NIRMALA AGARWAL, Jaipur V. ACIT, Jaipur

ITA 996/JPR/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6233 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 15-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI JCIT DHK
• Keywords: Bogus purchase; Principle of natural justice; Tangible material; Speculation loss; Difference of opinion; Corroborative evidences; Accommodation entries; Reason to believe; Change of opinion; Reassessment proceedings; Borrowed satisfaction
• 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 BENCHES, JAIPUR JH HKKXPAN] YS[KK LNL; ,OA JH DQY HKKJR ] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 995 & 996/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 & 2008-09 NIRMALA AGARWAL, A-11, JANTA COLONY, JAIPUR. CUKE VS. A.C.I.T., CIRCLE-5, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABPPA 5989 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI J.C. KULHARI (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 09/04/2018 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 11/04/2018 VKNS'K@ ORDER PER: BHAGCHAND, A.M. BOTH THESE APPEALS FILED BY THE ASSESSEE EMANATES FROM THE TWO SEPARATE ORDERS OF THE LD. CIT(A)-II, JAIPUR BOTH D ATED 25/08/2016 FOR THE A.Y. 2007-08 & 2008-09 RESPECTIVELY. THE GROUNDS OF APPEAL IN BOTH THE APPEALS ARE COMMON EXCEPT THE DIFFERENCE I N THE AMOUNT OF ADDITION. GROUNDS OF APPEAL ARE AS UNDER: 1. THE LEARNED CIT (APPEALS) ERRED IN UPHOLDING TH E REASSESSMENT BASED ON (I) ALLEGED INFORMATION OBTAINED FROM A PE RSON (I.E. THE SUPPLIER) BY WAY OF STATEMENTS U/S 132(4) OF THE IN COME TAX ACT, 1961, WITHOUT BRINGING ON RECORDS THE CORROBORATIVE EVIDENCES TO SUPPORT THE SAID STATEMENTS, (THE SAID STATEMENTS W ERE LATER ON ITA 995 & 996/JP/2016_ NIRMALA AGARWAL VS ACIT 2 RETRACTED BY DULY SWORN AFFIDAVIT) AND (II) WITHOUT PROVIDING ANY OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE SA ID PERSON AND ALSO TO CROSS VERIFY THE ACCOUNTING RECORDS OF SUPP LIER FIRMS WITH WHICH THE SAID PERSON WAS ASSOCIATED TO ELICIT THE AUTHENTICITY OF THE CONTENTS OF THE STATEMENTS, (III) WITHOUT GIVING CO MPLETE COPIES OF THE STATEMENTS OF SAID PERSON FOR REBUTTAL BY THE A SSESSEE AND (IV) WITHOUT GIVING COMPLETE COPIES OF THE STATEMENTS OF OTHER PERSONS REFERRED TO IN THE STATEMENTS OF SAID PERSON FOR RE BUTTAL BY THE ASSESSEE. 2. THE LEARNED CIT (APPEALS) FURTHER ERRED IN HOLDI NG PURCHASES OF DIAMONDS AGGREGATING RS.22576041/= AS BOGUS AND SUS TAINING ADDITION OF RS. 3386406/- IN THE A.Y. 2007-08 AND R S.200783361/= AS VERIFIED AND SUSTAINING ADDITION OF RS. 3011750/ - BY APPLYING PROFIT RATE OF 15.00% ON SAID PURCHASES FROM CONCE RNS IN WHICH THE AFORESAID PERSON STATED TO BE ASSOCIATED. 3. WITHOUT PREJUDICE TO ABOVE, THE LEARNED CIT (APP EALS) HAS FURTHER ERRED IN APPLYING PROFIT RATE OF GOODS WHICH ARE DI FFERENT IN NATURE AND VALUE AND ALSO NOT GIVING ANY CONSIDERATION TO THE CBDT CIRCULAR APPLICABLE TO PROFIT RATE IN DIAMOND TRADE. 2. SINCE THE COMMON ISSUE IS INVOLVED IN BOTH THESE APPEALS, THEREFORE, THE SAME ARE HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE AND BREVITY, A COMMON ORDER IS BEING PASSED. 3. IN THE GROUND NO. 1 OF BOTH THESE APPEALS, THE I SSUE INVOLVED IS AGAINST UPHOLDING THE REASSESSMENT. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE LD AR HAS SUBMITTED THAT THE ASSESSEE IS INDIVIDUAL AND PROPRIETOR OF M/S NEER GEMS, WHICH IS ENGAGED IN TRA DING AND EXPORT OF PRECIOUS AND SEMI PRECIOUS GEMS AND STONES (ROUGH A ND POLISHED) INCLUDING DIAMONDS. FOR THE A.Y. 2007-08, THE RETUR N OF INCOME WAS ITA 995 & 996/JP/2016_ NIRMALA AGARWAL VS ACIT 3 FILED ON 27/10/2007 DECLARING TOTAL INCOME OF RS. 1 9,73,760/- AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DETERMINING TOTAL INCOME OF RS. 25,3 6,830/- AFTER INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T AND APPLYING THE G.P. RATE OF 20% IN RESPECT OF TRADING OF SEMI PREC IOUS STONES. HOWEVER, IN THE CASE OF DIAMONDS, THE G.P. RATE DECL ARED WAS ACCEPTED @ 4.35%. THE LD. CIT(A) HAS REDUCED THE G.P. @ 16% BY F OLLOWING THE DECISION OF HONBLE ITAT IN A.Y. 2005-06 IN ASSESSEE S OWN CASE AND THE G.P. RATE IN THE DIAMOND TRADING REMAINED ACCEP TED. THEREAFTER ON THE BASIS OF AN INFORMATION RECEIVED FROM INVESTIGA TION WING, MUMBAI, A NOTICE U/S 148 OF THE ACT WAS ISSUED WHEREIN IT WAS ALLEGED THAT THE ASSESSEE HAS OBTAINED ACCOMMODATION ENTRIES IN RESP ECT OF DIAMOND FROM FIVE PARTIES. THE ASSESSEE FILED OBJECTION AND REQUESTED TO DROP THE PROCEEDING AND ALSO REQUESTED TO PROVIDE COPIES OF DOCUMENTS AND STATEMENTS RELIED UPON FOR REOPENING THE ASSESSMENT . THE ASSESSEE ALSO REQUESTED TO CROSS EXAMINE SHRI RAJENDRA KUMAR JAIN AND OTHER PERSONS. THE ASSESSING OFFICER MADE ADDITION OF RS. 56,44,010/- BEING 25% OF SUCH PURCHASES OF RS. 2,25,76,241/-. THE LD C IT(A) REDUCED IT TO 15%. THE LD AR FURTHER SUBMITTED THAT THE ASSESSM ENT U/S 143(3) WAS COMPLETED AFTER INVOKING THE PROVISIONS OF SECTI ON 145(3) OF THE ACT AND THIS REOPENING IS SOLELY BASED ON INFORMATI ON OF INVESTIGATION ITA 995 & 996/JP/2016_ NIRMALA AGARWAL VS ACIT 4 WING, MUMBAI. HE ALSO PLEADED THAT THE ASSESSING OF FICER HAS NOT ARRIVED AT ANY OBJECTIVE CONCLUSION BY PROPERLY EXA MINING THE INFORMATION/EVIDENCES WHICH HAS BEEN MADE BASIS FOR FORMING THE BELIEF FOR REOPENING THE ASSESSMENT. THE LD AR HAS F URTHER SUBMITTED AS UNDER: IT IS SUBMITTED THAT THE LD. AO OUGHT TO HAVE CONSI DERED THE ISSUE OBJECTIVELY AND NOT ON THE SO CALLED INFORMATION RE CEIVED FROM SOME OTHER OFFICIAL, THEREFORE, THE ACTION OF THE LD. AO IN RE OPENING THE COMPLETED ASSESSMENT WITHOUT INDEPENDENT APPLICATION OF MIND DESERVES TO BE HELD BAD IN LAW. THE HONBLE GUJRAT HIGH COURT IN THE CASE OF SETH BROTHERS VS. CIT REPORTED IN 169 CTR 519 HAS LAID DOWN FOLLOWING PRINCIPLES FOR THE RE- OPENING OF THE ASSESSMENT U/S 148 OF THE INCOME TAX ACT, 1961: (APB 1-10) '11 (A) THERE MUST BE MATERIAL FOR BELIEF (B) CIRCUMSTANCES MUST EXIST AND CANNOT BE DEEMED TO EXIST FOR ARRIVING AT AN OPINION. (C) REASON TO BELIEVE MUST BE HONEST AND NOT BASED ON SUSPICION, GOSSIP, RUMOUR OR CONJUNCTURE. (D) REASONS REFERRED MUST DISCLOSE THE PROCESS OF R EASONING BY WHICH HE HOLDS REASONS TO BELIEVE AND CHANGE OF OPINION DO ES NOT CONFER JURISDICTION TO REASSESS. (E) THERE MUST BE NEXUS BETWEEN MATERIAL AND BELIEF . (F) THE REASONS REFERRED MUST SHOW APPLICATION OF M IND BY THE ASSESSING OFFICER. THE VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS HAS TO BE JUDGED WITH REGARD TO THE MATERIAL AVAILABLE WITH T HE OFFICER AT THE POINT OF TIME OF ISSUE OF NOTICE U/S 148 AND CANNOT BE SO UGHT TO BE SUBSTANTIATED BY REFERENCE TO MATERIAL THAT MAY HAV E COME TO LIGHT SUBSEQUENTLY IN THE COURSE OF REASSESSMENT PROCEEDI NGS. IN THE LIGHT OF WHAT IS STATED ABOVE, WE HOLD THAT THERE WAS NO MATERIAL WITH THE AO FOR HAVING REASONS TO BELIEVE THAT THE INCOME AS CHARGEABLE ITA 995 & 996/JP/2016_ NIRMALA AGARWAL VS ACIT 5 TO TAX, HAS ESCAPED ASSESSMENT. WE ARE UNABLE TO HO LD THAT THE JURISDICTION ASSUMED U/S 147/148 WAS LEGAL AND VALI D. DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHEN TH E REOPENING WAS OBJECTED BY THE ASSESSEE (APB 4-13), ID. AO MISERABLY FAILED TO BRING ON RECORD ANY CORROBORATIVE EVIDENCE OR MATERIAL EXCEP T THE PART OF SO CALLED STATEMENTS OF ONE SH. RAJENDRA KUMAR JAIN, STATED T O HAVE BEEN RECORDED BY INVESTIGATION WING, MUMBAI DURING THE COURSE OF SEARCH CONDUCTED IN HIS CASE ON 03.10.2013 FOR SUPPORTING THE ALLEGATION TH AT THE PURCHASES MADE BY ASSESSEE FROM FIVE PARTIES (AS ABOVE) WERE IN FA CT BOGUS AND THE REQUEST FOR CROSS EXAMINATION OF THE PERSONS WAS ALSO NOT A LLOWED THOUGH IN THE STATEMENTS RELIED UPON BY THE DEPARTMENT THERE WAS NO ANY WHISPER OF APPELLANTS NAME AS BENEFICIARY (APB 179-185). FURTHER NOT ALLOWING THE CROSS EXAMINATION OF THE WITNESS OF THE DEPARTMENT TO THE ASSESSEE IS GROSS VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE AND F OR THIS RELIANCE IS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F ANDMAN TIMBER PRODUCTS VS. CCE REPORTED IN 127 DTR 241 / 281 CTR 241 WHEREIN IT HAS BEEN HELD AS UNDER: (CASE LAW PAPER BOOK PAGES 11-13) ASSESSMENT - NATURAL JUSTICE - DENIAL OF OPPORTUNIT Y TO CROSS-EXAMINE WITNESSES DENIAL OF OPPORTUNITY TO THE ASSESSEE TO CROSS-EXAM INE THE WITNESSES WHOSE STATEMENTS WERE MADE THE SOLE BASIS OF THE ASSESSMENT IS A SERIOUS FLAW RENDERING THE ORDER A NULLITY IN AS MUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE - IMPUGN ED ORDER AS PASSED BY THE TRIBUNAL IS SET ASIDE. FURTHER THE VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS HAS TO BE JUDGED WITH REGARD TO MATERIAL AVAILABLE WITH THE A SSESSING OFFICER AND THAT TOO BY FRAMING THE OPINION STRICTLY BASED ON THE DO CUMENTS AND INFORMATION IN POSSESSION, THAT CERTAIN INCOME HAS ESCAPED ASSE SSMENT AND NOT IN THE MECHANICAL MANNER AS HAS BEEN DONE IN THE CASE IN H AND. THE RE-OPENING OF THE CASE BASED ON THE BORROWED SATISFACTION ON THE INFORMATION SUPPLIED BY SOME OTHER OFFICIAL WITHOUT IN ANY MANNER COMING TO HIS OWN INDEPENDENT ITA 995 & 996/JP/2016_ NIRMALA AGARWAL VS ACIT 6 SATISFACTION DESERVES TO BE HELD ILLEGAL. IN THIS R EGARD RELIANCE IS PLACED ON THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF SARTHAK SECURITIES CO. PVT. LTD. VS. ITO REPORTED IN 329 ITR 110 WHEREIN IT HAS BEEN HELD AS UNDER : (CASE LAW PAPER BOOK PAGES 14-24) REASSESSMENT - NOTICE - CONDITION PRECEDENT - FORMA TION OF BELIEF THAT INCOME ESCAPED ASSESSMENT - ASSESSING OFFICER TREAT ING SHARE APPLICATION MONEY AS BOGUS ACCOMMODATION ENTRIES - PAYMENTS THROUGH BANKING CHANNEL AND COMPANIES INVESTING MONEY GENUINE - NO INDEPENDENT APPLICATION OF MIND BY ASSESSING OFFICER BUT ACTING UNDER INFORMATION FROM INVESTIGATION WING - NOTICE TO BE QUASHED - INCOME TAX ACT, 1961, SS. 147, 148. IT IS ALSO A MATTER OF FACT THAT NO SEARCH WAS TAKE N PLACE IN CASE OF ASSESSEE AND DOCUMENTS UNDER REFERENCE WERE NOT FOUND AND SE IZED FROM THE POSSESSION OF THE ASSESSEE THUS THE PRESUMPTION U/S 132(4) IS REBUTTABLE AND CANNOT BE APPLIED AGAINST THE ASSESSEE, AS HAS BEEN DONE BLINDLY BY THE ID. AO. IN THE CIRCUMSTANCES IT IS SUBMITTED THAT SINCE NO INDEPENDENT APPLICATION OF MIND WAS APPLIED BY LD. AO WHILE ISSUING NOTICE U/S 148 AND HE SIMPLY PROCEEDED ON BORROWED SATISFACTION REACHED BY SOME OTHER OFFICIALS ON THE BASIS OF STATEMENTS RECORDED IN THE CASE OF THIRD P ARTY WHICH STOOD RETRACTED BY THE PERSON WHO MADE THOSE STATEMENTS T HUS THE SAME HAS NO EVIDENTIARY VALUE, THEREFORE, THE ENTIRE PROCEEDING S INITIATED U/S 148 DESERVES TO BE HOLD BAD IN LAW. IT IS FURTHER SUBMITTED THAT DURING THE COURSE OF A SSESSMENT PROCEEDINGS U/S 143(3), AFTER PROPER VERIFICATION OF THE BOOKS OF A CCOUNT AND OTHER RECORDS THE ASSESSMENT WAS COMPLETED AND PROVISIONS OF SECT ION 145(3) WERE INVOKED AND GP RATE WAS APPLIED MEANING THEREBY THA T ALL THE ITEMS OF THE TRADING ACCOUNT INCLUDING PURCHASES STOOD MERGED IN THAT ESTIMATION OF INCOME AND ANY FURTHER ACTION U/S 148 ALLEGING ONE OF THE ITEM OF THAT TRADING ACCOUNT I.E. PURCHASES IS MERE CHANGE OF OPINION WHICH CANNOT BE ITA 995 & 996/JP/2016_ NIRMALA AGARWAL VS ACIT 7 PERMITTED UNDER THE EYES OF LAW. ASSESSEE HAD MADE TRADING OF DIAMOND ON LOT-TO-LOT BASIS AND SUCH PURCHASES AND SALE OF DIA MONDS WERE FULLY ACCEPTED BY LD. AO IN THE ASSESSMENT ORDER COMPLETE D U/S 143(3). IN OTHER WORDS, NO NEW MATERIAL WAS BROUGHT ON RECORD FOR RE OPENING THE CASE, RATHER MERELY RELYING UPON THE INFORMATION FROM INV ESTIGATION WING, MUMBAI THAT TOO ON THE BASIS OF SEARCH CONDUCTED IN CASE OF A THIRD PARTY REOPENING OF COMPLETED ASSESSMENT WAS MADE. THUS, R EOPENING AMOUNTS TO MERE CHANGE OF OPINION. RECENTLY UNDER THE SIMILAR CIRCUMSTANCES THIS HONBLE BENCH IN THE CASE OF M/S DWARKA GEMS LTD. I N ITA NO. 71/JP/2017 (APB 93-96) VIDE ORDERS DT. 27/3/2018 HAS QUASHED THE NOTICE IS SUED U/S 148 OF THE ACT WHEN THE PURCHASES HAVE ALREADY BEEN EXAMINED IN FIRST ROUND. IT IS THUS SUBMITTED THAT EVEN THE INFORMATION BY W AY OF RETRACTED STATEMENTS AS STATED TO HAVE BEEN SUPPLIED FROM THE INVESTIGATION WING, MUMBAI COULD NOT BE HELD AS SUFFICIENT MATERIAL FOR REOPENING THE ASSESSMENT MORE PARTICULARLY WHEN THE ID. AO AT THE TIME OF COMPLETION OF THE ASSESSMENT U/S 143(3) HAS ALREADY BEEN APPLIED HIS MIND ON THE ENTIRE PURCHASES CLAIMED, THUS AGAIN DOUBTING THE SAME IS NOTHING BUT MERE CHANGE OF OPINION FOR WHICH PROVISIONS OF SECTION 1 48 COULD NOT BE RESORTED TO. IN THE CIRCUMSTANCES, IT IS HUMBLY PRAYED THAT THE RE-OPENING U/S 148 OF COMPLETED ASSESSMENT IS BAD IN LAW HENCE THE RE-ASS ESSMENT SO FRAMED DESERVES TO BE QUASHED AND THE ASSESSEE PRAYS ACCOR DINGLY. FURTHER RELIANCE IS ALSO PLACED ON THE FOLLOWING CA SE LAWS: ACIT VS. ICICI SECURITIES PRIMARY DEALERSHIP [348 I TR 299 SC] HELD THAT, WHERE THE ASSESSEE HAS DISCLOSED FULL DE TAILS IN THE RETURN OF INCOME IN THE MATTER OF ITS DEALING IN STOCK AND SHARES, THE OBJECTION OF THE REVENUE THAT LOSS ITA 995 & 996/JP/2016_ NIRMALA AGARWAL VS ACIT 8 INCURRED WAS A SPECULATIVE LOSS IS CLEARLY A CHANGE OF OPINION AND THE ORDER OF REOPENING THE ASSESSMENT WAS NOT MAINTAINABLE. 34 DTR 49 CIT VS. KELVINATOR OF INDIA LTD. (SC) REASSESSMENT - REASON TO BELIEVE - CHANGE OF OPINIO N - AFTER 1 ST APRIL, 1989, POWER TO REOPEN IS MUCH WIDER - HOWEVER, MERE CHANGE OF OPINION CANNOT PER SE BE REASON TO REOPEN - AO HAS POWER TO REASSESS BUT NO POWER TO REVIEW - IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED, AS CONTE NDED ON BEHALF OF THE DEPARTMENT REVIEW WOULD TAKE PLACE IN THE GRAB OF R EOPENING OF ASSESSMENT - CONCEPT OF CHANGE OF OPINION IS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE AO - HENCE, AFTER 1 ST APRIL, 1989 AO HAS POWER TO REOPEN THE ASSESSMENT UNDER SECTION 147 PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT REASO NS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF JAI HOTELS CO. LIMITED VS. ASST. DIT, (2009) 24 DTR 37 (DEL): THE DELHI HIGH COURT HAS HELD THAT THERE BEING NO N EW MATERIAL IN THE HANDS OF THE REVENUE LEADING TO VIEW THAT THERE WAS REASON TO BE LIEVE THAT INCOME HAD ESCAPED ASSESSMENT, THE CASE IS A CLASSIC INSTANCE OF A CHA NGE OF OPINION. THE HIGH COURT FURTHER OBSERVED THAT WHEN COPIES OF STATEMENT OF I NCOME, TRADING ACCOUNT, PROFIT AND LOSS ACCOUNT, AUDIT REPORT ETC., WERE APPENDED TO THE RETURN FILED BY THE ASSESSEE, TAKING RESORT TO SECTION 147/148 WAS UNWA RRANTED AS IT CONSTITUTED A CHANGE OF OPINION, SINCE THE MATERIAL ACTED UPON HA D BEEN MADE AVAILABLE ALONG WITH RETURN OF INCOME. 314 ITR 275 CARTINI INDIA LTD. VS. ADDL. CIT (BOM.) S. 143(3) - REASSESSMENT - NOTICE - VALIDITY - DEDUCTION ALLOWED IN ASSESSMENT ORDER - REASSESSMENT ON BASIS OF MATERIAL CONSIDERED DURING ORIGINAL ASSESSMENT - MERE CHANGE OF OPINION - REASSESSMENT INVALID. 4. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE O RDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. WE H AVE ALSO GONE THROUGH THE CASE LAWS RELIED UPON. IT IS A TRITE LAW THAT FOR REOPENING THE ASSESSMENT U/S 148 OF THE ACT, THERE MUST BE MA TERIAL FOR BELIEF, ITA 995 & 996/JP/2016_ NIRMALA AGARWAL VS ACIT 9 CIRCUMSTANCES MUST EXIST AND CANNOT BE DEEMED TO EX IST FOR ARRIVING AT AN OPINION, REASON TO BELIEVE MUST BE HONEST AND NO T BASED ON SUSPICION, GOSSIP, RUMOUR OR CONJECTURE, REASONS RE FERRED MUST DISCLOSE THE PROCESS OF REASONING BY WHICH HE HOLDS REASONS TO BELIEVE AND CHANGE OF OPINION DOES NOT CONFER JURISDICTION TO R EASSESS, THERE MUST BE NEXUS BETWEEN MATERIAL AND BELIEF, THE REASONS RE FERRED MUST SHOW APPLICATION OF MIND BY THE ASSESSING OFFICER. THE VA LIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS HAS TO BE JUDGED WITH REGAR D TO THE MATERIAL AVAILABLE WITH THE OFFICE AT THE POINT OF TIME OF IS SUE OF NOTICE U/S 148 AND CANNOT BE SOUGHT TO BE SUBSTANTIATED BY REFEREN CE TO MATERIAL THAT MAY HAVE COME TO LIGHT SUBSEQUENTLY IN THE COURSE O F REASSESSMENT PROCEEDINGS. FURTHER IT IS ALSO PERTINENT TO NOTE T HAT EXCEPT THE STATEMENT OF RAJENDRA KUMAR JAIN RECORDED BY THE IN VESTIGATION WING, MUMBAI DURING THE COURSE OF SEARCH, THERE IS NO OTH ER CORROBORATIVE EVIDENCE OR MATERIAL WITH THE ASSESSING OFFICER TO R EOPEN THE ASSESSMENT. FURTHER IT IS ALSO NOTED THAT THE REVEN UE HAS NOT PROVIDED THE CROSS EXAMINATION OF THE WITNESSES WHICH IS A VI OLATION OF PRINCIPLES OF NATURAL JUSTICE AND IN SUCH A SITUATION THE HON' BLE SUPREME COURT IN THE CASE OF ANDMAN TIMBER PRODUCTS VS CCE (SUPRA) HA S HELD THAT DENIAL OF OPPORTUNITY TO CROSS EXAMINE WITNESSES, WH OSE STATEMENTS WERE MADE THE SOLE BASIS OF THE ASSESSMENT IS A SERI OUS FLAW RENDERING ITA 995 & 996/JP/2016_ NIRMALA AGARWAL VS ACIT 10 THE ORDER A NULLITY INASMUCH AS IT AMOUNTED TO VIOL ATION OF PROVISIONS PRINCIPLES OF NATURAL JUSTICE. IN SUCH A SITUATION, THE IMPUGNED ORDER WAS SET ASIDE. WE WOULD ALSO LIKE TO NOTE THAT THE VA LIDITY OF REASSESSMENT PROCEEDINGS HAS TO BE JUDGED WITH THE M ATERIAL AVAILABLE WITH THE ASSESSING OFFICER AND OPINION ARE STRICTLY BASED ON DOCUMENTS AND INFORMATION IN POSSESSION OF THE ASSESSING OFFI CER. NO REOPENING CAN BE MADE IN MECHANICAL MANNER. IT IS ALSO PERTIN ENT TO NOTE THAT REOPENING CANNOT BE BASED ON BORROWED SATISFACTION. THE INDEPENDENT SATISFACTION OF THE ASSESSING OFFICER IS BASIC NECE SSITY. THE HONBLE DELHI HIGH COURT IN THE CASE OF SARTHAK SECURITIES CO. PVT. LTD. VS. ITO (SUPRA) HAS QUASHED THE NOTICE WHERE NO INDEPENDENT APPLICATION OF MIND BY THE ASSESSING OFFICER WAS AVAILABLE AND ASSE SSING OFFICERS ACTION WAS ON THE BASIS OF INFORMATION FROM INVESTIG ATION WING ONLY. IN ASSESSEES CASE, THERE WAS NO SEARCH OPERATION. STAT EMENT RECORDED IN OTHER SEARCHED CANNOT BE APPLIED ON THE ASSESSEE BL INDLY AND WITHOUT PROVIDING CROSS EXAMINATION. FROM THE ABOVE FACTS A ND CIRCUMSTANCES OF THE CASE SUGGEST THAT THE ASSESSING OFFICER PROC EEDED FOR REOPENING ON BORROWED SATISFACTION RATHER THAN HIS OWN SATISFAC TION. ONCE THE ASSESSMENT WAS COMPLETED BY REJECTING THE BOOKS OF A CCOUNT AND G.P. RATE WAS ESTIMATED THEN TRADING ACCOUNTS INCLUDING T HE PURCHASES STOOD MERGED IN THAT ESTIMATION OF THE INCOME AND ANY FUR THER ACTION U/S 148 ITA 995 & 996/JP/2016_ NIRMALA AGARWAL VS ACIT 11 OF THE ACT FOR THE REASON THAT CERTAIN PURCHASES WER E NOT VERIFIABLE SHALL AMOUNT TO CHANGE IN OPINION WHICH IS NOT PERMITTED B Y LAW. SUCH VIEW IS ALSO SUPPORTED BY THE FOLLOWING DECISIONS: (I) ACIT VS. ICICI SECURITIES PRIMARY DEALERSHIP [34 8 ITR 299 SC] (II) 34 DTR 49 CIT VS. KELVINATOR OF INDIA LTD. (SC) (III) JAI HOTELS CO. LIMITED VS. ASST. DIT, (2009) 2 4 DTR 37 (DEL): IN A RECENT DECISION OF COORDINATE BENCH OF ITAT, JA IPUR IN THE CASE OF M/S DWARKA GEMS LTD. VS DCIT IN ITA NO. 71/JP/2017 OR DER DATED 27/03/2018, HAS HELD AS UNDER: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE OR IGINAL ASSESSMENT 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. THUS IT IS MANIFEST FROM THE RECORD THAT THE A O WHILE COMPLETING THE ORIGINAL ASSESSMENT UNDER SECTION 143(3) HAS CO NDUCTED AN ENQUIRY IN RESPECT OF THE PURCHASES MADE BY THE ASS ESSEE AND FINALLY CONCLUDED THAT THE PURCHASES MADE BY THE ASSESSEE F ROM THE 12 PARTIES WERE NOT VERIFIABLE AND ACCORDINGLY AN ADDI TION OF 25% OF SUCH PURCHASES WERE MADE BY THE AO. THEREFORE, THE ISSU E OF GENUINENESS OF PURCHASES WAS DULY EXAMINED BY THE AO WHILE COMP LETING THE SCRUTINY ASSESSMENT UNDER SECTION 143(3). THE AO, THEREAFTER, ISSUED A NOTICE UNDER SECTION 148 ON 21.11.2014 WHICH IS A FTER FOUR YEARS ITA 995 & 996/JP/2016_ NIRMALA AGARWAL VS ACIT 12 FROM THE END OF THE ASSESSMENT YEAR UNDER CONSIDERA TION. THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT ARE AS UND ER :- AS PER INFORMATION IT HAD BEEN ESTABLISHED THAT BO GUS SALES ENTRIES WERE MADE IN FAVOUR OF M/S DWARKA GEMS ON VARIOUS D ATED DURING F.Y. 2007-08 I.E. A.Y. 2008-09 TOTAL AMOUNTING TO R S. 31,40,818/-. THESE ENTRIES WERE PROVIDED BY M/S MERIDIAN GEMS & M/S MILLENIUM STARS WHICH ARE SOME OF THE BOGUS CONCERN S OF BHANWAR LAL JAIN & GROUP. THUS IT IS CLEAR THAT THE REOPENING OF THE ASSESSM ENT IS BASED ON THE INFORMATION RECEIVED AND TO ASSESS THE INCOME IN RE SPECT OF THE PURCHASES MADE BY THE ASSESSEE WHICH WAS EXAMINED B Y THE AO DURING THE ORIGINAL SCRUTINY ASSESSMENT UNDER SECTI ON 143(3). THE AO AFTER AN ENQUIRY AND INVESTIGATION DURING THE ORIGI NAL ASSESSMENT PROCEEDINGS HELD THAT THE PURCHASES MADE FROM 12 PA RTIES ARE NOT VERIFIABLE/GENUINE. THUS EXCEPT THE PURCHASES MADE FROM THOSE 12 PARTIES, THE AO HAS ACCEPTED THE GENUINENESS OF THE PURCHASES INCLUDING THE TWO PARTIES, NAMELY M/S. MARIDIAN GEM S AND M/S. MILLENNIUM STAR. EVEN IF THE SUBSEQUENT INFORMATIO N RECEIVED FROM THE DIT INVESTIGATION WING MUMBAI RENDERS THE ASSES SMENT ORDER PASSED UNDER SECTION 143(3) DEFECTIVE AND ERRONEOUS FOR WANT OF PROPER VERIFICATION AND INVESTIGATION, THE SAME WOU LD NOT TURN THE CASE IN THE CATEGORY THAT THE ASSESSEE HAS FAILED T O 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 REQU ISITE DOCUMENTS AND DETAILS OF PURCHASE RATHER THE AO CONDUCTED A D ETAILED ENQUIRY DURING THE ORIGINAL ASSESSMENT ON THE ISSUE OF GENU INENESS OF PURCHASES. THUS THE INFORMATION RECEIVED BY THE AO FROM INVESTIGATION WING MUMBAI WOULD NOT AMOUNT TO NON D ISCLOSURE OF PARTICULARS BY THE ASSESSEE, RATHER IT WAS THE SUBJ ECT MATTER OF ENQUIRY BY THE AO IN THE ORIGINAL ASSESSMENT. 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 R EVIEW THE ORDER OR ITA 995 & 996/JP/2016_ NIRMALA AGARWAL VS ACIT 13 REMOVE THE DEFECT BASED ON SUBSEQUENT INFORMATION. THE STATUTE HAS PROVIDED SEGREGATION OF POWERS AND JURISDICTION BET WEEN THE HIERARCHY OF THE TAXING AUTHORITIES AND, THEREFORE, THE POWER AND JURISDICTION VESTED WITH ONE AUTHORITY CANNOT BE AS SUMED BY THE OTHER AUTHORITY. SECTION 263 IS A PROVISION OF CHECK AND BALANCES AND, THEREFORE, IN CASE OF FAILURE ON THE PART OF THE AO TO CONDUCT A PROPER ENQUIRY AS REVEALED BY A SUBSEQUENT MATERIAL AND IN FORMATION CAME TO THE KNOWLEDGE OF THE COMMISSIONER, THE PROVISION S OF SECTION 263 CAN BE INVOKED BY THE REVISIONARY AUTHORITY. THEREF ORE, 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 REOPE NING AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR COMPLETED UNDER SECTION 143(3) IS NOT PERMISSIBLE WITHOUT SATISFYING THE CO NDITION PRECEDENT AS PROVIDED UNDER THE PROVISIONS OF SECTION 147 OF THE ACT. THE SUBSEQUENT INFORMATION RECEIVED BY THE AO CANNOT RE MOVE OR RELAX THE SAID CONDITION PROVIDED UNDER THE PROVISIONS OF SECTION 147 THAT THE ASSESSEE FAILED TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL NECESSARY FOR ASSESSMENT. IN THE CASE IN HAND, WHEN THE AO HA S ALREADY CONDUCTED AN ENQUIRY ON THE ISSUE AND THE ASSESSEE IS NOT EXPECTED TO FURNISH MORE THAN WHAT WAS ALREADY FURNISHED DURING THE ASSESSMENT PROCEEDINGS, THEN THE REOPENING BASED ON THE INFORM ATION FROM THE INVESTIGATION WING ON THE SAME ISSUE IS NOTHING BUT CHANGE OF OPINION AND TO REVIEW THE ORDER PASSED BY THE AO UNDER SECT ION 143(3) WHICH IS NOT PERMISSIBLE UNDER LAW. ACCORDINGLY, IN THE F ACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE REOPENI NG IS NOT VALID AND, THEREFORE, THE REASSESSMENT FRAMED BY THE AO IS WIT HOUT JURISDICTION AND CONSEQUENTLY THE REASSESSMENT ORDER PASSED IS Q UASHED. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HON 'BLE SUPREME COURT AS WELL AS HON'BLE HIGH COURT IN THE DECISIONS CITED (SUPRA) AND THE ITA 995 & 996/JP/2016_ NIRMALA AGARWAL VS ACIT 14 DECISION OF THE COORDINATE BENCH, WE QUASH THE REASS ESSMENT ORDER PASSED BY THE ASSESSING OFFICER AND CONFIRMED BY TH E LD. CIT(A). HENCE, GROUND NO 1 OF BOTH THESE APPEALS ARE ALLOWED . 6. SINCE WE HAVE ALLOWED THE GROUND NO. 1 OF THE APP EALS WHERE REOPENING HAS BEEN QUASHED, THEREFORE, THE OTHER GR OUNDS REMAINED UNACADEMIC AND THE SAME IS NOT REQUIRED TO BE ADJUD ICATED. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/04/2018. SD/- SD/- DQY HKKJR HKKXPAN (KUL BHARAT) (BHAGCHAND) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ TK;IQJ TK;IQJ TK;IQJ@ @@ @ JAIPUR FNUKAD@ DATED:- 11 TH APRIL, 2018 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SMT. NIRMALA AGARWAL, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE A.C.I.T., CIRCLE-5, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 995 & 996/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR