M.A. HEERAMANECK, MUMBAI V. ACIT CIR 16(2), MUMBAI

CO 192/MUM/2009

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6640 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-10-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 29-09-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Keywords: Reopening of assessment; Unexplained investment; Capital asset; Cost of acquisition; Difference of opinion; Valuation report; Assessment record; Change of opinion; Reassessment proceedings
• Section: 143(3); 54F; 142(1); 133(6); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI R.K. PANDA (ACCOUNTANT MEMBER) ITA NO. 1929/MUM/2008 ASSESSMENT YEAR-1998-99 THE ACIT, CIRCLE-16(2), MATRU MANDIR, TARDEO ROAD, MUMBAI-400 007 VS. SHRI M.A. HEERAMANECK, RINGHT WING GROUND FLOOR, NEPEANSEA TERRACE, MUMBAI-400 006 PAN-AAAPH 1858H (APPELLANT) (RESPONDENT) C.O. NO. 192/MUM/2009 (ARISING OUT OF ITA NO. 1929/MUM/2008) ASSESSMENT YEAR-1998-99 SHRI M.A. HEERAMANECK, RINGHT WING GROUND FLOOR, NEPEANSEA TERRACE, MUMBAI-400 006 PAN-AAAPH 1858H VS. THE ACIT, CIRCLE-16(2), MATRU MANDIR, TARDEO ROAD, MUMBAI-400 007 (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY: SHRI P.C. MAURYA ASSESSEE BY: SHRI FARROKH V. IRANI DATE OF HEARING :20.10.2011 DATE OF PRONOUNCEMENT: O R D E R PER B.R. MITTAL, JM : THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 1998-99 AGAINST ORDER OF LD. CIT(A) DT. 11 TH JANUARY, 2007 ON FOLLOWING GROUNDS: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN HOLDING THAT THE ISSUE OF NOTICE U/S 148 OF THE ACT WAS DUE T O CHANGE OF OPINION, IT IS BAD IN LAW AND THE PROCEEDINGS U/ S. 147 OF THE ACT SO INITIATED WAS INVALID. ITA NO. 1929/M/08 C.O. NO. 192/M/09 2 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN CANCELLING THE ASSESSMENT ORDER PASSED U/S. 143(3) R.W.S. 14 7 OF THE ACT DT. 28.2.2003. 2. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION DISP UTING CONFIRMATION OF ADDITION OF RS. 19,34,860/- MADE BY AO U/S. 69B OF I.T. ACT. 3. THE RELEVANT FACTS GIVING RISE TO THIS APPEAL AR E THAT THIS APPEAL IS ARISING OUT OF ASSESSMENT ORDER DT. 28.2.2003 COMPL ETED U/S. 143(3) R.W.S 147 OF THE ACT. IT IS RELEVANT TO STATE THAT ORIGIN AL ASSESSMENT WAS COMPLETED ON 27.12.2000 ON TOTAL INCOME AT RS. 33,96,040/- AS AGAINST RETURNED INCOME OF RS. 19,65,580/-. AT THE TIME OF MAKING ORIGINAL ASSESSMENT, ASSESSING OFFICER REJECTED ASSESSEES CLAIM ON SALE OF SILVER ARTICLES OF 60.615 KGS SOLD BY ASSESSEE DURING FINANCIAL YEAR RELEVANT TO ASSES SMENT YEAR UNDER CONSIDERATION TO SHRI FAROKH TODYWALA THAT THOSE A RTICLES WERE OF PERSONAL USE AND WOULD NOT ATTRACT CAPITAL GAINS PROVISIONS AS PER SEC. 2(14)(II) BEING PERSONAL EFFECT. THE AO ALSO REJECTED ASSESSEES CLAIM FOR EXEMPTION U/S. 54F AGAINST CAPITAL GAINS. HOWEVER, LD. CIT(A) VID E HIS ORDER DT. 20.6.2001 HELD THAT SILVER ARTICLES SOLD BY ASSESSEE WERE PE RSONAL EFFECTS AND WERE THEREFORE OUTSIDE DEFINITION OF CAPITAL ASSETS. T HE LD. CIT(A) ALSO GRANTED PROPORTIONATE RELIEF U/S. 54F TO ASSESSEE. 4. THE ASSESSEE DISCLOSED SALE OF SILVER ARTICLES O F 60.615 KGS TO SHRI FAROKH TODYWALA FOR RS. 20,00,860/- AND RECEIVED SA LE PROCEEDS VIDE CHEQUE DT. 7 TH APRIL, 1997 AND 12 TH APRIL, 1997. THE ASSESSEE ALSO OFFERED CAPITAL GA IN ON SAID SALE IN COMPUTATION OF TOTAL INCOME. THE AS SESSEE ALSO DISCLOSED CERTAIN ASSETS INCLUDING LOOSE DIAMONDS UNDER VDIS I N DECEMBER, 1997. THE AO SUBMITTED NOTE ON 24 TH AUGUST, 2001 TO CIT TO SEEK HIS PERMISSION TO ISSUE NOTICE U/S. 133(6) OF THE ACT FOR MAKING CERT AIN ENQUIRY. THE LD. CIT(A) HAS REPRODUCED THE SAID NOTE IN PARA 4.1 WHICH READ S AS UNDER: RETURN OF INCOME WAS FILED BY ASSESSEE ON 23.3.199 9 SHOWING TOTAL INCOME OF RS. 19,65,580/-. ASSESSMENT U/S. 1 43(3) WAS COMPLETED ON 27.12.2000 DETERMINING THE TOTAL INCOM E OF THE ITA NO. 1929/M/08 C.O. NO. 192/M/09 3 ASSESSEE AT RS. 33,96,040/-, THE ASSESSEE WENT IN APPEAL AND THE CIT(A) PASSED ORDER DT. 20.6.2001. APPEAL EFFE CT TO THAT ORDER HAS BEEN GIVEN. PERUSAL OF THE RECORD SHOWS THAT THERE ARE CERTAIN DISCREPANCIES IN THE ASSESSMENT WHICH NEED FURTHER ENQUIRY INTO T HE CASE. IT IS NOTICED FROM THE BANK SUMMARY FILED BY ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAD SHOWN SALE OF SILVER WARES ON 9.4.97 AND 10.4.97 FOR A SU M OF RS. 5 LACS AND 15 LACS, RESPECTIVELY AND USED THE ABOVE A MOUNTS TOWARDS PURCHASE OF THE PROPERTY. THE VDIS DECLARA TION FILED BY ASSESSEE SHOWS THAT THE ASSESSEE DECLARED THE SI LVER ARTICLES FOR A TOTAL SUM OF RS. 1,21,974/-. WITH THE VDIS D ECLARATION, ASSESSEE HAD ALSO SUBMITTED A VALUATION REPORT DT. 22.12.97. THIS VALUATION WAS DONE BY SHRI RAMESH M. ZAVERI. THE TWO STATEMENTS APPEAR TO BE CONTRADICTORY. IN CASE THE S ILVER ARTICLES WERE SOLD BY THE ASSESSEE IN APRIL 1997, H OW THE VALUER CERTIFIED THE ARTICLES AS BELONGING TO THE ASSESSEE ON 22.12.1997. THIS NEEDS ENQUIRY. IN VIEW OF THE ABOVE, PERMISSION OF THE CIT UNDER S ECOND PROVISO TO SEC. 133(6) OF THE I.T. ACT IS SOLICITED FOR MAKING AN INQUIRY ABOUT THE VERACITY OF THE CLAIM OF ASSESSEE IN THE RETURN OF INCOME. 5. IT IS FOUND THAT AO WAS OF THE OPINION THAT SILVE R ARTICLES SOLD BY ASSESSEE IN APRIL, 1997 COULD NOT BELONG TO ASSESSE E ON 22 ND DECEMBER 1997 I.E. AT THE TIME OF DECLARATION UNDER VDIS. THEREFO RE, AO AFTER RECORDING REASONS FOR REOPENING OF THE ASSESSMENT VIDE ORDER SHEET ENTRY DT. 15 TH OCTOBER 2001; ISSUED NOTICE U/S. 148 OF THE ACT DT. 25 TH OCTOBER, 2001 WHICH WAS SERVED ON ASSESSEE ON 1 ST NOVEMBER, 2001. 6. DURING THE COURSE OF REASSESSMENT PROCEEDINGS, N OTICE U/S. 142(1) WAS ISSUED ALONGWITH LETTER, WHICH IS REPRODUCED BY AO AT PAGE-2 OF ASSESSMENT ORDER WHICH IS AS UNDER: IT IS SEEN THAT IN RESPONSE TO NOTICE DT. 25.10.20 01 ISSUED U/S. 148 OF THE I.T. ACT NO SUCH RETURN HAS B EEN FILED BY YOU AS PER THE RECORDS. IN CASE ANY SUCH RETURN HA S BEEN FILED, YOU ARE REQUESTED TO FURNISH PROOF FOR FILING SUCH RETURN AND COPY OF THE RETURN. ON PERUSAL OF THE RECORD, IT IS SEEN THAT YOU HAD IN THE COURSE OF ASSESSMENT PROCEEDINGS CLAIMED TO HAVE RE CEIVED ITA NO. 1929/M/08 C.O. NO. 192/M/09 4 SALE PROCEEDS FROM ONE SHRI FAROOKH S. TODYWALA ON SALE OF SILVER ARTICLES AND COINS AS DETAILED BELOW: LOT NO.1 ONE LOT OF SILVER ARTICLES 16.225KG . RS . 4,05,625/- ONE LOT OF SILVER COINS 5.500KG RS. 66,000/ - LOT NO.2 LOT OF SILVER ARTICLES 44,390KG RS. 15,29,235/- --------------------- RS. 20,00,860/- ========== THE ABOVE SAID SALE PROCEEDS OF SILVER ITEMS WAS SHOWN IN THE COMPUTATION AT RS. 20,00,860/- AND DATE OF R ECEIPT OF MONEY WAS CLAIMED AS PER CHEQUES DT. 7.4.1997 AND 12.4.1997. THE COST OF ACQUISITION OF THESE SILVER WARES WAS CONTENDED TO BE PART OF DISCLOSURE MADE UNDER VDIS, 1997. IN RESPECT OF THE SAID COST YOU HAD FILED WITH THE RET URN VALUATION REPORT DT. 22.12.97 FROM RAMESH ZAVERI JEWELLERS- T HOUGH YOU HAD ALREADY SOLD THE ITEMS IN APRIL, 1997. YOU ARE THEREFORE, REQUIRED TO EXPLAIN THE DISCREPANCY DULY SUPPORTED BY PROOF, EVIDENCES AND DOCUMENTS. 7. ON BEHALF OF ASSESSEE, IT WAS STATED THAT ASSESS EE PURCHASED SILVER ARTICLES OF 60.615KG FROM M/S. PARAG JEWELLERS IN M AY, 1993 AND SAID ARTICLES WERE DULY REFLECTED IN HIS INCOME TAX/WEALTH TAX RET URNS IN ASSESSMENT YEAR 1994-95 ONWARDS TILL THE SAME WERE SOLD TO SHRI FAR OKH TODIWALA IN APRIL, 1997. IT WAS STATED THAT THESE SILVER ARTICLES OF 6 0.615KGS DID NOT FORM PART OF SILVER ARTICLES DECLARED BY ASSESSEE UNDER VDIS A S PER VDIS CERTIFICATE AND VALUATION REPORT DT. 22.12.1997 FROM RAMESH ZAVERI JEWELLERS. IT WAS CONTENDED THAT SINCE SILVER ARTICLES OF 60.615KGS P URCHASED FROM M/S. PARAG JEWELLERS WERE ALREADY SHOWN BY ASSESSEE IN INCOME T AX/WEALTH TAX RETURNS OF EARLIER YEARS, QUESTION OF DECLARING THE SAME UN DER VDIS 97 DID NOT ARISE. THE SILVER ARTICLES DECLARED BY ASSESSEE UNDER VDIS 97 WERE NOT SOLD BY ASSESSEE AND SAME REMAINED WEALTH OF ASSESSEE AS ON 31.3.1998. HOWEVER, AO STATED THAT DESCRIPTION OF ITEMS OF SILVER ARTIC LES PURCHASED BY ASSESSEE FROM M/S. PARAG JEWELLERS AND DESCRIPTION OF ITEMS PURCHASED BY SHRI FAROKH TODIWALA FROM ASSESSEE DID NOT MATCH. THE AO ALSO ISSUED A LETTER DT. 10.2.2003 TO EXPLAIN THE DISCREPANCIES WHICH HAS BE EN REPRODUCED BY AO AT PAGE-3 OF ASSESSMENT ORDER. THE ASSESSEE FILED WRI TTEN SUBMISSION VIDE LETTER ITA NO. 1929/M/08 C.O. NO. 192/M/09 5 DT. 18.2.2003 AND 26.2.2003 STATING THAT BILL MENTI ONED ONLY LOT OF SILVER ARTICLES WEIGHING SO MANY GRAMS ETC. IT WAS ALSO CO NTENDED EVEN CERTIFICATE ISSUED UNDER VDIS MENTIONED SILVER ARTICLES, UTENSI LS ETC. IT WAS ALSO STATED THAT WEIGHT OF ITEMS PURCHASED AS WELL AS ITEMS SOL D BY ASSESSEE IS SAME. HOWEVER, AO DID NOT AGREE WITH ASSESSEE AND STATED THAT DETAILS FURNISHED BY ASSESSEE ARE SELF SERVING AVERMENTS. HE HAS STATED THAT ASSESSEE IS UNABLE TO RECONCILE DISCREPANCIES WITH COGENT EXPLANATION THA T ITEMS OF SILVER PURCHASED BY HIM FROM M/S. PARAG JEWELLERS AND ITEMS SOLD BY HIM TO SHRI FAROKH TODIWALA WERE SAME. THEREFORE, AO CONSIDERED THE S OURCE OF ACQUISITION AND POSSESSION OF SILVER ARTICLES SOLD BY ASSESSEE IN A PRIL 1997 AS UNEXPLAINED AND MADE ADDITION OF RS. 19,34,860/- BEING PREVALENT MA RKET PRICE AS UNEXPLAINED INVESTMENT U/S. 69B OF THE ACT. BEING AGGRIEVED, AS SESSEE FILED APPEAL BEFORE FIRST APPELLATE AUTHORITY. 8. THE ASSESSEE CHALLENGED THE VALIDITY OF INITIATI ON OF ASSESSMENT PROCEEDINGS. IT WAS CONTENDED THAT INITIATION OF RE ASSESSMENT PROCEEDINGS AS PER A.OS LETTER DT. 21 ST OCTOBER, 2002 WAS MADE ON THE FOOTING THAT SILVER ITEMS COULD NOT FOUND PART OF DECLARATION MADE UNDE R VDIS, 1997. IT WAS CONTENDED THAT ASSESSEE EXPLAINED VIDE ITS LETTER D T. 28 TH OCTOBER, 2002 THAT SALE OF SILVER ARTICLES TO SHRI FAROKH TODIWALA WE RE NOT PART OF SILVER ARTICLES DISCLOSED UNDER VDIS, 1997, BUT WERE PURCHASED FROM M/S. PARAG JEWELLERS IN 1993. THEY HAD NO CONNECTION WITH SILVER ARTICLES D ISCLOSED UNDER VDIS. IT WAS CONTENDED THAT REASONS RECORDED BY AO FOR ISSUE OF NOTICE U/S. 148 WERE NOT FURNISH TO HIM THOUGH ASSESSEE FILED RETURN PUR SUANT TO NOTICE ISSUED U/S. 148 OF THE ACT. THE LD. CIT(A) CONSIDERED THE FACT THAT ASSESSEE DISCLOSED SILVER ARTICLES PURCHASED FROM M/S. PARAG JEWELLERS IN ASSESSMENT YEAR 1994- 95 IN INCOME TAX RETURN AND THE STATEMENT OF WEALTH TAX FOR ASSESSMENT YEARS 1994-95 TO 1998-99 AND THEY WERE ALREADY ON R ECORD OF DEPARTMENT. 9. THE LD. CIT(A) STATED THAT IN RESPECT OF ORIGINA L ASSESSMENT MADE, DEPARTMENT FILED APPEAL BEFORE TRIBUNAL AGAINST ORD ER OF LD. CIT(A) AND ITAT DISMISSED DEPARTMENTS APPEAL BEING ITA NO. 5426/M/ 2001. IT IS RELEVANT TO ITA NO. 1929/M/08 C.O. NO. 192/M/09 6 STATE THAT SAID ORDER DT. 23 RD JULY, 2007 IS ALSO PLACED AT PAGE 59 TO 61 OF PAPER BOOK. THE LD. CIT(A) STATED THAT ON PERUSAL OF ASSESSMENT RECORD, IT WAS FOUND THAT AO AFTER GIVING EFFECT TO THE ORDER OF LD. CIT(A) DT. 20.6.2001, SOUGHT PERMISSION OF CIT-XXVII, MUMBAI TO ISSUE NOTI CE U/S. 133(6) OF THE ACT FOR MAKING CERTAIN ENQUIRY. LD. CIT(A) STATED THAT IT IS FOUND THAT AO WAS OF THE OPINION THAT SILVER ARTICLES SOLD IN APRIL 1997 COULD NOT BELONG TO ASSESSEE ON 22.12.1997 I.E. AT THE TIME OF MAKING DECLARATIO N UNDER VDIS. THERE WAS NO MATERIAL BEFORE AO TO MAKE SUCH LINKAGE WHEN ORI GINAL ASSESSMENT WAS OVER AND LD. CIT(A) HAS ALREADY PASSED HIS ORDER O N 20.6.2001. THE IMPLICIT ASSUMPTION OF AO WAS THAT ASSESSEE HAS LINKED SALE OF SILVER ARTICLES IN APRIL, 1997 TO VDIS DECLARATION IN DECEMBER, 1997 AND THAT WAS NOT POSSIBLE. THE LD. CIT(A) STATED THAT AO HAD THE STATEMENTS OF VAL UERS OF SHRI BIMAL R. ZAVERI, SON OF SHRI RAMESH ZAVERI AND VERIFICATION WITH MR. TODIWALLA OF ITEMS PURCHASED BY HIM FROM ASSESSEE AND ITEMS EXPORTED B Y HIM. LD. CIT(A) STATED THAT AO DID NOT IDENTIFY THE CONTENTS OF ST ATEMENT; THOUGH HE HELD STATEMENTS WERE CONTRADICTORY. LD. CIT(A) STATED T HAT AO DID NOT APPRISE CIT WITH FULL AND COMPLETE FACTS WHEN HE SUBMITTED A NO TE TO HIM ON 24 TH AUGUST 2001. THE AO DID NOT DISCUSS REASONS RECORDED BY HI M TO REOPEN ASSESSMENT THAT WAS COMPLETED U/S. 143(3) IN THE IMPUGNED ORD ER. LD. CIT(A) AFTER DISCUSSING THE REASONS RECORDED BY AO HAS STATED THAT AO ABSOLUTELY RELIED ON ASSESSEES EXPLANATION THAT COST OF SILVER ARTI CLES SOLD BY HIM TO SHRI TODYWALLA IN APRIL, 1997 WAS PART OF DISCLOSURE MAD E BY HIM UNDER VDIS, 1997 IN DECEMBER, 1997. THIS FINDING OF AO WAS THE FOUNDATION FOR REOPENING OF ASSESSMENT U/S. 147 OF THE ACT. THE L D. CIT(A) HAS STATED THAT AO DID NOT IDENTIFY EVIDENCE ON THE BASIS OF WHICH HE REACHED SUCH FINDING. THE STATEMENT OF VALUER DID NOT CONTAIN ANYTHING T O SHOW ANY REMOTE CONNECTION WITH SILVER ARTICLES SOLD BY ASSESSEE IN APRIL 1997 WITH SILVER ARTICLES DISCLOSED UNDER VDIS AND VALUED BY HIM. TH E LD. CIT(A) HAS STATED THAT AT THE TIME OF RECORDING OF REASONS BY AO U/S. 148 OF THE ACT, QUESTION OF VERIFICATION WITH MR. TODIWALLA WAS NOT BROUGHT IN AND WAS NOT CITED AS AN EVIDENCE TO LINK SILVER ARTICLES SOLD TO HIM IN AP RIL, 1997 WITH THE SILVER ARTICLES DISCLOSED UNDER VDIS IN DECEMBER, 1997. LD. CIT(A) HAS FURTHER STATED THAT ITA NO. 1929/M/08 C.O. NO. 192/M/09 7 AO DID NOT RECORD IN THE REASONS RECORDED U/S. 148 OF THE ACT THAT ITEMS PURCHASED BY MR. TODIWALLA FROM ASSESSEE IN APRIL 1 997 WERE LARGELY DIFFERENT FROM ITEMS ASSESSEE PURCHASED FROM M/S. PARAG JEWEL LERS IN 1993. THAT DISCOVERY OR EMPHASIS ON THIS ASPECT WAS NON-EXISTE NT AT THE TIME OF INITIATION OF REASSESSMENT PROCEEDINGS AND WAS HIGHLIGHTED ONL Y AFTER REOPENING OF ASSESSMENT U/S. 148 OF THE ACT. IN VIEW OF ABOVE, L D. CIT(A) HAS HELD THAT AO HAD NO VALID EVIDENCE OR MATERIAL TO FORM A REA SONABLE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WARRANTING ISSUE OF NOTICE U/S. 148 OF THE ACT. THEREFORE, LD. CIT(A) HAS HELD THAT IS SUE OF NOTICE U/S. 148 OF THE ACT WAS DUE TO CHANGE OF OPINION; IT IS ENTIRELY BA D IN LAW AND PROCEEDING U/S. 147 OF THE ACT SO INITIATED WAS INVALID. HENCE, DE PARTMENT IS IN APPEAL BEFORE TRIBUNAL. 10. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT COPY OF REASONS RECORDED BY AO IS PLACED AT PAGE 77-78 OF PAPER BOO K. HE SUBMITTED AO FOUND THAT ITEMS PURCHASED FROM M/S. PARAG JEWELLER S AND ITEMS SOLD TO MR. TODIWALLA WERE DIFFERENT. LD. DR REFERRED TO PAGES 89 TO 92 OF PAPER BOOK WHICH ARE COPIES OF BILLS OF M/S. PARAG JEWELLERS AND SUBMITTED THAT ITEMS SOLD TO MR. TODIWALLA IN APRIL 1997 FROM PART OF AR TICLES DECLARED IN DECEMBER, 1997. THE LD. DR SUBMITTED THAT THESE FACTS WERE N OT BEFORE AO AT THE TIME OF FRAMING ORIGINAL ASSESSMENT. HENCE THERE IS NO CHANGE OF OPINION. THE LD. DR SUBMITTED THAT NO DETAILS WERE CALLED BY AO, HENCE THERE WAS NO FINDING IN ORIGINAL ASSESSMENT. THE LD. DR RELYING ON THE DECISIONS IN THE CASE OF KALYANJI MAVJI AND CO. VS COMMISSIONER OF INCOME-TAX (SC) 102 ITR 287 AND ESS ESS KAY ENGINEERING CO. P. LTD. VS COMM ISSIONER OF INCOME-TAX (SC) 247 ITR 818 SUBMITTED THAT ORDER OF LD. CIT(A) IS NOT VALID THAT AO HAS INITIATED REASSESSMENT PROCEEDINGS ON CHANGE OF OPI NION. THE LD. DR REFERRED TO PAGES 31 TO 34 OF PAPER BOOK WHICH IS C OPY OF LIST OF ITEMS DECLARED UNDER VDIS. HE SUBMITTED THAT ORDER OF LD. CIT(A) TO QUASH REASSESSMENT PROCEEDINGS IS NOT VALID. 11. ON THE OTHER HAND, LD. AR SUPPORTED THE ORDER O F LD. CIT(A) TO QUASH REASSESSMENT PROCEEDINGS. HE RELIED ON THE DECISIO N OF BOMBAY HIGH COURT ITA NO. 1929/M/08 C.O. NO. 192/M/09 8 IN THE CASE OF HINDUSTAN LEVER LTD. VS R.B. WADKAR, ACIT 268 ITR 332 AND SUBMITTED THAT FOR CONSIDERING VALIDITY OF ACTION O F AO TO INITIATE REASSESSMENT PROCEEDINGS ONLY REASONS ARE TO BE CONSIDERED AND N OT SUBSEQUENT FACTS. THE LD. AR SUBMITTED THAT REASSESSMENT PROCEEDINGS ARE INITIATED ONLY FOR MAKING ENQUIRY AND NOT ON THE BASIS OF BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. HE SUBMITTED THAT REASONS RECO RDED BY AO ARE FUNDAMENTALLY WRONG AS ITEMS DECLARED UNDER VDIS ARE DIFFERENT THAN THE ITEMS SOLD BY ASSESSEE TO SHRI TODYWALLA. HE REFER RED TO PAGE 4 OF THE PAPER BOOK, WHICH IS A COPY OF COMPUTATION OF INCOME FILE D BY ASSESSEE WITH THE RETURN AND SUBMITTED THAT ITEMS DECLARED UNDER VDIS ARE SEPARATE THAN THE ITEMS WHICH WERE SOLD BY ASSESSEE TO SHRI TODIWALLA . HE SUBMITTED THAT ITEMS WHICH WERE DECLARED UNDER VDIS WERE IN EXISTENCE AS WEALTH OF ASSESSEE AS ON 31.3.1998. HE FURTHER REFERRED TO PAGES 13 TO 15 OF THE PAPER BOOK AND SUBMITTED THAT IN THE ORIGINAL ASSESSMENT, AO RAISE D SPECIFIC QUERY IN RESPECT OF ITEMS SOLD BY ASSESSEE AND WHILE CONSIDERING LO NG TERM CAPITAL GAIN SHOWN IN COMPUTATION OF INCOME BY ASSESSEE. HE FU RTHER REFERRED PAGE 16 OF PAPER BOOK WHICH IS A COPY OF LETTER DT. 21 ST DECEMBER, 2000 WHICH IS ADDRESSED TO AO AND SUBMITTED THAT ASSESSEE INFORME D AO THAT ITEMS SOLD TO SHRI TODIWALLA WERE ITEMS PURCHASED FROM M/S. PARAG JEWELLERS AND ASSESSEE ALSO FILED COPIES OF BILLS FOR PERUSAL OF AO. LD. AR REFERRED PAGE 23 OF PAPER BOOK WHICH IS A COPY OF CERTIFICATE U/S. 68(2) OF V DIS, 1997 AND SUBMITTED THAT THOSE ITEMS WERE PURCHASED IN THE YEAR 1987-88 . HENCE, AO AT THE TIME OF MAKING ORIGINAL ASSESSMENT APPLIED HIS MIND AS T O WHAT ITEMS WERE SOLD BY ASSESSEE TO SHRI TODIWALLA. LD. AR RELIED ON DECIS ION OF BOMBAY HIGH COURT IN THE CASE OF PRASHANT S. JOSHI VS ITO AND ANOTHER 32 4 ITR 154 AND SUBMITTED THAT IF THERE IS NO BASIS BY AO TO FORM A BELIEF TH AT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, ACTION OF AO IS NOT VAL ID. HE FURTHER SUBMITTED THAT WHOLE BASIS TO INITIATE REASSESSMENT PROCEEDIN GS IS UNSUSTAINABLE. HE SUBMITTED THAT ORDER OF LD. CIT(A) BE CONFIRMED THA T PROCEEDINGS U/S. 147 OF THE ACT SO INITIATED IS NOT VALID. ITA NO. 1929/M/08 C.O. NO. 192/M/09 9 12. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF LD. REPRESENTATIVES OF PARTIES AND ORDERS OF AUTHORITIES BELOW. WE HAVE A LSO GONE THROUGH THE CASES CITED BY LD. REPRESENTATIVES IN SUPPORT OF THEIR SU BMISSIONS (SUPRA). WE HAVE ALSO PERUSED RELEVANT PAGES OF PAPER BOOK. 13. THERE IS NO DISPUTE TO THE FACT THAT ORIGINAL A SSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT. AT THE TIME OF MAKING ORIG INAL ASSESSMENT, AO CONSIDERED CLAIM OF ASSESSEE THAT HE SOLD SILVER AR TICLES WEIGHING 60.615KGS DURING THE YEAR TO SHRI TODIWALLA. WE ALSO OBSERVE THAT ON PERUSAL OF STATEMENT OF COMPUTATION OF INCOME, COPY PLACED AT PAGES 2 TO 8 OF PAPER BOOK THAT ASSESSEE HAS SHOWN SALE OF SILVER ARTICLE S WEIGHING 60.615 KG AT RS. 20,80,060/-. WE ALSO OBSERVE THAT ASSESSEE HAS ALS O SHOWN SEPARATELY ITEMS OF JEWELLERY AND SILVERWARES WHICH WERE DECLARED UN DER VDIS AND SAME ARE VALUED AT RS. 2,65,593/-. WE ALSO OBSERVE ON PERUS AL OF PAGES 16 & 17 OF PAPER BOOK WHICH IS A COPY OF LETTER DT. 21 ST DECEMBER, 2000 THAT ASSESSEE STATED THAT ITEMS WHICH WERE SOLD IN THE YEAR UNDER CONSIDERATION; WERE PURCHASED FROM M/S. PARAG JEWELLERS IN 1993. THE AS SESSEE ALSO ENCLOSED COPIES OF BILLS WITH THE SAID LETTER. WE ALSO OBSE RVE FROM PAGE 23 OF PAPER BOOK WHICH IS A COPY OF CERTIFICATE ISSUED UNDER VD IS, 1997 THAT ASSESSEE HAD DECLARED ITEMS OF JEWELLERY AND SILVER ARTICLES, TH E YEAR OF ACQUISITION SHOWN IS ASSESSMENT YEAR 1987-88. COPY OF VALUATION REPORT DT. 22.12.1997 IS ALSO PLACED AT PAGES 24 TO 35 OF PAPER BOOK. WE ALSO OB SERVE THAT ASSESSEE HAS SHOWN ITEMS OF SILVERWARES PURCHASED IN 1993 IN THE INCOME TAX RETURN AND WEALTH TAX RETURNS FILED FROM ASSESSMENT YEARS 1994 -95 TO 1998-99 AND THE SAID FACT HAS BEEN STATED BY LD. CIT(A) IN PARA 3.8 OF HIS IMPUGNED ORDER. DURING THE COURSE OF HEARING, LD. DR HAS NOT DISPUT ED ABOVE FINDING OF LD. CIT(A). WE ALSO OBSERVE THAT AO PUT UP A NOTE BEFO RE LD. CIT-XVII, MUMBAI ON 24 TH AUGUST, 2001, CONSIDERING THE ITEMS OF JEWELLERY S OLD BY ASSESSEE IN APRIL 1997 AND ITEMS DECLARED UNDER VDIS AND ONLY ST ATED IN THE SAID NOTE THAT THERE WERE CERTAIN DISCREPANCIES AND ALSO CONT RADICTION IN TWO STATEMENT WHICH NEEDS ENQUIRY. THE LD. CIT(A) HAS CATEGORICA LLY STATED THAT AS PER SAID NOTE SUBMITTED BY AO TO CIT-XVII MUMBAI, AO WAS OF THE FIRM OPINION ITA NO. 1929/M/08 C.O. NO. 192/M/09 10 THAT SILVER ARTICLES SOLD IN 1997 COULD NOT BELONG TO ASSESSEE ON 22.12.1997 I.E. AT THE TIME OF MAKING DECLARATION UNDER VDIS. THERE WERE NO MATERIAL BEFORE AO TO MAKE SUCH LINKAGE WHEN ORIGINAL ASSESS MENT WAS OVER AND LD. CIT(A) HAS ALREADY PASSED HIS ORDER ON 20.6.2001. THE LD. CIT(A) HAS ALSO STATED THAT AO DID NOT IDENTIFY CONTENTS OF STATEME NT THOUGH HE HELD THE STATEMENT WERE CONTRARY. IT IS ALSO RELEVANT TO STA TE THAT SAID FINDING OF AO WAS FOUNDATION FOR REOPENING OF ASSESSMENT U/S. 147 OF THE ACT BUT AO DID NOT IDENTIFY THE EVIDENCE ON THE BASIS OF WHICH HE REACHED SUCH FINDING. CONSIDERING THE ABOVE FACTS AND THE FACT THAT THERE IS NO MATERIAL TO SHOW ANY CONNECTION THAT SILVER ARTICLES SOLD BY ASSESSEE IN 1997 WITH SILVER ARTICLES DISCLOSED UN VDIS VALUED BY THEM HAD ANY LINKAGE OR CONNECTION AND THEREFORE, WE AGREE WITH LD. CIT(A) THAT THE EMPHAS IS OF AO THAT ITEMS SOLD BY ASSESSEE TO SHRI TODIWALLA IN APRIL, 1997 WERE D IFFERENT FROM ITEMS WERE PURCHASED FROM M/S. PARAG JEWELLERS IN 1993 WAS NON EXISTENCE AT THE TIME OF INITIATION OF REASSESSMENT PROCEEDINGS AND THIS ASP ECT WAS HIGHLIGHTED ONLY AFTER REOPENING OF ASSESSMENT. THEREFORE, WE AGREE WITH LD. AR THAT SUBSEQUENT FACTS ARE NOT TO BE CONSIDERED IN CONSID ERING VALIDITY OF REASONS RECORDED. AS OBSERVED BY HONBLE JURISDICTIONAL HI GH COURT IN THE CASE OF HINDUSTAN LEVER LTD. (SUPRA) THAT REASONS CANNOT BE SUPPLEMENTED BY EVIDENCE OR ORAL SUBMISSION. THE AO IS TO DISCLOSE IN THE REASONS RECORDED AS TO WHICH FACT OR MATERIAL NOT DISCLOSED BY ASSESSEE FULLY AND TRULY WHICH WAS NECESSARY FOR ASSESSMENT SO AS TO ESTABLISH VITAL L INK BETWEEN REASONS AND EVIDENCE. IN VIEW OF ABOVE, WE UPHOLD THE ORDER OF L D. CIT(A) THAT ISSUE OF NOTICE U/S. 148 OF THE ACT WAS DUE TO CHANGE OF OPI NION AND INITIATION OF REASSESSMENT PROCEEDINGS IS NOT VALID. HENCE GROUN D OF APPEAL TAKEN BY DEPARTMENT IS REJECTED. 14. SINCE WE HAVE UPHELD THE ORDER OF LD. CIT(A) TH AT INITIATION OF REASSESSMENT PROCEEDINGS IS INVALID, WE DO NOT CONS IDER IT NECESSARY TO DISCUSS GROUND OF CROSS OBJECTION FILED BY ASSESSEE DISPUTING THE ORDER OF LD. CIT(A) IN CONFIRMING ADDITION MADE BY AO U/S. 69B O F THE ACT OF RS. 19,34,860/- ON THE GROUND THAT ACQUISITION AND POSS ESSION OF SILVER ARTICLES ITA NO. 1929/M/08 C.O. NO. 192/M/09 11 SOLD BY ASSESSEE IN 1997 TO SHRI TODIWALLA REMAINED UNEXPLAINED AS IT BECOMES ONLY ACADEMIC IN NATURE. HENCE CROSS OBJEC TION OF ASSESSEE HAS BECOME INFRUCTUOUS. 15. IN THE RESULT, APPEAL OF DEPARTMENT AS WELL AS C ROSS OBJECTION OF ASSESSEE BOTH ARE DISMISSED. ORDER PRONOUNCED ON THIS 18 TH DAY OF NOVEMBER, 2011 SD/- SD/- ( R.K. PANDA) (B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 18 TH NOVEMBER, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 1929/M/08 C.O. NO. 192/M/09 12 DATE INITIALS 1. DRAFT DICTATED ON: 15.11.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 16.11.2011 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: