Bogus jewellery sale addition fails where documentary evidence supports the transaction and adverse material is not fairly confronted.

An addition alleging a bogus sale of jewellery to an accommodation-entry provider was not sustained where the jewellery had been disclosed under the Voluntary Disclosure of Income Scheme, 1997 and supported by the declaration certificate. The assessee also produced purchase bills, banking-channel receipts and buyer confirmation, while the Revenue relied mainly on third-party material and proceedings in another case. Mere suspicion or surmise was held insufficient to displace documentary evidence, and adverse material could not be used without giving the assessee a proper opportunity to respond. The deletion of the addition was upheld.

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Issues: Whether the addition made on the basis that the sale of jewellery to the alleged accommodation-entry provider was bogus could be sustained.

Analysis: The jewellery had been declared under the Voluntary Disclosure of Income Scheme, 1997 and the existence of the jewellery stood supported by the declaration certificate. The assessee produced purchase bills, banking-channel receipts, and confirmation from the buyer, while the Assessing Officer relied mainly on third-party material and the block assessment proceedings in another case. The Court found that mere suspicion or surmise could not replace proof of a sham transaction and that the material used against the assessee had not been effectively rebutted by cogent evidence. It also noted that adverse material could not be used without giving the assessee a proper opportunity to explain it.

Conclusion: The deletion of the addition was upheld and the assessee succeeded on the issue.

Ratio Decidendi: An addition alleging bogus sale or accommodation entry cannot be sustained unless the Revenue proves the sham nature of the transaction with cogent evidence and gives the assessee a fair opportunity to meet the material relied upon.

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