M/s. Premji Valji & Sons (Jewellers) P. Ltd., Rajkot V. The DCIT, Circle - 2 (1), Rajkot, Rajkot

ITA 257/RJT/2022

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 5749 (ITAT-RAJKOT)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 26-09-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 03-11-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIASHISHKUMARPANDEY; FORTHEASSESSEEWHICHWASALSONOTCONTROVERTED
• Assessee Lawyers: SHRIRANJITLALCHANDANI; ISSUINGSHOWCAUSENOTICEUSOFTHEACTDATED

Judgement Text

आयकरअपीलीयअधिकरण , अहमदाबादनायपीप INTHEINCOMETAXAPPELLATETRIBUNAL, (ConductedthroughE-Court,Rajkot) BEFOREMsSUCHITRAKAMBLE,JUDICIALMEMBER And SHRIWASEEMAHMED,ACCOUNTANT,JUDICMEMBER आयकरअपीलसं ./ITANos.257&223/Rjt/2022 निर्धररवरध / Asstt.Years:2010-11&2012-13 M/sPremjiValji&Sons (Jewellers)Pvt.Ltd. “KUVARJIBHAITOWER” PalaceRoad, Rajkot-360001. PAN:AACCP2555N Vs. D.C.I.T, Circle-2(1), Rakot. (Applicant)(Respondent) Assesseeby:ShriRanjitLalchandani,A.R Revenueby:ShriAshishKumarPandey,Sr.D.R सुिव्ईकीत्रीख/DateofHearing:27/09/2023 घोरर्कीत्रीख /DateofPronouncement:31/10/2023 आदेश /ORDER PERWASEEMAHMEDACCOUNTANTMEMBER: ThecaptionedtwoappealshavebeenfiledattheinstanceoftheAssessee againsttheorderoftheLearnedCommissionerofIncomeTax(Appeals),Rajkot-2, (NFAC,Delhi)(inshort“Ld.CIT(A)”)arisinginthematterofassessmentorder passedunders.143(3)r.w.s.147ftheIncomeTaxAct1961(here-in-after referredtoas"theAct")relevanttotheAssessmentYears2010-11&2012-13. ITAnos.257&223/Rjt/2022 Asstt.Years2010-11&2012-13 2 First,wetakeupITANo.257/RJT/2022forAY2010-11 2.Theassesseehasraisedthefollowinggroundsofappeal: “1.TheCIT(A)erredinconfirmingthereopeningoftheassessment.The confirmationofthereopeningisnotjustified. 2.TheCIT(A)erredinconfirmingthatthepurchasesfromM/s.NazarImpexPvt.Ltd. werebogusandmakinganadditionof25%ofthepurchases.” 3.TheassesseeingroundNo.1ofitsappealhaschallengedthevalidityof reopeningoftheassessmentu/s147oftheAct. 4.Thenecessaryfactsofthecasearethattherewasasearchatthepremises ofShriRajendraJainGroupofMumbaiu/s132oftheActdated3 rd October2013. Duringthesearch,itwasfoundthatoneoftheconcernsofthegroup,namelyM/s NazarImpexPvt.Ltd.isengagedinprovidingbogussalebillstovariousconcerns andthisfactwasalsoadmittedbythedirectorofthesaidcompany.Itwasfurther unearthedthatM/sNazarImpexPvt.Ltd.hasshownsalesamountingtoRs. 11,99,268/-fortheyearunderdisputetotheassessee.Accordingly,theAssessing Officerbasedontheinvestigationreportformedreasonstobelievethatthe assesseehasshownbogusexpensesofRs.11,99,268/-whichhasescaped assessment.Therefore,theproceedingsu/s147oftheActwereinitiatedinthe nameoftheassesseebyissuingshowcausenoticeu/s148oftheActdated1 st March2017. 5.Theld.AuthorizedRepresentativebeforeushaschallengedthereopening onthereasoningthattherewasalreadyanassessmentframedundersection 143(3)oftheActinthecaseoftheassesseedated29 th March2013.Thereafter, theassesseewasmadesubjecttotheescapementofincometaxproceedingsand hence,theassessmentwasagainframedu/s143(3)r.w.s.147oftheActvide orderdated12 th February2015.Aspertheld.AuthorizedRepresentative,the issuerelatingtothepurchasefromM/sNazarImpexPvt.Ltd.hasalreadybeen ITAnos.257&223/Rjt/2022 Asstt.Years2010-11&2012-13 3 verifiedbytheRevenueintwodifferentassessmentproceedingsasdiscussed above.Thus,furtherreopeningonsamesetoffactswillamounttochangeof opinionwhichisnotpermissibleforinitiatingtheproceedingsu/s147oftheAct. 6.Onthecontrary,theld.DepartmentalRepresentativesubmittedthatthe issueofallegedboguspurchaseswasnotverifiedbytheRevenueonearlier occasionsintwodifferentassessmentproceedings.Furthermore,thepresent proceedingswereinitiatedbasedontheinvestigationreportinpursuanttothe searchcarriedoutinthecaseofShriRajendraJainGroupatMumbai.Asperthe ld.DepartmentalRepresentative,thereweresufficientmaterialsbeforethe AssessingOfficerbasedonwhichtheAssessingOfficerformedreasonstobelieve thattheincomehasescapedassessment.Theld.DepartmentalRepresentative vehementlysupportedtheorderoftheauthoritiesbelow. 7.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Thefirstcontroversyarisesforouradjudication whethertheAssessingOfficerontheearlieroccasionduringtheproceedingsu/s 143(3)/143(3)r.w.s.147oftheActhasformedanyopinionaboutthepurchases shownbytheassesseefromM/sNazarImpexPvt.Ltd.Inthisregard,wefind pertinenttoreferthefindingofld.CIT(A)whicharereproducedasunder: “4.8ItcanbeseenfromtheabovethattheAOhasverysystematicallybroughtonrecord theinformationreceivedbyhimfromtheInvestigationWing,Mumbaiandalsopointedout thatthebeliefhasbeenformedbyhimthattheassesseehasnotfullyandtrulydisclosed allmaterialfacts,astheinformationhasbeenreceivedafterconclusionofthe2nd reassessment.AperusalofthereasonsrecordedindicatesthattheAOhasdulyand properlyappliedhismindtotheinformationsoreceivedbyhim.Tomymindtherefore,the reopeningmadebytheAOcannotbefaulted. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 4.9Asregardsthecontentionoftheassesseethatheiscoveredbythe1 st provisoto sec147,itistobenotedthatthereopeningandsubsequentadditionisbasedonspecific informationreceivedbytheAOfromtheInvestigationWing.Noparticularenquiries regardingthepurchasefromNazarimpexweremadebytheAOeitherintheregular scrutinyorthe1streopening.Itthereforecannotbesaidthattheassesseehasdischarged hisonusoffullyandtrulydisclosingallmaterialfactsbeforetheAO.Basedonthefactsas narratedaboveandrespectfullyfollowingthedecisionsofthejurisdictionalHighCourt,I ITAnos.257&223/Rjt/2022 Asstt.Years2010-11&2012-13 4 amoftheviewthatthereopeningofthisassessmentisproperandvalid.Accordingly,the sameisupheldandgroundnumber1isdismissed. 7.1Fromtheabove,thereisnoambiguitythattheAssessingOfficerhasnot formedanyopinionwithrespecttothepurchasesshownbytheassesseefrom M/sNazarImpexPvt.Ltd.inthelightofthefactsdiscussedaboveasaresultof searchandseizureoperationconductedinthecaseofShriRajendraJainGroup. Atthetimeofhearing,theld.counseloftheassesseehasnotcontrovertedthe findingsoftheld.CIT-A.Accordingly,weareoftheviewthattheactionofthe AssessingOfficercannotbesaidthatitisbasedonchangeofopinion. 7.2Further,wenotethatthefoundationofinitiatingtheproceedingsu/s147 oftheActwasthereportreceivedfromtheinvestigationwingwhereinitwas allegedthattheassesseehasmadeboguspurchasesfromM/sNazarImpexPvt. Ltd.Undisputedly,thereportfromtheinvestigationwingisatangiblematerial whichwasnotavailabletotheAssessingOfficerduringtheproceedingscarried outontheearlieroccasions.TheHon’bleGujaratHighCourtinthesimilarfacts andcircumstancesinthecaseofM/sSajaniJewelsVs.DCITreportedin71 taxmann.com90hasheldasunder: 8.Wenoticethatunderletterdated16.07.2014,theinvestigationwingoftheincometax departmenthadplacedtheentirereportofsaidinvestigationalongwithimportant documentssuchasthestatementofBhanwarlalJainandotherwitnesseswhose statementswererecorded.Ifafterperusalofsuchdocuments,theAssessingOfficer recordedthereasons,gistofwhichisnotedabove,inouropinion,itcannotbestatedthat thesereasonswerenotthoseoftheAssessingOfficerandmerelyamountedtomechanical reproductionoftheexerciseundertakenbytheinvestigationwingoftheIncometax department.Itisundoubtedlytruethatthereasonstoberecordedbeforeissuanceof noticeofre-openinghavetobethoseoftheAssessingOfficeralone.Thishowever,does notmeanthattheAssessingOfficercannotrelyontheexerciseundertakenbyotherwings oftheGovernmentdepartments,ifthematerialsocollectedthroughinquiryor investigationprovidesprima-facieinformation,atangiblematerial;whichenablesthe AssessingOfficertoformabeliefthatincomechargeabletotaxhasescapedassessment. ThereisnothingtopreventtheAssessingOfficerfromrecordingsuchsatisfactionandto proceedtoissuenoticeforreopening.AnindependentdecisionbytheAssessingOfficerto enablehertocometotheconclusionthatincomechargeabletotaxhasescaped assessmentissine-qua-nonforreopeninganassessment.Thiswouldundoubtedlyrequire applicationofmindonherpartwhencertainmaterialscollectedbysomeotherwingofthe departmentisplacedbeforeher.Therecanhoweverbenostraight-jacketformulaofthe mannerinwhich,mindcanbeappliedorshowntohavebeenapplied.Thesamemaybe ITAnos.257&223/Rjt/2022 Asstt.Years2010-11&2012-13 5 gatheredfromthereasonsrecordedandothercontemporaneousmaterialonrecord.In thiscontext,wearesatisfiedthatitwasthedecisionoftheAssessingOfficer,basedonthe materialscollectedbytheinvestigationwingthatsherecordedthereasonstoformabelief thatincomechargeabletotaxhadescapedassessment,whichledhertoissuenoticeof reopening. 7.3Inviewoftheabove,wedonotfindanyinfirmityintheinitiationofthe proceedingsbytheRevenueundertheprovisionsofsection147oftheActinthe givenfactsandcircumstances.Hence,thegroundofappealoftheassesseeis herebydismissed. 8.Thesecondissueraisedbytheassesseeisthattheld.CIT(A)erredin confirmingtheadditionmadebytheAssessingOfficerinpartbeing25%ofbogus purchasesinsteadofdeletingthesameinentirety. 9.TheAssessingOfficerduringtheassessmentproceedingsfoundthatthe assesseehasshownboguspurchasesamountingtoRs.11,99,268/-whichcannot beallowedasdeductionu/s37(1)oftheAct.Thus,theAssessingOfficer disallowedthesameandaddedtothetotalincomeoftheassessee. 10.Aggrievedassesseepreferredanappealbeforetheld.CIT(A)whohas restrictedtheadditionmadebytheAssessingOfficertotheextentofthegross profitembeddedinsuchboguspurchases.Therelevantfindingoftheld.CIT(A)is extractedasunder: “5.2ItremainstoaddressthecontentionoftheassesseethattheCIT(A)inhisowncase inanearlieryearhasruledinhisfavouranddeletedthedisallowanceofboguspurchase.I haveperusedthatorderoftheCIT(A)andfindthattheLdCIT(A)-2Rajkot,hasnot consideredthedecisionsofthejurisdictionalHighCourtcitedbymeabove.Inanycase, theratiooftheHighCourtdecisionwouldprevailandthiscontentionoftheassesseeis rejected.Theotherargumentisthattheassesseeclaimstobecoveredbythedecisionof theHon'bleSupremeCourtinthecaseofOdeonBuilders.ThatorderoftheSupreme CourtisarejectionoftheReviewpetitionandtheassesseeisrelyingontheheadnote withoutreferencetothefactsofhiscase.Inviewofthediscussionaboveonfacts,itisto beheldthattheassesseehasavailedboguspurchaseentryfromNazarimpex.Inrespect ofthequantumofdisallowance,respectfullyfollowingthedecisionsoftheHon'ble jurisdictionalHighCourtinthecaseofJagdishPatel,VijayTradingandSynbiotics,forthe AY2010-11,theadditionofRs.11,99,368isrestrictedtoGP%XRs.3,36,030,andforthe AY2011-12,isrestrictedtotheGP%XRs56,77,000.Grounds2&3forbothappealsare partlyallowed.” ITAnos.257&223/Rjt/2022 Asstt.Years2010-11&2012-13 6 11.Beingaggrievedbytheorderoftheld.CIT(A),theassesseeisinappeal beforeus. 12.Theld.AuthorizedRepresentativebeforeusfiledapaperbookrunning frompages1to125andcontendedthattheassesseehasalreadyshowngross profitoutoftheallegedboguspurchasesofRs.11,99,268/-whichisevidentfrom thefinancialstatementoftheassessee.Thus,aspertheld.Authorized Representativeifanyadditionismadeonaccountofgrossprofitonthevalueof allegedpurchases,itwouldleadtothedoubleadditionwhichisnotdesirable undertheprovisionsoflaw.Insumandsubstance,theld.Authorized Representativecontendedthatitisonlythenetgrossprofitembeddedinsuch allegedboguspurchasestobeaddedtothetotalincomeoftheassessee. 13.Ontheotherhand,theld.DepartmentalRepresentativevehemently supportedtheorderoftheauthoritiesbelow. 14.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Inthepresentcase,theldCIT(A)hasgivena directiontomaketheadditionoutoftheallegedboguspurchasestotheextentof thegrossprofitembeddedtherein.Undisputedly,therateofgrossprofit,directed bytheld.CIT-A,hasnotbeenchallengedbytheld.AuthorizedRepresentativeat thetimeofhearing.Theonlycontroversyislimitedtotheextentwhetherthe grossprofitalreadyshownbytheassesseeagainstsuchallegedboguspurchases shouldbesetofagainstgrossprofitdeterminedbytheld.CIT(A).Wefindforcein theargumentoftheld.counselfortheassesseewhichwasalsonotcontroverted bytheld.DepartmentalRepresentative.Accordingly,wedirecttheRevenuetotax onlythatportionofgrossprofitonsuchallegedpurchaseswhichisembedded therein.Forexample,thegrossprofitshownbytheassesseeintheregular financialstatementis15%ofthepurchases.Thus,ittranspiresthatthebogus purchaseshavealreadybeensufferedtotaxtotheextentofgrossprofitshown ITAnos.257&223/Rjt/2022 Asstt.Years2010-11&2012-13 7 bytheassesseeinitsbooksofaccounts.Thus,intheevent,theprofitonsuch allegedboguspurchasesisdecided@25%,then,theassesseeisentitledtoset offthegrossprofitbeing15%ofthepurchasesalreadyshowninthebooksof accounts. 14.1Inviewoftheaboveandafterconsideringthefactsintotality,wesetaside theissuetothefileoftheAssessingOfficerforfreshadjudicationinthelightof theabovediscussionandaspertheprovisionsoflaw.Hence,thegroundof appealoftheassesseeisherebyallowedforstatisticalpurposes. 15.Intheresult,theappealoftheassesseeisherebypartlyallowedforstatistical purposes. NowcomingtotheITANo.223/RJT/2022forAY2012-13. 16.Theassesseehasraisedthefollowinggroundsofappeal: “1.TheCIT(A)erredinconfirmingthereopeningoftheassessment.The confirmationofthereopeningisnotjustified. 2.TheCIT(A)erredinconfirmingthatthepurchasesfromM/s.NazarImpexPvt.Ltd. werebogusandmakinganadditionof25%ofthepurchases.” 17.TheassesseeingroundNo.1ofitsappealhaschallengedthevalidityof reopeningoftheassessmentu/s147oftheAct. 18.Attheoutset,wenotethattheissueraisedbytheassesseeinitsgroundof appealfortheAY2012-13isidenticaltotheissueraisedbytheassesseeinITA No.257/RJT/2022fortheassessmentyear2010-11.Therefore,thefindingsgiven inITANo.257/RJT/2022shallalsobeapplicablefortheAY2012-13.Theappeal oftheassesseeforAY2010-11hasbeendecidedvideparagraphNo.7ofthis orderagainsttheassessee.TheLd.ARandDRalsoagreedthatwhateverwillbe findingsfortheA.Y2010-11shallalsobeappliedfortheAY2012-13.Hence,the groundofappealfiledbytheassesseeisherebydismissed. ITAnos.257&223/Rjt/2022 Asstt.Years2010-11&2012-13 8 19.Thesecondissueraisedbytheassesseeisthattheld.CIT(A)erredin confirmingtheadditionmadebytheAssessingOfficerinpartbeing25%ofbogus purchasesinsteadofdeletingthesameinentirety. 20.Attheoutset,wenotethattheissueraisedbytheassesseeinitsgroundof appealfortheAY2012-13isidenticaltotheissueraisedbytheassesseeinITA No.257/RJT/2022fortheassessmentyear2010-11.Therefore,thefindingsgiven inITANo.257/RJT/2022shallalsobeapplicablefortheAY2012-13.Theappeal oftheassesseeforAY2010-11hasbeendecidedvideparagraphNo.14ofthis orderinfavouroftheassesseeinpartforstatisticalpurposes.TheLd.ARandDR alsoagreedthatwhateverwillbefindingsfortheAY2010-11shallalsobeapplied fortheAY2012-13.Hence,thegroundofappealfiledbytheassesseeispartly allowedforthestatisticalpurposes. 21.Intheresult,theappealfiledbytheassesseeispartlyallowedforthe statisticalpurposes. 22.Inthecombinedresult,boththeappealsfiledbytheassesseearepartly allowedforthestatisticalpurposes. OrderpronouncedintheCourton31/10/2023atAhmedabad. Sd/-Sd/- (SUCHITRAKAMBLE)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated31/10/2023 Manish ITAnos.257&223/Rjt/2022 Asstt.Years2010-11&2012-13 9 आदेशकीपनतनलनपगेनरत/CopyoftheOrderforwardedto: आदेश्िुस्र/BYORDER, उप/सह्यकपंजीक्र(Dy./Asstt.Registrar) आयकरअपीलीयअनरकरर,अहमद्ब्द/ITAT,Ahmedabad 1. अपील्र्/TheAppellant 2. प्यर्/TheRespondent. 3. संबंनरतआयकरआयुक/ConcernedCIT 4. आयकरआयुक(अपील)/TheCIT(A) 5. नवभ्गीयपनतनिनर,आयकरअपीलीयअनरकरर/DR, ITAT, 6. ग्रधफ्ईल/Guardfile.