Case Law Details
Redeem Exports Pvt. Ltd. Vs ITO (ITAT Surat)
The appeal before the Income Tax Appellate Tribunal (Surat) concerned the addition of Rs. 1,15,80,000 made by the Assessing Officer (AO) on account of alleged bogus purchases for Assessment Year 2017–18. The assessee, engaged in trading of rough and polished diamonds, had filed its return declaring income of Rs. 75,200. During assessment, the AO relied on statements recorded during a survey under Section 133A in another case, where it was admitted that certain entities, including the assessee’s suppliers, were paper concerns providing accommodation entries. Based on this, the AO treated purchases from two suppliers as bogus and made addition under Section 68.
The assessee contended that purchases were genuine, supported by confirmations, and payments were made through RTGS, duly reflected in bank accounts. It also argued that it was not provided copies of documents or statements relied upon by the AO and was denied the opportunity for cross-examination. Despite these submissions, the Commissioner (Appeals) upheld the addition.
Before the Tribunal, the assessee submitted additional evidence, including ledger confirmations, purchase invoices, income tax returns of suppliers, stock registers, bank statements, and sales and purchase registers. It was explained that these records were not produced earlier as they were old documents. The assessee requested that the matter be remanded to the Commissioner (Appeals) for proper verification of these evidences.
The Tribunal considered the submissions and accepted the plea for admission of additional evidence. It observed that the documents, including stock registers and income tax returns of suppliers, were relevant and required examination. Accordingly, the Tribunal remanded the matter back to the file of the Commissioner (Appeals) for proper verification and adjudication on merits in accordance with the provisions of the Income Tax Act.
The appeal was thus partly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT SURAT
This is an appeal filed against the order dated 31-012024 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2017-18.
2. The grounds of appeal are as under:-
“1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming purchases made amounting to Rs. 1,15,80,000/- from M/s Santosh Gems Pvt. Ltd and M/s Dharmik Exports Pvt. Ltd. as bogus purchases without considering that assessee had submitted all the documents to prove the identity, creditworthiness and genuineness of transactions.
2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming purchases made amounting to Rs. 1,15,80,000/- from M/s Santosh Gems Pvt. Ltd and M/s Dharmik Exports Pvt. Ltd. as bogus purchases without providing the copies of all documents, materials and statement recorded relied upon.
3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming purchases made amounting to Rs. 1,15,80,000/- from M/s Santosh Gems Pvt. Ltd and M/s Dharmik Exports Pvt. Ltd. as bogus purchases without allowing opportunity of cross examination of the persons, whose statement has been relied upon.
4. Alternatively, on the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of entire purchases made from M/s Santosh Gems Pvt. Ltd and M/s Dharmik Exports Pvt. Ltd. as bogus purchases without considering that only profit element can be taxed.
5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.
Total tax effect 1,23,15,692/-”
3. The assessee company is engaged in the business of trading of rough and polished diamonds during the year under consideration. The assessee company filed its return of income for assessment year 2017-18 on 23-03-2018 declaring total income at Rs. 75,200/-. Statutory notices were issued which was replied by the assessee and the details were filed by the assessee. The Assessing Officer observed that during the course of survey action u/s. 133A in the case of Crossiance Diamond Pvt. Ltd., statement of Ramesh Soni was recorded on oath on 02-03-2017 wherein he admitted that he is operator of Dharmik Export Pvt. Ltd. and Santosh James Pvt. Ltd. and running the day to day operations of the said companies. He also admitted that and Dharmik Export Pvt. Ltd. and Santosh James Pvt. Ltd. were paper concerns and not doing any real business. He admitted that the assessee company was a beneficiary of doing purchase provided by his paper concerns. The assessee company vide reply dated 12-12-2019 stated that purchase of diamonds from Santosh James Pvt. Ltd. amounting to Rs. 85,90,000/- and Dharmik Export Pvt. Ltd of Rs. 26,90,000/- were confirmed by these two parties and the payment made towards purchased of rough diamonds were through RTGS duly reflected in their bank accounts. The assessee company had no idea about the bogus purchase of the Dharmik Export Pvt. Ltd. and Santosh James Pvt. Ltd and the assessee has shown genuine purchase. After taking cognizance of the assessee’s reply the Assessing Officer made addition of Rs. 1,15,80,000/-u/s. 68 on account of bogus purchase.
4. The assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. The ld. A.R. submitted that the CIT(A) ignored the details filed by the assessee during the assessment proceedings which proved the identity, creditworthiness and genuineness of the transactions. In fact, the assessee was not given the copies of documents found during the survey action as well as statement recorded by the revenue authorities that of Shri Ramesh Soni. The assessee was not given the opportunity of cross –examination of the persons.
6. The ld. D.R. relied upon the assessment order and the order of the CIT(A).
7. We have heard both the parties and perused all the relevant material available on record. At the time of hearing, the ld. A.R. filed the additional evidences including that of ledger confirmation, purchase invoice, income tax return of the suppliers, stock register, bank statements and sales and purchase registers. Since these were old records, it was not filed before the Assessing Officer as well as before the CIT(A), therefore the ld. A.R. submitted that the assessee be given opportunity to demonstrate the assessee’s case through its additional evidence and the matter may be remanded back to the file of the CIT(A) for proper verification and adjudication of the issues. The said plea is accepted as the additional evidence comprising the stock register, income tax return of suppliers, sale and purchase registers which has to be looked into. The matter is remanded back to the file of the CIT(A) for proper verification of the evidences filed by the assessee before us and adjudicate the issue on merit as per Income Tax Act.
8. In the result, the appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the open court on 02-04-2026.
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