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TMI Blog2012 (5) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... S.K. Mukhi for the Appellant. ORDER Civil Misc. No. 24231 - CII of 2011 Ajay kumar Mittal, J. Delay in refilling is condonmed. ITA No. 316 of 2011 1.1 The assessee has filed this appeal under Section 260A of the Income Tax Act, 1961 (in short, "the Act") against the order dated 31.10.2008, Annexure A-3, passed by the Income Tax Appellate Tribunal Bench 'A', Chandigarh (in short, "the ITAT) in ITA No.503/CHD/2004 for the assessment year 1998-99, claiming following substantial questions of law: ( i ) That whether the ITAT was justified in not considering the retraction of the persons from their earlier statement when they specifically stated that their earlier statements were recorded under pressure and they were made to sign certain written pages with a threat that in case they do not do so they will be subjected to lot of litigation and other harassments. They further stated that there were no bogus sales of jewellery to M/s Zaveri Diamonds (appellant). Copies of the Retraction letters being as per Annexure A-9. Hence adverse finding of the ITAT on this count is perverse and needs intervention by this Hon'be Court in view of various judgments on the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of A.O., in applying the rate of 2% commission on the purchases of Rs. 16,27,86,745/-and making an addition of Rs. 32,55,740/- on estimate basis by ignoring the regular books of account being duly audited by a firm of chartered accountants and is infact based on surmises and conjectures? ( vi ) Whether the order of the Tribunal is perverse and against the provisions of law? 2. Brief facts as narrated in the appeal may be noticed. The appellant is a partnership firm at Ludhiana. It consists of two partners namely Sarv Shri Manoj Kumar and Vineet Kumar. It is engaged in the business of purchase and sale of diamond and gold jewellery. The Government of India had announced a Voluntary Disclosure of Income Scheme, 1997 (VDIS) whereby the declarants were allowed to declare undisclosed income/assets on payment of prescribed taxes without being liable for prosecution. The appellant filed its return of income for the assessment year 1998-99 on 30.10.1998 declaring total income of Rs. 1,11,500/- which was processed under Section 143(1) of the Act. A notice under Section 148 of the Act was issued to the assessee on 18.3.2002. During assessment proceedings, the Assessing Officer confro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fittings were made. The furniture used in the shop was not commensurate with the quantum of business alleged to have taken place at the shop. On certain dates cash deposits in the bank had exceeded Rs.20 lacs. Like on 23.2.1998 cash deposited in the bank was Rs.20 lacs whereas on 24.2.1998 there was a cash deposit of Rs.47 lacs. Cash deposit entries of Rs.53 lacs on 26.2.1998 and Rs. 57 lacs on 27.2.1998 were also found in the bank account. Besides, several other alarming factors were observed in the assessment order by the assessing authority to conclude that the amount of purchases as declared by the assessee amounting to Rs. 16,27,86,745/- was not on account of any business carried on in the name of Zaveri Diamond but was a device adopted by the assessee whereby it was receiving 2 to 3% commission on the alleged purchases. Taking 2% as the commission, the total commission income was calculated to be Rs. 32,55,735/-. 6. In addition to the above factors and those referred to in the assessment order, the assessing authority noticed that during investigations four persons, namely, (i) Sanjay Jain S/o Sh. Sham Lal r/o 297, Major Sham Singh Road, Ludhiana; (ii) Sanjeev Goel S/o Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors as recorded by the assessing authority and the ITAT clearly points out relating to the modus operandi of the assessee. It would be apposite to refer to the findings recorded by the ITAT, which read thus:- "24. To verify the above claim of the assessee of conduct of business of purchase and sale of diamond jewellery/loose diamond/bullion, enquiries were conducted from the partner of the assessee firm Shri Manoj Kumar, both by the Investigation wing as well as by the Assessing Officer. In the statements recorded by the Investigation wing of Shri Manoj Kumar on 6.5.1999 and 23.11.2000, he explained that, the main business is trading in diamond jewellery, gold and silver utensils etc. He further stated that this business was carried out at the shop located at Nalke Wali Gali in Pansari Bazar, Ludhiana. He also stated that, the Business was carried out by him alongwith one employee whose name was Guru Prasad. No particulars of such employee other than the fact that he was aged about 30 years were stated by Shri Manoj Kumar. He has stated that the employee namely Shri Guru Prasad used to go with him to help him in sales. It has also been stated that the said employee never went ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities used to keep the cash and note down the bank account number and give the pay in slip receipt later. It was further stated that the assessee used to lock the safe and, the boy Mr. Guru Prasad who was employed used to sit in the shop during his absence, which is apparently contradictory to his earlier statement, when he had stated such purported employee used to accompany him to the Bank. At this juncture too, Shri Manoj Kumar failed to provide the particulars of the employee Shri Guru Prasad. So far as the safe is concerned, it was stated that the same was a half floor. It was further stated that this business was carried out upto March 1999 and thereafter closed. As regards the packaging at the time of making of sales, it was stated that since the volume of jewellery was less, they were put in lifafa and were delivered at shop only and therefore, there was no requirement of any jewellery box. It was also stated that since the jewellery was old jewellery, there was no requirement of any display also. 27. Thereafter another statement was recorded by the Assessing Officer in the course of assessment proceedings on 27th March 2003 wherein Shri Manoj Kumar stated that dia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment proceedings or appellate proceedings to establish that the sales have been made and the cash deposited in the bank account was in lieu of the sales made of jewellery. Infact, we find that unverifiability of the sales had been accepted by the CIT(A) in his order when he had enhanced the income returned to Rs.3 lacs and the assessee in the impugned proceedings, has neither challenged this finding either by filing a separate appeal or cross objection or for that matter leading any evidence. Mere furnishing of cash memos cannot, by any stretch of imagination, be made a sole basis to conclude that any sales have been made by the assessee. It is, therefore, a case where on the basis of the evidence on record and on the basis of the findings recorded by both Assessing Officer as well as the CIT (A), it has to be held that the sales made by the assessee are unverifiable and unacceptable and in view thereof, it is held that the sales so declared by the assessee of Rs.16.28 crores, since are not supported by any evidence, the same are acceptable. 29. Moreover we find that the entire transactions of purchase and sale of jewellery, as claimed by the assesasee have been carried ..... X X X X Extracts X X X X X X X X Extracts X X X X
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