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9. With the aforesaid observation, thus, the Ld. CIT(A) was pleased not to accept the contentions raised by the assessee that 'Angadias' used to come to their show room/shops with the diamonds and if the assessee likes and selects some diamonds from them, they (Angadias) used to raise invoices/bills in the name of concerns (named in Box 'C') and assessee makes payment by cheque/RTGS in the name of concerns (named in Box 'C') and so according to assessee, he was doing a clean business. However, the ld CIT(A) did not accept the aforesaid explanation and modus suggested by the assessee and totally relying on the statement given by Rajendra Jain (concerns in Box C) disbelieved assessee, and with the aforesaid reasoning the Ld. CIT(A) was pleased to confirm the order of the AO ITA Nos.932 to 936/Kol/2017 Manoj Begani., AYs. 2008-09,2010-11 to 2012-13 & 2014-15 disallowing the entire purchase made from M/s. Vitrag as well as M/s. Arihant as bogus purchases and made entire purchase from the said concern was added. However, we do not subscribe and are not accepting the transactions made by the assessee with M/s. Vitrag and M/s. Arihant as well as that with M/s. Kangan for AYs 2010-11 to 2012-13 as bogus for the reasons given below.

14. When we read the aforesaid statement it is clear that when the consignment of diamonds reached either in Mumbai or in Surat, the actual delivery of the consignment comes first to Shri Rajendra Jain's office, from where the authorized person who has placed the actual order in the name of his company come to his office and collect the booked consignment on behalf of actual importer who are shown in Box 'D', where we note/see the names of nine persons are given. So, according to the modus operandi as explained by Rajendra Jain, the assessee must have purchased the diamonds from the persons named in Box 'D' with the unaccounted money they have from the persons named in Box 'D' which is the grey market from where the assessee got diamonds. However, it is curious to note that the assessee issued the cheques in the name of the concerns controlled by Shri Rajendra Jain (M/s. Vitrag and M/s. Arihant) which in turn would give the bills and was only playing the role of an accommodation entry/bill to the assessee. We do not understand the logic behind such a circuitous route as suggested by Shri Rajendra Jain for the simple reason that admittedly, the concerns M/s. Vitrag and M/s. Arihant which falls in Box 'C' legally books diamonds from foreign diamond exporter concerns in Box 'B' which in turn ships diamonds on credit to concerns in Box 'C' of Shri Rajendra Jain; and what we fails ITA Nos.932 to 936/Kol/2017 Manoj Begani., AYs. 2008-09,2010-11 to 2012-13 & 2014-15 to understand and defies logic is the alleged next part played by the assessee i.e. the assessee which falls in Box 'E' gives cheque/RTGS to concerns of Rajendra Jain in Box 'C' which is in turn transferred by Shri Rajendra Jain's concerns in (M/s. Vitrag and M/s. Arihant) to the foreign concerns in Box 'B' from whom they (Box 'C' concerns) have legally booked and imported and received the diamond. From a perusal of the answer given by Shri Rajendra Jain to Q No. 16 which is reproduced above, we note from the answer of Shri Rajendra Jain which he gives as paragraph E to Q. No. 16 it is clearly stated by Shri Rajendra Jain that "the payments made through cheques/RTGS by these concerns box E(assessee) gets utilized for the payments in foreign currency to the foreign concerns mentioned in box B as per the terms designed and on the intimation to the key persons controlling the concern of Box 'D'. Against the payments made by concerns of Box 'E' (assessee) through cheques/RTGS, the cash component is generally settled by the key persons controlling the concerns of Box 'D', directly or indirectly by taking services of Angadia." From the aforesaid statement it is crystal clear that the assessee gives cheque/RTGS to the concerns of Shri Rajendra Jain (M/s. Vitrag and M/s. Arihant) which are in turn utilized for payments in foreign currency to the foreign concerns mentioned in Box 'B' (foreign diamond suppliers) and that cash component in respect to the cheques/RTGS from assessee, is generally settled by the key persons controlling the concerns of Box 'D' directly or indirectly by taking services of Angadia. From the aforesaid statement of Shri Rajendra Jain read along with the assessee's stand all throughout that in the business of diamonds, the Angadias used to visits his shops/show- rooms and bring the diamonds along with them and when the assessee selects diamond from them directly, the payment towards the diamonds so purchased would be remitted by cheques/RTGS on the account shown in the invoice/bill raised by the concerns like in this case M/s. Vitrag/M/s. Arihant/M/s. Kangan. The assessee had brought on record the bills/invoices for the diamond purchased and that the bills were settled by cheque/RTGS to the concerns named in Box 'C' and the following documents were produced before the authorities below to substantiate that they have done a clean business. These are the ITA Nos.932 to 936/Kol/2017 Manoj Begani., AYs. 2008-09,2010-11 to 2012-13 & 2014-15 documents produced by the assessee before the authorities below which is evident also from the Ld. CIT(A)'s order at page 16 which is reproduced as under:

(f) Sales made out of the disputed purchase & payments recd. (Page 19-29)
(g) Purchase & creditors figure (including amount payable to Vitrag Jewels as on 31.03.2008) as reflected in the audited a/c (page 10, 12)
(h) Sales Tax return & VAT audit report reflecting the sales as shown in the audited accounts (page 30-43)."

15. We note that the AO disregarded all these documentary evidence and insisted the assessee to produce the Principal Officer of M/s. Vitrag and since the assessee failed to produce them, he made the disallowance of the entire diamond purchased by the assessee through cheques/RTGS. The assessee has produced the VAT return and VAT audit report also, which is placed at pages 73 to 86 of the paper book. The assessee has also produced the sales bill related to diamonds sold out by the assessee which was made out of the very same purchases disallowed by the AO which is found place from pages 56 to 59 of the paper book. We note that the AO has not disturbed the sales shown by the assessee in respect of the diamond purchased from M/s. Vitrag and M/s. Arihant and M/s. Kangan (AY 2010-11 to 2012-13). When the sales of the very same diamonds have been accepted by AO/CIT(A) without a murmur, the purchases could not have been disallowed without cogent material. In this case, for whatever reason best known for him, Shri Rajendra Jain who controls M/s. Vitrag and M/s. Arihant have made the statements wherein he explains in detail the modus of the whole operation, which defies logic and can be termed absurd on the face of it, and when the fact remains that he and his concerns were legally importing ITA Nos.932 to 936/Kol/2017 Manoj Begani., AYs. 2008-09,2010-11 to 2012-13 & 2014-15 jewels/diamonds directly from foreign suppliers named in Box 'B' and that he admits of receiving the cheques/RTGS from assessee in Box 'E'; and when the fact remains that Shri Rajendra Jain's concern M/s. Vitrag and M/s. Arihant utilised the cheques/RTGS given by the assessee (for the diamond purchased by him) and in turn is remitted in foreign exchange towards the bills raised by the foreign exporters (Box 'B'), in no way show that the assessee had made any purchase outside the books or from the grey market. We are unable to understand as to the role of the nine persons (whose names are appearing in Box 'D'). The modus operandi as suggested by Shri Rajendra Jain does not fit into the logic or rational reasoning of a common prudent person. However, the uncontroverted fact remains that Shri Rajendra Jain and his concerns are legally importing the diamonds directly from foreign concerns stated in Box B on credit (we explained earlier), so it is not understood as to what is the role of persons named in Box 'D'. Shri Rajendra Jain's answer to question no. 26 that he and his concerns placed the orders with the foreign concerns named in Box 'B' and collects the diamond in his office/show room. Let us pause for a minute and let us discard the role of persons named in Box 'D' for argument sake and then see the whole transaction. The diamonds are legally imported from foreign concerns named in Box B, by concerns in Box C which are delivered to persons in Box 'E' i.e. assessee and cheques/RTGS are issued in the name of the concerns controlled by Shri Rajendra Jain in Box C i.e. M/s. Vitrag and M/s. Arihant which in turn they utilised the cheques/RTGS given by the assessee to remit the foreign exchange to the foreign concerns in Box 'B'. So, from all these facts discussed above, the only probability is that the role of nine persons named in Box 'D' can only be that of Angadias and not as that what Shri Rajendra Jain has attributed them to do. No other role can be played by these people unless and otherwise the department is able to bring any evidence to show that after the issue of cheques/RTGS to Shri Rajendra Jain's concerns M/s. Vitrag and M/s. Arihant, the money component i.e. the unaccounted money of the assessee has been given back to the assessee, whereas it is clearly stated by Shri Rajendra Jain to Q No. 18 that cash component is generally settled by the key person controlling the concern in Box 'D' directly or indirectly by cheques/RTGS services of Angadia. So, therefore, the entire disallowance of the purchase/expenditure is based on surmises and ITA Nos.932 to 936/Kol/2017 Manoj Begani., AYs. 2008-09,2010-11 to 2012-13 & 2014-15 conjectures; and the assessee by furnishing the documents (supra) has discharged the burden of proof casted upon it to show that the entire purchase was done bonafidely and not with the unaccounted money of the assessee.

i) IXth step. The cash component in the cheque/RTGS given by the persons named in Box 'E' (assessee) is given to persons named in Box 'D'.

21. The aforesaid is the modus operandi as suggested by Shri Rajendra Jain, which we do not accept because it is illogical and absurd on the face of it. It is like touching the nose not directly but by bringing the hand from behind the neck and touching it. If the aforesaid modus operandi is what is happening on the ground, then the nine persons named in Box 'D' makes money without touching anything because the entire foreign suppliers are supplying the diamonds on credit to persons named in Box 'C' (i.e. like Shri Rajendra Jain's ITA Nos.932 to 936/Kol/2017 Manoj Begani., AYs. 2008-09,2010-11 to 2012-13 & 2014-15 concerns.). According to above modus operandi, the persons named in Box 'D' collects the diamonds from Shri Rajendra Jain's concern in Box 'C'( It needs to be kept in mind that Shri Rajendra Jain's concern legally books the order from foreign suppliers shown in Box 'B'and is shipped to them directly i.e concerns named in Box C) and persons in Box D after collecting diamond from Box C as stated before, gives it to persons named in Box 'E' (i.e. people like the assessee) and collect the unaccounted money for (sale of diamonds). Thereafter, in order to regularise the transaction the persons named in Box 'E' (like assessee) in order to get the fake bill gives the cheque/RTGS to Shri Rajendra Jain's concern in Box 'C' who in turn converts the cheques/RTGS to foreign exchange and square it up with the foreign supplier and thereafter, the cash component in the cheques/RTGS is given to the persons named in Box 'D'. So in the result, the persons named in Box 'D' makes money twice (i) by selling the diamonds to assessee and collects the unaccounted money from them and (ii) then when the assessee gives by cheque/RTGS to Shri Rajendra Jain's concern in Box 'C' (i.e. for fake bill), then the cash components of the cheque is given to persons (second time) named in Box 'D', which proposition/modus operandi cannot happen at all because the Box 'D' persons have collected already unaccounted money which will definitely be containing the cost of diamond plus their profit, then again how the persons in Box 'C' will give the cash component embedded in cheques/RTGS. This is nothing but an absurdity. What is intriguing and defies logic is that, the diamonds once legally imported and received by concerns in Box 'C' directly from foreign supplier named in Box 'B', then when the assessee in Box 'E' is admittedly giving cheques/RTGS to persons in Box 'C', why can't they buy directly diamonds from concerns named in Box 'C' only, why go for persons named in Box 'D', whose role in our humble opinion doesn't fits in at all. That is why the explanation of assessee which is the practice followed by Diamond merchants like assessee need to be seen. According to assessee, the diamonds are brought by 'Angadias' to their respective show rooms for sale and once assessee selects and purchase the diamonds, cheques/RTGS are issued in the name of concerns issuing invoice/bills, which in this case is concerns legally importing diamonds named in Box C which fits into the modus as explained by assessee is plausible and after taking out the ITA Nos.932 to 936/Kol/2017 Manoj Begani., AYs. 2008-09,2010-11 to 2012-13 & 2014-15 contradictions facts are corroborated by the statement of Shri Rajendra Jain. In the facts and circumstances the role of persons named in Box D can be that of Angadias or persons controlling them.