RAM MOHAN RAWAT, JAIPUR V. INCOME TAX OFFICER, WARD-2-1, JAIPUR

ITA 1014/JPR/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6268 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 31-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHISHEK SHARMA CIT DHK
• Keywords: Reopening of assessment; Bogus purchase; Accommodation entries; Assessment record; Reason to believe; Reassessment proceedings; Set aside
• Section: 139(1); 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH SMC, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 1014/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08. SHRI RAM MOHAN RAWAT PROP. M/S. RAWAT JAI CORPORATION, 2238, HALDION KA RASTA, JOHARI BAZAR, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 2(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AATPR 5737 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SIDDHARTH RANKA (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHRI ABHISHEK SHARMA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 01.10.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 10/10/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 29.06.2018 OF LD. CIT (APPEALS)-1, JAIPUR FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. LOWER AUTHORITIES GROSSLY ERRED IN ISSUING NOTICE U /S 148 OF THE INCOME-TAX ACT, 1961 WHICH IS ISSUED WITHOUT PROPER SANCTION, IS WITHOUT ANY REASON TO BELIEVE, AND IS VIOLATION OF SECTION 147, 148, 149 & 151 OF THE ACT AND THE ENTIRE PROCEEDING S OF REASSESSMENT DESERVES TO BE QUASHED. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT (APPEALS) GROSSLY ERRED IN RESTRICTING THE TRAD ING ADDITION TO THE EXTENT OF RS. 3,23,575/- AND IN REJECTING THE B OOKS OF ACCOUNT. 2 ITA NO. 1014/JP/2018 SHRI RAM MOHAN RAWAT, JAIPUR. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY OR AMEND ANY GROUND ON OR BEFORE THE DATE OF HEARING. GROUND NO. 1 IS REGARDING VALIDITY OF REOPENING OF ASSESSMENT. 2. THE ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF M/S. RAWAT JAI CORPORATION CARRYING ON BUSINESS OF TRADING, IMPORT AND EXPORT OF PRECIOUS AND SEMI PRECIOUS STONES. THE ASSESSEE FILED HIS RETURN OF INCOME UN DER SECTION 139(1) OF THE IT ACT ON 29.10.2007 DECLARING TOTAL INCOME OF RS. 2,28,22 0/-. SUBSEQUENTLY, THE AO INITIATED THE REASSESSMENT PROCEEDINGS BY ISSUING N OTICE UNDER SECTION 148 ON 28.03.2014. THE ASSESSEE RAISED THE OBJECTION AGAI NST THE NOTICE ISSUED UNDER SECTION 148 WHICH WAS DISPOSED OFF BY THE AO BY SEP ARATE ORDER DATED 2 ND JANUARY, 2015. THE REASSESSMENT WAS COMPLETED BY THE AO WHE REBY THE AO MADE ADDITION IN RESPECT OF THE ALLEGED BOGUS PURCHASES MADE BY T HE ASSESSEE FROM ONE PARTY, NAMELY, M/S. AVI EXPORTS, SURAT. THE ASSESSEE CHAL LENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) AND ALSO CHALLENGED THE VALI DITY OF REOPENING OF THE ASSESSMENT BASED ON THE REASONS RECORDED BY THE AO, BUT COULD NOT SUCCEED. 3. BEFORE THE TRIBUNAL, THE LD. COUNSEL FOR THE ASS ESSEE HAS SUBMITTED THAT REASONS RECORDED BY THE AO ARE BASED ON WRONG FACTS AND WITHOUT APPLICATION OF MIND. HE HAS REFERRED TO THE REASONS RECORDED AT PA GE 14 OF THE PAPER BOOK AND SUBMITTED THAT THE AO HAS STATED IN THE REASONS THA T THE ASSESSEE HAS MADE BOGUS PURCHASES AS PER THE INFORMATION PROVIDED BY THE IN VESTIGATION WING AND FURTHER ALLEGED THAT THE ASSESSEE HAS NOT FILED THE RETURN OF INCOME. HENCE THE AO OPINED THAT THE PURCHASES TO THE EXTENT OF RS. 24,02,235/- ARE NOT VERIFIABLE AND FORMED THE BELIEF THAT THE INCOME TO THAT EXTENT HAS ESCAPED A SSESSMENT. THE LD. COUNSEL HAS POINTED OUT THAT THIS STATEMENT OF THE AO AS RECORD ED IN THE REASONS IS FACTUALLY 3 ITA NO. 1014/JP/2018 SHRI RAM MOHAN RAWAT, JAIPUR. INCORRECT AS THE ASSESSEE FILED HIS ORIGINAL RETURN OF INCOME ON 29.10.2007. THE RETURN WAS FILED ON-LINE WHICH WAS SUBSEQUENTLY ACC EPTED BY THE AO THAT THE ASSESSEE HAS FILED THE RETURN OF INCOME. THEREFORE , THE FORMATION OF BELIEF BY THE AO ON THE BASIS OF INCORRECT FACTS RECORDED IN THE REASONS RENDERS THE REOPENING INVALID AND LIABLE TO BE QUASHED. HE HAS FURTHER S UBMITTED THAT EVEN IN THE OBJECTIONS FILED BY THE ASSESSEE AGAINST THE NOTICE ISSUED UNDER SECTION 148 THE ASSESSEE HAS SPECIFICALLY RAISED THIS OBJECTION ABO UT THE WRONG AND INCORRECT INFORMATION MENTIONED IN THE REASONS WHICH CLEARLY SHOWS THAT THE AO HAS NOT APPLIED HIS MIND WHILE FORMING THE OPINION/BELIEF T HAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. THE AO WHILE DISPOSING OFF THE OBJECTIONS VIDE ORDER DATED 2 ND JANUARY, 2015 HAS NOT DEALT WITH THIS SPECIFIC FAC TUAL OBJECTION RAISED BY THE ASSESSEE. THEREFORE, THE SAID ORDER OF THE AO REJE CTING THE OBJECTION RAISED BY THE ASSESSEE IS ALSO CONTRARY TO THE FACTS. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE FOLLOWING DECISIONS :- MUMTAZ HAJI MOHMAD MEMON VS. ITO (SPECIAL CIVIL APPLICATION NO. 21030/2017 DATED 2 1.03.2018 (GUJ.HC) BABA KARTAR SINGH DUKKI EDUCATIONAL TRUST VS. ITO (ITA NO.444-446/CHD/2014 DATED 29.05.2015 CHANDIG ARH TRIBUNAL) NIRMALA AGARWAL VS. ACIT (ITA 995-996/JP/2016 DATED 11.04.2018)(JAIPUR TRI BUNAL) RAJENDRA PRASAD CHOUDHARY VS. ACIT (ITA 1495-1496/JP/2018 DATED 12.06.2019) (JAIPUR TRIBUNAL) THUS THE LD. COUNSEL HAS SUBMITTED THAT THE REOPENI NG BASED ON INCORRECT AND WRONG REASONS RECORDED BY THE AO IS NOT SUSTAINABLE IN LA W AND LIABLE TO BE QUASHED. 4 ITA NO. 1014/JP/2018 SHRI RAM MOHAN RAWAT, JAIPUR. 4. ON THE OTHER HAND, THE LD. D/R HAS RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AO HAS DULY CONSIDERED THE OBJECTIONS OF THE ASSESSEE AND DISPOSED OFF THE SAME BY A SEPARATE SPEAKING OR DER. THE ASSESSEE HAS NOT DISPUTED THE FACT THAT THERE IS A PURCHASE MADE BY THE ASSESSEE FROM M/S. AVI GEMS, SURAT WHICH WAS FOUND BY THE INVESTIGATION WI NG BEING ENGAGED IN PROVIDING ACCOMMODATION ENTRIES OF BOGUS SALES. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS REOPENED THE ASSESSMENT BY RECO RDING THE REASONS AS UNDER :- AS PER INFORMATION, THE ASSESSEE HAS MADE BOGUS P URCHASES OF RS. 24,02,235/- DURING THE YEAR UNDER CONSIDERATION AS PER INFORMATION PROVIDED BY DGIT (INV.), VIDE HIS OFFICE LETTER DAT ED 14.03.2014. SINCE ASSESSEE HAS NOT FILED THE RETURN OF INCOME, PURCHASES AMOUNTING TO RS. 24,02,235/- ARE NOT VERIFIABLE. IN VIEW OF ABOVE GIVEN FACTS, I HAVE REASON TO BELIEVE THAT RS. 24,02,235/ - HAS ESCAPED ASSESSMENT IN TERM OF SECTION 47 OF I.T. ACT, 1961. IT IS A FIT CASE FOR ISSUANCE OF NOTICE U/S 148 OF I.T. ACT, 1961. SD/- (UMESH JAKHAR) DATED : 27.03.2014. INCOME TAX OFFICER, WARD 2(1), JAIPUR. THUS THE REASONS RECORDED BY THE AO FOR FORMATION O F BELIEF THAT INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT ARE BASED ON TWO COUN TS. ONE, THE ASSESSEE HAS MADE BOGUS PURCHASES AND THE SECOND, THAT THE PURCH ASES ARE NOT VERIFIABLE AS THE ASSESSEE HAS NOT FILED THE RETURN OF INCOME. THUS T HE FORMATION OF BELIEF IS BASED ON THESE TWO FACTUAL ASPECTS THAT THE ASSESSEE HAS MAD E BOGUS PURCHASES WHICH ARE 5 ITA NO. 1014/JP/2018 SHRI RAM MOHAN RAWAT, JAIPUR. NOT VERIFIABLE AS ASSESSEE HAS NOT FILED THE RETURN OF INCOME. THE REASONS FOR NON- VERIFIABLE OF THE PURCHASES MADE BY THE ASSESSEE DU E TO NON FILING OF THE RETURN OF INCOME AS STATED BY THE AO IS ABSOLUTELY INCORRECT AND WRONG AND CONTRARY TO THE RECORD WHEN THE ASSESSEE HAS FILED THE RETURN OF IN COME ELECTRONICALLY ON 29.10.2007. THIS FACT WAS ALSO SUBSEQUENTLY ACCEPT ED BY THE AO THAT THE ASSESSEE FILED THE RETURN OF INCOME UNDER SECTION 139(1). T HE SECOND ASPECT OF THE REASONS THAT THE ASSESSEE HAS MADE BOGUS PURCHASES IS ALSO NOT BASED ON ANY ENQUIRY OR VERIFICATION OF RECORD BY THE AO BUT THIS IS SIMPLY REPRODUCTION OF INFORMATION RECEIVED FROM THE INVESTIGATION WING. THE SAID INF ORMATION IS ALSO INCOMPLETE AS REGARDS THE DETAILS OF THE PURCHASES AND THE PARTIE S FROM WHOM SUCH PURCHASES WERE MADE BY THE ASSESSEE. THUS THE REASONS RECOR DED BY THE AO MANIFEST THAT THERE IS NO APPLICATION OF MIND AND THE AVERMENTS A S RECORDED IN THE REASONS ARE VERY VAGUE AND GENERAL AND RATHER INCONSISTENT WITH THE FACTS AVAILABLE ON RECORD SO FAR AS THE FILING OF RETURN OF INCOME BY THE ASSESS EE. THE FORMATION OF BELIEF ON SUCH INCORRECT AND VAGUE REASONS WOULD LEAD THE REO PENING OF THE ASSESSMENT AS INVALID. THE HONBLE GUJARAT HIGH COURT IN CASE OF MUMTAZ HAJI MOHMAD MEMON VS. ITO (SUPRA) WHILE CONSIDERING AN IDENTICAL ISSUE HA S OBSERVED IN PARA 10 & 11 AS UNDER :- 10. WE ARE CONSCIOUS THAT IN THE PRESENT CASE, TH E RETURN FILED BY THE ASSESSEE WAS NOT TAKEN IN SCRUTINY. NEVERTHELES S, IN SUCH A CASE ALSO THE REQUIREMENT THAT THE ASSESSING OFFICER MUS T HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT, WOULD APPLY. REFERENCE IN THIS RESPECT CAN BE MADE TO TH E DECISION OF THIS COURT IN CASE OF INDUCTOTHERM (INDIA) P. LTD. VS. M . GOPALAN, DEPUTY COMMISSION OF INCOME-TAX REPORTED IN (2013) 356 ITR 481 (GUJ.). 6 ITA NO. 1014/JP/2018 SHRI RAM MOHAN RAWAT, JAIPUR. VALIDITY OF THE REASONS RECORDED BY THE ASSESSING O FFICER WOULD THEREFORE BE ONE OF THE ISSUES. 11. IN THIS CONTEXT, WE HAVE NOTED THAT THE REASONS PROCEEDED ON TWO FUNDAMENTAL GROUNDS. ONE, THAT THE PROPERTY IN QUESTION WAS SOLD FOR A SUM OF RS. 1,18,95,000/- AND TWO; THAT THE AS SESSEE HAD NOT FILED THE RETURN AND THAT THEREFORE HIS 1/3 RD SHARE OUT OF THE SALE PROCEEDS WAS NOT OFFERED TO TAX. BOTH THESE FACTUAL GROUNDS ARE TOTALLY INCORRECT AS IS NOW VIRTUALLY ADMITTED BY THE REVENUE. IT IS UNDISPUTED THAT THE ASSESSEE HAD ACTUALLY FILED THE RETURN OF INCOME FO R THE SAID ASSESSMENT YEAR AND INCOME ALSO OFFERED HIS SHARE O F THE DECLARED SALE CONSIDERATION TO TAX AS CAPITAL GAIN. THE ASSESSING OFFICER MAY HAVE DISPUTE WITH RESPECT TO COMPUTATION OF SUCH CAPITAL GAIN, HE CANNOT SIMPLY DISPUTE THE FACT THAT THE ASSESSEE DID FILE THE RETURN. IMPORTANTLY, EVEN THE SECOND FACTUAL ASSERTION OF T HE ASSESSING OFFICER IN THE REASONS RECORDED IS TOTALLY INCORRECT. HE HA S REFERRED TO SAID SUM OF RS. 1,18,95,000/- AS A SALE PRICE OF THE PROPERT Y. THE ASSESSEE HAD PRODUCED BEFORE THE ASSESSING OFFICER, THE SALE DEE D IN WHICH, THE SALE CONSIDERATION DISCLOSED AS RS. 50 LAKHS. THUS MAKING THE WRONG STATEMENT IN THE REASONS RECO RDED AND IGNORING THE RELEVANT AND CORRECT FACTS AVAILABLE ON RECORD ESTABLISHED T HAT THE AO HAS NOT APPLIED HIS INDEPENDENT MIND WHILE FORMING THE OPINION. THE CH ANDIGARH BENCH OF THE TRIBUNAL IN CASE OF BABA KARTAR SINGH DUKKI EDUCATIONAL TRUS T VS. ITO (SUPRA) HAS ALSO CONSIDERED AN IDENTICAL ISSUE AND HELD THAT THE AO PROCEEDED FOR REOPENING OF THE ASSESSMENT FOR NON-EXISTENT AND FACTUALLY INCORRECT REASONS AND HAS NOT APPLIED HIS MIND. THE TRIBUNAL HAS CONCLUDED IN PARA 19 AS UND ER :- 19. IN VIEW OF THE ABOVE DISCUSSION, I HOLD THAT THE AO HAD TAKEN AN IRRELEVANT FACT INTO CONSIDERATION AND REOPENED THE ASSESSMENTS ON THE 7 ITA NO. 1014/JP/2018 SHRI RAM MOHAN RAWAT, JAIPUR. BASIS OF SUSPICION. FURTHER MORE, THE ASSESSING OF FICER PROCEEDED FOR RE-OPENING OF THE ASSESSMENT ON NON-EXISTENT AND FA CTUALLY INCORRECT BASIS/REASONS AND HAS NOT APPLIED HIS MIND AND DID NOT VERIFY THE ASSESSMENT RECORDS/RETURNS FILED BY THE ASSESSEE PR IOR TO RECORDING OF THE REASONS, THEREFORE, RE-OPENING OF THE ASSESSMEN TS FOR ASSESSMENT YEAR 2001-02, 2002-03 AND 2003-04 IS INVALID AND LI ABLE TO BE SET ASIDE/QUASHED. ACCORDINGLY, THE ORDERS OF THE AUTH ORITIES BELOW ARE NOT SUSTAINABLE AND HENCE DESERVE TO BE QUASHED. I ORDER ACCORDINGLY. ACCORDINGLY, IN VIEW OF THE ABOVE FACTS AND CIRCUMS TANCES OF THE CASE, WHEN THE AO HAS INITIATED THE PROCEEDINGS ON THE BASIS OF NON-E XISTENT AND FACTUALLY INCORRECT FACTS AND REASONS WITHOUT APPLICATION OF MIND AND W ITHOUT VERIFICATION OF THE FACTS AVAILABLE ON RECORD, THEN THE PROCEEDINGS INITIATED UNDER SECTION 147/148 ARE NOT SUSTAINABLE IN LAW. THE SAME ARE SET ASIDE AND CON SEQUENTIAL REASSESSMENT ORDER IS QUASHED. 6. SINCE THE REOPENING IS SET ASIDE AND QUASHED, TH EREFORE, THE GROUND NO. 2 RAISED ON THE MERITS OF THE ADDITION BECOMES INFRUC TUOUS. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 10/10/20 19. SD/- ( FOT; IKY JKWO (VIJAY PAL RAO) U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 10/10/2019. DAS/ 8 ITA NO. 1014/JP/2018 SHRI RAM MOHAN RAWAT, JAIPUR. VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI RAM MOHAN RAWAT, JAIPUR. 2. THE RESPONDENT THE ITO WARD 2(1), JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 1014/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR