RAVI GUPTA vs. I T O

Judgment 10/05/2017

(3 of 11) [ITA-25/2007]

In Appeal No. 375/2008 “(i) Whether on the facts and circumstances of the case the learned Income Tax Appellate Tribunal was justified to restore the protective assessment taking contradictory stand inasmuch as at the hone hand treating the purchases as bogus and accommodation transaction and on the other hand it is making addition for the same? (ii) Whether treating the whole transaction as bogus on the one hand and making the addition for alleged want of proof in respect of the same transaction treated as bogus is not contradictory to each other and therefore whether the consequential order is sustainable?” In Appeal No. 423/2008 “(i) Whether on the facts and circumstances of the case the learned Income Tax Appellate Tribunal was justified to restore the protective assessment taking contradictory stand inasmuch as at the hone hand treating the purchases as bogus and accommodation transaction and on the other hand it is making addition for the same? (ii) Whether treating the whole transaction as bogus on the one hand and making the addition for alleged want of proof in respect of the same transaction treated as bogus is not contradictory to each other and therefore whether the consequential order is sustainable?” In Appeal No. 533/2008 “(i) Whether on the facts and circumstances of the case the learned Income Tax Appellate Tribunal was justified to restore the protective assessment taking contradictory stand inasmuch as at the hone hand treating the purchases as bogus and accommodation transaction and on the other hand it is making addition for the same? (ii) Whether treating the whole transaction as bogus on the one hand and making the addition for alleged want of proof in respect of the same transaction treated as bogus is not contradictory to each other and therefore whether the consequential order is sustainable?” In Appeal No. 570/2008 “(i) Whether on the facts and in the circumstances of the case the learned Income Tax Appellate Tribunal was justified to restore the protective assessment taking contradictory stand inasmuch as at the hone hand treating the purchases as bogus and accommodation transaction and on the other hand it is making addition for the same?”

(4 of 11) [ITA-25/2007]

more particularly para 15 which reads as under:- “The assessee has filed a copy of Sales Tax registration certificate in support of his contention that the said firm was carrying on business at 17 Manav Ji Ka Bagh MD Road Jaipur. The said Sale Tax certificate is dated 20-04-98 and effective from 13-04-98. It clearly reflects that the assessee had not carried on business with effect from 09-03-98 but started this so called business form 13-04-98. The assessee has claimed to have made purchases form 09-03-98 The nature of business mentioned in the certificate of registration is manufacturing and trading of precious, semi precious stones, silver and gold jewellery and garments, carpets, handicrafts, leather and stationary items. This certificate clearly reflects that the assessee was not dealing in diamond cut and polished. It is clear that the assessee applied for registration in Sales Tax Department when the idea suddenly came to him to join other persons in abeting persons/parties who had made voluntary disclosures under VDIS Scheme 1997. I am satisfied that the assessee had not carried on any business at any stage of time in the name of M.s S.S. Gems at 17 Manav Ji Ka Bagh MD Road Jaipur.

Fictitious sales have been shown in the hands of the assessee and money in cash has also been received by the assessee. As such the amount received in cash in the garb of cash sales amounting to Rs. 7,02,22,833/- is added to the assessee’s income on protective basis. Since the cash has been inserted in the books of account as cash sale and then deposited in the bank account of the assessee, the same is cash credit as commonly known in the income tax. The amount of Rs. 7,02,22,833/- is therefore added to the assessee’s income under section 68 of the Income Tax Act 1961. 19. Since the books of account have been rejected under section 145(3) of the Income Tax Act 1961 net profit is estimated at 5% of the total sale shown by the assessee at Rs. 7,02,22,833/-. This will mean net profit of Rs. 35,11,141/-. This will be added to the assessee’s income on substantive basis.

A.Y. 1998-99 vide para nos. 4 and 4.1 which are being reproduced hereunder for ready reference:_

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affording opportunities to the assessee, as evident form the assessment order, the assessee did not bother to appear before the AO to establish the source of money. Of course, the assessee would have been absolved from his this obligation to establish the source of said money in question, if in the cases of sellers they had established the source of this money. We, thus, justify the action of the AO in making additions of Rs. 1,70,90,046/- in assessment year 1998-99 and Rs. 92,53,765/- in assessment year 1999-2000 and thus while reverting the first appellate order deleting these additions in these years, restore the additions in question made by the AO.

(8 of 11) [ITA-25/2007]

7,02,22,833/- questioned in ground no. 1 hereinabove but restore the assessment order in making addition of Rs. 7,02,22,833/- made on account of fictitious sales under section 68 of the Act on protective basis (ground no.2). The ground no. 1 is, thus rejected and ground no. 2 is allowed.

(9 of 11) [ITA-25/2007]

assessment year but it is not clear who has received that income and prima acie it appears that the income may have been received either by A or BV or by other together, it would be open to the relevant IT authorities to determine the said question by taking appropriate proceedings both against A and B. That being so, we do not think that Mr. Nambiar would be justified in resisting the enquiry which is proposed to be held by respondent NO. 1 in pursuance of the impugned notice issued by him against the appellant. Under these circumstances we do not propose to deal with the point of law sought to be raised by Mr. Nambiar. 9 We would, howeve,r like to add one direction in fairness to the appellant, The proeedings taken against both the appellants should continue and should be dealt with expeditiously having regard to the fact that the matter is fairly old. In the proceedings taken against Lalji the ITO should make an exhaustive enquiry and determine the question as to whether Lalji is laible to pay the tax on the income in question. All objections which Lalji may have to raise against his alleged liability would undoubtedly have to be considered in the said procedings. Proceedings against Chhotalal may also be taken by the ITO and continued and concluded, but until the proceedings against Lalji are finally determined no assessment order should be passed in the proceedings taken against Chhotalal. It in the proceedings taken against Lalji it is finally decided that it is Lalji who is responsible to pay tax for the income in question it may not become necessary to make any order against Chhotalal. If, however, in the said proceedings Lalji is not held to be liable to pay tax or it is found that Lalji is liable to pay tax along with Chootalal it may become necessary to pass appropriate orders against these lines they all agreed that this would be a fair and reasonable order to make in the present proceedings.” 7.1 under:- “The condition precedent for the issue of a notice under Section 34(1) (a) is "reason to believe" which means anything but reason to suspect that income had escaped assessment. There must be some material on the record for the reason entertained by the Income Tax Officer. When the Tribunal itself is not able to make up its mind and the (10 of 11) [ITA-25/2007]

Income Tax Officer was also not able to make up his mind, it is quite impossible to say that the Income Tax Officer entertained a reasonable belief that some income of the assessee had escaped assessment. The Income Tax Officer cannot blow hot and cold in the same breath. It was properly noticed by the Tribunal that, in the assessment upon the husband, in respect of this very income, the Income Tax Officer had said that it could not be the income of the wife as she had no business or source of income, and, after saying so. how could he on the very next day have proceeded to issue a notice to the assessee on the basis that he had a reasonable belief that some income in her hands had escaped assessment? Even if the Income Tax Officer can blow hot and cold, it is certainly not open to the Tribunal to blow hot and cold. Again, it might be open to the Income tax Officer to make a protective assessment but it is certainly not open to the Income Tax Appellate Tribunal which is the final court of fact to make a protective order The Act requires the Tribunal to give final findings of fact which, in this case, can only mean that it must find. as a fact, that the impugned sum was the income of the assessee and of no one else. When the Tribunal refuses to give any such finding, then it is not possible for the Tribunal to con-firm such an assessment, albeit under Section 34(1)(a). It is not for the Tribunal to make excuses for the Income Tax Officer or to justify his action first, in making the assessment in the hands of the undivided Hindu family and then in the hands of the husband and while an appeal against that assessment order made against the husband of the assessee is still pending to proceed and dispose of the appeal of the assessee. What the Tribunal ought to have done in a case like this was, to hear both the appeals together, and finally determine as to whether the impugned sum is, if at all, the income of the husband or the wife.”

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and against the Department and accordingly we set aside the order of the Tribunal and restore back the order of CIT (A). The appeals are accordingly allowed. A copy of this judgment be placed in each file. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. /bm gandhi 33-37