Income Tax Appellate Tribunal - Jaipur
Dwarka Gems Ltd., Jaipur vs Dcit, Jaipur on 27 March, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 71/JP/2017
fu/kZkj.k o"kZ@Assessment Years : 2008-09.
M/s. Dwarka Gems Ltd., cuke The DCIT,
H-20, Bhagat Singh Marg, Vs. Circle-7
C-Scheme, Jaipur. 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 the order dated 27th October, 2016 pertaining to Assessment Year 2008-09. The assessee has raised the following grounds of appeal :-
1. "On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in reopening the assessment u/s 148 of the Income Tax Act, 1961 arbitrarily, without appreciating the facts and circumstances of the case and the submission 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 upholding 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 party Sh. Bhanwar Lal Jain without bringing any corroborative material on record and without making proper enquires in the matter to ensure that any income of assessee has escaped assessment. 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 completed u/s 143(3) where after making necessary enquires, provisions of section 145(3) were invoked and income was estimated, thus the re-opening of completed assessment on account of alleged unverifiable purchases is change of opinion and thus 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 case, the Ld. CIT(A) has erred in confirming the application of provisions of section 145(3) by Ld. AO by alleging certain purchases to the tune of Rs. 31,40,818/- made from two parties i.e M/s Meridian Gems & Millennium Star as unverifiable by completely ignoring the fact that M/s Meridian Gems has acknowledged the transactions made with the assessee vide confirmation 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 confirming the action of Ld. AO by alleging the purchases of Rs. 31,40,818/- as unverifiable solely on the basis of statement of a third party Sh. Bhanwar Lal Jain who is completely unknown/ unrelated to assessee and who has not been allowed to be cross-examined by assessee. Thus, the action of Ld. CIT(A) in confirming the purchases as unverifiable deserves to be ignored and excluded. 2.2. That, the Ld. CIT(A) has further erred in upholding the order passed by Ld. AO treating the concerned purchases of Rs. 31,40,818/- as unverifiable on the basis of statements of a third party Sh. Bhanwar Lal Jain by completely ignoring that in his statements recorder during search at his business premises, he has nowhere mentioned that the sales to assessee were bogus. Thus, the action of Ld. CIT(A) in confirming the said purchases as bogus deserves to be held bad in law.
3ITA No. 71/JP/2017
M/s. Dwarka Gems Ltd., Jaipur.
3. On the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in confirming trading addition of Rs. 4,71,123/- being 15% of the alleged unverifiable purchases of Rs. 31,40,818/- arbitrarily, without appreciating the facts and circumstances of the case and the submission made before him. Thus, the addition of Rs. 4,71,123/- deserves to be deleted. 3.1. That, the Ld. CIT(A) has further erred in confirming the impugned addition made by Ld. AO by alleging the purchases 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 addition 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 reopening of the assessment. The assessee is a company and engaged in the business of manufacturing of silver/gold ornaments and articles. The assessee filed its return of income on 14.10.2008 on which scrutiny assessment was completed 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 unverifiable/bogus purchases made by the assessee from 12 parties. The matter against the original assessment was finally taken to the Hon'ble High Court and vide its order dated 23rd May, 2017 the Hon'ble High Court has set aside the matter to the record of the AO for fresh consideration. In the meantime, the AO proposed to reopen the assessment 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 to 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 as per the information received from the Investigation Wing, Mumbai. The AO accordingly completed the reassessment under section 143(3) read with section 147 on 31st March, 2015 making a trading addition of Rs. 7,85,204/-. The assessee challenged the action of the AO before the ld. CIT (A) and raised the objection against the reopening of the assessment. The ld. CIT (A) though confirmed the validity of reopening of assessment, however, restricted the trading addition 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 submitted that on perusal of reasons recorded by the AO for reopening of the assessment, it can be observed that the assessment is reopened merely on the basis of information received from Investigation Wing Mumbai without arriving at the objective 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 case that the said person was engaged in providing bogus bills. Further, it is submitted 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 decision of Hon'ble 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 believe that the income chargeable to tax has escaped assessment. The ld. A/R has further contended that the 5 ITA No. 71/JP/2017 M/s. Dwarka Gems Ltd., Jaipur.
reopening is after the expiry of four years from the end of the assessment year and, therefore, the AO cannot invoke the provisions of section 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 the series of decisions on the point that the opinion formed by the AO based on the conclusion of other person is not valid and, therefore, the AO was not having jurisdiction to invoke the provisions of section 147/148.
3.1. On the other hand, the ld. D/R has submitted that after completing the original assessment, the AO received fresh information 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 the 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 assessment was completed under section 143(3) on 27th 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 AO while completing the original assessment under section 143(3) has conducted an enquiry in respect of the purchases made by the assessee and finally concluded that the purchases made by the assessee from the 12 parties were not verifiable and accordingly an addition of 25% of such purchases were made by the AO. Therefore, the issue of genuineness of purchases was duly examined by the AO while completing the scrutiny assessment under section 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 consideration. The reasons recorded for reopening of the assessment are as under :-
"As per information it had been established that bogus sales entries were made in favour of M/s Dwarka Gems on various dated during F.Y. 2007-08 i.e. A.Y. 2008-09 total amounting to Rs. 31,40,818/-. These entries were provided by M/s Meridian Gems & M/s Millenium Stars which are some of the bogus concerns of Bhanwar Lal Jain & Group."
Thus it is clear that the reopening of the assessment 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 scrutiny assessment under section 143(3). The AO after an enquiry and investigation 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 including 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 renders 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 Investigation Wing Mumbai would not 7 ITA No. 71/JP/2017 M/s. Dwarka Gems Ltd., Jaipur.
amount to non disclosure of particulars by the assessee, rather it was the subject 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 review the order or remove the defect based on subsequent information. The statute has provided segregation of powers and jurisdiction between the hierarchy of the taxing authorities and, therefore, the power and jurisdiction vested with one authority cannot be assumed 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 information came to the knowledge of the Commissioner, the provisions of section 263 can be invoked by the revisionary authority. Therefore, the remedy for any defect or default in the order of the AO is provided under section 263 of the Act and not under section 147. The reopening after four years from the end of the assessment year completed under section 143(3) is not permissible without satisfying the condition precedent as provided under the provisions of section 147 of the Act. The subsequent information received by the AO cannot remove 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 has 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 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) which 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 framed by the AO is without jurisdiction and consequently the reassessment order passed is quashed.
5. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 27/03/2018.
Sd/- Sd/-
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(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 vxzfs 'kr@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