MAYUR RAJNIKANT SHAH, MUMBAI V. PR. CIT- 21 , MUMBAI

ITA 2367/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8780 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHISHEKH PATANKAR
• Keywords: Search and seizure; Corroborative evidences; Accommodation entries; Assessment record; Reason to believe; Set aside
• Section: 143(3); 133(6); 147; 263; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHR I M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 2367 / MUM . /201 9 ( ASSESSMENT YEAR : 20 09 1 0 ) MAYUR RAJNIKANT SHAH 21, A/B, 2 ND FLOOR, KARIA INDL. ESTATE M.K. ROAD, MUMBAI 400 011 PAN AMYPS2230G . APPELLANT V/S PCIT OF INCOME TAX CIRCLE 21, MUMBAI . RESPONDENT ASSESSEE BY : SHRI DHARMIL JHAVERI REVENUE BY : SHRI ABHISHEKH PATANKAR DATE OF HEARING 13.01.2020 DATE OF ORDER 17.01.2020 O R D E R PER SAKTIJIT DEY. J.M. THE CAPTIONED APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 26 TH FEBRUARY 2016, PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) BY THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX (PCIT) , MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 20 09 10 . 2. BRIEF FACTS ARE, THE ASSESSEE , AN INDIVIDUAL , IS ENGAGED IN THE BUSINESS OF TRADING IN DIAMOND. FOR THE ASSESSMENT YEAR UNDER 2 MAYUR RAJNIKANT SHAH DISPUTE, THE ASSESSEE FILED HIS RETURN OF INCOME DECLARING INCOME OF ` 5,64,630. SUBSEQUENTLY, THE ASSESSING OFFICER RECEIVED INFORMATION FROM THE DGIT(INV.), MUMBAI, THAT DURING THE SEARCH AND SEIZURE OPERATION CONDUCTED UNDER SECTION 132 OF THE ACT IN C ASE OF RAJENDRA JAIN AND HIS GROUP ON 3 RD OCTOBER 2013, IT WAS FOUND THAT THE SAID GROUP IS PROVIDING ACCOMMODATION ENTRIES IN THE SHAPE OF BOGUS SALES AND BOGUS UNSECURED LOANS. IT WAS FOUND THAT THE ASSESSEE HAS SHOWN PURCHASES OF ` 37,32,250, FROM SHRI ANOO P YOGENDRA JAIN (M/S AADI IMOEX) DURING THE YEAR UNDER CONSIDERATION WHO IS AFFILIATED TO SHRI RAJENDRA JAIN GROUP. ON THE BASIS OF SUCH INFORMATION, THE ASSESSING OFF ICER RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT. IN THE COURSE OF ASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO FURNISH VARIOUS DETAILS TO PROVE THE PURCHASES. FURTHER, TO VERIFY THE GENUINENESS OF PURCHASES MADE FROM M/S AADI IMPEX, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 133(6) OF THE ACT. AFTER TAKING NOTE OF THE INFORMATION RECEIVED AND OTHER MATERIAL ON RECORD, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE AS SESSEE HAD NOT PURCHASED THE DIAMOND FROM M/S. AADI IMPEX, BUT HAS PURCHASED THEM FROM GREY MARKET AND TO REGULARIZE SUCH PURCHASE H AS OBTAINED ACCOMMODATION BILLS FROM THE CONCERNED PARTY. ON THE BASIS OF SUCH CONCLUSION, THE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT @ 7% OF THE ALLEGED NON GENUINE PURCHASE WORTH ` 37,32,250, AND ADDED BACK 3 MAYUR RAJNIKANT SHAH AN AMOUNT OF ` 2,61,258. AGAINST THE AD DITION SO MADE, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHICH , AS STATED BY THE LEARNED AUTHORISED REPRESENTATIVE , IS STILL PENDING . BE THAT AS IT MAY, WHEN THE MATTER STOOD THUS, LEARNED PCIT IN EXERCISE OF POWER CONFERRED UNDER SECTION 263 OF THE ACT, CALLED FOR THE ASSESSMENT RECORD AND AFTER EXAMINING IT WAS OF THE VIEW THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE AS THE ASSESSING OFFICER WITHOUT PROPER ENQUIRY AND APPLICATION OF MIND HAS ESTIMATED THE PROFIT AT 7% OF THE NON GENUINE PURCHASES AND MADE ADDITION TO THAT EXTENT. IN THIS CONTEXT, THE LEARNED PCIT OBSERVED THAT THE HONBLE GUJARAT HIGH COURT IN CASE OF N.K. PROTEINS LTD. HAS CONFIRMED 100% ADDITION OF NON GENUINE PURCHASES WHIC H HAS BEEN UPHELD BY T H E HON'BLE SUPREME COURT. THUS, HE ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE REQUIRING HIM TO EXPLAIN WHY THE ASSESSMENT ORDER SHOULD NOT BE HELD AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE AND REVISED. AS OBSERVED BY LE ARNED PCIT , THE SHOW CAUSE NOTICE DATED 6 TH FEBRUARY 2019, FIXING THE DATE OF HEARING ON 18 TH FEBRUARY 2019, WENT WITHOUT ANY RESPONSE FROM THE ASSESSEE. ACCORDINGLY, HE PROCEEDED TO PASS THE IMPUGNED ORDER UNDER SECTION 263 OF THE ACT HOLDING THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE, AS ACCORDING TO HIM, TH E ASSESSING OFFICER HAS PASSED SUCH ORDER WITHOUT APPLICATION OF MIND. 4 MAYUR RAJNIKANT SHAH THUS, ULTIMATELY, THE LEARNED PCIT SET ASIDE THE ASSESSMENT ORDER WITH A DIRECTION TO THE ASSESSING OFFICER TO ASSESS THE INCOME OF THE ASSESSEE AFRESH AFTER FOLLOWING DUE PROCEDURE. 3. T HE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , IN THE C OURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS SPECIFICALLY ENQUIRED INTO THE PURCHASE TRANSACTION WITH M/S AADI IMPEX BY CALLING UPON THE ASSESSEE TO FURNISH THE RELEVANT DOCUMENTARY EVIDE NCES. ADDITIONALLY, THE ASSESSING OFFICER ALSO CONDUCTED INDEPENDENT ENQUIRY BY ISSUING NOTICE UNDER SECTION 133(6) OF THE ACT TO THE SELLING PARTY. HE SUBMITTED , IN PURSUANCE TO THE NOTICE ISSUED UNDER SECTION 133(6) OF THE ACT, THE SELLING PARTY NOT ONLY CONFIRMED OF HAVING EFFECTED THE SALES TO THE ASSESSEE, BUT FURNISH ED ALL SUPPORTING EVIDENCES . HE SUBMITTED , AFTER VERIFYING THE DOCUMENTARY EVIDENCES BROUGHT ON RECORD, THE ASSESSING OFFICER , THOUGH , DID NOT FIND ANY DISCREPANCY, HOWEVER, STILL HE PROCE EDED TO TREAT THE PURCHASES AS NON GENUINE AND MADE ADDITION OF THE PROFIT ELEMENT BY ESTIMATING IT @ 7%. HE SUBMITTED , THE AFORESAID FACTS CLEARLY INDICATE THAT THE ASSESSING OFFICER HAS NOT ONLY MADE ENQUIRY WITH REGARD TO THE DISPUTED PURCHASES, BUT HAS PASSED THE ASSESSMENT ORDER AFTER DUE APPLICATION OF MIND. HE SUBMITTED , IN THE ASSESSMENT YEAR 2008 09 ALSO, THE ASSESSEE ENTERED INTO SIMILAR TRANSACTION WITH FOUR PARTIES INCLUDING M/S AADI IMPEX AND THE ASSESSING OFFICER WHILE COMPLETING THE 5 MAYUR RAJNIKANT SHAH ASSESSMEN T HAS MADE ADDITION BY ESTIMATE THE GROSS PROFIT @ 6% OF THE NON GENUINE PURCHASES. HE SUBMITTED , THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R/W SECTION 147 ON 23 RD JUNE 2016 HAS BEEN ACCEPTED BY THE DEPARTMENT AS IT HAS NOT BEEN SUBJECTED TO ANY PRO CEEDINGS UNDER SECTION 263 OF THE ACT. THUS, HE SUBMITTED , THE REVENUE CANNOT TAKE DIFFERENT STAND ON IDENTICAL ISSUE IN RESPECT OF TWO DIFFERENT ASSESSMENT YEARS. FURTHER, HE SUBMITTED , THE RELIANCE UPON THE DECISION OF THE HON'BLE SUPREME COURT IN N.K. P ROTEINS (SUPRA) IS TOTALLY IRRELEVANT AS THE SAID DECISION IS FACTUALLY DISTINGUISHABLE AND NO T APPLICABLE TO THE FACTS OF ASSESSEES CASE. THUS, HE SUBMITTED , THE ORDER PASSED UNDER SECTION 263 OF THE ACT SHOULD BE QUASHED. IN SUPPORT OF SUCH CONTENTION, LEARNED AUTHORISED REPRESENTATIVE REL IED UPON THE FOLLOWING DECISION : I) YOGESH C. LAKKAD V/S ITO, ITA NO.2464 2466/MUM./2019, DATED 16 TH AUGUST 2019; AND 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELY ING UPON THE OBSERVATIONS OF LEARNED PCIT SUBMITTED , THE OBSERVATIONS / CONCLUSION OF THE ASSESSING OFFICER WITH REGARD TO THE NON GENUINE PURCHASES IS CONTRADICTORY AND CONFLICTING. HE SUBMITTED , ONCE THE ASSESSING OFFICER HAS TREATED THE PURCHASES AS NON GENUINE, THERE IS NO REASON WHY HE RESTR ICTED THE ADDITION TO THE GROSS PROFIT RATE OF 7%. THUS, HE SUBMITTED , THE ASSESSING OFFICER HAS PASSED THE ASSESSMENT 6 MAYUR RAJNIKANT SHAH ORDER WITHOUT PROPER APPLICATION OF MIND. IN THIS CONTEXT, HE SPECIFICALLY DREW OUR ATTENTION TO THE OBSERVATIONS OF LEARNED PCIT IN PARA 5 OF THE IMPUGNED ORDER. FURTHER, HE SUBMITTED , AS PER EXPLANATION 2 TO SECTION 263(1) OF THE ACT, IF THE ASSESSING OFFICER HAS PASSED THE OR DER WITHOUT MAKING ENQUIRY OR VERIFICATION WHICH HE SHOULD HAVE MADE, LEARNED PCIT IS EMPOWERED UNDER THE ACT TO R EVISE THE ASSESSMENT ORDER. THUS, HE SUBMITTED , THERE IS NO REASON TO INTERFERE WITH THE ORDER PASSED UNDER SECTION 263 OF THE ACT. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS IN THE LIGHT OF THE DECISIONS RELIED UPON AND PERUSED THE MATERIAL ON RECORD. A READIN G OF THE IMPUGNED ORDER PASSED UNDER SECTION 263 OF THE ACT BY THE LEARNED PCIT MAKES IT CLEAR THAT HE HAS CONSIDERED THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE PRIMARILY FOR THE REASON THAT THE ASSESSING OFFICER WITHO UT APPLYING HIS MIND AND WITHOUT ENQUIRY HAS PASSED THE ASSESSMENT ORDER. OF COURSE, WHILE DOING SO, HE HAS ALSO REFERRED TO THE DECISION OF THE HONBLE GUJARAT HIG H COURT IN N.K. PROTEINS, SUBSEQUENTLY CONFIRMED BY THE HON'BLE SU PREME COURT. KEEPING IN PE RSPECTIVE THE AFORESAID REASONING OF LEARNED PCIT IF WE DELVE INTO THE FACTS ARISING FROM RECORD, IT CAN BE SEEN THAT THE ASSESSING OFFICER INITIATED PROCEEDINGS UNDER SECTION 147 OF THE ACT HAVING REASON TO BELIEVE THAT THE PURCHASES WORTH ` 37,32,250, CL AIMED TO HAVE BEEN MADE FROM ANOOJ J YOGENDRA JAIN, IS 7 MAYUR RAJNIKANT SHAH NON GENUINE. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ENQUIRED INTO THE AFORESAID ASPECT BY CALLING UPON THE ASSESSEE TO FURNISH DOCUMENTARY EVIDENCE TO PROVE THE PURCHASE OF GOODS . AS IT TRANSPIRES FROM THE RECORD , IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFICER, THE ASSESSEE FURNISHED VARIOUS DOCUMENTARY EVIDENCES SUCH AS STOCK REGISTER, RE SALE IDENTIFICATION STATEMENT, QUANTITATIVE TALLY OF PURCHASES AND SALES, BANK STA TEMENT INDICATING PAYMENT T O SUPPLIER/ SELLER, ETC. IT IS FURTHER EVIDENT , WITH AN INTENTION TO INDEPENDENTLY VERIFY THE GENUINENESS OF THE AFORESAID PURCHASES, THE ASSESSING OFFICER CONDUCTED ENQUIRY WITH THE SELLING DEALER BY ISSUING NOTICE UNDER SECTION 133(6) OF THE ACT. IN PARA 7 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS SPECIFICALLY STATED THAT IN RESPONSE TO THE SAID NOTICE, THE SELLING DEALER, M/S AADI IMPEX VIDE LETTER DATED 29 TH AUGUST 2016, CONFIRMED THE TRANSACTION. EVEN , ON THE FACE OF SUCH CONFIRMATION RECEIVED FROM THE SELLING DEALER, THE ASSESSING OFFICER RELYING UPON THE INFORMATION GATHERED BY INVESTIGATION WING OF THE DEPARTMENT , IN HIS OWN WISDOM , CHOSE NOT TO ACCEPT THE SALES AS GENUINE. HOWEVER, PRESUMABLY BECAUSE THE ASSESSEE H AD FURNISHED THE STOCK REGISTER, QUANTITATIVE DETAILS OF PURCHASE AND SALES, BANK STATEMENT REFLECTING PAYMENT, ETC., THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE MAY NOT HAVE PURCHASED THE GOODS FROM THE DECLARED SOURCE, BUT FROM THE GREY MARKET AND FOR 8 MAYUR RAJNIKANT SHAH REGULARIZING SUCH SALES HAS OBTAINED ACCOMMODATION BILLS FROM THE SELLING DEALERS. ON THE BASIS OF THE AFORESAID REASONING, THE ASSESSING OFFICER , THOUGH T IT PRUDENT TO ESTIMATE THE GROSS PROFIT ON SUCH PURCHASES AT 7% AND ADDED BACK TO THE INCOME OF THE ASSESSEE. THUS, FROM THE AFORESAID FACTS IT IS VERY MUCH CLEAR THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOT ONLY ENQUIRED INTO THE AL LEGED PURCHASE TRANSACTION, BUT HAS APPLIED HIS MIND TO THE MATERIALS BROUGHT ON RECORD. IN FACT, THE DISPUTED PURCHASE IS THE SOLE REASON FOR WHICH THE ASSESSMENT WAS RE OPENED UNDER SECTION 147 OF THE ACT. IN VIEW OF THE AFORESAID FACTUAL POSITION, THE O BSERVATIONS OF LEARNED PCIT THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND OR HAS NOT MADE ENQUIRY WHICH HE SHOULD HAVE MADE, IN OUR VIEW, IS WITHOUT ANY FACTU AL BASIS. MORE SO, WHEN THE SELLING DEALER HAS RESPON DED TO NOTICE ISSUED UNDER SECTION 133( 6) BY THE ASSESSING OFFICER AND HAS CONFIRMED THE SALES MADE TO THE ASSESSEE. AS REGARDS THE DECISION RENDERED IN CASE OF N.K. PROTEINS WE MUST OBSERVE , IN THE FACTS OF THE SAID CASE, A SEARCH AND SE IZURE OPERATION WAS CONDUCTED IN THE PREMISES OF THE ASSE SSEE AND IN THE COURSE OF SUCH SEARCH AND SEIZURE OPERATION BLANK CHEQUE BOOKS, BILL BOOKS, LETTER HEAD S IN THE NAME OF VARIOUS PARTIES WERE FOUND AND SEIZED. HOWEVER, NO SUCH FACTS ARE INVOLVED IN THE PRESENT APPEAL. EVEN OTHERWISE ALSO, LEARNED PCIT HAS NOT EXPRESSED ANY OPINION AS TO WHETHER THE ENTIRE PURCHASE SHOULD 9 MAYUR RAJNIKANT SHAH HAVE BEEN DISALLOWED OR ONLY PROFIT ELEMENT HAS TO BE ADDED. HE HAS AGAIN LEFT THE ISSUE OPEN FOR THE DECI SION BY THE ASSESSING OFFICER WHILE DIRECTING HIM TO MAKE AFRESH ASSESSMENT. WHEN T HE ASSESSING OFFICER HAS ALREADY PASSED THE ASSESSMENT ORDER AFTER MAKING NECESSARY ENQUIRY AND APPLYING HIS MIND TO THE MATERIALS BROUGHT ON RECORD, IT IS NOT UNDERSTOOD WHAT MORE CAN BE ACHIEVED BY SETTING ASIDE THE ASSESSMENT ORDER AND RESTORING THE ISS UE TO HIM FOR MAKING A FRESH ASSESSMENT WITHOUT ANY SPECIFIC DIRECTION. IN THE AFORESAID FACTS AND CIRCUMSTANCES, WE HOLD THAT EXERCISE OF POWER UNDER SECTIO N 263 OF THE ACT IN THE FACTS OF THE INSTANT CASE IS NOT VALID. ACCORDINGLY, WE QUASH THE ORDER PAS SED UNDER SECTION 263 OF THE ACT AND RESTORE THE ASSESSMENT ORDER . GROUNDS ARE ALLOWED. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 17.01.2020 SD/ - M. BALAGANESH ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 17.01.2020 10 MAYUR RAJNIKANT SHAH COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI