M/S LUNAWAT GEMS CORPORATION V. THE COMMISSIONER OF INCOME TAX

ITA/272/2018

AI Insights

The case involves M/s Lunawat Gems Corporation, which appealed against the decision of the Income Tax Appellate Tribunal, Jaipur, confirming the addition of Rs.3,14,545 to their income due to unverifiable purchases. The appellant argued that they were not given an opportunity to cross-examine the seller of the purported purchases, which they claimed were bogus. The ITAT and CIT(A) had both upheld the addition, leading to the present appeal. The court dismissed the appeal, finding no substantial question of law, and also dismissed a related writ petition challenging the rectification of the ITAT's order.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 684970 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 29-03-2019
• Assessment Year: misc
• Other Referred Cases: Anuj Kumar Varshney vs. ITO
• Laws Referred To: Income Tax Act, 1961, Limitation Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: P K KASLIWAL
• Keywords: Assessment; Bogus purchases; Cross Examination; Cross-examination; Income Tax; Rectification; Reopening of assessment
• Section: 147; 148; 143(3); 5

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 272/2018 D.B. Civil Misc. Application No.2125/2018 M/s Lunawat Gems Corporation, Lunawat Market, Darra, Haldion Ka Rasta, Jaipur. Through Its Partner ----Petitioner Versus 1. The Commissioner Of Income Tax, N.C.R.B. Building Statue Circle, Jaipur 2. D.C.I.T., Circle-2, Jaipur ----Respondents Connected With D.B. Civil Writ Petition No. 20906/2018 M/s Lunawat Gems Corporation, Lunawat Market, Darra, Haldion Ka Rasta, Jaipur. Through Its Partner ----Petitioner Versus 1. Commissioner Of Income Tax, NCR Building Statue Circle, C-Scheme, Jaipur. 2. D.C.I.T., Circle-2, Jaipur. ----Respondents For Petitioner(s) : Shri P.K. Kasliwal For Respondent(s) : HON'BLE MR. JUSTICE MOHAMMAD RAFIQ HON'BLE MR. JUSTICE GOVERDHAN BARDHAR Judgment 29/03/2019 For the reasons stated in the application u/s.5 of the Limitation Act, the delay of 78 days in filing the appeal is condoned. The application u/s.5 of the Limitation Act is allowed. Heard learned counsel for the appellant. (2 of 5) [ITA-272/18 & CW-20906/2018] This appeal is filed against the judgement of the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur (for short-`the ITAT’) dated 9.2.2018 by which the appeal of the assessee-appellant was dismissed and the subsequent order dated 6.8.2018 by which the misc. application filed for rectification of the mistake in the order dated 9.2.2018 was also dismissed. The assessee in the aforesaid appeal before the Tribunal challenged the order dated 1.7.2016 passed by the CIT(A) by which the assessee was partly allowed. That appeal was filed by the assessee against the assessment order dated 31.10.2004. The assessee-appellant filed income tax return on 31.10.2007 declaring total income of Rs.13,76,920. Subsequently, proceedings u/s.147 were initiated and the assessment was completed u/s.147/143(3) of the Act at an income of Rs.19,01,160 on 31.10.2014. The assessee preferred appeal thereagainst. The CIT(Appeal) vide order dated 1.7.2016 partly allowed the appeal. The CIT(Appeal) has held that 15% of unverifiable/bogus purchases is to be added to the income of the appellant and therefore out of the addition of Rs.5,24,240 made by the Assessing Officer, the addition to the extent of Rs.3,14,545/-, addition to the extent of Rs.3,14,545/-, being 15% of Rs.20,96,965/- was sustained and remaining addition of Rs.2,09,695/- was deleted. The ITAT has confirmed the order passed by the CIT(A) by dismissing the appeal. The assessee then filed misc. application seeking rectification of the mistake, which was also dismissed vide order dated 6.8.2018. Shri P.K. Kasliwal, learned counsel for the assessee-appellant has argued that all the three authorities below have seriously erred in sustaining the addition of Rs.3,14,545/- and not allowing (3 of 5) [ITA-272/18 & CW-20906/2018] the appeal even though the opportunity to cross examine the seller M/s. JPK Trading India Ltd. was not allowed to the appellant. The objection raised in response to the notice u/s.148 was not considered. It is contrary to the settled proposition of law that statement of any witness cannot be relied unless the affected party has been given opportunity to cross examine the witnesses. The assessee raised ground no.1 challenging the validity of initiation of proceedings u/s.147 of the Income Tax Act, 1961 on the basis of borrowed satisfaction for which the objections were raised by the assessee before the Assessing Officer. The Tribunal by passing the impugned order had not adjudicated the specific contention and plea raised by the assessee. The Tribunal has not given any finding on the issue of validity of reopening when the Assessing Officer had disposed of the objection by a non-speaking order. I is argued that the order passed by the Tribunal is contrary to the settled proposition of law. Perusal of the order passed by the Tribunal dated 9.2.2018 indicates that the Investigation Wing, Mumbai had conducted search and seizure operation over the group concern of Shri Praveen Kumar Jain. It was established by the Investigation Wing that assessee was indulged in bogus bills to the needy person without actual delivery of goods. This fact was established on the basis of evidence recorded by the Investigation Wing. The Investigation Wing of the department recorded the statement of Shri Praveen Kumar Jain who is running bogus concern in the name and style of M/s.JPK Trading (I) Pvt. Ltd. He stated that the business concern was indulging in providing the accommodation bills to needy parties on commission basis. He used to issue bogus (4 of 5) [ITA-272/18 & CW-20906/2018] sale invoices as per the requirement of the parties on prefixed commission on the bill amount. He used to prepare bogus tax invoices on the basis of information provided by the bill seekers and then bogus invoices were supplied to the needy parties. As per the availability of funds, the parties who had taken bogus invoices used to issue cheques having consideration of amount which was received by the assessee. After clearing the cheques, the assessee used to withdraw the cash amount and the cash withdrawn was returned back to the parties who had taken bogus invoices after deducting their prefixed commission. In that case, it was noted that assessee had shown purchases from the above company of Shri Praveen Kumar Jain amounting to Rs.20,96,965/-. On examination of the record, it was found that no purchases had actually taken place from these parties but their names were only used to inflate the business expenses and thereby reducing the income chargeable to tax. It is established on the basis of information provided by the Investigating Wing that purchases from the parties are bogus and the bogus purchases pertaining to the assessment year under consideration representing income of Rs.20,96,965 had therefore escaped assessment. Hence reasons for reopening were recorded and notice u/s.148 was issued on 24.3.2014, which was duly served upon the assessee. Copy of reasons recorded were supplied to the assessee alongwith notice u/s.142(1) and notice u/s.143(2) dated 21.4.2014. The Assessing Officer on examination of purcahse details noted that the assessee had shown purchases from M/s. JPK Trading Pvt. Ltd. Amounting to Rs.20,96,965/-. However, as per the statement of Shri Praveen Kumar Jain, it was found that (5 of 5) [ITA-272/18 & CW-20906/2018] M/s. JPK Trading Pvt. Ltd. had never sold any goods and were only issuing bogus sale invoices and charged commission. The CIT(A) and ITAT have noted the request of the appellant for permitting cross examination of the Director of the said company Shri Praveen Kumar Jain of M/s. JPK Trading (I) Pvt. Ltd. It was noted by the Tribunal that the Assessing Officer taking resort to various case laws made the trading addition of Rs.5,24,240/- by disallowing 25% of unverifiable purchases of Rs.20,96,965/-. The CIT(A), however, reduced the trading addition to Rs.5,24,240/- by relying on the judgement of the ITAT Jaipur Bench dated 22.10.2014 in Anuj Kumar Varshney vs. ITO. The CIT(A) has also upheld the earlier orders by dismissing the appeal and noted that the CIT(A) has elaborately discussed the issue raised by the assessee in his order, which was not interfered by this Court. We are inclined to concur with the view taken by the ITAT as also the CIT(A). In our view, the present appeal does not raise any question of law much less substantial question of law. The appeal is therefore dismissed. Since no interference was made in the order of the Tribunal dated 9.2.2018, no case is made out for entertaining this writ petition against the order dated 6.8.2018, whereby the application seeking rectification in the order of the Tribunal dated 9.2.2018 was dismissed. In view of above, the writ petition also stands dismissed. (GOVERDHAN BARDHAR),J (MOHAMMAD RAFIQ),J RS/19-20 "