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Bhatia Diamonds Pvt. Ltd., 2919, Bank Street, Karol Bagh, New Delhi. PIN 110 005. vs The Income Tax Officer, Ward 4 (4), New Delhi.
June, 24th 2019

Referred Sections:
Section 68 of the I.T. Act, 1961,
Section 148 of the I.T. Act, 1961.
Section 133(6) of the I.T. Act
Section 147 of the Income Tax Act, 1961
Section 181
Section 193

Referred Cases / Judgments:
Smt. Jyoti Gupta vs. ITO
Timber vs. CIT
Andaman Timbe r Vs. C IT Civil Appeal No. 4228

     
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES "A": DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA.No.2822/Del./2018 Assessment Year 2013-2014 Bhatia Diamonds Pvt. Ltd., The Income Tax Officer, 2919, Bank Street, Karol vs., Ward ­ 4 (4), Bagh, New Delhi. PIN ­ 110 005. New Delhi. PAN AAECB2325C (Appellant) (Respondent) Shri R.S. Singhvi, C.A. And For Assessee : Shri Satyjeet Goel, C.A. For Revenue : Shri P.V. Gupta, Sr. D.R. Date of Hearing : 11.06.2019 Date of Pronouncement : 24.06.2019 ORDER PER BHAVNESH SAINI, J.M. This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-33, New Delhi, Dated 09.02.2018 for the A.Y. 2013-2014. 2 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. 2. 3. Learned Counsel for the Assessee did not press Ground Nos. 1 and 2 of the appeal regarding reopening of the assessment. The same are dismissed as not pressed. 4. On Ground Nos. 3 to 7, the assessee challenged the addition of Rs.52,63,386/- under section 68 of the I.T. Act, 1961, on account of unexplained purchases. 5. Briefly the facts of the case are that the assessee company filed its return of income declaring ­NIL- income. The case was reopened under section 148 of the I.T. Act, 1961. The main issue Involved in this case is that Shri Rajendra Jain, Shri Sanjay Choudhary and Shri Dharminchand Jain are some of the entry providers operating in Mumbai, indulging in providing accommodations entries in the nature of bogus sales and unsecured loans and that assessee company is a party to the transaction which was evident from evidences and 3 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. statements recorded on oaths during the search conducted on 03.10.2012. The Main allegation against the above mentioned groups were that their concerns are engaged in mere paper transaction, in the name of their numerous concerns, they import rough and cut and polished diamond for the other clients who do not want to show import in their books. The physical delivery of the diamonds so imported is immediately handed over to these actual importers after clearance of the consignment by CHA. These concerns issue bills/give accommodation entries for a commission to various parties who normally purchase diamonds in cash from undisclosed parties and need bills to show purchases against sales in their account and they provide accommodation entries of unsecured loans against cash. The A.O, therefore, noted that assessee has made purchased from these parties. During the course of search statement of Shri Rajendra Jain and Shri Surendra Jain were recorded on oath in which they admitted to have provided accommodation entries from the concerns controlled by them and they have also provided 4 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. accommodation entries to the assessee company in assessment year under appeal through the concerns controlled and managed by Shri Rajendra Jain group. The details of the same are as under : S. Name of concern operated by No Rajendra Jain Group which engaged Name of the beneficiary Amount in business of providing company (Rs.) accommodation entry. 1. Arihant Exports M/s. Bhatia Diamonds Rs.20,63,326 [AFLPP5405N] Pvt. Ltd., 2. Karnawat Impex Pvt. Ltd., M/s. Bhatia Diamonds Rs. 5,60,930 [AADCK1927A] Pvt. Ltd., 3. Kriya Impex Pvt. Ltd., M/s. Bhatia Diamonds Rs. 6,37,882 [AADCK1926B] Pvt. Ltd., 4. AVI Exports [ABIPJ5587A] M/s. Bhatia Diamonds Rs.20,01,248 Pvt. Ltd., Total Rs.52,63,386 5.1. The A.O, therefore, noted that assessee has introduced undisclosed income of Rs.52,63,386/- in its books of account through Shri Rajendra Jain group of concerns. The assessee further filed reply before A.O. explaining therein that assessee company had purchased goods from M/s. Arihant Exports and AVI Exports amounting to Rs.20,63,326/- and Rs.20,01,248/- respectively (Sl.Nos. 1 and 4). Further, in the reasons the A.O. has mentioned the names of four parties. The A.O. issued letters/notices under section 133(6) of the I.T. Act to 5 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. all the above four parties. Out of the above four parties, Karnawat Impex Pvt. Ltd., and Kriya Impex Pvt. Ltd., filed their reply denied to have made any transaction with the assessee. The A.O. also noted that Shri Rajendra Jain has retracted from his statement. The A.O. after considering the issue, rejected the claim of assessee for making genuine purchases from four parties. The A.O. made addition of Rs.52,63,386/- on account of unexplained credit under section 68 of the I.T. Act, 1961. The Ld. CIT(A) confirmed the addition. 6. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that assessee made purchases from two parties only i.e., Arihant Exports and AVI Exports. Therefore, reasons were incorrectly recorded. The assessee filed objection before A.O. The assessee filed list of purchases, copies of which are filed at page Nos. 19 to 24 of the PB giving their complete names, address and PAN number. Copies of the invoices from Arihant Exports and AVI Exports are filed at Pages 56 and 59 of the PB. PB-60 to 67 are the 6 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. replies filed by both the parties under section 133(6) of the I.T. Act, 1961, along with affidavit in which they have confirmed to have made sales to the assessee. PB-68 is affidavit of Shri Rajendra Jain in which he has retracted from the statement made during the course of search which was prior to recording of the reasons for reopening of the assessment. He has submitted that an identical issue was considered by ITAT, Delhi SMC-Bench in the case of the same assessee for the A.Y. 2011-2012 and similar addition have been deleted. The Order of the Tribunal is reproduced as under : "IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: `SMC', NEW DELHI BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER ITA No. 2821/Del/2018 Assessment Year: 2011-12 BHATIA DIAMONDS PVT. LTD. ITO, WARD 4(4), 2919, BANK STREET, Vs. NEW DELHI KAROL BAGH, NEW DELHI ­ 55 (PAN: AAECB2825C) (Appellant) (Respondent) Assessee by Sh. R.S. Singhvi, CA Department by Sh. S.L. Anuragi, Sr. DR. 7 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. ORDER The assessee has filed the appeal against the order dated 19.1.2018 passed by Ld. CIT(A)-33, New Delhi relevant to assessment year 2011-12 by raising as many as 07 grounds, but at the time of hearing, Ld. counsel for the assessee has only argued the ground no. 5 which is reproduced as under:- "5. The Assessing Officer has erred on facts and in law forming a negative inference solely on the basis of extracts of statement by third parties without confronting the same to the assessee company and in total disregard to the provisions of law." 2. Brief facts of the case are that assessee has not filed its return of income for the assessment year 2011-12. The case of the assessee was selected under section 147 of the Income Tax Act, 1961 (in short "Act"). Statutory notices u/s. 148/143(2)/142(1) of the Act were issued. In response thereto, the assessee filed its return of income on 18.5.2016 declaring NIL income for the AY 2011-12 and the AR of the assessee attended the assessment proceedings from time to time and filed necessary details. Shri Rajendra Jain, Shri Sanjay Choudhary and Shri Dharminchand Jain are some of the entry providers operating in Mumbai, indulged in providing accommodations entries in the nature of bogus sales and unsecured loans. The main allegation against the above mentioned groups were as under:- 8 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. i) Their concerns are engaged in merely paper transaction. ii) In the name of their numerous concerns, they import rough and cut and polished diamonds for the other clients who do not want to show import in their own books. The physical delivery of the diamonds so imported is immediately handed over to these actual importers after clearance of the consignment by CHA. iii) These concerns issue bills/ give accommodation entries for a commission to various parties who normally purchase diamonds in cash from undisclosed parties and need bills to show purchases against sales in their account. iv) They provide accommodation entries of unsecured loans against cash. 2.1 The search action resulted in the collection of evidences and other findings which conclusively proved that the above mentioned persons, through a web of concerns run and operated by them, are engaged in providing accommodation entries in the nature of bogus unsecured loans and bogus sales / purchases. During the course of search and seizure action statement of Sh. Rajendra Jain and Sh. Surendra Jain were recorded on oath wherein they admitted that the concerned controlled an managed them are not doing any real trading in diamonds but indulged in 9 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. paper transactions only and Shri Rajendra Jain also stated that if any concerns require bogus purchases bill for diamonds; however, our concerns have bogus stock of diamonds in out books of accounts, which are shown to be purchase / imported from foreign concerns. Therefore, the diamonds shown to be purchased / imported from foreign concerns by us are against shown to be sold to the independent concerns. These concerns take purchase bills from our concerns without actual delivery of diamonds. Further, payment made through cheques or RTGS, the cash components is generally settled by the key persons controlling the concerns, directly or indirectly by taking services of Angadia. Shri Rajendra Jain also submitted that there are some independent parties in the market which are in requirement of unsecured loans against unaccounted cash. The entries are usually for long period and the same gets reversed as and when such parties make payments through banking channels and take back the cash. The issue involved in this case is that M/s Bhatia Diamonds Pvt. Ltd. has made bogus purchases during the financial year 2010-11 relevant AY 2011-12 from the following concerns managed and controlled by Rajendra Jain Group: S.No. Name of concern operated by Name of the Amount (Rs.) Rajendra Jain Group which beneficiary engaged in business of company providing accommodation entry 1 Arihant Exports (AFLPP5405N) M/s Bhatia Rs. 4,80,001/- Diamonds Pvt. Ltd. 2 Kriya Impex Pvt. Ltd. M/s Bhatia Rs. 2,67,430/- (AADCK1926b) Diamonds Pvt. Ltd. Total Rs. 7,47,431/- 10 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. 2.2 During the assessment proceedings notices u/s 133(6) was issued on 15.06.2016 for the verification of transaction made by the assessee company for accommodation entries during the financial year 2010-11 relevant AY 2011-12 from the following concerns : S.No. Name of the party Amount 1. M/s Arihant Exports Rs.4,80,001/- 2. M/s Kriya Impex Pvt. Ltd. Rs. 2,67,430/- 2.3 M/s Kriya Impex Pvt. Ltd. vide his letter dated 15.07.2016 and M/s Arihant Exports dated 15.07.2016 have denied any transaction during the FY 2010-11 from the assessee company. In their letters "both" dated 15.07.2016 it was stated that "our company have not done any transaction from aforesaid company. The replies dated 15.07.2016 of these both parties are ditto in the language and also the font shapes and sizes. It is difficult to imagine and comprehend how two entities with different Directors and Partners submit such IDENTICAL letters with same font shapes/sizes/language unless there is a tacit and clandestine understanding amongst such operators. Further the assessee vide his letter dated 02.11.2016 has stated that Shri Rajender Jain had retracted from his earlier statement in respect of bogus purchases. In response to that the AO vide his letter dated 28.11.2016 has written a letter to the DCIT Central Circle4, Surat regarding Sh. Rajendra Jain retraction of statement made during the search and after search proceedings and inform of the status of scrutiny assessment which was completed by the 11 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. DCIT, Central Cirlce-4, Surat. In response to that, the DCIT Central Circle- 4 , Surat send a copy of assessment order in the case of M/s Kriya Impex Pvt. Ltd for AY 2012-13 u/s 144 r.w.s 153C of I.T.Act. dated 29.01.2016. In the said assessment order, the AO mentioned that during the course of search action in the case of Rajendra Jain Group, it is revealed that this group of companies has indulged as the groups in giving accommodation entries. The seizure made at place of Rajendra Jain, C-805, Oberoi Splendor Building, JVL Road, Andheri (E), Mumbai comprises of back up of Computer, Mobile arid Two Pen drives which contains details of group companies including details belong to M/s Kriya Impex Pvt. Ltd. Looking at the nature of the transactions, the seized material carry a clear implication over the income of the assessee. Shri Rajendra Jain and Shri Surendra Jain in their statements recorded on oath during the search proceedings, have categorically admitted that they were operating the business of providing accommodation entries through various companies. M/s Kriya Impex Pvt. Ltd. is one of the companies in which Rajendra Jain has done accommodation entries. As per the statement of Sh. Rajendra Jain dated 03.10.2013 during the search and seizure action u/s 132 of I.T.Act, 1961 has been carried out on the Sh. Rajendra Jain Group at C- 805, Oberoi Splendor Building, JVL Road, Andheri (E), Mumbai M/s Arihant Exports, M/s AVI Exports 3nd M/s Karnawat Impex Pvt. Ltd. are also bogus companies and providing bogus accommodation entries only. The statement which are recorded by administering oath are presumed to be carrying truth in view of provisions of section 181 and section 193 of the Indian Penal Code which provides for imprisonment if the false statement 12 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. is given. When it is so, no one like to be punished knowingly and hence, it is but logical to accept a sworn statement or the statement taken on oath as revealing the truth. Burden to prove the statement as incorrect is on the deponent and in case of failure of the deponent to prove that earlier stated facts were wrong, his earlier statements are sufficient to conclude a matter. Merely because a statement is retracted, it cannot become as involuntarily or unlawfully obtained. For any retraction to be successful in the eyes of law the deponent has to show as to how earlier recorded statements do not state the true facts or that there was coercion, inducement or threat while recording his earlier statements. Retraction was filed by the assessee on 31.10.2014 before AO after one year of search/statement recorded. The assessee has not filed any retraction before Investigation wing. The assessee has another chance to retract from his earlier statement on 05.12.2013 during the P.O. operation. Instead of denial of his earlier statement he has confirmed it. The assessee has submitted that he retracted the statement recorded on 05.10.2013 through an affidavit before notary on 21.10.2013 and also retracted the statement taken on 05.12.2015 though an affidavit before notary on 09.01.2014 which was kept with him and filed it before the AO on 31.10.2014. The assessee by non filing the affidavit before Investigation wing stopped any further investigation and not given time to investigation wing to collect the evidence against retraction. The Hon'ble Supreme Court held that in absence of proper verification affidavit cannot be admitted in evidence (A.K.K. Nambiar v/s Union of India (AIR 1970 SC 652). During the search and surveys proceedings the assessee could not 13 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. produce are verifiable evidence that the business was actually conducted. Only evidences have been created in the form of bank entries and books of account to claim that business have been conducted. Auditor has verified the bills and vouchers; not the goods. The assessee claimed that his business activities are duly acknowledge by the other Govt. Authorities like customs department, sales tax department is not reliable. Regarding Customs Department, as explained by assessee himself diamonds were handed over to real beneficiaries after the clearance from customs officials. Other Government authorities has not done any physical verification as the I.T. Department has done. Issuance of sales tax/VAT registration, payment of trade tax (in certain cases) are done by State Authorities. There is no evidence brought before the department whether any spot verification or any physical verification is carried out by such authorities, on other hand proceedings u/s 132, collection of evidence and information's during the course of such proceedings as well as corroborative verification with parties, transactions undertaken by this assessee prove that no real business was being carried out by this assessee. Such findings of the department is past the event of any verification of issuance of VAT/sales tax numbers, registration etc. by State Government or any other Authorities. During the course of search and seizure action, statements of Shri Sachin Pareek (Prop, of Arihant Exports, Director of Karnawatlmpex Pvt. Ltd. & Moulimanilmpex Pvt. Ltd.), Shri Manish Sushil Jain (Prop. of Kalash Enterprises, Director of M/s Kriya Impex Pvt. Ltd, Karnawatimpex Pvt. Ltd.) and Shri Anoop Y. Jain (Prop, of Aadilmpex and Prop, of M/s AVI Exports) have also been 14 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. recorded. All the above person in their statement 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 concerns listed at all the concern are totally controlled and managed by Sh. Rajendra Jain and Sh. Surendra Jain and other directors/partners/proprietors are just name lenders who are actually employees of Sh. Rajendra Jain and Sh. Surendrea Jain. The assessee has claimed that it had conducted proper purchase transactions with the parties - M/s Arihant Exports and M/s AVI Exports but not with the other two i.e. M/s Kriya Impex Pvt. Ltd and M/s Karnawat Impex Pvt. Ltd has also given their submission in response to notice u/s 133(6) of the I.T. Act. However, AO observed that what has to be understood in these kind of clandestine bogus purchases is that there is a tacit understanding between the parties concerned and try their level best to ensure that all papers are manipulated to give a picture that these transactions look like "real and genuine business transactions". AO further observed that it is in fact all fake transactions and such activities pertaining to evade tax should be looked and examined to ensure that the curtain that blocks the activities from being exposed should be brought down and such transactions are made duly accounted in the books of accounts. It was further observed by the AO that ho can such transaction which are claimed as genuine by this party be genuine when the party from whom they obtained the bills/vouchers etc have duly confessed that no genuine and actual purchases happen through statements given under oath during the search and post search proceedings. The attempt by M/s Bhatia 15 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. Diamonds Pvt. Ltd. To get some benefit by the submitting the "retraction / statement of Sh ^Rajendra S Jian" was verified from the Assessing Officer of Shri Rajendra S Jain from Surat. The details of how the AO rejected the retraction statement and made addition u/s 144/153C of I.T. Act in his case has been already been mentioned above. AO noted that When the main person Sh. Rajendra S. Jain involved in this whole episode is not able to attend and substantiate his claim by way of evidence and submission before his AO, then how is it possible that M/s Bhatia Diamonds Pvt. Ltd. has made claims of the genuineness of the sale/purchases. In view of above discussions, the AO made the following additions in the hands of M/s Bhatia Diamonds Pvt. Ltd for this AY 2013- 14. AO further observed that therefore, the creditworthiness and genuineness of these transactions amount to Rs. 7,47,431/- has not been proved by the assessee : S.No. Name of the party Amount 1. M/s Arihant Exports Rs. 4,80,001/- 2. M/s Kriya Impex Pvt. Ltd. Rs. 2,67,430/- Hence, he added back the amount Rs. 7,47,431/- to the income of the assessee as unexplained cash credits u/s. 68 of the I.T. Act vide order dated 30.12.2016 passed u/s. 143(3)/147 of the Act by assessing the income of the assessee on the same amount. Against the above addition, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 19.01.2018 has dismissed the appeal of the assessee. Aggrieved 16 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. with the impugned order dated 19.1.2018, assessee is in appeal before the Tribunal. 3. During the hearing, Ld. counsel for the assessee has submitted that the AO has erred on facts and in law forming a negative inference solely on the basis of extracts of statement by third parties without confronting the same to the assessee company and in total disregard to the provisions of law. He further stated assessee vide ground no. 3 which is at page no. 2 of the impugned order of the Ld. CIT(A), has raised the issue that "The AO made additions without giving opportunity of cross examination of the person on the basis of whose alleged statement, the additions was made" and submitted that the same was not adjudicated by the ld. CIT(A) and inspite of deciding the same, he has mentioned vide para no. 8.7 at page no. 15 that the AO has given sufficient opportunity to the assessee to present is contention and the appellant has no where mentioned in its submission that the AO was ever asked to provide opportunity to it to cross examine the persons whose statements were recorded, which was wrong. He further submitted that at page no. 8 of the impugned order of the Ld. CIT(A), the Ld. CIT(A) has reproduced the submission of the assessee that "the present appeal is against the additions under section 68 on assessment completed u/s. 148 of Rs. 747,431/- simply based on the report of investigation without ....."doing cross examination of any one.....". In view of above, he submitted that the addition in dispute was made and confirmed merely on the basis of the statement made by Sh. Rajendra Jain on the back of the assessee 17 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. and without giving any opportunity to cross examine him, which is not sustainable in the eyes of law. Therefore, he submitted that the issue argued vide ground no. 5 is squarely covered by the decision of the ITAT, SMC, Delhi Bench wherein the Tribunal vide its order dated 06.11.2018 passed in ITA No. 3510/Del/2018 (AY 2014-15) in the case of Smt. Jyoti Gupta vs. ITO has allowed the appeal of the assessee on exactly similar facts and circumstances. Hence, he requested to follow the aforesaid case and allow the appeal of the assessee. In support of his contention, he filed a small Paper Book containing pages 1-23 in which he has attached the copy of Company Master Data from MCA; copy of balance sheet for AY 2011-12; copy of bank statement for AY 2011-12; copy of income tax return form and computation for AY 2011-12; copy of reasons recorded by the AO; letter of objections filed during the assessment proceedings; copy of retraction affidavit given by Sh. Rajendra Jain and copy of replied u/s. 133(6) by M/s Arihand Exports and M/s Kriya Impex. 4. Ld. DR relied upon the orders of the authorities below. 5. I have heard both the parties and perused the records, especially the assessment order as well as impugned order and the Paper Book filed by the assessee containing pages 1-23 in which he has attached the copy of Company Master Data from MCA; copy of balance sheet for AY 2011- 12; copy of bank statement for AY 2011-12; copy of income tax return form and computation for AY 2011-12; copy of reasons recorded by the AO; letter of objections filed during the assessment proceedings; copy of retraction affidavit given by Sh. Rajendra Jain and copy of replied u/s. 18 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. 133(6) by M/s Arihand Exports and M/s Kriya Impex. I find that assessee has raised ground no. 3 which is at page no. 2 of the impugned order of the Ld. CIT(A), stating therein that "The AO made additions without giving opportunity of cross examination of the person on the basis of whose alleged statement, the additions was made". I find that the same issue was not adjudicated by the ld. CIT(A). However, he has mentioned vide para no. 8.7 at page no. 15 that the AO has given sufficient opportunity to the assessee to present is contention and the appellant has no where mentioned in its submission that the AO was ever asked to provide opportunity to it to cross examine the persons whose statements were recorded, which is not tenable. I further find that at page no. 8 of the impugned order of the Ld. CIT(A), the Ld. CIT(A) has reproduced the submission of the assessee by stating that the present appeal is against the additions under section 68 on assessment completed u/s. 148 of the Act of Rs. 747,431/- simply based on the report of investigation without ....."doing cross examination of any one.....". I further note that the addition in dispute was made and confirmed merely on the basis of the statement made by Sh. Rajendra Jain on the back of the assessee and without giving any opportunity to cross examine him, which is not sustainable in the eyes of law. I also notice from the copy of Company master Data from MCA that the date of incorporation of the assessee company is 25.08.2010. It is also noted from the assessee's reply dated 5.8.2016 and 23.12.2016 stating therein that assessee company had not purchased goods from M/s Arihant Exports and Kriyalimpex Pvt. Ltd. and no business activity was conducted during the period from 25.8.2010 19 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. (Date of incorporation of the assessee company) to 31.3.2011. It is also noted that Sh. Rajendra S. Jain has filed an affidavit 09.4.2014 by reconfirming his affidavit for retraction of statement. I further note that M/s Kriya Impex Pvt. Ltd. and M/s Arihant Exports vide their letter dated 15.7.2016 have confirmed that their companies have not done any transaction from the assessee during financial years 2010-11-2012. 5.1 Keeping in view of the aforesaid discussions, I am of the considered view that assessee has considerable cogency that addition was made on the basis of statement of Sh. Rajendra Jain, but the assessee was not granted the opportunity to cross examine Sh. Rajendra Jain which ground was also raised before the Ld. CIT(A), who did not adjudicate the same, which is against the settled law. I note that exactly on the similar facts and circumstances the ITAT, SMC, Delhi Bench vide its order dated 06.11.2018 passed in ITA No. 3510/Del/2018 (AY 2014-15) in the case of Smt. Jyoti Gupta vs. ITO wherein, the SMC Bench has considered the statement of Vikrant Kayan and has held that since the impugned addition was made on the statement of Sh. Vikrant Kayan without providing any opportunity to the assessee to cross examine the same, which is in violation of principle of natural justice and against the law laid down by the Hon'ble Supreme Court of India in the case of Andaman Timber vs. CIT decided in Civil Appeal No. 4228 of 2006. For the sake of convenience, I am reproducing the relevant portion of the ITAT, SMC, Delhi Bench vide its order dated 06.11.2018 passed in ITA No. 20 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. 3510/Del/2018 (AY 2014-15) in the case of Smt. Jyoti Gupta vs. ITO as under:- "13. Merely on the strength of state ment of third par ty i.e. Shri Vik rant Kaya n cannot justify the impu gned additions. More so, w hen spe cific re quest w as made by the as sessee for a llowing cro ss e xamination was denie d by the Asses sing Officer. The f irst appella te autho rity also did not conside r it fit to allow cr oss- examination. T his is in gross viola tion of the princ iples of natural justice and against the r atio laid dow n by the Hon' ble Supreme C ourt in the case o f Andaman Timbe r Vs. C IT Civil Appeal No. 4228 OF 2006 wherein it has been held as under: "According to us, not allowing the assessee to cross- examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross- 21 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex- factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross- examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to 22 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal." 14. C onsidering the facts of the case in totality, I do not find any merit in the impugne d additions. The findings of the CIT(A) are acc ordingly set aside. The Assess ing Offic er is directe d to allo w the claim of exe mptio n u/s 10(38) of the Act." 23 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. 6. Keeping in vie w of the facts and circums tances of the present cas e and respec tfully fo llowing the order of the Tribuna l, SMC B ench, D elhi in the case of Smt. Jyoti Gupta vs. ITO (Supra) a nd in vie w of the la w settle d by the Hon'ble Supreme C ourt o f India in the case o f Andaman Timber vs. C IT (Supra), o n ident ica l fact s an d circ umstances, t he addition in dispute is deleted and the appeal of the assessee is allowe d. 7. In the result, the appeal filed by the assessee is allowed. The decision is pronounced on 05/04/2019. Sd/- (H.S. SIDHU) JUDICIAL MEMBER Dated: 05/04/2019" 6.1. Learned Counsel for the Assessee in view of the above facts submitted that assessee has conducted the transaction through invoices which have been confirmed by the parties. The assessee made payment through banking channel which have not been disputed. Therefore, genuineness of the purchases would not have been doubted by the authorities below. He has submitted that the issue is covered by the Order of ITAT, Delhi SMC-Bench in the case of the same assessee (supra). 24 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. 7. On the other hand, the Ld. D.R. relied upon the Orders of the authorities below and submitted that issue is identical as have been considered by the Tribunal in the case of the same assessee for the A.Y. 2011-2012. 8. We have considered the submissions of both the parties and gone through the material on record. It is an admitted fact that an identical issue have been considered by ITAT, Delhi SMC-Bench in the case of the same assessee in preceding A.Y. 2011-2012 and similar addition have been deleted on merits and this fact is also stated by the Ld. D.R. that facts are identical in assessment year under appeal as have been considered in A.Y. 2011-2012. In the present case also, two of the parties have denied making any sales to the assessee. No entries of such sales have been recorded in the books of account. Two parties have admitted to have made sales to the assessee and filed reply under section 133(6) of the I.T. Act, 1961, supported by bill and Affidavit, on which, no adverse inference have been drawn by the A.O. All the payments of purchases have been made through banking channel which have not been doubted by the 25 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. authorities below. The assessee also filed the quantitative details of opening stock, purchase goods, manufacture, sales made and closing stock at Page-25 of the PB which also supports the explanation of assessee that he has made genuine purchases which have been sold later on. These facts clearly show that there was no basis for the authorities below to consider it to be a case of bogus purchases. It is also an admitted fact that statement of Shri Rajendra Jain was not provided to assessee nor statement was subjected to cross-examination on behalf of the assessee. He has also retracted from his earlier statement. Therefore, there was no basis to make any addition against the assessee. The issue is, therefore, covered by the Order of ITAT, Delhi SMC- Bench in the case of same assessee for the A.Y. 2011-2012 Dated 05.04.2019 (supra). In view of the above, we set aside the Orders of the authorities below and delete the entire addition. Ground Nos. 3 to 7 of the appeal of the Assessee are accordingly allowed. 9. In the result, appeal of Assessee partly allowed. 26 ITA.No.2822/Del./2018 Bhatia Diamonds Pvt. Ltd., New Delhi.. Order pronounced in the open Court. Sd/- Sd/- (PRASHANT MAHARISHI) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER Delhi, Dated 24th June, 2019 VBP/- Copy to 1. The appellant 2. The respondent 3. CIT(E) concerned 4. CIT concerned 5. D.R. ITAT "A" Bench 6. Guard File //By Order// Asst. Registrar : ITAT : Delhi Benches : Delhi.
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