J ANU EXPORTS P. LTD, MUMBAI V. DCIT RG 5(2), MUMBAI

ITA 2677/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7787 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2005-2006
• Appeal Filed On: 07-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV DUTT
• Keywords: Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI R.K. PANDA (AM) AND SMT. ASHA VIJAYARAG HAVAN (JM) ITA NO. 2677/MUM/2010 ASSESSMENT YEAR- 2005-06 M/S. JANU EXPORTS PVT. LTD., J.D. SANGHAVI & CO., CHARTERED ACCOUNTANTS, 409, JOLLY BHAVAN NO.2, 7, NEW MARINE LINES, MUMBAI-400 020 PAN-AAACJ 94421 VS. THE CIT - 5, AAYAKAR BHAVAN, NEW MARINE LINES, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI PRAMOD K. PARIDA SMT. SANJUKTA CHOWDHARY RESPONDENT BY: SHRI SANJEEV DUTT O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 26.3.2010 PASSED BY THE LD. CIT-5 FOR THE A SSESSMENT YEAR 2005- 06. 2. THE ASSESSEE IS A MANUFACTURER AND EXPORTER OF D IAMONDS AND JEWELLERY. IT CONVERTS ROUGH DIAMONDS INTO POLISHE D DIAMONDS AND ALSO TRADES IN POLISHED DIAMONDS. IN ITS RETURN OF I NCOME THE ASSESSEE HAS CLAIMED A STOCK LOSS OF 410.20 CARATS OF DIAMONDS V ALUED AT RS.80,19,428/-. THE CLAIM OF LOSS WAS EXPLAINED VID E LETTER DATED 6 TH DECEMBER, 2007. THE ASSESSEE HAD SUBMITTED A COPY O F THE COMPLAINT MADE TO THE POLICE IN RESPECT OF THE LOSS OF DIAMON DS ALONGWITH A NEWSPAPER CUTTING DECLARING THE SAID LOSS. ITA NO. 2677/M/10 2 3. THE CIT U/S. 263 OF THE I.T. ACT ISSUED A SHOW C AUSE TO THE ASSESSEE. IN RESPONSE, THE ASSESSEE SUBMITTED ON B EHALF OF THE ASSESSEE- COMPANY AS FOLLOWS: SHRI KAMLESH R. SHAH, DIRECTOR OF THE ASSESSEE COMP ANY HAD LOST AN EXNVELOP CONTAINING A PACKET OF DIAMONDS WE IGHING 410.20 CARATS AT MATHEWS ROAD, NEAR OPERA HOUSE AT AROUND 8.30 P.M. ON THE 15 TH OF MARCH, 2005. SHRI KAMELSH R. SHAH WAS LEAVING F ROM OFFICE AND HAD PROCEEDED ON MATHEWS ROAD TO HIRE A TAXI. ON REALIZATION THAT THE PACKET OF DIAMONDS HAD FALLEN, AN EARNEST EFFORT WAS MADE TO LOCATE THE PACKET ON THE STRETCH OF THE ROAD BETWEEN THE POINT WHERE THE TAXI WAS BEING HIRED AND THE OF FICE PREMISES. SINCE THE PACKET COULD NOT HE LOCATED A COMPLAINT W AS ADDRESSED TO THE SR. INSPECTOR OF POLICE DR. D.B. MARG POLICE ST ATION ON THE 22 ND OF MARCH, 2005 WHEREIN IT WAS MENTIONED THAT I THE UNDERSIGNED MR. KAMLESH R. SHAH HAVING OFFIC E AT 201 BHUPATI CHAMBERS, MATHEWS ROAD, OPERA HOUSE WOU LD LIKE TO STATE AS UNDER :- ON 15 TH MARCH, LATE IN THE NIGHT AT ABOUT 8.30 WHILE GOING FROM THE OFFICE I WALKED DOWN THE MATHEWS ROA D AS I WANTED TO CATCH THE CAB AT THE CORNER. WHILE CATCHI NG THE CAB I CAME TO KNOW THAT ONE PACKET IN BROWN ENVELOPE CONT AINING 410.20 CARATS DIAMONDS MISSING. IMMEDIATELY I CAME BACK TO SEE ON THE ROAD WHETHER IT CAN BE FOUND. I THEN SEA RCHED IN THE OFFICE ALSO BUT OFFICE STOCK WAS TALLYING, I HA VE TO THEREFORE, SAY THAT THE PACKET MUST HAVE FALLEN ON THE ROAD BE TWEEN OFFICE BUILDING TILL THE CORNER OF THE ROAD WHERE I CAME TO CATCH THE CAB. THIS IS IF FOR YOUR INFORMATION. WE ARE AL SO GIVING NOTICE INT EH PAPER AS IT MAY HELP IN GETTING THE P ACKET IN CASE ANYBODY HAS FOUND THIS. 4. THE CITS OBSERVATION IN HIS ORDER U/S. 263 DT. 26.3.2010 IS AS FOLLOWS: COMPLAINT HAD BEEN ACKNOWLEDGED BY THE POLICE ON T HE 22 ND OF MARCH ITSELF. OTHER THAN THE ABOVE THE ASSESSEE COMPANY FILED AN ADVERTISEMENT IN THE GUJARATI NEWSPAPER STATING THA T A PACKET OF DIAMONDS WEIGHING 410.20 CARAT HAD BEEN LOST. NO IN SURANCE CLAIM WAS RECEIVED AS THE SAID PROPERTY HAD NOT BEEN INSU RED. THE ITA NO. 2677/M/10 3 ASSESSEE COMPANY HAD MERELY FILED A LETTER DATED 6 TH DECEMBER, 2007 ALONGWITH A COPY OF THE POLICE COMPLAINT COPY OF THE NEWSPAPER CUTTING AND A COPY OF THE ACKNOWLEDGEMENT OF THE COMPLAINT BY THE POLICE. IT APPEARS THAT HE ASSESSEE HAD NOT MADE ANY EXTENS IVE AND REAL EFFORTS, AS EVIDENCED BY DOCUMENTS TO LOCATE T HE DIAMONDS. IT IS ALSO FOUND THAT THE ASSESSEE COMPANY MERELY FILED A COMPLAINT NARRATING THE INCIDENT OF LOSS OF PACKET OF DIAMOND S ON THE 22 ND OF MARCH, 2005 WHEN THE ALLEGED INCIDENT HAD TAKEN PLA CE ON THE 15 TH OF MARCH, 2005. THE SAID LETTER HAD BEEN ACCEPTED B Y THE POLICE STATION ON THE 22 ND OF MARCH, 2005 AND NO FIR WAS REGISTERED. THERE IS NO MENTION OF ANY INSURANCE CLAIM MADE BY THE ASSESSEE, EVEN THOUGH THE ADMINISTRATIVE AND SELLIN G EXPENSES AS SHOWN IN SCHEDULE N SHOWS A SUM OF RS.4.94 LAC AP PEARING AS JEWELLERS BLOCK POLICY. FROM THE DOCUMENTS FILED THE ASSESSEE ONLY WROTE A COMPLAINT TO THE POLICE FOLLOWED BY A DECLA RATION IN THE NEWSPAPER ON THE 25 TH OF MARCH, 2005. A PERUSAL OF THE RECORD REVEALS THAT THE ASSESSING AUTHORITY HAD NOT MADE / CAUSED ANY INDEPENDENT ENQUIRY INTO THE GENUINENESS OF THE CLAIM OF LOSS MADE BY THE ASSESS EE. THE ASSESSING AUTHORITY APPEARS TO HAVE ACCEPTED THE CL AIM WITHOUT ANY APPLICATION OF MIND. MOREOVER, THE ASSESSING OFFICE R HAD MADE NO EFFORTS TO CAUSE ENQUIRIES AS TO WHY NO CLAIM FOR I NSURANCE WAS MADE BY THE ASSESSEE COMPANY. RATHER THE RECORD SHO WS THAT THE ASSESSING OFFICER HAS MERELY ACCEPTED THE CLAIM OF THE ASSESSEE, AS IS EVIDENT FROM THE LETTER DATED 6 TH DECEMBER, 2007 AND ITS ENCLOSURES PLACED ON RECORD. THE FACT THAT THE ASSESSING OFFICER HAS NOT CAUSED PROPER ENQUIRY AS TO CHECK THE VERACITY OF THE INCIDENT, MAKES THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E AS THERE WAS AN INCORRECT ASSUMPTION OF FACTS AND THE ASSESSMENT WA S MADE WITHOUT ANY ENQUIRY. NON ENQUIRY BY THE ASSESSING OFFICER I S AN ERROR. AS SUCH, THE ASSESSMENT IS BOUND TO BE ERRONEOUS AND HENCE P REJUDICIAL TO THE REVENUE. THE ABOVE IS SUPPORTED BY THE FOLLOWING CA SE LAWS :- 1. CIT VS. PUSHPA DEVI (1987) 164 ITR 639 (PAT) 2. BISMILLAH TRADING CO. VS. INTELLIGENCE OFFICER (200 1) 248 ITR 292 (KER.) 3. THALIBAI F. JAIN VS. ITO (1975) 101 ITR 1 (KAR) 4. CIT VS. PUSHPA DEVI (1987) 164 ITR 639 (PAT.) 5. RAMPYARI DEVI SARAOGI VS. COMMISSIONER OF INCOME TA X (1968) 67 ITR 84 (SC). ITA NO. 2677/M/10 4 6. THALIBAI F. JAIN VS. INCOME TAX OFFICER (1975) 101 ITR 1 (KAR) 7. MALABAR INDUSTRIAL CO. LTD. VS. COMMISSIONER OF INC OME TAX (20000) 159 CTR (SC) 1. 5. THE LD. CIT HELD AS FOLLOWS: I AM OF THE OPINION THAT THE ASSESSING OFFICER HA S NEITHER CONSIDERED THE FACTS OF THE CASE IN PROPER LIGHT NO R APPLIED THE RELEVANT LAW CORRECTLY RESULTING IN LOSS OF REVENUE . I FIND THAT THE ASSESSMENT SO MADE IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE ASSESSMENT IS SET ASIDE WITH A DIR ECTION TO REFRAME THE SAME AFTER CONSIDERING THE OBSERVATIONS GIVEN A BOVE AND AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEI NG HEARD. 6. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US AND R AISED THE FOLLOWING GROUND: THE LD. CIT HAS ERRED IN SETTING ASIDE ORDER PASSE D BY DCIT RANGE-5 & DIRECTING TO REFRAME THE ASSESSMENT WITHO UT PROPERLY CONSIDERING THE FACTS AVAILABLE ON THE RECORDS 7. THE LD. COUNSEL FOR THE ASSESSEE SHRI PRAMOD K. PARIDA SUBMITTED THE FOLLOWING ARGUMENTS: 8. THE LD. CIT HAS PRESUMED THAT THE AO HAS NOT MAD E ANY ENQUIRY INTO THE GENUINENESS OF CLAIM OF LOSS MADE BY THE A SSESSEE. THE AO HAS APPLIED HIS MIND AND HAS GONE BY THE EVIDENCE OF TH E ASSESSEE FILING THE COMPLAINT BEFORE THE SR. INSPECTOR OF POLICE, DR. D .B. MARG POLICE STATION, MUMBAI. 9. BEFORE US THE ASSESSEES COUNSEL FILED A PAPER B OOK AND AT PAGE 32 THE AO HAS IN THE QUESTIONNAIRE DURING THE ASSESSM ENT PROCEEDINGS FOR A.Y. 2005-06 ASKED THE ASSESSEE TO FURNISH DETAILS OF WRITE OFF OF DIAMONDS VALUING OF RS. 80,19,428/-. THE LD. COUNS EL ALSO FILED COPY OF THE COMPLAINT MADE BEFORE THE POLICE AUTHORITIES. HE ALSO STATED THAT THE INSURANCE COMPANY REFUSED TO ENTERTAIN THEIR CLAIM SINCE THERE WAS SOME ITA NO. 2677/M/10 5 LAPSE ON THE PART OF THE ASSESSEE IN THE PAYMENT OF THE PREMIUM AMOUNT. THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THA T THOUGH THE INCIDENT TOOK PLACE ON 15 TH MARCH, 2005 THE COMPLAINT WAS LODGED ONLY ON 22 ND MARCH, 2005 SINCE THEY WERE PURSUING THE CLAIM OF I NSURANCE. HE ALSO STATED THAT THE CITS OBSERVED THAT NO FIR WAS REGI STERED WAS INCORRECT. HE FURTHER ARGUED THAT SINCE MOST OF THE DIAMOND TR ADERS WERE GUJARATHEES, THE ASSESSEE GAVE AN ADVERTISEMENT OF THE LOSS IN GUJARATHI NEWSPAPER. THE LD. COUNSEL FURTHER SUBMITTED THAT THE AO WAS FULLY AWARE OF THE LOSS AND SATISFIED WITH THE GENUINENES S OF THE CLAIM AS THE DETAILS WERE IN THE TAX AUDIT REPORT AND ALSO THE A O HAD EXAMINED THE SAME DURING THE ENQUIRY WHILE ISSUING NOTICE U/S. 1 43(2). THE LD. COUNSEL RELIED ON THE FOLLOWING CASE LAWS: 1) 268 ITR 128 2) 259 ITR 502 3) 203 ITR 108 4) 243 ITR 83 10. THE LD. DEPARTMENTAL REPRESENTATIVE SHRI SANJAY DUTT ARGUED THAT FURTHER ENQUIRY SHOULD HAVE BEEN MADE BY THE AO AND THE AO HAD MERELY GONE ON CIRCUMSTANTIAL EVIDENCE. 11. WE HEARD BOTH THE PARTIES. WE ARE OF THE OPINI ON THAT THE AO HAS PASSED THE ORDER AFTER DUE APPLICATION OF MIND. DUR ING THE SCRUTINY ASSESSMENT PROCEEDINGS THE ENTIRE PARTICULARS HAVE BEEN FURNISHED BY THE ASSESSEE. 12. IN THE CASE OF HARI IRON TRADING CO. VS CIT 263 ITR 437 (P&H), THE DIVISION BENCH, AFTER REFERRING TO SEC. 263 OF THE ACT HAS HELD AS FOLLOWS: A BARE PERUSAL OF THE AFORESAID PROVISIONS SHOWS T HAT THE COMMISSIONER CAN EXERCISE POWERS UNDER SUB-SEC. (1) OF SEC. 263 OF THE ACT ONLY AFTER EXAMINING THE RECORD OF ANY PROCEEDINGS UNDER THE ACT. THE EXPRESSION RECORD HAS ALSO BEEN DEFINED IN CLAUSE (B) OF THE EXPLANATION SO AS TO INCLUDE ALL RECORDS RELATING TO ANY PROCEEDINGS AVAILABLE A T THE TIME OF ITA NO. 2677/M/10 6 EXAMINATION BY THE COMMISSIONER. THUS, IT IS NOT O NLY THE ASSESSMENT ORDER BUT THE ENTIRE RECORD WHICH HAS TO BE EXAMINED BEFORE ARRIVING AT A CONCLUSION AS TO WHET HER THE AO HAD EXAMINED ANY ISSUE OR NOT. THE ASSESSEE HAS NO CONTROL OVER THE WAY AN ASSESSMENT ORDER IS DRAFTER. THE AS SESSEE ON ITS PART HAD PRODUCED ENOUGH MATERIAL ON RECORD TO SHOW THAT THE MATTER HAD BEEN DISCUSSED IN DETAIL BY THE AO. THE LEAST THAT THE TRIBUNAL COULD HAVE DONE WAS TO REFER TO T HE ASSESSMENT RECORD TO VERIFY THE CONTENTIONS OF THE ASSESSEE. INSTEAD OF DOING THAT, THE TRIBUNAL HAS MERELY BEEN SWAYED BY THE FACT THAT THE AO HAS NOT MENTIONED ANYTHING IN THE ASSESSMENT ORDER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO EXAMINES NUMEROUS ISSUES. GENE RALLY, THE ISSUES WHICH ARE ACCEPTED DO NOT FIND MENTION I N THE ASSESSMENT ORDER AND ONLY SUCH POINTS ARE TAKEN NOT E OF ON WHICH THE ASSESSEES EXPLANATIONS ARE REJECTED AND ADDITIONS/DISALLOWANCES ARE MADE. AS ALREADY OBSER VED, WE HAVE EXAMINED THE RECORDS OF THE CASE AND FIND THAT THE AO HAD MADE FULL INQUIRIES BEFORE ACCEPTING THE CLAIM OF THE ASSESSEE QUA THE AMOUNT OF RS. 10 LAKHS ON ACCOUNT OF DISCREPANCY IN STOCK. NOT ONLY THIS, HE HAS EVEN G ONE A STEP FURTHER AND APPENDED AN OFFICE NOTE WITH THE ASSESS MENT ORDER TO EXPLAIN WHY THE ADDITION FOR ALLEGED DISCR EPANCY IN STOCK WAS NOT BEING MADE. IN THE ABSENCE OF ANY SUGGESTION BY THE COMMISSIONER AS TO HOW THE INQUIR Y WAS NOT PROPER, WE ARE UNABLE TO UPHOLD THE ACTION TAKEN BY HIM U/S. 263 OF THE ACT. RESPECTFULLY FOLLOWING THE RATIO OF THE ABOVE DECIS ION, WE ALLOW THE ASSESSEES APPEAL. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF MARCH, 2011 SD/- SD/- (R.K. PANDA) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 31 ST MARCH, 2011 RJ ITA NO. 2677/M/10 7 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR I BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 2677/M/10 8 DATE INITIALS 1 DRAFT DICTATED ON: 2 5 . 0 3 .201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 2 6 .0 3 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10 . DATE OF DISPATCH OF ORDER: _________ ______