Decided on September 12,2008



Vimal Gandhi, President - (1.) THIS appeal by the assessee for assessment year 2001-02 is directed against order of Commissioner (Appeals) dated 2-12-2004. Although several grounds have been raised but main ground pertains to addition of Rs. 4,29,74,424 made under Section 68 of the Income Tax Act.
(2.) The facts of the case are that assessee, a limited concern, which was incorporated on 26-12-2000 claimed to have exported diamonds worth Rs. 4,29,74,424, which were shown to be purchased for Rs. 1,92,87,608. Out of the huge profit shown by the company, it claimed rebate at 80 per cent under Section 80HHC of the Income Tax Act. On scrutiny of account, the assessing officer found that assessee had made purchases from two parties as under: JUDGEMENT_3661_TLIT0_20080.htm It is stated in the assessment order that investigation revealed that the alleged sellers were running a racket for arranging entries of import and export and for providing bogus bills. The revenue authorities carried investigations and found that M/s. Vinayak Overseas was owned by one Shri Gauri Shanker Pareek who had given power of attorney in favour of Shri Mohan Sharma. The revenue authorities took action under Section 132 in the case of Vinayk Overseas and found that he was not operating from the address given by him. His income-tax records showed that he had filed some return at Surat but he was also not found at the address given in the return. The premises in Surat was found to be under the seal of D.R.I. Shri Mohan Sharma in his statement recorded on 8-7-2003 was unable to give whereabouts of Shri Gauri Shanker, except stating that he was staying at Bombay. He further accepted in his statement that above concern was giving entries and sale bills to accommodate people who were showing export of diamonds. 3.1 In the case of Mine 'O' Gem, the revenue carried a survey on 24-6-2003 at the address 115, Vardhman, Johri Bazar, Jaipur and statement of its proprietor Shri Sanjay Pareek was recorded under Section 131 on 4-7-2003. Shri Pareek had stated that Head Office of the concern was at 302, Chandralok Apartment, Surat. However, when a survey was carried, the above premises was found to be locked. The assessing officer, therefore, concluded that Mr. Sanjay Pareek had made a false statement. It was found that in his return, which was filed at Surat, his address was 204-Gopi Nath Apartment, Jadda Khadi, Mahidarpura, Surat. In the survey authorized on above premises, it was found that the premises, a flat was locked. From the income-tax record, the assessing officer found that for the assessment year 2002-03, M/s. Mine 'O' Gem, on turnover of Rs. 80.46 crore had shown net profit of Rs. 64,800 which gave ratio of 0.0008 per cent. No books of account were found at any business premises. Shri Sanjay Pareek had promised to produce the books but that promise remained un-complied with. No stock of any kind of precious stone or semi-precious stone was found with Mr. Sanjay Pareek, although in the books for the year 2002-03, it was shown at Rs. 2,17,64,505 Shri Sanjay Pareek, in his statement could not tell name of any party with whom any transaction was carried by M/s. Mine 'O' Gem. It was found that from the bank account, cash was immediately withdrawn after deposit. From the above, the assessing officer concluded that assessee did not make any purchase of diamonds for export and its purchases are bogus. In these circumstances, there was no question of the assessee making any export.
(3.) THE assessee was asked to produce the parties from whom purchases were made by the assessee. In its reply, the assessee reiterated that assessee exported tanzanite stone to Hong Kong and New York. Reliance was placed on export documents by custom attested export bills, air bills, bank advice, copies of FIRCs and other documents. As far as, parties from whom purchases made were concerned, it was claimed that two parties had shifted their base to Surat and the assessee was trying to locate their present address. Further, it was submitted that if statements of Shri GauriShanker Pareek and Sanjay Pareek are to be used against the assessee then an opportunity of cross examination may be provided to the assessee.;

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