9911796707
TMI Blog2008 (11) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was 28.11 per cent; whereas the assessee was claiming 100 per cent deduction u/. 80HHC and in this year it is only 80 per cent. It is true, the percentage of profit is substantially high, but in the absence of any comparative cases brought on record, we are unable to subscribe the view canvassed by the ld DR. It is to be mentioned that all these findings are not based on any facts except that the assessee purchased the diamonds from 11 parties on credit. But we are afraid, this alone is not sufficient to hold that the assessee had not purchased the goods/diamonds from these parties. AO mentioned that two parties have not filed confirmations, viz. Yash Gems and Pritam Exports. But the case of the assessee is that for the very same year in the block assessment these parties have confirmed the purchases. We are of the view that on the basis of the facts the reasoning of the AO that these parties have not confirmed their dealings with the assessee cannot be a factor that goes against the assessee. Contentions of the assessee is that the assessee did not get proper opportunity to rebut the statements taken from the third parties/Surat parties. AO recorded statements fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Payments are made by cheque to the immediate purchasers. They accepted and confirmed the sale. To hold otherwise, there should be some evidence in the possession of the Revenue. Suspicion, however strong, cannot take the place of evidence and that alone cannot be the criteria for deciding the matter. In the case of Chanana Associates, in this case the assessee did not produce any material to show that the belief that s. 40A(3) was not attracted where the profit was determined on estimate basis after rejecting the book results of the assessee. The facts in the instant case of the assessee are not so. So also in the case of Chanana Associates there was no dispute that the payments were made in cash in excess of the prescribed limit under s. 40A(3); whereas in the instant case of the assessee there is no evidence on record to show that the payments were made in cash but it is an assumption, resorting to the modus operandi adopted by the business circle in diamonds. We are of the view that the orders of the Revenue authorities are liable to be set aside as there is no evidence on record to show that the payments made by the assessee has come back to the assessee, except the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sale of diamonds from the purchases of Rs. 5,30,87,813. Assessee earned net profit of 23.4 per cent on sales as compared to a net profit of 28.11 percent on the sales in the earlier year. Assessee-firm came into existence on 7th Jan., 2000 and this is the second year of assessee's business. 3. AO held, in fact the fall in GP from 28.11 per cent to 23.4 per cent is quite abnormal and does not seem to have any bona fide reason, except during the relevant period assessee's deduction has come down from 100 per cent to 80 per cent. He further noted, the expenses during the year on account of diamond trading are also very nominal. It comes to 0.003 per cent and 0.004 per cent for the asst. yrs. 2000-01 and 2001-02. He also noted, the sales and purchases effected during the year, if one looks at the time gap, (are) also quite important. It appears that the assessee sells diamonds, in a period of seven days, at a profit of 23.5 per cent, which according to the AO, gives room for some doubt and suspicion. He further noted that the holding of the stock was for very few days. But he held, it is pertinent to note that the assessee is processing orders for supply of diamonds when actually t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts. He held, this leads to a conclusion that the deposited money goes back to the assessee. 6. The modus operandi of the people in diamond business is recorded by the AO at p. 5 onwards of his order. He records briefly: parties open a bank account in their name and also simultaneous bank accounts in the name of their relatives and employees. These accounts are opened for a short period, less than a year. Bills are provided when approached from a party, who needs accommodation bill, as is the case of most of the exporters. They raise an invoice on the party, like assessee and charge commission of 1 to 3 per cent depending on their standing in the market. The exporter who takes the bill normally does not pay immediately. The payments are made only on export realisation. If the payments are received in the next financial year, it goes to a different entity of the bill provider group as most of these parties operate for only one financial year or perhaps even less. He further records, the parties with dummy accounts have accounts in the same branch of the bill providers and these dummy account parties have a very nominal amount in a year. Cheque books signed by the operating pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Girish Diam: This party supplied goods worth Rs. 19,35,802, which they in turn purchased from Sanskar Diamond. Summons were issued to Girish Diam and it was submitted by one Shri Vijay Jain that the source of sales was Sanskar Diamond. From the account of Sanskar Diamond also the cash was withdrawn practically every day. Girish Diam's turnover comes to Rs. 64.55 crores and net profit is Rs. 1,34,285, which is roughly 0.12 per cent. 10. Saroj Diamond: This party supplied to the assessee diamonds worth Rs. 1,08,80,126. They had transactions with Advance Diamonds, Peacock Exports, Anmol Gems, Deep Impex, King Star, Khushboo Diamonds, etc. The cash deposited is withdrawn almost within a short gap. These Surat based parties are also having bank accounts in Mumbai. The turnover of Saroj Diamond comes to Rs. 78.2 crores altogether. 11. Mahavir Exports: This party purchased goods from Alaska International. Bank account of Alaska International showed 95 per cent of the deposits withdrawn in cash, out of the total transactions of Rs. 4.97 crores. The total transactions of Mahavir Exports comes to Rs. 24 crores and their net profit comes to Rs. 1,26,885 for the asst. yr. 2001-02 on a turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Eight parties were summoned. All of them were examined. Only two parties, viz. Yash Gems and Pritam Exports have not appeared. But they appeared and filed confirmations in block assessment, which proves the existence of the parties. It was further submitted, it is not for the assessee to find out whether the source or sources from which the creditor agreed to sell the stock of diamonds were genuine or not. If the creditor has a particular stock of diamonds with him, there is no limitation under the law on the part of the assessee to buy such stock of diamonds or part of it from the creditor. If the creditor fails, it is his failure to satisfy the Department. The said stock of diamonds cannot be treated as assessee's income from undisclosed sources. Assessee proved the genuineness as well creditworthiness of the parties from whom the assessee made purchases. Assessee has not to explain the source or sources. 14. The conclusion of the AO, briefly, is as under: AO held, the statement of the assessee is that it is not the duty of the assessee to verify from where the purchase party procures goods and a mere failure of a sub-creditor cannot in the absence of clinching evidence be tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the actual purchase at Rs. 6,45,88,956, whereas the assessee has shown only Rs. 5,30,87,813. He also made an addition under s. 40A(3) being 20 per cent of the cash purchases of Rs. 6,45,88,956. 17. Aggrieved by the above order, assessee approached the first appellate authority on the following grounds: "(1) The AO has erred in adding Rs. 3,45,33,175 as unexplained investment in business for cost of diamonds exported out of India at the market value being 1/0.82 times of the peak credit of Rs. 2,83,17,204 as per table on p. 16 of the order. (2) The AO has erred in concluding the total purchases at Rs. 6,45,88,956 in cash instead of credit purchases as declared by the appellant and thereafter adding Rs. 1,29,77,912 being 20 per cent of alleged cash purchases under s. 40A(3) of Rs. 6,45,88,956 to derive at the taxable profits under s. 80HHC at Rs. 34,23,864. (3) The AO has erred in deriving taxable profit at Rs. 34,23,864 as explained in para 13(4) of his order instead of Rs. 32,75,841 as declared by your appellant. (4) The AO has erred in disallowing Rs. 1,29,77,912 under s. 40A(3) of the Act being 20 per cent of alleged cash purchase of Rs. 6,45,88,950 and adding the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessee to prove the source of sources. In the case of the assessee, the creditworthiness of the creditors is established. Only the sub-creditors had no capacity, according to the AO, which is not the concern of the assessee. 19. Assessee also objected the finding of the AO that the purchase of Rs. 6.45 crores have been effected in cash and none of the purchase parties of the assessee's suppliers was in a capacity to supply goods to the assessee as they were non-existent. But the fact that assessee made the payment and made the purchases from the parties is not rejected. There is no evidence, except suspicion, that the cheque paid is encashed and returned back to the assessee. Relying upon the judgment of the Hon'ble Supreme Court in the case of State of Kerala vs. C. Velukutty Co. (1966) 60 ITR 239 (SC), it was submitted that the judgment is a faculty to decide the matters with wisdom truly and legally and not to depend on the arbitrary caprice of a Judge, but on settled and invariable principles of justice. It is true, there is an element of guesswork in a best judgment assessment, but it has to have a reasonable nexus to the material available and the circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es on 7th Jan., 2005, to be conducted on 19th Jan., 2005 and 20th Jan., 2005. However, on 18th Jan., 2005, assessee's representative appeared and stated that cross-examination would not be possible since there is a marriage in the family of the assessee. The parties, i.e. suppliers to assessee appeared on 19th Jan., 2005 and 20th Jan., 2005. However, one party, viz. Girish Diam only appeared on 3rd Feb., 2005, whose statement was recorded on similar facts. Assessee's representative was given the statements on 4th Feb., 2005. Assessee replied on 1st March, 2005 and stated that the assessee does not want to cross-examine the above parties. The findings of the AO during the remand proceedings, recorded from p. 25 onwards by the CIT(A) are briefly given as under: Saroj Diamond sold diamonds worth Rs. 1.08 crores to the assessee. This party was asked to give the details of their suppliers. They failed to give any details. Saroj Diamond admitted that the Surat parties, who supplied them diamonds, viz. Advance Diamond, Peacock Exports and Anmol Gems were not having any relation with the assessee and they are not in business after 2000-01. It was further questioned (Question No. 12) that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of some direct linkage of evidence which goes to show that the assessee has in fact adopted dubious means to obtain any unfair advantage. In this connection we have already relied upon the decision of the Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. vs. CIT (1954) 26 ITR 775 (SC)". 23. Assessee further submitted as under: "The AO has further referred to news published in mid-day of 16th Dec., 2004 regarding importance of Jangad. The non-maintenance of Jangad of such parties according to the AO establishes that transactions recorded in their books of account are not entered in the regular course of business. The question, which needs to be addressed, is whether whatever records are maintained by such parties conclusively prove what the learned AO alleges. If the statement recorded are considered, the learned AO could not have come to this conclusion, which he has. Moreover, the appellant's books of account have not been rejected by the learned AO." 24. CIT(A) records that during the course of appellate proceedings he found that AO had incorrectly worked out the peak of the assessee's unexplained investment in making the alleged purchases of diamonds at Rs. 3,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out as per the abovementioned table computing the unaccounted peak investment at Rs. 4,67,01,433. This amount of Rs. 4,67,01,433 as computed above, is proposed to be taxed as your unexplained investment within the meaning of the provisions of ss. 69B and 69C of IT Act, 1961. You are, therefore, requested to file your objections, if any, to the proposed enhancement of your assessed income. This letter may be treated as a notice under s. 251(2) of IT Act, 1961 and your reply in this regard should be filed on or before 15th March, 2005." 25. In response to the above notice, assessee further submitted that the AO was never directed by the CIT(A) to re-examine the parties, which he has done, which means he has gone beyond his jurisdiction. Assessee further replied as under: "The onus is on the Revenue to prove that the real investment exceeds the investment shown in the assessee's books of account. The additions under these sections cannot be made merely on the basis of an inference; more so when such an inference is attempted to be drawn on the basis of an examination by the AO of parties with whom the assessee had no dealings. It is not the concern of the assessee to confirm or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first appellate authority rejected the claim. He held that AO had fixed the opportunity of cross-examination on 19th and 20th Jan., 2005 not with an intention. The marriage was to take place on 21st Jan., 2005. But this claim is not supported by any evidence; whereas the fact remains that the assessee failed to avail the opportunity. Hence he rejected the assessee's claim of violation of principles of natural justice. He further held, AO has not brought any fresh evidence during the remand proceedings; but merely examined the parties and reiterated the conclusions drawn by him during assessment proceedings. There is nothing objectionable. CIT(A) held, it is true, all the parties confirmed the sales and receipts by cheque, which were duly deposited in their regular bank accounts. However, the assessee is not having any other evidence except this to prove the genuineness of purchases from these seller parties. On the other hand, he held, AO conducted extensive investigation to prove that these seller parties did not have any capacity actually to sell the impugned diamonds to the assessee, as their own suppliers were not traceable at the given address. He further held, examination by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the very meagre commission earned by the sellers also indicates that the assessee was showing unreasonably high rate of profit to claim the benefit under s. 80HHC. He held, hence the finding of the AO that the assessee has used its unaccounted money for financing the purchases of the diamonds from the open market and thereby tried to route the same back into its books of account in the form of export profits after taking the benefit under s. 80HHC is a reasonable conclusion. He worked out the peak credit as on 16th March, 2001 at Rs. 4,67,01,425. He further held, while working out the peak unaccounted investment, it could reasonably be presumed that various cheque payments made by the assessee during the period of purchases were available with the assessee in cash form. CIT(A) further held: "as observed above, the appellant has deliberately shown an unusually high rate of profit by understating the purchase consideration. Hence, in order to arrive at the reasonable purchase consideration which must have been paid by the appellant, the ostensible purchase consideration paid by the appellant at Rs. 5,21,38,209 needs to be treated as representing only 82 per cent of the real pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sales are accepted and the books of account were found correct. Assessee was asked to file confirmations. Confirmations were filed. All the purchase parties are assessed to tax. They are established parties, where the purchase parties' turnover is in fact much more than the assessee. They were summoned and examined and all of them accepted sale to the assessee and they confirmed it, as it appears in the books of account of the assessee. Payments were made by cheque and also deposited and reflected in their bank account. They also procured diamonds from third parties. The parties from whom assessee made purchases were also paid by cheque. What now the Revenue authorities want is to examine the source of sources i.e. the Surat parties. The case of the Revenue is that the turnover disclosed is not genuine and the suspicion of the Revenue is that assessee has purchased these diamonds from the parties, who sold to the assessee by cash payment. But there is no material. An iota of evidence to this effect was not available even during search and seizure action. This is mere suspicion. Another objection of the Revenue is that the profit made by the assessee is unreasonably high. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e gap between the purchases and sales are too short, i.e. about less than 10 days. Another reason given by the AO for suspicion is that the assessee does not even pay the purchase parties when it buys goods and most of the time the payment is made after realisation of exports and the purchase party thus gives credit of almost 3 to 4 months on these transactions, as is evident from the chart given, which shows certain transactions out of 11, wherein the payment has been received by the assessee after realisation. 35. Learned counsel submitted, in order to establish the veracity of the transactions, confirmations of all the purchase parties were filed before, the AO and the same are being filed once again vide pp. 1 to 68 of the paper book. He submitted, the finding of the AO that two parties, viz. Yash Gems and Pritam Exports, never filed confirmations is incorrect because they had filed confirmations at the time of block assessment. These confirmations (are) also placed at pp. 3 to 5 and 6 to 9 of the paper book. He further submitted, AO issued summons to all the abovementioned parties, from whom assessee made the purchases. The statements were recorded from all these parties und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is unreasonably high. The above conclusion was arrived at on the basis of some statement recorded from Shri Rajan A. Pawaskar, which in fact (was) rejected by the Customs Department as untrustworthy statement. Learned counsel submitted, identity of all the purchase parties is established. All except two parties physically appeared before the AO and confirmed the transactions. Assessee is not required to establish anything further, learned counsel contended. He relied upon the decision of the Hon'ble Gauhati High Court in the case of Nemi Chand Kothari vs. CIT for the above proposition. Learned counsel further submitted, there is no material to show that any part of the funds given by the assessee to its parties by cheque came back to the assessee in any form. Reliance was placed upon the decision of the Hon'ble Gujarat High Court in the case of CIT vs. M.K. Brothers. Assessee carried out the same business in the previous year. It was accepted on similar set of facts. Hence it was contended, the conclusion arrived at is on the basis of hypothesis and not supported by any material/evidence. Assessee also objected for not providing an opportunity to cross-examine the parties from w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in bill accommodation. In the absence of any concrete evidence, the AO as well the CIT(A) was not justified in rejecting the purchases reflected in the books of account, holding that these were cash purchases. Books of account were maintained in the regular course of business of the assessee, contended the learned counsel. The Hon'ble Assam High Court in the case of Talaram Daga vs. CIT (1966) 59 ITR 632 (Assam) held that the books of account maintained in the regular course of business are relevant and afford prima facie proof of the entries and correctness thereof. The Hon'ble Kerala High Court in the case of St. Teresa's Oil Mills vs. State of Kerala (1970) 76 ITR 365 (Ker) held that accounts regularly maintained in the course of business have to be taken as correct unless there are strong and sufficient reasons to, indicate that they are unreliable. Learned counsel contended, there is no evidence with the Revenue that the account books of the assessee are unreliable or incorrect. In fact, it has not been rejected at all. No purchase has been omitted. No addition has been made on that account either. In the case of St. Teresa's Oil Mills the Hon'ble High Court held that rejectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained by private enquiry, it should have been communicated to the assessee so as to know full particulars of the case and the failure to do so vitiates the case of the Revenue. For the above proposition, learned counsel relied upon the following judgments: (1) Bhogilal H. Patel vs. CIT (1969) 74 ITR 692 (Bom); (2) Gargi Din Jwala Prasad vs. CIT (1974) 96 ITR 97 (All); (3) Nagulakonda Venkata Subba Rao vs. CIT (1957) 31 ITR 781 (AP); (4) M.O. Thomakutty vs. CIT (1958) 34 ITR 501 (Ker). Learned counsel further reiterated the submissions made before the CIT(A) with regard to the remand report, which was made beyond the scope of the direction. Learned counsel submitted, instead of providing an opportunity to cross-examine, the parties were examined afresh by the AO. Hence, AO went beyond the scope of the direction itself. 40. Learned counsel also brought our attention to the decision of the Tribunal is SA No. 244/Mum/2005, dt. 5th Aug., 2005, while granting stay. Learned counsel submitted, though prima facie observation of the Tribunal which clinches the idea and the facts "in our opinion the assessee has prima facie discharged the onus by producing the entities from whom i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Departmental Representative submitted, it is well-settled position that block assessments have to be completed on the basis of material found during the course of search and not on the basis of post-search inquiries. If no material was found during the search doubting the genuineness of the purchases and parties confirmed the purchases made by the assessee, then there is no scope or reason for the AO to make any adverse finding in the block assessment when prima facie it would found to be correct. Therefore, the learned Departmental Representative submitted, no reliance could be placed on the averments of the assessee that no adverse finding has been recorded in the block assessment. 44. Referring to the argument of the learned counsel that the sellers of the diamonds confirmed the transactions, payments were made by cheque and had shown income in their hands, the learned Departmental Representative made the following submissions: Out of the ten parties, assessee filed confirmations from six. Remaining two parties filed confirmations themselves, but regarding two parties, viz. Yash Gems and Pritam Exports, no confirmations were filed despite giving various opportunities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n proper opportunity to cross-examine the parties, even though they were witnesses of the Department. The assessee relied upon the bills given by these parties, though assessee claims that they are the witnesses of the Department. In spite of all these the CIT(A) remanded the matter back to the file of AO for providing cross-examination to the assessee and the dates were given. But the assessee, on the ground that there was a marriage in the family on 21st Jan., 2005, did not avail it. The statements were given to the assessee again on 4th Feb., 2005, to which assessee relied on 1st March, 2005 and stated that the assessee does not want to cross-examine the parties. 46. Coming to the objection of the assessee that the AO exceeded his power by recording fresh evidence, the learned Departmental Representative submitted, AO did not bring on record any fresh evidence and merely examined to reiterate the conclusions arrived at by him during the assessment proceedings. Even otherwise, learned Departmental Representative submitted, the materials collected can be used in the proceedings even if it is not collected by a mode, which is not as per law. The learned Departmental Representativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of these parties. Hence bank accounts of these parties were traced and it was seen that there were huge cash withdrawals from these accounts, RBI guidelines states of reporting of Rs. 10 lakhs and above cash transaction. To evade the same, a sum of Rs. 9,95,000 or similar figures are withdrawn every day on account of cheque deposit, The learned Departmental Representative supported the order of the AO and held, the modus operandi hereinabove mentioned, as found out by the AO, clearly establish that the bills, etc. are make-belief and way to deprive the Revenue its due. He further submitted, the turnover of the suppliers was about 70 times more than that of the assessee, but the profit earned is as low as 0.1 per cent; whereas assessee's business profit is Rs. 104 lakhs out of the total turnover of Rs. 7 crores and that too purchases are on credit basis, which is an impossible situation to imagine. The learned (Departmental Representative) further submitted, all the eight parties failed to furnish the residential address and telephone number of the parties, who supplied them the diamonds. Further, the parties failed to provide the present business address and telephone numbers o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g cash purchases to the tune of 20 per cent is also correct. Hence he submitted, recomputation of deduction under s. 80HHC and the profit is on the right steps. Learned Departmental Representative submitted, the orders of the Revenue authorities are liable to be upheld. 49. Hearing the rival submissions and going through the orders of the Revenue authorities and the facts and on the basis of the decisions, we are of the view that the issue has to go in assessee's favour. 50. The first objection of the Revenue authorities is that the assessee earned a high profit of about 23.4 per cent, whereas in this line of business normally the profit is 6 per cent. No comparative case brought on record to substantiate this point. The reasoning of the AO to come to such a conclusion mainly is that in the preceding year the profit shown by the assessee was 28.11 per cent; whereas the assessee was claiming 100 per cent deduction under s. 80HHC and in this year it is only 80 per cent. It is true, the percentage of profit is substantially high, but in the absence of any comparative cases brought on record, we are unable to subscribe the view canvassed by the learned Departmental Representative. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter was carried before the CIT(A), he called for the remand report from the AO and also directed the AO to give the assessee an opportunity to cross-examine the parties. AO recorded statements from all these parties and the date was fixed for cross-examination; but the assessee could not avail it due to marriage in the family. Hence the AO came to the conclusion that the assessee is not interested in cross-examining the parties. 53. The case of the assessee is that the assessee is not bound to prove the source of sources. The immediate parties, from whom the assessee made purchases, confirmed their sales. Revenue authorities are in fact doubting the capacity of the parties who sold diamonds to the assessee and also the assessee perhaps purchases the diamonds from open market and obtained bills from these parties. None of these facts, except the reasoning, are based on any evidence. 54. The CIT(A) remanded the matter back to the file of AO and the AO obtained statements from Surat based parties. But going through the statements, we find two of the most important factors have not been brought out of this questioning. First the assessee made the payments through cheques to these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rting to s. 40A(3), he disallowed 20 per cent being the cash purchases. Again we have to say that there is not an iota of evidence, except the reasoning of the AO, to show that the assessee made purchases by making cash payments. 57. Hereinabove we have recorded the statement obtained by the Revenue from Shri Rajan A. Pawaskar, chartered accountant, wherein he stated that the assessee is not engaged in diamond business activity rather the said transactions were merely used to launder black money of the assessee. But the fact remains that the assessee exported the goods, which is certified by the Customs Department. They rejected Shri Pawaskar's statement. Therefore, the issue that whether assessee exported or not does not arise. The question is whether the assessee purchased the diamonds by paying cash. There is nothing on record to suggest to the above conclusion. The reasoning however powerful cannot take the force of evidence. No evidence has been brought on record to this effect. As we have already noted, not even a single question was put to any of the parties from whom the statements were recorded by the AO, as to whether the payment made by the assessee by cheque was withd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that as it may, we are not making any proposal. No question has been put to immediate suppliers to the assessee whether they purchased the material from the open market other than the parties who said to have supplied them from Surat. Therefore, the proposition that in the absence of insurance, mode of transportation, etc. the claim that the diamonds came from Surat cannot be accepted, is not a sound conclusion arrived at. It is true, the profit shown by the assessee is extremely high, which may not be possible in this line of business, at least not a general trend in the market. But then, no similar cases of export have been mentioned anywhere by the AO or by the CIT(A) to discredit the assessee's claim of higher profit. Export of the assessee is accepted by. the Customs Department, which shows that the export of diamonds cannot be doubted. 62. Coming to the decision relied upon by the Revenue authorities reported in the case of Attar Singh Gurmukh Singh, the issue before the Hon'ble Supreme Court was the validity of s. 40A(3) of the Act and the applicability of s. 40A(3) to payment made for acquiring stock-in-trade. Their Lordships upheld the Constitutional validity of s. 40A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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