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TMI Blog2024 (8) TMI 876X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has raised the following grounds of appeal:- 1. The Income tax Officer 19 (2)-5, Mumbai ( the A.O. ) erred in framing the assessment under section 143 (3) read with section 147 of the Income tax Act, 1961 ( the Act ). 2 WITHOUT PREJUDICE TO THE ABOVE: 2.1 The National Faceless Appeal Centre, Delhi, ( the NFAC ) erred in confirming the action of the A.O. whereby the A.O. made addition of Rs. 66,30,039/- under section 69 C of the Act as unexplained expenditure alleging the purchases made by the Appellant from M/s. Krishna Diam as non - genuine. 2.2 While doing so, the NFAC failed to appreciate that: (a) There was no material whatsoever with A.O to show that Appellant had actually incurred any expenditure on purchases outside his books of account; (b) The purchases were made in regular/normal course of his business; (c) Proper quantitative details of purchases were maintained by the Appellant; (d) Confirmation of M/s. Krishna Diam confirming the purchases made from them was also furnished by the Appellant to A.O.; (e) Copy of income tax return filed by M/s. Krishna Diam for the A.Y. 2011-10 was filed before the A.O. (f) The amounts have been paid to the purchasers through a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m each of the sources? Ans. My income from M/s Karishma Diamond Pvt. Ltd. is Rs. 2 lacs (approx) per annum, from M/s. Krishna Diam share of profit is Rs. 3 Lacs (approx) and from M/s. Mihir Diamond it is Rs. 7 lacs. Short term Capital Gain is around 6 lacs (approx) Q.15 Please state the nature of your business including the commodity that you deal in? Ans. Sir my business in all the three concern namely M/s. Karishma Diamond Pvt. Ltd., M/s. Krishna Diam, and proprietor in M/s. Mihir Diamond is of trading in rough and polished diamond. Q.16 Please state the approximate quantity and value of stock as on date? Ans As on date the quantity and value of stock is NIL. Q.37 please state how and where the goods (diamonds) are received? Ans. Sir it is received in my office 5B/1108 A1167/68B Santok Diamond Office No.204.2nd Floor, Somnath Mahadev Ni Sheri, Gajar Falia, Hari Pura, and Surat by my employees. Q.38 Please provide the names, contact number and addresses of your employees who are responsible for taking the delivery of diamonds which are imported by you and also delivery which is taken locally? Ans. Sir I have few employees working for me, I cannot provide these details. Q.39. Pleas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e name of M/s. Parshwanath Gems Pvt. Ltd. and M/s. Shree Ganesh Gems which also claim to be trading in diamonds but in which no actual business takes place. Sir, I hereby on my own declare that I am running these paper based companies with no real business activities at all. Q.53 Please state the modus operandi in detail of the 5 concerns which are controlled by you? Ans. Various brokers of the diamond market approach me regularly and they give direction from time to time to import diamonds in my books of A/c. Once the diamonds are received they are taken away by these brokers at whose direction these imports were made. For doing these activities, I get a commission. As a result of above, stock of diamonds is reflected in my books without any physical stock being there. Thereafter, at a certain commission I issue bogus sale bills of such diamonds which are appearing in my books as stock in the names of other interested parties/concerns, which is again arranged by these brokers. For this, I get commission. I also give bogus sale bills when there is no stock available in my books. by arranging bogus purchase bills from the local market from various concerns through various brokers. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e all paper concerns with no actual business of any kind. You had also accepted in the said statement that all the bills issued for sales are nothing but bogus bills issued to interested parties and that all loans and advances to interested parties is nothing but accommodation entries given against cash. Please confirm the same. Ans. Yes sir I confirm that whatever that has been recorded in my statement u/s. 131(1A) of the I.T. Act, 1961 on 06/10/2013 is true in all respect and I again confirm that the business in all my concerns namely M/s. Karishma Diamond Pvt. Parshwanath Gems Pvt Ltd., M/s. Krishna Diam, and xxxxxxx all paper concerns with no actual business of any kind. Also, all the xxxxxxx are nothing but bogus bills issued to interested xxxxxx and advances to interested parties are nothing but xxxxxxx given against cash. THE ABOVE STATEMENT IS TRUE AND CORRECT TO THE BEST OF MY KNOWLEDGE AND BELIEF. THE ABOVE STATEMENT HAS BEEN GIVEN BY ME VOLUNTARILY, WITHOUT ANY THREAT, COERCION OR UNDUE INFLUENCE. I HAVE READ THE ABOVE STATEMENT AND I CONFIRM THAT IT HAS BEEN RECORDED CORRECTLY. Sd/- Sd/- Vibhor Badoni Gautam B. Jain (ADIT (Inv.)/Unit-VIII (1), Mumbai) (Deponent) From th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, any stock of diamond was found. Any concern which is in genuine business of diamond trade, at a given point of time would at least have some stock of diamond available. However, the fact that none of the 70 concerns had any stock of diamond as on 03/10/2013 i.e. the day when search commenced raises a suspicion with regard to genuineness of business activity of these 70 concerns. b) Books of accounts not maintained at the respective registered offices: The registered offices and residential premises of the said 70 concerns and the dummy directors, partners and proprietors along with the residential premise of Gautam Jain, Rajesh Gautam Jain and Manish Bhanwarlal Jain in Surat and Surat were covered during the Search action. However, the team of the Income Tax Authorities did not find any books of accounts of the said 70 benami concerns at any of the premises. c) Books found at a secret undisclosed back office:- During search 2 back offices of the assessee at 16, Mohan Building, JSS Road, Girgaum and Plot No. 233, Ground Floor, Navkar House, Vitthal Bhai Patel Road, Girgaum (Near Parathana Samaj, VP Road), Surat -04 were discovered where the books of accounts of all the 70 concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to these actual importers after clearance of the consignment by Customs, without recording sales in the books of account. (iii) Sales bill issued to diamond processing houses and traders against book stock by the benami Importer. (iv) These concerns issue sale bills/give accommodation entries for a commission to various parties who normally purchase diamonds in cash from undisclosed parties and need bills to show purchases against sales in their account. (v) Payments are made by cheque against bogus purchases. (vi) They also provide accommodation entries of unsecured loans against cash. 5.15 Findings of the search action on Gautam Jain Others: The Directors/proprietors of all these concerns admitted on oath that the concerns are nothing but paper companies with no genuine business. It was established that the concerns import rough diamonds in their hands at the behest of a third person/interested parties. The diamonds once cleared from Customs are immediately taken away by the interested parties (third party). These group concerns are thus left with no physical stock; however, the stock is reflected in their books against which bogus bills of sale are issued to interest parties. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2019] 103 taxmann.com 459 (Bombay) Principal Commissioner of Income-tax-17 v. Mohommad Haji Adam Co. Section 69C of the Income-tax Act, 1961 - Unexplained expenditure (Bogus purchases) - Assessee was a trader of fabrics - In course of assessment, Assessing Officer noted that certain purchases made by assessee were bogus - He thus added said amount to assessee's taxable income - Tribunal noted that there was no discrepancy between purchases shown by assessee and sales declared - Accordingly, Tribunal restricted addition limited to extent of bringing gross profit rate on purchases at same rate as applied in other genuine purchases Whether, on facts, no substantial question of law arose from Tribunal's order - Held, yes [Paras 8 and 9] [2022] 141 taxmann.com 245 (Bombay) Principal Commissioner of Income-tax v. Batliboi Environmental Engineering Ltd. I. Section 69C of the Income-tax Act, 1961 - Unexplained expenditure (Bogus purchases) - Assessment year 2011-12 - Assessing Officer treated purchases made by assessee as bogus purchases and disallowed in totality - Commissioner (Appeals) directed Assessing Officer to disallow 12.5 per cent of bogus purchases and to add 12.5 per ce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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