Tribunal orders fresh consideration for Assessee, emphasizing cross-examination and natural justice principles.

The Tribunal found merit in the Assessee's arguments, particularly concerning the non-provision of collected material and retracted statements, and the overlooking of original documents for diamond imports. Emphasizing the need for cross-examination as per the principles of natural justice, the Tribunal set aside the issues to the file of the AO for fresh consideration, ensuring the Assessee is given a fair hearing. Both the Assessee's and Revenue's appeals were allowed for statistical purposes.

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Issues Involved:
1. Legality and correctness of the CIT(A)'s order.
2. Non-provision of collected material and retracted statements.
3. Ignoring original documents for import of diamonds.
4. Addition based on statements recorded under section 132(4).
5. Evidential value of statements without incriminating material.
6. Addition of 25% of alleged bogus purchases as embedded profit.
7. Rejection of books under section 145(3) and determination of quantum of addition.
8. Assumption of diamond procurement from the grey market.
9. Additional arbitrary addition under section 69C for alleged commission payment.

Detailed Analysis:

1. Legality and Correctness of the CIT(A)'s Order:
The Assessee contended that the CIT(A)'s order dated 22/6/2017 was illegal and erroneous. It was argued that the CIT(A) rejected several grounds and issues arbitrarily or by relying on distinguishable citations without accepting applicable ones cited by the Assessee.

2. Non-provision of Collected Material and Retracted Statements:
The Assessee argued that the CIT(A) failed to adjudicate the ground of appeal regarding the non-provision of collected material and retracted statements, despite written requests for rebuttal. This was seen as a significant oversight.

3. Ignoring Original Documents for Import of Diamonds:
The Assessee claimed that the CIT(A) ignored the chain of original documents for the import of diamonds by Praveen Jain/Nilesh Parmar group, which were available with tax authorities. These documents were crucial as they provided evidence of genuine supplies from M/s Mohit International to the Assessee.

4. Addition Based on Statements Recorded Under Section 132(4):
The Assessee contended that the CIT(A) erred by confirming the addition based on general admissions and descriptions in statements recorded under section 132(4) of the Income Tax Act. These statements were provided without giving the Assessee an opportunity to confront and cross-examine the concerned persons.

5. Evidential Value of Statements Without Incriminating Material:
The Assessee argued that the CIT(A) did not adjudicate the question of the evidential value of the recorded statements under section 132(4) of Praveen Jain/Nilesh Parmar, especially in the absence of any incriminating material found during the search. This was the basis of the addition, and its validity was questioned.

6. Addition of 25% of Alleged Bogus Purchases as Embedded Profit:
The Assessee disputed the CIT(A)'s decision to uphold Rs. 16,90,250 (25% of the alleged bogus purchase of Rs. 67,61,000) as embedded profit liable for addition. The Assessee argued that this was done without proper consideration of the higher G.P. rate already declared in Form 3CD during the year.

7. Rejection of Books Under Section 145(3) and Determination of Quantum of Addition:
The Assessee contended that the CIT(A) arbitrarily rejected the books under section 145(3) based on discrepancies and a lower G.P. rate during the year. The CIT(A) determined the quantum of addition without considering the higher G.P. rate of 27.05% already declared by the Assessee.

8. Assumption of Diamond Procurement from the Grey Market:
The Assessee argued that the CIT(A) wrongly assumed that the Assessee procured diamonds from the grey market while obtaining bills from accommodation entry providers. This assumption was used to justify the addition.

9. Additional Arbitrary Addition Under Section 69C for Alleged Commission Payment:
The Assessee disputed the CIT(A)'s decision to uphold an additional arbitrary addition of Rs. 13,522 (0.2% of Rs. 67,61,000) under section 69C. This was on account of alleged commission payments in trade to obtain bogus bills in cash from unaccounted sources, which were not accounted for in the cash book.

Conclusion:
The Tribunal found merit in the Assessee's arguments, particularly regarding the non-provision of collected material and retracted statements, and the ignoring of original documents for diamond imports. The Tribunal noted that the CIT(A) had not properly adjudicated these issues and had based the addition on statements without providing the Assessee an opportunity for cross-examination. Citing the Supreme Court's decision in Andaman Timber Vs. CIT, the Tribunal emphasized the importance of allowing cross-examination to uphold the principles of natural justice. Consequently, the Tribunal set aside the issues to the file of the AO for fresh consideration, ensuring the Assessee is given adequate opportunity to be heard. Both the Assessee's and Revenue's appeals were allowed for statistical purposes.

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