Yogendra Raj Singhvi vs DCIT

PER MANISH AGARWAL, AM :

All the three captioned appeals are filed by assessee against the separate orders, all dated 17.12.2024 of Ld. Commissioner of Income Tax (A)-29, New Delhi [“Ld.CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of different assessment orders, all dated 30.03.2023 passed u/s 153C r.w.s. 143(3) of the Act pertaining to Assessment Year 2019-20, 2018-19 & 2017-18 respectively.

Since all the appeals filed by the assessee are having common, identical and similar issues, therefore, they are decided by a common order.

First we take appeal of the assessee in ITA No. 520/Del/2025 for Assessment Year 2017-18.

Brief facts of the case are that the assessee is an individual and proprietor of two firms namely, M/s. Maniprabh Exports and M/s. YRA Exports. The assessee is trading of diamonds besides derived income from salary, capital gain and house property. The assessee filed his return of income on 31.10.2017, declaring total income of INR 18,12,230/-. A search and seizure action was carried out in the case of Kamla Pasand Group (“K.P. Group”) on 15.01.2020 u/s 132 of the Act. The business and residential premises of the assessee and the farm house owned by the assessee were also covered under the search though no search warrant was issued in the name of the assessee however, all such premises was covered as part of Kamla Pasand Group. During the course of search, certain documents were found and seized besides WhatsApp chat were found. Thereafter, the AO initiated the proceedings u/s 153C of the Act for AYs 2014-15 to 2020-21 in terms of the notice issued u/s 153C of the Act dated 31.03.2022. The sole allegation of the AO is that various entities of K.P. Group have disclosed sales of diamonds of INR 445,32,22,924/-and declared Long Term Capital gain (“LTCG”) on the same. The AO observed such sale of diamonds to 11 different parties however, they all are having marginal turnover and entry providers who had provided accommodation entries to the members of the K.P. Group. The AO observed that the assessee worked as the facilitator and provided entries of sale of diamonds to various family members of K.P. Group however, during the course of search proceedings, the assessee has failed to provide any documents related to the sale of diamonds by the members of KP group. Further in the statement recorded during the course of search u/s 132(4) of the Act, the assessee has admitted that he has provided accommodation entries of purchase and sale of diamonds to the members of KP group. The relevant extract of the statement of assessee and his trusted employee, Shri Nemi Chand Kawadia as recorded during the course of search are reproduced in the assessment order. The AO further observed that spot verification was carried out by deputing Circle Inspector of the buyers of diamonds from K.P. Group, who has visited the place of buyer and found them locked/no effective business was carried out. Accordingly, AO concluded that assessee has provided accommodation entries of sale of diamonds to various members of K.P. Group and earned commission income @ 4% on such sales and thus, an addition of INR 17,81,21,917/- was proposed to be made in the hands of the assessee. The assessee in reply denied any such transactions of accommodation entries and further submits that statements recorded during the course of search u/s 132(4) were under pressure and duress which were retracted immediately within fifteen days and further requested for the cross-examination. The assessee further stated that in the statement recorded on 20.01.2020, he accepted the receipt of commission @ 0.18%. After considering the submissions of the assessee, the AO hold that the entities who purchased the diamonds from various family members of K.P. Group are not genuine and assessee worked as mediator and facilitated them to convert their undisclosed income as LTCG in the guise of sale of diamonds through the dummy/non-existent firms/companies. As per AO, all the entities to whom diamonds were sold, are managed by the assessee and for providing such accommodation entries, assessee charged commission @ 0.18% and accordingly, addition of INR 80,50,800/- was made in the hands of the assessee u/s 69A of the Act.

Against the said order, assessee filed appeal before Ld. CIT(A) who vide imputed order dated 17.12.2024, dismissed the appeal of the assessee.

Aggrieved by the order of Ld.CIT(A), assessee is in appeal before the Tribunal by taking following grounds of appeal:-

Apart from this, during the course of hearing, the assessee has raised certain additional Grounds of appeal which are as under:-

During the course of hearing, before us, Ld. AR for the assessee submits that additions have been made in the hands of assessee by alleging that assessee has provided accommodation entries of sales of diamonds to various members of K.P. Group where they declared LTCG from the sale of diamonds of more than INR 445 crores. Ld. AR submits that additions made in the hands of the assessee is the mirror image of the orders passed in the case of members of K.P. Group. Ld. AR submits that no incriminating loose paper /documents were found/seized as a result of search carried out at the business/residential premises of the assessee which were covered under search u/s 132 of the Act as a part of K.P. Group. Ld. AR submits that statements of the assessee were recorded u/s 132(4) on 28.01.2020 wherein an admission of obtained from him that he has provided accommodation entries of sale of diamonds to various members of KP Group and charged commission @ 0.18% on the same. The AR submits that these statements were recorded under pressure as marriage of daughter of the assessee was to be solemnized on 31.01.2020 at Jaipur and assessee was under tremendous pressure of making arrangements of the marriage of his daughter thus, as a result of such pressure, assessee has signed on the dotted lines where he admitted providing accommodation entries of sale of diamonds to various members K.P. Group and charged commission @ 0.18%. Ld.AR drew our attention to the page 78 to 84 of the Paper Book which is retraction affidavit filed by the assessee dated 04.02.2020 before the lower authorities explaining the compelling circumstances under which the admission was obtained from him during the search. Ld.AR further submits that except so-called statement of the assessee recorded on 28/29.01.2020, there is no incriminating material found or seized during the course of search indicating involvement of the assessee with the members of KP Group. He further drew our attention the judgement of Co-ordinate Delhi Bench of Tribunal in the case of one of the member of KP Group, Shri Shashi Kant Chaurasia vs DCIT in ITA Nos.3844 & 3845/Del/2023 for Assessment Years 2018-19 & 2019-20 wherein vide order dated 20.01.2025, Co-ordinate Bench has held that “sales made by Shri Shashi Kant Chaurasia of the diamonds is genuine sale.” In the said order, the Co-ordinate Bench has considered the statements of the assessee and also of Shri Nemi Chand Kawadia and thereafter, concluded Long term capital gain declared from the sale of Diamonds by Shri Shashi Kant Chaurasia as genuine. He thus, submits that once in the case of seller party, sale of diamonds is held as genuine sales, the allegation that assessee has provided accommodation entries of sales of diamonds to the members of KP Group has no legs to stand and, therefore, it is requested by ld. AR that additions so made in the hands of the assessee on account of commission for providing accommodation entry to the members of KP group deserves to be deleted. He prayed accordingly.

On the other hand, Ld. CIT DR for the Revenue filed a written submissions wherein it is stated by Ld. CIT DR that during the course of search, certain WhatsApp messages were found and seized which are discussed by the AO from page 28 to 32 of the order. These WhatsApp conversations clearly shows that accommodation entries were provided by the assessee to various members of K.P. Group. Ld. CIT Dr further submits that though in the case of Shri Shashi Kant Chaurasia, the Co-ordinate Bench has accepted the sale of Diamonds as genuine however, Ld. CIT DR drew our attention to the independent verification carried out by the AO by deputing Circle Inspector, who visited the premises of buyers and reported that no real business activities were carried out from the premises of these parties. With respect to the argument of not providing the opportunity of cross-examination, Ld. CIT DR submits that the request was made at the fag end of the proceedings and further relied upon the judgement of Hon’ble Supreme Court in the case of State of Jammu & Kashmir & others Vs. Bakshi Gulam Mohammad, wherein Hon’ble Supreme Court has held that “ a right of hearing does not a right to cross-examination and right to cross-examination must depend upon the circumstances of each case”.

Ld. CIT DR further submits that AO has observed in the assessment order that on the basis of incriminating material, confessional statements of the assessee, WhatsApp chats, inspector report additions u/s 69A of the Act was made and thus, requested that the additions so made, be upheld.

Heard the contentions of both parties at length and perused the material available on record. It is an admitted fact that business/residential/farm house of the assessee were searched u/s 132 of the Act alongwith various premises of KP group searched on 15.01.2020 and thereafter also. This fact is further confirmed from the perusal of copies of panchnama prepared during the search and produced before us by both the parties alongwith their written submissions. It is observed that name of the assessee is not appearing as the person in whose name search warrant was issued and name of various members of KP group i.e. Chaurasia family are mentioned. The statement of the assessee and his trusted employee were recoded during the course of search wherein they have admitted providing accommodation entries of sale of Diamonds to various members of KP group. The sole allegation of the AO is that the assessee has controlled and managed the firms/companies to whom diamonds were sold by various members of the K.P. Group which includes sale of diamonds by Shri Shashi Kant Chaurasia , who is one of the members of the K.P. Group. It is observed that though no sales were made by Shri Shashi Kant Chaurasia during the year under appeal however, other member of KP Group had made sale of diamonds in whose cases, coordinate bench of Delhi Tribunal has held such sales as genuine. It is further observed that AO has concluded that assessee has provided accommodation entries of sales of diamonds to members of K.P. Group which fact was admitted by assessee himself in the statement recorded u/s 132(4) of the Act which were further corroborated by the statement of Shri Nemi Chand Kawadia, trusted employee by the assessee. It is observed that such statement was retracted by the assessee in terms of affidavit dated 04.02.2020 before the authorities below. In the said affidavit, the assessee has stated that his statements were recorded on 29.01.2020 and marriage of assessee’s daughter, Ms. Khusbu was to be performed on 31.01.2020 at Jaipur and they were about to leave, when the search has taken placed in the early morning of 27.01.2020. Due to the search, assessee was forced to stay at home when his statements were recorded. Due to paucity of time, as the assessee has to look after all the arrangements of the marriage, he has signed on the dotted lines on the statements recorded by the authorities during the course of search. Assessee’s statements were again recorded on 27.02.2020 when the search was again taken place at his residence at Mumbai, however, in the said statement, it is observed that assessee has not confronted with any question regarding alleged accommodation entry nor material was found nor any admission was made regarding alleged accommodation entries of sale of diamonds by the members of K.P. Group.

At this juncture, it is relevant to state in the case of one of the members of K.P. Group namely Shri Shashi Kant Chaurasia for AYs 2018-19 & 2019-20 wherein sale of diamonds made by him was treated as bogus sales and the consideration received was added as unexplained credit u/s 68 of the Act, the Co-ordinate Bench in ITA NO.3844 & 3845/Del/2023 vide order dt. 20.01.2025 after considering the submissions made and statements of the assessee and him employee and also after considering the enquiries and verification done with respect to the parties to whom diamonds were sold, concluded the sale of diamonds as genuine sales and additions made were deleted. The relevant observations as contained in para 28 to para 35 of the said order are reproduced as under:-

It is further relevant to state that Co-ordinate Bench in the case of Shri Shashi Kant Chaurasia for other assessment years and in the case of Shri Vijay Anand Chaurasia, the other members of KP group has held the sale of diamonds as genuine sales and deleted the additions made.

Since in the case of the assessee, sole allegation of the Revenue is that assessee has acted as facilitator in providing accommodation entries of sale of diamonds to the members of K.P. Group and in the return assessee had received commission. However, as observed above, the Co-ordinate Bench of Tribunal in the cases of various members of K.P. Group have already held that the sale of diamonds made by them is not the accommodation entry and are genuine transaction of sale of diamonds and accepted LTCG declared by them. Once the very basis of allegation of accommodation entry in the hands of the members of K.P. Group has been held to be incorrect, the corresponding allegation that assessee has received commission on such alleged accommodation entries has no legs to stand.

In view of these facts, we are of the consideration opinion that no addition could be made in the hands of the assessee on account of commission received for providing accommodation entries already held as genuine transaction carried out by the respective persons independently. Accordingly hus, Ground of appeal No.2 raised by the assessee is allowed.

Since we have already allowed Ground of appeal No.2 raised by the assessee and deleted the additions confirmed by ld. CIT(A), the legal grounds of appeal taken as well as additional grounds of appeal become academic hence, not adjudicated.

In the result, appeal of the assessee is allowed.

Now we take appeals of the assessee in ITA No. 519 & 518/Del/2025 for Assessment Year 2018-19 & 2019-20 respectively.

While deciding the appeal of the assessee in ITA No.520/Del/2025 for Assessment Year 2017-18, under identical circumstances commission income on alleged accommodation entries of sale of diamonds by various members of K.P. Group through assessee was added in the hands of the assessee. Before us, both the parties fairly agreed that the facts in the present appeals are similar to the facts in the case of assessee for Ay 2017-18, thus, by following the aforesaid observations in ITA No.520/Del/2025 for AY 2017-18 which are Mutatis Mutandis applicable to the facts of present case also, we are of the view that no addition could be made in the hands of the assessee on account of commission received for providing accommodation entries. Thus, Ground of appeal No.2 raised by the assessee in both captioned appeals, is allowed.

Since we have already allowed Ground of appeal No.2 raised by the assessee and deleted the additions uphold by ld. CIT(A), the other grounds of appeal taken as well as additional grounds of appeal are become academic hence, not adjudicated.

In the result, both captioned appeals of the assessee are allowed.

In the final result, all appeals of the assessee in ITA Nos. 520, 519 & 518/Del/2025 [Assessment Years 2017-18 to 2019-20] respectively, are allowed.