness of purchases and parties from whom these purchases have shown to be made. The logical corollary the above fact leads to the conclusion that purchases are made from grey market by investing the assessee's own unaccounted cash for which the assessee has not offered any explanation regarding its nature and source. In view of the assessee's failure to furnish plausible explanation with cogent evidences, the provisions of section 69C are attracted on this amount. Accordingly, unexplained expenditure amounting to Rs. ₹ 1,31,99,794/- in respect of which assessee has sought accommodation entries is disallowed and brought to tax. 3.6. The ld AO also added the commission expenditure u/s 69C of the Act for obtaining bogus bills which was worked out at 0.1% on the total value of purchases of ₹ 1,31,99,794/- for the Asst Year 2007-08. Accordingly, he made an addition towards commission of ₹ 13,200/- in Asst Year 2007-08. 4. The ld AO by making similar observations made similar addition on pea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not figure in the said Annexure. Moreover, the seized document of Shri Bhanwarlal Jain on which heavy reliance has been placed by the ld AO relates to the period 1.1.2008 to 31.12.2008 and hence the same cannot be relied upon for making any addition for the Asst Year 2007-08. The ld CITA also noted that the ld AO took objection that the stock register is maintained carat wise and the details of the quality, cut and clarity of the diamond is not given and therefore it cannot be relied upon. However the assessee submitted that in this line of business, the stock register is maintained carat wise only. The ld CITA appreciated the reliance placed by the assessee on the decision of Mumbai Tribunal in the case of Sundaram Gems that maintaining carat wise stock register is a normal practice prevalent in diamond trade. This decision was later affirmed by the Hon ble Jurisdictional High Court in the same case in Income Tax Appeal No. 6785 of 2010. With these observations, he proceeded to delete the addition made in the sum of ₹ 1,31,99,794/- for the Asst Year 2007-08. The ld CITA correspondingly deleted the addition towards commission at 0.1% of disputed purchases for the Asst Year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for good purchases and subsequently sale through exports h) Quantitative tally chart i) ITR Acknowledgement and bank statement duly marked of purchase entries j) Affidavit of Kothari Co, Mouli Gems , Rose Gems Pvt Ltd and Meridian Gems k) Requesting letter to purchase party to appear before the ld AO for verification of transaction l) Statement of gross profit for last 9 years showing consistency in gross profit In addition to the above, the assessee produced all the purchase parties before the ld AO for examination wherein the ld AO had recorded statements from them. All the parties duly confirmed the fact of supply of goods to the assessee with relevant documentary evidences. The ld CITA appreciated the various evidences submitted by the assessee as well as by the disputed parties before the ld AO and made similar observations as was made for the Asst Year 2007-08 and deleted the addition for the Asst Year 2009-10 in the sum of ₹ 3,29,30,159/-. The ld CITA correspondingly deleted the addition towards commission at 0.1% of disputed purchases for the Asst Year 2009-10. Aggrieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the ld AO u/s 69C of the Act. The basic principle of section 69C of the Act is that the incurrence of an expenditure is not in dispute whereas the source for such expenditure is in dispute. In the instant case, since the addition is made u/s 69C of the Act, it could be safely concluded that the purchases has been accepted as genuine by the ld AO and only the source is disputed. We find that the source for such purchases have been explained from the regular books of accounts by making payment by account payee cheques. Hence there cannot be any addition u/s 69C of the Act. Hence the addition deserves to be deleted on that count also. 8.2. In view of deletion of addition made on account of alleged disputed purchases, correspondingly, the addition made towards commission at 0.1% also requires to be deleted which was rightly deleted by the ld CITA. 9. For the Asst Year 2009-10, we find that the various documentary evidences supporting the purchases actually made by the assessee with corresponding linking of export sales supported by stock register, quantitative tally, affidavits from parties etc are not in dispute before us. Infact the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chases made by the appellant from the abovementioned four parties. As already mentioned, the appellant expresses ignorance about this paper and says he is not aware how these entries are made by Shri Bhanwarlal Jain and disowns the same by stating that nothing has been found either in his premises or in the premises of the aforementioned four parties. None of the parties have confirmed providing accommodation entries to the appellant nor did Shri Bhanwarlal Jain mentioned the appellant in any of his statements. On the other hand, all the parties from whom the purchases have been made have not only filed affidavits but have appeared before the assessing officer and have confirmed the purchases. All of them file income tax returns regularly and are assessee to tax. The assessee has produced his stock register and had shown the entries of the purchases made and the corresponding exports of the same. The assessing officer also took objection that the stock register is maintained carat wise and the details of the quality cut and clarity of the diamonds is not given, therefore, it cannot be relied upon. However the assessee submitted that in this line of business the stock register is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such as was done in that case. In the instant case, although the appellant has called upon us to draw an inference that the burden shifted to the revenue in the present case, once it was established that the payments were made and repaid by cheque, be need not hasten and adopt that view after giving out through to various issue raised and the decisions cited by Mr. Tralshawalla and finding that on a very fundamental aspect, the revenue was not justified in making an addition at the time of reassessment without having first given the assessee an opportunity to cross examine the deponent on the statements relied upon by the ACIT, Quite apart from denial of an opportunity of cross examination, the revenue did not even prove the material on the basis of which the department sought to conclude that the loan was a bogus transaction. 4.3.5. In our view in the light of the fact that the monies were advanced apparently by the account payee cheque and was repaid vide account payee cheque, the lease that the revenue should have done was to grant an opportunity to the assessee to meet the case against him by providing the material sought to be used against assessee in arrivin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . How this proves that the appellant has taken accommodaton entries from Mouli Gems, Rose Gems Pvt. Ltd. Kothari and Co., and Meridian Gems and how the cheques were given by the appellant and cash received back has not been brought on record by the AO that the appellant has received cash from these four parties. It appears that the reliance placed by the AO on the statement Shri Bhanwarlal Jain and the paper attached as Annexure-B to the assessment order is misplaced. 4.3.8. In view of the above discussion, the addition made by the assessing Officer of ₹ 3,29,30,159/- cannot be sustained and is directed to be deleted. This ground of appeal is allowed. 9.1. Moreover, we find that the ld AO had placed heavy reliance on the seized document of Shri Bhanwarlal Jain relating to the period 1.1.2008 to 31.12.2008 for making addition in the hands of the assessee. But we find from Annexure C to the assessment order which contains the workings of peak credit for purchases, those are transactions of purchases made by the assessee and payments made by the assessee to the disputed parties. We find that those transactions are not at all reflected in the sei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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