The ACIT, Bharuch Circle,, Bharuch v. Shri Abhaykumar Bharatkumar Shah,, Bharuch

ITA 1589/AHD/2006 | 1998-1999
Pronouncement Date: 18-01-2010 | Result: Dismissed

Appeal Details

RSA Number 158920514 RSA 2006
Assessee PAN SINCE1993H
Bench Ahmedabad
Appeal Number ITA 1589/AHD/2006
Duration Of Justice 3 year(s) 6 month(s) 28 day(s)
Appellant The ACIT, Bharuch Circle,, Bharuch
Respondent Shri Abhaykumar Bharatkumar Shah,, Bharuch
Appeal Type Income Tax Appeal
Pronouncement Date 18-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 18-01-2010
Date Of Final Hearing 14-12-2009
Next Hearing Date 14-12-2009
Assessment Year 1998-1999
Appeal Filed On 20-06-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD BBENCH BEFORE DR. O.K. NARAYANAN VICE-PRESIDENT (AZ) AND SHRI MAHAVIR SINGH JUDICIAL MEMBER ITA NO.1589/AHD/2006 [ASSTT.YEAR:1998-99] DRAFTED:11.01.10 ASSTT.COMMISSIONER OF INCOME VS.SHRI ABHAYKUMAR BH ARATKUMAR SHAH TAX BHARUCH CIRCLE 27 PRITAM NAGAR SOCIETY-1 BHARUCH BHARUCH PAN NO.AJMPS0683C REVENUE BY: SMT. NEETA SHAH SR. DR ASSESSEE BY: SHRI MILIN ME HTA AR ITA NO.1590/AHD/2006 [ASSTT.YEAR:1998-99] ASSTT.COMMISSIONER OF INCOME VS. MRS. JASMINE KALP ESHBHAI SHAH TAX BHARUCH CIRCLE 27 PRITA M NAGAR SOCIETY-1 BHARUCH BHARU CH PAN NO.AJMPS0689J REVENUE BY: SMT.NEETA SHAH SR. DR ASSESSEE BY: SHRI MILIN ME HTA AR ITA NO.1591/AHD/2006 [ASSTT.YEAR:1998-99] ASSTT.COMMISSIONER OF INCOME VS.MRS.SAROJIBEN BHAR ATKUMAR SHAH TAX BHARUCH CIRCLE 27 PRITAM NAGAR SOCIETY-1 BHARUCH BHARUCH PAN NO.AJMPS0691Q REVENUE BY: SMT.NEETA SHAH SR. DR ASSESSEE BY: SHRI MILIN ME HTA AR ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 2 ITA NO.1592/AHD/2006 [ASSTT.YEAR:1998-99] ASSTT.COMMISSIONER OF INCOME VS. MRS.NUTANBEN ASHO KKUMAR GANDHI TAX BHARUCH CIRCLE 50 BHRUG UPUR SOCIETY BHARUCH BHARUCH PAN NO.ACQPG2998H REVENUE BY: SHRI B.D. BAROT SR. DR ASSESSEE BY: SHRI MILIN M EHTA AR ITA NO.1593/AHD/2006 [ASSTT.YEAR:1998-99] ASSTT.COMMISSIONER OF INCOME VS. MRS.KANTABEN JADA VCHAND GANDHI TAX BHARUCH CIRCLE 50 BHRUG UPUR SOCIETY BHARUCH BHARUCH PAN NO.ADCPG4008M REVENUE BY: SMT. NEETA SHA H SR. DR ASSESSEE BY: SHRI MILIN ME HTA AR DATE OF ORDER RESERVED: 14/12/09 O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THESE FIVE APPEALS BY REVENUE ARE ARISING OUT OF D IFFERENT ORDERS OF COMMISSIONER OF INCOME-TAX (APPEALS)-XIX AHMEDABAD IN APPEAL NOS. CIT (A)- XIX/CAB/VI-260-264/04-05 OF EVEN DATE 21-03-2006. T HE ASSESSMENTS WERE FRAMED BY THE ASSISTANT COMMISSIONER OF INCOME-TAX BHARUC H CIRCLE BHARUCH U/S. 143(3) R.W.S. 147 OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDERS OF EVEN DATE I.E. 28-02-2005 ALL FOR THE AS SESSMENT YEAR 1998-99. 2. ALL THESE FIVE APPEALS CONTAINS THE TWO INTER-CO NNECTED COMMON ISSUES AND THESE ARE EXACTLY ON THE SAME SET OFF FACTS AND ARE ARISING OUT OF THE SAME SEARCH CONDUCTED U/S.132 OF THE ACT AT THE BUSINESS AND RE SIDENTIAL PREMISES OF SHARMA AND JOHARI & OTHERS BY THE REVENUE ON 14-03-2000 AN D RE-ASSESSMENT FRAMED ON THE BASIS OF EXAMINATION OF SEIZED DOCUMENTS STATE MENTS OF VARIOUS PERSONS RECORDED DURING THE COURSE OF SEARCH OTHER CIRCUMS TANTIAL EVIDENCES. THE INTER- CONNECTED ARE REGARDING SALE OF DIAMONDS AND JEWELL ERY CLAIMED TO BE THROUGH ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 3 BOGUS PURCHASE BILLS BY THE REVENUE AND THEREBY DI SALLOWING THE COMMISSION EXPENSES OF ACCOMMODATION ENTRY ADDED U/S.69C OF T HE ACT. FOR THIS REVENUE HAS COMMON GROUNDS IN ALL THE FIVE APPEALS. THE GROUND S RAISED IN REVENUES APPEAL ARE BEING REPRODUCED FROM THE APPEAL OF MRS KANTABE N J GANDHI IN ITA NO.1539/AHD/2006 AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.35 76 994/- MA DE U/S.68 BEING THE SALE PROCEEDS OF THE GOLD JEWELLERY AND DIAMONDS CREDITE D IN THE CAPITAL ACCOUNT OF THE ASSESSEE. 2. THE CIT(A) ERRED IN HOLDING THAT THE PURCHASERS OF SAID GOLD JEWELLERY DIAMONDS WERE IDENTIFIED PERSONS WHO HAD CONFIRMED THE TRANSACTIONS WHEREAS IT WAS CATEGORICALLY FOUND BY THE A.O THAT THE ALLEGED PURCHASERS ISSUED ACCOMMODATION BILLS ONLY BY CHARGING A CO MMISSION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) ALSO ERRED IN DELETING COMMISSION EXPENSES @ 10% OF ACCOMMODATION BILLS ADDED UNDER SECTION 69C OF THE ACT BY THE A.O CONSE QUENT TO THE FINDING THAT THE BOGUS PURCHASE BILLS WERE PROCURED BY THE ASSES SEE FROM ALLEGED PURCHASERS BY PAYING THE AMOUNT. IT IS TO BE CLARIFIED THAT THE FACTS BEING EXACTLY IDENTICAL IN ALL THE APPEALS WE WILL DISCUSS THE FACTS IN THE CASE OF MRS. KANTABEN J GANDHI . 3. THE BRIEF FACTS ARE THAT THE ASSESSEE AND OTHER FAMILY MEMBERS AND RELATIVES DECLARED LOOSE DIAMONDS AND GOLD JEWELLERY UNDER VO LUNTARY DISCLOSURE OF INCOME SCHEME 1997 (VDIS IN SHORT). THE ASSESSEE CLAIMED TO HAVE MADE SALE OF LOOSE DIAMONDS AND GOLD JEWELLERY DURING THE PREVIOUS YEA R 1997-98 RELEVANT TO ASSESSMENT YEAR 1998-99 AND CREDITED THE SALE PROCE ED TO THE CAPITAL A/C. THE ASSESSEE FILED RETURN OF INCOME ON 29-01-1999 FOR T HE RELEVANT ASSESSMENT YEAR DECLARING LONG TERM CAPITAL GAINS ON SALE OF GOLD J EWELLERY LOOSE DIAMONDS APART FROM OTHER INCOMES. THE RETURN OF INCOME WAS PROCE SSED U/S.143(1) OF THE ACT ON 09-08-1999. SUBSEQUENTLY ON THE BASIS OF SEARCH A CTION U/S.132 OF THE ACT AT THE BUSINESS AND RESIDENTIAL PREMISES OF SHARMA AND JOH ARI & OTHERS BY THE REVENUE ON 14-03-2000 A RE-ASSESSMENT PROCEEDINGS WAS START ED BY ISSUING NOTICE U/S. 147 R.W.S. 148 OF THE ACT ON THE BASIS OF EXAMINATION O F SEIZED DOCUMENTS STATEMENTS OF VARIOUS PERSONS RECORDED DURING THE COURSE OF SEARC H OTHER CIRCUMSTANTIAL EVIDENCES. THE ASSESSING OFFICER DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAS NOT FILED ANY SUPPORT ING EVIDENCES IN RESPECT OF SALE OF ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 4 LOOSE DIAMONDS AND GOLD JEWELLERY SUCH AS NAMES A ND ADDRESSES OF THE PARTIES TO WHOM SALES WERE EFFECTED DATE OF SALES WEIGHT AND VALUE PER GM./CARAT AND DETAILED DESCRIPTIONS OF LOOSE DIAMONDS AND GOLD JE WELLERY AND COPIES OF SALE BILLS AND DETAILS OF REALIZATION OF SALE CONSIDERATION. THE AO DURING THE COURSE OF RE- ASSESSMENT PROCEEDINGS REQUIRED THE ASSESSEE TO FUR NISH COMPLETE DETAILS AND INVENTORY OF GOLD JEWELLERY AND LOOSE DIAMONDS THE YEAR OF ACQUISITION AND ALSO THE DETAILED ADDRESS OF PARTIES TO WHOM THE GOLD JEWELL ERY AND LOOSE DIAMONDS WERE SOLD ALONG WITH COPIES OF THE BANK PASS BOOKS WHERE SUCH SUMS WERE CREDITED. THE ASSESSEE HAS FURNISHED THE FOLLOWING DETAILS:- I) COPY OF PURCHASE VOUCHER OF THE PARTIES TO WHOM CUT POLISHED LOOSE DIAMONDS AND GOLD AND GOLD JEWELLERY WERE SOLD; II) COPY OF THE VALUATION REPORT OF THE VALUER SHR I CHANDRAKANT JEKISONDAS CHOKSHI; AND III) ZEROX COPY OF BANK PAS BOOK OF S.B. A/C. NO.70 54 WITH BHARUCH DISTRICT CENTRAL CO-OP. BANK BHARUCH FOR THE PERIOD 05.02.1 998 TO 05.03.1998 DURING WHICH PERIOD THE SALE CONSIDERATION IN RESPECT OF S ALE OF DIAMONDS OF RS.26 27 205/- WAS CREDITED. IT WAS CONTENDED BY THE ASSESSEE THAT SHE HAD ACQUI RED THE CUT POLISHED DIAMONDS DURING THE MONTH OF MARCH 81 AND VARIOUS GOLD JEWE LLERY DURING THE MONTH OF MARCH87 AND THE SAME WERE DISCLOSED UNDER VDIS AND FOR THE PURPOSE OF COMPUTING INDEXED COST OF ACQUISITION THE VALUE W HICH WAS DISCLOSED UNDER VDIS WAS ADOPTED AND ACCORDINGLY THE CAPITAL GAIN WAS CALCULATED AND DISCLOSED IN THE RETURN OF INCOME. 4. THE ASSESSEE WAS FURTHER REQUIRED TO FURNISH THE FOLLOWING DETAILS:- I] MODE AND DATE OF DELIVERY OF DIAMONDS TO THE PU RCHASING PARTY II] NAME AND ADDRESS OF ANGADIA AGENT THROUGH WHOM THE DIAMONDS WERE DELIVERED IF ANY. III] HOW AND WHEN YOU CAME TO KNOW ABOUT THE PURCHA SING PARTY IV] PLEASE JUSTIFY AS TO HOW SUCH HIGH VALUE DIAMON DS COULD BE SOLD BY YOU TO A PURCHASER IN MUMBAI ON CREDIT. V] PLEASE ALSO FURNISH THE COPIES OF THE PURCHASE I NVOICE(S) IN ORIGINAL. THE ASSESSEE FILED THE RELEVANT DETAILS AS UNDER:- ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 5 01. REGARDING MODE OF DELIVERY WE SUBMIT THAT OUR FAMILY MEMBERS SHRI AJAYBHAI & SHRI ABHAYBHAI HAS PERSONALLY DELIVERED GOLD JEWELLERY AND DIAMOND TO M/S. GALAXY EXPORT M/S. MINI EXPORT AND M/S JHONSON JEWELLERS ON 16 TH DECEMBER 1997. 02. .. SINCE GOLD JEWELLERY AND DIAMONDS WERE P ERSONALLY DELIVERED TO THE ABOVE PURCHASING PARTY; THIS PARA IS NOT APPLIC ABLE. 03. M/S. MINI EXPORTS AND M/S.GALAXY EXPORT A RE TWO FIRMS ENGAGED IN THE BUSINESS OF DEALING IN PRECIOUS STONES. THEY ARE WELL REPUTED FIRM SITUATED AT MUMBAI M/S S. JOHNSON JEWELLERS IS ALS O ONE OF THE GOLD AND SILVER MERCHANT SITUATED AT AHMEDABAD. WE CAME TO K NOW OF THE ABOVE PARTIES THROUGH OUR BUSINESS CONTRACTS AND INQUIRY MADE THROUGH PERSON DEALING IN SIMILAR BUSINESS. 04. IN THIS REGARD WE SUBMIT THAT THE ABOVE GOL D AND JEWELLERY ARE SPECIAL ONE AND IN LARGE QUANTITY. ON THE BASIS OF OUR INQUIRY WE HAVE DECIDED TO SELL THE ABOVE GOLD JEWELLERY AND DIAMON D TO THE ABOVE MENTION FIRMS TO OBTAIN FAIR PRICE. SINCE THE AMOUNT INVOLV ED IN THE ABOVE TRANSACTION IS HIGH THEY REQUESTED US TO GIVE THE TIME FOR PAYMEN T AS THEY WOULD TAKE SOME TIME TO RE-SELL THE SAME. THEREFORE WE INQUIRED THE CREDITWORTHINESS OF THE ABOVE PARTY FROM VARIOUS BUSINESS SOURCES. AFTER SA TISFYING WITH THE CREDITWORTHINESS OF THE ABOVE PARTY WE HAVE DECIDE D TO SELL GOLD JEWELLERY AND DIAMOND TO THE ABOVE PARTIES ON CREDIT OF NOT E XCEEDING THREE MONTHS. YOUR KIND OFFICE SHOULD ALSO NOTE THAT MADE OF RECE IPT OF AMOUNT IS THROUGH CHEQUES. YOUR KIND OFFICE HAS ALSO ASKED THE ABOVE INFORMATION IN RESPECT OF JOHNSON JEWELLERS. IN RESPECT OF THE SAME WE SUBMI T THAT WE HAVE NOT GIVEN ANY CREDIT TO THIS PARTY. WE HAVE RECEIVED THE PAYM ENT FROM THIS PARTY IMMEDIATELY AFTER THE DATE OF SALE THE ASSESSING OFFICER DISCUSSED ON THE ABOVE INFORM ATION THAT THE CLAIM OF THE ASSESSEE THAT SHRI AJAYBHAI HAS DELIVERED THE GOLD AND JEWELLERY AND DIAMONDS ON 16-12-1997 PERSONALLY WHEREAS THE BILL OF M/S. JON SHON JEWELLERS IN RESPECT OF SALE OF GOLD ORNAMENTS IS DATED 15-12-1997. IT WAS THE C LAIM THAT SHRI AJAYBHAI AND SHRI ABHAYBHAI HAVE DELIVERED THE DIAMONDS AND GOLD JEWE LLERY BELONGING TO OTHER FAMILY MEMBERS OF THE ASSESSEE SEEMS INTERESTING ACCORDIN G TO THE ASSESSING OFFICER AS THE BILL ISSUED BY M/S. GALAXY EXPORTS AND MINI EXP ORTS IS SIMPLY PURCHASE INVOICE WITHOUT MENTIONING IN SERIAL NUMBER. ACCORDING TO THE AO IT IS ALSO INTERESTING THAT THE CREDIT PURCHASES MADE BY THE ABOVE TWO FIRMS AR E NOT REALLY EFFECTED PURCHASES AND IT IS DIFFICULT TO BELIEVE THAT THE DIAMONDS WO RTH RS.2.12 CRORES WERE ACTUALLY HANDED OVER ON 16-12-1997 TO THE BUYERS IN MUMBAI W ITH WHOM THE ASSESSEE HAD NO PREVIOUS DEALINGS AND FOR WHICH THE PAYMENT WAS REALIZED AFTER A GAP OF 2-3 MONTHS. THE AO IN VIEW OF THIS DISCUSSION HAS REQ UIRED THE ASSESSEE TO FURNISH ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 6 CERTAIN EVIDENCES AND THE ASSESSEE IN RESPONSE FURN ISHED THE FOLLOWING DOCUMENTS ALONG WITH LETTER DATED 07-01-2005:- I) COPY OF THE PURCHASE INVOICES FROM M/S. MIN EXP ORTS AND M/S GALAXY EXPORTS MUMBAI AND M/S. JOHNSON JEWELLERS AHMEDA BAD. II) COPY OF CHEQUES / DEMAND DRAFT ISSUED BY THE AB OVE-NAMED PARTIES TOWARDS PAYMENT OF SALES CONSIDERATION OF DIAMONDS AND GOLD JEWELLERY. III) COPIES OF AFFIDAVITS BY SHRI KAMAL KUMAR JOHAR I KARTA OF HUF OF KAMAL KUMAR JOHARI AND PARTNER IN THE FIRMS OF M/S./ GALA XY EXPORTS AND M/S. MINI EXPORTS MUMBAI. 5. THE ASSESSING OFFICER THEREAFTER DISCUSSED THE M ODUS OPERANDI THE VDIS DECLARANTS IN GENERAL. HE DISCUSSED THAT BY WAY OF PROCURING ACCOMMODATION BILLS FOR SALE OF DIAMONDS BENEFITS OF INDEXATION AS PER THE COST INFLATION INDEX WAS AVAILED AND CONSEQUENTLY CAPITAL GAINS TAX OF MEA GER AMOUNT WAS PAID AND HUGE UNACCOUNTED CASH WAS IS INTRODUCED AS SALE PROCEEDS ON ACCOUNT OF SALE OF SUCH DIAMONDS PURPORTED TO HAVE BEEN SOLD TO THE ABOVE P ARTIES. HE FURTHER NOTED THE FACTS GATHERED BY THE DEPARTMENT IN THE CASE OF SHR I KAMAL KUMAR JOHARI AND NARRATED HOW HE PROVIDED THE ACCOMMODATION ENTRIES BY WAY OF BOGUS SALES / PURCHASES OF NON-EXISTENT DIAMONDS IN HIS CAPACITY AS KARTA OF HUF WHICH IS A PARTNER IN VARIOUS SUCH FIRMS INCLUDING THE ABOVE STATED TWO FIRMS. THE GROUP WAS COVERED UNDER SEARCH OPERATION U/S.132 OF THE ACT A ND DURING THIS SEARCH IT WAS ESTABLISHED THAT THEY HAD INDULGED IN A SYSTEMATIC RACKET OF ISSUING ACCOMMODATION BILLS TO FACILITATE VDIS DECLARANTS WHO HAD PLANNE D TO SHOW SALE OF SUCH DIAMONDS WHICH WERE DECLARED UNDER THE VDIS. ACCORDINGLY H E HELD THAT THIS FACT HAS BEEN CONCLUSIVELY PROVED THAT HAWALA RACKET WAS BEING CO NDUCTED BY SHRI KAMAL KUMAR JOHARI IN COLLABORATION WITH SHRI HARI OM SHARMA B Y WAY OF BOGUS PURCHASES/SALES OF NON-EXISTENT DIAMONDS. ACCORDING TO HIM THIS V IEW HAS ALSO BEEN CONFIRMED BY THE CIT(A) CENTRAL-VI MUMBAI IN HIS ORDER BEARING NO. CIT(A) CENT.VI/IT 81/2002-03 DATED 25-11-2002 IN THE CASE OF SHRI KAMAL KUMAR JO HARI FOR THE BLOCK PERIOD 01-04- 1989 TO 14-03-2000. SUBSEQUENTLY THE ASSESSING OF FICER RELIED ON THE CIT(A)S ORDER IN THE CASE OF SHRI KAMAL KUMAR JOHARI (SUPRA ). ACCORDINGLY THE AO HELD THE ABOVE SALE TRANSACTION OF LOOSE DIAMONDS AND GOLD J EWELLERY ONLY ARRANGED HAWALA TRANSACTION BY GIVING FOLLOWING FINDINGS IN PARA-5.2 AND 5.4 OF HIS ASSESSMENT ORDER:- 5.2 IN THE INSTANT CASES OF THE ASSESSEE AND OTHER MEMBERS OF HER GROUP THE DIAMONDS WERE PURPORTED TO HAVE BEEN DELIVERED BY SHRI AJAYBHAI TO M/S. ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 7 GALAXY EXPORTS AND M/S. MINI EXPORTS AGAINST PLAIN PAPER STATIONERY TITLED AS PURCHASE INVOICE WITHOUT ANY SERIAL NUMBER AND OT HER RELEVANT DETAILS OF CASH/CREDIT MODE OF DELIVERY TERMS OF THE PURCHAS E/SALE TRANSACTION ETC. IT IS FURTHER NOTED THAT THE ASSESSEE HAS FULLY RELIED ON SUCH PURCHASE INVOICE WHICH HAS NO PROPER DETAILS AND RECEIVED THE PAYMEN T IN FULL ONLY AFTER A PERIOD OF 2-3 MONTHS. THE FACTS DISCUSSED IN THE CA SE OF SHARMA JOHARI AND OTHER DISCUSSED ABOVE ARE SQUARELY APPLICABLE IN TH E CASE OF THE ASSESSEE AND OTHER MEMBERS OF THE GROUP. THE CONCLUSION WHIC H UNMISTAKABLY EMERGES IS A HARD FACT THAT NO SUCH SALE OF DIAMOND S BY THE ASSESSEE HAS TAKEN PLACE AND THE ASSESSEE HAS GIVEN HER OWN CASH TO THE HAWALA OPERATOR CAS AND TAKEN IT BACK IN THE SHAPE OF CHEQUES/DDS A ND SHOWN AS SALE CONSIDERATION OF DIAMONDS DECLARED UNDER VDIS. IN VIEW OF THE ABOVE FACTS IT IS CRYSTAL CLEAR THAT SO CALLED SALE OF DIAMONDS IS ONLY AN ARRANGED HAWALA TRANSACTION (PAPER TRANSACTION0 WITHOUT ACTUAL SALE OF DIAMONDS). 5.3 SIMILARLY EVEN IN RESPECT OF THE SALE OF GOLD JEWELLERY TO M/S. JOHNSON JEWELLERS IT IS SEEN THAT ALTHOUGH THE ASSESSEE WA S SPECIFICALLY POINTED OUT THE INFIRMITIES NAMELY ABSENCE OF ITEM-WISE GROSS WEIGHT IMPURITIES NET WEIGHT CUSTOMERS SIGNATURE DETAILS AND MODE OF P AYMENT ETC. THE ASSESSEE HAS NOT SUBMITTED ANY EXPLANATION OR CLARIFICATION IN THIS REGARD. IN ORDER TO VERIFY THE GENUINENESS OF SALES TRANSACTION OF GOLD JEWELLERY AND TO GET THE CONFIRMATION FROM M/S. JOHNSON JEWELLERS AHMEDABAD THIS OFFICE HAD CALLED FOR CERTAIN INFORMATION FROM THE SAID PARTY VIDE LE TTER NO.BCH/ACIT/INFORMATION/PDS/2004-05 DATED 01-09-200 4 WHICH IS REPRODUCED HEREUNDER:- THE FOLLOWING ASSESSEES ARE ASSESSED TO INCOME-TAX BY THE UNDERSIGNED: (1) SHRI ABHAYBHAI BHARATBHAI SHAH BHARUCH (2) SMT. NUTANBEN ASHOKKUMAR GANDHI BHARUCH (3) SMT. KANTABEN JADAVCHAND GANDHI BHARUCH (4) SMT. JASMINEBEN KALPESHBHAI SHAH BHARUCH (5) SMT. SAROJBEN BHARATBHAI SHAH BHARUCH DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y . 1998-1999 THE ABOVEMENTIONED ASSESSEES HAVE SUBMITTED THAT HAVE R ECEIVED SOME AMOUNT OF SELLING OF OLD GOLD ORNAMENTS DURING THE F.Y. 19 97-1998 FROM YOU. YOU ARE THEREFORE REQUESTED TO PLEASE FURNISH THE FOLLOWIN G DETAILS IN THIS REGARD: (1) DATE AND BILL NUMBER OF PURCHASE OF GOLD ORNAME NTS WITH COPY OF BILL IF ANY ISSUED FOR PURCHASE OF ORNAMENTS FROM THE ABOVE PERSONS. (2) IF NO BILL WAS ISSUED THEN COPY OF ANY OTHER DOCUMENT LIKE INVOICE OR RECEIPT MAY ALSO BE FURNISHED IN SUPPORT OF GOLD ORNAMENTS WHICH CAN SHOW THE DETAILS OF GOLD ORNAMENTS PURCHA SED BY YOU. (3) DETAILS OF PAYMENTS MADE ON ACCOUNT OF PURCHASE OF ABOVE GOLD ORNAMENTS WITH MODE OF PAYMENT I.E BY CASH /CHEQUES /DD. (4) COPY OF ACCOUNT OF ABOVE ASSESSEES FROM YOUR BO OKS OF ACCOUNT (5) DESIGNATION OF THE ASSESSING OFFICER WITH WHOM YOU ARE FILING YOUR INCOME-TAX RETURNS OF INCOME. ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 8 THE ABOVE INFORMATION IS CALLED FOR U/S.133(6) OF T HE I.T. ACT WHICH MAY PLEASE BE FURNISHED WITHIN SEVEN DAYS OF THE RECEIPT OF TH IS LETTER. IN RESPONSE TO THE ABOVE M/S. JOHNSON JEWELLERS HA S SUBMITTED THE DETAILS VIDE THEIR LETTER DATED 21-09-2004. FROM THE DETAIL S FURNISHED BY M/S. JOHNSON JEWELLERS IT IS SEEN THAT THERE WERE TRANSACTIONS OF HUGE AMOUNT IN THE BANK ACCOUNT OF THIS PARTY. M/S. JOHNSON JEWELLERS HAS D EPOSITED HUGE AMOUNT OF CASH INTO BANK ACCOUNTS AND HAS ALSO ISSUED CHEQUES TO CERTAIN PARTIES INCLUDING THE ASSESSEE AND OTHER MEMBERS OF HER GRO UP. FROM BOTH THESE BANK ACCOUNTS FOLLOWING POSITION EMERGES IN RESPECT OF SUCH CASH DEPOSITS- MANECKCHOWK CO.OP BNK LTD. INDUS IND B ANK LTD. DATE CASH DEPOSITED DATE CASH DEPOSITED 12-12-97 RS 20 25 000 18-12-97 RS.10 00 000 12-12-97 RS. 1 00 000 19-12-97 RS.50 00 000 13-12-97 RS. 1 00 000 20-12-97 RS.10 00 000 15-12-97 RS 1 00 000 16-12-97 RS. 35 00 000 17-12-97 RS. 10 00 000 17-12-97 RS. 55 00 000 18-12-97 RS. 50 00 000 TOTAL RS.1 73 25 000 TOTAL RS.95 00 000 FROM THE ABOVE IT CAN SEEN THAT M/S. JOHNSON JEWEL LERS HAS DEPOSITED HUGE AMOUNT OF CASH AS ABOVE WITHIN A WEEK (I.E. FROM 12 -12-97 TO 19-1-97) AND SIMILAR CASH TRANSACTIONS ARE ALSO NOTICED FROM THE DIFFERENT DATES. FURTHER AS STATED EARLIER A PERUSAL OF THE BILLS ISSUED BY TH E PARTY REFLECTS THAT THEY WERE NOT PREPARED IN A PROPER ORDER AND IN A ROUTINE MAN NER. THIS CLEARLY SUGGESTS THAT THE MODUS OPERANDI IN THESE TRANSACTIONS IS NOTHING BUT ACCOMMODATIVE TRANSACTIONS BY HAWALA AS DONE WITH M/S. SHARMA & J OHARI OF MUMBAI IN RESPECT OF SALES OF DIAMONDS. ALTHOUGH AMPLE OPPORT UNITIES WERE GIVEN BY THIS OFFICE TO THE ASSESSEE TO SUBSTANTIATE HER CLAIM T HE ASSESSEE HAS CHOSEN TO SUBMIT THE DETAILS IN TAPAL AN AUTHORIZED REPRESE NTATIVE. THE CONTENTIONS OF THE ASSESSEE ARE ONLY THAT NON-MENTION OF THE DETAI LS CANNOT BE A REASON TO TREAT THE ENTIRE TRANSACTIONS AS BOGUS. AS DISCUSSE D ABOVE THE ENTIRE CIRCUMSTANTIAL EVIDENCES AND THE CONDUCT OF THE ASS ESSEE POINTS TO AN ALTOGETHER DIFFERENT CONCLUSION AND THEREFORE IT IS DIFFICULT TO BELIEVE THE CLAIM OF THE ASSESSEE AS GENUINE. THE ASSESSEE WAS ALSO A FFORDED ONE MORE OPPORTUNITY TO PRODUCE THE BOOKS OF ACCOUNT ALL BA NK PASS BOOKS AND ANY OTHER DETAILS/INFORMATION IN SUPPORT OF HER RETURN OF INCOME VIDE THE NOTICE U/S.142(1) OF THE ACT DATED 7-02-2005 FIXING THE H EARING ON 15-022005 ALTHOUGH MORE THAN ADEQUATE OPPORTUNITY HAD ALREADY BEEN GRANTED EARLIER. ON THE DATE OF HEARING THE ACCOUNTANT OF THE ASSES SEE AND SHRI S.DESHPANDE CA FROM K.C.MEHTA & CO. ATTENDED BUT DID NOT PRODUCE ANY BOOKS OF ACCOUNT AND BANK PASS BOOKS. NO FURTHER SU BMISSIONS WERE MADE BY THE COUNSEL AND HE RELIED UPON THE VARIOUS WRITT EN SUBMISSIONS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FROM TIME TO T IME. 5.4 IT MAY BE MENTIONED HERE THAT THE ASSESSEE HAS CONTENDED THAT THE EXISTENCE OF DIAMONDS AND JEWELLERY CANNOT BE DOUBT ED AS IT IS EVIDENCED BY ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 9 THE CERTIFICATE U/S.68(2) OF THE VDIS 1997. A PERUS AL OF THE VALUATION REPORT OF THE VALUER M/S. CHANDRAKANT JEKISONDAS CHOKSHI DA TED 8121997 REVEALS THAT TIME-WISE PARTICULARS OF CUT & POLISHED LOOSE DIAMONDS AND GOLD ORNAMENTS WERE INDICATED. THE DECLARATION UNDER VDI S 1997 MADE ON 9-12- 1997 AND THE CERTIFICATE U/S.68(2) WAS RECEIVED ON 12-12-1997. THE SALE OF GOLD ORNAMENTS/JEWELLERY WAS MADE ON 15-1-1997. THE PAYMENTS IN RESPECT OF DIAMONDS WERE RECEIVED AFTER A GAP OF 2-3 MONTHS . THE ASSESSEE HAS FAILED TO ESTABLISH THAT THE GOLD ORNAMENTS DECLARE D UNDER THE VDIS 1997 WERE ACTUALLY SOLD ON 15-1-1997. IN FACT THE PURCH ASE INVOICE OF JOHNSON JEWELLERS BEARING NO.0257 DATED 15-12-1997 ONLY BEA RS THE LIST OF ITEMS WITHOUT MENTIONING THE ITEM-WISE GROSS WEIGHT IMPU RITIES NET WEIGHT CUSTOMERS SIGNATURE DETAILS AND MODE OF PAYMENT E TC. AS SHOULD BE THE CASE IN A GENUINE INSTANCE OF SALE. AND IN VIEW OF THIS FINDING HE MADE ADDITION IN PARA-7 AS UNDER:- 7. IN VIEW OF THE ABOVE SALE OF DIAMOND TRANSACTI ONS MADE BY THE ASSESSEE WITH M/S. GALAXY EXPORTS AND SALE OF GOLD JEWELLERY TO M/S. JOHNSON JEWELLERS ARE TREATED AS FICTITIOUS/BOGUS ONE AND THE ENTIRE SALE PROCEEDS AGGREGATING TO RS.35 76 994/- ARE BROUGHT TO TAX AS UNEXPLAINED CA SH CREDIT U/S.68 OF THE INCOME TAX ACT 1961 IN PLACE OF THE CAPITAL GAINS OFFERED TO TAX BY THE ASSESSEE. FURTHER 10% OF THE SALE CONSIDERATION WH ICH WORKS OUT TO RS.3 57 700/- IS ALSO BROUGHT TO TAX U/S.69C OF THE I.T. ACT 1961 BEING COMMISSION PAID BY THE ASSESSEE FOR OBTAINING FICTI TIOUS/BOGUS SALE BILLS FROM THESE PARTIES IN LINE WITH THE CONCLUSION DRAWN IN THE ASSESSMENT ORDER OF SHRI KAMAL KUMAR JOHARI FOR THE BLOCK PERIOD01-04-89 TO 14-03-2000 PASSED BY THE ACIT CENTRAL CIRCLE-38 MUMBAI. AGGRIEVED AGAINST THE ACTION OF THE ASSESSING OFFIC ER THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 6. BEFORE THE CIT(A) THE ASSESSEE CONTENDED THE FOL LOWING FACTS:- I) THE EXISTENCE OF DIAMONDS AND THEIR AVAILABILITY FOR SALE TO M/S. GALAXY EXPORTS M/S. MINI EXPORT AND M/S. JHONSON JEWELLERS IS EVIDENCED BY VDIS I997 DECLARATION MADE BY THE ASSESSEE AND CERTIFICATES U/S.68(2) OF VDIS 1997 ACT ISSUED BY CIT BARODA ON 12.12.1997. II) THE SALE OF LOOSE DIAMONDS BY THE ASSESSEE TO M/S. GALAXY EXPORTS M/S. MINI EXPORTS AND GOLD JEWELLERY TO M/ S.JHONSON JEWELLERS ARE EVIDENCED BY PURCHASE BILLS ISSUED BY THESE PARTIES AND FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER DURING THE ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 10 REASSESSMENT PROCEEDINGS. III) THE GENUINENESS OF SALE CONSIDERATION RECEIVED BY THE APPELLANT IS EVIDENCED BY THE ACCOUNT PAYEE CHEQUES ISSUED BY TH ESE THREE PARTIES FROM THEIR BANK ACCOUNT AND DULY CREDITED I N THE BANK ACCOUNT OF THE ASSESSEE. IV). T HE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT THE ASSESSEE HAD GIVEN AN EQUIVALENT AMOUNT OF CASH TO THESE BUYERS BEFORE RECEIVING THEIR CHEQUE FROM THEIR BANK ACCOUNT: V) . THE ASSESSEE HAS NOT ONLY PRODUCED THE BILLS ISSUED BY THESE THREE PARTIES BUT SHE HAS ALSO PRODUCED CONFIRMATIO NS IN THE FORM OF AFFIDAVIT FROM M/S. GALAXY EXPORTS AND M/S. MINI EXPORTS WHILE IN THE CASE OF M/S. JHONSON JEWELLERS THE ASSESSINQ OFFICER HIMSELF HAS MADE INQUIRIES TO ASCERTAIN THE GENUINE NESS OF SAID TRANSACTIONS WITH THE APPELLANT. M/S. JHONSON JEWEL LERS HAS CONFIRMED OF HAVING PURCHASED GOLD JEWELLERY BUT WI THOUT BASED ON ANY MATERIAL FACT THE CONFIRMATION WAS IGNORED. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION BY TREATING THE SALE OF LOOSE DIAMONDS AND GOLD JEW ELLERY AS GENUINE SALE. THE CIT(A) ALSO DELETED THE COMMISSION PAYMENT AS HE HA S ALREADY TREATED THE SALE OF LOOSE DIAMONDS AND GOLD JEWELLERY AS GENUINE SALE. AGGRIEVED NOW REVENUE CAME IN APPEAL BEFORE US. 7. BEFORE US LD SR. DR SMT. NEETA SHAH ARGUED AND STATED THAT IT WAS THE CLAIM BY THE ASSESSEE THAT HER FAMILY MEMBERS NAMELY SH RI AJAYBHAI AND SHRI ABHAYBHAI HAD PERSONALLY DELIVERED DIAMONDS WORTH RS.2 12 46 947/- AND GOLD JEWELLERY WORTH RS.77 68 188/- RESPECTIVELY TO M/S. GALAXY EXPORTS AND M/S. MINI EXPORTS OF MUMBAI AND M/S. JOHNSON JEWELLERS AHMEDABAD. SHE STATED T HAT SHRI AJAYBHAI HAD DELIVERED THE DIAMONDS AT MUMBAI AND SHRI ABHAYBHAI HAD DELIVERED THE GOLD JEWELLERY AT AHMEDABAD AND ARGUED THAT IT IS INTERE STING THAT WHILE IT IS CLAIMED THAT THESE PERSONS HAD PERSONALLY DELIVERED GOLD JEWELLE RY AND DIAMONDS ON 16-12-1997 ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 11 AND THE BILL OF M/S. JOHNSON JEWELLERS IN RESPECT O F SALE OF GOLD ORNAMENTS IS DATED 15-12-1997. SHE FURTHER MENTIONED THAT THESE TWO FA MILY MEMBERS OF THE ASSESSEE HAD DELIVERED THE DIAMONDS AND GOLD JEWELLERY BELON GING TO THE ASSESSEE AND OTHER MEMBERS OF HER FAMILY WHICH HAD SUBSTANTIAL VALUE B UT M/S. GALAXY EXPORTS AND M/S. MINI EXPORTS HAS NOT ISSUED ANY BILLS FOR PURCHASE OF DIAMONDS BUT SIMPLY ISSUED PURCHASE INVOICE WITHOUT MENTIONING THE SERIAL NUMB ER ON THE PURCHASE INVOICE AS DISCUSSED IN THE ASSESSMENT ORDER IN DETAIL. ACCORD ING TO HER THIS WOULD LEAD TO A CONCLUSION THAT THE CREDIT PURCHASES MADE BY THE TW O ABOVE MENTIONED FIRMS ARE NOT REAL EFFECTIVE PURCHASES AND SIMILARLY THE ASSESSE ES CLAIM OF GIVING DELIVER ON SUCH PURCHASE INVOICE HAS ALSO NO BEARING AND AS SUCH I T IS DIFFICULT TO BELIEVE THAT DIAMONDS WORTH RS.2.12 CRORES WERE ACTUALLY HANDED OVER ON 16-12-1997 TO THE BUYERS IN MUMBAI WITH WHOM THE ASSESSEE HAD NO PRE VIOUS DEALING AND FOR WHICH FULL PAYMENTS WERE REALIZED AFTER A GAP OF NEARLY 2 -3 MONTHS. SHE FURTHER NARRATED THE FACT AS DISCUSSED IN DETAIL IN ASSESSMENT ORDER THAT M/S. MINI EXPORT AND M/S. GALAXY EXPORTS WERE NEVER IN THE BUSINESS OF DIAMON DS BEFORE ENTERING INTO ACCOMMODATION TRANSACTIONS FOR BOGUS PURCHASE OF NO N-EXISTENT DIAMONDS FROM VARIOUS VDIS DECLARANTS OR DURING THE COURSE OF SUC H TRANSACTIONS OR AFTER SUCH TRANSACTIONS. IN VIEW OF THE FOREGOING SHE FURTHER ARGUED THAT THE AFFIDAVITS FILED BY THE ASSESSEE IN SUPPORT OF HER CONTENTIONS DO NOT H AVE ANY EVIDENTIARY VALUE IN THE EYES OF THE LAW AND IT HAS BEEN ESTABLISHED BEYOND ANY DOUBTS AND CONFIRMED BY APPELLANT AUTHORITIES THAT THE TRANSACTIONS PERTAIN ING TO PURCHASE/SALE OF DIAMONDS FROM VDIS DECLARANTS ARE NOTHING BUT SHAM TRANSACTI ONS OF NON-EXISTENT DIAMONDS ON WHICH THEY HAVE EARNED COMMISSION INCOME FOR PRO VIDING SUCH ACCOMMODATIVE ENTRIES TO DECLARANTS OF UNDER THE VDIS97 SCHEME. SHE FURTHER STATED THAT EVEN THE BILLS ISSUED BY M/S. JOHNSON JEWELLERS REFLECTED TH AT THEY WERE NOT PREPARED IN A PROPER ORDER AND ROUTINE MANNER AND ALTHOUGH EACH B ILL CONTAINS PARTICULARS OF PURCHASES OF HUGE AMOUNTS I.E. IN LAKHS OF RUPEES THERE IS NO MENTION OF ITEM-WISE GROSS WEIGHT IMPURITIES NET WEIGHT CUSTOMERS; SI GNATURE DETAILS AND MODE OF PAYMENT ETC. ACCORDING TO HER THIS CLEARLY SUGGES TS THAT THE MODUS OPERANDI IN THESE TRANSACTIONS ARE NOTHING BUT ACCOMMODATIVE TR ANSACTIONS AS DONE WITH M/S. SHARMA & JOHARI OF MUMBAI IN RESPECT OF SALES OF D IAMONDS AS DISCUSSED ABOVE. THESE FACTS WERE BROUGHT TO THE NOTICE OF THE ASSES SEE AND SHE WAS REQUIRED TO JUSTIFY THE SALE OF SUCH LOOSE DIAMONDS AND JEWELLE RY BUT SHE FAILED TO DO SO. IN VIEW ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 12 OF THESE ARGUMENTS THE LD. SR. DR URGED THE BENCH TO CONFIRM THE ORDER OF THE ASSESSING OFFICER. 8. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE SHRI MILIN MEHTA STATED THAT THE ASSESSING OFFICER HAS ERRED IN CONTENDING THAT THE TRANSACTION OF SALE IS ONLY A PAPER TRANSACTION AND NOT A GENUINE TRANSACTION. HE STATED THAT THE AO HAS PLACED RELIANCE ON CONJECTURE AND SURMISES AND ERRED IN ME NTIONING THAT THE ASSESSEE HAD MADE DECLARATION FOR NON-EXISTENT DIAMONDS / JEWELL ERY ONLY FOR THE PURPOSE OF CONVERTING HER UNACCOUNTED MONEY INTO ACCOUNTED MON EY. HE RELIED ON THE FOLLOWING EVIDENCES FILED BY THE ASSESSEE:- A. THE COPY OF DECLARATION MADE BY THE APPELLANT UN DER VDIS 97 EVIDENCING THAT THE VALUATION REPORT OF THE APPROVED VALUER. B. THE APPROVED VALUER HAD ISSUED THE REPORT ONLY A FTER VERIFICATION OF THE LOOSE DIAMONDS AND GOLD JEWELLERY PRODUCED BEFORE HIM AND ACCORDINGLY EXISTENCE OF DIAMONDS AND JEWELLERY IS PROVED. C. THE APPELLANT HAD ALSO GIVEN THE BILLS ISSUED BY THE PURCHASER FOR PURCHASE OF DIAMONDS / JEWELLERY. D. THE SAID BILLS WERE ALSO SUPPORTED BY AFFIDAVIT S; AND E. THE MONEY ON ACCOUNT OF SALE WAS RECEIVED THROUG H PROPER BANKING CHANNEL. THE LD. COUNSEL FOR THE ASSESSEE FURTHER STATED THA T THE APPEALS IN THE CASE OF SHRI KAMAL KUMAR JOHRI CA M/S.GALAXY EXPORTS ARE ALLOW ED BY THE MUMBAI TRIBUNAL. THE APPEALS WHICH WERE CONFIRMED BY THE CIT(A) WERE ALLOWED BY THE TRIBUNAL AND THE ORDER OF THE CIT(A) WAS REVERSED. FURTHER THE LD. COUNSEL RELIED ON THE AFFIDAVITS OF M/S. GALAXY EXPORTS AND M/S. MINI EXPORTS AND ST ATED THAT THESE FIRMS ARE IN EXISTENCE SINCE 1993 HAVING THEIR SEPARATE REGISTRA TION WITH THE GEMS & JEWELLERY EXPORT PROMOTION COUNCIL. THE REGISTRATION NO. OF G ALAXY EXPORTS IS GJC/REGN/G- 761/1995-2000 AND THAT OF MINI EXPORTS IS GJC/REGN/ M-1197/1995-2000. FURTHER THESE FIRMS ARE ALSO REGISTERED WITH RBI VIDE CODE NOS. BG-965 DATED 14-12-93 AND BM-6901 DATED 14-12-93 RESPECTIVELY. LD. COUNSEL FU RTHER STATED THAT IN THE PROCEEDINGS BEFORE THE TRIBUNAL ALSO IT WAS CATEGOR ICALLY MENTIONED THAT THE CONTENTION OF THE AO THAT VARIOUS CONCERNS WERE FLO ATED TO LAUANDER THE UNACCOUNTED MONEY OF VARIOUS PARTIES DURING VDIS 97 IS FACTUALL Y INCORRECT. IT WAS MENTIONED THAT ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 13 THESE FIRMS HAD SUBSTANTIVE TURNOVER DURING AYS 199 8-99 AND 1999-00. IT WAS ALSO SHOWN THAT THE CONCERNS ARE IN BUSINESS SINCE LAST SEVERAL YEARS AND ARE REGULARLY FILING THE INCOME TAX RETURNS AND ALSO ARE SUBJECT TO TAX AUDITS U/S.44AB OF THE ACT. THE LD. COUNSEL FURTHER STATED THAT THE ADDITION MA DE BE DELETED VIDE LETTER DATED 27- 09-2005 AND ALSO FILED COPIES OF DECISIONS OF CIT(A )-I THANE AND CIT(A)-XXII MUMBAI AND STATED THAT THE FACTS OF THESE CASES ARE SIMILAR TO THE CASE OF THE ASSESSEE. IN THESE CASES ALSO THE CIT(A) HAVE DELE TED THE ADDITION MADE. AT THIS STAGE HE MADE FOLLOWING REFERENCE TO THE DECISION O F THE CIT(A)-XXII MUMBAI IN THE CASE OF SMT. GEETA D MEHTA:- 7. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE. THE SOLE BASIS OF THE ADDITION IN QUESTION IS THE INVESTIGATION DONE IN THE CASE OF SHRI KAMAL KUMAR JOHRI AND SHRI HARI OM SHARMA DURING THE COURSE OF SEARCH PROCEEDINGS IN THEIR CASE ON 14-3-2000 IN WHICH IT IS ALLEGEDLY PR OVED THAT THE SALE AND PURCHASE TRANSACTION OF DIAMONDS AS APPEARING IN TH EIR BOOKS OF ACCOUNT WAS A PAPER TRANSACTION ONLY AND CARRIED OUT WITH A VIE W TO FACILITATE THE DECLARANTS UNDER VDIS 1997. IT HAS NOWHERE BEEN PROVED IN THE ASSESSMENT ORDER 9THAT THE APPELLANT WAS CONFRONTED WIDTH THE EVIDENCE GAT HERED BY THE AO OR BY THE INVESTIGATION DIRECTORATE OF PUNE. IN FACT THE AO D OES NOT APPEAR TO HAVE CONDUCTED ANY INVESTIGATION HIMSELF AND HE HAS MERE LY RELIED ON THE INVESTIGATION DONE BY THE INVESTIGATION DIRECTORATE IN THE CASE OF SHRI KAMAL KUMAR JOHRI AND SHRI HARI OM SHARMA. THE EVIDENCE A ND INVESTIGATION IN THOSE CASES CANNOT HAVE A DIRECT BEARING ON THE ASS ESSMENT PROCEEDINGS IN THE APPELLANTS CASE UNLESS THE APPELLANT WAS CONFR ONTED WITH THE SAME AND ALLOWED TO CROSS-EXAMINE THE PERSON WHO GAVE STATEM ENTS DETRIMENTAL TO THE INTERESTS OF THE APPELLANT. 8. IN VIEW OF THESE FACTS IT IS VERY CLEAR THAT TH E ADDITION OF RS.11 95 265/- IN THE CASE OF THE APPELLANT HAS BEEN MADE NOT ON THE BASIS OF ANY DIRECT EVIDENCE BUT MERELY ON THE BASIS OF INVESTIGATION I N THE CASE OF THIRD PARTY DURING THE COURSE OF SEARCH PROCEEDINGS IN THAT CAS E. AS FAR AS THE ASSESSMENT PROCEEDINGS IN THE CASE OF THE APPELLANT ARE CONCERNED THERE IS NO DAMAGING STATEMENT MADE BY THE SAID KAMAL KUMAR JOHRI AND HARI OM SHARMA DIRECTLY INDICATING THE APPELLANTS NAME AND WHICH CAN SUGGEST THAT HE HADE ANY BOGUS PURCHASE FROM THE APPELLANT OR TH E APPELLANT HAD MADE ANY BOGUS SALE OF DIAMONDS. THE APPELLANT HAS FULLY DISCHARGED THE ONUS PLACED ON HIM REGARDING THE GENUINENESS FOR SALE OF DIAMONDS BY THE FOLLOWING FACTS:- I) THE EXISTENCE OF DIAMONDS AND THEIR AVAILABILITY FOR SALE TO M/S. GALAXY EXPORTS IS EVIDENCED BY VDIS 1997 DECLARATI ON MADE BY THE APPELLANT AND A CERTIFICATE U/S.68(2) OF VDIS 1997 ACT ISSUED BY CIT MC-XV MUMBAI ON 2-1-1997. II) THE SALE OF LOOSE DIAMONDS BY THE APPELLANT TO M/S. GALAXY EXPORTS IS EVIDENCED BY PURCHASE BILL DATED 27-1-98 ISSUED BY M/S. GALAXY ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 14 EXPORTS AND FILED BY THE APPELLANT BEFORE THE AO DU RING THE REASSESSMENT PROCEEDINGS. III) THE GENUINENESS OF SALE CONSIDERATION RECEIVED BY THE APPELLANT IS EVIDENCED BY THE ACCOUNT PAYEE CHEQUES ISSUED BY M/ S. GALAXY EXPORTS FROM THEIR BANK ACCOUNT AND DULY CREDITED I N THE BANK ACCOUNT OF THE APPELLANT. IV) THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE T O PROVE THAT THE APPELLANT HAD GIVEN AN EQUIVALENT AMOUNT OF CASH TO M/S. GALAXY EXPORTS BEFORE RECEIVING THE CHEQUES FROM THEIR BAN K ACCOUNTS. V) THE APPELLANT HAS NOT ONLY PRODUCED THE BILL ISS UED BY M/S. GALAXY EXPORTS BUT SHE HAS PRODUCED CONFIRMATIONS FROM THI S PARTY BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS AND THEREAFTER THE AO DOES NOT APPEAR TO HAVE BOTHERED TO EITHER ASK THE APPELLANT TO PRODUCE THE BUYER PARTY FOR EXAMINATION OR ISSUE SUMMONS TO SUC H PARTY FOR EXAMINING THE GENUINENESS OF THE TRANSACTIONS RELAT ING TO THE SALE / PURCHASE OF DIAMONDS. INSTEAD THE AO HAS RELIED UP ON THE RESULTS OF INVESTIGATION IN SEARCH PROCEEDINGS IN THE CASE OF THIS BUYER PARTY WITHOUT EVEN CONFRONTING THE APPELLANT ON THE EVIDE NCE GATHERED IN THOSE PROCEEDINGS. UNDER THESE CIRCUMSTANCES THE APPELLANT HAS DISCHARGED THE PRIMARY ONUS PLACED ON HER REGARDING THE GENUINENESS OF THE CREDIT IN HER CAPITAL ACCOUNT. THEREAFTER T HE ONUS SHIFTS ON THE AO TO CONCLUSIVELY PROVE THAT THE AMOUNT OF RS.11 9 5 265 RECEIVED BY THE APPELLANT FROM M/S. GALAXY EXPORTS WAS APPELLAN TS OWN MONEY AND THAT THERE WAS N FACT NO SALE OF DIAMONDS BY TH E APPELLANT. FOR THIS PURPOSE THE AO SHOULD HAVE SUMMONED THE BUYER PART Y AND RECORDED ITS STATEMENT AND IF THEY STATED ANYTHING AGAINST T HE APPELLANT THEN THE AO SHOULD ALLOWED A CROSS-EXAMINATION OF SUCH BUYER PARTY BY THE APPELLANT. IN ANY CASE THE ADDITION OF RS.11 95 26 5/- CANNOT BE SUSTAINED MERELY ON THE BASIS OF INVESTIGATION DONE IN THE CASE OF THE BUYER PARTY DURING THE COURSE OF SEARCH PROCEEDINGS IN ITS CASE AS THE SAME HAS NO DIRECT RELEVANT TO THE ASSESSMENT PROCE EDINGS IN THE APPELLANTS CASE. ON THE CONTRARY THE CONFIRMATION OF THE BUYER PARTY FILED BY THE APPELLANT DURING THE ASSESSMENT PROCEE DINGS IS DIRECTLY RELEVANT IN THIS CASE AND THE AO HAS DONE NOTHING T O DISPROVE THE SAME. THERE HAS BEEN COMPLETE DENIAL OF THE PRINCIP LES OF NATURAL JUSTICE IN THIS CASE INASMUCH AS THE EVIDENCE FILED BY THE APPELLANT HAS NOT BEEN CONTROVERTED BY THE AO AND COMPLETE RELIAN CE IS PLACED BY THE AO ON THE OUTCOME OF INVESTIGATION IN A THIRD P ARTY DURING SEARCH PROCEEDINGS IN ITS OWN CASE WHICH HAS NO DIRECT REL EVANCE TO THE APPELLANTS CASE UNLESS THE APPELLANT WAS PROVIDED AN OPPORTUNITY TO CROSS-EXAMINE THE BUYER PARTY. UNDER THESE CIRCUMS TANCES I DO NO FIND ANY REASON TO UPHOLD THE ACTION OF THE AO IN T REATING THE TRANSACTION OF SALE OF DIAMONDS BY THE APPELLANT TO M/S. GALAXY EXPORTS AS A BOGUS SALE. ACCORDINGLY THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.11 95 65/- ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 15 9. IN VIEW OF THE ABOVE ARGUMENTS FACTS OF THE CAS E AND TOTALITY OF CIRCUMSTANCES THE LD. COUNSEL STATED THAT THE ADDI TION MADE ON THE SAME SET OF FACTS HAS BEEN KNOCKED DOWN BY THE MUMBAI TRIBUNAL J BENCH IN ITA NO.50/MUM/2003 DATED 31-01-2005 IN THE CASE OF SHRI KAMAL KUMAR JOHARI V. DCIT READS AS UNDER:- 4.THE ABOVEMENTIONED 18 APPEALS BY ASSESSEE AND 16 APPEALS BY REVENUE HAVE BEEN FILED BEFORE THE TRIBUNAL IN RESPECT OF T HE BLOCK PERIOD A.Y 1990-91 TO 22-08-2000. THE RELEVANT FACTS IN SHORT AS AL LEGED OR APPEARING FROM RECORD ARE THAT SHRI KAMAL KUMAR JOHARI (KKJ) AND SHRI HERI OM SHARMA (HOS) ARE CHARTERED ACCOUNTANTS BY PROFESSION AND D URING THE AFORESAID BLOCK PERIOD WERE CARRYING ON PROFESSIONAL PRACTIC E OF CHARTERED ACCOUNTANCY IN PARTNERSHIP IN THE FIRM NATURE AND S TYLE SHARMA JOHARI. SINCE 1993 THEIR RESPECTIVE HUFS BEING SEPARATE TA XABLE ENTITIES WERE ENGAGED IN THE BUSINESS OF TRADING AND EXPORT OF DI AMONDS EITHER AS A PARTNER OR PROPRIETOR AS DETAILED ON PAGE 5 AND 6 PB. SEARCH AND SEIZURE OPERATION U/S.13 OF I.T. ACT 1961 (ACT) WERE CONDU CTED ON 14.03.2000/22.08.2000 IN THE CASES OF ABOVE MENTION ED ASSESSEES THEIR FAMILY MEMBERS AND BUSINESS CONCERNS AT VARIOUS PLA CES. BEFORE THIS SEARCH THE DDIT MUMBAI HAD CARRIED OUT SURVEY ON THE RESID ENTIAL PREMISES OF KKJ AND HOS ON 27.01.2000 INVENTORY OF WHICH IS PLACED ON PAGE 22. IN THE VARIOUS BUSINESS CONCERNS SUBJECTED TO SEARCH AND SEIZURE OPERATION AND INVOLVED IN THESE APPEALS CLOSE RELATIVES OR ACQUA INTANCE OF KKJ & HOS WERE PARTNERS OR PROPRIETORS OR SHAREHOLDERS. DURING TH E SEARCH AT PUNE IT WAS DETECTED THAT THE ASSESSEE GROUP HAD IN PROVIDING A CCOMMODATION ENTRIES AND HAD FACILITATED THE VDIS DECLARANTS IN SHOWING HUGE CAPITAL GAINS. 6. AS PER ASSESSING OFFICER KKJ AND HOS HAVE GIVEN ACCOMMODATION ENTRIES FOR SALE OF NON-EXISTING DIAMONDS BY USING MULTILAY ERED SYSTEM. HE GROUPED VARIOUS ENTITILES OF KKJ AND HOS AND THEIR RELATIVE S COVERED IN THE SEARCH UNDER FOLLOWING HEADS AND DESCRIBED THE MODUS OPERANDI OF THE PURCHASES AND SALE OF DIAMONDS AS UNDER: (1) FRANT CONCERNS BEING FOUR IN NUMBER PURCHASED DIAMONDS FROM A LARGE NUMBER OF VDIS DECLARANTS. FOLLOWING ARE THE FRONT CONCERNS (I) M/S. GALAXY EXPORTS II) M/S.MINI EXPORTS III) M/S. KARTIK EXPORTS IX) M/S. KUNAL EXPORTS (2) BULK CONCERNS ARE FIVE IN NUMBER. THE FRONT CO NCERNS SOLD THOSE DIAMONDS TO BULK CONCERNS. FOLLOWING ARE THE BULK CONCERNS: I) M/S. PRIMA STAR EXPORTS II) M/S. SHINE STAR EXP ORTS III) M/S. NEELAM EXPORTS IV) M/S. KAYJEE EXPORTS V) M/S. VISHWA EXPORTS (3) RETAIL CONCERNS ARE TEN IN UMBER. THE BULK CONC ERNS SOLD THOSE DIAMONDS TO RETAIL CONCERNS. THE RETAIL CONCERNS DISPOSED THESE DIAMONDS TO A LARGE ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 16 NUMBER OF PERSONS FROM SURAT IN CASH BELOW RS.20 0 00/-. FOLLOWING ARE THE RETAIL CONCERNS: I) M/S. SHASHANK GEMS II) M/S. ASIATIC GEMS III) M/S. AMIT JOHARI IV) M/S. R.N. ENTERPRISES V) M/S. SUPER GEMS VI) M/S. JITENDRA R JOHARI VII) M/S. GANGA GEMS VIII) M/S. DEEP GEM S IX) M/S. S.R. JOHARI X) M/S. M.J. RATHOD 7. THE CASH OF SALE PROCEEDS OF DIAMONDS BY RETAIL CONCERNS WAS DEPOSITED IN BANK IN BANK ACCOUNTS OF RETAIL CONCERNS IN MUMBAI. THE RETAIL CONCERNS ISSUED CHEQUES /DEMAND DRAFTS TO THE BULK CONCERNS WHO IN TURN ISSUED CHEQUES FROM THEIR BANK ACCOUNTS AT MUMBAI TO FRONT CONCERNS FROM WHERE CHEQUES/DDS HAVE BEEN ISSUED TO VDIS DECLARANTS (BE NEFICIARIES) 55. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AS ALSO THE RIVAL CONTENTIONS WE FIND SUBSTANCE IN THE CONTENTIONS O F THE LEARNED CIT- DEPARTMENTAL REPRESENTATIVE THAT THE EVIDENCE NEED NOT NECESSARILY BE DIRECTED AND IT MAY BE CIRCUMSTANTIAL AS ITSELF FOR FASTENIN G THE LIABILITY THE CIRCUMSTANTIAL EVIDENCE TOO HAS GOT TO BE THERE. HOWEVER IN THE CASES/APPEALS UNDER OUR CONSIDERATION WE FIND WITH DISMAY THAT THERE IS NO T THE REQUIRED / INCRIMINATING ON RECORD WHETHER DIRECT OR CIRCUMSTANTIAL. ALL THE C ASES IN HAND ARE BLOCK ASSESSMENTS FRAMED UNDER CHAPTER-XIVB OF THE ACT. T HE UNDISCLOSED INCOME HAS BEEN DEFINED UNDER S.158B(B) AS INCOME WHICH HA S NOT BEEN DISCLOSED OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF T HE ACT. IN A BLOCK ASSESSMENT THE UNDISCLOSED INCOME OF THE BLOCK IS COMPUTED AS PER THE PROVISIONS OF S.158BB. AS PER S.158BB(1) AN UNDISC LOSED INCOME TO BE ONE SHOULD BE BASED ON EVIDENCE FOUND AS A RESULT OF SE ARCH OF FROM SUCH OTHER MATERIALS OF INFORMATION AS ARE AVAILABLE WITH ASSE SSING OFFICER AND ARE RELATABLE TO SEARCH. 56. IT IS REVEALED FROM THE RECORD THAT IN THE INST ANT CASES IT IS ON UNDISPUTED FACT THAT ALL THE TRANSACTIONS HAVE BEEN DULY RECORDED I N THE BOOKS OF ACCOUNT AND THE RETURNS OF INCOME INCLUDING THE SAME HAVE BEEN DULY FILED WITHIN THE DUE DATE AND PRIOR TO SEARCH. THE ADDITIONS OF UNDISCLOSED I NCOME ARE FOUND TO HAVE BEEN MADE ON THE INFERENTIAL PRESUMPTION THAT THE TRANSI TIONS THOUGH RECORDED IN BOOKS BUT REFLECT HIGH IMPROBABILITY AND SO THE INF ERENTIAL CONCLUSION TO BE DRAWN IS THAT THE DIAMONDS INVOLVED IN THE TRANSACTIONS O F PURCHASE/SALE OF DIAMONDS ARE NON-EXISTENT AND THE SAME ARE HAWALS TRANSACTIO NS OPERATED IN FACILITATE THE VDIS DECLARANTS-BENEFICIARIES AND THAT THIS IS A HA WALA OPERATION RACKED MASTER- MINDED BY KKJ AND HOS. HOWEVER UNDER OUR CONSIDER ATION BEING THE BLOCK ASSESSMENTS NO SUCH INFERENTIAL PRESUMPTIONS/CONSI DERATION CAN BE DRAWN IN THE MATER; AND WE HOLD THIS VIEW ALSO FOR THE REASON I N PARTICULAR THAT THE SELLER- PARTIES WHOSOEVER WERE SUMMONED BY ASSESSING OFFIC ER UNDER S.131 THEY ALL CONFIRMED THE SALE OF DIAMONDS BY THEM WHICH BEING A GLARING DIRECT EVIDENCE FURTHER LENDS CREDENCE TO THE ENTRIES OF THESE TRAN SACTIONS RECORDED IN THE REGULAR BOOKS OF ACCOUNT WHICH HAVE BEEN DULY AUDITED. SOM E SEEMING IMPROBABILITIES WHETHER OF SOME COINCIDENCES OR OTHERWISE MAY RAISE SUSPICIONS AND LOT OF SUSPENSION BUT THE SETTLED LEGAL POSITION REMAINS T HAT THE SUSPICION HOWSOEVER STRONG THE SAME MAY BE CANNOT TAKE THE PLACE OF PR OOFS; AND IT IS ALSO THE LEGAL ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 17 POSITION SETTLED WALL BY NOW THAT ADDITIONS OF UN DISCLOSED INCOME CANNOT BE MADE ON THE BASIS OF SURMISES/CONJECTURES AS ALSO ON THE BASIS OF PRESUMPTIONS/ASSUMPTIONS MUCH LESS ON THE BASIS OF ESTIMATE MADE BY DISBELIEVING THE ENTRIES AS THEY STAND ALREADY REC ORDED IN THE REGULAR BOOKS AND DISCLOSED IN THE RETURNS ALREADY FILED PRIOR TO SEA RCH AND PRESUMING THE TRANSACTIONS CONTAINED THEREIN AS NOT ACTUAL BUT HA WALA ONCE AND THAT TOO IN THE FACE OF CONTRARY DIRECT EVIDENCE SUPPORTIVE OF THOS E ENTERED TRANSACTIONS. BESIDES THERE IS NO EVIDENCE FOUND AS A RESULT OF SEARCH OR INFORMATION AVAILABLE WITH ASSESSING OFFICER RELATABLE TO SUCH EVIDENCE. 57. IN VIEW OF OUR DISCUSSIONS MADE ABOVE AND CONSI DERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASES IN HAND WE FIND NO JUST IFICATION FOR THE ADDITION S IN THESE BLOCK ASSESSMENTS MADE BY THE ASSESSING OFFIC ER AS UNDISCLOSED INCOME OF ASSESSEES B TREATING THE TRANSACTIONS AS HAWALA TRANSACTIONS AND INFERRING THE ASSESSEE TO HAVE EARNED HAWALA INCOME THEREON AND IN TURN ESTIMATING THE HAWALA INCOME AT 10% OF TURNOVER WHICH THE LEARNED CIT(A) REDUCED TO 8% AND ATTRIBUTED TO VARIOUS CONCERNS BY BIFURCATION THERE OF. WE THEREFORE DELETE THESE ADDITIONS OF UNDISCLOSED INCOME MADE / SUSTAINED IN THE HANDS OF ALL THESE ASSESSEES. WE ORDER ACCORDINGLY THIS DISPOSES OF I SSUES NO.(III) AND (IV) CONTAINED IN VARIOUS GROUNDS IN THE APPEALS OF ASSE SSEES AS MENTIONED ABOVE IN TABULATION FORM TOGETHER WITH VARIOUS GROUNDS RAIS ED IN VARIOUS APPEALS OF REVENUE DISPUTING THE LD. CIT(A)S IMPUGNED APPELLA TE ORDER IN REDUCING THE RATE OF HAWALA COMMISSION THAT WAS DETERMINED BY THE ASS ESSING OFFICER INASMUCH AS WHEN WE HAVE DELETED THE VARY ADDITIONS MADE BY ASS ESSING OFFICER BY ESTIMATING THE HAWALA INCOME THE ISSUE DISPUTING T HE REDUCTION INCOME OBVIOUSLY GET LOST. 58. THE ISSUE NO. (V) DISPUTES THE NON-ALLOWANCE OF SET OFF IN RESPECT OF PROFITS DISCOVERED BY ASSESSEE IN THE BOOKS OF ACCOUNT ON T RADING OF DIAMONDS WHICH THE LD. CIT(A) TREATED AS NON-GENUINE. 59. HOWEVER IN VIEW OF OUR DECISION RENDERED ABOVE ON ISSUES NO. (III) AND (IV) WHEREIN THE ADDITION OF UNDISCLOSED INCOME MADE BY TREATING THE TRANSACTIONS OF PURCHASE/SALE OF DIAMONDS AS NON-GENUINE AND HAWALA TRANSACTIONS HAS BEEN DELETED THIS ISSUE HAS BEEN RENDERED REDUNDANT/INF RU9CTUOUS AND SO WE DISMISS THE SAME ACCORDINGLY. ACCORDINGLY THE LD. COUNSEL FOR THE ASSESSEE URGED THE BENCH TO CONFIRM THE ORDER OF CIT(A) DELETING THE ADDITION ON BOTH THE ISSUES. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE ABOVE FACTS ARGUMENTS OF BOTH THE SIDES AND CASE RECORDS THAT THE ASSESSEE HAS FILED THE DETAILS IN RESPECT OF HOLDING OF THE LOOSE DIAMONDS AND GOLD JEWELLERY THE DECLAR ATION MADE BY THE ASSESSEE UNDER VDIS 1997 EVIDENCING THAT THE VALUE DECLARED WAS AS PER THE VALUATION REPORT OF THE APPROVED VALUER WHICH VERIFY THE FACT THAT THE ASSESSEE IS HOLDING LOOSE ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 18 DIAMONDS AND GOLD JEWELLERY. THE VALUER HAS ISSUED A REPORT AFTER VERIFYING THE FACT THAT THE LOOSE DIAMOND AND GOLD JEWELLERY WAS IN EX ISTENCE AND WAS PRODUCED BEFORE HIM. THE ASSESSEE ALSO PROVIDED COPIES OF BILLS T O PROVE THE GENUINENESS OF SALE ISSUED BY PURCHASER OF DIAMONDS AND GOLD JEWELLERY. THE PURCHASERS HAVE ALSO SUPPORTED THE PURCHASE BILLS BY AFFIDAVITS AND THE ASSESSEE ADMITTED THIS FACT. EVEN THE SALE CONSIDERATION WAS RECEIVED BY BANKING CHAN NEL BY ACCOUNT PAYEE CHEQUE / DRAFT. EVEN NOW BEFORE US THE ASSESSEE HAS FILED COMPLETE DETAILS IN RESPECT OF SALE TRANSACTIONS MADE WITH M/S GALAXY EXPORTS M/S MINI EXPORTS AND M/S JONSHON JEWELLERS. THESE FACTS HAVE BEEN VERIFIED BY THE A SSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND FOUND NO INFIR MITY OR NON-GENUINENESS OF THESE DOCUMENTS I.E. THE SALE TRANSACTIONS. THE A SSESSING OFFICER HAS PLACED RELIANCE ON THE BASIS OF CONJECTURE AND SURMISES FO R HOLDING THE SALE TRANSACTIONS AS PAPER TRANSACTIONS. EVEN THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASES OF SHRI KAMAL KUMAR JOHORI M/S. MINI EXPORTS MUMBAI M/S. GALAXY EXPORTS MUMBAI AND SHRI HARI OM SHARMA MUMBAI HAS CONFIRMED THE TRANSA CTIONS TAKEN PLACE WITH THESE FIRMS AS GENUINE. THE HONBLE TRIBUNAL AS CITED A BOVE BY STATING THAT THE ADDITION OF UNDISCLOSED INCOME ARE MADE ON THE INFERENTIAL PRES UMPTION THAT THE TRANSACTIONS THOUGH RECORDED IN THE BOOKS OF ACCOUNT REFLECTS H IGH IMPROBABILITY AND ACCORDINGLY THE INFERENTIAL CONCLUSION DRAWN WAS THAT THE DIAMO NDS INVOLVED IN THE PURCHASE / SELL ARE NON-EXISTENCE AND THE SAME ARE HAWALA TRAN SACTIONS OPERATED TO FACILITATED THE VDIS 1997 DECLARANTS AND THIS HAWALA OPERATION WAS MASTER-MIND BY SHRI KAMAL KUMAR JOHARI AND SHRI HARI OM SHARMA. BUT TH E TRIBUNAL HELD THAT NO SUCH INFERENCE CAN BE DRAWN AND HELD AS WE HOLD THIS VIEW ALSO FOR THE REASON IN PARTICULAR THAT THE SELLER-PARTIES WHOSOEVER WERE SUMMONED BY ASSESSING OFFICER UNDER S.131 THEY ALL CONFIRMED THE SALE OF DIAMOND S BY THEM WHICH BEING A GLARING DIRECT EVIDENCE FURTHER LENDS CREDENCE TO THE ENTR IES OF THESE TRANSACTIONS RECORDED IN THE REGULAR BOOKS OF ACCOUNT WHICH HAVE BEEN DU LY AUDITED. SOME SEEMING IMPROBABILITIES WHETHER OF SOME COINCIDENCES OR OT HERWISE MAY RAISE SUSPICIONS AND LOT OF SUSPENSION BUT THE SETTLED LEGAL POSITIO N REMAINS THAT THE SUSPICION HOWSOEVER STRONG THE SAME MAY BE CANNOT TAKE THE P LACE OF PROOFS; AND IT IS ALSO THE LEGAL POSITION SETTLED WALL BY NOW THAT ADDIT IONS OF UNDISCLOSED INCOME CANNOT BE MADE ON THE BASIS OF SURMISES/CONJECTURES AS AL SO ON THE BASIS OF PRESUMPTIONS/ASSUMPTIONS MUCH LESS ON THE BASIS OF ESTIMATE MADE BY DISBELIEVING THE ENTRIES AS THEY STAND ALREADY RECORDED IN THE REGULAR BOOKS AND DISCLOSED IN THE ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 19 RETURNS ALREADY FILED PRIOR TO SEARCH AND PRESUMIN G THE TRANSACTIONS CONTAINED THEREIN AS NOT ACTUAL BUT HAWALA ONCE AND THAT TOO IN THE FACE OF CONTRARY DIRECT EVIDENCE SUPPORTIVE OF THOSE ENTERED TRANSACTIONS. BESIDES THERE IS NO EVIDENCE FOUND AS A RESULT OF SEARCH OR INFORMATION AVAILABL E WITH ASSESSING OFFICER RELATABLE TO SUCH EVIDENCE. ACCORDINGLY WE ARE OF THE VIEW THAT THE TRIBUNAL IN THE CASE OF PURCHASER HAS HELD THE TRANSACTIONS OF SALE AND PUR CHASE AS GENUINE IN THE HANDS OF SELLER THE TRANSACTION CAN NOT BE HELD OTHERWISE ON THE SAME SET OF FACTS. 11. WE FURTHER FIND THAT THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF MANOJ AGGARWAL V. DCIT [2008] 113 ITD 377 (DEL) (SB) HAS TAKEN A SIMILAR VIEW AS IN THE CASE OF PURCHASER OF JEWELLERY TAKEN BY THE MUMBAI BENCH IN THE CASE OF SHRI KAMAL KUMAR JOHARI (SUPRA):- 82. IN VIEW OF THE FOREGOING DISCUSSION IT APPEAR S TO US THAT THE EVIDENCE COLLECTED BY THE REVENUE AUTHORITIES IS NOT SUFFICI ENT TO ESTABLISH THEIR STAND THAT THE JEWELLERY TRANSACTIONS CARRIED ON BY BEMCO JEWELLERS PVT. LTD. WERE ONLY PAPER TRANSACTIONS OR BOGUS AND THAT MANOJ AGA RWAL WHO WAS ONE OFF THE DIRECTOR OF THE COMPANY AT THE RELEVANT TIME C ONTROLLED AND PUT THROUGH THESE TRANSACTIONS BY ACCOMMODATION ENTRIES AND EAR NED COMMISSION INCOME THEREFROM. WE ARE AWARE THAT THE ENTIRE EVIDENCE HA S TO BE APPRECIATED IN A WHOLESOME MANNER AND EVEN WHERE THERE IS DOCUMENTAR Y EVIDENCE THE SAME CAN BE OVERLOOKED IF THERE ARE SURROUNDING CIR CUMSTANCES TO SHOW THAT THE CLAIM OF THE ASSESSEE IS OPPOSED TO THE NORMAL COURSE OF HUMAN THINKING AND CONDUCT OR HUMAN PROBABILITIES. THIS PRINCIPLE HAS BEEN LAID DOWN BY THE SUPREME COURT IN TWO LEADING CASES CIT V. DURGA PRASAD MORE [1971] 82 ITR 540 AND SUMATI DAYAL V. CIT [1955] 214 ITR 801. EVEN APPLYING THIS PRINCIPLE TO THE PRESENT CASE WE HAVE FELT SOME DI FFICULTY IN REJECTING THE ASSESSEES PLEA AS OPPOSED TO THE NORMAL COURSE OF HUMAN CONDUCT. THE CIRCUMSTANCES SURROUNDING THE CASE ARE ALSO IN OUR VIEW NOT STRONG ENOUGH TO JUSTIFY THE REJECTION OF THE ASSESSEES PLEA AS FANTASTIC OR OUTRAGEOUS. WE HAVE CONSIDERED THE BACKGROUND OF BISHAN CHAND AGGA RWAL AND HIS SON MANOJ AGGARWAL TO BE OF RELEVANCE TO THE CASE. WE HAVE ALSO CONSIDERED TO BE OF SIGNIFICANCE THE ADMISSION OF MANOJ AGARWAL T HAT ONLY THE TRANSACTIONS IN THE SHARES ARE ACCOMMODATION ENTRIES AND THAT BE MCOS JEWELLERY TRANSACTIONS ARE GENUINE AND WE HAVE ALSO GIVEN OUR REASONS AS TO WHY WE CONSIDER IT TO BE SO. WE HAVE ALSO TAKEN NOTE OF TH E FACT THAT MOST OF THE QUESTIONS PUT TO MANOJ AGGARWAL WHILE RECORDING SEV ERAL STATEMENTS FROM HIM RELATED TO THE SHARE TRANSACTIONS PUT THROUGH FRIEN DS PORTFOLIO PVT. LTD. AND THAT HARDLY ANY RELEVANT QUESTION REGARDING THE ACT IVITIES OF BEMCO WAS ASKED. WE HAVE ALSO CONSIDERED IT TO BE OF SOME IMPORTANCE THE FACT THAT THE TURNOVER SHOWN IN THE SHARE TRANSACTIONS WHICH WER E ADMITTED TO BE BOGUS WAS ABOUT THREE AND HALF TIMES THE PURCHASES OF RS. 36.69 CRORES SHOWN BY BEMCO IN ITS JEWELLERY BUSINESS. ADDED TO THESE AR E THE FACTS THAT EVEN IN THE SEIZED MATERIAL THERE WAS A LETTER-HEAD OF BEMCO WH ICH SHOWED JAI SIDHI APARTMENTS AT AHMEDABAD AS THE BRANCH OFFICE OF BEM CO WHICH MEANS THAT ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 20 THE CLAIM OF BEMCO THAT IT HAD A BRANCH OFFICE AT A HMEDABAD WHERE THE GOLD BARS WERE SOLD WAS RIGHT AS ALSO THE SALES-TAX ASS ESSMENT ORDER UNDER THE GUJARAT SALES-TAX ACT WHERE THE ASSESSEE DECLARED R S.24 07 30 000 AS TOTAL SALES AND EXEMPTED SALES. THERE WAS NO EVIDENCE OF ANY CONSEQUENCE WHICH WAS UNEARTHED DURING THE SEARCH TO DIRECTLY SHOW TH AT BEMCO WAS CARRYING ON ONLY ACCOMMODATION ENTRY BUSINESS FOR JEWELLERY. SU NIL KAPOOR WHO WAS PROJECTED AS ONE OF THE WITNESSES OF THE DEPARTMENT TO SUPPORT THEIR STAND THAT BEMCOS JEWELLERY BUSINESS WAS BOGUS HAS BEEN FOUN D BY US TO HAVE ACTED AS SUB-MEDIATOR IN THE SHARE ACCOMMODATION ENTRY BU SINESS CARRIED ON BY MANOJ AGGARWAL THROUGH FRIENDS PORTFOLIO AND HE HAS ALSO BEEN PAID COMMISSION IN THAT BUSINESS. BEMCO HAS BEEN FOUND T O HAVE HAD A SHOP OR SHOWROOM IN 1182 KUCHA MAHAJANI AND THIS HAS BEEN CONFIRMED BY THE REPORT OF THE SALES-TAX INSPECTOR AS ALSO BY THE RE NTAL RECEIPT STARTING FROM JANUARY 1998. THUS THE SURROUNDING CIRCUMSTANCES APART FROM THE DIRECT EVIDENCE IN THE CASE DO NOT CONTAIN ANYTHING WHICH BELIES THE CLAIM OF MANOJ AGARWAL THAT THOUGH HIS SHARE TRANSACTION BUSINESS WAS ONLY AN ACCOMMODATION ENTRY BUSINESS FOR COMMISSION THE JE WELLERY BUSINESS CARRIED ON BY BEMCO HAS NOT BEEN PROVED TO BE SO. 12. IN VIEW OF THE ABOVE VIEW OF MUMBAI BENCH OF TH IS TRIBUNAL IN THE CASE OF KAMAL KUMAR JOHARI AND OTHERS (SUPRA) WHEREIN THE GENUINENESS OF TRANSACTIONS O F SALE AND PURCHASE OF DIAMONDS AND GOLD JEWELLERY IS ACCEPTED AND IN VIEW OF THE FACT THAT THE ASSESSEE HAS FILED THE DETAILS IN RES PECT OF HOLDING OF THE LOOSE DIAMONDS AND GOLD JEWELLERY THE DECLARATION MADE BY THE ASSESSEE UNDER VDIS 1997 EVIDENCING THAT THE VALUE DECLARED WAS AS PER THE VALUATION REPORT OF THE APPROVED VALUER WHICH VERIFY THE FACT THAT THE ASS ESSEE IS HOLDING LOOSE DIAMONDS AND GOLD JEWELLERY AND THE COPIES OF BILLS TO PROV E THE GENUINENESS OF SALE ISSUED BY PURCHASER OF DIAMONDS AND GOLD JEWELLERY AND ALS O SUPPORTED THE PURCHASE BILLS BY AFFIDAVITS AND EVEN THE SALE CONSIDERATION WAS R ECEIVED BY BANKING CHANNEL BY ACCOUNT PAYEE CHEQUE / DRAFT THE TRANSACTIONS OF S ALE IN THE HANDS OF THE ASSESSEE CANNOT BE DOUBTED. ACCORDINGLY WE ACCEPT THE TRANS ACTION OF SALE OF LOOSE DIAMONDS AND GOLD JEWELLERY IN THE HANDS OF THE ASSESSEE GEN UINE AND CONFIRM THE ORDER OF CIT(A) DELETING THE ADDITION. CONSEQUENTLY WE ALS O CONFIRM THE ORDER OF CIT(A) DELETING THE COMMISSION EXPENSES ON ABOVE TRANSACTI ON AFTER ACCEPTING THE SAME AS GENUINE. ACCORDINGLY BOTH THE INTER-CONNECTED ISS UES OF THE REVENUES APPEAL IS DISMISSED. 13. AS WE HAVE DECIDED THE ABOVE INTER-CONNECTED IS SUE DISMISSING THE REVENUES APPEAL IN THE CASE OF KANTABEN J GANDHI THE FACTS BEING EXACTLY IDENTICAL IN THE CASES OF ABHAYKUMAR B SHAH MRS. JASMINE K SHAH MRS. SAROJB EN B SHAH & ITA NO.1589 TO 1593AHD/2006 A.Y. 1998-99 ACIT BHARUCH CICLE V. ABHAYKUMAR B SHAH MRS. JASMIN E K SHAH SAROJBEN B SHAH MRS. NUTANBEN A GANDHI & MRS. KANTABEN J GANDHI P AGE 21 MRS. NUTANBEN A GANDHI IN ITA NO.1589/AHD/2006 1590/AHD/2006 1591/AHD/2006 AND 1592/AHD/2006 WE DISMISS EXACTLY ON SIMILAR FINDINGS. 14. IN THE RESULT ALL FIVE REVENUES APPEALS ARE DISMI SSED. ORDER PRONOUNCED ON THIS DAY OF 18 TH JANUARY 2010 SD/- SD/- (DR.O.K.NARAYANAN) (MAHAVIR SINGH) (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD DATED :18/01/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-I BARODA 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD