ACIT,Cir.-5, Pune V. Shri Ramesh G. Porwal, Pune

ITA 264/PUN/2010

• Counselvise Citation: 26424514 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-09-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 15-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R G NAHAR
• Assessee Lawyers: SANJAY SINGH
• Keywords: Bogus purchase; Unexplained expenditure; Income from undisclosed sources; Search and seizure; Accommodation entries
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER I.T.A. NO. 264/PN/2010 AND 980/PN/2011 A.Y. 1998-99 AND 1998-99 ASSTT. CIT CIR. 5, PUNE :: APPELLANT VS. SHRI RAMESH G. PORWAL F-23 PARMAR TRADE CENTER NEAR SADHU VASWANI CHOWK, PUNE-411 001 PAN ACMPP 8685 N :: RESPONDENT APPELLANT BY: SHRI R.G. NAHAR RESPONDENT BY: SHRI SANJAY SINGH DATE OF HEARING: 8-9-2011 DATE OF PRONOUNCEMENT : 23 -9-2011 ORDER PER SHAILENDRA KUMAR YADAV, JM BOTH THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF CIT(A)-III PUNE DATED 23-11-20 09 FOR A.Y. 1998-99. ITA NO. 264/PN/2011 2. THE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL READ AS UNDER: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 27,11,719/- WITHOUT 2 ITA NO. 264 AND 980/PN/2011 RAMESH G. PORWAL A,Y. 1998-99 APPRECIATING THE FACTUAL AND LEGAL POSITION BROUGHT OUT BY THE A.O IN THE ASSESSMENT ORDER. 3. THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT IF THE TWIN TESTS OF LOOKING INTO SURROUNDING CIRCUMSTANCES AND APPLYING TEST OF HUMAN PROBABILITY, AS ENUNCIATED BY HON. SUPREME COURT IN CASE OF SUMATI DAYAL VS. CIT REPORTED IN 2 14 ITR 801 (SC) ARE APPLIED, THE ADDITION MADE BY THE A.O REQUIRES TO BE SUSTAINED. 4. THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN GIVING UNDUE IMPORTANCE TO FORM OF THE TRANSACTION AS DISTINGUISHED FROM SUBSTANCE OF THE TRANSACTION WHI CH CLEARLY POINTS TO UNTENABILITY OF THE CLAIM OF THE ASSESSEE REGARDING POSSESSION OF THE DIAMOND. 5. FOR THIS AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE A.O BE RESTORED. 2.1. THE ASSESSING OFFICER OBSERVED THAT AS A RESUL T OF SEARCH AND SEIZURE OPERATION CARRIED OUT IN THE CAS E OF SHARMA AND JOHARI GROUP, THAT BOGUS PURCHASES OF DIAMOND JEWELLERY DECLARED UNDER VDIS 1997 WAS MADE BY M/S. GALAXY EXPORT FROM VARIOUS DECLARANTS AND THE ASSESSEE WAS ONE OF THEM. ACCORDINGLY, THE ASSESSIN G OFFICER FOUND THAT THERE WAS NO ACTUAL SALE OF DIAM ONDS TO GALAXY EXPORTS AND THE ASSESSEE HAD OBTAINED BOGUS SALE CERTIFICATE FOR SALE OF NONEXISTENT DIAMONDS DECLAR ED UNDER VDIS 1997 AND THEREFORE, TREATED AN AMOUNT OF RS. 27,11,719/- REPRESENTING SALE PROCEEDS OF DIAMOND JEWELLERY AS INCOME FROM UNDISCLOSED SOURCES AND AD DED THE SAME TO THE INCOME OF THE ASSESSEE. THE ASSESSI NG 3 ITA NO. 264 AND 980/PN/2011 RAMESH G. PORWAL A,Y. 1998-99 OFFICER ALSO ESTIMATED THE PRICE FOR OBTAINING ACCOMMODATION ENTRIES @ 10% OF THE SALE PROCEEDS AN D MADE A FURTHER ADDITION OF RS. 2,71,171/- TO THE IN COME OF THE ASSESSEE AS UNEXPLAINED EXPENDITURE U/S 69-C OF THE ACT. ON APPEAL, THE CIT(A) DELETED BOTH THE ADDITIO NS MADE BY THE ASSESSING OFFICER, WHICH HAVE BEEN OPPOSED B EFORE US BY THE REVENUE. 3. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD WE FIND THAT THE ISSUE RAISED IN THIS APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE THIRD MEMBER DECISION OF THE TRIBUNAL IN THE CASE OF UTTA MCHAND JAIN VS. SITO (2006) 103 ITD 1. WE ALSO FIND THAT T HE SAID DECISION OF THE TRIBUNAL IN THE CASE OF UTTAMCHAND JAIN HAS BEEN UPHELD BY THE BOMBAY HIGH COURT IN INCOME- TAX APPEAL NO. 634 OF 2009 VIDE ORDER DATED 2-7-2009. U NDER THESE CIRCUMSTANCES, THE ORDER OF THE CIT(A) NEEDS NO INTERFERENCE. THE SAME IS UPHELD. ITA NO. 980/PN/2011 4. THIS APPEAL HAS BEEN FILED BY THE REVENUE TAKING AN ADDITIONAL GROUND OF APPEAL WHICH READS AS UNDER: THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN HOLDING THAT THE PROVISO TO SEC. 147 IS APPLICABLE AND THE NOTICE U/S 148 OF THE ACT ISSUED BY THE A.O HAV ING BEEN ISSUED BEYOND 4 YEARS FROM THE END OF THE ASSESSMENT YEAR IS NOT VALID IN ACCORDANCE WITH THE PROVISIONS OF LAW. 4 ITA NO. 264 AND 980/PN/2011 RAMESH G. PORWAL A,Y. 1998-99 4.1. DURING THE PROCEEDINGS BEFORE THE FIRST APPELL ATE AUTHORITY, IT WAS SUBMITTED THAT WHEN AN ASSESSMENT IS COMPLETED U/S 143(3) OF THE ACT, ACTION U/S 147 OF THE ACT CANNOT BE TAKEN AFTER FOUR YEARS FROM THE END OF TH E RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL TH E MATERIAL FACTS NECESSARY FOR ASSESSMENT. FURTHER, THE REASO NS RECORDED FOR REOPENING DO NOT STATE THAT THE ASSESS EE HAS NOT TRULY AND FULLY DISCLOSED ALL MATERIAL FACTS AN D THEREFORE, THE NOTICE ISSUED U/S 148 WAS INVALID AN D THE ASSESSMENT COMPLETED IN PURSUANCE OF SUCH NOTICE IS AB INITIO VOID. AFTER TAKING INTO CONSIDERATION THE SU BMISSIONS MADE ON BEHALF OF THE ASSESSEE, THE CIT(A) HELD THA T THE NOTICE U/S 148 HAS BEEN ISSUED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT AND THEREFO RE, PROVISO TO SECTION 147 DOES COME INTO PLAY AND THER EFORE, THE ACTION OF REOPENING THE ASSESSMENT BY THE ASSES SING OFFICER WAS HELD TO BE NOT VALID AND IN ACCORDANCE WITH THE PROVISIONS OF LAW. 4.2. AFTER TAKING INTO CONSIDERATION THE RIVAL SUBM ISSIONS AND PERUSING THE MATERIAL ON RECORD, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). ALTHOUGH IT I S TRUE THAT CERTAIN FACTS RELEVANT FOR THE PURPOSE OF ASSESSMEN T IN THE 5 ITA NO. 264 AND 980/PN/2011 RAMESH G. PORWAL A,Y. 1998-99 CASE OF THE ASSESSEE CAME TO THE KNOWLEDGE OF THE ASSESSING OFFICER, SUBSEQUENT TO COMPLETION OF ASSE SSMENT U/S 143(3) OF THE ACT, IT IS ONLY A PRESUMPTION TO SAY THAT THE ASSESSEE WAS AWARE OF MALPRACTICES INDULGED IN BY SHARMA AND JOHARI GROUP AGAINST WHOM SEARCH AND SEI ZURE OPERATION CARRIED OUT AND THAT THE BOGUS PURCHASES OF DIAMOND JEWELLERY DECLARED UNDER VDIS 1997 WAS MADE BY M/S. GALAXY EXPORT FROM VARIOUS DECLARANTS INCLUDIN G THE ASSESSEE. ONCE THE ASSESSEE WAS NOT IN THE KNOWLEDG E OF SUCH FACTS WHICH CAME TO LIGHT AS A RESULT OF ENQUI RIES CONDUCTED BY THE INVESTIGATION WING, IT CANNOT BE S AID THAT THE INCOME CHARGEABLE TO TAX ESCAPED ASSESSMENT. EV EN THE REASONS RECORDED BY THE ASSESSING OFFICER BEFORE RE OPENING THE ASSESSMENT DO NOT STATE THAT THE ASSESSEE HAS N OT TRULY AND FULLY DISCLOSED ALL MATERIAL FACTS. IN THE FACT S AND CIRCUMSTANCE OF THE CASE, THE CIT(A) WAS JUSTIFIED IN HOLDING THAT THE ACTION OF THE ASSESSING OFFICER IN REOPENING THE ASSESSMENT CANNOT BE HELD TO BE VALID AND IN ACCORDANCE WITH PROVISIONS OF LAW. WE UPHOLD THE S AME. 5. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. PRONOUNCED IN THE OPEN ON 23 RD SEPTEMBER 2011. SD/ - (G.S. PANNU) ACCOUNTANT MEMBER SD/ - SHAILENDRA KUMAR YADAV JUDICIAL MEMBER PUNE DATED THE 23 RD SEPTEMBER,2011 6 ITA NO. 264 AND 980/PN/2011 RAMESH G. PORWAL A,Y. 1998-99 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT III PUNE 4. CIT(A)-III PUNE 5. THE D.R, ITAT PUNE BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES, PUNE.