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TMI Blog2018 (1) TMI 1300X X X X Extracts X X X X X X X X Extracts X X X X ..... 17/02/2013 declaring total income at Rs. 3,55,512/-. The return of the assessee was processed on 21/03/2013. Information has been received from DIT (Inv.)-II, Mumbai that the assessee during the financial year 2011-12 had availed of entries of bogus purchases amounting to Rs. 14,55,472/-from a concern M/s. Nice Diamonds of Mumbai. The above information has been received consequent to the search & seizure operation conducted in the case of Bhanwarlal Jain group of cases. A search & Seizure operation on the above mentioned group was conducted on 03.10.2013. As a result of the said search and follow - up investigation, it came to the light that Bhawarlal Jain Group is a leading entry provider of Mumbai. The group provides accommodation entries of bogus purchases through various benami concern operated and managed by Bhanwarlal Jain and his son. The search revealed various incriminating documentary evidences indicating the same. Statements of various persons ( who assists Bhanwarlal Jain in providing bogus purchases through benami concern to the beneficiaries) were recorded. It is further mentioned in the said report that the entire bogus nature of the transactions has also been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Nice Diamonds. 6. Apart from the above the AO also treated the long term capital gain which were declared by the assessee in the return of income on account of sale of shares as bogus and ultimately determined the total income of the assesee as follows :- Rs. Rs. Returned Income 3,55,512 Add : Purchase from unaccounted source [as discussed] 14,55,472 Add: Unexplained cash credit [as discussed] 41,38,799 Total Income 59,49,783 7. It may be seen from the above additions made by the AO that the long term capital gain which was treated as bogus viz. Rs. 41,38,799/- was not the reason for which the assessment proceedings were initiated by the AO u/s 147 of the Act as recorded in the reasons for initiating reassessment proceedings which we have extracted in paragraph 2 of this order. 8. On appeal by the assessee the CIT(A) confirmed the order of the AO. The conclusion of the CIT(A) on the issue of bogus purchase of diamonds were as follows : "a. The assessee has been unable to prove the actual transport and receipt of the diamond in her hands, despite being repeatedly asked in the matter by the Ld. AO. b. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as no question of any income or escapement of income. 5. For that the Ld. CI.T (A) erred in confirming the addition of Rs. 14,55,472/- as purchased from unaccounted sources when payment for such purchases was made by account payee cheque for which bank statement was produced, there was no evidence of any other payment and no deduction was claimed as the source of the purchase was duly proved and there was no evidence that he assessee earlier purchased the diamonds by paying cash money. 6. For that the Ld. C.I.T(A) erred in confirming the addition 01 Rs. 41,17,365/- as unexplained cash credit U Is. 68 when there is nothin8 on record to treat the said sum as concealed income which had come to his notice 01 the AO in the course of assessment proceedings, 7. For that the Ld. C.I.T(A) erred in addin8 back Rs. 41,17,365/- as unexplained cash credit when all the evidences with re8ard to the earning of the saidcapita1aain were filed and the Ld. AO failed to bring on record any evidence to prove the contrary except relying of the here say communication forwarded by the DGIT(Inv). 8. For that the Ld. C.I.T(A) erred in confirming the estimate and making addition of Rs. 21,434/- as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the conclusion that the purchases in question were not genuine. Ultimately the AO made an addition in the case of the Assessee by observing that since the assessee in the balance sheet has shown increase in jewelry there is no evidence on record to doubt that he didn't make any purchase in the FY-2011-12 but the purchases were made by the Assessee from some other party in earlier year but the assessee has not furnished the details of the same. Accordingly, expenditure incurred towards purchase of diamonds shown as jewelery in the Balance Sheet is considered as unexplained investment u/s 69 of the Act and deemed to be the income of the assessee for the financial year 2009-10. On appeal by the assessee the CIT(A) confirmed the orders of the AO. 15. We have heard the submissions of the ld. Counsel for the assessee and the ld. DR. The ld. Counsel for the assesee pointed out that the jewellery in question has been purchased by the assesee which was confirmed by Nice Diamonds and the payment has been made by cheques. More important it was pointed out that the investments has been shown in the books of accounts and the source had been duly explained as from the disclosed bank ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section". Explanation 3 to s. 147 inserted by F (No. 2) Act, 2009 w.r.e.f 1.4.1989 provides that the AO "may assess or reassess the income in respect of any issue ... notwithstanding the reasons for such issue have not been included in the reasons recorded ..." (ii) The words "and also" indicate that reassessment must be with respect to the income for which the AO has formed an opinion and also in respect of any other income which comes to his notice subsequently. However, if the AO accepts the objection of the assessee and does not assess the income which was the basis of the notice, it is not open to him to assessee income under some other issue independently; (iii) Explanation 3 to s. 147 was inserted to supersede the judgments in Vipin Khanna 255 ITR 220 (P&H) & Travancore Cements 305 ITR 170 (Ker) where it was held that the AO could not assess income in respect of issues unconnected with the issue for which the notice was issued. However, Explanation 3 does not affect the judgments in Shri. Ram Singh 306 ITR 343 (Raj) & Atlas Cycle Industries 180 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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