TMI Blog2021 (3) TMI 1388X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-2021 - SHRI PAWAN SINGH, JM DR. A. L. SAINI, AM Revenue by : Shri O.P. Vaishnav, CIT(DR) Assessee by : Shri Rohit Vijayvargiya, CA O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the Revenue, pertaining to the Assessment Year (AY) 2007-08, is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-1, Surat [in short the ld. CIT(A) ] in Appeal No. CAS-1/239/2015-16, dated 02.05.2016, which in turn arises out of an assessment order passed by Assessing Officer (in short the AO ) under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 [hereinafter referred to as the Act ], dated 05.03.2015. 2. The grievances raised by the Revenue are as follows: 1. On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in deleting the additions of Rs. 4,05,66,100/- on account of bogus purchase. 2.On the facts and in the circumstances of the case and in Law, Ld. CIT(A) has erred in estimating income @ 5% of bogus purchases without appreciating the fact that during the course or search Seizure operations at the premises of Shri Gautam Jain and other related persons, whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that a search and seizure action was carried out by the Investigation wing, Mumbai in the Gautam Jain and others group of cases on 03.10.2013, which resulted in collection of evidences. It was also proved that they are operating benami concerns in the names of their employees through which they provided accommodation entries of unsecured loans and bogus purchases to various beneficiaries. 5. From the details made available through the above letter it was noticed by the assessing officer that assessee, M/s. Anchal Diamonds is one of the beneficiary and is involved in transactions from M/s. Krishna Diam Pvt Ltd. and M/s. Mihir Diamonds amounting to Rs.4,07,69,950/-, since the evidential and materials facts found during the course of search and survey in the case of Shri Gautam Jain group prove giving of accommodation purchase entries of Rs.4,07,69,950/-therefore, assessing officer prima facie observed that the assessee has utilized such bogus purchases to suppress his profits from the year to that extent. The assessing officer was of the view that there is no other prudent use of bogus purchase bills. Such transactions are bogus and therefore, have been incurred to curb the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the contention of the assessee and held that from the details and evidences made available through the above referred letter of the Director of Income Tax (Investigation), Mumbai, it is clear that the assessee has availed the benefit of accommodation entries of bogus purchases, during A.Y. 2009-10. The assessing officer observed that entities of Shri. Gautam Jain Group who are leading entry providers of Mumbai group have given accommodation entries of bogus purchases to the assessee during the year. It may be mentioned that the group floated by Shri Gautam Jain had indulged in giving such accommodation entries. Shri Gautam Jain has admitted the entire nature of bogus transactions in his statement. Therefore, the assessing officer was of the view that assessee availed bogus purchase entry from M/s. Mihir Diamond, and M/s. Krishna Diam P. Ltd. Accordingly, the amount of Rs.4,07,69,950/- as bogus purchases from Kotons Impex and Jalaram Enterpise was added to the total income of the assessee. 9. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has partly allowed the appeal of the assessee. Aggrieved by the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso furnished copy of Ledger account of said party (contra A/c) for AY 2007-08 showing payment made through banking channel. 13. We note that solitary grievance of the Revenue in this appeal is pertaining to addition of Rs.4,07,69,950/-made towards alleged bogus purchases made through accommodation entries received from M/s. Mihir Diamodns and M/s. Krishna Diam Pvt. Ltd.(actual name is M/s. Krishna Diam), an entities of Gautam Jain group. Before ld CIT(A) the assessee has argued that except statement of Shri Gautam Jain group, no positive evidence was brought on record by the Assessing Officer to prove his allegation that impugned purchases were bogus. The main basis of the Assessing Officer for making addition is the information received from investigation wing, Mumbai regarding search action and statement recorded by Search Party in the case of Shri Gautam Jain and others group of Mumbai wherein it was admitted by them that the hawala racket of providing accommodation entries for bogus purchases to various persons through web of numerous benami concerns was run by them. On verification of facts and evidence, the ld CIT(A) noticed that during the year under consideration, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . was bogus. It was also observed by ld CIT(A) that neither the copy of statement, nor any evidence proving the allegation was provided to the assessee to defend his case. No opportunity of cross-examination was allowed to the assessee though specifically asked for by the assessee. Besides this, apparently Ld. AO neither issued Summons u/s 131 or notice u/s 133(6) of the Act to the seller party nor independently verified the facts about the genuineness of the said purchases from said parties as well as the impugned purchase transaction. Therefore, ld CIT(A) held that ld. AO did a very shoddy investigation and whole addition was based on mere guess work, conjectures and surmises which has not place in tax jurisprudence. 15. Regarding the true nature of business activity carried on by the assessee during the year under consideration, that is, whether assessee is a trader or commission agent? As per Written Submission dated 25.01.2015, the assessee has contended that he was commission agent of rough and polished diamond in Surat, making sales and purchases on behalf of some diamond trades for which he was receiving commission. Though sales and purchases were recorded in books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24,221/-(PB Pg 52). Likewise, on Paper Book page 54 in Notes of Accounts [Part of 3CD Report], Auditor has put the following note [Sr. No 2]: 2. As explained to us assessee is commission agent but to record the movement of goods it has maintained sales and purchases register. Commission / gross receipts denotes to excess of safes over purchases. On the basis of above evidences and material, the ld CIT(A) held that assessee was not a trader but commission agent (Pucca Araditya) evident by the fact that no purchases shown in Income and Expenditure account and Return filed. In fact, no Trading account was prepared to reflect purchases and Sales and fact of his being Commission agent is apparent from 3CD Report, Return of Income and Books of Accounts. The Auditor has clarified that Purchase and sales Registers were made just to record the movement of stock. The assessee has maintained daily stock tally product wise, quantity wise which is tallied without having any shortfall or discrepancy therein. Assessee has stated that goods purchased are later sold to principals after addition up the commission ranging from 0.12% to 0.15%, thus difference of sales and purchase is commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per market price. The ld CIT(A) also noted that assessee could not provide one to one mapping of impugned purchases with sales to show as to how much commission income was earned on such alleged purchases vis-a-vis other purchases of Rs.4,07,69,950/-. This puts the entire transaction under a shadow of doubts about unverifiability of purchase price that assessee must have purchased the goods from grey/open market and bill must have been obtained from other party to support the purchases and price shown in said bill was inflated in order to suppress the profit. There is nothing on record to accept the possible contention of the assessee that price paid to said party was at Arm s Length Price (ALP). The surrounding circumstances and statement of Shri Gautam Jain casts enough doubts about the genuineness of purchase transactions. On the basis of preponderance of probability, it could be said that book results are not showing true and correct picture leading to rejection of book results u/s 145(3) of the Act. Based on these facts and circumstances, the ld CIT(A) wanted to reject the books of accounts of the assessee and for that he relied on the judgment of the Hon'ble Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Hon`ble Supreme Court in the case of Andaman Timber Industries 281 CTR 214(SC) held that not allowing the assessee company to cross examine the witness by the adjudicating authority though the statements of those witness were made the basis of impugned order is a serious flaw which makes the order nullity. On the same issue, the Hon`ble Calcutta High Court in the case of Eastern Commercial Enterprises 210 ITR 103 (cal) held as follows: It is a trite law that cross examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against the party unless the party is put on notice of the case made out against him. We note that statement of Shri Gautam Jain has not been provided to the assessee. The opportunity of cross examination has not been provided to the assessee, therefore statement of Shri Gautam Jain does not apply to the assessee. That being so we decline to interfere in the order of the ld CIT(A), his order on this issue is hereby accepted and grounds of appeal raised by the Revenue is dismissed. 18. In the result, the appeal filed by the Revenue is dismissed. Order is pronounced on 23/03/2021 by placing re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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