M/S GOENKA JELWELLERS vs. COMMISSIONER INCOME TAX-I

Judgment 30/10/2018 (Per Hon’ble Mr. Justice Mohammad Rafiq) This income tax appeal under Section 260A of the Income Tax Act, 1961 (for short ‘the Act’) seeks to challenge the judgment dated 07.05.2018 passed by the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur (for short ‘the Tribunal’) whereby

the appeal filed by the appellant has been dismissed. The dispute pertains to assessment year 2007-08. The appellant-assessee is a firm engaged in the manufacturing of diamonds. The appellant-assessee filed its return of income declaring loss of Rs. 1,60,82,698/- after claiming deduction under Section 10AA of the Act to the tune of Rs. 3,50,21,661/- being the profit and gains derived from the export made by its unit situated at SEZ, Surat. Original assessment under Section 143(3) of the (2 of 9) [ITA-251/2018] Act was completed on returned income allowing deduction under Section 10AA of the Act. The Commissioner of Income Tax-I, Jaipur under Section 263 of the Act cancelled the aforesaid assessment holding that the Assessing Officer wrongly allowed deductions under Section 10AA of the Act and directed de-novo assessment. The Assessing Officer in the de-novo proceedings under Section 143(3)/263 of the Act disallowed the deductions made under Section 10AA of the Act and assessed the income of the appellant-assessee at Rs. 3,49,54,100/-. The appellant- assessee then filed appeal before the Commissioner of Income Tax (Appeals)-I, Jaipur against the de-novo assessment order passed under Section 143(3)/263 of the Act. CIT(A)-I allowed the appeal as also deductions claimed by the assessee under Section 10AA of the Act. The appellant-assessee further filed appeal before the Tribunal which vide order dated 03.10.2015 allowed the same. The Assessing Officer again initiated proceedings by issuing notice under Section 148 of the Act on 27.03.2014 by recording the reason that “the assessee is a beneficiary of having made bogus purchases of Rs. 59,45,850/- from M/s. Ankit Exports Mumbai during A.Y. 2007-2008 as reported by DIT(INV.)-II, Mumbai vide letter dated 13.03.2014 and purchase of Rs. 1,50,00,000/- from M/s. Natasha Enterprises Mumbai as reported by DIT(INV.), Mumbai vide letter dated 07.03.2014”. The appellant-assessee submitted its objections demanding copy of the statements on the basis of which the re-assessment was proposed but the Assessing Officer rejected the objection and carried out re- assessment proceedings. Total income of the appellant was then assessed at Rs. 4,01,90,562/- vide re-assessment order dated

(3 of 9) [ITA-251/2018] 30.01.2015, which was again rectified by the Assessing Officer under Section 154 of the Act because in the appeal preferred by the assessee against the de-novo assessment order, the CIT(A)-I, Jaipur vide its judgment dated 28.11.2013 passed in ITA No. 281/12-13 allowed the deductions of Rs. 3,49,54,100/- under Section 10AA of the Act, which was considered in the total income of the assessee by mistake in the re-assessment order. After rectification, the re-assessment order was finally passed for the total income of Rs. 52,36,460/-. Aggrieved by the re-assessment order dated 30.01.2015 as rectified vide order dated 27.02.2015 by which an income of Rs. 52,36,460/- was added against the non genuine purchase, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals)-I, Jaipur [for short ‘the CIT(A)’] who partly allowed the appeal of the assessee vide order dated 07.12.2015 by which the disallowance on the alleged bogus purchase of Rs. 2,09,45,850/- was restricted to only 15% in place of 25%. Being aggrieved by the order passed by CIT(A), the appellant preferred appeal before the Tribunal. Case of the appellant before the Tribunal was that reassessment proceedings under Section 147/148 of the Act have been initiated by the Assessing Officer merely on the basis of change of opinion, as all the primary facts viz. the purchase made by the assessee, books of accounts, bills of purchase were produced before the Assessing Officer during assessment proceedings and were already known to the Assessing Officer. The Assessing Officer after considering all the facts allowed the expenditure as genuine purchase and thereafter he reopened the entire proceedings for the same expenditure, which according to assessee tantamount to change of (4 of 9) [ITA-251/2018] opinion. The Tribunal vide order dated 07.05.2018 dismissed the appeal of the appellant by holding that this was not a case of change of opinion as the Assessing Officer has done the re- assessment after receiving the fresh information. Mr. Pradeep Choudhary, learned counsel for the appellant argued that the Tribunal committed serious illegality by holding that reassessment order dated 30.01.2015 does not tantamount to change of opinion under Section 143(3)/148 of the Act. It is well settled law that if the entire material and primary facts were available before the Assessing Officer while passing original assessment, then reassessment cannot be made on the basis of similar material. No additional facts were made before the Assessing Officer except the confessional statement made by a third person i.e. Shri Praveen Jain during search operation at his premises. It is argued that addition could not have been made merely on the basis of uncontroverted confessional statement. The authorities below failed to consider that copy of statement of Shri Praveen Jain and other relevant persons were not provided to the appellant assessee and he was not afforded any opportunity to cross-examine him. In any case, it was the bounden duty of the Revenue to discharge its burden by producing cogent evidence for reassessment. The Tribunal has wrongly shifted that burden on the appellant-assessee. Learned counsel argued that the Assessing Officer wrongly added Rs. 2,09,45,850/- under Section 69C of the Act as unexplained expenditure, merely on the ground that M/s. Ankit Export and M/s. Natasha Enterprises, from whom the bills of purchase were obtained, were not in existence because they have not responded to the notice of the department. It is (5 of 9) [ITA-251/2018] argued that the Tribunal has failed to appreciate that at the time of original assessment, the appellant produced all the bills of purchase, books of accounts and the bank statements which clearly established that the purchase was genuinely made by the assessee. The Tribunal has further failed to see that the purchase of rough material in the Gems Stones business is made through the broker and the firm rarely meets the supplier. Once the goods are finalized, the same are delivered by the broker and the payment is made to the concerned supplier firm through cheque and the relevant entries are made in the books of accounts. It is therefore prayed that present appeal be allowed and the substantial questions of law framed at Page 10 and 11 of the memo of the appeal may be answered in favour of the appellant- assessee. Learned counsel in support of his arguments relied upon the judgment of the Supreme Court in Commissioner of Income Tax, Delhi Vs. M/s. Kelvinator of India Limited (Civil Appeal No. 2009-2011 of 2003 decided on 18.01.2010). Mr. Anuroop Singhi, learned counsel appearing on behalf of the respondent-Revenue opposed the appeal. Learned did not have the opportunity to cross-examine Shri Praveen Jain. In any case, the appellant did not make any such prayer before the Assessing Officer or even before the CIT(A) to recall Shri Praveen Jain for cross-examination. Plea of the alleged breach of (6 of 9) [ITA-251/2018] principles of natural justice was taken for the first time at the appellate stage therefore the same is liable to be rejected. We have given our anxious consideration to rival submissions and carefully perused the material on record. The Tribunal in its order has noted that the appellant- assessee has shown purchases of Rs. 2,09,45,850/- from two concerns namely M/s. Ankit Exports (Rs. 59,45,850/-) and M/s. Natasha Enterprises (Rs. 1,50,00,000/-), Mumbai. These firms were controlled by Shri Praveen Jain who was the key person of these companies engaged in providing entries for bogus purchases. During the course of search of premises of Mr. Praveen Jain, many incriminating documents were found and seized. Statements of various key persons including Shri Praveen Jain were recorded under Section 132(4) of the Act wherein it has been established that the group was indulging in providing accommodation entries for bogus purchases and sale through these concerns. The concerns controlled by him were found non- existing at the given addresses and also non-genuine. Shri Praveen Jain also admitted this fact in his sworn statements during the course of search operation. From the documents and evidence, it was clearly established that the assessee was beneficiary of accommodation entries from Shri Praveen Jain and his concerns by obtaining bogus purchase bill amounting to Rs. 2,09,45,850/- from M/s. Ankit Exports, Mumbai and M/s. Natasha Enterprises, Mumbai. These were the paper concerns of Shri Praveen Jain Group of Mumbai. The Assessing Officer asked the assessee to produce these parties with the books of accounts in order to prove the genuineness and verification of the transactions

(7 of 9) [ITA-251/2018] made but the assessee failed to do so. Notice send to these parties returned back unserved. The Tribunal therefore held that the assessee failed to prove the genuineness of the purchase made from these two concerns. The assessee also failed to discharge the primary onus to establish the genuineness of purchases from these concerns. The Assessing Officer made disallowance of Rs. 52,36,462/- (25% of the total purchase of Rs. 2,09,45,850/-). The CIT(A) has restricted the disallowance to the extent of 15% in view of the decision of ITAT Jaipur Bench in the 187/JP/2012 dated 22.10.2014). Having heard learned counsel for the parties and perused the material on record, we are inclined to concur with the view taken by the Tribunal, which is based on the facts proved by statement of Shri Praveen Jain. The appellant despite being provided opportunity failed to prove the genuineness of the transactions and failed to produce the parties along with their books of accounts from whom such transactions were made to verify the same. Relied judgment of the Supreme Court in Commissioner of Income Tax, Delhi Vs. M/s. Kelvinator of India Limited (Supra) does not offer any assistance to the appellant in the present case. It cannot be said that the Assessing Officer in the subsequent assessment order has arrived at a view that it has taken only on the basis of whatever material was available with him at the time of framing of initial assessment order. Indisputably, the Assessing Officer at the subsequent stage has relied upon the statement of Shri Praveen Jain recorded under (8 of 9) [ITA-251/2018] Section 132 (4) of the Act. It is on that basis that he called upon the appellant to prove the genuineness of the transactions. Therefore, the Assessing Officer has rightly disallowed the deduction under Section 10AA of the Act.

As regards the argument of the appellant for not providing him opportunity of cross examine Shri Praveen Jain, in the first place, the Assessing Officer himself required the appellant to produce representative of the concerned parties along with their books of accounts and he failed to produce them. Secondly, no such prayer was ever made by the appellant before the Assessing Officer to summon Shri Praveen Jain for his cross-examination. We may at this juncture usefully refer to the observations of the Supreme Court in The Chairman, Board of Mining Examination and Chief Inspector of Mines & Another Vs. Ramjee, (1977) 2 SCC 256 wherein concept of natural justice was succinctly summarized in the following terms: “xxxxxxxxxx Natural justice is no unruly horse, no lurking land mine, nor a judicial cure-all. If fairness is shown by the decision-maker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating. We can neither be financial nor fanatical but should be flexible yet firm in this jurisdiction. No man shall be hit below the belt-that is the conscience of the matter.” Calcutta High Court in Hindustan Tobacco Company (supra) in somewhat similar circumstances rejected identical argument in para 34 of the judgment which reads as under:

(9 of 9) [ITA-251/2018] “34. If the assessee felt that cross-examining of any person was necessary for establishing its case it was incumbent upon the assessee to make such prayer before the Assessing Officer during the assessment proceeding. If a party fails to avail of the opportunity to cross-examine a person at the appropriate stage in he proceeding, the said party would be precluded from raising such issue at a latter stage of the proceeding. Therefore the belated claim of the assessee at the appellate stage that it was denied the opportunity of cross- examining witnesses in the assessment proceeding is wholly untenable in law.” In view of above discussion, no question of law, much less substantial question of law, arises in this appeal. We are therefore not inclined to entertain this appeal and the same is accordingly dismissed being devoid of merits. Stay Application No. 3261/2018 also stands dismissed.

(GOVERDHAN BARDHAR),J (MOHAMMAD RAFIQ),J Manoj/7