Manoj Begani Kolkata v. Acit Circle 44 Kolkata Kolkata

1 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 A In The Income Tax Appellate Tribunal A Bench Kol Kata Before And Before Shri A T Varkey Jm Shri Waseem Ahmed Am I T A No 932 Kol 2017 Assessment Year 2008 09 I T A Nos 933 To 935 Kol 2017 Assessment Year 2010 11 To 2012 13 I T A No 936 Kol 2017 Assessment Year 2014 15 Manoj Begani Pan Adppb 9417 N Vs Assistant Commissioner Of Income Tax Circle 44 Kolkata Appellant Respondent Date Of Hearing 16 10 2017 Date Of Pronouncement 15 12 2017 Appellant Shri Miraj D Shah Advocate For The Respondent Shri Kalyan Nath Addl Cit Dr Order Per Shri A T Varkey Jm All These Appeals Filed By The Assessee Are Against The Separate Orders Of Ld Cit A 13 Kolkata Which Are All Dated 27 02 2017 For Ays 2008 09 2010 11 To 2012 13 And 2014 15 Respectively Since Grounds Are Common And All The Appeals Have Been Heard Together We Dispose Of All These Appeals By This C Onsolidated Order For The Sake Of Convenience 2 At The Outset Itself Ld Counsel For The Assess Ee Shri Miraj D Shah Has Submitted That He Is Not Pressing Ground Nos 1 To 4 Of All T He Appeals Which Are The Legal Issue Taken By The Assessee Against Reopening Of Assessment For This Assessment Year Done U S 148 Of 2 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 The Income Tax Act 1961 Hereinafter Referred To A S The Act Therefore Ground Nos 1 To 4 Of All The Appeals Are Dismissed As Not Pressed 3 Ground No 5 In All The Appeals Are Against The Action Of The Ld Cit A In Upholding The Addition Of Rs 27 28 000 Being Bogus Purchase Of Diamonds From M S Vitrag Jewels Hereinafter Referred To As M S Vitrag For Ay 2 008 09 Likewise In Ay 2010 11 The Ld Cit A Has Confirmed The Addition Of Rs 32 41 4 40 Being Bogus Purchase Of Diamonds From M S Kangan Jewels Pvt Ltd Hereina Fter Referred To As M S Kangan Likewise For Ay 2011 12 The Ld Cit A Has Confir Med The Addition Of Rs 38 99 463 Being Bogus Purchase Of Diamonds From M S Kangan Similarly For Ay 2012 13 The Ld Cit A Confirmed The Addition Of Rs 35 39 363 Bei Ng Bogus Purchase Of Diamonds From M S Kangan Likewise For Ay 2014 15 The Ld Cit A Confirmed The Addition Of Rs 37 50 000 Being Bogus Purchase Of Diamonds Fro M M S Arihant Exports Hereinafter Referred To As M S Arihant Since The Order Pa Ssed By The Ld Cit A Is Identically Worded And The Basis For Addition In All The Assess Ment Years Are The Same Except Variance In Figures We Take The Lead Case That Of Ay 2008 0 9 And The Decision For That Year Will Be Followed In All Other Assessment Years 4 Briefly Stated Facts Are That The Ao Noted That The Assessee Had Filed His Return Of Income For Ay 2008 09 On 10 01 2008 Declaring Total Income Of Rs 8 05 440 Which Was Revised On 17 11 2008 To An Income Of Rs 8 19 800 And The Case Was Processed U S 143 1 Of The Act On 14 11 2010 Later The Ao Reopened Th E Case For Ay 2008 09 U S 147 Of The Act After Issuing Notice U S 148 Of The Act On 23 03 2015 The Ao Noticed That The Assessee Was Engaged In The Business Of Manufacturi Ng Of Jewellery And Trading Of Metal Precious Semi Precious Stones Under The Name Of His Proprietary Concern M S Manoj Begani According To The Ao On Verification It Was Found That The Assessee Has Made Bogus Transaction With M S Vitrag Amounting To Rs 27 28 000 And For That Reason The Case Was Reopened The Ao Noted That Vide Notice U S 142 1 Of The Act Dated 03 06 2015 The Case Was Fixed For Hearing On 11 06 2015 However No H Earing Could Take Place Because Of An Adjournment Application Moved By The Assessee So H E Refixed The Case On 18 06 2015 And Since The Assessee Sought Adjournment Again The Ma Tter Was Refixed For Hearing On 3 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 26 04 2015 Thereafter The Ao Asked The Assessee To Produce The Principal Officer Of M S Vitrag Along With The Books Of Accounts To Verify T He Genuineness Of The Transaction Made With The Assessee Thereafter The Ao Noted That T He Assessee Did Not Made Compliance Till The Date Of Passing Of The Assessment Order And Sin Ce The Assessee Failed To Produce The Principal Officer Of M S Vitrag Along With Books O F Account The Ao Concluded That Assessee Had Excessively Debited In The P L Account The Amount Of Bogus Purchase Amounting To Rs 27 28 000 From M S Vitrag And Si Nce The Assessee Has Not Been Able To Prove Satisfactorily That The Purchases Made Are No T Bogus Purchases The Entire Amount Of Rs 27 28 000 Was Added Back To The Total Income O F The Assessee Aggrieved By The Aforesaid Order Of The Ao Assessee Preferred An Ap Peal Before The Ld Cit A Who Was Pleased To Confirm The Same Here We Note That Tho Ugh The Reassessment Order Was Only Of Two 2 Pages The Ld Cit A Has Decided The Matt Er By An Impugned Order Running To Sixty Four 64 Pages 5 We Have Heard Rival Submissions And Gone Thro Ugh The Facts And Circumstances Of The Case We Note That The Ao Has Disallowed The Entir E Purchase From M S Vitrag On The Basis That The Assessee Failed To Produce The Principal O Fficer Of M S Vitrag Along With The Books Of Account So He Could Not Verify The Genuineness Of The Transaction On That Basis The Ao Disallowed The Entire Purchase Made From M S Vi Trag In The Appellate Proceedings And On Perusal Of The Appellate Order It Reveals Th At The Ld Cit A Has Brought On Record Elaborately The Background Facts Which Prompted The Ao To Reopen The Assessment Of The Assessee For All The Assessment Years Before Us F Or Better And Easy Understanding In All The Assessment Years Before Us The Additions Made Were Based On The Allegation Of Bogus Purchases Of Diamonds As Stated By The Accommodatio N Entry Providers Which Are Given By A Chart Below Sl No Ay Section Addition Name Of The Parties 1 2008 09 147 2 780 000 Vitrag Jewels 2 2010 11 147 3 241 440 Kangan Jewels P Ltd 3 2011 12 147 3 899 463 Kangan Jewels P Ltd 4 2012 13 147 3 539 363 Kangan Jewels P Ltd 5 2014 15 147 3 750 000 Arihant Exports 17 210 266 4 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 We Would Like To Discuss The Background Of All The Cases For Better Understanding Of The Cases Before Us From A Perusal Of The Aforesaid Ch Art We Note That For The Relevant Assessment Year Which Is Under Consideration In The Lead Case Is In Respect To Purchases From M S Vitrag Ay 2008 09 In Respect To M S Vitrag Ay 2008 09 And M S Arihant I E With Respect To Ay 2014 2015 We Note That Bot H The Concerns Are Controlled By Rajendra Jain Group Which We Discern From Perusal O F Pages 31 And 32 Of The Ld Cit A S Order In Respect To M S Kangan It Belongs To Dha Rmichand Group Ay 2010 11 To 2012 13 In Which Shri Dharmichand Jain Is The Key Perso N We Note That Reopening The Assessments And Thereafter Additions Were Made On T He Assessee For All These Assessment Years Before Us Was Based On The Statement Of Shri Rajendra Jain Who Controlled M S Vitrag Ay 2008 09 And M S Arihant Ay 2014 15 H As Been Relied Upon Likewise In Respect Of Ays 2010 11 To 2012 13 The Statement Of Shri Dharmichand Jain Was Relied Upon In Respect To Bogus Purchases From M S Kangan We Note That The Ld Cit A Has Heavily Relied On The Statement Of Shri Rajendra Ja In For Making The Disallowance Of The Purchases Claimed By The Assessee From M S Vitrag Ay 2008 09 And In Respect To M S Arihant 2014 15 Whose Statement Is Reproduced Fro M Pages 31 To 38 Which Was Recorded During Search And Seizure On 03 10 2013 In Their Pr Emises And In Page 39 Of The Ld Cit A S Order He Gives The Gist Of Shri Dharmicha Nd Jains Statement In Respect Of M S Kangan For Ays 2010 11 To 2012 13 And Observes That The Modus Operandi Adopted By All These Three Groups Are Similar Therefore We Are G Oing To Discuss In Detail About The Statement Recorded Of Shri Rajendra Jain Which Is R Elevant For Ay 2008 09 And 2014 15 Which Will Decide All The Cases Before Us 6 The Ld Cit A At Page 34 Of His Order Has Given The Modus Operandi And Has Given A Pictorial Description Which According To Him Has Been Prepared By The Officers Of Investigation Wing After Detailed Discussion And U Nderstanding From Shri Rajendra Jain Which Is Essential For Better Understanding The Nui Sance Of The Whole Transaction The Chart Is Reproduced As Under 5 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 6 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 7 Thereafter The Ld Cit A Reproduces The Questi On And Answer From Shri Rajendra Jain Wherein He Explained The Pictorial Representat Ion Which Is Important To Understanding The Case Is Reproduced From Question No 16 And Ans Wer As Under Q 16 Please Refer To The Detailed Pictorial Repre Sentation Made By You In Answer To Question Number 15 And Explain The Detail Of Each A Nd Every Block Of The Pictorial Representation Diagram Ans Sir In The Pictorial Diagram Submitted By Me I Explained The Modus Of Various Parties Persons Concerns Involved At Various Blocks The Details Of These Block Are Explained As Under A This Block A Represents Various Concerns Of Dome Stic Market From Which We Take Purchase Bills Of Polished Diamonds Without Actual Delivery Of Diamonds These Bills Are Taken For A Long Credit Period And Usually They Are Not Settled With The Cheques But By The Sale Bills Of Rough Diamond Given By Us To Them In Usual Circums Tances The Bills Of Polished Diamond Is Only Settled By The Bills Of The Diamonds However Sometimes These Bills Are Also Settled By Movement Of Cheques From One Party To Another The Purchase Shown In Our Books From These Domestic Concern Have A Long Credit Period As Refl Ected In Our Books These Entries Are Merely Paper Transactions Which Are Used For Showin G High Turnover By The Beneficiary Domestic Concerns B This Block B Represent The Foreign Concerns From Whom We Import Diamonds These Concerns Are Mostly Based In Belgium And Name Of Fe W Such Concerns Are As Under A Hrp Diam Belgium B Gem Blue Belgium C Vee Diam Belgium D Swintu Diarn Belgium Here I Would Like To Clarify That We Are Just Impo Rting The Bills Of Diamonds From Such Foreign Parties And The Underlying Stock Of Diamonds Is Tak En By The Real Importers Who Do Not Figure Out At Any Place In The Books Of Accounts Maintaine D By Us As Well As The Foreign Exporter Only In The Eye Of Foreign Banker We Are The Genui Ne Importer Of The Diamond Otherwise All The Three Parties Involved In The Transaction Knows The Reality To Sum Up The Real Importers Of The Diamond From These Foreign Concern Are The Conc Erns Mentioned In Block D However The Bill Are Issued In The Name Of Concerns Mentioned I N The Block C In Our Block C Books Of Accounts The Diamonds Imported From Foreign Concern Mentioned In Block B Gets Reflected But We Dont Received The Physical Diamonds And The Same Diamonds Are Used By The Concerns Mentioned In Block D We Do Not Have Any Direct Con Tact With The Foreign Concerns Though We Have The Legal Liability We Have Only Some E Mail Communications With The Foreign Parties And That Too At The Instance Of Parties Concerns Me Ntioned In Block D C These Are The Various Concerns Operated And Cont Rolled By Myself And Sri Surendra Jain In Answer To Question No 13 I Have Already Explaine D In Details About These Concerns In These Concerns The Import Of Rough Diamonds Are Shown And Only The Accounting Entries Are Made Without Real Trading Of Diamonds The Bill Issued B Y The Foreign Concerns For The Rough Diamonds Are Issued In The Name Of These Concerns Block C However The Concerns Do Not Use The Imported Diamonds And The Physical Delivery Is Made To The Concerns Mentioned In The 7 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 Block D All The Concerns Mentioned In Block C Are Operated Controlled And Managed By Myself And Shri Surendra Jain Therefore We Two Ar E The Persons Responsible For Day To Day Activities Of The Concerns The Sharing Of Profit L Oss Is Between Myself And Shri Surendra Jain Only Whereas Others Are Working On Our Instance An D Directions For Which They Are Paid Salary Remuneration Which Further Get Compensated B Y The Business Income Arising Out Of This Operation In Their Respective Concerns D The Concerns Mentioned In Block D Are The Concer Ns Actually Importing The Diamonds Without Using Their Name And Address They Utilize Our Service As Name Lender The Payments To The Foreign Parties Against The Diamonds Importe D Are Also Monitored By The Concerns Mentioned In Block D Therefore The Parties Mentio Ned In Block D Sometimes Arranges The Cheque Payment By Getting The Sales Bill Issued By Us To Those Concerns Block E Interested In Taking Bogus Purchase Bills For Regularizing Their Books Of Accounts Further I Would Like To Clarify That I Dont Know The Actual Reason For Imp Orting The Rough Diamonds In The Name Of Concerns Managed And Controlled By Us Block C E The Concerns In Block E Are The Concerns That Re Quire Bogus Purchase Bills For Diamonds However Our Concerns Have Bogus Stock Of Diamonds I N Our Books Of Accounts Which Are Shown To Be Purchased Imported From Foreign Conce Rns Therefore The Diamonds Shown To Be Purchased Imported From Foreign Concerns Thus Ar E Against Shown To Be Sold To The Independent Concerns Mentioned In Block E These Co Ncerns In Block E Take Purchase Bills From Our Concerns Block C Without Actual Delivery Of Diamonds The Payments Made Through Cheques Or Rtgs By These Concerns Block E Gets Utilized For The Payments In Foreign Currency To The Foreign Concerns Mentioned In Black B As Per The Terms Designed And Under Intimation To The Key Person Controlling The Concerns Of Block D Against The Payment Made By Concerns Of Block E Thr Ough Cheques Or Rtgs The Cash Component Is Generally Settled By The Key Persons C Ontrolling The Concerns Of Block D Directly Or Indirectly By Taking Services Of Angadia F The Parties Mentioned In The Block F Are The In Dependent Parties In The Market Which Are In Requirement For Entries Of Unsecured Loans Again St Their Unaccounted Cash These Entries Are Usually For Long Period And The Same Gets Rever Sed As And When Such Parities Make Payments Through Banking Channels And Take Back The Cash During The Course Of Search And Seizure Action Stat Ement Of Shri Sachin Pareek Prop Of Arihant Exports Director Of Karnawat Imp Ex Pvt Ltd Moulimani Impex Pvt Ltd Shri Manish Sushil Jain Prop Of Kalash Ent Erprises Director Of M S Kriya Impex Pvt Ltd And Karnawat Impex Pvt Ltd And Shri Anoop Y Jain Prop Of Aadi Impex Have Also Been Recorded All The Above Persons In Their State Ment Admitted That They Were Acting As Per The Directions Of Their Bosses Namely Shri Rajendra Jain And Shri Surendra Jain For Which They Were Getting Salary Hence It Is Clear That C Oncerns Listed At Sr 1 To Sr No 10 Above Are Totally Controlled And Managed By Sh Rajendra Jain And Sh Surendra Jain And Other Directors Partners Proprietors Are Just Name Lender S Who Are Actually Employees Of Sh Rajendra Jain And Sh Surendra Jain During The Course Of Search And Seizure Action Stat Ement Of Shri Sanjay Choudhary Director Of Nazar Impex Pvt Ltd And Karta Of Sanj Ay Choudhary Huf Proprietor Of M S Mayank Impex Has Been Recorded Wherein He Has Exp Lained The Modus Operandi Of Their Business That They Are Engaged In The Business Of B Ill Shopping Through All The Concerns And That They Dont Maintain Any Physical Stock Of Diam Onds The Relevant Extract Of Statement Of Shri Sanjay Choudhary Recorded During The Course Of Survey Action At His Office Is Reproduced Hereunder 8 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 8 After Reproducing Certain More Questions And Ans Wers In The Impugned Order The Ld Cit A Was Of The Opinion That He Was Convinced Tha T The Modus Operandi Adopted By All The Three Groups Are Similar We Note That Another Groups Name Is Also Figuring In I E Of One Sanjay Choudhury Group And The Statement Of One Sanjoy Chowdhury Was Also Recorded Which Figures At Page 39 Of Ld Cit A S Order Which Has Nothing To Do With Our Assessee So It Need Not Be Discussed We Note Tha T The Ld Cit A Has Made His Deductions Based On The Statement Given By Shri Rajendra Jain Who Controlled M S Vitrag 2008 09 And M S Arihant 2014 15 And The Ld Cit A After Analysing The Statement And Pictorial Description Of The Modus Operandi Supra Has Made The Following Observations During The Course Of Appellate Proceeding The App Ellant Submitted The Bills Issued By So Called Suppliers Perusal Of Bills Issued By M S V Ltrag Jewellers Ltd Shows That It Is Printed On Letter Head It Does Not Have Any Receip T Number On The Invoice Which Is Issued In Letter Form The Appellant Invested Its Unaccounted Money Out Of Books In Order To Purchase Diamond From Grey Market In Cash Which Has Been Reg Ularised Through Taking Bogus Books From The Aforesaid Persons It Is Undispelled That The Appellant Invested Its Unaccounted Money Out Of Books In Order To Purchase Diamond Fro M Grey Market In Cash Which Has Been Regularise Through Taking Bogus Bills From The Afor Esaid Persons As It Has Been Stated By Rajendra Jain In His Answer To Question No 15 As I T Has Been Stated By Rajendra Jain In His Answer To Question No 15 The Relevant Portion Of S Tatement Is Reproduced As Under Shri Rejendra Jain In His Statement Had Categorical Ly Mentioned That Concerns Purchasing Diamonds In Cash From Grey Market And Ta King Bogus Purchase Bills To Regularize The Purchase In Books Are The Concerns That Requir E Bogus Purchase Bill For Diamonds However Their Concerns Have Bogus Stock Of Diamond In Their Books Of Account Which Are Shown To Be Purchased From Foreign Concerns The Di Amonds Shown To Be Purchased Imported From Foreign Concerns Are Shown To Be Sold To These Concerns Who Take Purchase Bills From Their Concerns Without Actual D Elivery Of Diamonds The Payments Made Through Cheques Or Rtgs By These Concerns Get Utili Sed For The Payments In Foreign Currency To The Foreign Concerns Against The Payment Made B Y These Concerns Through Cheques Or Rtgs The Cash Component Is Settled By The Key Pers Ons Who Import Diamond Without Bill Directly Or Indirectly By Taking Services Of Angadi A It Was Also Admitted By Shri Rajendra Jain In His Statement That They Were Engaged In The Business Of Bill Shopping Through All The Concerns Due To Which They Didnt Have Any Physical Stock Of Diamond At Any Place At Any Point Of Time The Ao In His Assessment Order Has Concluded That From The Statements Of The Key Persons Of This Group Which Were Recorded On Oath At The Time Of Search Seizure Operation U S 132 Of The I T Act It Is Crystal C Lear That This Group Was Not Carrying Out Any Actual Business Of Any Kind But Merely Running The Paper Concerns For Providing Accommodation Entries To The Interested Parties Th E Assessee Also Got Accommodation Entry From M S Vitrag Jewellers Ltd Which Was A Paper C Oncerns Of This Group Engaged In The Activity Of Providing Paper Transactions For The Pu Rpose Of Purchase Bills Accommodation Entries Etc Hence There Was No Purchase Of Diamon D From M S Vitrag Jewellers Ltd Rather Assessee Had Diamond Worth Rs 27 28 000 Fr Om Some Unknown Parties Whom Payments Have Been Made From Unexplained Cash So F Ar As Payments Through Cheques To 9 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 M S Vitrag Jewellers Ltd By The Assessee Are Conce Rned The Same Have Been Settled In Cash Subsequently As Per The Statements Of These Pe Rsons Therefore This Amount Of Rs 27 28 000 Is Treated As Income From Undisclose D Sources Of The Assessee For The Year Under Consideration Which Has Been Used For Purchas E Of Diamonds In Cash From Some Unknown Parties The Appellant Nowhere Has Tried To Prove The Effect Ive Delivery Of Diamond From Sri Rajendra Jain Rather M S Vitrag Jewellers Ltd The Aforesaid Query Raised By The Ao Has Not Been Replied The Case Laws Cited By The Appell Ant States About The Taxability Of Gross Profits In Case Of Bogus Purchases But In Non Of T He Cases Unrecorded Cash Deployed Outside Of Books For Purchase Of Diamond From Grey Market And Regularising Through Cheque Ledger In Which Such Cash Was Not Disclosed At All Has Be En Dealt With In This Case It Is Clear That The Aforesaid Concern M S Vitrag Jewellers Ltd Has Not Actually Purchased Any Material Nor Sold Any Materi Al Only Bills Were Issued Which Shows That The Appellant Has Purchased Diamond From Grey Market In Cash The Aforesaid Cash Deployed Was Out Of Books Which Has Been Subsequen Tly Recorded In The Books Of Account By Taking Bogus Purchase Bills And Banking Channels T Hus The Capital In Cash Deployed By The Appellant At The Time Of Such Purchase Was Out Of B Ooks And No Argument Has Been Offered By The Appellant On This Issue In Case Of Income Tax Officer Ward 6 3 New Delhi Vs M S Meghuna Towers Pvt Ltd And Vice Versa Dated Augus T 4 2016 Itat Delhi Held That Assessee Is One Among Many Persons Who May Have At Tempted To Benefit From The Alleged Racketeering When Investigation Wing Of Income Tax Department Has Busted The Racket Of Bogus Accommodation Entries And When The Alleged E Ntry Operators Have Admitted On Oath That They Ran This Racket And When Name Of The Ass Essee Is Discovered As One Of The Beneficiaries Of The Alleged Racket And When Amoun Ts Are Actually Found In The Books Of Assessee To Be Credited In The Name Of Alleged Entr Y Operators Burden Was On The Assessee To Prove That It Was Not A Beneficiary Of The Racket In This Case The Appellant Failed To Prove That His Transaction Was Affected Through Physical Delivery And No Attempt Was Made To Produce The Parties From Where The Purchases Has Be En Made Keeping In View That Cash Component Deployed Out Of Books In Order To Purchas E Of Diamond From Grey Market And Subsequently Bringing It Into His Books Of Account By The Way Of Procuring Bogus Bills And Paying Through Cheques The Cash Deployed Remains O Ut Of Books And From Taxation Hence The Addition Made By The Ao Is Hereby Upheld And Th E Ground Of Appeal Is Dismissed 9 With The Aforesaid Observation Thus The Ld Ci T A Was Pleased Not To Accept The Contentions Raised By The Assessee That Angadias Used To Come To Their Show Room Shops With The Diamonds And If The Assessee Likes And Sel Ects Some Diamonds From Them They Angadias Used To Raise Invoices Bills In The Name Of Concerns Named In Box C And Assessee Makes Payment By Cheque Rtgs In The Name O F Concerns Named In Box C And So According To Assessee He Was Doing A Clean Busi Ness However The Ld Cit A Did Not Accept The Aforesaid Explanation And Modus Suggeste D By The Assessee And Totally Relying On The Statement Given By Rajendra Jain Concerns In B Ox C Disbelieved Assessee And With The Aforesaid Reasoning The Ld Cit A Was Pleased To Confirm The Order Of The Ao 10 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 Disallowing The Entire Purchase Made From M S Vitr Ag As Well As M S Arihant As Bogus Purchases And Made Entire Purchase From The Said Co Ncern Was Added However We Do Not Subscribe And Are Not Accepting The Transactions Ma De By The Assessee With M S Vitrag And M S Arihant As Well As That With M S Kangan For A Ys 2010 11 To 2012 13 As Bogus For The Reasons Given Below 10 We Note That Ao Exercised His Power To Reopen The A Ssessment For Ay 2008 09 On The Following Reasons Recorded By Him The Reasons Recorded U S 148 Of The Act Before R Eopening Of The Assessment Reads As Follows From The Specific Information Received From The Dir Ector Of Income Tax Investigation W N Sikkim Ner Aayakar Bhawan Annexe P 13 Chowring Hee Square Kolkata 69 The Communication Has Been Received From The Dgit Inv Mumbai It Is Seen The Shri Manoj Begani Pan Adppb 9417 N Assessed To Tax With The Jur Isdiction Is One Of The Beneficiary The Information Reveals That For The Ay 2008 09 The Above Assessee Has Taken Entry From One M S Vitrag Jewels Pan Aovpk 0047 C Prop Mudit Karnawat For A Sum Of Rs 27 28 000 In The Guise Of Purchase Thus It I S Seen That The Above Purchase Is Bogus Hence I Have Reasons To Believe That Income Charge Able To Tax To The Tune Of Rs 27 28 000 Has Escaped Assessment For The Ay 2008 09 Within Th E Meaning Of Section 147 Of The Income Tax Act 1961 11 We Note That Other Than Aforesaid Reason No Other Statements Of Shri Rajendra Jain Or Another Were Furnished To The Assessee Despite The Y Asking For It Which The Ld Cit A At Page 60 Justified The Omission Of Ao By Stating Tha T The Relevant Material Relating To Appellant Were Already Included In The Reasons So R Ecorded By The Ao Though We Note It Was Made In The Context Of Assessees Ground Raised For Non Supply Of Documents Information From Dit Inv To Ao Which Has In Turn Triggered The Reasons To Believe As Contemplated In Sec 147 Of The Act Though T He Ao Need Not Supply The Entire Investigation Report Of Dit Inv The Statement Of Shri Rajendra Jain And Another Which Was Relied On By The Ld Cit A In The Impugned Order Ought To Have Been Given To The Assessee And He Should Not Have Been Kept The Assessee In Th E Dark While Assessment Was Framed Against Him The Ao Has Added The Entire Purchase Consideration From M S Arihant On The Sole Basis That The Assessee Failed To Produce The Sellers Of Diamond I E M S Arihant We 11 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 Are Very Well Aware That Assessment Proceedings Are Purely Administrative And That The Ao Can Make Private Enquiries Even Behind The Back Of The Assessee As They Are All Administrative Enquiries However They Assume A Qu Asi Judicial Character Only After The Issue Of Notices For Assessment This Is Not Becau Se Ao Is Not A Court As Held By The Honble Supreme Court In Dhakeswari Cotton Mills 26 Itr 775 Sc Ao Is Vested With The Same Power As That Of Court As Limited By Sec 131 Of The Act As Held By Honble Supreme Court In Mahindra Mahindra Air 1979 Sc 798 Wide Though His Ao Powers Ao Must Act In Consonance With Rules Of Nat Ural Justice One Such Rule Is That He Shall Not Use Any Material Against The Assessee Wit Hout Giving Him An Opportunity To Meet It In Short The Ao Cannot Assess By Keeping The Asses See In The Dark As To Materials Against Him In The Instant Case The Ao Kept The Assessee In The Dark About The Statement Of Shri Rajendra Jain Another While Saddling The Addition S However We Note That Ld Cit A Who Has Co Terminus Powers As That Of Ao Has Repro Duced The Statement Of Shri Rajendra Jain And Shri Dharmichand Jain Of Box C Concer Ns In The Impugned Order As Said Earlier In The Instant Case The Basis Of Re Asses Sment Was Only On The Statement Of Shri Rajendra Jain And Shri Dharmichand Jain There Was Nothing Else To Support It Next Vital Question Is Whether Their Statements Be Accepted As True The Value Or Weight To Be Attached To It Fell Within The Exclusive Jurisdiction Of Rev Enue And Tribunal With This Back Drop Let Us Examine The Statement Of Shri Rajendra Jain And Shri Dharmichand Jain 12 Let Us Have A Look At The Pictorial Represe Ntation Reproduced By The Ld Cit A At Page 34 Which Has Been Reproduced By Us After Para 6 Supra And Also Go Through The Statement Given By Shri Rajendra Jain Explaining Th E Modus Operandi Adopted By Him We Note That His Statement Is Riddled With Inherent Co Ntradictions Which We Will Highlight Later According To Shri Rajendra Jain He Controlled M S Vitrag And M S Arihant Which Are Found Placed In Box C And The Assessee Is Placed In Box E As Per Shri Rajendra Jain M S Vitrag And M S Arihant Booked The Order With The Foreign Diamond Exporter Concerns At Belgium Which Is Shown In Box B Namely From A Hrp Diam Belgium B Gem Blue Belgium C Vee Diam Belgium And D Swintu Diam B Elgium And That These Concerns Supplied Diamonds On Credit To Shri Rajendra Jains Concerns Which Are M S V Itrag And 12 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 M S Arihant This Fact Can Be Inferred From Shri Rajendra Jains Statement At Page 6 7 Supra Wherein He States As Under Here I Would Like To Clarify That We Are Just Impo Rting The Bills Of Diamonds From Such Foreign Parties And The Underlying Stock Of Diamond S Is Taken By The Real Importers Who Do Not Figure Out At Any Place In The Books Of Accounts Ma Intained By Us As Well As The Foreign Exporter Only In The Eye Of Foreign Banker We Are The Genuine Importer Of The Diamond Otherwise All The Three Parties Involved In The Tra Nsaction Knows The Reality To Sum Up The Real Importers Of The Diamond From These Foreign Co Ncern Are The Concerns Mentioned In Block D However The Bill Are Issued In The Name Of Conce Rns Mentioned In The Block C In Our Block C Books Of Accounts The Diamonds Imported From Fore Ign Concern Mentioned In Block B Gets Reflected But We Dont Received The Physical Diamo Nds And The Same Diamonds Are Used By The Concerns Mentioned In Block D We Do Not Have Any D Irect Contact With The Foreign Concerns Though We Have The Legal Liability We Have Only So Me E Mail Communications With The Foreign Parties And That Too At The Instance Of Parties Con Cerns Mentioned In Block D C These Are The Various Concerns Operated And Cont Rolled By Myself And Sri Surendra Jain In Answer To Question No 13 I Have Already Explaine D In Details About These Concerns In These Concerns The Import Of Rough Diamonds Are Shown And Only The Accounting Entries Are Made Without Real Trading Of Diamonds The Bill Issued B Y The Foreign Concerns For The Rough Diamonds Are Issued In The Name Of These Concerns Block C However The Concerns Do Not Use The Imported Diamonds And The Physical Delivery Is Made To The Concerns Mentioned In The Block D All The Concerns Mentioned In Block C Are Operated Controlled And Managed By Myself And Shri Surendra Jain Therefore We Two Ar E The Persons Responsible For Day To Day Activities Of The Concerns The Sharing Of Profit L Oss Is Between Myself And Shri Surendra Jain Only Whereas Others Are Working On Our Instance An D Directions For Which They Are Paid Salary Remuneration Which Further Get Compensated B Y The Business Income Arising Out Of This Operation In Their Respective Concerns D The Concerns Mentioned In Block D Are The Concer Ns Actually Importing The Diamonds Without Using Their Name And Address They Utilize Our Service As Name Lender The Payments To The Foreign Parties Against The Diamonds Importe D Are Also Monitored By The Concerns Mentioned In Block D Therefore The Parties Mentio Ned In Block D Sometimes Arranges The Cheque Payment By Getting The Sales Bill Issued By Us To Those Concerns Block E Interested In Taking Bogus Purchase Bills For Regularizing Their Books Of Accounts Further I Would Like To Clarify That I Dont Know The Actual Reason For Imp Orting The Rough Diamonds In The Name Of Concerns Managed And Controlled By Us Block C E The Concerns In Block E Are The Concerns That Re Quire Bogus Purchase Bills For Diamonds However Our Concerns Have Bogus Stock Of Diamonds I N Our Books Of Accounts Which Are Shown To Be Purchased Imported From Foreign Conce Rns Therefore The Diamonds Shown To Be Purchased Imported From Foreign Concerns Thus Ar E Against Shown To Be Sold To The Independent Concerns Mentioned In Block E These Co Ncerns In Block E Take Purchase Bills From Our Concerns Block C Without Actual Delivery Of Diamonds The Payments Made Through Cheques Or Rtgs By These Concerns Block E Gets Utilized For The Payments In Foreign Currency To The Foreign Concerns Mentioned In Black B As Per The Terms Designed And Under Intimation To The Key Person Controlling The Concerns Of Block D Against The Payment Made By Concerns Of Block E Thr Ough Cheques Or Rtgs The Cash Component Is Generally Settled By The Key Persons C Ontrolling The Concerns Of Block D Directly Or Indirectly By Taking Services Of Angadia 13 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 13 As Per The Answer To Q No 26 Reproduced By The Ld Cit A In His Order Which Is Reproduced Below Which Becomes Clear How The Busine Ss Is Run Q 26 Please Explain The Modus Operandi Of Your Bu Siness Sir The Diamonds Are Imported From Outside India I N The Name Of My Company Proprietorship Huf But The Actual Order Is Placed By Some Other Person Further When The Consignment Comes In India Either At Mumba I Or Surat The Actual Delivery Of Consignment Either Comes To My Office Of I Authoriz E The Persons Who Has Placed The Order In Garb Of Company Proprietorship Huf If The Consignm Ent Comes In My Office I Handover The Packed Consignment To The Actual Importer Who Has M Ade The Order Sometimes I Have Authorization Or Representation Le Tter To The Importer Who Actually Order In Regard Of My Company Proprietorship Huf To Collect The Consignment On My Behalf From Courier Agencies Like Lemuir Express And B V Chinai And Co I Pvt Ltd As The Imports Have Been Made On My Company Proprie Torship Huf So Against These Import Purchases I Give Bogus Sales Entries To Other Trad Es Exporters Processors Who Are Showing Their Business Of Diamond Further Regarding Local Purchase Sales Of Trading D Iamond In My Company Proprietorship Huf I Only Provide Accommod Ation Entries For Purchase Sales 14 When We Read The Aforesaid Statement It Is Cl Ear That When The Consignment Of Diamonds Reached Either In Mumbai Or In Surat The Actual Delivery Of The Consignment Comes First To Shri Rajendra Jains Office From Wh Ere The Authorized Person Who Has Placed The Actual Order In The Name Of His Company Come To His Office And Collect The Booked Consignment On Behalf Of Actual Importer Who Are Sh Own In Box D Where We Note See The Names Of Nine Persons Are Given So According To T He Modus Operandi As Explained By Rajendra Jain The Assessee Must Have Purchased The Diamonds From The Persons Named In Box D With The Unaccounted Money They Have From The Pers Ons Named In Box D Which Is The Grey Market From Where The Assessee Got Diam Onds However It Is Curious To Note That The Assessee Issued The Cheques In The Name Of The Concerns Controlled By Shri Rajendra Jain M S Vitrag And M S Arihant Which In Turn Would Give The Bills And Was Only Playing The Role Of An Accommodation Entry Bil L To The Assessee We Do Not Understand The Logic Behind Such A Circuitous Route As Sugges Ted By Shri Rajendra Jain For The Simple Reason That Admittedly The Concerns M S Vitrag An D M S Arihant Which Falls In Box C Legally Books Diamonds From Foreign Diamond Exporte R Concerns In Box B Which In Turn Ships Diamonds On Credit To Concerns In Box C Of Shri Rajendra Jain And What We Fails 14 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 To Understand And Defies Logic Is The Alleged Next Part Played By The Assessee I E The Assessee Which Falls In Box E Gives Cheque Rtgs To Concerns Of Rajendra Jain In Box C Which Is In Turn Transferred By Shri Rajendra Jain S Concerns In M S Vitrag And M S Arihant To The Foreign Concerns In Box B From Wh Om They Box C Concerns Have Legally Booked And Imported And Received The Diamon D From A Perusal Of The Answer Given By Shri Rajendra Jain To Q No 16 Which Is Reproduc Ed Above We Note From The Answer Of Shri Rajendra Jain Which He Gives As Paragraph E To Q No 16 It Is Clearly Stated By Shri Rajendra Jain That The Payments Made Through Cheques Rtgs By These Co Ncerns Box E Assessee Gets Utilized For The Payments In Forei Gn Currency To The Foreign Concerns Mentioned In Box B As Per The Terms Designed And On The Intimation To The Key Persons Controlling The Concern Of Box D Against The Pa Yments Made By Concerns Of Box E Assessee Through Cheques Rtgs The Cash Component Is Generally Settled By The Key Persons Controlling The Concerns Of Box D Direct Ly Or Indirectly By Taking Services Of Angadia From The Aforesaid Statement It Is Crystal Clea R That The Assessee Gives Cheque Rtgs To The Concerns Of Shri Rajendra Jain M S Vitrag And M S Arihant Which Are In Turn Utilized For Payments In Foreign Curren Cy To The Foreign Concerns Mentioned In Box B Foreign Diamond Suppliers And That Cash C Omponent In Respect To The Cheques Rtgs From Assessee Is Generally Settled By The Key Persons Controlling The Concerns Of Box D Directly Or Indirectly By Takin G Services Of Angadia From The Aforesaid Statement Of Shri Rajendra Jain Read Alon G With The Assessees Stand All Throughout That In The Business Of Diamonds The An Gadias Used To Visits His Shops Show Rooms And Bring The Diamonds Along With Them And Wh En The Assessee Selects Diamond From Them Directly The Payment Towards The Diamond S So Purchased Would Be Remitted By Cheques Rtgs On The Account Shown In The Invoice Bi Ll Raised By The Concerns Like In This Case M S Vitrag M S Arihant M S Kangan The Asse Ssee Had Brought On Record The Bills Invoices For The Diamond Purchased And That T He Bills Were Settled By Cheque Rtgs To The Concerns Named In Box C And The Following Doc Uments Were Produced Before The Authorities Below To Substantiate That They Have Do Ne A Clean Business These Are The 15 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 Documents Produced By The Assessee Before The Autho Rities Below Which Is Evident Also From The Ld Cit A S Order At Page 16 Which Is Rep Roduced As Under A Invoices Raised By Vitrag Jewels For 339 Cara Ts Of Cut Polished Diamonds For Rs 27 28 000 Page 3 4 B Purchase Day Book Showing Purchase Of Diamond Other Goods Worth Rs 1 64 57 538 As Reflected In The Audited Accounts Including Purchas Es Made From Vitrag Jewels Of Rs 27 28 000 Page 7 8 C Ledger Accounts Of Vitrag Jewels For Fy 07 08 08 09 Page 14 D Copy Of Bank Statement Showing Payments To Vitr Ag Jewels Page 5 6 E Statement Showing Complete Accounting Of Disput Ed Purchase Page 14 F Sales Made Out Of The Disputed Purchase Payme Nts Recd Page 19 29 G Purchase Creditors Figure Including Amount P Ayable To Vitrag Jewels As On 31 03 2008 As Reflected In The Audited A C Page 1 0 12 H Sales Tax Return Vat Audit Report Reflecting The Sales As Shown In The Audited Accounts Page 30 43 15 We Note That The Ao Disregarded All These Docum Entary Evidence And Insisted The Assessee To Produce The Principal Officer Of M S V Itrag And Since The Assessee Failed To Produce Them He Made The Disallowance Of The Entir E Diamond Purchased By The Assessee Through Cheques Rtgs The Assessee Has Produced The Vat Return And Vat Audit Report Also Which Is Placed At Pages 73 To 86 Of The Pape R Book The Assessee Has Also Produced The Sales Bill Related To Diamonds Sold Out By The Assessee Which Was Made Out Of The Very Same Purchases Disallowed By The Ao Which Is Found Place From Pages 56 To 59 Of The Paper Book We Note That The Ao Has Not Disturbed The Sales Shown By The Assessee In Respect Of The Diamond Purchased From M S Vitrag A Nd M S Arihant And M S Kangan Ay 2010 11 To 2012 13 When The Sales Of The Very Sa Me Diamonds Have Been Accepted By Ao Cit A Without A Murmur The Purchases Could Not Have Been Disallowed Without Cogent Material In This Case For Whatever Reason Best Known For Him Shri Rajendra Jain Who Controls M S Vitrag And M S Arihant Have Made The Statements Wherein He Explains In Detail The Modus Of The Whole Operation Which Defi Es Logic And Can Be Termed Absurd On The Face Of It And When The Fact Remains That He And H Is Concerns Were Legally Importing 16 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 Jewels Diamonds Directly From Foreign Suppliers Nam Ed In Box B And That He Admits Of Receiving The Cheques Rtgs From Assessee In Box E And When The Fact Remains That Shri Rajendra Jains Concern M S Vitrag And M S Arihan T Utilised The Cheques Rtgs Given By The Assessee For The Diamond Purchased By Him And In Turn Is Remitted In Foreign Exchange Towards The Bills Raised By The Foreign Exporters Box B In No Way Show That The Assessee Had Made Any Purchase Outside The Books Or From The Grey Market We Are Unable To Understand As To The Role Of The Nine Persons Whos E Names Are Appearing In Box D The Modus Operandi As Suggested By Shri Rajendra Jain D Oes Not Fit Into The Logic Or Rational Reasoning Of A Common Prudent Person However The Uncontroverted Fact Remains That Shri Rajendra Jain And His Concerns Are Legally Importin G The Diamonds Directly From Foreign Concerns Stated In Box B On Credit We Explained Earlier So It Is Not Understood As To What Is The Role Of Persons Named In Box D Shri Raje Ndra Jains Answer To Question No 26 That He And His Concerns Placed The Orders With The Fore Ign Concerns Named In Box B And Collects The Diamond In His Office Show Room Let U S Pause For A Minute And Let Us Discard The Role Of Persons Named In Box D For Argument S Ake And Then See The Whole Transaction The Diamonds Are Legally Imported From Foreign Conc Erns Named In Box B By Concerns In Box C Which Are Delivered To Persons In Box E I E Assessee And Cheques Rtgs Are Issued In The Name Of The Concerns Controlled By Shri Raje Ndra Jain In Box C I E M S Vitrag And M S Arihant Which In Turn They Utilised The Cheque S Rtgs Given By The Assessee To Remit The Foreign Exchange To The Foreign Concerns In Bo X B So From All These Facts Discussed Above The Only Probability Is That The Role Of Nin E Persons Named In Box D Can Only Be That Of Angadias And Not As That What Shri Rajendra Jain Has Attributed Them To Do No Other Role Can Be Played By These People Unless And Other Wise The Department Is Able To Bring Any Evidence To Show That After The Issue Of Cheques Rt Gs To Shri Rajendra Jains Concerns M S Vitrag And M S Arihant The Money Component I E The Unaccounted Money Of The Assessee Has Been Given Back To The Assessee Whereas It Is Clearly Stated By Shri Rajendra Jain To Q No 18 That Cash Component Is Generally S Ettled By The Key Person Controlling The Concern In Box D Directly Or Indirectly By Cheque S Rtgs Services Of Angadia So Therefore The Entire Disallowance Of The Purchase Expenditure Is Based On Surmises And 17 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 Conjectures And The Assessee By Furnishing The Doc Uments Supra Has Discharged The Burden Of Proof Casted Upon It To Show That The Entire Pur Chase Was Done Bonafidely And Not With The Unaccounted Money Of The Assessee 16 Even If For Argument Sake And Remote Possibilit Y Is There To What Rajendra Jain Said Is Taken As True Then The Modus Would Be That Nin E Persons Named In Box D Used To Collect The Diamonds From Box C Concerns And Sel Ls It To Persons Like Assessee In Box E And Collects The Unaccounted Money Of Theirs Box E Assessee Then We Wonder As To What Actions The Department Ao Has Taken Against These N Ine Parties Who According To Shri Rajendra Jain Are The Actual Importers And Who Col Lects The Diamonds Once It Reaches Them Box C And Thereafter The Diamonds Are Collect Ed By Nine Persons In Box D From Box C And Then Sold To Assessee In Box E And Collec Ts Unaccounted Money So Whether The Department Has Taken Action Against Them Or What Ac Tion Was Taken Against Them Box D Or Whether Their Nine Persons Named In Box D Wa S Summoned Raided Searched Or Statement Recorded Which Implicates The Assessee A Nd Corroborate Shri Rajendra Jains Statement Nothing Is Discernible Or There Is Any Whisper About These Nine Persons In Box D Who Are Supposed To Be The Real Players Behind Concerns In Box C Even In Respect To Import Of Diamonds Moreover Shri Rajendra Jain N Owhere Has Said That Cheque Rtgs Given By Assessee To His Concerns Were Later Retur Ned Back In Cash Or Material To Assessee Or Concerns In Box E On The Other Hand He Said The Cheque Rtgs Is Converted Into Foreign Exchange For Squaring Up With Foreign Concerns In Box B However We Take Note Of A Statement Wherein Shri Rajendra Jain Has Said Tha T The Cash Element In Cheque Rtgs Given By Assessee Box E Is Given To Persons Named In Box D If That Is Believed Then Also The Role Of Nine Persons In Box D Is Very Importa Nt To Complete The Puzzle Because Chain Breaks There Unless The Nine Persons In Box D A Re Examined And Material Collected From Them Which Show That They Have Collected The Cash Component From Box C Concern And Given Back To Assessee Box E Then Only The Ch Ain Will Be Complete So Without The Statement Of Person In Box D The Whole Statement Of Shri Rajendra Jain And Other Person Cannot Be Believed Even If We Believe That Persons Named In Box D 9 Persons Collected 18 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 The Unaccounted Money Cash From Assessee While Sel Ling The Diamond Then Whether Their Box D Persons Statements Against Assessee Was R Ecorded If So Whether The Assessee Was Given A Copy Of That Statement Or Did Any Of Th E Nine Persons In Box D Implicate The Assessee Even If Persons Named In Box D Stateme Nt Were Recorded Whether Their Statements Were Given To Assessee And Whether Those Persons Were Allowed To Be Cross Examined By The Assessee And Without Doing So The Material Or Statement Collected On 03 10 2013 Admittedly Behind The Back Of Assessee Cannot Be Used Against The Assessee Without Giving Opportunity To Cross Examine As Held By Honble Supreme Court In The Case Of Andaman Timber Industries Vs Commissioner Of C Entral Excise 62 Taxman Com 3 In The Said Case Of Andaman Timber Industries Supra The Honble Sc Has Held That The Failure To Give The Assessee The Right To Cross Exa Mine Witnesses Whose Statements Are Relied Upon Results In Breach Of Nat Ural Justice And It Is A Serious Flaw Which Renders The Order A Nullity Without Doing All The Exercises As Aforestated How The So Called Unaccounted Money Supposed To Be Handed Over By The Assessee To 9 Persons Named In Box D Can Be Added In The Hands Of Assessee Merely On The Statement Of Persons Named In Box C Which Is Riddled With Cont Radictions And Which Cannot Stand Logic Or Reasons 17 In Our View In The Light Of The Fact That Sales Were Supported By Invoices From M S Arihant M S Vitrag And M S Kangan And The Monies Were Paid By Account Payee Cheques Rtgs The Least The Revenue Should Have Don E Was To Grant An Opportunity To The Assessee To Meet The Case Against Him By Providing The Material Sought To Be Used Against The Assessee In Arriving Before Passing The Order Of Re Assessment This Not Having Been Done The Denial Of Such Opportunity Goes To The Root Of The Matter And Strikes At The Very Foundation Of The Reassessment And Therefore Rend Ers The Orders Passed By The Ao And The Ld Cit A Vulnerable In Our View The Assessee Wa S Bound To Be Provided With The Material Used Against Him Apart From Being Permitte D To Cross Examine The Deponents We Note That The Ao Kept The Assessee In The Dark As T O The Statement Of Shri Rajendra Jain And Shri Dharmichand Jain Which Was Recorded On 03 10 2 013 At Their Premises At 19 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 Surat Mumbai Admittedly Behind The Back Of The As Sessee Only The Ld Cit A Has Included Their Statement In His Order However We Note That He Has Not Even Summoned Them Before Him And Should Have Taken A Statement Directly From Shri Rajendra Jain And Shri Dharmichand Jain And Examined Them And If The Y Implicate The Assessee In Any Manner Then He Should Have Provided An Opportunity To Assessee To Cross Examine Those Deponents Failure To Do So Make The Order Fragile In The Eyes Of Law We Note That The Ao Issued Notice U S 133 6 Of The Act To M S Vitrag And They Had Replied To The Same As Brought Out By The Assessee In Page 17 Of The Impug Ned Order Which Fact Has Not Been Controverted By Ld Cit A Thereafter The Ao Gav E The Responsibility To The Assessee To Bring The Suppliers Of Diamonds Before Him And For Not Doing So The Assessee Was Saddled With The Addition We Note That In Such Circumstanc Es The Ao Ought To Have Exercised His Powers U S 131 Of The Act And Should Have Summoned Them Before Him We Note That The Assessee Has Given The Full Details Of The 339 Ct Of Diamond Purchased From M S Vitrag During The Year 2007 08 And Has Given The Address A S Under Name Address Phone No Pan Sales Tax Registration M S Vitrag Jewels 803 C Shrinathji Apartment Rampura Main Road Surat Ph No 02613008385 Aovpk 0647 C Gst 24220400561 Cst 24720400561 18 The Full Details Of The Party Has Been Given Fr Om Page 18 To 21 Of Ld Cit A S Order Wherein All The Details Regarding The Sale And Purc Hase Have Been Given And Reproduced We Note That The Assessee Had Submitted Audited Books Of Account And The Ao Could Not Figure Out Any Deficiency Thereof The Ao Disregarded The Documents Submitted During The Reassessment Which Includes Details Of Purchase Sa Le And Profits Suppliers Bills And Bills Raised By Customers Bank Statement Showing Payment To Suppliers And Receipt From Customers Stock Reconciliation Statement Etc The Ao Neither Denies The Sales Which Was Made From The Stock Generated From The Alleged Bogu S Purchase Of Rs 27 28 000 Nor Pointed Out Any Quantitative Discrepancy In The Sto Ck Figure The Ao Did Not Issue 20 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 Summons On The Suppliers U S 131 Of The Act Nor Di D He Do Any Enquiry With The Suppliers Jurisdictional Ao Though Pan Details Were Available The Ao Did Not Do Any Enquiry With The Sales Tax Authorities Though Vat Cst No Was Av Ailable The Ao Did Not Enquire With The Banker Hdfc Though The Entire Payment Receipt Was Routed Through Banking Channels So Therefore This Is A Case Of Clear Cut Non Enqu Iry At All And The Addition Was Based On Surmises And Conjectures 19 In Order To Ascertain The Veracity Of The State Ment Of Shri Rajendra Jain The Department Ought To Have Confronted The Assessee W Ith The Statement Of Shri Rajendra Jain And Dharmichand Jain And Given An Opportunity To Th E Assessee To Cross Examine Them Which Has Made The Statement Of All These Legally F Ragile As Held By Honble Supreme Court In Andaman Timber Industries Supra As Stated Ea Rlier And Even If We Believe Shri Rajendra Jains Statement In Totality In Order To Complete The Chain Of Events Then The Statements Of Nine Persons In Box D Or Corroborat Ive Relevant Material Is Vital To Pinn Down The Assessee However As Stated Earlier In O Ur Order At Para 14 Page 15 The Assessee Has Discharged The Onus Casted Upon It To Prove Tha T He Purchased The Diamonds From M S Arihant M S Vitrag Nd M S Kangan So The Additi On Made By The Ao Cit A Cannot Be Sustained Therefore It Is Directed To Be Deleted 20 Before We Part We Thought Of Stating The Reaso N As To How We Are Of The Opinion That The Entire Transaction Modus Operandi As Suggested By Shri Rajendra Jain Is Absurd Non Believable Are For The Following Reasons Accordin G To The Pictorial Chart Prepared By The Investigation Wing And Thereafter As Explained By S Hri Rajendra Jain The Following Transaction Takes Place In The Following Order A I St Step The Nine Persons In Box D Places The Orde R With Shri Rajendra Jains Concerns Which Are Shown In Box C B Iind Step Thereafter Shri Rajendra Jains Con Cerns In Box C Booked The Order With Foreign Suppliers Named In Box B 21 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 C Iii Rd Step The Foreign Suppliers In Box B Sent The Di Amonds To Shri Rajendra Jains Concerns In Box C D Iv Th Step The Diamonds Which Have Arrived At The Conc Erns Of Shri Rajendra Jain In Box C Gets Collected By Persons From Box D E V Th Step Thereafter The Persons Named In Box D Su Pplies The Diamonds To Persons Named In Box E I E The Assessee In This Case And Persons Like Assessee Gives Their Unaccounted Money Cash For The Diamonds To Pe Rsons In Box D Since The Persons Like Assessee In Box E Has Co Llected The Diamonds From Persons Named In Box D It Was Termed That The Assessee Ha S Purchased Diamonds From Grey Market F Vith Step Since Persons Like Assessee Have Pur Chased From Grey Market And In Order To Keep The Books Of Account Properly The Pe Rsons Like Assessee In Box E Approaches Shri Rajendra Jains Concerns In Box C For Fake Bills In Lieu Of Commission G Viith Step The Box C Concerns Of Shri Rajendr A Jain Issued Fake Bills To Persons Named In Box E For Commission And Acts As An Acco Mmodation Entry Provider H Viiith Step The Cheque Rtgs Received From Pers Ons Named In Box E Assessee Is Converted To Foreign Exchange And Sent To The Forei Gn Suppliers To Square Up The Transaction I Ixth Step The Cash Component In The Cheque Rtgs Given By The Persons Named In Box E Assessee Is Given To Persons Named In Box D 21 The Aforesaid Is The Modus Operandi As Suggeste D By Shri Rajendra Jain Which We Do Not Accept Because It Is Illogical And Absurd On Th E Face Of It It Is Like Touching The Nose Not Directly But By Bringing The Hand From Behind The N Eck And Touching It If The Aforesaid Modus Operandi Is What Is Happening On The Ground Then The Nine Persons Named In Box D Makes Money Without Touching Anything Because T He Entire Foreign Suppliers Are Supplying The Diamonds On Credit To Persons Named I N Box C I E Like Shri Rajendra Jains 22 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 Concerns According To Above Modus Operandi The Persons Named In Box D Collects The Diamonds From Shri Rajendra Jains Concern In Box C It Needs To Be Kept In Mind That Shri Rajendra Jains Concern Legally Books The Orde R From Foreign Suppliers Shown In Box Band Is Shipped To Them Directly I E Concerns Nam Ed In Box C And Persons In Box D After Collecting Diamond From Box C As Stated Before Giv Es It To Persons Named In Box E I E People Like The Assessee And Collect The Unaccount Ed Money For Sale Of Diamonds Thereafter In Order To Regularise The Transaction The Persons Named In Box E Like Assessee In Order To Get The Fake Bill Gives The C Heque Rtgs To Shri Rajendra Jains Concern In Box C Who In Turn Converts The Cheques Rtgs To Foreign Exchange And Square It Up With The Foreign Supplier And Thereafter The Cash Component In The Cheques Rtgs Is Given To The Persons Named In Box D So In The Re Sult The Persons Named In Box D Makes Money Twice I By Selling The Diamonds To As Sessee And Collects The Unaccounted Money From Them And Ii Then When The Assessee Giv Es By Cheque Rtgs To Shri Rajendra Jains Concern In Box C I E For Fake Bill The N The Cash Components Of The Cheque Is Given To Persons Second Time Named In Box D Wh Ich Proposition Modus Operandi Cannot Happen At All Because The Box D Persons Ha Ve Collected Already Unaccounted Money Which Will Definitely Be Containing The Cost Of Diamond Plus Their Profit Then Again How The Persons In Box C Will Give The Cash Compo Nent Embedded In Cheques Rtgs This Is Nothing But An Absurdity What Is Intriguin G And Defies Logic Is That The Diamonds Once Legally Imported And Received By Concerns In B Ox C Directly From Foreign Supplier Named In Box B Then When The Assessee In Box E Is Admittedly Giving Cheques Rtgs To Persons In Box C Why Cant They Buy Directly Dia Monds From Concerns Named In Box C Only Why Go For Persons Named In Box D Whose Ro Le In Our Humble Opinion Doesnt Fits In At All That Is Why The Explanation Of Assessee Which Is The Practice Followed By Diamond Merchants Like Assessee Need To Be Seen According To Assessee The Diamonds Are Brought By Angadias To Their Respective Show Rooms For Sa Le And Once Assessee Selects And Purchase The Diamonds Cheques Rtgs Are Issued In T He Name Of Concerns Issuing Invoice Bills Which In This Case Is Concerns Legal Ly Importing Diamonds Named In Box C Which Fits Into The Modus As Explained By Assessee Is Plausible And After Taking Out The 23 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 Contradictions Facts Are Corroborated By The State Ment Of Shri Rajendra Jain In The Facts And Circumstances The Role Of Persons Named In Box D Ca N Be That Of Angadias Or Persons Controlling Them What Actually Happen Will Be Clear From The Chart G Iven Below Box B Foreign Concern In Belgium 2 After Taking Order From Box C Ships Diamonds To B Oxc 9 Receives Foreign Exchange For Diamonds Sold To Box C By Cheque Rtgs From Box C Box C Shri Rajendra Jains Concerns M S Vitrag M S A Rihant 1 Places Orders For Diamonds From Box B 3 Received Diamonds From Box B 4 Diamonds Are Sent For Sale To Buyer Like Assessee I N Box E 7 Deposit Cheque Rtgs Received From Assessee Box E In Their Bank Accounts 8 Converts To Foreign Exchange Cheques Rtgs From Box E Assessee And Transfer It To Concerns Box B Box E Assessee 5 Buys Diamonds From Angadias Or Carrier Sent By Concern In Box C 6 Issues Cheques Rtgs To Concerns Which Raises Invoic E I E Concerns Box C Box D Carrier Angadias 24 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 22 From The Aforesaid Pictorial Chart The Activiti Es Of Persons Concerns In Each Box Is As Stated And The Numerical Numbers Are Step By Step A Ctivities In Serial Number Of Concerns In Box C Rajendra Jains Concerns Place First The O Rder 1 With Foreign Belgium Concerns For Diamonds The Box B Concerns 2 Takes The Order And Ships The Diamond To Box C Then 3 The Concern In Box C Collects The Diamon D Sent By Box B Then 4 The Diamonds Are Sent To Concerns Like Assessee In Box E And T He 5 The Concerns In Box E Purchases The Diamonds And The 6 Issues The Cheques Rtgs In The Name Of The Concerns Shown In The Invoice Of Sale I E Concerns Named In Box C The Reafter 7 Step The Box C Concerns After Receiving The Cheque Rtgs From Box E Concer Ns Assessee Deposit It In Their Bank Account Thereafter 8 Step Concern In Box C Co Nverts The Amount Deposited In Their Accounts Into Foreign Exchange And Transfer It To B Ox B 9th Step The Belgium Concern In Box B Gets The Sale Consideration Of Diamonds So Ld To Box C Concern When The Aforesaid Transaction Is Seen In The Light Of The S Tatement Of Assessee That In The Diamond Business The Angadias Bring The Diamond To Their S How Room And The Assessee Selects Some Diamonds From Them Which Are Invoiced In The Name Of Concerns In Box C And The Cheques Rtgs Are Deposited In Their Bank Accounts Box C Concerns Means The Assessee Cannot Be Said To Be Doing Business As Suggested By Concerns In Box C 23 From The Aforesaid Entire Transaction The Only Inference In Respect To The Role Of Persons Named In Box D Can Only Be That Of Carrie Rs Of Diamond To People Like Assessee This Inference From The Aforesaid Analysis Can Only Be Changed By Bringing Cogent Evidence Or At Least By Bringing On Record The Statements Of The Nine Persons Named In Box D To The Effect That They Corroborate The Version Given By S Hri Rajendra Jain As Correct 25 Ita Nos 932 To 936 Kol 2017 Manoj Begani Ays 2008 09 2010 11 To 2012 13 20 14 15 24 For The Reasons Stated In Para 19 Supra And Ot Her Reasons Cited Above We Are Of The Considered Opinion That The Additions Saddled On Th E Assessee For Ays 2008 09 2010 11 2011 12 2012 13 And 2014 15 Should Be Deleted And We Order Accordingly 25 In The Result All The Appeals Of Assessee Are Partly Allowed Order Is Pronounced In The Open Court On 15th Dece Mber 2017 Sd Sd Waseem Ahmed Aby T Varkey Accountant Member Judicial Member Dated 15th December 2017 Jd Sr P S Copy Of The Order Forwarded To 1 Appellant Shri Manoj Begani C O D J Shah Co Kalyan Bhavan 2 Elgin Road Kolkata 700 020 2 Respondent Acit Circle 44 Kolkata 3 The Cit A Kolkata 4 5 Cit Kolkata Dr Kolkata Benches Kolkata True Copy By Order Sr Pvt Secretary