Mehra Jewel Palace Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 2311/DEL/2011

• Counselvise Citation: 231120114 RSA 2011
• Duration Of Justice: 2 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 27-11-2013
• Assessment Year: 2000-2001
• Appeal Filed On: 06-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAVI PRATAP MALL S

Judgement Text

ITA NOS.2311 & 2312/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E : NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NOS.2311 & 2312/DEL/2011 ASSESSMENT YEAR : 2000-01 & 2001-02 MEHRA JEWEL PALACE PVT. LTD., PLOT NO.2, AJMAL KHAN ROAD, KAROL BAGH, NEW DELHI. PAN : AAACM5478K VS. ITO, WARD-6 (3), NEW DELHI. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : S/ SHRI SALIL AGGARWAL & SHRI RAVI PRATAP MALL, ADVOCATES & SHAILESH GUPTA, CA DEPARTMENT BY : S HRI KEYUR PATEL, SR. DR ORDER PER A.D. JAIN, JUDICIAL MEMBER: THESE ARE ASSESSEES APPEALS FOR ASSESSMENT YEARS 2000-01 AND 2 001- 02 AGAINST THE ORDERS DATED 17.02.2006 AND 21.12.2010 , RESPECTIVELY, PASSED BY THE LD. CIT(A)-IX, NEW DELHI, CONTENDING TH AT THE LD. CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF TRADING LOSS INCURRED ON ACCOUNT OF SALE MADE IN LOOSE DIAMOND AND DIAMOND JEWELLERY, WHE REAS THE ASSESSEE HAD FURNISHED ALL THE INFORMATION AND DOCUMENTS AS ASKE D FOR BY THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAD NO DOUBT O VER THE GENUINENESS OF THE TRANSACTION. 2. THE ASSESSEE IS A COMPANY DEALING IN THE PURCHASE AND SALE OF JEWELLERY. THE TRADING LOSS CLAIMED BY THE ASSESSEE FOR BOTH THE YEARS UNDER CONSIDERATION, HAVING BEEN INCURRED ON ACCOUNT OF SAL E MADE IN LOOSE ITA NOS.2311 & 2312/DEL/2011 2 DIAMOND AND DIAMOND JEWELLERY, WAS DISALLOWED BY THE ASSESSING OFFICER, OBSERVING THAT THE ASSESSEE COMPANY IN COLLUSION WITH ITS ASSOCIATE CONCERNS, HAD ARRANGED A FEW TRANSACTIONS OF PURCHASE AND SALE SO AS TO RECORD LOSSES WHICH HAD BEEN SET OFF AGAINST ITS COMMISSION INCOME FOR BOTH THE YEARS. THE ASSESSING OFFICER OBSERVED THAT THE LOSS SHO WN BY THE ASSESSEE WAS NOT A GENUINE TRADING LOSS; THAT THE ASSESSEE HAD NOT BEEN ENGAGED IN THE REGULAR TRADING TRANSACTIONS THROUGHOU T THE YEARS; THAT ITS BUSINESS PREMISES HAD BEEN SUBLET TO A RELATED CONCERN, N AMELY, M/S MEHRA SONS JEWELLERS FROM WHOM, MAJOR PURCHASES HAD BEEN MAD E AND WHOM THE ASSESSEE COMPANY HAD MADE PART OF SALES OF ` 23,25,200/- AND THE BALANCE SALE HAD BEEN MADE TO TWO OTHER SISTER CONCERN, M/S NA RANI GEMS & INVESTMENT LTD. AND M/S VIDHATA PROPERTIES PVT. LTD.; THAT THERE HAD BEEN SPORADIC PURCHASES, WHICH HAD BEEN SOLD IN THE LAST WEEK OF MARCH, OTHER THAN NOMINAL SALES (ASSESSMENT YEAR 2000-01); THAT THE LO SSES IN TRADING OF JEWELLERY APPEARED TO HAVE SOME CO-RELATION WITH THE COMMISSION AND MISCELLANEOUS INCOME OF ` 8,49,175/- FOR ASSESSMENT YEAR 2000-01 AND OF ` 12,90,081/-, FOR ASSESSMENT YEAR 2001-02, AGAINST WHICH, TRADING LOSSES OF ` 7,76,125/- AND 11,24,900/-, RESPECTIVELY, HAD BEEN SE T OFF; AND THAT IN THE EARLIER YEARS ALSO, SUCH LOSS IN A SIMILAR FASHION WAS INCU RRED, AND IT WAS TOO MUCH OF A CO-INCIDENCE AND THAT THE MARKET CONDITIO N WAS SUCH THAT EACH YEAR THE ASSESSEE COMPANY INCURRED LOSSES ALMOST EQUAL TO T HE COMMISSION EARNED BY IT ESPECIALLY WHEN OTHER CONCERNS ENGAGED I N THE SAME TRADE WERE RECORDING PROFITS. 3. THE LD. CIT (A) DELETED THE DISALLOWANCE FOR ASSESSME NT YEAR 2000-01 VIDE ORDER DATED 17.02.2006. FOR ASSESSMENT YEAR 2001- 02, HOWEVER, VIDE ORDER DATED 14.05.2004, THE DISALLOWANCE WAS CONFIRME D. THE ITAT RESTORED THE MATTER TO THE FILE OF THE CIT (A) FOR FRESH DECI SION AFTER MAKING DUE INQUIRIES WITH REGARD TO THE PREVAILING MARKET PRICE OF THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS SISTER CONCERN, SO AS TO FIND OUT THE INCOME EARNED FROM THE SAME SISTER CONCERN. FOR ASSESSMENT YEAR 2000-01, ITA NOS.2311 & 2312/DEL/2011 3 THE LEGAL ISSUE OF REOPENING OF THE CASE WAS ALSO DIREC TED TO BE DECIDED BY THE LD. CIT (A). 4. BEFORE US, THE ASSESSEE CONTENDS THAT IN PURSUANCE OF T HE AFORESAID DIRECTIONS OF THE ITAT, THE ASSESSEE PRODUCED THE RELEVA NT DOCUMENT AND PAPER CUTTING IN RESPECT OF GOLD AND GOLD JEWELLERY BEFORE THE CIT (A), BUT WITH REGARD TO THE LOOSE DIAMONDS AND DIAMOND JEWELLE RY, THE ASSESSEE SUBMITTED BEFORE THE CIT (A) THAT WHERE NECESSARY QUOT ES ARE NOT AVAILABLE, BID AND ASK PRICE IS THE PREVAILING MARKET PRICE, WHI CH DEFINITION IS ACCEPTABLE WORLDWIDE; THAT THE LD. CIT (A) REJECTED THE SUBMISSIONS OF THE ASSESSEE WITHOUT VERIFYING THE PREVAILING MARKET PRICE ON HIS OWN; THAT THERE IS NO MATERIAL WHATSOEVER WITH THE DEPARTMENT TO REBU T THE ASSESSEES MATERIAL CONCERNING THE RATES OF LOOSE DIAMONDS/DIAMON D JEWELLERY; THAT THE THIRD PARTY BILLS WERE DULY FURNISHED BY THE ASSESSEE BEF ORE THE LD. CIT (A) ON THE REMAND OF THE MATTER BY THE ITAT; THAT THE LD. CIT (A) HAS WRONGLY OVERLOOKED THIS INFORMATION; AND THAT THE DEPARTMENT HAS FAILED TO DISCHARGE THE BURDEN CAST ON IT. 5. THE LD. DR, ON THE OTHER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDERS. IT HAS BEEN CONTENDED THAT DESPITE TH E CLEAR-CUT DIRECTION OF THE ITAT, THE ASSESSEE DID NOT PRODUCE THE RELEVANT DOCUMENTS BEFORE THE LD. CIT (A) REGARDING THE LOOSE DIAMONDS AND DIAMOND JEWELLERY; THAT THE ITAT HAD SPECIFICALLY DIRECTED THE CIT (A) TO VERIF Y THE TRANSACTIONS SHOWN BY THE ASSESSEE, AS TO WHETHER THEY WERE AT THE PREVAILING MARKET PRICE OF LOOSE DIAMONDS AND DIAMOND JEWELLERY; THAT THE LD. CIT (A) HAS OBSERVED THAT THE ASSESSEE HAD NOT BEEN ABLE TO FURNISH ANY INDEPENDENT DO CUMENTARY EVIDENCE TO JUSTIFY THE RATE CONCERNING THE TRANSACTI ONS IN LOOSE DIAMONDS AND DIAMOND JEWELLERY; THAT THE LD. CIT (A) HAS NOTE D THAT THE ASSESSEE ADMITTED THAT IN RESPECT OF DIAMOND JEWELLERY, THE Q UOTES/MARKET RATES ARE NOT AVAILABLE AND THE PRICES CHANGE BASED ON THE DEMA ND AND SUPPLY AND THE BUYER-SELLER FUNDAMENTALS; THAT THE LD. CIT (A) R IGHTLY OBSERVED THAT IN THE ABSENCE OF ANY INDEPENDENT DOCUMENTARY EVIDENCE, THE PURCHASE AND ITA NOS.2311 & 2312/DEL/2011 4 SALE VOUCHERS FOR THE TRANSACTIONS BETWEEN THE RELATED PARTIES DID NOT HAVE ANY CREDIBILITY; AND THAT SINCE THE ASSESSEE HAD NOT FUR NISHED ANY DOCUMENTARY EVIDENCE FOR THE MARKET RATES IN RESPECT OF TRANSACTIONS IN LOOSE DIAMONDS/DIAMOND JEWELLERY, THE LD. CIT (A) WAS UNABLE TO VERIFY THE SAME AND COMPLY WITH THE DIRECTIONS OF THE ITAT AND SO, THE LD. CIT (A) RIGHTLY HELD THAT THE ASSESSEE HAD REMAINED UNABLE TO S UBSTANTIATE THE LOSS CLAIMED FOR BOTH THE YEARS. 6. HAVING HEARD THE PARTIES, WE FIND THAT ADMITTEDLY , THE ASSESSEE HAS NOT FURNISHED THE REQUISITE DETAILS/DOCUMENTARY EVIDEN CE TO PROVE THAT THE TRANSACTIONS WERE ENTERED INTO BY THE ASSESSEE WITH ITS SIST ER CONCERN AT THE PREVAILING MARKET PRICE. THE DIRECTION OF THE ITAT WAS SPECIFIC AND THE CIT (A) HAD BEEN DIRECTED TO VERIFY THE TRANSACTIONS, AS TO WH ETHER THEY WERE AT THE PREVAILING MARKET PRICE OR NOT. IN THE ABSENCE OF SUC H EVIDENCE, OBVIOUSLY, THE LD. CIT (A) WAS UNABLE TO CARRY OUT THE VERIFIC ATION AS DIRECTED BY THE ITAT. ON OUR ASKING, THE LD. COUNSEL FOR THE ASSESSEE CON TENDS THAT SUCH EVIDENCE CAN NOW BE BROUGHT BEFORE THE LD. CIT (A). ACCORDINGLY, WE DEEM IT FIT TO REMIT THIS MATTER TO THE FILE OF THE LD. CIT (A) TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW PURSUANT TO THE AFORESAID DIRECT IONS ISSUED BY THE ITAT. THE ASSESSEE SHALL, NO DOUBT, COOPERATE IN THE PROCEEDIN GS BEFORE THE LD. CIT (A) AND THE CIT (A) SHALL AFFORD DUE AND ADEQUAT E OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE T REATED AS ALLOWED, FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 07.02.201 4. SD/- SD/- [ G.D. AGRAWAL ] [A.D. JAIN] VICE PRESIDENT JUDICIAL MEMBER DATED, 07 TH FEBRUARY, 2014. DK ITA NOS.2311 & 2312/DEL/2011 5 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.