Adarsh Kumar Goel, J.@mdashThis appeal has been preferred by the Revenue u/s 260A of the IT Act, 1961 (for short ""the Act"") against the
order dt. 25th July, 2008 of the Tribunal, Special Bench, Delhi in ITA No. 163/Asr/2003 reported as Tejinder Singh (HUF) v. Dy. CIT (Inv.)
(2008) 117 TTJ (Del)(SB) 145 : (2008) 11 DTR (Del) for the asst. yr. 1998-99 proposing to raise following substantial questions of law:
(i) Whether on the facts and in the circumstances of the case, the order of the Special Bench of Tribunal, New Delhi is ex facie perverse in that it
ignores all the evidences and facts brought on record demonstrating the Hawala nature of the impugned transactions, while holding that these
evidences were not sufficient to doubt the bona fides of the said transactions?
(ii) Whether on the facts and in the circumstances of the case, the order of the Special Bench of Tribunal, New Delhi has erred in deciding the case
of the Respondent on the basis of the factual findings in the case of M/s Bemco Jewellers (P) Ltd./Manoj Aggarwal whereas they were entirely
different?
(iii) Whether the Special Bench of Tribunal, New Delhi has erred in holding that M/s Bishan Chand Mukesh Kumar was a genuine trader of
jewellery because facts of this firm were similar to the case of M/s Bemco Jewellers/Manoj Aggarwal, even though Shri Manoj Aggarwal was
found to be a Hawala operator by the Special Bench, Tribunal, Delhi?
(iv) Whether the Special Bench of Tribunal, New Delhi has committed an ex facie perversity in holding that no useful purpose will be fulfilled in
allowing the AO to examine the additional evidence in the form of material collected during the course of assessment proceedings of M/s Bishan
Chand Mukesh Kumar, even while the Special Bench of Tribunal, New Delhi had held that:
...and the issue about the genuineness of the transactions of purchase and sale of jewellery by M/s Bishan Chand Mukesh Kumar including the
purchase of jewellery from the Assessee has not been considered and decided by us on merits.
(v) Whether the Special Bench of Tribunal, New Delhi has erred in relying upon the sales-tax assessment orders filed at page Nos. 138 and 139 of
the Appellant''s paper book without giving an opportunity to the AO to verify the same without giving any reasons for the same rendering the order
perverse and non-speaking?
(vi) Whether on the facts and in the circumstances of the case, the Special Bench of Tribunal, New Delhi was right in ignoring the glaring errors and
gaping holes pointed out by Appellant Revenue Department in the evidence led by the Assessee in cases such as when the jewellery was valued at
Delhi as per business practices of M/s Bishan Chand Mukesh Kumar, then how was it possible that cheque of exact amount was issued at
Amritsar at the time of purchase of jewellery. This argument is not disposed of in the final order issue, thus rendering it non-speaking and perverse?
(vii) Whether on the facts and in the circumstances of the case, the Special Bench of Tribunal, New Delhi was justified in accepting the genuineness
of the jewellery transactions of the Respondent, when the Respondent''s conduct conflicted with the test of ''normal human conduct'' principle laid
down by the Hon''ble Supreme Court in the cases of Commissioner of Income Tax, West Bengal II Vs. Durga Prasad More, and Sumati Dayal
Vs. Commissioner of Income Tax Bangalore, ?
(viii) Whether the Special Bench of Tribunal, New Delhi has committed a gross perversity in sweepingly ignoring all the facts and evidences of the
Appellant Revenue Department whilst accepting every far-fetched argument of the Respondent?
(ix) Whether the learned Tribunal grossly erred in law by applying two different yardsticks and standards by requiring the Appellant Revenue
Department to pass test of cross-examination of all witnesses and at the same time being satisfied by all the Respondent''s averments at face value,
thus forcing the Revenue to prove its case beyond all reasonable doubt?
(x) Whether the learned Special Bench of Tribunal, New Delhi was justified in giving no finding regarding the genuineness of sale of the jewellery
by the Respondent to M/s Bishan Chand Mukesh Kumar?
2. The Assessee is HUF engaged in the business of fabrics. In its return for the assessment year in question, the Assessee claimed long-term capital
loss on account of sale of jewellery. The said jewellery was disclosed under Voluntary Disclosure of Income Scheme, 1997 (for short ""VDIS"")
valued at Rs. 7,88,131 as on 1st April, 1987. Indexed cost was higher than the price at which the same was claimed to be sold on 2nd Feb., 1998
and 18th Feb., 1998. The AO doubted the genuineness of the transactions and held the sale proceeds to be unaccounted funds of the Assessee.
The CIT(A) upheld the additions. On further appeal, the Tribunal reversed the view taken by the AO and the CIT(A) mainly on the ground that in
the decision rendered in the case of M/s Bemco/Manoj Aggarwal Jewellers (""Bemco"") which was held applicable to M/s Bishan Chand Mukesh
Kumar (""BCMK"") to whom the jewellery was sold by the Assessee, additions were set aside. Findings recorded on the issue by the AO, the
CIT(A) and the Tribunal are as under:
Finding recorded by the AO
This office frames its inference on the basis of material on record and comes to the conclusion that the alleged sale of jewellery is bogus and is in
fact the introduction of the unaccounted money of the Assessee through the garb of sale of jewellery disclosed by the Assessee under VDIS. The
conclusion is based on the following factors:
(a) The Assessee has submitted that the jewellery was very old and had sentimental value. However, the same has been immediately sold after the
date of receipt of VDIS certificate from the office of worthy CIT, Amritsar.
(b) The Assessee submits that M/s Bishan Chand Mukesh Kumar jeweller was introduced to him through his relatives at Delhi. However, he was
unable to identify the relatives.
(c) The Assessee has further submitted that the representative of the jeweller came to Amritsar to take delivery of the jewellery worth
approximately Rs. 14 lakhs without any receipt or without receiving the payment for the same is also not believable.
(d) Confirmation has been received by this office while the party is not traceable at the address as given by the Assessee. It is then strange as to
why the letters sent by this office were not received back. In case they were duly received and replied, then why were they not traceable on
enquiry of Inspector of DDI office. Also non-co-operation of the jeweller with the office to whom commission was issued by this office also gives
credence to the conclusion being drawn by this office.
(e) The jewellery sold inter alia includes diamond jewellery sold worth Rs. 3.67,868 whose value as on 1st April, 1987 had been shown at Rs.
77,170. Thus, the increase has been shown at 4.77 times. However, as per the date of the gem and jewellery export promotion council this
increase in rates of diamond jewellery has not been so sharp.
Thus considering all the above factors, it is clear that the sale of jewellery as disclosed by the Assessee is bogus and has been used only to
introduce his own unaccounted income into the regular books. Thus, the Assessee has not explained to the satisfaction of the office the introduction
of credit of Rs. 16,80,475 in his regular books and is thus added to the income of the Assessee u/s 68 of the IT Act. Accordingly, the loss of Rs.
1,82,891 as claimed by the Assessee is also disallowed and the capital gain on sale of MEP units at Rs. 1,227 is separately brought to tax.
Findings recorded by the CIT(A)
7.1 I have considered the Appellant''s contentions in the background of facts on appellate record and the reasons given by the AO in the
assessment order and his remand report, as mentioned above. The issue to be decided here is as to on whom the onus lies to prove the
genuineness of sales and whether the party on whom the onus lies has been able to discharge such onus in a complete manner so that it can be said
that the onus has shifted on the other side to disprove the same. In the present case, the Appellant''s counsel has filed confirmation of sales
purportedly from M/s Bishan Chand Mukesh Kumar, Saraf, Delhi which bears date much prior to the calling of information by the AO in this case.
This raises serious doubts about the genuineness of confirmation because in the normal circumstances confirmation is sought from the party only
when it is required by the other party during the course of assessment or other proceedings. In the present case, it appears that this confirmation
was obtained by the Appellant much before the date of query raised by the AO which indicates a prior planning and premeditated approach. This
raises serious doubts about the genuineness of the confirmation filed and in my opinion, this confirmation could not be said to be sufficient to
discharge the onus of proving the sale of jewellery in the context of the following facts:
(i) Though the Appellant claimed jewellery to be very old and having sentimental value, the Appellant had promptly sold this very jewelleiy
immediately after the date of receipt of VDIS certificate.
(ii) Jewellery was sold to unknown party of Delhi i.e., M/s Bishan Chand Mukesh Kumar claimed to have been introduced through a relative of the
Appellant to whom the Appellant was not able to identify.
(iii) The Appellant handed over jewellery worth Rs. 14 lacs to this unknown jeweller of Delhi without any receipt or without receiving any payment
on the delivery of the jewellery.
(iv) Although confirmation has been received by the AO, but the party is not traceable at the address given on the confirmation.
(v) All the letters sent by the AO through registered post/speed post have not been received back undelivered.
(vi) The said party i.e., M/s Bishan Chand Mukesh Kumar, Delhi is stated to be not traceable as per the report of the Inspector, referred to above.
Hence, it is clear that the onus which lies on the Appellant to prove genuineness of sale of jewellery cannot be said to have been discharged.
Report of the Inspector of the Investigation Wing, Delhi dt. 16th Jan., 2002 along with letter of the Addl. Director of IT (Inv.) Unit-I(2), Delhi are
reproduced hereunder for ready reference:
Per letter No. Addl Director of IT (Inv.) Unit-I/2001 02/1081, dt. 22nd Jan.. 2002 sent by Shri K.L. Anand, Addl Director of IT (Inv.) Unit 1(2),
New Delhi to Shri B.B. Vig, ITO, Ward IV(4), Amritsar.
2. After receipt of your letter, another summons u/s 131 was issued to the party, namely M/s Bishan Chand Mukesh Kumar and the same could
not be served at the given address. Copy of Inspector''s report in this regard is enclosed. It is also brought to your notice that action u/s 132(1)
was carried out by the Investigation Unit-I this Directorate on 3rd Aug., 2000 in the case of Shri Manoj Kumar and others. One of the associates
covered u/s 132(1) was the same M/s Bishan Chand Mukesh Kumar. This group has since been centralized with Shri Ram Mohan Singh, Chief
Director of IT, Central Circle-3, Mayur Bhawan (Room No. 724, Connaught Circus), New Delhi.
3. I am directed to request you to please contact Shri Ram Mohan Singh, Dy. CIT holding jurisdiction M/s Bishan Chand Mukesh Kumar for
conducting necessary enquiries in the case.''
Per Inspector Shri Praduman Singh, ITI, Unit-I, New Delhi''s report in the case of M/s Bishan Chand Mukesh Kumar dt. 16th Jan., 2002.
As directed, I visited the premises No. 1166/202, Kucha Mahajani, Chandni Chowk, Delhi on 14th Jan., 2002 to serve the summons on the
abovesaid party. The premises is on the 2nd floor and there is no sign board of M/s Bishan Chand Mukesh Kumar at this premises. Local enquiry
made revealed that this party is not functioning from this place. Efforts are being made to locate the present address of the party.
The report received from the Dy. Director of IT (Inv.) dt. 25th Oct., 2002 throws further light on the authenticity of the confirmation letters filed in
this case. Content of the letter dt. 25th Oct., 2002 is reproduced hereunder for ready reference:
Per letter No. DSDIT (Inv.) Unit-II(2)/2002/2003/21 dt. 25th Oct, 2002 sent to this office by Shri S.S. Jain, Dy. Director of IT (Inv.), UnitII(4),
New Delhi.
Kindly refer to your letter No. 205/2002-03-671 dt. 23rd Aug., 2002 on the subject noted above. After going through the appraisal report the
required information is submitted as under:
As per the information it was found that Shri Manoj Aggarwal and others had been in the business of selling bogus accommodation book entries of
various types for consideration of commission and that he had no real business. He had been operating from different premises in Delhi.
As a consequence of information, search was conducted u/s 132 of IT Act, 1961 on 3rd Aug., 2000 at the office premises and at the residential
premises of Shri Manoj Aggarwal, as well as at the premises of one of the mediators Shri Kamlesh Kumar Gupta, and one of the beneficiaries Shri
Girish Mittal. Survey operations u/s 133A of the IT Act, 1961 were also carried out on 3rd Aug., 2000 at B-19, Swasathya Vihar, Delhi i.e., the
premises of Shri Manoj Aggarwal.
It revealed that he had various bank accounts in different banks which had been opened and operated by him and his associates to facilitate his
business of selling bogus accommodation book entries.
As per page Nos. 4-7 of the appraisal report there are 51 bank accounts in different names including the names of Bishan Chand Mukesh Kumar
as given below. Majority of these accounts have been used in his widespread operations of providing bogus accommodation book entries:
SI. Name arid address of a/c Name arid A/c
No. holder/operated by address of bank Nos.
4 Bishan Chand Mukesh Kumar Vijaya Bank, 1001
1166/202, Kucha Mahajani, ChandaniVigyari Vihar,
Chowk, Delhi Mukesh Kumar. Delhi
9 Bishan Chand Aggarwal, 1166/202, �do� 6512
Aggarwal Kucha Mahajani. Charidarii
Chowk, Delhi Bishan Charid
10 Mukesh Kumar, 1166/202, Kucha �-do� 6528
Mahajani, Chandani Chowk, Delhi
Mukesh Kumar
12 Bishan Chand. (HUF) PP-33 �-do� 1355
Pitampura, Delhi Bishan Chand
13 Bishan Chand (HUF) C-25, 2-East �-do� 6832
Baldev Park, Delhi Bishan Chand
25 Bishan Chand Mukesh Kumar Cariara Bank, 5637
1166/202, Shankar Market Kucha Trinagar. Delhi
Mahajani, Charidani Chowk, Delhi
Mukesh Kumar,
42 �-do� �-do� �-do� 5637
The case was centralized with Central Circle-III in the charge of CIT, Central-II, New Delhi and the seized record along with the appraisal report
was sent to the AO, Central Circle-Ill on 17th Sept., 2001. In view of the above, any further information in this regard may kindly be asked for by
the AO who was suggested to ascertain the volume and nature of transactions in the abovesaid bank accounts before arriving at the correct income
of the Assessee.''
Perusal of the said letter shows that the partners of the concern M/s Bishan Chand Mukesh Kumar are known to be involved in the business of
selling bogus accommodation book entries of various types for consideration of commission and they had no real business. On the basis of such
information, search has been conducted u/s 132 at the office premises and residential premises of the partners of the concern, M/s Bishan Chand
Mukesh Kumar. Investigation Wing has been able to identify various bank accounts in different banks which have been opened and operated by
the partners and its associates to validate the selling of bogus accommodation book entries. These bank accounts have been identified and further
investigations are in progress. In spite of various enquiry letters issued by the Investigation Wing, the party M/s Bishan Chand Mukesh Kumar has
failed to appear and confirm the purchases made from the Appellant. Considering the totality of facts and circumstances of this case including the
various reports, referred to above, I am of the opinion that firstly confirmation letter filed by the Appellant or received subsequently by the AO
cannot be said to be sufficient to discharge the onus which lies on the Appellant particularly in the context of the fact that the party whose
confirmation is sought to be relied upon by the Appellant is known to be indulging in providing bogus accommodation book entries for a
consideration. Further the said party M/s Bishan Chand Mukesh Kumar, Delhi has failed to appear or produce evidence in respect of jewellery
claimed to have been purchased by them from the Appellant even after a lapse of 2 years including the period of time during the assessment
proceedings as well as appellate and remand proceedings. Further, even if the said party, M/s Bishan Chand Mukesh Kumar is proved to be
existing on the address given, but that is not sufficient to completely discharge the onus of proving the alleged sale of jewellery and genuineness of
the transaction because nexus between sale of jewellery claimed to have been sold by the Appellant and the transaction with M/s Bishan Chand
Mukesh Kumar does not seem to have been proved. In view of the above, the Appellant''s contentions in this regard are rejected and it is held that
the AO was justified in making addition of Rs. 16,80,475 on account of bogus sale of jewelleiy and also in rejecting the loss claimed by the
Appellant at Rs. 1,82,891.
Findings recorded by the Tribunal
166. After hearing the arguments of learned representatives of all the sides in these cases, we felt that it would be appropriate to consider and
decide the appeals filed in the case of M/s Bishan Chand Mukesh Kumar and Shri Manoj Aggarwal/Bemco Jewellers first as the issues relating to
genuineness of the transactions of purchase and sale of jewellery in the said cases have been investigated in detail and the decision thereon will
have a direct bearing on the ultimate fate of the case of the Assessee i.e., Tejinder Singh, HUF. Accordingly, the appeals filed in the case of M/s
Bishan Chand Mukesh Kumar have already been disposed of by us in the foregoing portion of this order wherein the assessment made u/s 158BC
r/w Section 158BD has been held to be bad in law on the grounds and for the reasons set out thereon. Consequently, the said assessment made in
the case of M/s Bishan Chand Mukesh Kumar has been quashed by us holding the same to be invalid and keeping in view this decision on the
preliminary legal issues, we have refrained ourselves from considering and deciding the other issues involved in the said case on merits including the
issue relating to genuineness of the transactions of purchase and sale of jewellery. Assuming the possibility of such an eventuality and keeping in
view that the material collected during the course of assessment proceedings in the case of M/s Bishan Chand Mukesh Kumar , which has already
been filed and admitted as additional evidence in the case of Tejinder Singh, HUF, can still be utilized, Shri S.D. Kapila has urged that the case of
Shri Tejinder Singh should be restored to the file of the AO to consider and decide the same afresh in the light of the said additional evidence. He
has submitted that this will also facilitate in giving an opportunity to the Assessee to cross-examine the deponents whose statements have been
sought to be relied upon by the Department and also to rely upon the letters/affidavits of the said deponents which have been fried by him and
admitted by the Tribunal as additional evidence. He has contended that this will enable the AO to reach a proper conclusion after taking into
consideration this entire evidence which has been gathered after the completion of assessment in the case of Tejinder Singh, HUF and which is
relevant to decide the issues involved in the said case. Although this plea of Shri S.D. Kapila sounds to be logical and legally tenable, we find it
difficult to accept the same in view of our decision rendered in the cases of Shri Manoj Aggarwal and Bemco in the foregoing portion of this order.
It is no doubt true that jewellery by Tejinder Singh, HUF, was sold to M/s Bishan Chand Mukesh Kumar and the issue about the genuineness of
the transactions of purchase and sale of jewellery by M/s Bishan Chand Mukesh Kumar including the purchase of jewellery from the Assessee has
not been considered and decided by us on merits. However, a similar issue involved in the case of Bemco/Manoj Aggarwal has been considered
and decided by us on merits. In the said cases, the facts involved were almost similar to the facts involved in the case of M/s Bishan Chand
Mukesh Kumar in as much as the transactions relating to purchase and sale of jewellery were held to be bogus by the Department alleging that
such transactions were entered into in order to give accommodation entries on commission basis. This allegation was based on the similar type and
nature of evidence collected by the Department and the modus operandi allegedly followed by Bemco/Manoj Aggarwal was the same as alleged
to be followed by M/s Bishan Chand Mukesh Kumar while giving accommodation entries in the form of bogus sales entries of jewellery. The case
sought to be made out by the Department about the alleged bogus purchase and sale of jewellery transactions on the basis of similar nature of
evidence has been examined by us in detail and on such examination, we have held that the evidence collected by the Revenue authorities was not
sufficient to establish their stand that the jewellery transactions carried on by Bemco Jewellers (P) Ltd. were only paper transactions or bogus and
the same were put through by accommodation entries in order to earn commission income therefrom. We have found it difficult to reject the
Assessee''s plea about the genuineness of the jewellery transactions as opposed to the normal course of human conduct even applying the
principles laid down by the Hon''ble Supreme Court in the cases of Durga Prasad More (supra) and Sumati Dayal (supra). We have also found
that the circumstances surrounding the case were not strong enough to hold the claim of the Assessee about genuineness of the jewellery
transactions as totally unbelievable or outrageous. We have also found that no evidence of any consequence was unearthed during the course of
search to directly show that the jewellery business was bogus and that it was only accommodation entry business. On the other hand, the evidence
brought on record by the Assessee especially the evidence in the form of sales-tax assessment order wherein the transactions of purchase and sale
of jewellery were accepted by the sales-tax authorities was found to be reliable by us to support the case of the Assessee that the relevant
transactions of purchase and sale of jewellery were genuine. As the issue involved in the case of Bemco/Manoj Aggarwal as well as all the material
facts relevant thereto including the evidence brought on record are similar to the case of M/s Bishan Chand Mukesh Kumar, we are of the view
that the decision rendered in the case of Bemco/Manoj Kumar on the said issue is applicable even in the case of M/s Bishan Chand Mukesh
Kumar with equal force and this being so, no meaningful purpose will be served by sending the matter back to the AO for reconsideration and
redecision merely because the issue has not been decided on merits in the case of M/s Bishan Chand Mukesh Kumar. In our opinion, this exercise
would prove to be merely academic and it would result only in multiplicity of litigation. In that view of the matter and keeping in view the reasons
given above, we do not find any justifiable reason to send this matter to the AO for reconsideration as sought by Shri Kapila and following our
conclusion drawn in the case of Bemco/Manoj Aggarwal, we hold the transaction relating to sale of jewellery in the case of the present Assessee,
i.e., Tejinder Singh (HUF) is genuine. Accordingly, we delete the addition made by the AO and confirmed by the CIT(A) u/s 68 and allow this
appeal of the Assessee.
3. We have heard learned Counsel for the parties.
4. Learned Counsel for the Revenue submits that the Tribunal erred in reversing the finding recorded by the AO and the CIT(A) solely on the basis
that since in the case of Bishan Chand Mukesh Kumar transactions of jewellery were held to be genuine, the case of the Assessee was not
required to be gone into on merits. It was submitted that case of the Assessee was required to be individually gone into to ascertain genuineness of
the claim of the Assessee for capital loss. Even if Bemco or even Bishan Chand Mukesh Kumar to whom the jewellery is said to have been sold
by the Assessee was not liable to be taxed in respect of said transactions, the case of the Assessee had to be examined to determine whether sale
by the Assessee was genuine. Finding in the case of Bemco could not be mechanically applied to Bishan Chand Mukesh Kumar and on that basis
to the Assessee. The issue of genuineness of the transaction of sale by the Assessee and correctness of the finding recorded by the AO and the
CIT(A) were required to be gone into by the Tribunal before setting aside the addition. Reasons given by the AO and CIT(A) are required to be
dealt with. The documents produced for the first time such as sales-tax assessment order in the case of Bishan Chand Mukesh Kumar, required
the matter being remanded to consider the circumstances such as whether the jewellery allegedly sold was not the same as had been declared
under the VDIS, as held by the CIT(A).
5. Learned Counsel for the Assessee fairly stated that the finding that order in the case of Bemco could be automatically applied to the Bishan
Chand Mukesh Kumar and to the Assessee without considering the merits of the case of the Assessee could not be justified. She, however,
submitted that the Assessee has furnished sufficient explanation in support of genuineness of its claim, as noticed in the impugned order. She also
relied upon the judgment of Hon''ble Supreme Court in Commissioner of Income Tax, Orissa Vs. Orissa Corporation (P) Ltd., to contend that it
was for the Revenue to examine source of income of the creditor/purchaser of the jewellery, in absence of which addition in the hands of the
Assessee could not be made. Once the Assessee discharged the onus, addition u/s 68 was not justified.
6. We are satisfied that the finding recorded by the Tribunal that addition u/s 68 in respect of alleged bogus sale of jewellery was not justified is
perverse. The Tribunal has not considered the merits of the genuineness of the transaction of sale by the Assessee. In the light of finding recorded
by the AO and the CIT(A), it was expected that the Tribunal should have gone into the question of identity of the jewellery declared under the
VDIS and jewellery sold in the transaction in question. It was necessary to go into the question whether the Assessee had not received any bogus
accommodation book entries as inferred in the orders of AO and CIT(A). In absence thereof, the impugned finding cannot be sustained. In this
view of the matter, it is not necessary to go into the submission made on behalf of the Assessee that there was sufficient explanation as this is an
issue which is yet to be gone into by the Tribunal which is a final fact-finding authority.
7. Accordingly, we hold that the order of the Tribunal is perverse to the extent indicated above. The questions raised stand answered accordingly.
The impugned order of the Tribunal is set aside and the matter is remanded to it for fresh decision on merits in accordance with law. It is made
clear that the parties will be at liberty to raise such contentions as may be relevant and necessary including the contention of applicability of Section
68. The parties may appear before the Tribunal for further proceedings on 4th April, 2011.
8. The appeal is disposed of accordingly.