ITO 12(2)(1), MUMBAI V. DESIRE JEWELS P.LTD, MUMBAI

ITA 136/MUM/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3542 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 08-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VISHWAS JADHAV
• Keywords: Bogus purchase; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEORE SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NO. 136/MUM/2015 (ASSESSMENT YEAR : 2008-09) THE ITO 12(2)(1), R.NO.224, 2 ND FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400020 ... APPELLANT VS. M/S. DESIRE JEWELS PVT. LTD., FLAT NO. 404, MANGAL BHAVAN, 14 TH ROAD, KHAR (WEST), MUMBAI 400 052 PAN:AACCD 3886A .... RESPONDENT C.O.NO.139/MUM/2015 [ARISING OUT OF ITA NO. 136/MUM/2015(A. Y : 2008-0 9)] M/S. DESIRE JEWELS PVT. LTD., FLAT NO. 404, MANGAL BHAVAN, 14 TH ROAD, KHAR (WEST), MUMBAI 400 052 ...CROSS OBJECTOR VS. THE ITO 12(2)(1), R.NO.224, 2 ND FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400020 .... APPELLANT IN APPEAL APPELLANT BY : SHRI VISHWAS JADHAV RESPONDENT BY : SHRI DHARMESH SHAH DATE OF HEARING : 10/12/2015 DATE OF PRONOUNCEMENT : 29/02/2016 2 ITA NO. 136/MUM/2015 (ASSESSMENT YEAR : 2008-09) ORDER PER G.S. PANNU,AM: THE CAPTIONED CROSS PROCEEDINGS ARE PREFERRED BY THE REVENUE AND THE ASSESSEE PERTAINING TO THE ASSESSMENT YEAR 2008-09 AND ARE DIRECTED AGAINST THE ORDER PASSED BY THE CIT(APPEAL S) -19, MUMBAI DATED 01.10.2014, WHICH IN TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICER DATED 06.03.2013 UNDER SECTION 14 3(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN BRIEF, THE FACTS ARE THAT INITIALLY THE ASS ESSEE COMPANY FILED A RETURN OF INCOME ON 30/09/2008 DECLARING A LOSS OF RS.2,11,181/-, WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 24/07/2009. SUBSEQUENTLY, A NOTICE UNDER SECTION 148 OF THE AC T WAS ISSUED AND SERVED ON THE ASSESSEE ON 30/03/2012, WHEREBY THE A SSESSMENT WAS SOUGHT TO BE REOPENED ON THE GROUND THAT INCOME CHA RGEABLE TO TAX HAD ESCAPED ASSESSMENT ON ACCOUNT OF CERTAIN BOGUS PURCHASES FROM ONE M/S. U.M EXPORTS(PROPRIETOR SHRI MAHESH MEHTA) TO THE EXTENT OF RS.4,90,275/-. IN RESPONSE TO THE SAID NOTICE, ASS ESSEE COMMUNICATED TO THE ASSESSING OFFICER THAT THE ORIGINAL RETURN F ILED BE TAKEN AS RETURN FILED IN RESPONSE TO THE NOTICE ISSUED UNDER SECTIO N 148 OF THE ACT. IN THE ENSURING ASSESSMENT, THE ASSESSING OFFICER TREA TED THE PURCHASES MADE BY THE ASSESSEE FROM M/S. U.M EXPORTS AS A MER E ACCOMMODATION ENTRY. ACCORDINGLY, PURCHASES TO THE EXTENT OF RS.9,32,931/- WAS CONSIDERED AS BOGUS PURCHASES. FURTHERMORE, ADDITION @ 25% WAS ALSO MADE ON THE GROUND THAT THE ASSESSEE WOULD HAVE EARNED THE PROFITS IN CASH, WHICH AMOUNTS TO R S.2,33,230/-. IN THIS 3 ITA NO. 136/MUM/2015 (ASSESSMENT YEAR : 2008-09) MANNER, AS AGAINST THE RETURNED LOSS OF RS,2,11,1 81/- THE ASSESSING OFFICER ASSESSED THE TOTAL INCOME AT RS.9,54,980/-. THE SAID ASSESSMENT WAS CHALLENGED IN AN APPEAL BEFORE THE C IT(APPEALS) IN LAW AND ON FACTS. FIRSTLY, THE ASSESSEE CONTENDED THAT THE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT WAS BAD IN LAW; AND, S ECONDLY, THE ASSESSMENT FINALIZED UNDER SECTION 143(3) R.W.S. 14 7 WAS LIABLE TO BE QUASHED. ON FACTS ALSO, THE ADDITION MADE WAS SOUG HT TO BE ASSAILED. 3. THE CIT(APPEALS) CONSIDERED THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING UNDER SECTION 148 O F THE ACT AND HELD THAT THE SAME DID NOT REFLECT ANY APPLICATION OF MI ND AND WERE, THEREFORE, CONTRARY TO THE LEGAL POSITION. ACCORDI NGLY, THE INITIATION OF PROCEEDINGS BY ISSUANCE OF NOTICE UNDER SECTION 147 /148 OF THE ACT WAS FOUND TO BE AB-INITIO INVALID. THE CIT(APPEALS) AC CORDINGLY, QUASHED THE REASSESSMENT PROCEEDINGS. IN THIS VIEW OF THE MATT ER, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL, INTER-ALIA, CONTENDING THAT THE QUASHING OF THE REOPENING PROCEEDINGS BY THE CIT(APPEALS) WAS N OT JUSTIFIED. 4. BEFORE ME, THE LD. DEPARTMENTAL REPRESENTATIVE HAS PRIMARILY REITERATED THE AVERMENTS MADE IN THE GROUNDS OF APP EAL, WHICH PRIMARILY REVOLVE AROUND THE OBJECTION THAT THE INF ORMATION RECEIVED BY THE ASSESSING OFFICER IS A GOOD GROUND FOR COMMENCE MENT OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT. IT I S SOUGHT TO BE CONTENDED THAT AT THE TIME OF COMMENCEMENT OF PROC EEDINGS UNDER SECTION 147 OF THE ACT, WHAT HAS TO BE SEEN IS ONLY PRIMA-FACIE MATERIAL AND NOT THE SUFFICIENCY OR CORRECTNESS OF THE MATER IAL. 4 ITA NO. 136/MUM/2015 (ASSESSMENT YEAR : 2008-09) 5. ON THE OTHER HAND, LD. REPRESENTATIVE FOR THE AS SESSEE HAS SUPPORTED THE DECISION OF THE CIT(APPEALS) BY POINT ING OUT THAT THE REASONS RECORDED BY THE ASSESSING OFFICER DID NOT R EFLECT ANY APPLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER FOR F ORMATION OF BELIEF ABOUT ESCAPEMENT OF INCOME. THEREFORE, ACCORDING T O HIM, THE CIT(APPEALS) MADE NO MISTAKE IN SETTING-ASIDE THE I MPUGNED ASSESSMENT PROCEEDINGS HAVING REGARD TO THE RATIO O F THE FOLLOWING JUDICIAL PRONOUNCEMENTS:- 1. SIGNATURE HOTELS VS. ITO & ANOTHER, 338 ITR 51(D EL) 2. MEERA KAPOOR VS. CIT, ITA NO.1395 OF 2008 DATED 31/08/2012(DEL) 3. ITO VS. LAKHMANI MEWAL DAS, 103 ITR 437 (SC) 4. M/S. INTIME CREDIT & HOLDINGS PVT. LTD. V. ITO, ITA NO.1726/MUM/2012 ORDER DATED 27.07.2015 6. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S. ONE OF THE NECESSARY INGREDIENTS REQUIRED TO INITIATE REASSESS MENT PROCEEDINGS UNDER SECTION 147 OF THE ACT IS FORMATION OF BELIEF BY THE ASSESSING OFFICER THAT CERTAIN INCOME CHARGEABLE TO TAX HAD E SCAPED ASSESSMENT. IT IS ALSO A TRITE LAW THAT THE FORMATION OF SUCH B ELIEF SHOULD BE DISCERNIBLE FROM THE MATERIAL AND INFORMATION ON RE CORD WHEN THE ASSESSING OFFICER RECORDS HIS REASONS. IN OTHER WO RDS, IT IS AN ACCEPTED POSITION OF LAW THAT THERE SHOULD BE A LIVE LINK BE TWEEN THE REASONS AND THE EVIDENCE/MATERIAL AVAILABLE WITH THE ASSESSING OFFICER. IN THE PRESENT CASE, THE CIT(APPEALS) HAS EXTRACTED THE RE ASONS RECORDED BY THE ASSESSING OFFICER IN PARA 3.2 OF HIS ORDER. A READING OF SUCH 5 ITA NO. 136/MUM/2015 (ASSESSMENT YEAR : 2008-09) REASONS REVEAL THAT THE ASSESSING OFFICER REFERS TO INFORMATION RECEIVED FROM THE INVESTIGATION WING THAT ASSESSEE MADE BOGU S PURCHASES FROM ONE M/S. U.M EXPORTS TO THE EXTENT OF RS.4,90,275/- . MERELY NOTICING SUCH INFORMATION, THE ASSESSING OFFICER PROCEEDS TO RECORD A BELIEF THAT INCOME CHARGEABLE TO THE AFORESAID EXTENT HAD ESCAP ED ASSESSMENT. IN THE CONTEXT OF SUCH RECORDING OF REASONS THE CIT(AP PEALS) REFERRED TO THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MEERA KAPOOR (SUPRA), WHEREIN A SOMEWHAT SIMILAR REASON S RECORDED WERE HELD TO BE NON- COMPLAINT WITH THE REQUIREMENT OF S ECTION 147/148 OF THE ACT. 6.1 AT THE TIME OF HEARING, THE LD. REPRESENTATIVE FOR THE ASSESSEE REFERRED TO THE PAPER BOOK, WHEREIN A COPY OF THE S TATEMENT RENDERED BY SHRI MAHESH P. MEHTA, PROPRIETOR OF M/S. U.M EXP ORTS IS PLACED. ON THAT BASIS, IT IS SOUGHT TO BE EXPLAINED THAT THE A SSESSEE HAS NOT BEEN SPECIFICALLY NAMED THEREIN. 6.2 BE THAT AS IT MAY, I AM PRESENTLY ONLY EXAMININ G THE CONCLUSION OF THE CIT(APPEALS) THAT THE REASONS RECORDED BY TH E ASSESSING OFFICER DO NOT REFLECT INDEPENDENT APPLICATION OF MIND AS T O WHETHER THE INFORMATION BEFORE HIM SUGGESTED ANY ESCAPEMENT OF INCOME. TO THAT EXTENT, IN MY VIEW, THE REASONS RECORDED DO NOT SAT ISFY THE REQUIREMENT OF SECTION 147 OF THE ACT IN AS MUCH AS THEY DO NOT REFER TO ANY DOCUMENTS OR STATEMENT, ETC., WHICH WOULD PRIMA-FAC IE ESTABLISH A LINK BETWEEN THE BOGUS NATURE OF THE IMPUGNED PURCHASES AND CONSEQUENTIAL ESCAPEMENT OF INCOME. THEREFORE, HAV ING REGARD TO THE FACTS AND MATERIAL FOUND BY THE CIT(APPEALS), THE I NITIATION OF 6 ITA NO. 136/MUM/2015 (ASSESSMENT YEAR : 2008-09) PROCEEDINGS UNDER SECTION HAVE BEEN RIGHTLY HELD TO BE AB-INITO INVALID. THE ORDER OF THE CIT(APPEALS) ON THIS ASPECT IS HE REBY AFFIRMED. 6.3 SO FAR AS THE ARGUMENTS PUT-FORTH BY THE REVENU E ARE CONCERNED, THE SAME ARE NOT TENABLE HAVING REGARD TO THE FACTS OF THE PRESENT CASE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. 8. SO FAR AS THE CROSS OBJECTION FILED BY THE ASSES SEE IS CONCERNED, THE SAME RELATES TO THE MERITS OF THE ADDITIONS MAD E BY THE ASSESSING OFFICER, WHICH DO NOT SURVIVE AS I HAVE ALREADY AFF IRMED THE ACTION OF THE CIT(APPEALS) OF QUASHING THE REASSESSMENT PROC EEDINGS. 9. IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/02/2016. SD/- (G.S. PANNU) ACCOUN TANT MEMBER MUMBAI, DATED 29/02/2016 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI VM , SR. PS