2011 (9) TMI 131 - HC - Income Tax

Accommodation entry - interest U/S 158BFA(1) - genuine transaction - business of jewelery - Appeal has been admitted after after re-framing of question of law.

Summary

Issues Involved:
1. Deletion of addition on account of cash found during search.
2. Deletion of addition on account of commission income from M/s. Bemco Jewellers Pvt. Ltd.
3. Deletion of interest charged under Section 158BFA(1) of the Income Tax Act, 1961.
4. Legitimacy of transactions relating to sale/purchase of jewellery.
5. Legitimacy of business transactions from specific premises.
6. Justification of rejecting the books of accounts.
7. Applicability of the principle of probability of human behavior.
8. Allegations of the tribunal's order being perverse.

Detailed Analysis:

1. Deletion of Addition on Account of Cash Found During Search:
The tribunal deleted the addition of Rs.11,71,900/- found during the search, which was contested by the Revenue. The CIT (Appeals) presumed the cash belonged to BJPL, while the tribunal inferred it belonged to others using Manoj Aggarwal for accommodation entries, thus Section 69A was deemed inapplicable. The Revenue argued that the names and details of said persons were not furnished, and Section 69A should be fully applied.

2. Deletion of Addition on Account of Commission Income from M/s. Bemco Jewellers Pvt. Ltd.:
The tribunal deleted the addition of Rs.18,10,079/- on account of commission income from BJPL. The Revenue highlighted contradictions in the tribunal's findings and argued that the burden of proof was wrongly placed on the Revenue. The tribunal was accused of ignoring the material evidence and statements, including those by Manoj Aggarwal admitting to providing accommodation entries.

3. Deletion of Interest Charged Under Section 158BFA(1) of the Income Tax Act, 1961:
The tribunal's decision to delete the interest charged under Section 158BFA(1) was challenged. The Revenue argued that the tribunal struck down the interest on the grounds of delay in furnishing seized documents without examining particulars and details.

4. Legitimacy of Transactions Relating to Sale/Purchase of Jewellery:
The tribunal held that transactions of sale and purchase of jewellery were genuine. The Revenue contested this, citing lack of sufficient proof and arguing that the burden of proof was on Manoj Aggarwal to establish the genuineness of these transactions. The tribunal's reliance on certain statements and documents, which the Revenue deemed insufficient or contradictory, was questioned.

5. Legitimacy of Business Transactions from Specific Premises:
The tribunal held that genuine business transactions were carried out from 1182, Kucha Mahajani, Chandni Chowk, Delhi, and B-108, Jai Sidhi Apartments, Ahmedabad. The Revenue argued that witnesses denied knowledge of the jewellery business, and the tribunal wrongly ignored these statements. The tribunal's acceptance of explanations regarding transportation of gold and cash was also contested.

6. Justification of Rejecting the Books of Accounts:
The tribunal rejected the Assessing Officer's decision to reject the books of accounts of the assessee. The Revenue highlighted issues such as the absence of stock registers, freshly prepared bills, and auditors' inability to verify stock and purchase invoices. The tribunal's acceptance of the books despite these issues was challenged.

7. Applicability of the Principle of Probability of Human Behavior:
The tribunal held that the principle of probability of human behavior laid down by the Apex Court was not applicable to this case. The Revenue argued that the tribunal ignored the principle, which should have been applied given the unusual nature of the transactions and the manner in which they were conducted.

8. Allegations of the Tribunal's Order Being Perverse:
The Revenue argued that the tribunal's order was perverse as it ignored relevant facts, including seized material and post-search investigations. The tribunal was accused of relying on irrelevant material and leaving out significant evidence, thus raising a question of law.

Conclusion:
The High Court admitted the appeals and framed substantial questions of law regarding the tribunal's findings on the legitimacy of the jewellery business, the deletion of additions on account of cash and commission income, and the deletion of interest charged. The appeals were to be listed and disposed of together, with a comprehensive examination of the evidence and material presented before the tribunal.