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TMI Blog2021 (7) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... plete one-to-one corelation of the purchases vis- -vis diamonds utilized in exports made by the assessee. The documentary evidences as furnished by the assessee as elaborated by us in para-5 duly support the said propositions. The assessee s books of accounts have duly been audited as per Income Tax Rules and there are no adverse remarks by the Tax Auditor with respect to purchases, utilization of raw material, sale or closing stock. Upon perusal of the Tax Audit Report, it could be gathered that the assessee has maintained complete quantitative details of raw materials, work-in-progress as well as finished goods sold by it. Upon perusal of financial statements, it could be observed that the assessee has reflected Net profit Rate of around 6% in this year as against net Profit Rate of 5.85% in immediately preceding year. We are of the considered opinion that the onus casted upon assessee to substantiate the purchases was duly discharged and the onus was on revenue to dislodge the assessee s submissions as well as documentary evidences. The whole basis of addition is statement made by the tainted group during search operations. The opportunity to cross-examine the same has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follow a strict procedure for procurement of consignment in accordance with the procedure laid down by the Customs/SEZ Authorities. 1.3 The Ld. AR advanced argument assailing the additions made / confirmed by lower authorities whereas Ld. DR pleaded for dismissal of the appeals. We have carefully heard the rival submissions and perused relevant material on record including documents as placed in the paper book. Our adjudication to the appeal would be as given in succeeding paragraphs. Assessment Proceedings 2.1 The material facts are that the assessee being resident firm is stated to be engaged in manufacturing export of jewellery. An assessment was framed for the year u/s 143(3) r.w.s. 147 of the Act on 11/02/2015. The original return of income filed by the assessee was scrutinized u/s 143(3) on 18/12/2009 accepting the returned income of ₹ 26.62 Lacs. However, pursuant to search operations by DGIT(Inv), Mumbai in the case of Shri Rajendra Jain Group, Shri Sanjay Choudhary Group and Shri Dharminchand Group on 03/10/2013, it was alleged that the assessee obtained bogus purchase bills from an entity namely M/s Sun Diam. Accordingly, the case was reopened as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s along with its invoice to the Deputy Commissioner of Customs at DPCC (Diamond Plaza Clearing Centre) at Dr. D. B. Marg, Mumbai - 400 004 for complete verification and appraisal of quality, quantity and value of the consignment. c) The sale made by supplier locally to assessee was not to be considered as local sale but a deemed export for which it was obligatory for supplier to get itself registered with JCCI E (Joint Chief Controller of Imports and Exports) who would allot all such parties the Importer - Exporter Code Number (IEC). d) After the customs authorities have inspected, verified and appraised the consignment, they would take delivery / possession of the goods from the suppliers and seal the consignment and retain it with them. Simultaneously, the invoice would also be stamped and endorsed by the custom authorities, the entry of which would also be made in the customs register. e) One copy of this customs stamped and endorsed invoice is then handed over to the assessee by the supplier which is required to be given / handed over to the jurisdictional Preventive officer for the purpose of taking delivery of the goods. f) Subsequently, one person from assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in manufacture and export vis- -vis purchases made from M/s Sun Diam was also enclosed. The confirmed account statement along with copy of Income Tax Return of M/s Sun Diam was also furnished. Lastly, the notarized affidavit executed by Shri Rajendra Jain as partner of M/s Sun Diam, confirming the aforesaid transactions with the assessee was also placed on record. Finally, it was submitted that the allegation of Ld. AO doubting the purchase transactions stood completely negated. The assessee also submitted that it ought to have been granted an opportunity to cross-examine the party. Reliance was placed on several favorable decisions of Tribunal rendered under similar factual matrix. The same has already been elaborated in the impugned order. 4.1 The Ld. CIT(A) noted that the assessee was a manufacturer and not a trader and therefore one-to-one correlation of the purchases was not possible. The assessee did not elaborate the manufacturing process and did not mention anything about the sale of the finished product. The rejection of books was not mandatory since only the purchases were disallowed in view of the fact that the same were found to be made with a view to reduce the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such purchases to be made by the assessee have to follow strict procedure as laid down in SEZ rules and regulations. This procedure has elaborately been given by the assessee in its submissions during appellate proceedings. The same has also been noted by us in preceding para 3.2. Upon perusal of the same, it could be seen that the assessee could not purchase the material directly from the local vendor rather the purchases had to following specific procedure as per the rules. We find that the assessee has purchased loose diamonds from M/s Sun Diam which has been used in making the jewellery. The proposed quantity of cut polished diamonds as required by the assessee would first be intimated to Superintendent of Customs along with the proforma invoice of the supplier party showing therein the complete details of quality, quantity and value. Against this intimation, the Superintendent of Customs would issue a certificate of procurement and movement of imported goods / excisable good without payment of duty. A copy of the same is on record. Upon perusal of the same (page 85 of the paper-book), it could be gathered that this certificate is issued for particular invoice number detaili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds have been used/consumed. The custom officer after satisfying himself fully would endorse under his seal and signature assessee s respective export invoice(s) and also on the end-use certificate showing the complete details therein, only after which the goods would be eligible for export to overseas buyers. The perusal of sample copy of end-use certificate (page 84 of paper-book) would reveal that this would contain import quantity of cut polished diamonds, export invoice number date, shipping bill number date and would certify that the goods have been fully utilized in the manufacture of studded jewellery and also the fact that said manufactured goods have ultimately been exported by the assessee. Similar documents have been placed on record for all the consignment procured by the assessee from M/s Sun Diam. 6. Upon perusal of all these facts as well documents, it could very well be said that the purchases made by the assessee was to undergo strict rules regulations as well as verification by customs authorities. Not only this, the utilization of the same while exporting the goods was also to be demonstrated by the assessee. There is complete one-to-one corelation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this order. Ground Nos. 2 to 4 stands allowed. 9. The Ld. AR has assailed the reassessment proceedings on the ground that original return was scrutinized u/s 143(3) and the case was reopened beyond four years. However, there is no allegation by Ld. AO in the recorded reasons to the fact that there was any failure on the part of the assessee during scrutiny assessment. We do not concur with the same since assessment was framed u/s 143(3) on 18/12/2009 whereas search action on tainted group took place on 03/10/2013 which is a subsequent event. The Ld. AO was clinched with tangible material arising out of a subsequent event. This material established possible escapement of income in the hands of the assessee. Therefore, nothing more was required at this stage to reopen the case of the assessee. Ground No.1 stands dismissed. 10. In the result, the appeal stands partly allowed. ITA No.7510/Mum/2019, AY 2008-09 11. The assessee has similarly been assessed in AY 2008-09 u/s 143(3) r.w.s. 147 on 19/01/2016 wherein purchases made from two suppliers have been disallowed. The appellate order is common order for all the years against which the assessee is in further appeal be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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