TaxTMI 
TaxTMI 
2021 (7) TMI 764
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....y the Learned Assessing Officer as bad in law as the conditions laid down under the Act for initiating reassessment proceeding u/s 147 of the Act were not fulfilled. 2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in not holding that the Learned Assessing Officer erred in not providing an opportunity to cross examine to the appellant while relying on a third party statement as the same was also in violation of the principles of natural justice. 3. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition made by Ld. A.O. of Rs. 4,17,27,832/-, by treating genuine local purchases/ deemed imports as accommodation entry. 4. On the facts and circumstances of the case and in law the learned CIT(A) erred in not acknowledging the fact that the appellant firm is a 100% Export Oriented Unit (EOU) and any purchases/ deemed imports made from local suppliers are considered to be deemed exports for such supplier and is subject to mandatorily follow a strict procedure for procurement of consignment in accordance with the procedure laid down by the Customs/SEZ Authorities. 1.3 The Ld. ....
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....were also furnished in support of the same. As per the terms of license, the assessee was mandatorily obliged to follow strict norms, rules and compliances as set out by the Government of India - Ministry of Commerce during conduct of its business. 3.2 It was submitted that assessee being an 100% EOU, all purchases of cut & polished diamonds made from local parties have to be in the nature of deemed imports only for which strict procedures was required to be followed viz. a) The proposed required quantity of cut & polished diamond was to be intimated to Superintendent of Customs along with the proforma invoice of the supplier party showing therein the complete details of quality, quantity and value. Against this intimation, the Superintendent of Customs would issue, under his stamp and seal, a "Certificate of procurement" only on the basis of which the purchases / procurement could be made by the assessee. b) Having complied with and completed the above formality, the supplier would take the consignment of diamonds along with its invoice to the Deputy Commissioner of Customs at DPCC (Diamond Plaza Clearing Centre) at Dr. D. B. Marg, Mumbai - 400 004 for complet....
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....r which the goods would be eligible for export to overseas buyers. It was thus submitted that the assessee purchased nine consignments of diamonds from M/s Sun Diam during the year by following the above strict norms, procedures and rules which were to be followed by any 100% EOU. The invoice-wise details showing quantity as well as value were also furnished. The copies of invoices along with respective certificate of procurement and movement of goods duly endorsed by custom authorities / preventive officer were filed during the course of assessment proceedings as well during appellate proceedings. Thus, the assessee claimed that all these documents completely establish and prove the description, quantity, quality and movement-cum-delivery of goods purchased from M/s Sun Diam. The details of payment made through banking channels were also furnished along with bank statements of the assessee. The copies of end-use certificates duly endorsed and certified by the custom authorities / preventive officer showing complete details of consumption of cut and polished diamonds in manufacture and export vis-à-vis purchases made from M/s Sun Diam was also enclosed. The confirmed acco....
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....ctually been made. Having not done so, the assessee did not satisfactorily substantiate the purchases. Further, in case of trader, one-to-one correlation would be evident but in case of a manufacturer, the chain of events after purchases for manufacturing leading to the final product which is ultimately sold needs to be explained and the appellant has grossly erred in not doing so in the present case. Thus, this was not a case of having made the purchases from grey market and regularizing the same by obtaining bills of purchases rather it was a case where the purchases were made only to reduce the profits. 4.3 In the background of all these observations, the action of Ld. AO was upheld against which the assessee is in further appeal before us. Our findings and Adjudication 5. We find that the assessee firm is engaged as manufacturer exporter of diamond / stone studded jewellery. The assessee is a 100% Export Oriented Unit (EOU) situated in a SEZ. As per the extant rules / regulations, all the local purchases made by the assessee would be deemed imports. All such purchases to be made by the assessee have to follow strict procedure as laid down in SEZ rules and regulation....
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.... register. One copy of this stamped invoice would be handed over by supplier to the assessee, on the basis of which the delivery of goods would be given to assessee by the preventive officer in the office of Deputy Commissioner of Customs at DPCC (Diamond Plaza Clearing Centre). The delivery of sealed consignment would be taken against the procurement certificate as well as stamped-cum-endorsed invoice. Pertinently, the delivery of the goods / consignment is only and only given to the Preventive Officer in charge who would make an entry in his register and deliver the possession of the goods in assessee's factory premises only. All such deemed imports made by assessee has to be then fully and completely accounted for in terms of its consumption / end-use in the manufacturing of jewellery which is exported by the assessee. In other words, at the time of export of a particular consignment of jewellery, the quantity and the quality of the diamonds has to be co-related and accounted for with the custom authorities as to from which lot of deemed import the said diamonds have been used/consumed. The custom officer after satisfying himself fully would endorse under his seal and signatu....
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....inished goods sold by it. Upon perusal of financial statements, it could be observed that the assessee has reflected Net profit Rate of around 6% in this year as against net Profit Rate of 5.85% in immediately preceding year. 8. In the light of above facts and circumstances, we are of the considered opinion that the onus casted upon assessee to substantiate the purchases was duly discharged and the onus was on revenue to dislodge the assessee's submissions as well as documentary evidences. However, the whole basis of addition is statement made by the tainted group during search operations. The opportunity to cross-examine the same has never been provided to the assessee. It could be concluded that the additions are made merely on the basis of allegations without there being any cogent material in the armory of the revenue. Therefore, considering the facts of the case, we are inclined to delete the impugned additions as made by Ld.AO and as confirmed by Ld. CIT(A) in the impugned order. We order so. The Ld. AO is directed to re-compute assessee's income, in terms of this order. Ground Nos. 2 to 4 stands allowed. 9. The Ld. AR has assailed the reassessment proceedings on the....