DWARKA GEMS LTD., Jaipur V. DCIT, Jaipur

ITA 71/JPR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1970 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 20-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY MALIK CIT DHK
• Keywords: Reopening of assessment; Bogus purchase; Difference of opinion; Change of opinion
• Section: 143(3); 147; 148; 263

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,O A JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 71/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2008-09. M/S. DWARKA GEMS LTD., H-20, BHAGAT SINGH MARG, C-SCHEME, JAIPUR. CUKE VS. THE DCIT, CIRCLE-7 JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAACD 8548 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI AJAY MALIK (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 24.01.2018 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 27/03/2018 VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 27 TH OCTOBER, 2016 PERTAINING TO ASSESSMENT YEAR 2008-09. THE AS SESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS GROSSLY ERRED IN REOPENING THE ASSESSMEN T U/S 148 OF THE INCOME TAX ACT, 1961 ARBITRARILY, WITHOUT APPRE CIATING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE SUBMISS ION MADE, THUS, REOPENING OF ASSESSMENT U/S 147 MUST BE HELD BAD IN LAW AND THE CONSEQUENT ORDER PASSED BY LD. AO DESERVES TO BE HELD VOID AB INITIO. 1.1 THAT, THE LD. CIT(A) HAS FURTHER ERRED IN UPHOL DING THE ASSESSMENT COMPLETED BY LD. AO U/S R.W.S. OF INCOME TAX ACT, 2 ITA NO. 71/JP/2017 M/S. DWARKA GEMS LTD., JAIPUR. 1961 MERELY ON THE BASIS OF STATEMENTS OF A THIRD P ARTY SH. BHANWAR LAL JAIN WITHOUT BRINGING ANY CORROBORATIVE MATERIAL ON RECORD AND WITHOUT MAKING PROPER ENQUIRES IN THE MA TTER TO ENSURE THAT ANY INCOME OF ASSESSEE HAS ESCAPED ASSE SSMENT. THUS, APPELLANT PRAYS COMPLETION OF ASSESSMENT U/S 147 R.W.S. 143(3) MUST BE HELD BAD IN LAW. 1.2. THAT, THE LD. CIT(A) HAS FURTHER ERRED IN IGNORING THE FACT THAT THE ASSESSMENT IN THE CASE OF APPELLANT STOOD COMPL ETED U/S 143(3) WHERE AFTER MAKING NECESSARY ENQUIRES, PROVI SIONS OF SECTION 145(3) WERE INVOKED AND INCOME WAS ESTIMATE D, THUS THE RE-OPENING OF COMPLETED ASSESSMENT ON ACCOUNT O F ALLEGED UNVERIFIABLE PURCHASES IS CHANGE OF OPINION AND THU S THE ORDER PASSED IS WITHOUT ANY AUTHORITY OF LAW AND THUS THE ADDITIONS MADE DESERVES TO BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE APPLICATION OF P ROVISIONS OF SECTION 145(3) BY LD. AO BY ALLEGING CERTAIN PURCHA SES TO THE TUNE OF RS. 31,40,818/- MADE FROM TWO PARTIES I.E M /S MERIDIAN GEMS & MILLENNIUM STAR AS UNVERIFIABLE BY COMPLETEL Y IGNORING THE FACT THAT M/S MERIDIAN GEMS HAS ACKNOWLEDGED TH E TRANSACTIONS MADE WITH THE ASSESSEE VIDE CONFIRMATI ON FURNISHED IN RESPONSE TO NOTICE U/S 133(6). THUS, THE ACTION OF LD. CIT(A) IN CONFIRMING THE PURCHASES MADE FROM M/S MERIDIAN GEMS AS UNVERIFIABLE DESERVES TO BE HELD BAD IN LAW AND THE CONSEQUENT ADDITION DESERVES TO BE DELETED. 2.1. THAT, THE LD. CIT(A) HAS FURTHER ERRED IN CONFIRMIN G THE ACTION OF LD. AO BY ALLEGING THE PURCHASES OF RS. 31,40,81 8/- AS UNVERIFIABLE SOLELY ON THE BASIS OF STATEMENT OF A THIRD PARTY SH. BHANWAR LAL JAIN WHO IS COMPLETELY UNKNOWN/ UNRELAT ED TO ASSESSEE AND WHO HAS NOT BEEN ALLOWED TO BE CROSS-E XAMINED BY ASSESSEE. THUS, THE ACTION OF LD. CIT(A) IN CON FIRMING THE PURCHASES AS UNVERIFIABLE DESERVES TO BE IGNORED AN D EXCLUDED. 2.2. THAT, THE LD. CIT(A) HAS FURTHER ERRED IN UPHOLDING THE ORDER PASSED BY LD. AO TREATING THE CONCERNED PURCHASES O F RS. 31,40,818/- AS UNVERIFIABLE ON THE BASIS OF STATEME NTS OF A THIRD PARTY SH. BHANWAR LAL JAIN BY COMPLETELY IGNORING T HAT IN HIS STATEMENTS RECORDER DURING SEARCH AT HIS BUSINESS P REMISES, HE HAS NOWHERE MENTIONED THAT THE SALES TO ASSESSEE WE RE BOGUS. THUS, THE ACTION OF LD. CIT(A) IN CONFIRMING THE SA ID PURCHASES AS BOGUS DESERVES TO BE HELD BAD IN LAW. 3 ITA NO. 71/JP/2017 M/S. DWARKA GEMS LTD., JAIPUR. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING TRADING ADDI TION OF RS. 4,71,123/- BEING 15% OF THE ALLEGED UNVERIFIABLE PU RCHASES OF RS. 31,40,818/- ARBITRARILY, WITHOUT APPRECIATING T HE FACTS AND CIRCUMSTANCES OF THE CASE AND THE SUBMISSION MADE B EFORE HIM. THUS, THE ADDITION OF RS. 4,71,123/- DESERVES TO BE DELETED. 3.1. THAT, THE LD. CIT(A) HAS FURTHER ERRED IN CONF IRMING THE IMPUGNED ADDITION MADE BY LD. AO BY ALLEGING THE PU RCHASES MADE FROM TWO PARTIES AS BOGUS BY IGNORING THE FACT THAT IN APPEAL FILED AGAINST THE ASSESSMENT ORDER PASSED U/ S 143(3), THE LD. CIT(A), HAD ALREADY UPHELD THE TRADING ADDI TION OF RS. 3,00,000/- AFTER DUE CONSIDERATION OF UNVERIFIABLE PURCHASES, THUS THE FURTHER ADDITION ON SAME ACCOUNT DESERVES TO BE DELETED. 4. THAT THE APPELLANT CRAVES THE RIGHT TO ADD, DELETE, AMEND OR ABANDON ANY OF THE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF APPEAL. 2. GROUND NOS. 1 TO 1.2 ARE REGARDING VALIDITY OF R EOPENING OF THE ASSESSMENT. THE ASSESSEE IS A COMPANY AND ENGAGED IN THE BUSINE SS OF MANUFACTURING OF SILVER/GOLD ORNAMENTS AND ARTICLES. THE ASSESSEE F ILED ITS RETURN OF INCOME ON 14.10.2008 ON WHICH SCRUTINY ASSESSMENT WAS COMPLET ED ON 27.12.2010. THE AO WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3 ) OF THE IT ACT MADE AN ADDITION OF RS. 1,27,15,683/- ON ACCOUNT OF UNVERIF IABLE/BOGUS PURCHASES MADE BY THE ASSESSEE FROM 12 PARTIES. THE MATTER AGAINST T HE ORIGINAL ASSESSMENT WAS FINALLY TAKEN TO THE HONBLE HIGH COURT AND VIDE ITS ORDER DATED 23 RD MAY, 2017 THE HONBLE HIGH COURT HAS SET ASIDE THE MATTER TO THE RECORD O F THE AO FOR FRESH CONSIDERATION. IN THE MEANTIME, THE AO PROPOSED TO REOPEN THE ASSE SSMENT BY ISSUING A NOTICE 4 ITA NO. 71/JP/2017 M/S. DWARKA GEMS LTD., JAIPUR. UNDER SECTION 148 ON 21.11.2014. THE AO PROPOSED T O ASSESS THE INCOME ON ACCOUNT OF PURCHASES MADE BY THE ASSESSEE FROM TWO PARTIES, NAMELY M/S. MERIDIAN GEMS AND M/S. MILLENNIUM STARS AS BOGUS PURCHASES A S PER THE INFORMATION RECEIVED FROM THE INVESTIGATION WING, MUMBAI. THE AO ACCORDI NGLY COMPLETED THE REASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 147 ON 31 ST MARCH, 2015 MAKING A TRADING ADDITION OF RS. 7,85,204/-. THE A SSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) AND RAISED THE OBJECT ION AGAINST THE REOPENING OF THE ASSESSMENT. THE LD. CIT (A) THOUGH CONFIRMED THE V ALIDITY OF REOPENING OF ASSESSMENT, HOWEVER, RESTRICTED THE TRADING ADDITIO N TO RS. 4,71,123/- AS AGAINST RS. 7,85,204/- MADE BY THE AO. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT ON PERUSAL OF REASONS RECORDED BY THE AO FOR REOPENING OF THE ASS ESSMENT, IT CAN BE OBSERVED THAT THE ASSESSMENT IS REOPENED MERELY ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING MUMBAI WITHOUT ARRIVING AT THE O BJECTIVE CONCLUSION DRAWN AFTER EXAMINING THE SO CALLED INFORMATION, THE BASIS HAS BEEN FORMED ON THE BASIS OF CONCLUSION DRAWN BY THE DGIT MUMBAI IN SOME OTHER C ASE THAT THE SAID PERSON WAS ENGAGED IN PROVIDING BOGUS BILLS. FURTHER, IT IS S UBMITTED THAT THE AO OUGHT TO HAVE CONSIDERED THE ISSUE OBJECTIVELY AND NOT ON THE SO CALLED INFORMATION RECEIVED FROM OTHER OFFICIAL. THEREFORE, THE ACTION OF THE AO IN REOPENING THE COMPLETED ASSESSMENT WITHOUT INDEPENDENT APPLICATION OF MIND IS NOT VALID AND BAD IN LAW. THE LD. A/R OF THE ASSESSEE HAS RELIED UPON THE DECISIO N OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SETH BROTHERS VS. CIT, 169 CTR 519 (GUJ .) AND SUBMITTED THAT THERE WAS NO MATERIAL WITH THE AO FOR HAVING THE REASON TO BE LIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE LD. A/R HAS FUR THER CONTENDED THAT THE 5 ITA NO. 71/JP/2017 M/S. DWARKA GEMS LTD., JAIPUR. REOPENING IS AFTER THE EXPIRY OF FOUR YEARS FROM TH E END OF THE ASSESSMENT YEAR AND, THEREFORE, THE AO CANNOT INVOKE THE PROVISIONS OF S ECTION 147 WITHOUT SATISFYING THE CONDITION THAT THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. HE HAS ALSO RELIED UPON T HE SERIES OF DECISIONS ON THE POINT THAT THE OPINION FORMED BY THE AO BASED ON TH E CONCLUSION OF OTHER PERSON IS NOT VALID AND, THEREFORE, THE AO WAS NOT HAVING JUR ISDICTION TO INVOKE THE PROVISIONS OF SECTION 147/148. 3.1. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED T HAT AFTER COMPLETING THE ORIGINAL ASSESSMENT, THE AO RECEIVED FRESH INFORMAT ION AND MATERIAL REGARDING THE BOGUS PURCHASES MADE BY THE ASSESSEE FROM THESE TWO PARTIES AND, THEREFORE, THE REOPENING IS VALID AND PROPER. HE HAS RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ORIGINAL ASSE SSMENT WAS COMPLETED UNDER SECTION 143(3) ON 27 TH DECEMBER, 2010 AFTER AN ADDITION ON ACCOUNT OF UNVERIFIABLE/BOGUS PURCHASES WAS MADE BY THE AO. T HUS IT IS MANIFEST FROM THE RECORD THAT THE AO WHILE COMPLETING THE ORIGINAL AS SESSMENT UNDER SECTION 143(3) HAS CONDUCTED AN ENQUIRY IN RESPECT OF THE PURCHASE S MADE BY THE ASSESSEE AND FINALLY CONCLUDED THAT THE PURCHASES MADE BY THE AS SESSEE FROM THE 12 PARTIES WERE NOT VERIFIABLE AND ACCORDINGLY AN ADDITION OF 25% O F SUCH PURCHASES WERE MADE BY THE AO. THEREFORE, THE ISSUE OF GENUINENESS OF PUR CHASES WAS DULY EXAMINED BY THE AO WHILE COMPLETING THE SCRUTINY ASSESSMENT UNDER S ECTION 143(3). THE AO, THEREAFTER, ISSUED A NOTICE UNDER SECTION 148 ON 21 .11.2014 WHICH IS AFTER FOUR YEARS 6 ITA NO. 71/JP/2017 M/S. DWARKA GEMS LTD., JAIPUR. FROM THE END OF THE ASSESSMENT YEAR UNDER CONSIDERA TION. THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT ARE AS UNDER :- AS PER INFORMATION IT HAD BEEN ESTABLISHED THAT BO GUS SALES ENTRIES WERE MADE IN FAVOUR OF M/S DWARKA GEMS ON V ARIOUS DATED DURING F.Y. 2007-08 I.E. A.Y. 2008-09 TOTAL A MOUNTING TO RS. 31,40,818/-. THESE ENTRIES WERE PROVIDED BY M/ S MERIDIAN GEMS & M/S MILLENIUM STARS WHICH ARE SOME OF THE BO GUS CONCERNS OF BHANWAR LAL JAIN & GROUP. THUS IT IS CLEAR THAT THE REOPENING OF THE ASSESSME NT IS BASED ON THE INFORMATION RECEIVED AND TO ASSESS THE INCOME IN RESPECT OF THE PURCHASES MADE BY THE ASSESSEE WHICH WAS EXAMINED BY THE AO DURING THE ORIGINAL SC RUTINY ASSESSMENT UNDER SECTION 143(3). THE AO AFTER AN ENQUIRY AND INVEST IGATION DURING THE ORIGINAL ASSESSMENT PROCEEDINGS HELD THAT THE PURCHASES MADE FROM 12 PARTIES ARE NOT VERIFIABLE/GENUINE. THUS EXCEPT THE PURCHASES MADE FROM THOSE 12 PARTIES, THE AO HAS ACCEPTED THE GENUINENESS OF THE PURCHASES INCLU DING THE TWO PARTIES, NAMELY M/S. MARIDIAN GEMS AND M/S. MILLENNIUM STAR. EVEN IF THE SUBSEQUENT INFORMATION RECEIVED FROM THE DIT INVESTIGATION WING MUMBAI REN DERS THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DEFECTIVE AND ERRONEOUS FOR WANT OF PROPER VERIFICATION AND INVESTIGATION, THE SAME WOULD NOT TURN THE CASE IN THE CATEGORY THAT THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL THE PARTICULARS NECESSARY FOR ASSESSMENT. IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE HAS NOT FURNISHED THE REQUISITE DOCUMENTS AND DETAILS OF PURCHASE RATHER THE AO CONDUCTED A DETAILED ENQUIRY DURING THE ORIGINAL ASSESSMENT ON THE ISSUE OF GENUINENESS OF PURCHASES. THUS THE INFORMATION RECEIVED BY THE AO FROM INVEST IGATION WING MUMBAI WOULD NOT 7 ITA NO. 71/JP/2017 M/S. DWARKA GEMS LTD., JAIPUR. AMOUNT TO NON DISCLOSURE OF PARTICULARS BY THE ASSE SSEE, RATHER IT WAS THE SUBJECT MATTER OF ENQUIRY BY THE AO IN THE ORIGINAL ASSESSM ENT. THEREFORE, IF THE AO FAILED TO CONDUCT PROPER ENQUIRY REGARDING THE GENUINENESS OF THE PURCHASES, THE SAME WOULD NOT GIVE JURISDICTION TO THE AO TO REVIEW THE ORDER OR REMOVE THE DEFECT BASED ON SUBSEQUENT INFORMATION. THE STATUTE HAS PROVIDED S EGREGATION OF POWERS AND JURISDICTION BETWEEN THE HIERARCHY OF THE TAXING AU THORITIES AND, THEREFORE, THE POWER AND JURISDICTION VESTED WITH ONE AUTHORITY CANNOT B E ASSUMED BY THE OTHER AUTHORITY. SECTION 263 IS A PROVISION OF CHECK AND BALANCES AN D, THEREFORE, IN CASE OF FAILURE ON THE PART OF THE AO TO CONDUCT A PROPER ENQUIRY AS R EVEALED BY A SUBSEQUENT MATERIAL AND INFORMATION CAME TO THE KNOWLEDGE OF THE COMMIS SIONER, THE PROVISIONS OF SECTION 263 CAN BE INVOKED BY THE REVISIONARY AUTHO RITY. THEREFORE, THE REMEDY FOR ANY DEFECT OR DEFAULT IN THE ORDER OF THE AO IS PRO VIDED UNDER SECTION 263 OF THE ACT AND NOT UNDER SECTION 147. THE REOPENING AFTER FOU R YEARS FROM THE END OF THE ASSESSMENT YEAR COMPLETED UNDER SECTION 143(3) IS N OT PERMISSIBLE WITHOUT SATISFYING THE CONDITION PRECEDENT AS PROVIDED UNDE R THE PROVISIONS OF SECTION 147 OF THE ACT. THE SUBSEQUENT INFORMATION RECEIVED BY TH E AO CANNOT REMOVE OR RELAX THE SAID CONDITION PROVIDED UNDER THE PROVISIONS OF SEC TION 147 THAT THE ASSESSEE FAILED TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL NECESS ARY FOR ASSESSMENT. IN THE CASE IN HAND, WHEN THE AO HAS ALREADY CONDUCTED AN ENQUIRY ON THE ISSUE AND THE ASSESSEE IS NOT EXPECTED TO FURNISH MORE THAN WHAT WAS ALREA DY FURNISHED DURING THE ASSESSMENT PROCEEDINGS, THEN THE REOPENING BASED ON THE INFORMATION FROM THE INVESTIGATION WING ON THE SAME ISSUE IS NOTHING BUT CHANGE OF OPINION AND TO REVIEW THE ORDER PASSED BY THE AO UNDER SECTION 143(3) WHI CH IS NOT PERMISSIBLE UNDER LAW. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE REOPENING 8 ITA NO. 71/JP/2017 M/S. DWARKA GEMS LTD., JAIPUR. IS NOT VALID AND, THEREFORE, THE REASSESSMENT FRAME D BY THE AO IS WITHOUT JURISDICTION AND CONSEQUENTLY THE REASSESSMENT ORDER PASSED IS Q UASHED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 27/03/2018 . SD/- SD/- FOE FLAG ;KNO FOT; IKY JKWO (VIKRAM SINGH YADAV) ( VIJAY PAL RAO ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 27/03/2018. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-M/S. DWARKA GEMS LTD., JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT CIRCLE-7, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 71/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR