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

Facts

The assessee, M/s Lunawat Gems Corporation, filed an appeal before the High Court against the ITAT's order dated February 9, 2018, which dismissed the assessee's appeal. The ITAT had upheld the CIT(A)'s order dated July 1, 2016, which partly allowed the assessee's appeal against an assessment order dated October 31, 2004. The original assessment, completed under Section 147/143(3) on October 31, 2014, determined the income at Rs. 19,01,160, an increase from the declared Rs. 13,76,920. The CIT(A) sustained an addition of Rs. 3,14,545, representing 15% of alleged unverifiable purchases of Rs. 20,96,965, while deleting the remaining addition. The assessee also challenged the dismissal of their rectification application on August 6, 2018.

Held

The High Court concurred with the view taken by the ITAT and the CIT(A). The Court found that the present appeal did not raise any question of law, much less a substantial question of law. The ITAT had noted that the Investigation Wing, Mumbai, established that the assessee indulged in bogus bills without actual delivery of goods, based on the statement of Shri Praveen Kumar Jain, who ran M/s. JPK Trading (I) Pvt. Ltd. This concern issued accommodation bills on a commission basis. The assessee had shown purchases of Rs. 20,96,965/- from this entity, which were found to be bogus. The CIT(A) had reduced the addition to 15% of these purchases, relying on ITAT Jaipur Bench's decision in Anuj Kumar Varshney vs. ITO. The High Court found no reason to interfere with the ITAT's order. Consequently, the writ petition challenging the dismissal of the rectification application was also dismissed.

Key Issues

1. Whether the Tribunal erred in sustaining the addition of Rs. 3,14,545/- to the assessee's income, despite the denial of an opportunity to cross-examine the seller, M/s. JPK Trading India Ltd., and the alleged non-consideration of objections to the Section 148 notice? 2. Whether the Tribunal's order is contrary to the settled proposition of law that a witness's statement cannot be relied upon without affording the affected party an opportunity for cross-examination? Assessee's Contentions: - All three authorities below erred in sustaining the addition of Rs. 3,14,545/-. - The assessee was not allowed the opportunity to cross-examine the seller, M/s. JPK Trading India Ltd. - Objections raised in response to the notice u/s. 148 were not considered. - The Tribunal failed to adjudicate the specific plea regarding the validity of reopening proceedings u/s. 147, which was based on borrowed satisfaction and disposed of by a non-speaking order. - The order passed by the Tribunal is contrary to the settled proposition of law regarding cross-examination. Revenue's Contentions: - The judgment records no specific contentions for the revenue, but it details the findings of the Investigation Wing and the Assessing Officer regarding bogus purchases.