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

ITA 258/RJT/2022

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0702 (ITAT-RAJKOT)
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 03-10-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 03-11-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIV.J.BORICHA; FORTHEASSESSEEWHICHWAS
• Assessee Lawyers: SHRIR.D.LALCHANDANI

Judgement Text

INTHEINCOMETAXAPPELLATETRIBUNAL RAJKOTBENCH,RAJKOT [CONDUCTEDTHROUGHVIRTUALCOURT] Before:ShriWaseemAhmed,AccountantMember AndShriSiddharthaNautiyal,JudicialMember M/sPremjitValji&Sons (Jewellers)Pvt.Ltd. Rajkot PAN:AACCP2555N (Appellant) Vs Dy.CIT, Circle-2(1), Rajkot (Respondent) Assesseeby:ShriR.D.Lalchandani,A.R. Revenueby:ShriV.J.Boricha,Sr.D.R. Dateofhearing:04-10-2023 Dateofpronouncement:18-10-2023 आदेश/ORDER PER:WASEEMAHMED,ACCOUNTANTMEMBER:- Thisassessee’sappealforA.Y.2011-12,arisesfromtheorderof NationalFacelessAppealCentre(NFAC),Delhidated26-08-2022,inthe proceedingsundersection250oftheIncomeTaxAct,1961;inshort“the Act”. ITANo.258/Rjt/2022 AssessmentYear2011-12 I.T.ANo.258/Rjt/2022A.Y.2011-12PageNo M/s.PremjiValji&Sons(Jewellers)Pvt.Ltd.vs.DCIT 2 2.Theassesseehasraisedthefollowinggroundsofappeal: “1.TheCIT(A)erredinconfirmingthereopeningoftheassessment.The confirmationofthereopeningisnotjustified. 2.TheCIT(A)erredinconfirmingthatthepurchasesfromM/s.NazarImpex Pvt.Ltd.werebogusandmakinganadditionof25%ofthepurchases.” 3.TheassesseeingroundNo.1ofitsappealhaschallengedthevalidity ofreopeningoftheassessmentu/s147oftheAct. 3.1Thenecessaryfactsofthecasearethattherewasasearchatthe premisesofShriRajendraJainGroupofMumbaiu/s132oftheActdated 3 rd October2013.Duringthesearch,itwasfoundthatoneoftheconcernsof thegroup,namelyM/sNazarImpexPvt.Ltd.isengagedinprovidingsale billstovariousconcernsandthisfactwasalsoadmittedbythedirectorof thecompany.ItwasfurtherunearthedthatM/sNazarImpexPvt.Ltd.has shownsalesamountingtoRs.46,76,000/-fortheyearunderdisputetothe assessee.Accordingly,theAssessingOfficerbasedontheinvestigation reportformedreasonstobelievethattheassesseehasshownbogusexpenses ofRs.56,77,000/-whichhasescapedassessment.Therefore,the proceedingsu/s147oftheActwereinitiatedinthenameoftheassesseeby issuingshowcausenoticeu/s148oftheActdated1 st March2017. 3.2Theld.AuthorizedRepresentativebeforeushaschallengedthereopening onthereasoningthattherewasalreadyanassessmentframedundersection143(3) oftheActinthecaseoftheassesseedated29 th March2013.Thereafter,the assesseewasmadesubjecttotheescapementofincometaxproceedingsandhence theassessmentwasagainframedu/s143(3)r.w.s.147oftheActvideorderdated I.T.ANo.258/Rjt/2022A.Y.2011-12PageNo M/s.PremjiValji&Sons(Jewellers)Pvt.Ltd.vs.DCIT 3 18 th February2016.Aspertheld.AuthorizedRepresentative,theissuerelatingto thepurchasefromM/sNazarImpexPvt.Ltd.hasalreadybeenverifiedbythe Revenueintwodifferentassessmentproceedingsasdiscussedabove.Thus, furtherreopeningonsamesetoffactswillamounttochangeofopinion whichisnotpermissibleforinitiatingtheproceedingsu/s147oftheAct. 3.3Onthecontrary,theld.DepartmentalRepresentativesubmittedthat theissueofallegedboguspurchaseswasnotverifiedbytheRevenueon earlieroccasionsintwodifferentassessmentproceedings.Furthermore,the presentproceedingswereinitiatedbasedontheinvestigationreportin pursuanttothesearchcarriedoutinthecaseofShriRajendraJainGroupat Mumbai.Aspertheld.DepartmentalRepresentative,thereweresufficient materialsbeforetheAssessingOfficerbasedonwhichtheAssessingOfficer formedreasonstobelievethattheincomehasescapedassessment.Theld. DepartmentalRepresentativevehementlysupportedtheorderofthe authoritiesbelow. 4.Wehaveheardtherivalcontentionsofboththepartiesandperused thematerialsavailableonrecord.Thefirstcontroversyarisesforour adjudicationwhethertheAssessingOfficerontheearlieroccasionduring theproceedingsu/s143(3)/143(3)r.w.s.147oftheActhasformedany opinionaboutthepurchasesshownbytheassesseefromM/sNazarImpex Pvt.Ltd.Inthisregard,wefindpertinenttoreferthefindingofld.CIT(A) whicharereproducedasunder: “4.8ItcanbeseenfromtheabovethattheAOhasverysystematicallybroughton recordtheinformationreceivedbyhimfromtheInvestigationWing,Mumbaiand I.T.ANo.258/Rjt/2022A.Y.2011-12PageNo M/s.PremjiValji&Sons(Jewellers)Pvt.Ltd.vs.DCIT 4 alsopointedoutthatthebeliefhasbeenformedbyhimthattheassesseehasnot fullyandtrulydisclosedallmaterialfacts,astheinformationhasbeenreceived afterconclusionofthe2ndreassessment.Aperusalofthereasonsrecorded indicatesthattheAOhasdulyandproperlyappliedhismindtotheinformation soreceivedbyhim.Tomymindtherefore,thereopeningmadebytheAOcannot befaulted. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 4.9Asregardsthecontentionoftheassesseethatheiscoveredbythe1 st provisotosec147,itistobenotedthatthereopeningandsubsequentadditionis basedonspecificinformationreceivedbytheAOfromtheInvestigationWing.No particularenquiriesregardingthepurchasefromNazarimpexweremadebythe AOeitherintheregularscrutinyorthe1streopening.Itthereforecannotbesaid thattheassesseehasdischargedhisonusoffullyandtrulydisclosingallmaterial factsbeforetheAO.Basedonthefactsasnarratedaboveandrespectfully followingthedecisionsofthejurisdictionalHighCourt,Iamoftheviewthatthe reopeningofthisassessmentisproperandvalid.Accordingly,thesameisupheld andgroundnumber1isdismissed. 4.1FromtheabovethereisnoambiguitythattheAssessingOfficerhas notformedanyopinionwithrespecttothepurchasesshownbytheassessee fromM/sNazarImpexPvt.Ltd.inthelightofthefactsdiscussedaboveasa resultofsearchandseizureoperationconductedinthecaseofShriRajendra JainGroup.Atthetimeofhearing,theld.counseloftheassesseehasnot controvertedthefindingsoftheld.CIT-A.Accordingly,weareoftheview thattheactionoftheAssessingOfficercannotbesaidthatitisbasedon changeofopinion. 4.2Further,wenotethatthefoundationofinitiatingtheproceedingsu/s 147oftheActwasthereportreceivedfromtheinvestigationwingwherein itwasallegedthattheassesseehasmadeboguspurchasesfromM/sNazar ImpexPvt.Ltd.Undisputedly,thereportfromtheinvestigationwingisa tangiblematerialwhichwasnotavailabletotheAssessingOfficerduringthe I.T.ANo.258/Rjt/2022A.Y.2011-12PageNo M/s.PremjiValji&Sons(Jewellers)Pvt.Ltd.vs.DCIT 5 proceedingscarriedoutontheearlieroccasions.TheHon’bleGujaratHigh CourtinthesimilarfactsandcircumstancesinthecaseofM/sSajaniJewels Vs.DCITreportedin71taxmann.com90hasheldasunder: 8.Wenoticethatunderletterdated16.07.2014,theinvestigationwingofthe incometaxdepartmenthadplacedtheentirereportofsaidinvestigation alongwithimportantdocumentssuchasthestatementofBhanwarlalJainand otherwitnesseswhosestatementswererecorded.Ifafterperusalofsuch documents,theAssessingOfficerrecordedthereasons,gistofwhichisnoted above,inouropinion,itcannotbestatedthatthesereasonswerenotthoseofthe AssessingOfficerandmerelyamountedtomechanicalreproductionofthe exerciseundertakenbytheinvestigationwingoftheIncometaxdepartment.Itis undoubtedlytruethatthereasonstoberecordedbeforeissuanceofnoticeofre- openinghavetobethoseoftheAssessingOfficeralone.Thishowever,doesnot meanthattheAssessingOfficercannotrelyontheexerciseundertakenbyother wingsoftheGovernmentdepartments,ifthematerialsocollectedthroughinquiry orinvestigationprovidesprima-facieinformation,atangiblematerial;which enablestheAssessingOfficertoformabeliefthatincomechargeabletotaxhas escapedassessment.ThereisnothingtopreventtheAssessingOfficerfrom recordingsuchsatisfactionandtoproceedtoissuenoticeforreopening.An independentdecisionbytheAssessingOfficertoenablehertocometothe conclusionthatincomechargeabletotaxhasescapedassessmentissine-qua- nonforreopeninganassessment.Thiswouldundoubtedlyrequireapplicationof mindonherpartwhencertainmaterialscollectedbysomeotherwingofthe departmentisplacedbeforeher.Therecanhoweverbenostraight-jacketformula ofthemannerinwhich,mindcanbeappliedorshowntohavebeenapplied.The samemaybegatheredfromthereasonsrecordedandothercontemporaneous materialonrecord.Inthiscontext,wearesatisfiedthatitwasthedecisionofthe AssessingOfficer,basedonthematerialscollectedbytheinvestigationwingthat sherecordedthereasonstoformabeliefthatincomechargeabletotaxhad escapedassessment,whichledhertoissuenoticeofreopening. 4.3Inviewoftheabove,wedonotfindanyinfirmityintheinitiationof theproceedingsbytheRevenueundertheprovisionsofsection147ofthe Actinthegivenfactsandcircumstances.Hence,thegroundofappealofthe assesseeisherebydismissed. I.T.ANo.258/Rjt/2022A.Y.2011-12PageNo M/s.PremjiValji&Sons(Jewellers)Pvt.Ltd.vs.DCIT 6 5.Thesecondissueraisedbytheassesseeisthattheld.CIT(A)erredin confirmingtheadditionmadebytheAssessingOfficerinpartbeing25%of boguspurchasesinsteadofdeletingthesameinentirety. 6.TheAssessingOfficerduringtheassessmentproceedingsfoundthat theassesseehasshownboguspurchasesamountingtoRs.56,77,000/-which cannotbeallowedasdeductionu/s37(1)oftheAct.Thus,theAssessing Officerdisallowedthesameandaddedtothetotalincomeoftheassessee. 7.Aggrievedassesseepreferredanappealbeforetheld.CIT(A)who hasrestrictedtheadditionmadebytheAssessingOfficertotheextentofthe grossprofitembeddedinsuchboguspurchases.Therelevantfindingofthe ld.CIT(A)isextractedasunder: “5.2ItremainstoaddressthecontentionoftheassesseethattheCIT(A)inhis owncaseinanearlieryearhasruledinhisfavouranddeletedthedisallowance ofboguspurchase.IhaveperusedthatorderoftheCIT(A)andfindthattheLd CIT(A)-2Rajkot,hasnotconsideredthedecisionsofthejurisdictionalHighCourt citedbymeabove.Inanycase,theratiooftheHighCourtdecisionwouldprevail andthiscontentionoftheassesseeisrejected.Theotherargumentisthatthe assesseeclaimstobecoveredbythedecisionoftheHon'bleSupremeCourtinthe caseofOdeonBuilders.ThatorderoftheSupremeCourtisarejectionofthe Reviewpetitionandtheassesseeisrelyingontheheadnotewithoutreferenceto thefactsofhiscase.Inviewofthediscussionaboveonfacts,itistobeheldthat theassesseehasavailedboguspurchaseentryfromNazarimpex.Inrespectofthe quantumofdisallowance,respectfullyfollowingthedecisionsoftheHon'ble jurisdictionalHighCourtinthecaseofJagdishPatel,VijayTradingand Synbiotics,fortheAY2010-11,theadditionofRs.11,99,368isrestrictedto GP%XRs.3,36,030,andfortheAY2011-12,isrestrictedtotheGP%XRs 56,77,000.Grounds2&3forbothappealsarepartlyallowed.” I.T.ANo.258/Rjt/2022A.Y.2011-12PageNo M/s.PremjiValji&Sons(Jewellers)Pvt.Ltd.vs.DCIT 7 8.Beingaggrievedbytheorderoftheld.CIT(A),theassesseeisin appealbeforeus. 9.Theld.AuthorizedRepresentativebeforeusfiledapaperbook runningfrompages1to93andcontendedthattheassesseehasalready showngrossprofitoutoftheallegedboguspurchasesofRs.56,76,000/- whichisevidentfromthefinancialstatementoftheassessee.Thus,asper theld.AuthorizedRepresentativeifanyadditionismadeonaccountof grossprofitonthevalueofallegedpurchases,itwouldleadtothedouble additionwhichisnotdesirableundertheprovisionsoflaw.Insumand substance,theld.AuthorizedRepresentativecontendedthatitisonlythenet grossprofitembeddedinsuchallegedboguspurchasestobeaddedtothe totalincomeoftheassessee. 10.Ontheotherhand,theld.DepartmentalRepresentativevehemently supportedtheorderoftheauthoritiesbelow. 11.Wehaveheardtherivalcontentionsofboththepartiesandperused thematerialsavailableonrecord.Inthepresentcase,theld.CIT(A)has givenadirectiontomaketheadditionoutoftheallegedboguspurchasesto theextentofthegrossprofitembeddedtherein.Undisputedly,therateof grossprofithasnotbeenchallengedbytheld.AuthorizedRepresentativeat thetimeofhearing.Theonlycontroversyislimitedtotheextentwhether thegrossprofitalreadyshownbytheassesseeagainstsuchallegedbogus purchasesshouldbesetofagainstgrossprofitdeterminedbytheld.CIT(A). Wefindforceintheargumentoftheld.counselfortheassesseewhichwas I.T.ANo.258/Rjt/2022A.Y.2011-12PageNo M/s.PremjiValji&Sons(Jewellers)Pvt.Ltd.vs.DCIT 8 alsonotcontrovertedbytheld.DepartmentalRepresentative.Accordingly, wedirecttheRevenuetotaxonlythatportionofgrossprofitonsuchalleged purchaseswhichisembeddedtherein.Forexample,thegrossprofitshown bytheassesseeintheregularfinancialstatementis15%ofthepurchases. Thus,ittranspiresthattheboguspurchaseshavealreadybeensufferedtotax totheextentofgrossprofitshownbytheassesseeinitsbooksofaccounts. Thus,intheevent,theprofitonsuchallegedboguspurchasesisdecided@ 25%,then,theassesseeisentitledtosetoffthegrossprofitbeing15%ofthe purchasesalreadyshowninthebooksofaccounts. 11.1Inviewoftheaboveandafterconsideringthefactsintotality,weset asidetheissuetothefileoftheAssessingOfficerforfreshadjudicationin thelightoftheabovediscussionandaspertheprovisionsoflaw.Hence,the groundofappealoftheassesseeisherebyallowedforstatisticalpurposes. 12.Intheresult,theappealoftheassesseeispartlyallowedforstatistical purposes. Orderpronouncedintheopencourton18-10-2023 Sd/-Sd/- (SIDDHARTHANAUTIYAL)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad:Dated18/10/2023