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-
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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
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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."
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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).
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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
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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.
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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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