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TMI Blog2024 (5) TMI 1476X X X X Extracts X X X X X X X X Extracts X X X X ..... r for deciding the questions of difference amongst both the Hon'ble Members. 4. I have heard the ld. Representatives and perused the record carefully. Before adverting to the questions of difference referred for opinion, I deem it appropriate to bear in mind the basic facts necessary for adjudication of the controversy involved in both the appeals. Therefore, I take note of the brief facts. ITA No. 226/ASR/2017 5. In this appeal, the assessee has taken six grounds of appeal, out of which under Grounds No. 1 to 3, the assessee has challenged the reopening of assessment by issuance of a notice under section 148. However, during the course of hearing, ld. Counsel for the assessee has withdrawn this fold of grievances and did not press these three grounds. Out of the remaining three grounds, Ground No. 6 is a general ground of the appeal, which does not call for recording of any finding. This lead me to confine only two issues, which read as under:- Ground No. 4:- "That the CIT(A) was not justified in upholding the addition of Rs. 86,76,315/- on account of alleged bogus purchases and he completely ignored the submissions of the appellant. That the CIT(A) failed to appreciate tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the query of ld. Assessing Officer, the assessee filed detailed written submission. I will revert those submissions while dealing with the argument raised by the ld. Counsel for the assessee. The ld. Assessing Officer has briefly noted the reply of the assessee in paragraphs no. 6.4 & 6.5 of the impugned assessment order and thereafter rejected such submissions by recording the following finding:- "6.4. The reply submitted by assesses is carefully considered and following observations are made:- (a) Sh Bhanwar Lal Jain has categorically accepted that he deals in providing bogus bills. (b) Sh Bhanwar Lal Jain has accepted that M/s Daksh Diamonds and M/s Jewel Diamonds are controlled and managed by him. (c) Assessee has made purchases from M/s Daksh Diamonds and M/s Jewel Diamonds. (d) Sh. Bhanwar Lal Jain has nowhere made any exclusion vis a vis M/S Gujranwala Jewelers in his statement. Therefore it is clear that he provided bogus sale bills to M/S Gujranwala Jewelers too. (e) While examining books of account it was noticed that there were no details of disputed diamonds available in stock register rather there were only general entries, in other words total weight i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal, which read as under:- Ground No. 3:- That the CIT'(A) failed to appreciate that notice issued by the AO u/s 133(b) was beyond the powers of the AO since no assessment proceedings were pending at the time of issue of notice. Ground No. 4:- That the CIT(A) was not justified in upholding the addition of Rs. 8217465/- on account of alleged bogus purchases and he completely ignored the submissions of the appellant. That the CIT(A) failed to appreciate that no trading additions could have been made by the AO without pointing out any defect in the audited books of accounts and without rejection of the same. Ground No. 5:- That CIT(A) failed to appreciate that addition has been made on the basis of statement of Mr. Sanjay Choudhary and despite the request of the assessee he was not produced by the AO for cross examination. Hence the action of AO and CIT(A) are against the natural justice. Ground No. 6:- That without prejudice to grounds raised above both AO & CIT(A) failed to appreciate that if it all any addition was to be made it could have been made on the net profit arising out of the alleged bogus purchases and not the entire amount. 10. Brief facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Act, 1961 In re: Gujaranwala Jewellers & Ors. v. Asst. CIT (ITA Nos. 226 & 586/ASR/2017) A difference of opinion has arisen between the Members constituting the Bench which heard the captioned appeal, passing their separate orders u/s. 254(1) of the Income Tax Act, 1961 ('the Act ' hereinafter), Accordingly, in terms of section 255 (4), a reference is being hereby made to the Hon'ble President, Income Tax Appellate Tribunal , for referring the matter for resolution of the said difference to a Id. third Member, articulated by the following points of difference: emanating from the respective orders by the said Members: 1. Whether the disallowance of the impugned expenditure justified in the facts and circumstances of the respective cases, or has the assessee/s proved the relevant purchases, so as not to warrant any disal lowance of the expenditure claimed in its respect? 2(a) Whether the entries in the stock register prove the purchases in the facts and circumstances of the case, including as to their price? (b) Whether the stock register as maintained can be said to be a proper record, resulting in correct stock, valuation and, thus, determination of operating resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinate Benches in various cases as referred in composite order of these appeals under consideration, specifically Amritsar Bench in DCIT vs. Sunil Kumar {ITA No.563, 564, 564, 567, 343, 571, 572, 573, 574 and 232/Asr/2016 decided on 30.03.2017] has decided the similar and identical issue which was mainly relied upon by the assessee for its cases, however the Hon'ble A.M has taken the contrary view. (ii) Whether the additions made by the Assessing Officer and affirmed by the Ld. CIT(A) are not liable to be deleted in view of the facts and circumstances of the cases. (iii) 'Whether, as per dictum of Apex Court in the case of Andaman Timber Industry vs. CCE (Civil Appeal No. 4228 of 2006 dated 02/09/2015, the additions are not liable to be deleted in the instant cases, wherein the assessee was not granted any opportunity to cross examine the third party on the basis of whose statement, the additions were made". 15. The ld. Counsel for the assessee while impugning the orders of ld. CIT(Appeals) in both the appeals took me through synopsis of his argument, which are placed on the record. He also made reference to a large number of judgments. As far as the synopsis of argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. of Nazar Impex is mentioned in their invoices. (iv) Copy of the Stock Register of Diamonds from 01.04.2012 to 31 03.2013 is appended on page no. 36 & 37 of Paper Book wherein the purchases have been entered into the receipt side of the Stock Register. (v) Copy of letter dated 22.01.2016 written by the assesses requesting the AO to ' provide the statement of Sanjay Choudhry at page no. 54 of Paper Book .and copy of letter of ACIT dated 02.02.2016 enclosing the statement of Sanjay Choudhry at page no. 55 to 70 of Paper Book. (vi) Copy of letter of assessee dated 11.02.2016 requesting the AO to summon Sanjay Choudhry for cross examination of his statement at page no. 71 to 72 of Paper Book. (vii) Copy of letter dated 08.03.2016 of ACIT fixing the date of cross examination of Sanjay Choudhry 14.03.2016 at page no. 73 of Paper Book (viii) Copy of letter dated 15.11 2016 of the AO directing the assessee to appear before DCIT Circle-4 of Surat for cross examination of Sanjay Choudhry at page no. 74 to 75 of Paper Book.. (ix) Copy of letter dated 17.11.2016 of the assessee requesting the AO to call her witness at Jalandhar for cross examination at page no. 76 of Paper B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017) 186 TTJ (Mum) 353 at page 359 and the judgment of ACIT Vs. Mahesh K. Shah (2017) 184 TTJ (Mum) 702. (copies enclosed). Hence It is prayed that appeal of the assessee may be allowed". 16. In support of his contention, he relied upon the following judgments, whose copies are placed on the record:- (i) DCIT -vs.-Sunil Kumar Prop. Sunil Jewellers [ITA No. 563, 564, 565, 567 & 343 (ASR) 2016]; (ii) CIT -vs.- M/s. Odean Builders Pvt. Ltd. (SC) Civil Appeal No. 9604-9605 of 2018]; (iii) 405 ITR ST 3; (iv) ACG Arts and Properties Pvt. Ltd. -vs.- DCIT [171 ITD (Mumbai)184]; (v) Fancy Wear -vs.- ITO [167 ITD (Mumbai) 621; (vi)Parvesh Kejriwal -vs.- IYO [174 ITD (KOL) 662; (vii) Videocon industries Ltd. -vs.- DCIT [186 TTJ (Mumbai) 353; (viii) Pr. CIT -vs.- Vaman International Pvt. Ltd. [321 CTR (Bombay) 671]; (ix) DCIT -vs.- Padmini VNA Mechatronics Pvt. Ltd. [195 TTJ (Del) 649; (x) Oopal Diamond -vs.- ACIT [197 ITD (Mumbai) 827]; (xi) Jaswant Lal J. Shah -vs.- ACIT [190 ITD Mumbai) 157]; (xii) DCIT -vs.- Lucent Diamond [189 ITD (Mumbai) 581]; (xiii) DCIT -vs.- Hi-Tech Engineers (222 TTJ (Mumbai) 785]; (xiv) Pr. CIT -vs.- Tirupati Earth Neerprima JV [457 ITR ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ornaments. It has also filed copy of the stock register exhibiting opening stock, purchase, sales and closing stock. The assessee thereafter filed purchase bills issued by M/s. Daksh Diamonds, M/s. Jewel Diamonds and M/s. Nazar Impex (P) Ltd. in the respective years. The assessee has made the payments to its suppliers through banking channel. The seller of the diamonds was having PAN, VAT, TIN and CST no. Those details were submitted by the assessee to the ld. Assessing Officer during the course of assessment proceedings. The assessee had made request that the person, who has disclosed from its back that he was engaged in providing bogus entries, then, such a person be subject to cross examination. Ld. Counsel for the assessee took me through page no. 79 of the paper book wherein order-sheet of the proceedings before the ld. Assessing Officer has been placed on the record. On 11th of March, ld. Assessing Officer issued summons under section 131 of the Income Tax Act to Bhanwar Lal Jain for appearance on 23.02.2015, but Shri Bhanwar Lal Jain and Shri Sanjay Choudhary never appeared. The assessee thereafter brought it to the notice of the ld. Assessing Officer that a perusal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins audited accounts of the assessee, stock register, purchase register, details of payments of purchases through banking channel, details of suppliers/sellers, namely PAN, VAT, TIN, CST nos. 22. The assessee has produced quantitative details, which were verifiable and also tallied. For example, if 100 kgs. of raw material is being purchased, then sales also represent those 100 kgs. or unsold items are reflected in the closing stock. 23. The short question before me is, whether on the basis of the information collected from the back of the assessee from a third party, its purchases could be doubted and disallowance of expenditure is to be made. This is not a dispute which has fallen for consideration by the Tribunal for the first time. It has come up on a number of occasions across the Benches of the Tribunal. The ITAT, Amritsar Bench has considered identical issue in the case of DCIT -vs.-Sunil Arora in ITA No. 563 & Others (Amritsar) 2016. The Hon'ble Judicial Member is Author of the order in those cases. Apart from that, the ld. Counsel for the assessee drew my attention towards the judgment of the Hon'ble Supreme Court in the case of CIT -vs.- M/s. Odeon Builders Pvt. Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned order of the ITAT." In these circumstances, the Review Petitions are dismissed. J. (R.R Nariman) J. (Indu Malhotra) New Delhi; August 21, 2019 24. A perusal of the above decision would reveal that Hon'ble Supreme Court has concurred with the judgment of Hon'ble High Court and order of the ITAT on the ground that disallowance based on third party information gathered by the Investigation Wing of the Department without independent verification of the ld. Assessing Officer cannot be made. In other words, the information transmitted by the DIT (Investigation) was a material to ignite assessment machinery in motion but it cannot be treated as gospel truth for disallowing the claim of the assessee without independent cross verification of those information by the ld. Assessing Officer. 25. The second aspect is that information of the DIT, Investigation Wing is based upon the statements of two persons, namely Shri Bhanwar Lal Jain and Shri Sanjay Chaudhary, who are managing the affairs of assessee's suppliers. Both these witnesses were not subject to cross examination. Hon'ble Supreme Court in the case of Andaman Timber Industries -vs.- Commissioner of Central Excise rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions". 26. It is pertinent to observe that when an explanation or defence of an assessee based on number of facts supported by evidence and circumstances required consideration, whether it is sound or not must be determined not by considering the evidence attached to each single facts in isolation, but by assessing the cumulative effects of all the facts in their setting as a whole. If I weigh both the sets of evidences discussed by me, then, certainly scale will tilt in favour of the assessee, because when assessee made the purchases at that point of time, all the three concerns were having PAN with the Department/TIN/VAT/CST nos. It has made payments through account payee cheques. It has accounted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case, the decision is based on purely factual aspect and a slightest variation in the facts would change the results. For example- had the assessee not made payments through account payee cheque of its purchases, there must be different ramification. It is very difficult to find out exact facts of similar nature. There can be slight variation and the decision in both the appeals is only based on inference of facts supported with the evidence. Therefore, to my mind, this question need to be replied by me in the present proceeding. 28. The Question No. 3 referred by the Hon'ble Judicial Member is, "whether, as per dictum of the Hon'ble Apex Court in the case of Andaman Timber Industries, the additions are not liable to be deleted in the instant case, wherein the assessee was not granted any opportunity to cross examine the third party. On the basis of whose statement, the additions were made". To my mind, this also could not be a question of difference, because the judgment of the Hon'ble Supreme Court is categorical. I have already reproduced the relevant part of the judgment. It lays down the proposition that if third party statement recorded from the back of an ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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