Smt. Kanta Chaudhary, Jaipur V. Income Tax Officer, Ward-7(3), Jaipur

ITA 878/JPR/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0115 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 09-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI JCIT A
• Keywords: Bogus purchase; Principle of natural justice; Accommodation entries; Reason to believe; Reassessment proceedings; Borrowed satisfaction
• Section: 147; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S A, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA 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. 878/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 SMT. KANTA CHAUDHARY PROP. M/S MONU JEWELLERS, PUROHITON KA MOHALLA, CHOMU, DISTT. JAIPUR (RAJ) CUKE VS. THE ITO, WARD-7(3), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AATPC 8533 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI MUKESH KHANDELWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI J.C. KULHARI (JCIT) A LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 19/11/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 06/12/2018 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A), JAIPUR DATED 10.05.2018 FOR ASSESSMENT YEAR 2007-08 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APP EAL:- 1. THAT THE LD. AO AS WELL AS CIT(A) HAVE ERRED IN LAW AND ON FACTS IN REJECTING THE OBJECTION OF THE APPELLANT W ITHOUT PROPER APPRECIATION OF CORRECT FACTS. THIS OBJECTION WAS R AISED IN CONNECTION WITH RECORDING OF WRONG FACTS FOR INITIA TION OF ITA NO. 878/JP/2018 SMT. KANTA CHAUDHARY VS. ITO 2 REASSESSMENT PROCEEDINGS. IT IS THEREFORE SINCERELY REQUESTED THAT THE WHOLE PROCEEDINGS MAY PLEASE BE DECLARED NULL A ND VOID. 2. THAT THE LD. CIT(A) HAS ERRED SERIOUSLY ON FACTS IN SUSTAINING AN ADDITION OF RS. 5,49,645/- BEING 15% OF ALLEGED BOG US PURCHASES AS AGAINST AN ADDITION OF RS. 9,16,075/- BEING 25% OF ALLEGED BOGUS PURCHASES OF RS. 36,64,300/- AND HENCE ALLOWI NG ONLY A RELIEF OF 10% OF SUCH ALLEGED BOGUS PURCHASES. RELI EF MAY PLEASE BE PROVIDED BY DELETING THE ADDITION OF RS. 5,49,64 5/- SUSTAINED BY LD. CIT(A). 3. THAT THE LD. CIT(A) ERRED ON FACTS IN HOLDING TH AT THE ALLEGED BOGUS PURCHASES IS THROUGH ACCOMMODATION ENTRIES ON LY, WITHOUT CARRYING HIS INDEPENDENT ENQUIRIES. 4. THAT THE LD. AO AS WELL AS LD. CIT(A) ERRED ON F ACTS AND IN LAW IN MAKING THE ABOVE SAID ADDITION ON ACCOUNT OF ALL EGED BOGUS PURCHASES BY RELYING MERELY ON CERTAIN INFORMATIONS RECEIVED FROM INVESTIGATION WING OF THE DEPARTMENT AND WITHO UT ALLOWING ANY OPPORTUNITY TO THE APPELLANT TO CROSS EXAMINE T HE WITNESSES OF THE DEPARTMENT, ON ACCOUNT OF WHICH THE ORDER SO PASSED MAY KINDLY BE HELD NULL AND VOID AS HAD BEEN PASSED WIT HOUT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. 2. FIRSTLY, GROUND NO. 3 WAS NOT PRESSED DURING THE COURSE OF HEARING. HENCE, THE SAME IS DISMISSED AS NOT PRESS ED. 3. IN RESPECT OF OTHER GROUNDS OF APPEAL, THE LD A R SUBMITTED THAT THE FACTS OF THE CASE ARE THAT THE LD. AO BASED ON INFORMATION RECEIVED FROM INVESTIGATION WING OF THE DEPARTMENT ABOUT A S EARCH CONDUCTED ON SHRI PRAVIN KUMAR JAIN GROUP WHEREIN IT WAS INFE RRED THAT M/S. NEW ITA NO. 878/JP/2018 SMT. KANTA CHAUDHARY VS. ITO 3 PLANET TRADING CO. P LTD. WAS A CONCERN MANAGED AND CONTROLLED BY THEM AND WAS ENGAGED INTO PROVIDING ACCOMMODATION E NTRIES AND THE APPELLANT WAS ONE OF THE BENEFICIARY. THE LD. AO AL SO OBSERVED THAT THE ASSESSEE DID NOT FILE HER ORIGINAL RETURN AND HENCE NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 WAS ISSUED. DURING SCRUTINY P ROCEEDINGS, THE APPELLANT WAS ASKED TO PROVE GENUINENESS OF PURCHAS ES MADE FROM ABOVE NAMED PARTIES. IN RESPONSE, THE APPELLANT HAD SUBMITTED COPIES OF THE BILLS, BANK STATEMENTS, STOCK RECORDS ETC. THE LD. AO ALLEGED THAT HE HAD SENT HIS INSPECTOR TO THE OFFICE ADDRESS OF THE ABOVE NAMED PARTY WHERE NO SUCH OFFICE WAS FOUND AND HENCE THE LD. AO INFERRED THAT THE APPELLANT HAD PURCHASED GOODS FROM SOME OT HER PARTY AND TOOK ACCOMMODATION BILLS FROM THE ABOVE NAMED PARTY . ACCORDINGLY HE DISALLOWED A SUM OF 25% OF ALLEGED UNVERIFIABLE PUR CHASES AND ADDED THE SAME TO INCOME OF THE APPELLANT. 3.1 IT WAS FURTHER SUBMITTED THAT ON APPEAL BEFORE THE LD. CIT (A), THE LATTERS ATTENTION WAS DRAWN TO THE ORDER OF TH IS BENCH OF ITAT IN THE CASE OF M/S. ALLIED GEMS CORPORATION (ITA NO. 7 94/JP/2011) WHEREIN IT WAS HELD THAT IN SUCH CASES, ESTIMATION OF CORRECT INCOME OF THE ASSESSEE HAS TO BE MADE ON THE BASIS OF PAST HI STORY OF THE APPELLANT. HOWEVER, THE LD CIT(A) NOT FULLY CONVINC ED WITH THE SAME REDUCED THE DISALLOWANCE TO 15% AND GRANTED RELIEF FOR 10% OF SUCH PURCHASES. 3.2 IN THE ABOVE FACTUAL BACKGROUND, IT WAS SUBMITT ED BY THE LD AR THAT AS PER THE REASONS RECORDED FOR REOPENING, THE LD. AO STATED THAT ITA NO. 878/JP/2018 SMT. KANTA CHAUDHARY VS. ITO 4 THE APPELLANT DID NOT FILE HER ORIGINAL RETURN ON T HE BASIS OF AST SYSTEM OF THE DEPARTMENT WHEREAS THE CORRECT FACT IS THAT THE APPELLANT HAD FILED HER REGULAR RETURN ON 31.07.2007. IT PROVES T HAT THE LD. AO ACTED MERELY ON THE BASIS OF INFORMATION PASSED ON BY INV ESTIGATION WING, MUMBAI AND HE DID NOT APPLY HIS MIND BEFORE ISSUING NOTICE U/S 148 OF THE INCOME TAX ACT, 1961. THE APPELLANT HAD OBJECTE D TO SUCH REOPENING BEFORE LD. AO WHICH WAS SETTLED BY HIM BY STATING THAT IN THE INFORMATION RECEIVED, HE ONLY HAD THE NAME OF THE P ROPRIETORY CONCERN OF THE ASSESSEE AND DID NOT HAVE DETAILS ABOUT PAN AND NAME OF PROPRIETOR AND HENCE IN THE REASONS, IT WAS MENTION ED THAT THE ASSESSEE DID NOT FILE ORIGINAL RETURN. 3.3 THE LD. AR FURTHER SUBMITTED THAT IN ALL SUCH C ASES NORMALLY ALL DETAILS SUCH AS NAME OF PROPRIETOR, ADDRESS, PAN ET C. ARE RECEIVED. IT WAS FURTHER SUBMITTED THAT ONE THING IS VERY CLEAR THAT THE LD. AO DID NOT APPLY HIS INDEPENDENT MIND BEFORE ISSUANCE OF N OTICE U/S 148 AND HE HAS PROCEEDED MERELY ON THE BASIS OF BORROWED SA TISFACTION OF THE INVESTIGATION WING OF MUMBAI. RELIANCE IS PLACED ON PCIT -5, MUMBAI V/S M/S. SHODIMAN INVESTMENTS P LTD. (ITA NO. 1297 OF 2015 MUMBAI HC VIDE ORDER DATED 16.04.2018) WHEREIN THE HONBLE MUMBAI HIGH COURT HAS HELD AS UNDER :- 13 IN THIS CASE, THE REASONS AS MADE AVAILABLE TO T HE RESPONDENT ASSESSEE AS PRODUCED BEFORE THE TRIBUNAL MERELY INDICATES INFORMATION RECEIVED FROM THE DIT (INVEST IGATION) ABOUT A PARTICULAR ENTITY, ENTERING INTO SUSPICIOUS TRANS ACTIONS. HOWEVER, THAT MATERIAL IS NOT FURTHER LINKED BY ANY REASON T O COME TO THE ITA NO. 878/JP/2018 SMT. KANTA CHAUDHARY VS. ITO 5 CONCLUSION THAT THE RESPONDENT ASSESSEE HAS INDULGE D IN ANY ACTIVITY WHICH COULD GIVE RISE TO REASON TO BELIEVE ON THE PART OF THE ASSESSING OFFICER THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS FOR THIS REASON THAT THE RECORDED REASONS EVE N DOES NOT INDICATE THE AMOUNT WHICH ACCORDING TO THE ASSESSIN G OFFICER, HAS ESCAPED ASSESSMENT. THIS IS AN EVIDENCE OF A FISHIN G ENQUIRY AND NOT A REASONABLE BELIEF THAT INCOME CHARGEABLE TO T AX HAS ESCAPED ASSESSMENT. 14 FURTHER, THE REASONS CLEARLY SHOWS THAT THE ASSE SSING OFFICER HAS NOT APPLIED HIS MIND TO THE INFORMATION RECEIVE D BY HIM FROM THE DDIT (INV.). THE ASSESSING OFFICER HAS MERELY I SSUED A REOPENING NOTICE ON THE BASIS OF INTIMATION REGARDI NG REOPENING NOTICE FROM THE DDIT (INV.) THIS IS CLEARLY IN BREA CH OF THE SETTLED POSITION IN LAW THAT REOPENING NOTICE HAS TO BE ISS UED BY THE ASSESSING OFFICE ON HIS OWN SATISFACTION AND NOT ON BORROWED SATISFACTION. 15 THEREFORE, IN THE ABOVE FACTS, THE VIEW TAKEN BY THE IMPUGNED ORDER OF THE TRIBUNAL CANNOT BE FOUND FAULT WITH. T HIS VIEW OF THE TRIBUNAL IS IN ACCORDANCE WITH THE SETTLED POSITION IN LAW. 3.4 THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE ALSO OBJECTED TO REOPENING ON THE GROUND THAT SAME HAS BEEN TAKEN ON UNTENABLE GROUNDS. IN THE REASONS, IT HAS BEEN STATED BY THE LD. AO THAT THE ASSESSEE DID NOT FILE ORIGINAL RETURN U/S 139(1) AN D THE SAID FACT IS WRONG AS THE ASSESSEE HAD FILED HER RETURN U/S 139( 1) ON 31.07.2007. ITA NO. 878/JP/2018 SMT. KANTA CHAUDHARY VS. ITO 6 THE INFORMATION FOR ABOVE TRANSACTION OF PURCHASES FROM ABOVE NAMED PARTY WAS RECEIVED BY THE LD. AO FROM INVESTIGATION WING, MUMBAI BUT AFTER RECEIVING THE SAME THE LD. AO DID NOT MAKE AN Y INDEPENDENT ENQUIRY ABOUT THE TRUE FACTS OF THE CASE AND THEREF ORE, IT HAS BEEN WRONGLY OBSERVED THAT NO RETURN WAS FILED BY THE AS SESSEE. THEREFORE THE NOTICE SO ISSUED IS PURELY ON THE BASIS OF RECE IPT OF CERTAIN INFORMATION AND MERELY ON THIS BASIS THE CASE WAS R EOPENED. UNDER SUCH CIRCUMSTANCES ALL THE PROCEEDINGS UNDERTAKEN U /S 147 & 148 ARE LIABLE TO BE QUASHED. SUCH VIEW WAS HELD BY THE JAI PUR TRIBUNAL IN THE CASE OF NARAIN DUTT SHARMA V. INCOME-TAX OFFICER, WARD- 6 ( 1), JAIPUR (ITA NO. 203/2017 VIDE ORDER DATED 07.02.2018) WHER EIN IT WAS HELD :- WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSED TH E MATERIAL AVAILABLE ON RECORD. FIRSTLY, IT IS NOTED THAT IN T HE INSTANT CASE, THE NOTICE UNDER SECTION 148 IN EXERCISE OF POWERS UNDE R SECTION 147 HAS BEEN ISSUED ON 23.03.2014 AFTER THE EXPIRY OF P ERIOD OF FOUR YEARS FROM THE END OF THE IMPUNGED ASSESSMENT YEAR I.E, AY 2007-08. IN TERMS OF PROVISO TO SECTION 147 OF THE ACT, AN ACTION UNDER THE SAID PROVISIONS CAN BE TAKEN BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO FILE HIS RETURN OF INCOME O R TO DISCLOSE FULLY AND TRULY ALL NECESSARY FACTS NECESSARY FOR HIS ASS ESSMENT FOR THE SUBJECT ASSESSMENT YEAR. THE CONTENTION OF THE REVE NUE AT THE TIME OF RECORDING THE REASONS WAS THAT THE ASSESSEE HAD FAILED TO FILE HIS RETURN OF INCOME FOR THE IMPUNGED ASSESSME NT YEAR AND THE SAME WAS NOT REFLECTED IN THE IT SYSTEM. PER CO NTRA, THE LD AR HAS SUBMITTED THAT RETURN OF INCOME FOR THE AY 2 007-08 WAS FILED BY THE ASSESSEE MANUALLY WITH ITO WARD 6(1) J AIPUR VIDE ACKNOWLEDGMENT NO. 2611000925 ON 21.05.2008. IT IS RELEVANT TO ITA NO. 878/JP/2018 SMT. KANTA CHAUDHARY VS. ITO 7 NOTE THAT THE RETURN OF INCOME SO FILED MANUALLY IS WITH ITO WARD 6(1) WHO IS THE SAME OFFICER WHO HAS SUBSEQUENTLY I SSUED THE NOTICE U/S. 148 OF THE ACT AND THEREFORE, REVENUE C ANNOT TAKE THE PLEA THAT RETURN WAS FILED WRONGLY BY THE ASSESSEE WITH ANOTHER OFFICER NOT HAVING JURISDICTION OVER THE ASSESSEE. THE RELATED CONTENTION OF THE REVENUE THAT THE RETURN SO FILED MANUALLY NOT UPLOADED IN THE IT SYSTEM THEREFORE CANNOT BE ACCEP TED MORE SO IN THE CONTEXT OF REASSESSMENT PROCEEDINGS AND WHER E THERE IS FAULT ON THE PART OF THE ASSESSEE IN FILING HIS RET URN OF INCOME. 3.5 IN THE PRESENT CASE, IT WAS SUBMITTED THAT THE PROCEEDINGS WERE UNDERTAKEN BEYOND FOUR YEARS OF THE END OF THE RELE VANT YEAR AND THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE IN DISCL OSING ALL RELEVANT FACTS. IT IS THEREFORE SINCERELY REQUESTED THAT TH E NOTICE SO ISSUED IS LIABLE TO BE DECLARED AS ILLEGAL AND THE WHOLE PROC EEDINGS ARE LIABLE TO BE QUASHED. 4. THE LD. DR HAS VEHEMENTLY ARGUED THE MATTER AND HAS RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON PERUSAL OF THE REASONS SO RECORDED BY THE AO BEFORE ISSUANCE OF NOTICE U/S 148 OF THE ACT, WE FI ND THAT ON THE BASIS CERTAIN INFORMATION RECEIVED FROM THE INVESTIGATION WING MUMBAI, THE AO HAS NOT JUST FORMED AN OPINION BUT HAS FINALLY C ONCLUDED THAT THE ASSESSEE HAS BENEFITTED BY OBTAINING ACCOMMODATION ENTRIES FROM M/S NEW PLANET TRADING CO LTD. FURTHER, THE AO HAS STA TED THAT SINCE THE ASSESSEE HAS NOT FILED THE RETURN OF INCOME AS PER AST SYSTEM OF THE DEPARTMENT, HE HAS REASONS TO BELIEVE THAT INCOME H AS ESCAPED ITA NO. 878/JP/2018 SMT. KANTA CHAUDHARY VS. ITO 8 ASSESSMENT. TO OUR MIND, SUCH AN APPROACH OF THE A O WHERE, BASED ON INFORMATION RECEIVED IN CONTEXT OF A THIRD PARTY , EVEN BEFORE ISSUANCE OF NOTICE U/S 148 HAS CONCLUDED THAT ASSESSEE HAS O BTAINED ACCOMMODATION ENTRIES AND INCOME TO THAT EXTENT HAS ESCAPED ASSESSMENT IS NOT A CORRECT APPROACH IN THE EYES OF LAW. IN THE INSTANT CASE, IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HA S FILED HER RETURN OF INCOME ON 31.07.2007 WHERE SHE HAS SHOWN PURCHASES OF RS 36,64,300 AND WHICH ARE THE ONLY PURCHASES DURING THE YEAR AN D WHICH ARE ALLEGED TO BE ACCOMMODATION ENTRY AS PER THE REASONS ISSUED U/S 148 OF THE ACT. THE ASSESSEE HAS SHOWN THE CORRESPONDING SALE S OF RS 39,44,220 AND REPORTED A GROSS PROFIT OF RS 3,41,752. AS HEL D BY THE BOMBAY HIGH COURT IN CASE OF M/S SHODIMAN INVESTMENTS, THE MATERIAL IN POSSESSION OF THE AO HAS TO BE FURTHER LINKED BY AN Y REASON TO COME TO CONCLUSION THAT THE ASSESSEE HAS INDULGED IN ANY AC TIVITY WHICH COULD GIVE RISE TO REASON TO BELIEVE THAT INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT. IN OTHER WORDS, UNLESS THE AO CARRIES OUT THE FURTHER EXAMINATION AFTER RECEIPT OF INITIAL INFORM ATION FROM THE INVESTIGATION WING, HOW CAN HE CONCLUDE THAT INCOME HAS ESCAPED ASSESSMENT. IT IS A FACT THAT THE ASSESSEE HAS FIL ED HER RETURN OF INCOME. THE AO SHOULD HAVE EXAMINED HER RETURN OF INCOME AND CARRIED OUT INITIAL INVESTIGATION BEFORE COMING TO THE CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, THE NOTICE ISSUED UNDER SECTION 148 CANNOT BE SUSTAINED AND THE SAME IS HELD TO BE BAD IN LAW. IN THE RESULT, THE REASSESSMENT PROCEEDINGS ARE HEREBY QUASHED AND SET -ASIDE. THE GROUNDS ON MERIT HAVE THUS BECOME INFRUCTOUS AND AR E NOT ADJUDICATED UPON. ITA NO. 878/JP/2018 SMT. KANTA CHAUDHARY VS. ITO 9 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 06/12/2018. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 06/12/2018. *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SMT. KANTA CHAUDHARY, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ITO. WARD- 7(3), 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. 878/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR