INCOME TAX OFFICER, WARD 2(5), THANE vs. OSTWAL DIAMOND PRIVATE LIMITED, MUMBAI

This appeal by revenue is directed against the order of ld. Commissioner

We have considered the submission of both the parties and have gone through the orders of authorities below. We have also gone through the orders of co-ordinate bench of Tribunal in dated 01.03.2019 for Assessment Year 2007-08. The co-ordinate bench of Tribunal while deciding the ground of appeal raised by assessee against the validity of re-assessment order passed the following order:

On going through the above observation of non-jurisdictional officer, who has categorically mentioned the words needs verification (of information). It clearly means that AO is not satisfied with the information for that she needs further verification then how she can reach to the conclusion that income is under assessed, particularly, when she has not verified anything because nothing was available with her at the time of reopening of the case.

It is well settled principle that the Act, does not permit to reopen the case for reassessment for the reason of verification of any reason to believe, which is missing in the reason recorded.

In para 8.1 of the assessment order, the Ld. AO has categorically mentioned that further in order to reconfirm the facts as communicated by the Investigation Wing a letter dated 18.02.2015 was issued to the DDIT(lnv), Unit -4(1), Mumbai. Here, it is worthwhile to mention that even at the stage of assessment proceedings on 18.02.2013 the Ld. AO was just dealing with information and was not having any material evidence on record to confront the assessee then how on which basis he/she can form reason to believe for reopening of the case. It is again worthwhile to mention that in the same para the Ld. AO has requested to provide the relevant copies of statement recorded during and post search proceedings. It was further requested by the Ld. AO to the DDIT (Inv) to provide copies of incriminating documents seized during the search proceedings.

It is clear from above that the officer was neither having statement recorded during search nor having any incriminating documents seized during the search at assessment stage. It means the no incriminating documents or statement recorded were available at the time of recording of reason, then on which Mum 2017-M/s Ostwal Diamond Pvt. Ltd.

In para 7 of the assessment order in which the Ld. AO once again mentioned as Under: “During the course of assessment proceedings, Shri Manoj Jain duly authorised by the assessee attended along with the two directors namely Shri Ashok Jain and Uttamchand Osfwai They were confronted upon the information received from the investigation wing."

It is again established that the Ld. AO was having just information and the same is part of assessment order. Hence, it is established that the reasons were recorded just on the basis of information without any material and the same is not sufficient for reopening the assessment completed under scrutiny proceedings of Sec.143(3) of IT Act. Furthermore, the relevant assessment year under consideration is 2007-08, whereas reopening was on 28/03/2014 by issue of notice u/s.148. Since the assessment was reopened after expiry of four years from the end of the relevant assessment year, the department has to show that there is failure on the part of the assessee to make return u/s.139 or in response to notice issued u/s. 142(1) or Section 148 are to disclose fully and truly all material facts necessary for his assessment, for that assessment year. However, nowhere department has shown that there is any failure on the part of the assessee to disclose fully and truly all the material facts in the return of income so filed, accordingly, in terms of the jurisdictional High Court decision in the case of 1. IPCA Laboratories Ltd., vs. Gajanand Meena, DCIT & Others (No.2) reported in 251 ITR 416.

ICICI Bank Ltd., vs. K.J. Rao and another reported in 268 ITR 203, 3. Hindustan Lever Ltd., vs. R.B.Wadkar, ACIT and others (No.1) reported in 268 ITR 332 4. Devidayal Rolling Mill and Another vs. Y.R.Saini, ACIT and others reported in 285 ITR 514, no reopening after expiry of four 5 Mum 2017-M/s Ostwal Diamond Pvt. Ltd.

Now, coming to the merit of the addition, we observe that addition of Rs.4,21,59,050 was made on account of unproved purchases. From the record we found that the assessee had submitted all the documents during the assessee proceedings, such as purchase bill, sales against said alleged purchase, payment by account payee cheque, confirmation of accounts of alleged parties, stock register. The assessee has also produced the complete books of accounts, the Ld. AO has not pointed out any mistake in such records. The assessee has also produced the retraction statement of alleged parties. The Ld. AO has not provided any cogent material in support of his claim. There is no material on record other that the third party statement, which were also retracted.

From the record we also found that the AO issued summons u/s.131 to Shri Gautamchand Jain supplier of goods who submitted before the AO that he had actually sold diamonds to the assessee during the year under consideration and had filed the following details before the AO, the AO had summarized the same as under:- “Copies of I.T. returns alongwith Balance-Sheet, Profit & Loss a/c of all the three concerns for A.Y.2007-08, copies of bank statement of these concerns for F.Y.2006-07, copies of bills issued to the assessee, copies of ledger extract of the assessee as appearing in their books of accounts for the relevant period. However, Shri Gautam Jain failed to attend in person for verification.”

Shri Gautamchand Jain appeared before the AO on 25/03/2015 when the AO recorded his statement which has been reproduced in the assessment order at page No.14 to 20.

In the result, the appeal of the revenue is dismissed.