Chowringhee Residency Pvt. Ltd., Kolkata V. ACIT, C.C. - 3(2), , Kolkata

CO 112/KOL/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8495 (ITAT-KOLKATA)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 13-11-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRADIP MAJUMDAR CITSRDR
• Assessee Lawyers: S S GUPTA
• Keywords: Bogus purchase; Unexplained cash credit; Unexplained investment; Search and seizure; Opportunity of cross examination; Source of fund; Wrong claim; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 143(1); 147; 68; 69; 148

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI, M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 1800 / KOL / 20 17 & C.O. NO.112/KOL/2018 (A/O ITA NO.1800/KOL/2017) ASSESSMENT YEAR :2009-10 ACIT, CENTRAL CIRCLE- 3(2), AAYAKAR BHAWAN,POORVA, 5THFLOOR, 110, SHANTI PALLY,KOLKATA-107 V/S . M/S CHOWRINGHEE RESIDENCY PVT. LTD., M/S SHANTINATH FINANCIAL SERVICES LTD., 42B, CHOWRINGHEE ROAD,KOLKAKTA-700001 [ PAN NO.AACCD 6701 C ] /APPELLANT .. / RESPONDENT / CO-OBJECTOR /BY ASSESSEE SHRI S.S. GUPTA, FCA /BY REVENUE SHRI PRADIP MAJUMDAR, ADDL. CIT-SR-DR /DATE OF HEARING 26-12-2018 /DATE OF PRONOUNCEMENT 31-12-2018 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS REVENUES APPEAL AND ASSESSEES CROSS-OBJECTIO N ARISE FROM COMMISSIONER OF INCOME TAX (APPEALS)-21,KOLKATAS O RDER DATED 26.05.2017 PASSED IN CASE NO.10745/CC-3(2)/CIT(A)-21/KOL/16-17 INVOLVING PROCEEDINGS U/S 147 R.W.S.143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. WE COME TO REVENUES APPEAL ITA NO.1800/KOL/2017 FIRST SEEKING TO REVERSE CIT(A)S FINDINGS QUASHING RE-OPENING / RE- ASSESSMENT IN ISSUE VIDE FOLLOWING DETAILED DISCUSSION:- ITA NO.1800/KOL/2017 & CO NO.112/KOL/2018 A. Y. 2009-10 ACIT CC-3(2), KOL. VS. M/S CHOWRINGHEE RE SIDENCY PVT. LTD. PAGE 2 4. THE AR HAS FILED AN ADDITIONAL GROUND OF APPEAL ON 19-04-20 17 IN WHICH ASSESSMENT ORDER PASSED U/S 147/143(3) HAS BEEN CHA LLENGED. THIS ADDITIONAL GROUND OF APPEAL IS AS UNDER : ' (I) THAT THE LD ASSESSING OFFICER ERRED IN LAW AS WELL AS IN FACTS IN ASSESSING ITEM OF INCOME WHICH WAS NOT PART OF REASONS TO BEL IEVE EVEN WHEN THE ITEM OF INCOME ALLEGED TO HAVE ESCAPED ASSESSMENT WAS NE VER CLAIMED AS DEDUCTION. (II) THAT THE LD ASSESSING OFFICER ERRED IN LAW AS WELL AS IN FACTS IN ASSESSING THE SUM OF RS.53500000/- AS UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME TAX ACT, 1961 IN VIEW OF THE FACTS AND CIRCUMSTANCE S OF THE CASE THAT, THE AMOUNT OF INTEREST PAID RS.1418390/- NEVER ESCAPED ASSESSMENT WHICH WAS THE SOLE REASON FOR THE ASSESSING OFFICER TO BELIEV E THAT INCOME HAS ESCAPED ASSESSMENT AND FURTHER IN VIEW OF THE PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT, 1961 THE SAID AMOUNT OF RS.53500000/- COUL D NOT HAVE BEEN ASSESSED TO TAX'. ISSUE INVOLVED HERE IN THIS ADDITIONAL GROUND OF AP PEAL IS IN CASE THE BASIS ON WHICH THE ASSESSMENT HAD BEEN REOPENED U/S 148 IS NOT SUS TAINABLE, CAN THE ASSESSMENT ORDER SURVIVE. DURING THE APPELLATE PROCEEDINGS THE AR HAS FILED A COPY OF THE LETTER NO.CIRCLE-8(1),KOLKATA/ 147/2016-17/923 DT.30- 09-2 016 ADDRESSED TO THE PRINCIPAL OFFICER, M/S CHOWRINGHEE RESIDENCY PVT LTD, 42B, CH OWRINGHEE ROAD, KOL-700071 ON THE SUBJECT 'PROCEEDINGS U/S 147 OF THE I T ACT, 1961 IN THE CASE OF M/S CHOWRINGHEE RESIDENCY PVT LTD (PAN: AACCD6701C) FOR THE AY 2009-10-REG. IN THIS LETTER THE AO HAS GIVEN THE REASONS RECORDED U /S 148(2) AS UNDER : 'IT IS EVIDENT THAT A TOTAL AMOUNT OF RS.1418390/- HAS BEEN CLAIMED BY THE ASSESSEE, M/S CHOWRINGHEE RESIDENCY (P) LTD AS INTE REST EXPENDITURE ON ACCOUNT OF PAYMENT TO BOGUS./JAMAKHARCHI COMPANIES. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT AN AMOUNT OF RS.1418390 /- CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE AY 2009-10'. FROM THE REASONS RECORDED BY THE AO AS GIVEN TO THE ASSESSEE, IT IS CLEAR THAT THE AO HAS REOPENED THE ASSESSMENT FOR AY 2009-10 ON TH E BELIEF THAT RS.1418390/- (INTEREST AMOUNT PAID TO DIFFERENT COMPANIES), HAS ESCAPED ASSESSMENT. AND ON THIS GROUND/REASON THE AO HAS INITIATED THE PROCEEDINGS U/S 147. DURING THE APPELLATE PROCEEDINGS THE AR HAS ALSO PRODUCED A COPY OF THE LETTER DT.22-11-2016 ADDRESSED TO THE ACIT CC-3(2). THIS LETTER WAS REPLY TO NOTIC E ISSUED BY THE AO. IN THIS LETTER, THE ASSESSEE COMPANY HAS CLEARLY MENTIONED AS UNDER : 'FURTHER, THE COMPANY WAS IN THE PROCESS OF SETTING UP A REAL ESTATE PROJECT AND THE COST INCURRED IN CONNECTION TO THE ACQUISIT ION OF LAND ALONG WITH ALL THE RELATED CONSTRUCTION/ DEVELOPMENT COSTS (INCLUD ING INTEREST) WAS CARRIED FORWARD AS STOCK IN TRADE. THE INTEREST AMOUNT OF R S.1418390/- ALLEGED TO BE ON ACCOUNT OF JAMAKHARCHI TRANSACTIONS WAS NOT CLAI MED AS DEDUCTION IN THE RELEVANT ASSESSMENT YEAR. THEREFORE, THE CONTENTION THAT INCOME HAS ESCAPED ASSESSMENT, IS ERRONEOUS AND MISPLACED'. DURING THE ASSESSMENT PROCEEDINGS THE AR HAS ALSO P RODUCED/FILED A COPY OF AUDITED BALANCE SHEET AS ON 31-03-2009. IN SCHEDULE VII UND ER THE HEAD DETAILS OF INVENTORIES (WORK-IN-PROGRESS RS.1418390/-) HAS BEE N SHOWN. ACCORDINGLY, THIS AMOUNT HAS NOT BEEN CLAIMED BY THE ASSESSEE AS ANY DEDUCTION/ EXPENDITURE DURING THE RELEVANT ASSESSMENT YEAR. I HAVE ALSO CONSIDERE D THE WRITTEN SUBMISSION FILED BY THE AR ON THIS ISSUE WHICH IS AS UNDER: 'REGARDING ADDITION MADE ON ACCOUNT OF ALLEGED DISA LLOWANCE OF INTEREST OF RS.1418390/-, IT WAS ALSO SUBMITTED BEFORE THE LD A SSESSING OFFICER VIDE OUR LETTER DT.28-11-2016 AS FOLLOWS: ITA NO.1800/KOL/2017 & CO NO.112/KOL/2018 A. Y. 2009-10 ACIT CC-3(2), KOL. VS. M/S CHOWRINGHEE RE SIDENCY PVT. LTD. PAGE 3 IT WAS ALSO SUBMITTED THAT THE ASSESSEE COMPANY WAS IN THE PROCESS OF SETTING UP A REAL ESTATE PROJECT AND THE COST IN CURRED IN CONNECTION TO THE ACQUISITION OF LAND ALONG WITH ALL THE RELAT ED CONSTRUCTION/ DEVELOPMENT COSTS (INCLUDING INTEREST) WAS CARRIED FORWARD AS STOCK IN TRADE. THEREFORE, IT IS NOT UNDERSTOOD AS TO HOW RE ASSESSMENT PROCEEDINGS CAN BE INITIATED IN RESPECT OF INTEREST AMOUNT OF RS.1418390/- AND ALLEGED TO BE ON ACCOUNT OF JAMAKH ARCHI TRANSACTIONS, WHICH WAS NOT CLAIMED AS DEDUCTION FR OM TAXABLE INCOME IN THE RELEVANT ASSESSMENT YEAR. THUS, IT IS SUBMITTED THAT WHEN THE SAID SUM OF RS. 1418390/-, WHICH WAS NEVER CLAIMED AS A DEDUCTION, COULD NEVER BE SA ID TO HAVE ESCAPED ASSESSMENT. THEREFORE THE ACTION OF THE LD ASSESSING OFFICER IN ASSESSING THE PRINCIPAL AMOUNTS OF LOANS RECEIVE D BEING ALLEGED UNEXPLAINED CASH CREDIT IS CONTRARY TO PROVISIONS O F SECTION 147 OF THE INCOME TAX ACT, 1961'. THE AO IN THE ASSESSMENT -ORDER HAS GIVEN HIS FINDI NGS AS UNDER : 'IN THE CASE OF CASH CREDIT ENTRY, IT IS NECESSARY FOR THE ASSESSEE TO PROVE NOT ONLY IDENTITY OF THE CREDITORS BUT ALSO TO PROVE TH E CAPACITY OF THE CREDITORS TO ADVANCE THE MONEY AND THE GENUINENESS OF THE TRANSA CTIONS. THEREFORE, THE SUBMISSION OF THE ASSESSEE IS NOT ACCEPTED. A SUM O F RS.53500000/- IS TREATED AS UNEXPLAINED CASH CREDIT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE I T ACT, 1961. THE CLAIM OF INTEREST PAID OF RS.1418390/- TO THESE JAMAKHARCHI COMPANIES IS TREA TED AS BOGUS CLAIM OF EXPENSES AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE'. I HAVE CONSIDERED FINDING OF THE AO IN THE ASSESSME NT ORDER, REASONS RECORDED BY THE AO FOR REOPENING OF THE ASSESSMENT AND THE WRIT TEN SUBMISSION AS WELL AS CASE LAWS BROUGHT ON RECORD BY THE AR. FROM THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER IT IS CLEAR THAT THE AO HAS DISALLOWED PAYMEN T OF INTEREST AMOUNT OF RS.1418390/- ASSUMING THAT THIS AMOUNT HAS BEEN CLA IMED BY THE ASSESSEE AS EXPENDITURE. BUT IT IS CLEAR FROM THE WRITTEN SUBMI SSION FILED BY THE AR ALONG WITH COPIES OF THE AUDITED BALANCE SHEET AND DETAILS OF WORK-IN-PROGRESS IN SCHEDULE VII THAT THE ALLEGED AMOUNT OF RS.1418390/- AS INTEREST PAYMENT TO JAMAKHARCHI COMPANIES WAS NEVER CLAIMED AS EXPENDITURE BY THE A SSESSEE IN THE ASSESSMENT YEAR 2009-10. SO IF THE ALLEGED INTEREST PAYMENT OF AMOUNT OF RS.1418390/- HAS NOT BEEN CLAIMED AS EXPENDITURE BY THE ASSESSEE IN AY 2 009-10, THEN IN THAT SITUATION WHERE IS THE QUESTION OF MAKING DISALLOWANCE OF THI S AMOUNT OF RS.1418390/- AS WRONG EXPENDITURE CLAIMED. ACCORDINGLY, AO'S ACTION OF MAKING DISALLOWANCE FOR ALLEGED EXPENDITURE AS INTEREST PAYMENT IN AY 2009- 10 OF RS.1418390/- CANNOT BE SUSTAINED. ONCE IT IS CLEAR THAT THE ASSESSEE HAS NOT CLAIMED THE AMOUNT OF RS.1418390/- AS EXPENDITURE (ON ACCOUNT OF INTEREST PAYMENT) DURING THE AY 2009-10. IN THAT SITUATION THE AO'S REASON TO BELIEVE THAT AN AMOUNT OF RS.141 8390/- HAS ESCAPED ASSESSMENT (ON ACCOUNT OF PAYMENT OF INTEREST TO JAMAKHARCHI C OMPANIES) IS NOT BASED ON FACTUAL POSITION OF THIS CASE. ACCORDINGLY, THE VERY BASIS ON WHICH NOTICE U/S 148(2) HAS BEEN ISSUED CANNOT BE JUSTIFIED AND SUSTAINED. IN THIS SITUATION WHEREIN THE VERY BASIS OF THE ' REASONS TO BELIEVE' OF THE AO FOR REOPENING OF THE ASSESSMENT DOES NOT STAND AND ADDI TION MADE ON THAT BASIS IS NOT SUSTAINED THEN, CAN OTHER ADDITIONS MADE IN THE ASS ESSMENT ORDER PASSED U/S 147/143(3) BE SUSTAINED. ITA NO.1800/KOL/2017 & CO NO.112/KOL/2018 A. Y. 2009-10 ACIT CC-3(2), KOL. VS. M/S CHOWRINGHEE RE SIDENCY PVT. LTD. PAGE 4 THE AR HAS BROUGHT ON RECORD DIFFERENT CASE LAWS ON THIS ISSUE WHICH MAY BE DISCUSSED AS UNDER. IN THE CASE LAW OF CIT VS JET A IRWAYS (I) LTD (2011) 331 ITR 236 (BORN). IN .THIS CASE THE HON'BLE BOMBAY HIGH COURT HAS DECIDED THE RATIO ON THE SUBJECT AS UNDE R: 'REASSESSMENT-SCOPE OF POWER OF ASSESSING OFFICER-L AW APPLICABLE-EFFECT OF AMENDMENT OF SECTION 147 W.E.F 1-4-1989-ASSESSING O FFICER CAN ALSO ASSESS OTHER INCOMES NOT REFERRED TO IN NOTICE OF REASSESS MENT-POWER TO ASSESS SUCH OTHER INCOME ONLY IF INCOME REFERRED TO IN NOTICE O F REASSESSMENT HAS BEEN ASSESSED. EXPLANATION 3 TO SECTION 147 OF THE INCOME TAX ACT, 1961, WAS INSERTED BY THE FINANCE (NO.2) ACT OF 2009, WITH EFFECT FROM APRIL 1, 1989. THE EFFECT OF THE EXPLANATION IS THAT EVEN THOUGH THE NOTICE THAT HAS BEEN ISSUED UNDER SECTION 148 CONTAINING THE REASONS FOR REOPENING THE ASSESSMENT DOES NOT CONTAIN A REFERENCE TO A PARTICULAR ISSUE WITH REFERENCE TO WHICH INCOME H AS ESCAPED ASSESSMENT, THE ASSESSING OFFICER MAY ASSESS OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE WHICH HAS ESCAPED ASSESSMENT, WHEN SUCH ISSUE COMES TO HI S NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS. PARLIAMENT HAVING USED T HE WORDS 'ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT', THE WORDS ' AND ALSO ' CANNOT BE READ AS BEING IN THE ALTERNATIVE. ON THE CONTRARY, THE CORRECT INTERPRETATION WOULD BE T O REGARD THOSE WORDS AS BEING CONJUNCTIVE AND CUMULATIVE. IT IS OF SOME SIGNIFICA NCE THAT PARLIAMENT HAS NOT USED THE WORD ' OR '. THE LEGISLATURE DID NOT REST CONTENT BY MERELY U SING THE WORD ' AND '. THE WORDS ' AND ' AS WELL AS ' ALSO ' HAVE BEEN USED TOGETHER AND IN CONJUNCTION. EVIDENTLY, WHAT PARLIAMENT INTENDS BY USE OF THE WO RDS ' AND ALSO ' IS THAT THE ASSESSING OFFICER, UPON THE FORMATION OF A REASON T O BELIEVE UNDER SECTION 147 AND THE ISSUANCE OF A NOTICE UNDER SECTION 148(2) MUST ASSESS OR REASSESS: (I) SUCH INCOME; AND ALSO (II) ANY OTHER INCOME CHARGEABLE T O TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN THE COURSE OF THE PROCEEDINGS UNDER THE SECTION. EXPLANATION 3 DOES N OT AND CANNOT OVERRIDE THE NECESSITY OF FULFILLING THE CONDITIONS SET OUT IN T HE SUBSTANTIVE PART OF SECTION 147. AN EXPLANATION TO A STATUTORY PROVISION IS INTENDED TO EXPLAIN ITS CONTENTS AND CANNOT BE CONSTRUED TO OVERRIDE IT OR RENDER THE SUBSTANCE AN D CORE NUGATORY. SECTION 147 HAS THIS EFFECT THAT THE ASSESSING OFFICER HAS TO ASSES S OR REASSESS THE INCOME ('SUCH INCOME') WHICH ESCAPED ASSESSMENT AND WHICH WAS THE BASIS OF THE FORMATION OF BELIEF AND IF HE DOES SO, HE CAN ALSO ASSESS OR REA SSESS ANY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO THE NOTICE DU RING THE COURSE OF THE PROCEEDINGS. HOWEVER, IF AFTER ISSUING A NOTICE UND ER SECTION 148, HE ACCEPTS THE CONTENTION OF THE ASSESSEE AND HOLDS THAT THE INCOM E WHICH HE HAS INITIALLY FORMED A REASON TO BELIEVE HAD ESCAPED ASSESSMENT, HAS AS A MATTER OF FACT NOT ESCAPED ASSESSMENT, IT IS NOT OPEN TO HIM INDEPENDENTLY TO ASSESS SOME OTHER INCOME.' SIMILARLY, THE HON'BLE DELHI HIGH COURT IN THE CASE OF RANBAXY LABORATORIES LTD VS CIT (2011) 336 ITR 136 (DEL) HELD THAT 'REASSESSMEN T ITEMS OF INCOME SAID TO HAVE ESCAPED ASSESSMENT ON WHICH REASSESSMENT PROPOSED N OT ADDED BUT OTHER DEDUCTIONS REDUCED NOT PERMISSIBLE'. AGAIN, THE CHH ATTISGARH HIGH COURT IN THE CASE OF ACIT VS MAJOR DEEPAK MEHTA (2012) 344 ITR 641 (C HHATTISGARH) HELD (REASSESSMENT-VALIDITY-EFFECT OF EXPLANATION 3 TO S ECTION 147 AND SECTION 152(2)- FINDING THAT INCOME MENTIONED IN NOTICE HAD NOT ESC APED ASSESSMENT-REASSESSMENT NOT VALID. FURTHER THE PUNE BENCH OF ITAT IN THE CA SE OF MAHARASHTRA ACADEMY OF ENGINEERING AND EDUCATIONAL RESEARCH VS DCIT (2017) 55 ITR (TRIB) 242 (PUNE) , HAS HELD THAT REASSESSMENT-SCOPE OF PROVISIONS-ASSESSIN G OFFICER MAKING NO ADDITION ON ISSUE ON WHICH ASSESSMENT REOPENED-ASSESSING OFFICE R CANNOT MAKE OTHER ADDITIONS-INCOME TAX ACT, 1961, S.147. ITA NO.1800/KOL/2017 & CO NO.112/KOL/2018 A. Y. 2009-10 ACIT CC-3(2), KOL. VS. M/S CHOWRINGHEE RE SIDENCY PVT. LTD. PAGE 5 I HAVE CONSIDERED FINDINGS OF THE AO IN THE ASSESSM ENT ORDER AND AO'S REASONS TO BELIEVE TO REOPEN THE ASSESSMENT IN HIS NOTICE U/S 148(2). I HAVE ALSO CONSIDERED WRITTEN SUBMISSION FILED BY THE AR AND DIFFERENT CA SE LAWS BROUGHT ON RECORD ON THIS ISSUE DURING THE APPELLATE PROCEEDINGS. I THINK. TH E RATIO DECIDED BY THE HON'BLE BOMBAY HIGH COURT IN JET AIRWAYS CASE (SUPRA), BY T HE HON'BLE DELHI HIGH COURT IN THE CASE OF RANBAXY LABORATORIES (SUPRA) AND BY THE HON'BLE CHHATTISGARGH HIGH COURT IN THE CASE OF MAJOR DEEPAK MEHTA (SUPRA), AR E VERY APPROPRIATE AND RELEVANT IN THIS CASE. IN FACT, THE FACTUAL POSITION IN THIS CASE IS SQUARELY COVERED BY THE RATIO DECIDED IN CASES REFERRED ABOVE. ACCORDINGLY, ASSES SEE'S APPEAL ON THE ADDITIONAL GROUND IS ALLOWED ON TECHNICAL BASIS. 5. SINCE I HAVE ALREADY ALLOWED ASSESSEES APPEAL O N TECHNICAL GROUNDS, THEREFORE I AM NOT INCLINED TO DECIDE / ADJUDICATE THIS CASE ON MERIT ON OTHER GROUNDS OF APPEAL. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. 3. LEARNED ADDL. CIT-DR VEHEMENTLY CONTENDS DURING THE COURSE OF HEARING THAT CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN QUASHING THE IMPUGNED RE-OPENING / RE-ASSESSMENT IN VIEW OF VARI OUS CASE LAWS CIT VS. JET AIRWAYS (I) LTD (2011) 331 ITR 26 (BOM), & RANBAXY LABORATORIES LTD. VS. CIT (2011) 336 ITR 136 (DEL). HIS CASE BEFORE US IS THA T THE ASSESSING OFFICER HAD RIGHTLY RE-OPENED THE REGULAR ASSESSMENT IN QUESTIO N AFTER NOTICING THE ASSESSEE TO HAVE CLAIMED INTEREST EXPENDITURE OF 14,18,390/- PAID IN THE NATURE OF JAMAKHARCHI TRANSACTIONS. MR. MAJUMDAR SU BMITS THAT THE SAID INTEREST ULTIMATELY STOOD ADDED TO COST OF ASSESSEE S WORK-IN-PROGRESS AND THEREFORE, IT IS A CASE OF ESCAPEMENT OF TAXABLE IN COME FROM BEING ASSESSED GIVING RISE TO DISALLOWANCE AS WELL AS UNSECURED LO ANS ADDITION OF 5,35,00,000/- IN CONSEQUENTIAL RE-ASSESSMENT. WE DO NOT FIND ANY MERIT IN EITHER OF REVENUES CONTENTIONS. THIS ASSESSEE IS A COMPANY ENGAGED IN DEVELOPMENT OF IMMOVABLE PROPERTY. IT FILED ITS RET URN ON 27.03.2010 STATING INCOME OF 36,89,767/-. SAME STOOD PROCESSED U/S.143(1) OF THE ACT. THIS FOLLOWED THE REGULAR ASSESSMENT DATED 27.12.2011 CO MPLETED IN ASSESSEES CASE MAKING VARIOUS DISALLOWANCE(S) / ADDITION(S) R ESULTING IN AN ENHANCEMENT OF ABOVE DECLARED INCOME TO 43,43,533/-. 4. CASE FILE INDICATED THAT THE ASSESSING OFFICER T HEREAFTER FRAMED REASONS TO BELIEVE THAT ASSESSEES TAXABLE INCOME LIABLE TO BE ASSESSED HAD ESCAPED ASSESSMENT IN VIEW OF SOLE REASON THAT ITS INTEREST PAYMENT OF 14,18,390/- HAD BEEN PAID TO JAMAKHARCHI COMPANY(IES). WE MAKE IT CLEAR THAT THERE IS NO ITA NO.1800/KOL/2017 & CO NO.112/KOL/2018 A. Y. 2009-10 ACIT CC-3(2), KOL. VS. M/S CHOWRINGHEE RE SIDENCY PVT. LTD. PAGE 6 DISPUTE THAT THE ASSESSING OFFICER HAVING RE-OPENED THE ABOVE REGULAR ASSESSMENT IN VIEW OF THE SAID SOLE REASON. THIS FO LLOWED THE IMPUGNED RE- ASSESSMENT FRAMED ON 29.03.2016 BOTH DISALLOWING TH E ABOVE INTEREST PAYMENT AS WELL AS ADDING UNSECURED LOANS OF 5,35,00,000/- AVAILED FROM 13 ENTITIES. 5. THE ASSESSEE PREFERRED A APPEAL AGAINST THE ABOV E TWO ADDITION(S). THE CIT(A) OBSERVES THAT THE ASSESSEE HAD SUCCESSFULLY DEMONSTRATED DURING THE COURSE OF LOWER APPELLATE PROCEEDINGS THAT IT HAD N EVER CLAIMED THE IMPUGNED INTEREST EXPENDITURE IN ITS BOOKS. HE THEREAFTER HO LDS THAT THE ASSESSING OFFICERS SOLE REASON OF RE-OPENING NO MORE SURVIVE S AND THIS IS WHAT BRINGS INTO ACTION VARIOUS DECISIONS (SUPRA) THAT IF A RE- OPENING IS DONE FOR X REASON, THEN IT DESERVES TO BE QUASHED IN CASE NO ADDITION IS MADE FOR THE SAID REASON. MR. MAJUMDARS CASE IS THAT THE ASSESSING O FFICER HAD MADE THE TWIN ADDITION(S) INCLUDING ONE FORMING THE SUBJECT-MATTE R OF RE-OPENING. HE FAILS TO DISPUTE THE CLINCHING FACT THAT ASSESSEE HAD NO WHE RE CLAIMED THE IMPUGNED EXPENDITURE IN ITS BOOKS FOR THE IMPUGNED ASSESSMEN T YEAR WHICH GAVE RISE ESCAPEMENT OF TAXABLE INCOME FROM BEING ASSESSED. T HE CIT(A) HAS RIGHTLY OBSERVED THEREFORE THAT THE ABOVE RE-OPENING REASON ITSELF HAD BEEN ASSUMED ON AN INCORRECT FACTUAL POSITION. THAT BEING THE CA SE, WE FIND MERIT IN THE CIT(A)S ABOVE EXTRACTED DETAILED REASONING THAT TH E IMPUGNED RE-OPENING WOULD NOT SUSTAIN THE TEST OF LEGALITY. COUPLED WIT H THIS, THIS TRIBUNALS CO- ORDINATE BENCHS DECISION IN SANJU KJALAN VS. ITO ITA NO.634/KOL/2017 DECIDED ON 10.01.2018 HAS QUASHED VALIDITY OF RE-OP ENING IN CASE THE ABOVE BASED ON SOLE REASON WHEREIN STAND DELETED IN APPEA L PROCEEDINGS AS FOLLOWS:- 2. THE ASSESSEE IS AN INDIVIDUAL. HIS SOURCE OF IN COME IS INCOME UNDER THE HEAD SALARIES, OTHER SOURCES AND CAPITAL GAINS. FOR A.Y. 2012-13 THE ASSESSEE FILED RETURN OF INCOME ON 17.02.2013 SHOWING A TOTAL INCOME OF R S.3,55,512/-. THE SAID RETURN WAS ACCEPTED AND AN INTIMATION U/S 143(1) OF THE IN COME TAX AC6T, 1961 (ACT) WAS ISSUED. SUBSEQUENTLY THE ASSESSMENT WAS REOPENED BY A NOTICE ISSUED U/S 148 OF THE ACT DATED 27.03.2015 FOR MAKING A RE-ASSESSMENT U/S 147 OF THE ACT. THE REASONS RECORDED BY THE AO BEFORE ISSUING A NOTICE U/S 148 OF THE ACT READS AS FOLLOWS :- 23/03/2015 IT APPEARS FROM THE RECORD THAT THE ASS ESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 ON 17/02/201 3 DECLARING TOTAL ITA NO.1800/KOL/2017 & CO NO.112/KOL/2018 A. Y. 2009-10 ACIT CC-3(2), KOL. VS. M/S CHOWRINGHEE RE SIDENCY PVT. LTD. PAGE 7 INCOME AT RS.3,55,512/. THE RETURN OF THE ASSESSEE WAS PROCESSED ON 21/03/2013. ITA NO.634/KOL/2017 SANJU JALAN A.YR.2012-13 INFORM ATION HAS BEEN RECEIVED FROM DIT (INV.)-II, MUMBAI THAT THE ASSESS EE DURING THE FINANCIAL YEAR 2011-12 HAD AVAILED OF ENTRIES OF BOGUS PURCHA SES AMOUNTING TO RS. 14,55,472/-FROM A CONCERN M/S. NICE DIAMONDS OF MUM BAI. THE ABOVE INFORMATION HAS BEEN RECEIVED CONSEQUENT TO THE SEARCH & SEIZURE OPERATION CONDUCTED IN THE CASE OF BHANWARLAL JAIN GROUP OF CASES. A SEARCH & SEIZURE OPERATION ON THE ABOVE MENTIONED GROUP WAS CONDUCTED ON 03.10.2013. AS A RESULT OF THE SAID SEARCH AND FOLLOW - UP INVESTI GATION, IT CAME TO THE LIGHT THAT BHAWARLAL JAIN GROUP IS A LEADING ENTRY PROVIDER OF MUMBAI. THE GROUP PROVIDES ACCOMMODATION ENTRIES OF BOGUS PURCHASES THROUGH VA RIOUS BENAMI CONCERN OPERATED AND MANAGED BY BHANWARLAL JAIN AND HIS SON . THE SEARCH REVEALED VARIOUS INCRIMINATING DOCUMENTARY EVIDENCES INDICATING THE SAME. STATEMENTS OF VARIOUS PERSONS (WHO ASSISTS BHANWARLAL JAIN IN PROVIDING B OGUS PURCHASES THROUGH BENAMI CONCERN TO THE BENEFICIARIES) WERE RECORDED. IT IS FURTHER MENTIONED IN THE SAID REPORT THAT THE ENTIRE BOGUS NATURE OF THE TRANSACTIONS HA S ALSO BEEN ADMITTED BY BHAWARLAL JAIN IN HIS STATEMENT RECORDED U/S. 132(4) OF THE I .T.ACT,1961. ON THE BASIS OF DETAILED REPORT, IT IS SUMMARIZED THAT THE GROUP IN DULGED IN PROVIDING BOGUS PURCHASE BILLS AND RETURNING THE AMOUNT IN CASH AFTER DEDUCT ING COMMISSION AND THIS MODUS OPERANDI WAS ALSO FOLLOWED IN THE ASSESSEE'S CASE. BASED ON THE ABOVE INFORMATION, I HAVE THE REASON T O BELIEVE THAT THE ASSESSEE ENTERED INTO BOGUS PURCHASES THROUGH ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GOODS AND PAYMENTS AS DETAILED ABOVE BEING THE M ODUS OPERANDI OF SELLER GROUP AND SO TAXABLE INCOME TO THE EXTENT OF RS. 14,55,47 2/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T.ACT,19 61. 3. THE ASSESSEE OBJECTED TO THE VALIDITY OF INITIAT ION OF RE-ASSESSMENT PROCEEDINGS BUT THE SAME WAS REJECTED BY THE REVENUE AUTHORITIE S. 4. IT CAN BE SEEN FROM THE REASONS RECORDED BY THE AO FOR INITIATING PROCEEDINGS FOR REASSESSMENT THAT THE AO WANTED TO EXAMINE THE GENU INENESS OF PURCHASE OF DIAMONDS BY THE ASSESSEE DURING THE PREVIOUS YEAR O F THE VALUE OF RS.4,55,472/- FROM M/S. NICE DIAMONDS, MUMBAI. AS FAR AS THE QUES TION WHETHER PURCHASE OF DIAMOND WAS BOGUS THE ASSESSEE HAD SUBMITTED BEFORE THE AO THAT THE PURCHASES WERE GENUINE AND FURNISHED DOCUMENTARY EVIDENCE LIK E INVOICE DATED 17.03.2012 ISSUED BY NICE DIAMONDS, BANK STATEMENT MAINTAINED WITH UNION BANK OF INDIA EVIDENCING PAYMENT TO NICE DIAMONDS THROUGH CHEQUES DATED 27.03.2012 FOR RS.10,02,472/- AND CHEQUE DATED 3 ITA NO.634/KOL/20 17 SANJU JALAN A.YR.2012-13 3 28.03.2012 FOR RS.4,53,000/-. AS PER THE INVOICE DI AMONDS WERE SOLD AT SURAT. THE AO INSISTED ON PROOF OF DELIVERY OF DIAMONDS AT SUR AT. THE ASSESSEE ALSO WANTED RIGHT OF CROSS EXAMINATION OF SHRI BHAWARLAL JAIN W HO THE REVENUE CLAIMS TO HAVE GIVEN A CONFESSION THAT THEY ARE ENGAGED IN PROVIDI NG BOGUS PURCHASES. SUCH OPPORTUNITY OF CROSS EXAMINATION WAS NOT PROVIDED A ND THE AO PROCEEDED TO RELY ON THE STATEMENT RECORDED BY D.I.T. (INVESTIGATION),-I I, MUMBAI. 5. IN THE COURSE OF SEARCH OF BHANWARLAL JAIN THE A O WAS OF THE VIEW THAT SINCE INVESTMENT IN DIAMONDS WAS SHOWN IN THE BALANCE SHE ET AND THE SAME MUST HAVE BEEN ACQUIRED FROM SOME OTHER PARTIES AND SINCE THE DETAILS OF SUCH PURCHASES WERE NOT FURNISHED THE INVESTMENT SHOULD BE TREATED AS U NEXPLAINED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE AO ACCORDINGLY MADE ADD ITION OF RS.14,55,472/- ON ACCOUNT OF UNEXPLAINED PURCHASE FROM NICE DIAMONDS. ITA NO.1800/KOL/2017 & CO NO.112/KOL/2018 A. Y. 2009-10 ACIT CC-3(2), KOL. VS. M/S CHOWRINGHEE RE SIDENCY PVT. LTD. PAGE 8 6. APART FROM THE ABOVE THE AO ALSO TREATED THE LON G TERM CAPITAL GAIN WHICH WERE DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME ON ACCOUNT OF SALE OF SHARES AS BOGUS AND ULTIMATELY DETERMINED THE TOTAL INCOME OF THE ASSESEE AS FOLLOWS :- RS. RS. RETURNED INCOME 3,55,512 ADD : PURCHASE FROM UNA CCOUNTED SOURCE [AS DISCUSSED] 14,55,472 ADD: UNEXPLAINED CASH CREDIT [AS DISCUSSED] 41,3 8,799 TOTAL INCOME 59,49,783 7. IT MAY BE SEEN FROM THE ABOVE ADDITIONS MADE BY THE AO THAT THE LONG TERM CAPITAL GAIN WHICH WAS TREATED AS BOGUS VIZ. RS.41,38,799/- WAS NOT THE REASON FOR WHICH THE ASSESSMENT PROCEEDINGS WERE INITIATED BY THE AO U/S 147 OF THE ACT AS RECORDED IN THE REASONS FOR INITIATING REASSESSMENT PROCEEDI NGS WHICH WE HAVE EXTRACTED IN PARAGRAPH 2 OF THIS ORDER. 8. ON APPEAL BY THE ASSESSEE THE CIT(A) CONFIRMED T HE ORDER OF THE AO. THE CONCLUSION OF THE CIT(A) ON THE ISSUE OF BOGUS PURC HASE OF DIAMONDS WERE AS FOLLOWS: A. THE ASSESSEE HAS BEEN UNABLE TO PROVE THE ACTUA L TRANSPORT AND RECEIPT OF THE DIAMOND IN HER HANDS, DESPITE BEING REPEATEDLY ASKE D IN THE MATTER BY THE LD. AO. B. THE TWO CHEQUES WERE PAID BY THE ASSESSEE AFTER A HIATUS OF 10 DAYS TO THE ALLEGED SUPPLIER, QUITE AN IMPOSSIBILITY IN THE JEW ELLERY TRADE, MORE SO IN THE DIAMOND TRADE. C. IT IS QUITE IMPOSSIBLE FOR ANY JEWELLER NOT TO D EMAND AND ACCEPT MONEY ON HANDING OVER THE 'DIAMOND' TO THE BUYER, MORE SO AN UNKNOWN BUYER WITH A SINGLE TRANSACTION. D. IN THE JEWELLERY BUSINESS PURCHASE AND PAYMENT A RE SIMULTANEOUS AND NOT SUCCESSIVE, ESPECIALLY FOR A NEW AND ONE-TIME BUYER . E. THE RECEIPT OF THE PURCHASE THEREFORE IS A DOUBT FUL DOCUMENT, WHEN VIEWED IN THE SURROUNDING CIRCUMSTANCES OF THE CASE. F. NO DIAMONDS WERE FOUND DURING THE SEARCH AND SEI ZURE OPERATIONS CARRIED OUT IN THE PREMISES OF THE BHANWARLAL JAIN GROUP, WHO WERE ALLEGED TO BE ACCOMMODATION ENTRY GIVERS. G. THERE IS NO MERIT IN THE CONTENTION OF THE ASSES SEE THAT SHE OUGHT TO BE PROVIDED AN OPPORTUNITY FOR CROSS-EXAMINATION, AS THE SELLER HAS ALREADY DENIED THE TRANSACTION. H. THEREFORE, ONCE THE INFORMATION HAD BEEN PROVIDE D BY THE LD AO TO THE ASSESSEE, THE ONUS WAS CAST ON THE ASSESSEE TO CONTROVERT THE INFORMATION, AND THIS HAS CLEARLY NOT BEEN DONE. 9. THE OTHER ADDITIONS OF BOGUS LONG TERM CAPITAL G AIN WAS ALSO CONFIRMED BY THE CIT(A). AGGRIEVED BY THE ORDER OF CIT(A), THE ASSES SEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL RAISING THE FOLLOWING GR OUNDS OF APPEAL : 1.FOR THAT THE ORDER 01 THE LD. CIT (A) IS ARBITRA RY, ILLEGAL AND BAD IN LAW. 2. FOR THAT THE LD. C.I.T (A) ERRED IN CONFIRMING T HE INITIATION OF PROCEEDINGS U/S. 147 BY THE AO WHO MERELY RELIED ON THE INFORMA TION FROM DGIT(INV), MUMBAI WITHOUT APPLYING H 5 ITA NO.634/KOL/2017 SAN JU JALAN A.YR.2012-13 5 REASONABLE BELIEF THAT ANY INCOME HAS ESCAPED ASS ESSMENT AND THE PROCEEDINGS IS BAD IN LAW . 3. FOR THAT THE LD. CLT(A) ERRED IN CONFIRMING THE INITIATION OF PROCEEDINGS U/S. 147 WHEN THE AO DID NOT APPLY HIS OWN MIND AND EXAM INED THE RECORDS OF THE ASSESSEE SINCE THE ASSESSEE NEVER CLAIMED THE SUM O F RS.14,55,472/ - AS DEDUCTION IN ANY MANNER WHILE COMPUTING THE TOTAL I NCOME AND AS SUCH THERE WAS NO ESCAPEMENT OF INCOME. ITA NO.1800/KOL/2017 & CO NO.112/KOL/2018 A. Y. 2009-10 ACIT CC-3(2), KOL. VS. M/S CHOWRINGHEE RE SIDENCY PVT. LTD. PAGE 9 4. FOR THAT THE LD. CLT(A) ERRED IN CONFIRMING THE INITIATION OF PROCEEDINGS U/S.147 WHICH WERE BAD IN LAW SINCE IT WAS NOT THE CASE 01 THE AO THAT THE PURCHASE WAS NOT DISCLOSED IN THE BOOKS OR THAT THE PAYMENT MADE 10R SUCH PURCHASE WAS NOT EXPLAINED AND THUS THERE WAS NO QU ESTION OF ANY INCOME OR ESCAPEMENT OF INCOME. 5. FOR THAT THE LD. CI.T (A) ERRED IN CONFIRMING TH E ADDITION OF RS. 14,55,472/- AS PURCHASED FROM UNACCOUNTED SOURCES WHEN PAYMENT FOR SUCH PURCHASES WAS MADE BY ACCOUNT PAYEE CHEQUE FOR WHICH BANK STA TEMENT WAS PRODUCED, THERE WAS NO EVIDENCE OF ANY OTHER PAYMENT AND NO D EDUCTION WAS CLAIMED AS THE SOURCE OF THE PURCHASE WAS DULY PROVED AND T HERE WAS NO EVIDENCE THAT HE ASSESSEE EARLIER PURCHASED THE DIAMONDS BY PAYING CASH MONEY. 6. FOR THAT THE LD. C.I.T(A) ERRED IN CONFIRMING TH E ADDITION OF RS. 41,17,365/- AS UNEXPLAINED CASH CREDIT U/S. 68 WHEN THERE IS NO THIN8 ON RECORD TO TREAT THE SAID SUM AS CONCEALED INCOME WHICH HAD COME TO HIS NOTICE 01 THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS, 7. FOR THAT THE LD. C.I.T(A) ERRED IN ADDIN8 BACK R S. 41,17,365/- AS UNEXPLAINED CASH CREDIT WHEN ALL THE EVIDENCES WITH REGARD TO THE EA RNING OF THE SAID CAPITAL AAIN WERE FILED AND THE LD. AO FAILED TO BRING ON RECORD ANY EVIDENCE TO PROVE THE CONTRARY EXCEPT RELYING OF THE HERE SAY COMMUNICATION FORWAR DED BY THE DGIT(INV). 8. FOR THAT THE LD. C.I.T(A) ERRED IN CONFIRMING TH E ESTIMATE AND MAKING ADDITION OF RS. 21,434/- AS PAYMENT MADE FOR ARRANGING THE CAPI TAL GAIN WHEN THERE WAS NO SUCH PAYMENT NOR ANY EVIDENCE WAS BROUGHT ON RECORD TO P ROVE THE SAME. 9. FOR THAT THE REOPENING OF THE ASSESSMENT FOR THE REASONS RECORDED WAS NOT MAINTAINABLE SINCE THE SOURCE OF THE PAYMENT FOR PU RCHASE FROM BHAWARLAL JAIN GROUP WAS EXPLAINED AND THEREFORE NO OTHER ADDITION ON ANY OTHER ISSUE WAS CALLED FOR. ITA NO.634/KOL/2017 SANJU JALAN A.YR.2012-13 6 10. FOR THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTE R OR AMEND ANY GROUND BEFORE OR AT THE TIME OF HEARING. 10. FIRST WE WILL TAKE UP FOR CONSIDERATION GROUND NO.5 WITH REGARD TO THE ADDITION ON ACCOUNT OF BOGUS PURCHASES OF DIAMONDS. ON THE ABOV E ISSUE THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS WERE MADE BE FORE THE REVENUE AUTHORITIES. THE LD DR RELIED ON THE ORDER OF THE REVENUE AUTHOR ITIES. 11. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE A SSESSEE PURCHASED JEWELLERY WORTH RS.14,55,472/- FROM NICE DIAMONDS, MUMBAI ON 17.3.2012. THE ASSESSEE PAID NICE DIAMONDS THE PURCHASE VALUE OF THE JEWELL ERY BY TWO CHEQUES FOR RS.10,02,472 AND RS.4,53,000 RESPECTIVELY DATED 27. 3.2012 AND 28.3.2012 RESPECTIVELY. IN THE BALANCE SHEET AS ON 31.3.2013 THE ASSESSEE HAS SHOWN THE VALUE OF THE JEWELLERY AS ADDITION TO HIS CAPITAL. THE DOCUMENTARY EVIDENCE LIKE BILLS, INVOICES, BANK STATEMENTS ETC., WERE FURNISHED BY T HE ASSESSEE AND THERE IS NO DISPUTE ON THIS ASPECT. 12. THE RETURN OF INCOME FILED BY THE ASSESSEE FOR AY 2012-13 WAS ACCEPTED AND AN INTIMATION WAS ISSUED U/S.143(1) OF THE ACT. 13. IT APPEARS THAT THERE WAS INFORMATION RECEIVED BY THE AO OF THE ASSESSE FROM D.I.T. (INVESTIGATION)-II, MUMBAI. THE INFORMATION RECEIVED WAS THAT THERE WAS A SEARCH AND SEIZURE OPERATION CONDUCTED IN THE CASE OF BHAWARLAL JAIN GROUP OF CASES ON 03.10.2013. CONSEQUENT TO THE SAID SEARCH AND INVESTIGATION CONDUCTED, IT CAME TO LIGHT THAT BHAWARLAL JAIN GROUP WAS PROVIDI NG BOGUS/ACCOMMODATION ENTRIES TO SEVERAL PERSONS AND ENTITIES AND THESE ENTRIES W ERE BOGUS ENTRIES. NICE DIAMONDS ITA NO.1800/KOL/2017 & CO NO.112/KOL/2018 A. Y. 2009-10 ACIT CC-3(2), KOL. VS. M/S CHOWRINGHEE RE SIDENCY PVT. LTD. PAGE 10 IS ONE OF THE ENTITIES BELONGING TO BHAWARLAL JAIN GROUP OF CASES. SINCE THE ASSESSEE CLAIMED TO HAVE MADE PURCHASES FROM NICE DIAMONDS, THE ASSESSMENT IN THE CASE THE ASSESSEE WAS REOPENED U/S 147 OF THE INCOME TAX ACT, 1961 (ACT.). ITA NO.634/KOL/2017 SANJU JALAN A.YR.2012-13 14. IN THE ASSESSMENTS CONCLUDED, THE AO AFTER MAKI NG REFERENCE TO ALL THE EVIDENCES FILED BY THE ASSESSEE TO PROVE THE SOURCE OF FUNDS AS WELL AS EVIDENCE OF PAYMENTS AND CAME TO THE CONCLUSION THAT THE PURCHA SES IN QUESTION WERE NOT GENUINE. ULTIMATELY THE AO MADE AN ADDITION IN THE CASE OF THE ASSESSEE BY OBSERVING THAT SINCE THE ASSESSEE IN THE BALANCE SH EET HAS SHOWN INCREASE IN JEWELRY THERE IS NO EVIDENCE ON RECORD TO DOUBT THA T HE DIDN'T MAKE ANY PURCHASE IN THE FY-2011-12 BUT THE PURCHASES WERE MADE BY THE A SSESSEE FROM SOME OTHER PARTY IN EARLIER YEAR BUT THE ASSESSEE HAS NOT FURN ISHED THE DETAILS OF THE SAME. ACCORDINGLY, EXPENDITURE INCURRED TOWARDS PURCHASE OF DIAMONDS SHOWN AS JEWELERY IN THE BALANCE SHEET IS CONSIDERED AS UNEXPLAINED I NVESTMENT U/S 69 OF THE ACT AND DEEMED TO BE THE INCOME OF THE ASSESSEE FOR THE FIN ANCIAL YEAR 2009-10. ON APPEAL BY THE ASSESSEE THE CIT(A) CONFIRMED THE ORDERS OF THE AO. 15. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNSE L FOR THE ASSESSEE AND THE LD. DR. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT TH AT THE JEWELLERY IN QUESTION HAS BEEN PURCHASED BY THE ASSESSEE WHICH WAS CONFIRMED BY NICE DIAMONDS AND THE PAYMENT HAS BEEN MADE BY CHEQUES. MORE IMPORTANT IT WAS POINTED OUT THAT THE INVESTMENTS HAS BEEN SHOWN IN THE BOOKS OF ACCOUNTS AND THE SOURCE HAD BEEN DULY EXPLAINED AS FROM THE DISCLOSED BANK ACCOUNTS OF TH E ASSESSEE. IT WAS SUBMITTED THAT IN THE CIRCUMSTANCES THE ADDITION MADE U/S 69 OF TH E ACT CANNOT BE SUSTAINED. THE LD. DR RELIED ON THE ORDERS OF CIT(A). 16. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. IT IS AN UNDISPUTED POSITION THAT ADDITION IN CASE OF THE AS SESSE HAS BEEN MADE U/S 69 OF THE ACT. SECTION 69 OF THE ACT READS AS FOLLOWS :- UNEXPLAINED INVESTMENTS 69. WHERE IN THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR THE ASSESSEE HAS MADE INVESTMENTS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT, IF ANY, M AINTAINED BY HIM FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLAN ATION ABOUT THE NATURE AND SOURCE OF THE INVESTMENTS OR THE EXPLANATION OF FERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE 8 ITA NO.634/KOL/2017 SANJU JALAN A.YR.2012-13 8 VALUE OF THE INVESTMENTS MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE OF SUCH FINANCIAL YEAR. 17. IN THE PRESENT CASE INVESTMENTS OF JEWELLERY IS DULY REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSES. THEREFORE THERE IS NO SCO PE OF APPLYING THE PROVISION OF SECTION 69 OF THE ACT. APART FROM THE ABOVE SOURCE OF FUNDS IS EVIDENCED BY THE PAYMENTS FROM DISCLOSED BANK ACCOUNTS. THEREFORE TH E SOURCE OF INVESTMENTS IS ALSO PROPERLY AND SATISFACTORILY EXPLAINED BY THE ASSESS ES. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ADDITIONS MADE BY THE AO AND C ONFIRMED BY CIT(A) CANNOT BE SUSTAINED AND THE SAME IS DIRECTED TO BE DELETED. G ROUND NO.5 RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 18. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ON THE OTHER GROUNDS OF APPEAL VI., GR.NO.6 TO 8, IT IS THE PLEA OF THE ASSESSEE B EFORE US THAT WHEN AN ASSESSMENT IS REOPENED FOR ONE REASON BUT NO ADDITION IS MADE IN THE REASSESSMENT PROCEEDINGS IN RESPECT OF THAT REASON OR WHEN THE SAID ADDITION IS DELETED, THEN, NO FURTHER ADDITION CAN BE MADE IN THE REASSESSMENT PROCEEDINGS. IN THI S REGARD LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS INDIA LTD., 331 ITR 326 (BOM), WHEREIN THE HONBLE ITA NO.1800/KOL/2017 & CO NO.112/KOL/2018 A. Y. 2009-10 ACIT CC-3(2), KOL. VS. M/S CHOWRINGHEE RE SIDENCY PVT. LTD. PAGE 11 BOMBAY HIGH COURT HELD THAT IF AO DOES NOT ASSESS I NCOME FOR WHICH REASONS WERE RECORDED U/S 147 OF THE ACT, HE CANNOT ASSESS OTHER INCOME U/S 147 OF THE ACT. THE HONBLE COURT OBSERVED THAT (I) S. 147 PROVIDES THA T THE AO MAY ASSESS THE INCOME WHICH HAS ESCAPED ASSESSMENT AND ALSO ANY OTHER IN COME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTIC E SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION. EXPLANATION 3 TO S. 147 INSERTED BY F (NO. 2) ACT, 2009 W.R.E.F 1.4.1989 PROVIDES THAT THE AO MA Y ASSESS OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE NOTWITHSTANDING THE REASO NS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RECORDED ITA NO.634/KOL/2017 SANJU JALAN A.YR.2012-13 9 (II) THE WORDS AND ALSO INDICATE THAT REASSESSMEN T MUST BE WITH RESPECT TO THE INCOME FOR WHICH THE AO HAS FORMED AN OPINION AND A LSO IN RESPECT OF ANY OTHER INCOME WHICH COMES TO HIS NOTICE SUBSEQUENTLY. HOWE VER, IF THE AO ACCEPTS THE OBJECTION OF THE ASSESSEE AND DOES NOT ASSESS THE I NCOME WHICH WAS THE BASIS OF THE NOTICE, IT IS NOT OPEN TO HIM TO ASSESSEE INCOM E UNDER SOME OTHER ISSUE INDEPENDENTLY; (III) EXPLANATION 3 TO S. 147 WAS INSERTED TO SUPER SEDE THE JUDGMENTS IN VIPIN KHANNA 255 ITR 220 (P&H) & TRAVANCORE CEMENTS 305 ITR 170 (KER) WHERE IT WAS HELD THAT THE AO COULD NOT ASSESS INCOME IN RESPECT OF ISSUES UNCONNECTED WITH THE ISSUE FOR WHICH THE NOTICE WAS ISSUED. HOWEVER, EXPLANATION 3 DOES NOT AFFECT THE JUDGMENTS IN SHRI. RAM SINGH 306 ITR 343 (RAJ) & ATLAS CYCLE INDUSTRIES 180 ITR 319 (P&H) WHERE IT WAS HELD THAT IF THE AO ACCEPTED THAT THE REASONS FOR WHICH THE NOTICE WAS ISSUED WERE NOT CORRECT, HE WOULD CEASE TO HAVE JUR ISDICTION TO PROCEED WITH THE REASSESSMENT; (IV) EXPLANATION 3 LIFTS THE EMBARGO INSERTED BY JU DICIAL INTERPRETATION ON THE MAKING OF AS 147 ASSESSMENT IN RESPECT OF ITEMS NOT REFERRED TO IN THE RECORDED REASONS. HOWEVER, IT DOES NOT AND CANNOT OVERRIDE THE SUBSTA NTIVE PART OF S. 147 THAT THE INCOME FOR WHICH THE NOTICE WAS ISSUED MUST BE ASSE SSABLE. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). 19. WE HAVE CONSIDERED THE SUBMISSION OF THE LEARNE D COUNSEL FOR THE ASSESSEE IN THE LIGHT OF THE JUDGMENT OF THE HONBLE BOMBAY IN THE CASE OF JET AIRWAYS (I) LTD. (SUPRA). WE ARE OF THE VIEW THAT ON THE FACTS AND I N THE CIRCUMSTANCES OF THE PRESENT CASE THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF JET AIRWAYS INDIA LTD. (SUPRA)IS SQUARELY APPLICABLE. A S WE HAVE ALREADY SEEN THAT THE ASSESSMENT WAS REOPENED FOR THE REASON THAT THE JEW ELLERY PURCHASED BY THE ASSESSEE WAS FROM UNDISCLOSED SOURCES AND THE PURCH ASES WERE BOGUS. THAT ADDITION HAS NOT BEEN SUSTAINED NOW. THE ASSESSING OFFICER HOWEVER, PROCEEDED TO MAKE AN ADDITION ON ACCOUNT OF LONG TERM CAPITAL GA IN (LTCG) ON SALE OF SHARES. THIS WAS CLEARLY BEYOND 10 ITA NO.634/KOL/2017 SANJ U JALAN A.YR.2012-13 10 THE SCOPE OF THE PROCEEDINGS UNDER SECTION 148 OF THE A CT. THE ASSESSING OFFICER, THEREFORE, COULD NOT HAVE PROCEEDED TO MAKE THE IMP UGNED ADDITION OF BOGUS LTCG. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HONBLE DELH I HIGH COURT IN THE CASE OF RANBAXY LABORATORIES VS. CIT, ITA 148 OF 2008 DATED 3/6/2011. THE HONBLE DELHI HIGH COURT FOLLOWED THE DECISION OF THE HONBLE BOM BAY HIGH COURT IN THE CASE OF JET AIRWAYS (SUPRA). IN THAT VIEW OF THE MATTER WE HOLD THAT THE ADDITION BY TREATING THE LTCG AS BOGUS CANNOT BE SUSTAINED AS IT WAS BEYOND THE SCOPE OF THE PROCEEDINGS UNDER SECTION 147 OF THE ACT. WE THEREFORE DELETE T HE SAID ADDITION ALSO AND ALLOW GROUND NO..6 TO 8. ITA NO.1800/KOL/2017 & CO NO.112/KOL/2018 A. Y. 2009-10 ACIT CC-3(2), KOL. VS. M/S CHOWRINGHEE RE SIDENCY PVT. LTD. PAGE 12 WE ADOPT THE ABOVE DETAILED REASONING MUTATIS MUTAN DIS TO AFFIRM CIT(A)S FINDINGS UNDER CHALLENGE. THE REVENUE FAILS IN ITS SOLE SUBSTANTIVE LEGAL GROUND AS WELL AS MAIN APPEAL ITA NO.1800/KOL/2017. 6. WE NOW ADVERT TO ASSESSEES CROSS OBJECTION NO. 112/KOL/2018. LEARNED COUNSEL STATES VERY FAIRLY THAT THIS CROSS OBJECTION CHALLENGED VALIDITY OF RE-ASSESSMENT ON OTHER FACETS AS WELL AS THE IMP UGNED UNEXPLAINED CASH CREDITS ADDITION OF UNSECURED LOANS AMOUNTING TO 5,35,00,000/- IS RENDERED INFRUCTUOUS SINCE WE HAVE ALREADY UPHELD THE CIT(A) S FINDINGS ON SOLE LEGAL ISSUE IN REVENUES APPEAL. WE ORDER ACCORDINGLY. 8. THIS REVENUES APPEAL ITA NO.1800/KOL/2017 IS DI SMISSED AND ASSESSEES CROSS OBJECTION NO.112/KOL/2018 IS DISMI SSED AS RENDERED INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT 31/ 12/2018 SD/- SD/- ( ) () ) (M.BALAGANESH) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S *- 31 / 12 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-M/S CHOWRINGHEE RESIDENCY PVT. LTD., M/S SHANTINATH FINANCIAL SERVICES LTD., 42B , CHOWRINGHEE ROAD, KOLKATA-001 2. /REVENUE-ACIT CC-3(2) AAYAKAR BHAWAN POORVA 5 TH FL, 110, SHANTI PALLY KOL-107 3. 5 6 / CONCERNED CIT KOLKATA 4. 6- / CIT (A) KOLKATA 5. 9 ))5, 5, / DR, ITAT, KOLKATA 6. > / GUARD FILE. BY ORDER/ , /TRUE COPY/ / 5,