Priya Soparkar 1 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (IT) NO.937 OF 2017 WITH INCOME TAX APPEAL (IT) NO.1121 OF 2017 AND INCOME TAX APPEAL (IT) NO.1135 OF 2017 Pr.Commissioner of Income Tax, Central-4. Appellant V/s. M/s Sunshine Import and Export Pvt. Ltd. Respondent Mr.Sham Walve with Mr. Pritish Chatterji, Advocate for Appellant. Ms.Aasifa Khan, Advocate for Respondent. CORAM : UJJAL BHUYAN & MILIND N. JADHAV, JJ. DATE : MARCH 4, 2020 P.C.:- 1. This order will dispose of Income Tax Appeal Nos.937, 1121 and 1135 of 2017. 2. We have heard Mr.Sham Walve, learned standing counsel, Revenue for appellant; and Ms.Aasifa Khan, learned counsel for respondent-assessee. 3. This appeal under Section 260A of Income Tax Act, 1961 (briefly Act hereinafter) has been preferred by Revenue assailing order dated 9 th September, 2016 Uploaded on - 11/03/2020 Downloaded on - 14/03/2020 16:44:26 Priya Soparkar 2 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o passed by Income Tax Appellate Tribunal, B Bench, Mumbai ("the Tribunal for short) in Income Tax Appeal No.4347/Mum/2015 for assessment year 2008-09. 4. Be it stated that Income Tax Appeal No.937 of 2017 pertains to assessment year 2009-10, whereas Income Tax Appeal Nos.1121 and 1135 of 2017 pertains to assessment year 2008-09. All appeals were disposed of by Tribunal vide common order dated 9th September, 2016. 5. On request of Mr. Walve, Income Tax Appeal No. 937 of 2017 is taken up as lead appeal. 6. This appeal has been preferred by Revenue projecting following questions as substantial questions of law:- (i) Whether on facts and in circumstances of case and in law, Tribunal erred in holding that on basis of statement of director Shri Saurabh N. Garg alone, AO cannot come to conclusion that assessee has issued accommodation bills and reject books of account of assessee? (ii) Whether on facts and in circumstances of case and in law, Tribunal had failed to appreciate that evidentiary value of statement given by director of assessee company could not be disputed and assessment order was passed by Assessing Officer on basis of various circumstantial evidence which has been brought out in assessment order and Tribunal ought to have considered such circumstantial evidence while making its decision? Uploaded on - 11/03/2020 Downloaded on - 14/03/2020 16:44:26 Priya Soparkar 3 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o (iii) Whether on facts and in circumstances of case and in law, order of Tribunal is perverse in sense that conclusion does not follow facts found and thus, gives rise to question of law? (iv) Whether on facts and in circumstances of case and in law, Tribunal failed to appreciate evidentiary value of statement given by director of company and circumstantial evidence brought out in assessment order while holding that interest income is assessed as business income ignoring fact that said business is only of giving accommodation entries? 7. Respondent is assessee under Act engaged in business of manufacturing and trading in precious and semi-precious stones and jewellery in name and style of M/s Sunshine Import and Export Private Limited. Assessee is company having two Directors-Shri Paras Jain and Shri Saurabh Garg. 8. survey under Section 133A of Act was carried out in respect of respondent/assessee. During post survey proceedings, statement of one of Directors i.e. Shri Saurabh Garg was recorded. In one of his statements he was reported to have stated that respondent provided only bill entries and there was no actual transaction of purchase and sale. Subsequently, statement of other Director-Shri Paras Jain was also recorded. From statement of Shri Paras Jain Assessing Officer came to conclusion that he was person of no means and drew inference that respondent/assessee was engaged in activity of issuing accommodation bills for purchase and sale of diamonds Uploaded on - 11/03/2020 Downloaded on - 14/03/2020 16:44:26 Priya Soparkar 4 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o coupled with acting as dummy for importer. Holding transactions as not reliable, Assessing Officer rejected books of account of respondent. By assessment order dated 6th March, 2013 Assessing Officer assessed 2% as rate of commission of respondent/assessee on account of import purchases i.e. for acting as dummy. That apart, commission @ 0.75% on sales bills was assessed. 9. Aggrieved by aforesaid order passed by Assessing Officer, respondent preferred appeal before Commissioner of Income Tax (Appeals)-49, Mumbai, also referred to first appellate authority hereinafter. By appellate order dated 29th May, 2015, first appellate authority confirmed action of Assessing Officer. 10. Continuing to be aggrieved, respondent preferred further appeal before Tribunal. Similar appeals were preferred for other assessment years. By common order dated 9th September, 2016, Tribunal returned finding that assessee was not engaged in issuing accommodation bills and acting as dummy for importing diamond bills. Therefore, Assessing Officer was directed to delete income as estimated by him and to accept book results declared by assessee. 11. Aggrieved, Revenue is in appeal before us raising above questions for consideration. Uploaded on - 11/03/2020 Downloaded on - 14/03/2020 16:44:26 Priya Soparkar 5 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o 12. Submissions made by learned counsel for parties have been considered. 13. At outset, we may reproduce relevant portion of order passed by Tribunal which is as under:- 13. Further from record we found that assessee is mainly engaged in imports of diamonds and sales in local markets to exporters who export goods. import of diamonds is done through customs authorities and banking channel in India. import of diamonds undergoes appraisal process by appraisers appointed by custom authorities. officers appointed by Government of India verify physically each and every parcel of diamonds in order to ascertain quality, quantity, rate, value and place of origin vis vis declared by importers. Further all transaction of purchase, sales import is made through cross account payee cheques and not single payment made to any party by way of cash. All purchase and sales transactions are carried out with reputed parties of diamond trade and all payment received from debtors are through cross account payee cheques and all payment made to creditors are through cross account payee cheques. Ld. AO cannot allegedly consider imports of goods as providing accommodation bill in market when physical delivery of goods were confirmed by other arm of government authorities I.e custom authorities. From record we found that sales were made to reputed exporters who are assessed to tax and their identities are known to income tax department. customers are registered under state VAT laws. company has received payments against sales proceeds by account payee cheques. company has also purchased from local parties to whom payment were made by account payee cheques. Uploaded on - 11/03/2020 Downloaded on - 14/03/2020 16:44:26 Priya Soparkar 6 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o From record we also found that to discharge onus of proving transaction as genuine and to substantiate that all purchases and sales made are genuine assessee have submitted following documents and submissions on time to time which was ignored by A.O. while making reassessment: a. Copies of bank statement for relevant year. b. Ledger copies of various purchases parties for A.Y. 2008-09 and 2009-10. c. Xerox copies of purchases invoices of parties for A.Y. 2008-09 and 2009-10. d. relevant copies of daily stock Register. e. Confirmation from various sale parties. f. Details of interest received from various parties. g. Details of unsecured loan alongwith confirmation. These documents prove that assessee is not engaged in issuing accommodation bills and acting as dummy for importing diamonds bills. Thus, contention of ld. AO that bills issued by assessee are all accommodation bill is wrong. Just on basis of statement recorded he cannot come to conclusion that assessee has issued accommodation bills and reject books of account of assessee. 14. From above, it is evident that on verification of documents and other materials on record Tribunal was satisfied that respondent was mainly engaged in import of diamonds and sales in local markets to exporters who export goods. Import of diamonds by respondent Uploaded on - 11/03/2020 Downloaded on - 14/03/2020 16:44:26 Priya Soparkar 7 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o was done through custom authorities and through regular banking channels in India. procedure governing trading in diamonds was discussed. It was also noted that all transactions relating to purchase and sales were made through account payee cheques and that there was not single transaction by way of cash. Parties to transaction were reputed in trade; sales were made to reputed exporters who were assessed to tax and their identities were known to Income Tax Department besides they were registered under state tax laws. Thus, Tribunal noted that assessee had discharged onus of proving transactions as genuine by furnishing relevant documents, such as, copies of bank statements, ledger copies of various purchases, xerox copies of purchase invoices, relevant copies of daily stock register, confirmation letters etc. On such basis Tribunal recorded clear finding of fact that assessee was not engaged in issuing accommodation bills and acting as dummy for importing diamond bills. In arriving at such finding Tribunal noted that survey party did not find any incriminating evidence and material that could establish stand taken by Assessing Officer. There was no dispute to fact that no incriminating evidence was found on day of survey. It was also noted that merely on basis of statement of one of directors i.e. Shri Saurabh Garg that too recorded after 20- 25 days of survey could not be basis for bringing into assessment and making any addition to income without further supporting or corroborative evidence. Statement recorded under Section 133A of Act not being recorded on Uploaded on - 11/03/2020 Downloaded on - 14/03/2020 16:44:26 Priya Soparkar 8 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o oath cannot have any evidentiary value and no addition can be made on basis of such statement. 15. In 300 ITR 157 (CIT Vs. S. Khader Khan Son), Madras High Court surveyed law relating to statement recorded under Section 133A of Act and culled out following legal principles :- 7. From foregoing discussion, following principles can be culled out:- (i) admission is extremely important piece of evidence but it cannot be said that it is conclusive and it is open to person who made admission to show that it is incorrect and that assessee should be given proper opportunity to show that books of accounts do not correctly disclose correct state of facts, vide decision of Apex Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [(1973) 91 I.T.R. 18]; (ii) In contradistinction to power under section 133A, section 132(4) of Income-tax Act enables authorised officer to examine person on oath and any statement made by such person during such examination can also be used in evidence under Income-tax Act. On other hand, whatever statement is recorded under section 133A of Income- tax Act it is not given any evidentiary value obviously for reason that officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons v. Commissioner of Income- tax [(2003) 263 I.T.R. 101]; (iii) expression "such other materials or information as are available with Assessing Officer" contained in Section 158BB of Income-tax Act, 1961, would include materials gathered during survey Uploaded on - 11/03/2020 Downloaded on - 14/03/2020 16:44:26 Priya Soparkar 9 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o operation under Section 133A, vide Commissioner of Income-tax v. G.K. Senniappan [(2006) 284 I.T.R. 220]; (iv) material or infomration found in course of survey proceeding could not be basis for making any addition in block assessment, vide decision of this Court in T.C. (A) No.2620 of 2006 (between Commissioner of Income-tax v. S.Ajit Kumar); (v) Finally, word "may" used in Section 133A (3)(iii) of Act, viz., "record statement of any person which may be useful for, or relevant to, any proceeding under this Act, as already extracted above, makes it clear that materials collected and statement recorded during survey under Section 133A are not conclusive piece of evidence by itself. 16. Thus, Madras High Court concluded that statement recorded under Section 133A of Act is not given any evidentiary value and that materials or information found in course of survey proceedings could not be basis for making any addition; besides materials collected and statement obtained under Section 133A would not automatically bind upon assessee. 17. above decision of Madras High Court has been affirmed by Supreme Court by dismissing civil appeal of Revenue in 352 ITR 480,CIT Vs.S. Khader Khan Son. 18. In view of discussions made above, we see no reason to interfere with order passed by Tribunal. Consequently, appeal fails and is accordingly dismissed. No cost. Uploaded on - 11/03/2020 Downloaded on - 14/03/2020 16:44:26 Priya Soparkar 10 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o 19. In view of above order, Income Tax Appeal Nos.1121 and 1135 of 2017 are also dismissed. (MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.) . Uploaded on - 11/03/2020 Downloaded on - 14/03/2020 16:44:26 Pr. Commissioner of Income-tax, Central-4 v. Sunshine Import And Export Pvt. Ltd