Sheetal V. Bhat, CHENNAI V. ACIT, CHENNAI

ITA 272/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4231 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 30-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D ANAND
• Keywords: Reopening of assessment; Bogus purchase; Reason to believe
• Section: 133(6); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , , ' # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.272/MDS/2017 & '& / ASSESSMENT YEAR : 2007-08 SMT. SHEETAL V. BHAT, NO.37, GOPALAPURAM, CATHEDRAL ROAD, CHENNAI - 600 086. PAN : AACPB 0790 L V. THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE XV, CHENNAI - 600 034. ()*/ APPELLANT) (+,)*/ RESPONDENT) )* - . / APPELLANT BY : SHRI D. ANAND, ADVOCATE +,)* - . / RESPONDENT BY : SHRI AR.V. SREENIVASAN, JCIT / - 0' / DATE OF HEARING : 08.06.2017 12' - 0' / DATE OF PRONOUNCEMENT : 28.06.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 4, CHENN AI, DATED 21.10.2016 AND PERTAINS TO ASSESSMENT YEAR 2007-08. 2 I.T.A. NO.272/MDS/17 2. SHRI D. ANAND, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERATION IS RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). ACCORDING TO THE LD. COUNSEL, THE ASSE SSEE FILED RETURN OF INCOME ON 29.10.2007 AND THE SAME WAS PROCESSED UND ER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFF ICER REOPENED THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT ON 25.03.2015. THE LD.COUNSEL SUBMITTED THAT ONCE THE ASSESSMENT PROCEEDING WAS TERMINATED BY OPERATION OF LAW, THE ASSESSING OFFICER CANNOT REOPEN THE SAME UNDER SECTION 147 OF THE ACT. PLACING RELIANCE ON THE JUDGMENT OF MADRAS HIGH COU RT IN TANMAC INDIA V. DCIT IN TAX CASE (APPEAL) NO.1426 OF 2007 DATED 19.12.2016, THE LD.COUNSEL SUBMITTED THAT THE MADRA S HIGH COURT, AFTER CONSIDERING THE JUDGMENT OF APEX COURT IN DCI T V. RAJESH JHAVERI STOCK BROKERS PVT. LTD. (295 ITR 499), FOUN D THAT THE ASSESSMENT CANNOT BE REOPENED WITHOUT ANY MATERIAL DISCLOSING ESCAPEMENT OF INCOME. IN FACT, ACCORDING TO THE LD . COUNSEL, THE MADRAS HIGH COURT PLACED ITS RELIANCE ON THE JUDGME NT OF DELHI HIGH COURT IN CIT V. ORIENT CRAFT LTD. (354 ITR 546). T HEREFORE, ACCORDING TO THE LD. COUNSEL, THE REOPENING OF ASSE SSMENT IS NOT JUSTIFIED. 3 I.T.A. NO.272/MDS/17 3. ON THE CONTRARY, SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE RET URN OF INCOME WAS ADMITTEDLY PROCESSED UNDER SECTION 143(1) OF TH E ACT. IT IS NOT A CASE THAT THERE WAS NO MATERIAL FOR OPENING ASSES SMENT. ACCORDING TO THE LD. D.R., THERE WAS SEARCH IN THE CASE OF M/S DAKSH DIAMONDS, MUMBAI. ON THE BASIS OF THE REPORT RECEIVED FROM DEPUTY DIRECTOR OF INCOME TAX (INVESTIGATION)-II, M UMBAI, THE ASSESSING OFFICER REOPENED THE ASSESSMENT SINCE THE RE WAS ESCAPEMENT OF INCOME. THE REPORT RECEIVED FROM DEP UTY DIRECTOR OF INCOME TAX (INVESTIGATION)-II, MUMBAI DISCLOSES BOG US ENTRIES OF PURCHASE TO THE EXTENT OF ` 9.70.515/-. THEREFORE, THE LD. D.R. SUBMITTED THAT THE JUDGMENT OF MADRAS HIGH COURT IN TANMAC INDIA (SUPRA) WOULD NOT BE APPLICABLE AT ALL, HENCE, THE ASSESSING OFFICER HAS RIGHTLY REOPENED THE ASSESSMENT. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE RETURN FILED BY THE ASSESSEE ON 29.10.2007 WAS PROC ESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, A NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 25.03.2014. THE QUEST ION ARISES FOR 4 I.T.A. NO.272/MDS/17 CONSIDERATION IS WHETHER THE ASSESSING OFFICER HAS RIGHTLY REOPENED THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT. 5. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF M ADRAS HIGH COURT IN TANMAC INDIA (SUPRA). THE ISSUE BEFO RE THE MADRAS HIGH COURT IS AN IDENTICAL REOPENING OF ASSESSMENT AFTER PROCESSING THE RETURN UNDER SECTION 143(1) OF THE ACT. THE MA DRAS HIGH COURT AFTER REFERRING TO THE JUDGMENT OF APEX COURT IN RA JESH JHAVERI STOCK BROKERS PVT. LTD. (SUPRA), FOUND THAT FOR INI TIATING PROCEEDING UNDER SECTION 147 OF THE ACT, REASON TO BELIEVE ON THE PART OF THE ASSESSING OFFICER THAT INCOME CHARGEABLE TO TAX WAS ESCAPED ASSESSMENT, IS ONE OF THE ESSENTIAL CONDITIONS. TH E HIGH COURT FURTHER FOUND THAT THE COURT CANNOT EXAMINE THE SUF FICIENCY OF THE REASON ON THE BASIS OF WHICH REASSESSMENT WAS INITI ATED, STILL THE EXISTENCE OR OTHERWISE SUCH REASON TO BELIEVE IS CE RTAINLY OPEN TO VERIFICATION AND WOULD BE EVIDENT FROM THE REASONS RECORDED PRIOR TO ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT. IN T HE CASE BEFORE THE MADRAS HIGH COURT, THE REASON FOR REOPENING ASSESSM ENT WAS THE DEBIT CLAIMED TOWARDS LUMP SUM PAYMENT MADE AS A CO MPENSATION FOR FUTURE PROFITS TO THE EXTENT OF ` 5,50,000/-. THE HIGH COURT FOUND THAT THE DOCUMENT RELIED ON BY THE ASSESSING OFFICE R WAS PART OF THE 5 I.T.A. NO.272/MDS/17 RETURN FILED BY THE ASSESSEE. THE HIGH COURT FURTH ER FOUND THAT IF THE ASSESSING OFFICER, AFTER PROCESSING THE RETURN UNDE R SECTION 143(1) OF THE ACT, DOES NOT ISSUE NOTICE UNDER SECTION 143 (2) OF THE ACT TO INITIATE SCRUTINY PROCEEDING, THE OBVIOUS CONCLUSIO N IS THAT THE ASSESSING OFFICER DOES NOT CONSIDER IT NECESSARY OR EXPEDIENT TO DO SO TO VERIFY THE RETURN FILED BY THE ASSESSEE. THI S OPINION CANNOT BE ARBITRARILY CHANGED BY THE ASSESSING OFFICER TO RE- ASSESS ON THE BASIS OF THE MATERIAL ALREADY ON RECORD. SINCE NO MATERIAL IS AVAILABLE ON RECORD AFTER PROCESSING RETURN UNDER S ECTION 143(1) OF THE ACT, THE HIGH COURT FOUND THAT THE REASSESSMENT PROCESSING INITIATED BY THE ASSESSING OFFICER IS NOT JUSTIFIED . 6. IN THE CASE ON OUR HAND, THE FACTS ARE ENTIRELY DIFFERENT. IN THIS CASE, AFTER PROCESSING UNDER SECTION 143(1) OF THE ACT, THE ASSESSING OFFICER RECEIVED A REPORT FROM THE DEPUTY DIRECTOR OF INCOME TAX (INVESTIGATION)-II, MUMBAI REGARDING BOG US PURCHASE OF DIAMONDS FROM M/S DAKSH DIAMONDS, MUMBAI. THEREFOR E, THE REPORT RECEIVED FROM DEPUTY DIRECTOR OF INCOME TAX (INVESTIGATION)- II, MUMBAI WAS THE BASIS FOR REOPENING OF ASSESSMEN T. HENCE, IT CANNOT BE SAID THAT THE REOPENING WAS MADE ON THE B ASIS OF THE MATERIAL ALREADY EXISTED ON RECORD. THIS TRIBUNAL IS OF THE 6 I.T.A. NO.272/MDS/17 CONSIDERED OPINION THAT WHEN THE ASSESSING OFFICER RECEIVED INFORMATION WITH REGARD TO BOGUS PURCHASE OF DIAMON DS FROM M/S DAKSH DIAMONDS, SHE RIGHTLY REOPENED THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT, THEREFORE, THI S TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 7. NOW COMING TO THE MERIT OF THE ADDITION MADE BY THE ASSESSING OFFICER, SHRI D. ANAND, THE LD.COUNSEL FO R THE ASSESSEE, SUBMITTED THAT THE ASSESSEE, IN FACT, PURCHASED DIA MONDS FROM M/S DAKSH DIAMONDS AND PAYMENTS WERE MADE THROUGH BANKI NG CHANNEL. THE INVOICE DATED 05.07.2006 WAS PRODUCED BEFORE THE ASSESSING OFFICER AND THE PAYMENT WAS ALSO MADE ON 01.09.2006, ALMOST TWO MONTHS LATER. IF THE TRANSACTIONS WERE SHAM AND BOGUS AS CLAIMED BY THE ASSESSING OFFICER, THEN THERE MAY NOT BE ANY NECESSITY TO THE ASSESSEE TO SETTLE THE PAYMENT THR OUGH BANKING CHANNEL. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING ANY ADDITION. 8. REFERRING TO THE ORDER OF THE CIT(APPEALS), THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT(APPEALS) CONFIR MED THE ORDER OF THE ASSESSING OFFICER ONLY ON THE GROUND THAT M/ S DAKSH 7 I.T.A. NO.272/MDS/17 DIAMONDS HAS NOT CONFIRMED THE PURCHASE OF DIAMONDS BY THE ASSESSEE EVEN AFTER ISSUING OF NOTICE UNDER SECTION 133(6) OF THE ACT. ACCORDING TO THE LD. COUNSEL, IT IS FOR THE A SSESSING OFFICER TO ENFORCE THE ATTENDANCE OF M/S DAKSH DIAMONDS, MUMBA I, IN EXERCISE OF HIS STATUTORY POWER AND TO VERIFY WHETH ER THE ASSESSEE HAS IN FACT PURCHASED THE DIAMONDS FROM M/S DAKSH D IAMONDS. THE LD.COUNSEL FURTHER SUBMITTED THAT THE CIT(APPEA LS) IS ALSO DOUBTFUL HOW THE ASSESSEE WAS ABLE TO TRANSPORT DIA MONDS FROM SURAT TO CHENNAI. ACCORDING TO THE LD. COUNSEL, TH E COST OF DIAMONDS IS ONLY ` 9,70,515/-. IT CAN BE CARRIED EASILY BY HAND, THEREFORE, THE WAY BILL OR LORRY BILL IS NOT REQUIR ED TO PROVE THE TRANSPORT OF DIAMONDS FROM SURAT TO CHENNAI. SINCE THE ASSESSEE PRODUCED ALL THE MATERIALS, ACCORDING TO THE LD. CO UNSEL, THE CIT(APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE ADD ITION. 9. ON THE CONTRARY, SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASS ESSEE HAS NOT PRODUCED ANY MATERIAL BEFORE THE ASSESSING OFFICER TO SUBSTANTIATE THE TRANSACTION, THEREFORE, THE ENTRY MADE IN THE B OOKS OF ACCOUNT TO THE EXTENT OF ` 9,70,515/- WAS FOUND TO BE BOGUS. MOREOVER, THE ASSESSING OFFICER MADE AN ATTEMPT TO VERIFY THE PUR CHASES BY 8 I.T.A. NO.272/MDS/17 ISSUING NOTICE UNDER SECTION 133(6) OF THE ACT. TH E SO-CALLED M/S DAKSH DIAMONDS HAS NOT RESPONDED TO THE LETTERS ISS UED BY THE ASSESSING OFFICER. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE MAIN CONTENTION OF THE ASSESSEE IS THAT THE DIAMONDS WER E PURCHASED FROM M/S DAKSH DIAMONDS AND THE DETAILS OF LEDGER A ND BANK ACCOUNTS WERE PRODUCED BEFORE THE ASSESSING OFFICER AS WELL AS THE CIT(APPEALS) AND THE PAYMENTS WERE MADE THROUGH BAN KING CHANNEL. THIS IS OBVIOUS FROM THE OBSERVATION MADE BY THE ASSESSING OFFICER IN THE IMPUGNED ORDER ITSELF. HO WEVER, THE PURCHASE BILLS WERE NOT PRODUCED BEFORE THE ASSESSI NG OFFICER. THEREFORE, THE ASSESSING OFFICER CAME TO A CONCLUSI ON THAT THE ASSESSEE HAS NOT PRODUCED PROPER DOCUMENTARY EVIDEN CE TO SUPPORT THE TRANSACTIONS. THE CIT(APPEALS) FOUND T HAT M/S DAKSH DIAMONDS HAS NOT RESPONDED TO THE LETTERS ISSUED BY THE ASSESSING OFFICER UNDER SECTION 133(6) OF THE ACT. THEREFORE , THE INFORMATION PROVIDED BY THE DEPUTY DIRECTOR OF INCOME TAX (INVE STIGATION)-II, 9 I.T.A. NO.272/MDS/17 MUMBAI WAS PROVED BEYOND DOUBT. WHEN THE ASSESSEE CLAIMS THAT THE DIAMONDS WERE PURCHASED AND PRODUCED THE LEDGER AND THE DETAILS OF PAYMENT MADE TO M/S DAKSH DIAMONDS, IT I S OBLIGATION ON THE PART OF THE ASSESSING OFFICER TO EXAMINE THE NE CESSITY OF THE ASSESSEE TO MAKE PAYMENT THROUGH BANKING CHANNEL. MERELY BECAUSE M/S DAKSH DIAMONDS HAS NOT RESPONDED TO THE LETTERS ISSUED BY THE ASSESSING OFFICER UNDER SECTION 133(6 ) OF THE ACT, THAT WOULD NOT CREATE ANY DOUBT IN THE MIND OF THE ASSESSING OFFICER THAT THE INFORMATION RECEIVED FROM DEPUTY DIRECTOR OF INCOME TAX (INVESTIGATION)-II, MUMBAI WOULD BE PROVED. 11. INCOME-TAX ACT IS A SPECIAL ENACTMENT FOR THE P URPOSE OF COMPUTATION OF TAXABLE INCOME AS PER THE MATERIAL A VAILABLE ON RECORD. NO TAX CAN BE LEVIED ON PRESUMPTION. UNLE SS THE MATERIAL AVAILABLE ON RECORD ESTABLISHES THAT THE ASSESSEE H AS EARNED THE INCOME, NO TAX CAN BE LEVIED BY THE AUTHORITIES ON THE PRESUMPTION THAT THE THIRD PARTY HAS NOT RESPONDED TO THE QUERY MADE BY THE ASSESSING OFFICER. THE INCOME-TAX ACT CONFERS AMPL E POWER AND AUTHORITY ON THE ASSESSING OFFICER TO ENFORCE THE A TTENDANCE OF M/S DAKSH DIAMONDS AND CALL FOR RECORDS FROM THEM TO VE RIFY THE TRANSACTION MADE BY THE ASSESSEE. THE ASSESSING OF FICER IS NOT 10 I.T.A. NO.272/MDS/17 EXPECTED TO LEAVE THE MATTER AS SUCH MERELY BECAUSE M/S DAKSH DIAMONDS HAS NOT RESPONDED TO HER LETTERS ISSUED UN DER SECTION 133(6) OF THE ACT. IF THE ASSESSING OFFICER DID NO T WANT TO PROCEED AFTER ISSUING LETTERS UNDER SECTION 133(6) OF THE A CT, THE ASSESSEE CANNOT BE PENALIZED ON PRESUMPTION. 12. THE MATTER WOULD STAND DIFFERENTLY IN CASE THE ASSESSING OFFICER PROCEEDS FURTHER AFTER ISSUING NOTICE UNDER SECTION 133(6) OF THE ACT, AND ESTABLISH THAT THE ASSESSEE HAS NOT PU RCHASED ANY DIAMOND FROM M/S DAKSH DIAMONDS. IN THIS CASE, THE ASSESSING OFFICER HAS NOT TAKEN ANY FURTHER STEP AFTER ISSUIN G THE NOTICE UNDER SECTION 133(6) OF THE ACT. THEREFORE, THIS TRIBUNA L IS OF THE CONSIDERED OPINION THAT THERE CANNOT BE ANY DISALLO WANCE / ADDITION ON THE BASIS OF PRESUMPTION THAT THE INFORMATION RE CEIVED BY THE ASSESSING OFFICER WAS ESTABLISHED BEYOND REASONABLE DOUBT. THEREFORE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE OR DERS OF THE AUTHORITIES BELOW. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ADDITION OF ` 9,70,515/- IS DELETED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 11 I.T.A. NO.272/MDS/17 ORDER PRONOUNCED ON 28 TH JUNE, 2017 AT CHENNAI. SD/- SD/- ( ) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 28 TH JUNE, 2017. KRI. - +056 76'0 /COPY TO: 1. )* /APPELLANT 2. +,)* /RESPONDENT 3. / 80 () /CIT(A)-4, CHENNAI-34 4. PRINCIPAL CIT-5, CHENNAI. 5. 69 +0 /DR 6. :& ; /GF.