DEPUTY COMMISSIONER OF INCOME TAX 4(3)(1), MUMBAI V. PANNA GOLD IMPEX LTD, MUMBAI

ITA 5158/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5392 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 04-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHI RAM KARTIKEYAN LD
• Assessee Lawyers: POOJA JAIN LD ARS
• Keywords: Unexplained cash credit; Principle of natural justice; Onus to prove
• Section: 143(3); 142(1); 131; 68; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5158/MUM/2017 ( / ASSESSMENT YEAR:2014-15) D CIT - 4(3)(1) ROOM NO.649, 6 TH FLOOR AAYKAR BHAVAN MUMBAI-400 020. / VS. M/S. PANNA GOLD IMPEX LTD. 2 ND FLOOR, FRONT SIDE, JOHARI MANSION, 259, KALBADEVI ROAD OPP. ADARSH HOTEL MUMBAI- 400 002. ./ ./PAN/GIR NO. AAHCS-7367-L ( ! /APPELLANT ) : ( '#! / RESPONDENT ) & C.O.NO.109/MUM/2019 [ARISING OUT OF ITA NO.5158/MUM/2017] ( / ASSESSMENT YEAR:2014-15) M/S. PA NNA GOLD IMPEX LTD. 2 ND FLOOR, FRONT SIDE, JOHARI MANSION, 259, KALBADEVI ROAD OPP. ADARSH HOTEL MUMBAI- 400 002. / VS. D CIT - 4(3)(1) ROOM NO.649, 6 TH FLOOR AAYKAR BHAVAN MUMBAI-400 020 ./ ./PAN/GIR NO. AAHCS-7367-L ( ! /APPELLANT ) : ( '#! / RESPONDENT ) ASSESSEE BY : VIMAL PUNAMIYA & MS. POOJA JAIN- LD. ARS DEPARTMENT BY : SHRI ABHI RAM KARTIKEYAN - LD. DR / DATE OF HEARING : 09/05/2019 / DATE OF PRONOUNCEMENT : 16/05/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2014-15 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-9, 2 MUMBAI [CIT(A)], APPEAL NO. CIT(A)-9/CIR.4/208/2016-17 DATED 31/05/2017 ON FOLLOWING GROUND OF APPEAL: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING TO AO TO DELETE THE ADDITION MADE TOWARDS UNEXPLAINED CASH CREDITS U/S. 68 OF THE ACT, OF RS.1,86,18,353/-. THE ASSESSEE, IN ITS CROSS-OBJECTION, HAS RAISED TH E FOLLOWING GROUNDS: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 9, MUMBAI ERRED IN AFFIRM ING THE ACTION OF THE AO IN CONFIRMING THE ADDITION MADE U/S. 143(3) R.W.S. 153 C OF THE ACT IN ABSENCE OF ANY NOTICE ISSUED U/S. 142(1) R.W.S. 153C OF THE INCOME -TAX ACT, 1961 ('THE ACT'), OR WARRANT ISSUED U/S. 132 OF THE INCOME-TAX ACT, 1961 ('THE ACT'), OR ASSETS / DOCUMENTS REQUISITIONED U/S. 132A. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD T HAT NO ASSESSMENT U/S. 143(3) R.W.S. 153 A CAN BE MADE SINCE THE PETITION OF DDLT(LNV), TIRUNELVELI WAS REJECTED BY THE COURT OF JUDICIAL MAGISTRATE NAGERCOIL AND THE ASSE TS SEIZED BY THE POLICE WERE RELEASED BY THE COURT. 3. THE RESPONDENT, THEREFORE, PRAYS THAT THE ASSESSMENT PROCEEDINGS U/S. 143(3) R.W.S. 153C OF THE ACT BE HELD AS VOID AB INITIO AN D BAD IN LAW. 2.1 FACTS ON RECORD REVEAL THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING IN GOLD WAS ASSESSED FOR IMPUGNED AY 143(3) R.W.S. 153C ON 28/03/2016 WHEREIN THE INCOME OF THE ASSESSEE WAS D ETERMINED AT RS.200.58 LACS AFTER CERTAIN ADDITIONS AS AGAINST R ETURNED INCOME OF RS.14.39 LACS FILED BY THE ASSESSEE ON 22/11/2014. 2.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT POLICE AUTHORITIES OF NAGERCOIL ARRESTED ONE SH. DHIRAJ KUMAR, EMPLOYEE OF ASSESSEE ON 04/09/2013 UNDER SUSPICIOUS CIRCUMSTANCES ALONG WIT H 6093.93 GRAMS OF GOLD ORNAMENTS AND CASH OF RS.3 LACS VIDE FIR NO.61 2/2013. THE DDIT (INVESTIGATION), TIRUNELVELI RECORDED STATEMENT OF SH. DHIRAJ KUMAR U/S 131 ON 07/09/2013 WHEREIN IT WAS SUBMITTED THAT SH. DHIRAJ KUMAR WAS THE EMPLOYEE OF THE ASSESSEE AND THE JEWELLERY WAS HANDED OVER TO SH. DHIRAJ KUMAR BY THE ASSESSEE FOR ONWARD DELIVERY TO 3 PARTIES SITUATED AT 3 NAGERCOIL AREA. THESE 3 PARTIES WERE STATED TO BE M/S SWASTHIKAS JEWELLERS, M/S PEREPPADANS GOLD PARK & M/S SHAJAHAN AS JEWELLERS . HOWEVER, UPON INQUIRY, THESE PARTIES DENIED HAVING PLACING ANY WORK ORDER WITH THE ASSESSEE. THE STATEMENT OF DIRECTOR OF THE ASSESSEE COMPANY WAS ALSO RECORDED WHEREIN IT WAS SUBMITTED THAT THE JEWELLERY BELONGED TO THE ASSESSEE AND THE SAME WAS HANDED OV ER FOR ONWARD DELIVERY. ACCORDINGLY, THE ASSESSEE WAS DIRECTED TO SUBSTANTIATE THE SAME. 2.3 THE ASSESSEE, VIDE REPLY DATED 10/03/2016 REITE RATED THAT JEWELLERY WAS HANDED OVER FOR ONWARD DELIVERY TO FOLLOWING CU STOMERS OF THE ASSESSEE: - NO. NAME OF CUSTOMERS GRAMS 1. SHAJAHANS JEWELLERS,NAGERCOIL, TAMIL NADU 3097.4 00 2. PEREPPADANAS GOLD PARK, NEYYATTINKARA, KERALA 14 43.210 3. SWASTHIKAS JEWELLERS, THIRUVANTMPURAM, KERALA 15 53.320 TOTAL 6093.30 IN SUPPORT, IT WAS ALSO SUBMITTED THAT MR. DHIRAJ K UMAR WAS GIVEN GOLD BARS WEIGHING 796.810 GRAMS COLLECTED FROM M/S SWASTHIKAS JEWELLERS FOR MAKING ORNAMENTS AT MUMBAI. THIS STOCK WAS ALSO WITH HIM WHEN HE WAS INTERCEPTED UNDER SUSPICION. THE ATTENTION WAS DRAWN TO THE FACT THAT THE ENTIRE STOCK OF GOLD ORNAMENTS WAS DULY AC COUNTED FOR IN THE BOOKS OF ACCOUNT MAINTAINED IN THE REGULAR COURSE O F BUSINESS BY THE ASSESSEE COMPANY. COPIES OF STOCK REGISTER REFLECTI NG RELEVANT ENTRIES FOR ISSUE OF GOLD JEWELLERY TO THE ABOVE SAID CUSTO MERS FOR ONWARD DELIVERY, SALES INVOICES, AUTHORIZATION LETTER ISSU ED BY COMPANY IN RESPECT OF GOODS TO BE DELIVERED TO THE AFORESAID P ARTIES, COPY OF ISSUE VOUCHERS FOR GOLD BARS WEIGHING 796.810 GRAMS ISSUE D BY M/S SWASTHIKAS JEWELERS ETC. WAS PLACED ON RECORD. ATTE NTION WAS ALSO 4 DRAWN TO THE FACT THAT UPON SATISFACTORY PRODUCTION OF PROOF OF OWNERSHIP, HONBLE JUDICIAL MAGISTRATE, NAGERCOIL AS PER ORDER NO. CMP 94/14 DATED 27/01/2014 OF JUDICIAL MAGISTRATE NO. II, COURT NAG ERCOIL ORDERED FOR THE RELEASE OF SEIZED GOLD AND DIRECTED FOR HANDING OVE R THE SAME TO THE AUTHORIZED PERSON OF THE ASSESSEE COMPANY. IN THIS BACKGROUND, IT WAS SUBMITTED THAT GOLD WAS DULY ACCOUNTED FOR IN THE B OOKS OF ACCOUNTS AND THE SAME WAS HANDED OVER BY THE ASSESSEE FOR ONWARD DELIVERY IN REGULAR COURSE OF BUSINESS. 2.4 HOWEVER, LD. AO OPINED THAT THE ASSESSEE FAILED TO SUBMIT ANY DOCUMENTARY EVIDENCE OR CREDIBLE EVIDENCE TO SATISF Y THAT 3 PARTIES PLACED ANY WORK ORDER OF JEWELLERY WITH THE ASSESSE E. IT WAS ALSO NOTED THAT THE 3 PARTIES DENIED THAT THE ITEMS IN POSSESS ION OF SH. DHIRAJ KUMAR BELONGED TO THEM. IN THE ABOVE BACKGROUND, AN AGGREGATE AMOUNT OF RS.186.18 LACS COMPRISING-OFF OF GOLD JEW ELLERY FOR RS.183.18 LACS AND CASH OF RS.3 LACS WAS TREATED AS UNEXPLAIN ED CASH CREDIT U/S 68 AND ADDED TO THE INCOME OF THE ASSESSEE. 3.1 THE ASSESSEE REITERATED THE SUBMISSION BEFORE L D. FIRST APPELLATE AUTHORITY AND CONTESTED THE ADDITIONS ON LEGAL GROU NDS AS WELL AS ON MERITS. THE LD. FIRST APPELLATE AUTHORITY, WHILE UP HOLDING THE ASSESSMENT PROCEEDINGS, OBSERVED THAT THE ASSESSEE WAS NOT PRO VIDED WITH OPPORTUNITY OF CROSS-EXAMINATION OF THE 3 PARTIES, WHOSE STATEMENTS FORMED THE BASIS OF MAKING THE IMPUGNED ADDITIONS. IT WAS FURTHER OBSERVED THAT THE OPPORTUNITY OF CROSS-EXAMINATION WAS AN ESSENTIAL INGREDIENT OF PRINCIPLE OF NATURAL JUSTICE AS HELD BY HONBLE APEX COURT IN ANDAMAN TIMBER INDUSTRIES [CIVIL APPEAL NO.4228 OF 2006 02/09/2015]. THEREFORE, MERE DENIAL OF THE 3 PARTIES COULD NOT L EAD TO ADDITION U/S 68 IN THE HANDS OF THE ASSESSEE. 5 3.2 PROCEEDING FURTHER, THE ORDER PASSED BY HONBLE JUDICIAL MAGISTRATE DIRECTING RELEASE OF THE JEWELLERY WAS ALSO EXAMINE D AND FOUND THAT DDIT, TIRUNELVELI COULD NOT PRODUCE ANY EVIDENCE TO SUBSTANTIATE THAT THE GOLD JEWELLERY WAS UNACCOUNTED FOR. ALSO, POLICE AU THORITIES DROPPED THE PROCEEDING AND FIR WAS CLOSED. THE JEWELLERY WAS DI RECTED TO BE HANDED OVER TO THE ASSESSEE COMPANY UNDER DUE PROCE SS OF LAW. IT WAS ALSO OBSERVED THAT NO DISCREPANCIES COULD BE POINTE D OUT BY LD. AO IN STOCK REGISTER, SALES INVOICES ETC. SUBMITTED BY TH E ASSESSEE DURING ASSESSMENT PROCEEDINGS AND THE SAID JEWELLERY WAS P ROPERLY ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. 3.3 IN THE ABOVE BACKGROUND, THE LD. FIRST APPELLAT E AUTHORITY, CONCURRING WITH ASSESSEES SUBMISSIONS, DELETED THE ADDITIONS BY MAKING FOLLOWING OBSERVATIONS: - 6.3.6. BASED ON THESE PECULIAR FACTS AND CIRCUMSTAN CES OF THE CASE ALONG WITH DOCUMENTARY EVIDENCES LIKE THE COURT ORDERS, CONFIR MATION BY THE PURCHASE PARTIES, CONFIRMATION BY THE SALE PARTY FOR HAVING PLACED OR DER IN ONE CASE, ETC, I FIND STRONG SUBSTANCE IN THE CASE OF THE APPELLANT COMPANY AS I T WAS PROVED AT THE STAGE OF CRIMINAL PROCEEDINGS ITSELF THAT THE GOLD JEWELLERY IS NOT UNACCOUNTED. FURTHER, AS FAR AS THE SOURCE OF SUCH GOLD JEWELLERY IS CONCERNED, I HAVE ALSO EXAMINED THE SAMPLE LETTER PLACED IN THE PAPER BOOK WHERE THE PURCHASE PARTY HAS CONFIRMED HAVING SOLD THE GOLD TO THE APPELLANT COMPANY OUT OF WHICH THE IMPUGNED GOLD JEWELLERY HAS BEEN MANUFACTURED. HENCE, THE AO HAS FULLY VERIFIED THE SOURCE OF THE GOLD JEWELLERY. ONCE HAVING PROVED THAT THE GOLD JEWELLE RY IS ACCOUNTED FOR BY THE COURT OF JUDICIAL MAGISTRATE AND THAT THE SOURCE OF SUCH JEWELLERY HAS BEEN VERIFIED BY THE AO, THERE CANNOT BE ANY GROUND FOR ADDITIONS IN THE PRESENT CASE, U/S 68 OF THE ACT. 6.3.7. AS FAR THE GROUND OF THE AO OF THE SALES PAR TIES DENIAL OF THE PLACING OF ORDERS IS CONCERNED, IT HAS ALREADY BEEN PROVED THAT THE S AME STOCK OF GOLD JEWELLERY HAS BEEN SOLD BY THE APPELLANT COMPANY TO TWO OF SUCH P ARTIES. AT NO POINT OF TIME, THE GOLD/ JEWELLERY WAS SEIZED BY THE DEPARTMENT EVEN T HOUGH REQUISITION WAS MADE BY THE DEPARTMENT BEFORE THE COURT FOR HANDING OVER/ G IVING CUSTODY OF THE SAID GOLD /JEWELLERY AND CASH BUT, THE SAME WAS NOT ALLOWED B Y THE COURT AFTER HEARING THE CONCERNED PARTIES. IN VIEW OF THE TOTALITY OF THE FACTS AND THE ORDERS OF THE JUDICIAL MAGISTRATE , I AM INCLINED TO AGREE WITH THE APPELLANT COMPANY THAT THE GOLD /JEWELLERY AS WELL AS CASH WAS NOT UNACCOUNTED AND HENCE NO ADDITION CAN BE MADE U/S 68 OF THE ACT. ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE ADDITION OF RS. RS.1,86,18,353/-. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 6 4. THE LD. DR SUBMITTED THAT THE 3 PARTIES CATEGORI CALLY DENIED HAVING PLACING ANY WORK ORDER WITH THE ASSESSEE AND THE RE LEASE OF JEWELLERY BY HONBLE JUDICIAL MAGISTRATE WOULD NOT SUBSTANTIATE THE SOURCE OF THE JEWELLERY AND THE COMPLETE ONUS TO PROVE THE SAME W AS ON ASSESSEE. PER CONTRA, LD. AR, ON THE STRENGTH OF DOCUMENTS PL ACED IN THE PAPER - BOOK, SUBMITTED THAT THE STOCK OF SEIZED GOLD WAS DULY AC COUNTED FOR IN THE BOOKS OF ACCOUNTS AND THE CONCLUSIVE DOCUMENTAR Y EVIDENCES WERE FURNISHED BY THE ASSESSEE TO SUBSTANTIATE THE SOURC E OF THE SAME. 5. WE HAVE CAREFULLY DELIBERATED ON THE ISSUE. THE UNDISPUTED FACT THAT EMERGES FROM THE RECORD ARE THAT THE GOLD JEWE LLERY WHICH WAS INTERCEPTED BY THE POLICE AUTHORITIES UNDER SUSPICI OUS CIRCUMSTANCES, HAS BEEN DECLARED BY HONBLE JUDICIAL MAGISTRATE AS BELONGING TO SH. DHIRAJ KUMAR, THE POSSESSOR THEREOF WHICH IS EVIDEN T FROM THE ORDERS OF HONBLE COURT AS PLACED ON RECORD. NOTHING ON RECOR D SUGGEST THAT SH. DHIRAJ KUMAR WAS NOT AN EMPLOYEE OF THE ASSESSEE CO MPANY AND THE SAID JEWELLERY DID NOT BELONG TO ASSESSEE COMPANY. IN FACT, THE STATEMENT OF SH. DHIRAJ KUMAR AS WELL AS THE DIRECT OR OF THE ASSESSEE COMPANY, IN UNISON, CONFIRM THE SAID FACTS. PROCEED ING FURTHER, THE SAID JEWELLERY WAS DULY ACCOUNTED FOR IN THE STOCK REGIS TERS SUBMITTED BY THE ASSESSEE DURING ASSESSMENT PROCEEDINGS AND THE ASSE SSEE PRODUCED DOCUMENTARY EVIDENCES IN THE SHAPE OF SALES INVOICE S, AUTHORIZATION LETTER ISSUED BY ASSESSEE IN RESPECT OF GOODS TO BE DELIVERED TO THE AFORESAID PARTIES, COPY OF ISSUE VOUCHERS FOR GOLD BARS WEIGHING 796.810 GRAMS ISSUED BY M/S SWASTHIKAS JEWELERS. THE STOCK OF GOLD JEWELLERY UNDER DISPUTE, UPON RELEASE BY JUDICIAL AUTHORITIES , HAS BEEN RECEIVED BACK IN THE STOCK REGISTER MAINTAINED BY THE ASSESS EE AND HENCE, DULY ACCOUNTED FOR. LASTLY, THE WHOLE BASIS OF MAKING AD DITIONS I.E. DENIAL BY 7 THE 3 PARTIES AS TO PLACING ANY WORK ORDER WITH THE ASSESSEE, WAS NEVER CONFRONTED TO THE ASSESSEE WHICH WAS IN VIOLATION O F PRINCIPLE OF NATURAL JUSTICE. IT IS TRITE LAW THAT NO ADDITION COULD BE MADE MERELY ON THE BASIS OF SUSPICION, CONJECTURES OR SURMISES. IN FACT, THE ASSESSEE HAS SUPPLIED THE JEWELLERY TO FEW OF THESE PARTIES SUBSEQUENTLY DURING THE IMPUGNED AY ITSELF WHICH FURTHER WEAKENS THAT STAND OF LD.AO . 6. THE GIVEN FACTUAL MATRIX CONVINCES US TO CONCUR WITH THE STAND TAKEN BY LD. FIRST APPELLATE AUTHORITY IN THE IMPUG NED ORDER. BY CONFIRMING THE SAME, WE DISMISS REVENUES APPEAL. 7. THE ASSESSEES CROSS OBJECTIONS CONTEST ASSESSME NT PROCEEDINGS ON LEGAL GROUNDS. SINCE, WE HAVE ADJUDICATED THE IS SUE ON MERITS IN ASSESSEES FAVOR, DELVING INTO THE SAME WOULD BE ME RELY ACADEMIC IN NATURE AND HENCE, NOT DEALT WITH. THE CROSS-OBJECTI ONS STANDS DISMISSED AS INFRUCTUOUS. 8. THE REVENUES APPEAL AS WELL AS ASSESSEES CROSS -OBJECTIONS STANDS DISMISSED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON16/05/2019. SD/- SD/- (MAHAVIR SINGH) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED :16/05/2019 SR.PS, JAISY VARGHESE !'#$ # / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT CONCERNED 5. +, '%- , - , / DR, ITAT, MUMBAI 6. ,./0 / GUARD FILE 8 / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.