9911796707
TMI Blog2005 (11) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... ified by the Customs Department. They rejected Shri Pawaskar s statement. Therefore, the issue that whether assessee exported or not does not arise. The question is whether the assessee purchased the diamonds by paying cash. There is nothing on record to suggest to the above conclusion. The reasoning however powerful cannot take the force of evidence. No evidence has been brought on record to this effect. As we have already noted, not even a single question was put to any of the parties from whom the statements were recorded by the Assessing Officer, as to whether the payment made by the assessee by cheque was withdrawn and paid back to the assessee. In the absence of any other evidence on facts, we are unable to accept the reasoning of the Assessing Officer that the assessee made the cash purchases. Thus, further addition made by the revenue authorities, resorting to section 40A(3) also does not survive. Hence, we also hold that there is no material to recompute the profits for the purpose of deduction u/s 80HHC. We have also noted hereinabove that the Assessing Officer worked out the peak credit and the CIT(A) enhanced the peak investment holding that the difference of 18 per cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in cash in excess of the prescribed limit under section 40(A)(3); whereas in the instant case of the assessee there is no evidence as record to show that the payments were made in the cash but it is an assumption, resorting to the modus operandi adopted by the business circle in diamonds. Coming to the purchases made by the assessee on payment of cash also cannot be accepted as there is no evidence to this effect because the payment is made by the assessee by cheque, which is also reflected in the books of account of the purchasers as well as of the assessee. In the result, appeal of the assessee stands allowed. - K.P.T. THANGAL AND D.C. AGARWAL, JJ. S.K. Tulsiyan for the Appellant. Krishna Mohan Prasad for the Respondent. ORDER K.P.T. Thangal, Vice President. - In this appeal by the assessee, for the assessment year 2001-02, the following grounds are urged : "(1)The CIT(A) has erred in passing the order under section 250 as it is based on illegal/uncalled remand report of the Assessing Officer and consequently the order be squashed. Without prejudice (2)The CIT(A) has erred in enhancing the assessment by Rs. 1,21,68,258 by recomputing the unaccounted peak investment at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one looks at the time gap, (are) also quite important. It appears that the assessee sells diamonds, in a period of seven days, at a profit of 23.5 per cent, which according to the Assessing Officer, gives room for some doubt and suspicion. He further noted that the holding of the stock was for very few days. But he held, it is pertinent to note that the assessee is processing orders for supply of diamonds when actually there was no stock available with the assessee. He further noted, assessee makes the payment to the purchase parties most of the time after realisation of exports and almost all the purchase parties give credit of almost 3 to 4 months. The details of purchase payments and sales receipts are given at p. 3 of the assessment order. 4. Assessee was asked to give confirmation letters from the purchase parties. Assessee furnished confirmation letters from these parties, viz. Veni Gems, Saroj Diamonds, Mahavir Exports, Priyanka Exports, Girish Diamond and Shree Nakoda Exports. Assessing Officer records that from Yash Gems, Pritam Exports, Rough Stones and Neha Gems, the assessee has not filed confirmation letters (p. 3, para 7.6). Subsequently, Rough Stones and Neha Gems a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exporter who takes the bill normally does not pay immediately. The payments are made only on export realisation. If the payments are received in the next financial year, it goes to a different entity of the bill provider group as most of these parties operate for only one financial year or perhaps even less. He further records, the parties with dummy accounts have accounts in the same branch of the bill providers and these dummy account parties have a very nominal amount in a year. Cheque books signed by the operating parties at the account opening stage itself are in possession of the bill providers, who encash self cheques by depositing them in these accounts and the money is returned to the exporter. Most probably the money is realised on the very same day. The suppliers to bill providers file commission income in the return and the bill providers file confirmation of its supplier. Whenever asked during the assessment proceedings, they produce it but the party may not be traceable. He further records, there are other parties who are heavy weight bill providers, who do the same in the second or third layer by introducing three or four purchase parties and then the cash is withd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Star, Khushboo Diamonds, etc. The cash deposited is withdrawn almost within a short gap. These Surat based parties are also having bank accounts in Mumbai. The turnover of Saroj Diamond comes to Rs. 78.2 crores altogether. 11. Mahavir Exports : This party purchased goods from Alaska International. Bank account of Alaska International showed 95 per cent of the deposits withdrawn in cash, out of the total transactions of Rs. 4.97 crores. The total transactions of Mahavir Exports comes to Rs. 24 crores and their net profit comes to Rs. 1,26,885 for the assessment year 2001-02 on a turnover of Rs. 29.69 crores. 12. It is almost the same case with every other party. The conclusion is arrived at by the Assessing Officer at p. 13 of his order. He held, in short, the parties give accommodation bills at the rate of 1 to 2 per cent and make only that kind of profits and obviously, as the transactions are not bona fide ; they show minimum profit in the business. He noted it is a foolish thing from a turnover of Rs. 500 crores the reward is about Rs. 10 lakhs, whereas the assessee made the profit of Rs. 1.66 crores from 11 transactions within a year. Hence he came to the conclusion that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the creditor. If the creditor fails, it is his failure to satisfy the Department. The said stock of diamonds cannot be treated as assessee s income from undisclosed sources. Assessee proved the genuineness, as well as creditworthiness of the parties from whom the assessee made purchases. Assessee has not to explain the source or sources. 14. The conclusion of the Assessing Officer, briefly, is as under : Assessing Officer held, the statement of the assessee is that it is not the duty of the assessee to verify from where the purchase party procures goods and a mere failure of a sub-creditor cannot in the absence of clinching evidence be treated as income of the assessee derived from undisclosed sources. Assessing Officer held, in this case the sub-creditors were not found. All their accounts show cash withdrawals every day with a minimum balance and this is not a mere co-incidence. The supplier to the assessee-firm earns a profit of less than Rs. 10 lakhs on a total turnover of Rs. 500 crores, whereas the assessee earns income of about Rs. 1.6 crores by mere 11 transactions. The fact that finance incharge even after date of search on 11th October, 2000 confirmed that this was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.82 times of the peak credit of Rs. 2,83,17,204 as per table on p. 16 of the order. (2)The Assessing Officer has erred in concluding the total purchases at Rs. 6,45,88,956 in cash instead of credit purchases as declared by the appellant and thereafter adding Rs. 1,29,77,912 being 20 per cent of alleged cash purchases under section 40A(3) of Rs. 6,45,88,956 to derive at the taxable profits under section 80HHC at Rs. 34,23,864. (3)The Assessing Officer has erred in deriving taxable profit at Rs. 34,23,864 as explained in para 13(4) of his order instead of Rs. 32,75,841 as declared by your appellant. (4)The Assessing Officer has erred in disallowing Rs. 1,29,77,912 under section 40A(3) of the Act being 20 per cent of alleged cash purchase of Rs. 6,45,88,950 and adding the amount to the profit for the purpose of calculating income under section 80HHC." 18. Before the CIT(A), assessee filed written submissions, briefly, to the following effect : Assessee s partners and family members are in business for about 20 to 25 years and regularly assessed to tax. For the assessment year 2000-01, assessee offered income of Rs. 73,44,023 under the head "Business". After deduction under section 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in cash and none of the purchase parties of the assessee s suppliers was in a capacity to supply goods to the assessee as they were non-existent. But the fact that assessee made the payment and made the purchases from the parties is not rejected. There is no evidence, except suspicion, that the cheque paid is encashed and returned back to the assessee. Relying upon the judgment of the Hon ble Supreme Court in the case of State of Kerala v. C. Velukutty Co. [1966] 60 ITR 239 , it was submitted that the judgment is a faculty to decide the matters with wisdom truly and legally and not to depend on the arbitrary caprice of a Judge, but on settled and invariable principles of justice. It is true, there is an element of guesswork in a best judgment assessment, but it has to have a reasonable nexus to the material available and the circumstances of the case. The materials collected behind the back of the assessee at least should have been put to the assessee and assessee should have been given an opportunity to explain. For the above proposition reliance was placed upon the decision of the Hon ble Supreme Court in the case of C. Vasantlal Co. v. CIT [1962] 45 ITR 206 . Assessee further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee appeared on 19th January, 2005 and 20th January, 2005. However, one party, viz. Girish Diam only appeared on 3rd February, 2005, whose statement was recorded on similar facts. Assessee s representative was given the statements on 4th February, 2005. Assessee replied on 1st March, 2005 and stated that the assessee does not want to cross-examine the above parties. The findings of the Assessing Officer during the remand proceedings, recorded from p. 25 onwards by the CIT(A) are briefly given as under: Saroj Diamond sold diamonds worth Rs. 1.08 crores to the assessee. This party was asked to give the details of their suppliers. They failed to give any details. Saroj Diamond admitted that the Surat parties, who supplied them diamonds, viz. Advance Diamond, Peacock Exports and Anmol Gems were not having any relation with the assessee and they are not in business after 2000-01. It was further questioned (Question No. 12) that the investigation carried out by the Department at Surat revealed that presently there are no parties located at the address provided and what the party wants to say on the point. Saroj Diamond stated, the parties might have changed their address and since they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC)". 23. Assessee further submitted as under : "The Assessing Officer has further referred to news published in mid-day of 16th December, 2004 regarding importance of Jangad. The non-maintenance of Jangad of such parties according to the Assessing Officer establishes that transactions recorded in their books of account are not entered in the regular course of business. The question, which needs to be addressed, is whether whatever records are maintained by such parties conclusively prove what the learned Assessing Officer alleges. If the statement recorded are considered, the learned Assessing Officer could not have come to this conclusion, which he has. Moreover, the appellant s books of account have not been rejected by the learned Assessing Officer." 24. CIT(A) records that during the course of appellate proceedings he found that Assessing Officer had incorrectly worked out the peak of the assessee s unexplained investment in making the alleged purchases of diamonds at Rs. 3,45,33,175 instead of Rs. 4,67,01,433. Accordingly, enhancement notice was issued on 10th March, 2005. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unaccounted peak investment at Rs. 4,67,01,433. This amount of Rs. 4,67,01,433 as computed above, is proposed to be taxed as your unexplained investment within the meaning of the provisions of sections 69B and 69C of Income-tax Act, 1961. You are, therefore, requested to file your objections, if any, to the proposed enhancement of your assessed income. This letter may be treated as a notice under section 251(2) of Income-tax Act, 1961 and your reply in this regard should be filed on or before 15th March, 2005." 25. In response to the above notice, assessee further submitted that the Assessing Officer was never directed by the CIT(A) to re-examine the parties, which he has done, which means he has gone beyond his jurisdiction. Assessee further replied as under: "The onus is on the revenue to prove that the real investment exceeds the investment shown in the assessee s books of account. The additions under these sections cannot be made merely on the basis of an inference; more so when such an inference is attempted to be drawn on the basis of an examination by the Assessing Officer of parties with whom the assessee had no dealings; It is not the concern of the assessee to confirm or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dropped. 28. However, the learned first appellate authority rejected the claim. He held that Assessing Officer had fixed the opportunity of cross-examination on 19th and 20th January, 2005 not with an intention. The marriage was to take place on 21st January, 2005. But this claim is not supported by any evidence; whereas the fact remains that the assessee failed to avail the opportunity. Hence he rejected the assessee s claim of violation of principles of natural justice. He further held, Assessing Officer has not brought any fresh evidence during the remand proceedings; but merely examined the parties and reiterated the conclusions drawn by him during assessment proceedings. There is nothing objectionable. CIT(A) held, it is true, all the parties confirmed the sales and receipts by cheque, which were duly deposited in their regular bank accounts. However, the assessee is not having any other evidence except this to prove the genuineness of purchases from these seller parties. On the other hand, he held, Assessing Officer conducted extensive investigation to prove that these seller parties did not have any capacity actually to sell the impugned diamonds to the assessee, as their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eas the other parties earned profit of only 1 per cent from the assessee. He held, the high profit earned by the assessee against the very meagre commission earned by the sellers also indicates that the assessee was showing unreasonably high rate of profit to claim the benefit under section 80HHC. He held, hence the finding of the Assessing Officer that the assessee has used its unaccounted money for financing the purchases of the diamonds from the open market and thereby tried to route the same back into its books of account in the form of export profits after taking the benefit under section 80HHC is a reasonable conclusion. He worked out the peak credit as on 16th March, 2001 at Rs. 4,67,01,425. He further held, while working out the peak unaccounted investment, it could reasonably be presumed that various cheque payments made by the assessee during the period of purchases were available with the assessee in cash form. CIT(A) further held : "as observed above, the appellant has deliberately shown an unusually high rate of profit by understating the purchase consideration. Hence, in order to arrive at the reasonable purchase consideration which must have been paid by the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot ignore the facts entirely. In that case the purchase and sales are accepted and the books of account were found correct. Assessee was asked to file confirmations. Confirmations were filed. All the purchase parties are assessed to tax. They are established parties, where the purchase parties turnover is in fact much more than the assessee. They were summoned and examined and all of them accepted sale to the assessee and they confirmed it, as it appears in the books of account of the assessee. Payments were made by cheque and also deposited and reflected in their bank account. They also procured diamonds from third parties. The parties from whom assessee made purchases were also paid by cheque. What now the revenue authorities want is to examine the source of sources i.e. the Surat parties. The case of the revenue is that the turnover disclosed is not genuine and the suspicion of the revenue, is that assessee has purchased these diamonds from the parties, who sold to the assessee by cash payment. But there is no material. An iota of evidence to this effect was not available even during search and seizure action. This is mere suspicion. Another objection of the revenue is that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Income-tax Act". Assessing Officer further held, the expenses claimed, average comes to only 0.003 per cent and 0.004 per cent for the assessment years 2000-01 and 2001-02, which is quite abnormal. The time gap between the purchases and sales are too short, i.e. about less than 10 days. Another reason given by the Assessing Officer for suspicion is that the assessee does not even pay the purchase parties when it buys goods and most of the time the payment is made after realisation of exports and the purchase party thus gives credit of almost 3 to 4 months on these transactions, as is evident from the chart given, which shows certain transactions out of 11, wherein the payment has been received by the assessee after realisation. 35. Learned counsel submitted, in order to establish the veracity of the transactions, confirmations of all the purchase parties were filed before, the Assessing Officer and the same are being filed once again vide pp. 1 to 68 of the paper book. He submitted, the finding of the Assessing Officer that two parties, viz . Yash Gems and Pritam Exports, never filed confirmations is incorrect because they had filed confirmations at the time of block assessment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the head "Business", etc. which did not satisfy the Assessing Officer. The findings of the Assessing Officer are based on some statements recorded from third parties with whom assessee had no dealings or transactions. In fact the books of account of the assessee have not been rejected. The only comment was that the profit declared by the assessee is unreasonably high. The above conclusion was arrived at on the basis of some statement recorded from Shri Rajan A. Pawaskar, which in fact (was) rejected by the Customs Department as untrustworthy statement. Learned counsel submitted, identity of all the purchase parties is established. All except two parties physically appeared before the Assessing Officer and confirmed the transactions. Assessee is not required to establish anything further, learned counsel contended. He relied upon the decision of the Hon ble Gauhati High Court in the case of Nemi Chand Kothari ( supra ) nor the above proposition. Learned counsel further submitted, there is no material to show that any part of the funds given by the assessee to its parties by cheque came back to the assessee in any form. Reliance was placed upon the decision of the Hon ble Gujarat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knowledge of the assessee. It was never put to the assessee. Even if that happened, how the assessee could be fastened with such liability that the money came back to the assessee, learned counsel contended. Assessee was subjected to search and seizure action under section 132 on 20th September, 1990. No incriminating material or anything else was found in the course of such search proceedings even remotely hinting that the assessee is engaged in bill accommodation. In the absence of any concrete evidence, the Assessing Officer as well the CIT(A) was not justified in rejecting the purchases reflected in the books of account, holding that these were cash purchases. Books of account were maintained in the regular course of business of the assessee, contended the learned counsel. The Hon ble Assam High Court in the case of Tolaram Daga v. CIT [1966] 59 ITR 632 held that the books of account maintained in the regular course of business are relevant and afford prima facie proof of the entries and correctness thereof. The Hon ble Kerala High Court in the case of St. Teresa s Oil Mills v. State of Kerala [1970] 76 ITR 365 held that accounts regularly maintained in the course of business h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessment made without giving the assessee an opportunity of setting out his case was liable to be set aside". So also, the Hon ble Supreme Court observed in the case of Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775. Learned counsel submitted, if the Assessing Officer proposes to use any material against the assessee, which is obtained by private enquiry, it should have been communicated to the assessee so as to know full particulars of the case and the failure to do so vitiates the case of the revenue. For the above proposition, learned counsel relied upon the following judgments : (1) Bhogilal H. Patel v. CIT [1969] 74 ITR 692 (Bom.); (2) Gargi Din Jwala Prasad v. CIT [1974] 96 ITR 97 (All.); (3) Nagulakonda Venkata Subba Rao v. CIT [1957] 31 ITR 781 (AP); (4) M.O. Thomakutty v. CIT [1958] 34 ITR 501 (Ker.). Learned counsel further reiterated the submissions made before the CIT(A) with regard to the remand report, which was made beyond the scope of the direction. Learned counsel submitted, instead of providing an opportunity to cross-examine, the parties were examined afresh by the Assessing Officer. Hence, Assessing Officer went beyond the scope of the direction itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng year has no much relevance except on the basis for every year. 43. The learned Departmental Representative further submitted, the fact that no adverse evidence was found in block assessment completed on 27th March, 2003, where purchases were examined, parties were summoned and purchases and sales were held genuine as assessed at nil also has no much relevance. The learned Departmental Representative submitted, it is well-settled position that block assessments have to be completed on the basis of material found during the course of search and not on the basis of post-search inquiries. If no material was found during the search doubting the genuineness of the purchases and parties confirmed the purchases made by the assessee, then there is no scope of reason for the Assessing Officer to make any adverse finding in the block assessment when prima facie it would found to be correct. Therefore, the learned Departmental Representative submitted, no reliance could be placed on the averments of the assessee that no adverse finding has been recorded in the block assessment. 44. Referring to the argument of the learned counsel that the sellers of the diamonds confirmed the transactions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Nemi Chand Kothari ( supra ) has no relevance. In the present case, the Assessing Officer has discharged the onus but the assessee has not made any efforts to controvert the evidence collected by the Department to prove that the purchases shown are genuine. 45. Learned Departmental Representative also objected assessee s plea that the assessee was not given proper opportunity to cross-examine the parties, even though they were witnesses of the Department. The assessee relied upon the bills given by these parties, though assessee claims that they are the witnesses of the Department. In spite of all these the CIT(A) remanded the matter back to the file of Assessing Officer for providing cross-examination to the assessee and the dates were given. But the assessee, on the ground that there was a marriage in the family on 21st Jan., 2005, did not avail it. The statements were given to the assessee again on 4th Feb., 2005, to which assessee relied on 1st March, 2005 and stated that the assessee does not want to cross-examine the parties. 46. Coming to the objection of the assessee that the Assessing Officer exceeded his power by recording fresh evidence, the learned Departmental Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same Mumbai address and have similar purchase parties. Neha Gems and Shree Nakoda Exports have also same Mumbai address and have similar purchase parties. Since the Surat parties genuineness was in doubt, the matter was referred to Investigation Wing, Surat. Enquiry revealed that none of the above parties (was) in existence. There was no local information available regarding any of these parties. Hence bank accounts of these parties were traced and it was seen that there were huge cash withdrawals from these accounts. RBI guidelines states of reporting of Rs. 10 lakhs and above cash transaction. To evade the same, a sum of Rs. 9,95,000 or similar figures are withdrawn every day on account of cheque deposit. The learned Departmental Representative supported the order of the Assessing Officer and held, the modus operandi hereinabove mentioned, as found out by the Assessing Officer, clearly establish that the bills, etc. are make-belief and way to deprive the revenue its due. He further submitted, the turnover of the suppliers was about 70 times more than that of the assessee, but the profit earned is as low as 0.1 per cent; whereas assessee s business profit is Rs. 104 lakhs out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee that the assessee exported diamonds and it is certified by the Customs Department goes against the assessee. It means the assessee purchased the material from undisclosed sources and exported, exactly the case of the revenue. Hence the learned Departmental Representative submitted, the peak worked out was the correct method to find out the investment and the disallowance made under section 40A(3) being cash purchases to the tune of 20 per cent is also correct. Hence he submitted, recomputation of deduction under section 80HHC and the profit is on the right steps. Learned Departmental Representative submitted, the orders of the revenue authorities are liable to be upheld. 49. Hearing the rival submissions and going through the orders of the revenue authorities and the facts and on the basis of the decisions, we are of the view that the issue has to go in assessee s favour. 50. The first objection of the revenue authorities is that the assessee earned a high profit of about 23.4 per cent, whereas in this line of business normally the profit is 6 per cent. No comparative case brought on record to substantiate this point. The reasoning of the Assessing Officer to come to such a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that the parties confirm the transaction and also in response to notice, they appear. One of the objections of the Assessing Officer is that (para 8.2) though the parties appeared confirmed the transactions, they are not existing at the given address. This alone cannot be the reason for rejection of their confirmation. 52. One of the contentions of the assessee is that the assessee did not get opportunity to rebut the statements taken from the third parties/Surat parties. When the matter was carried before the CIT(A), he called for the remand report from the Assessing Officer and also directed the Assessing Officer to give the assessee an opportunity to cross-examine the parties. Assessing Officer recorded statements from all these parties and the date was fixed for cross-examination; but the assessee could not avail it due to marriage in the family. Hence the Assessing Officer came to the conclusion that the assessee is not interested in cross-examining the parties. 53. The case of the assessee is that the assessee is not bound to prove the source of sources. The immediate parties, from whom the assessee made purchases, confirmed their sales. revenue authorities are in fact do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heque ultimately reached back to the assessee is not a finding based on any fact. Unless there is some evidence in support of the claim that the money reached back to the assessee, we are unable to hold that the finding arrived at by the revenue authorities is the right one. Suspicion alone however strong is not sufficient. It is true, the Assessing Officer clearly established the modus operandi in this line of business. But unless there is some evidence against the assessee, however weak, the decision has to go in assessee s favour. 56. The CIT(A) found that the assessee made purchases to the tune of Rs. 5,30,87,813 and resorting to section 40A(3), he disallowed 20 per cent being the cash purchase. Again we have to say that there is not an iota of evidence, except the reasoning of the Assessing Officer, to show that the assessee made purchases by making cash payments. 57. Hereinabove we have recorded the statement obtained by the revenue from Shri Rajan A. Pawaskar, chartered accountant, wherein he stated that the assessee is not engaged in diamond business activity rather the said transactions were merely used to launder black money of the assessee. But the fact remains that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances, for the subsequent period to hold that the entire purchase is bogus is a conclusion that is very difficult to arrive at. Another reasoning of the Assessing Officer to come to the conclusion that the assessee had not actually purchased the diamonds from the immediate suppliers is that their suppliers from Surat had no capacity and even if they had the capacity, there is no evidence that they transported it to Mumbai. According to the Assessing Officer, the diamonds worth crores of rupees, if they claimed to have transported, these diamonds should have been insured and the mode of transportation or at least the details of tickets, etc. of the persons who brought diamonds should have been mentioned. Be that as it may, we are not making any proposal. No question has been put to immediate suppliers to the assessee whether they purchased the material from the open market other than the parties who said to have supplied them from Surat. Therefore, the proposition that in the absence of insurance, mode of transportation, etc. the claim that the diamonds came from Surat cannot be accepted, is not a sound conclusion arrived at. It is true, the profit shown by the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to show that the material has been transported from Surart to Mumbai. The third parties are not the parties who sold to the assessee directly. Surat parties claimed that they have delivered the goods to the sellers from whom assessee purchased. Therefore, this point also cannot be strictly taken against the assessee. 65. In the case of Jay Engineering Works Ltd. ( supra ), the Hon ble Delhi High Court held that unless there is contrary evidence in the possession of the Assessing Officer, though the rules of evidences are not strictly applicable to the assessment proceedings, books of account are evidence under section 34 of the Evidence Act, after the relevant entries are proved by oral evidence or admission. The decisions relied upon by the assessee in the case in Tolaram Daga ( supra ) and St. Tesesa s Oil Mills ( supra ) also supports this view. In the light of the above discussion, we are of the view that the orders of the revenue authorities are liable to be set aside as there is no evidence on record to show that the payments made by the assessee have come back to the assessee, except the modus operandi said to be prevalent in this line of business. 66. Coming to the purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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