SAMKIT SHASHIKANT SHAH ,MUMBAI V. PRINCIPAL COMMISSIONER OF INCOME TAX -20 , MUMBAI

ITA 3703/MUM/2025

AI Insights

The case revolves around the reassessment proceedings initiated against Shri Samkit Shashikant Shah for the Assessment Year 2018-19, based on allegations of bogus purchases from certain parties dealing in rough diamonds. The Principal Commissioner of Income Tax-20, Mumbai, set aside the JAO's order dropping the reassessment proceedings, citing non-compliance with the Faceless Assessment Scheme and lack of detailed inquiry. However, the Tribunal found that the JAO had adequately verified the documents and proceedings before dropping the reassessment, and thus, the PCIT's order was erroneous and prejudicial to the interest of the Revenue.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711695 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2018-2019
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.A. DHYANI
• Assessee Lawyers: RASHMIKANT MODI AW
• Keywords: Set aside; Business income; Opportunity of being heard; Reassessment proceedings; Bogus purchase; Procedural lapse; Bogus
• Section: 147; 148; 263

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SMT RENU JAUHRI, ACCOUNTANT MEMBER ITA No.3703/Mum/2025 (Assessment Year :2018-19) Shri Samkit Shashikant Shah 8th Floor, DE8081, DE8082, Bharat Diamond Bourse Block G, BKC Road Bandra East, Mumbai – 400 051 Vs. Principal Commissioner of Income Tax-20, Mumbai PAN/GIR No.BGKPS8245N (Appellant) .. (Respondent) Assessee by Shri Rashmikant Modi a/w. Ms. Ketki Rajeshirke Revenue by Shri R.A. Dhyani, CIT DR Date of Hearing 17/07/2025 Date of Pronouncement 21/07/2025 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 31/03/2025 passed by ld. PCIT, Mumbai-20 in relation to the revisionary order passed u/s. 263 for the A.Y.2018-19. Printed from counselvise.com ITA No.3703/Mum/2025 Samkit Shashikant Shah 2 2. In the grounds of appeal the assessee has raised following grounds of appeal:- “1. On the facts and in the circumstances of the case and in law, the Appellant submits that the Hon'ble Principal Commissioner of Income Tax-20, Mumbai erred in passing the impugned order w/s 283 of the Income-tax Act, 1961 dated 31.03.2025 to set aside the order of the Assessing Officer dated 09.06.2022, whereby the reassessment proceedings u/s 148 were dropped. 2. On the facts and in the circumstances of the case and in law, the Appellant submits that the Hon'ble Principal Commissioner of Income Tax-20, Mumbai erred in alleging that the Assessing Officer had dropped proceedings without making any inquiry or verification, despite the fact that detailed submissions were filed by the Appellant which were duly considered by the Assessing Officer before dropping the reassessment proceedings.” 3. The brief facts are that the assessee has filed its return of income for A.Y.2018-19 declaring total income of Rs. 50,02,670/-. Later on based on certain information received from DDIT(Inv) Unit-3, Surat that assessee has taken accommodation of bogus purchases from the following three parties:- Sr. No. Total Sales / Purchase Made during the FY 2017-18 Information Value 1. Sales made to Antique Exim Private Limited (PAN: AAJCA9815B) 86,16,631 2. Sales made to Saffron Gems Private Limited (PAN: AANCS2828J) 75,58,234 3. Sales/Purchase made with M/s Tanman Jewels Private Limited (PAN: AADCT3283A) 3,12,97,630 TOTAL 4,74,72,495 Printed from counselvise.com ITA No.3703/Mum/2025 Samkit Shashikant Shah 3 4. Accordingly, the proceedings u/s.148 was initiated in accordance with the risk management strategy notice u/s.148B was issued. In response, assessee had filed objections and replies before the ld. AO and submitted the following documents:- i. Ledger account of both parties duly confirmed by them on their Letterhead ii. Bank statement of the opposite party showing amount received against purchase. iii. Copy of Invoice duly accepted by both the parties. iv. Affidavit on stamp paper of Rs. 500/- confirming the transaction made by all three parties duly notarized. v.GST Returns of all the three above mentioned parties. vi. Income Tax Returns along with Acknowledgement of all the three above mentioned parties. 5. It was further submitted that assessee was engaged in the business of export and trading of diamonds and pointed out that assessee dealt purely in the polished diamond and alleged allegation is that these parties have provided bogus purchase bills for rough diamonds, whereas, the assessee has never dealt with rough diamond but only dealt with polished diamonds. Against order u/s. 148A(d), assessee had submitted as under:- Further, the nature of business of M/s Samkit Gems is Trader and Exporter of Polished Diamond and assessee has never dealt in Rough Diamond since its inception. Printed from counselvise.com ITA No.3703/Mum/2025 Samkit Shashikant Shah 4 In your findings, M/s Tanman Jewels Pvt. Ltd., Antique Exim Pvt Ltd and Saffron Gems Pvt. Ltd. is dealing in rough diamonds whereas assessee has not made any dealings in rough diamonds neither with the above-mentioned parties nor with any other diamond dealer. Further we have not paid any labour charges for polishing of any rough diamonds. Therefore, the statement showing parties has dealt in rough diamond is not at all applicable to assessee and hence assessment made on these findings shall be dropped. To substantiate this claim we herewith attach Form 3CD, showing details of Traded Polished Diamonds in form of Quantitative Details. (Annexure A) In our case, the quantity details/record are perfectly tallied carat to carat and there is no mismatch in the quantity record. Our sale and purchase have been done at Arm's length price with the actual delivery of goods. We have made the sales of diamonds purchased from above sald parties mentioned in the annexure and the same is duly reflected in ROI and books of accounts We have disclosed all the true and material facts in the return of income and there is no failure on our part, hence the proceeding u/s 148 is bad in law. Since all books of accounts are audited and all the purchase entries are recorded In books of accounts and shown in bank statements and ledger confirmation is available so there is no Income escaping assessment. Therefore, there is no new material for reopening the case. 6. Apart from that it was stated that there was corresponding sale which was made out of all the purchases including these parties and sales are duly disclosed in the return of income. Apart from that various judgments were also relied upon. Printed from counselvise.com ITA No.3703/Mum/2025 Samkit Shashikant Shah 5 7. The ld. AO on perusal of all these documents and after verifying the entire details had dropped the proceedings u/s.148 vide intimation and order dated 09/06/2022 which reads as under:- In this case, the assessee has filed return of Income on 15.09.2018 declaring total Income of Rs. 50,02,670/- Thereafter on 08.02.2019 the return was processed u/s 143(1) of the Income- tax act, 1961 by CPC, Further proceeding u/s 148A of the act was initiated in accordance with the risk management strategy formulated by the Board on the basis of Information available on the Insight Portal of the Income Tax Department. Thereafter order u/s 148A (d) of the act was passed on 25.04.2022 and consequently notice u/s 148 of the act was issued and the ongoing proceeding was initiated. 2 In compliance to the notice u/s 148 of the act, the assessee has filed return of income on 26.04.2022 declaring total income of Rs. 50,02,670/- and submitted reply on 08.06.2022. 3. Submission of the assessee has been considered. It is seen that the assessee is engaged in the business of Export and trading of Diamonds and deals exclusively in cut and polish diamonds only not in the business of rough diamonds. However the information is specifically regarding bogus sale/purchase of rough diamonds or cheap diamonds. Further the assessee has submitted that they have not paid any labour charges for polishing of any rough diamonds whereas in the business of rough diamond labour for polishing of rough diamonds is business necessary. The assessee has submitted relevant extract of form 3CD in support of his claim and provided reference of case laws in support his plea. Further from financials it is seen that the assessee has shown all purchases, sale data with respect to the purchase and disclosed all income derived from the business operation. Further in sport regarding genuineness of the transaction the assessee has submitted all relevant document i.e. Invoices, ledgers of parties, Bank statement, Qualitative and quantitative detail, affidavit from the parties from whom the transaction were made, GST Invoices Printed from counselvise.com ITA No.3703/Mum/2025 Samkit Shashikant Shah 6 and ITR of the parties and reconciled all the transaction value with bills, bank statement, ledger and affidavit. Hence the transaction mentioned in the information does not substantiate that the income has escaped from assessment. 4. In view of the above facts and circumstances, submission of the assessee is found satisfactory and acceptable, hence the proceeding is hereby dropped. 8. Now, the only allegation of the ld. PCIT in his order is that dropping of the proceedings by JAO was not in accordance with the Faceless Assessment Scheme introduced w.e.f. 13/08/2020 and therefore, dropping of assessment proceeding by JAO is erroneous and prejudicial in the interest of the Revenue. Apart from that he has not made any detailed enquiry and verification. Finally, he has set aside the order dropping the proceedings u/s.147 after observing as under:- “8. In view of the above discussion from Para 1 to 7. It is evident that this is a case where the assessing officer has without application of mind and without making any enquiry or verifying the details of the case and before allocation of the case to the Faceless Assessing Officer by the DGIT (Systems) as per the SOPs issued on various dates by the DGIT(Systems), dropped the proceedings on the ITBA portal. The action of dropping of the proceedings by the JAO without verifying the fact of the case before allocation of the case to the Faceless Assessing Officer by the DGIT (Systems) as per the SOPs Issued on various dates is erroneous and prejudicial to the interest of the revenue. Therefore, in exercise of the powers conferred upon the undersigned under Section 263 of the Income-tax Act, 1961, the order of the AO dropping the proceedings on the ITBA is hereby set aside. The matter is remitted back to the AO for de novo consideration to undertake a detailed inquiry and verification in this case and pass speaking assessment order in accordance with the Income Tax act, 1961 by following extant SOPs in this regard after giving due opportunity of being heard to the assessee.” Printed from counselvise.com ITA No.3703/Mum/2025 Samkit Shashikant Shah 7 9. We have heard both the parties and perused the impugned order as well as the material placed on record. It is observed that the sole reason for which the learned PCIT invoked jurisdiction under section 263 of the Act is that, prior to the allocation of the case to the Faceless Assessing Officer (FAO) under the Faceless Assessment Scheme by the DGIT (Systems), the Jurisdictional Assessing Officer (JAO), in purported contravention of the Standard Operating Procedures (SOPs), dropped the reassessment proceedings initiated under section 147 on the ITBA portal. According to the PCIT, the JAO was not competent to do so and ought to have referred the matter for faceless adjudication. 10. However, from the records, it is evident that the assessee had duly filed all requisite replies to the notice under section 148 on the ITBA portal. The JAO carried out a due verification of the documents furnished comprising over 55 pages of purchase bills, sales invoices, explanations, and supporting records. The JAO, after examining the information in the allocation module, found that it pertained to entities dealing in rough diamonds, whereas the assessee’s business exclusively involved polished diamonds. The two are materially distinct business domains, and the assessee had no dealings in rough diamonds. Accordingly, the JAO found that the adverse information in the allocation had no relevance to the assessee’s case. Printed from counselvise.com ITA No.3703/Mum/2025 Samkit Shashikant Shah 8 11. Further, the JAO verified the assessee’s purchase and sales transactions, and found them supported by all relevant documentary evidence, including invoices, ledger copies, bank statements, GST returns, quantitative and qualitative details, and affidavits from the parties from whom purchases were made. The Assessing Officer reconciled the transaction values and found no discrepancy. Thus, the adverse information per se did not substantiate any escapement of income from assessment. 12. Upon consideration of the entire material, we find that the dropping of reassessment proceedings under section 147 by the JAO, after due verification and on the strength of documents submitted by the assessee, cannot be said to be erroneous so as to invoke jurisdiction under section 263. It is a well-settled legal proposition that for assumption of jurisdiction under section 263, the order sought to be revised must be not only erroneous but also prejudicial to the interest of the Revenue. 13. In the present case, all the replies were filed on the ITBA portal; the JAO who issued notice under section 148 has applied his mind, considered the replies and documentary evidences, and thereafter passed a reasoned order on the portal. Merely because, in the opinion of the learned PCIT, the reassessment should have been undertaken by the FAO instead of the JAO, cannot constitute a valid basis for Printed from counselvise.com ITA No.3703/Mum/2025 Samkit Shashikant Shah 9 invoking section 263. At the highest, this may constitute a technical or procedural irregularity, which by itself does not render the order erroneous or prejudicial to the Revenue. 14. We further note that the learned PCIT has not demonstrated how the dropping of proceedings by the JAO has caused any loss to the Revenue. Nowhere in the order has it been explained what prejudice has been caused or how the income has escaped assessment. On the contrary, the JAO has verified all relevant documents, including bank statements, GST invoices, ITRs, affidavits from suppliers, and corresponding sales. It has been clarified that the assessee had no dealings in rough diamonds, and the suspicion raised on the basis of third-party information pertained only to rough diamonds. 15. In any event, it is trite law that the information received from the Investigation Wing is only a trigger, and the final action depends on independent verification based on the facts of each case. In the present case, the JAO has undertaken such verification and found no material to support any addition. Therefore, even if it were to be assumed that notice under section 148 had been validly issued, once the reassessment was completed by accepting the return of income and no addition was made after due application of mind, there is no justification for invocation of section 263. Printed from counselvise.com ITA No.3703/Mum/2025 Samkit Shashikant Shah 10 16. In view of the foregoing discussion, we are of the considered opinion that the learned PCIT has erred both in law and in facts in setting aside the order passed by the JAO under section 147. Accordingly, the order of the learned PCIT is quashed, and the order of the JAO dropping the reassessment proceedings under section 147 is upheld. 17. In the result, appeal of the assessee is allowed. Order pronounced on 21st July, 2025. Sd/- (RENU JAUHRI) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 21/07/2025 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Printed from counselvise.com "