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TaxTMI 
TaxTMI 
TaxTMI 
2013 (1) TMI 38
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....a and Mr. Arvind G. Kakadia, who shared profits equally. In the search conducted by the Enforcement Directorate (ED), the authorised officers found stock of nearly 70,000 carats of cut and polished diamonds and Indian currency of over Rs. 27,00,000/-. The ED officers, through fax message, informed the Income Tax department, who arrived at the scene and took over and carried on the search u/s 132(1). At the time, when ED officials entered the business premises of the assessee firm, another person Mr. Shailesh B. Waghani, was also present, and on whom there was found a stock of cut and polished diamonds weighing nearly 4000 carats. As per the assessment order neither the partner of the assessee firm nor Mr. Shailesh Waghani were able to produce any valid documents explaining the source of the stock of diamonds found at the time of search. 3. After taking various statements, the AO concluded that 73,753.22 carats of diamonds, which included diamonds found from Mr. Shailesh Waghani were unexplained investments made in the financial year 2004-05 and added the same under section 69 of the I.T. Act and made an addition of Rs. 16,28,74,290/-. Embedded in the addition of the assessee, was ....
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....one Mr. Dhiren Modi. The assessee has also filed copy of Jhanghad receipts issued by Shri. Dhiren Modi in the name of the assessee firm. I have gone through these Jhanghad. It is noticed that these Jhanghad have been issued by one Mr. Dhiren Modi in the name of M/s P. Bharatkumar & Co. Shri Bharat G. Kakadia has also acknowledged the contents of these Jhanghad on behalf of the assessee firm at the bottom of the Jhanghad itself. It is further noticed that these Jhanghad contains the details of Sl. No., Particulars of Cut and Polished Diamonds, carats of diamonds, Asking rate and remarks. These Jhangad were issued from 01.02.2005 to 21.04.2005. In the remarks columns in of the Jhanghad it has been indicated that "Received above goods back" with date and seal of Mr. Dhiren Modi. In some of the Jhanghad seal of Shri Dhiren as been put with another seal marked "Approved." In order to verify the genuineness of transactions appearing on these, summons u/s 131 of the I.T. Act, 1961 was issued to Shri Dhiren Modi on 04.05.2009 along with a detailed questionnaire at the address given in the Jhanghad. However, the said summons and questionnaire were received in this office undelivered with t....
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....ity of having 1,47,389.68 carats of diamonds. It is stated by him that 1,47,389.68 carats of diamonds were made available to him by one Shri Manoj Thakkar, who is an Aadatia of M/s Shree Meena International. Shri. Manoj Takkar is also engaged in diamond Aadat business for the last several years. He is the Aadatia of M/s Shree Meena International. Shri. Manoj Thakkar had made available 1,47,389.69 carats of diamonds to Shri. Dhiren Modi through various Jhandhad after obtaining the same from M/s Shree Meena International. He has also filed copy of Jhandhad issued by Shri. Manoj Thakkar in the name of Shri. Dhiren Modi." Mr. Manoj Thakkar Further in order to verify the genuineness of Jhanghad issued by Shri. Manoj Thakkar in the name of Shri. Dhiren Mod, summons u/s 131 of the l.T. Act,1961 was issued to Shri. Manoj Thakker alongwith a detailed questionnaire on 21.05.2009 fixing the compliance for 02.06.2009. Though on 02.06.2009 Shri. Manoj Thakkar has filed his detailed reply alongwith supporting evidence, he failed to attend the office of the undersigned personally for his deposition. Therefore, fresh summons was issued on 02.6.2009. On 12.06.2009 Shri. Majoj Thakkar attended the....
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....urchase register, sales register, expenses ledger, Jhangad register and stock register for the assessment years 2005-06 and 2006-07. The assessee has also filed copies of Audited Report on form No. 3CB for the assessment year 2005-06 and 2006-07. These reports give indication that M/s Shree Meena International is engaged in trading of diamonds. Statement of Shri. Bharat Shantilal Bhavsar prop. of M/s Shree Meena International was recorded on oath on 12.06.2008 and 23.06.2009. Vide answer to question No. 4 of his statement dated 12.06.2009 Shri. Bharat Shantilal Bhavsar has admitted to have carried out trading in diamonds in the assessment year 2005-06 and 2006-07. Vide answer to question No. 1 of his statement dated 23.06.2009 Shri. Bharat Shantilal Bhavsar has admitted that Shri. Manoj Thakkar was its Adhatia. Shri. Bharat Shantilal Bhavsar has admitted that during the period relevant to assessment year 2005-06 he has given 1,31,200.05 carats of diamonds to Shri. Monoj Thakkar from 27.01.2005 to 18.03.2005 on adhat through Jhanghad. He has further admitted that during the period relevant to assessment year 2006-07 he had further given 16,421.82 carats of diamonds to Shri. Manoj ....
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....2.27 (1,31,200.05+16,421.82), M/s Shree Meena International had returned diamonds of 1,03,047.64 carats to the parties from whom the said diamonds were received on approval. Sl.No. Name of person Quantity 1. Su Hira 908.000 ct 2. Da Lu 260.100 ct 3. LK 534.000 ct 4. Vithani 8,867.280 ct 5. A.Anilkumar &Co 92,958.220 ct. Out of the remaining 44,574.63 carats (1,47,622.27-1,03,047.64), 23,354.79 carats were mentioned as sold and 21,219.44 carats were shown as closing stock as on 31.3.2006. From the perusal of Balance sheet as on 31.03.23006, it is noticed that current assets were shown for Rs. 2,21,82,846/-, capital a/c at Rs. 2,60,599/- and current liabilities at Rs. 2,19,22,247/-. The details of current assets include stock in trade at Rs. 2,19,14,747/-. The current liability of Rs. 2,19,14,747/- is shown in the name of M/s A. Anilkumar & Co from whom purchases of 21,219.44 carats of cut & polished diamonds for the value of Rs. 2,19,14,747/- were made on credits. Copy of purchase bills dated 31.03.2006 issued by M/s A. Anilkumar & Co. are also filed. From the perusal of P&L a/c it is noticed that purchases were shown at Rs. 5,70,40,142/- and sales at Rs. 3,53,2....
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....ing this, the Assessing Officer has undertaken a multi layered investigation to find out the source of Mr. Dhiren Modi. In this process the Assessing Officer has found that Mr. Dhiren Modi, in turn, had received the diamonds from one Mr. Manoj Thakkar, who again, in turn, is an Aadaitiya agent of M/s Shree Meena International. I find that the Assessing Officer has made a detailed investigation into the genuineness of the transactions of these three parties. While investigating the transactions carried out by these three parties, the Assessing Officer has based his investigation, inter alia, on the following documents, statements, accounts and evidences: i) Copies of Jhangad receipts issued by the respective parties. ii) Affidavit by Mr. Dhiren Modi. iii) Jhangad Register iv) Statements of the parties recorded on oath. v) Municipal Taxes receipts and copy of electricity bills in connection with the business run by Mr. Dhiren Modi. vi) Copies of computerized books of account including balance sheet, profit a Loss account, cash book, purchase register, sales register, expenses Ledgers and stock register for assessment years 2005-06 and 2006-07 of M/s Shree Meena International. ....
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....roprietor of M/s Shree Meena International and the entries reflected in the Tax Audit Report of M/s Shree Meena International. In face of these several evidences and, particularly, the Tax Audit Report of M/s Shree Meena InternationaL which was verified by the Assessing Officer, this discrepancy stands satisfactorily explained, that this quantity of diamond was found to be with M/s Shree Meena International. In light with the foregoing, premised on the satisfaction of the Assessing officer on the genuineness of the transactions and the capacity of the respective Aadahtiyas as well as the explanations given on the discrepancies noted, I find that the entries on page 25 of Annexure A-1 contained transactions of the appellant as an Aadahtiya. In this respect, the Assessing Officer's comment that the explanation of the appellant is an afterthought is inconsistent with his own remand report in which after detailed verification he has not noticed anything adverse. After having made a detailed investigation, the Assessing Officer has given his findings on the genuineness of the transaction and the creditworthiness of the parties and accordingly, to say that the explanation is after though....
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....ssion income to the department in his return of income for A.Y. 2006-07 The sales of Rs. 3,46,84,000/- out of the diamonds received on adhatia basis were during the period 1.4.2005 to 21.5.2005. Before paying any commission to Shri. Dhiren Modi, the business activities of the appellant came to a standstill and accordingly the appellant could not discharge its obligations of payment of commission on adhatia sales of Rs. 3,46,84,000/. Merely because Shri. Dhiren Modi has not disclosed the commission income in his return ofincome for A.Y. 2006-07, no adverse inference can be drawn as regards the business transaction of the appellant, as adhatia agent of Shri. Dhiren Modi. In the circumstances, it cannot be said that there is any discrepancy. 3 There was no written agreement between the assessee and Shri. Dhiren Modi for carrying out Aadhatia business. In the Jhanghad receipts issued by Shri. Dhiren Modi, the terms and conditions have been duly incorporated and the same have been accepted and agreed by the appellant. In the circumstances, it cannot be said that there is any discrepancy. 4 No guarantee was obtained by Shri. Dhiren Modi from the assessee for giving diamonds for the....
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....s. 35,000/- being 0.10% of Rs. 3,46,84,000/- from M/s. Shree Meena International. However, he has admitted to have received Rs. 15,000/- only. On perusal of commission account maintained in the books of M/s. Shree Meena International, it is noticed that M/s. Shree Meena International has paid the commission of Rs. 15,000/- to the following persons and the name of Shri Majoj Thakkar did not appear: (a) Bhupar Bhai - Rs. 2000/-, (b) Mahendra M - Rs. 2250/-, (c) Munni Rs. 2350/-, (d) Kanti Popat Rs. 1900/-, (e) Jhaveri Yogesh Rs. 2050/-, (f) Kiran Bhai Rs. 2050/-, (g) Joyesh Panda Rs. 2400/-. It is further noticed that M/s Shree Meena International did not make any provision for the balance commission of Rs. 20000 - i.e. to Shri. Manoj Thakkar. With reference to this alleged discrepancy, we request your Honour's attention to the answer given in response to question No.4 in the statement recorded on 23.6.2009 of Shri. Bharat Shantilal Bhavsar, proprietor of M/s. Shree Meena international. 2 There was no written agreement between Shri. Manoj Thakkor and Shri. Dhiren Modi and even with MIs. Shree Meena International for carrying out adhatia business The terms and cond....
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....only Rs. 15,000/- during the period relevant to assessment year 2006-07. On perusal of commission account maintained in the books of M/s Shree Meena International it is also noticed that M/s Shree Meena International has paid the commission of Rs. 15,000/- to the following persons and the name of Shri. Manoj Thakkar did not appear :- (a) Bhupat Bhai Rs. 2000/-, (b) Mahendra M. Rs. 2250/- (c) Munni Rs. 2350/- (d) Kanti Popat Rs. 1900/-, (e) Jhaveri Yogesh Rs.2050/- (f) Kiran Bhai Rs. 2050/-, (g) Jogesh Panda Rs. 2400/-. It is further noticed that M/s Shree Meena International did not make any provision for the balance commission of Rs. 20,324/- payable to Shri. Manoj Thakkar. With reference to this alleged discrepancy, we request your Honour's attention to the answer given in response in the statement recorded on 23.6.2009 of Shri. Bharat Shantilal Bhavsar, proprietor of M/s Shree Meena International The DR particularly observed that which answer to which question is being talked, nothing can be verified. The DR therefore submitted that the order of the CIT(A), as challenged by the department has holes, because of which, the order cannot be accepted and he, therefore....
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....idence, the CIT(A) forwarded the same to the AO for his comments and report after necessary verification/investigation/inquiry. The AO conducted detailed investigations and summoned persons named in the additional evidences and examined them on oath. The AR pointed out that after detailed investigations and inquiries conducted by the AO, the Remand Report was sent, which concluded by the words "nothing adverse is noticed". The AO, however, to support his assessment orders, mentioned that the facts brought to the notice of CIT(A) Central V, Mumbai, in the additional evidence, "appears" to be an "after thought". He further pointed out that only after the receipt of the remand report and assessee's objections thereon, the CIT(A) admitted the additional evidence and adjudicated thereon and deleted the addition made under section 69 of the I.T. Act. 13. The DR in the rejoinder stated that the assessee had retracted from the original statements given at different times and filing of additional evidence after 30 months should not be entertained, and therefore, the order of the AO making initial addition be sustained. 14. We have heard the arguments from both the sides and have perused t....
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.... a single purchase from outside party nor compared with market rate, Assessing Officer concluded that payment made by assessee to 'E' Ltd. was excessive and unreasonable to extent of Rs. 10 lakhs and, accordingly, disallowed same under section 40A(2)(b) - On appeal, assessee filed additional evidences in form of sale invoices and, statement of 'E' Ltd. to highlight that assessee had purchased materials at a lower rate on a comparative analysis - It further contended that Assessing Officer gave no opportunity to it to establish reasonableness of such payments ..". The AR also cited the decision of coordinate Bench at Jabalbapur in the case of DCIT v/s Dolphine Marbles (P) Ltd., reported in 129 ITD 163 (Jab-TM) as under: "During assessment proceedings, Assessing Officer made an addition under section 68 in respect of share application money received by assessee from four shareholders - On appeal, assessee submitted an application under rule 46A of 1962 Rules before Commissioner (Appeals) for admission of additional evidences - Commissioner (Appeals) admitted additional evidences and on basis of those evidences, deleted addition made by Assessing Officer - On instant appeal, revenue....
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....vidence and the cases cited before us, we find that the CIT(A) admitted the additional evidence only after coming to a conclusion that the interpretation of the seized document goes to the root of the issue and from the remand report, we find that the interpretation of the notings in the seized and impugned document was the correct interpretation and the only objection of the AO and DR is that after a time gap of 30, months, it seems to be an after thought. Neither the AO nor the DR had been able to bring out any discrepancy in the interpretation of the noteings, as explained by the assessee. We find that in the remand proceedings, it was the AO, who was satisfied that the stock of diamonds found from the assessee was actually the "jhanghad stock" and not the trading stock and belonging to Shree Meena International and the conclusion of the three layered investigation conducted by the AO was, "nothing adverse is noticed". Taking into account all these observations, we reject the contentions of the DR in the additional ground filed that admission of additional evidence under rule 46A was not in accordance with the prescribed norms. 17. Coming to the main ground of appeal, i.e. de....
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....observe that the entire diamond trade is conducted in a very disorganized structure, but there is a complete organized norms, by which, each and every piece of diamond, is not only identified, but is accounted for, because in the remand proceedings it was mentioned that no guarantees are given/taken, when jangahds are given to the adahtiyas. The notings on each packet, can be identified and that is the reason, why in the impugned paper, the first two items on the right hand side give exact figures in quantum. In fact, the first figure itself clarifies the entire picture, when it says 78,168.43 carats of stock, valued at Rs. 10,50,16,019/-, this shows that the assessee had with him janghad stock, on the date, prior to the search operation. 20. In the light of the evidence and inference, culled out from the enquiry conducted by the AO in the remand proceedings, it is held that the assessee was an adatiya and the notings found on the seized document, relied upon by the department, clearly indicate that they pertained to janghads given to an adahtiya (assessee herein), and does not, pertain to independent diamond trading of the assessee. 21. We, therefore, endorse and agree with the....
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....al presumptions. He, therefore, deleted the addition(s) made in the year(s) under consideration. 31. We have seen the nature of addition made and we are in agreement with the observation of the CIT(A) that the addition is on presumptions and really not based on facts. Since it is a case pertaining to search and seizure operation, the addition should have been made on material found and not on "inferential presumption". We, therefore, confirm the order of the CIT(A) and dismiss the appeal filed by the department. 32. In the current year, the department has raised ground (d), wherein the CIT(A) had deleted the addition made at Rs. 75,00,000/- as possible initial capital in the undisclosed business. 33. The CIT(A) in his order has categorically observed that there is no other business of the assessee except for adahtiya business and if we go in accordance with the statement of Mr. Bharat Kakadiya taken on 26-05-2005, that he had become the partner in the assessee firm in 1994-95. Therefore, question of initial capital in assessment year 2000- 01 cannot be accepted, also, from the point of view that there is no other business of the assessee firm. In these circumstances, we endors....
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..... We, therefore, set aside the order of the CIT(A) on this issue and direct the AO to allow the claim of job charges payment. The appeal is allowed. ITA No. 1856/Mum/2010 Assessment year 2006-07 (assessee's appeal): 42. Ground No. 1 is with regard to rejection of books u/s 145(3). 43. We have seen from the orders of the revenue authorities that the entire case of the revenue is on page no. 25, Annexure 1A of the seized documents. It is pertinent to mention that: (a) We have already held that the entire document pertains to adahat business of the assessee; (b) Profit has been struck, which has been offered for tax in its return of income. Both these facts, if viewed together, only decipher that the books are correct and true, because not one entry could be proved by the AO either in the assessment proceedings or even in the remand proceedings to be either incorrect or presumptuous, which could lead to an inference that the book results could be questioned. 44. In the light of this observation, we hold that the orders of the revenue authorities were incorrect and we hold that the rejection of books were without any basis, hence we allow the ground of appeal, filed by the ass....