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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: HON’BLE SHRI MAHAVIR SINGH, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
O R D E R
Per Manoj Kumar Aggarwal (Accountant Member ) 1. Aforesaid appeal by revenue for Assessment Year [AY] 2014-15 contest the order of Ld. Commissioner of Income-Tax (Appeals)-9, Mumbai [CIT(A)], Appeal No. CIT(A)-9/Cir.4/208/2016-17 dated 31/05/2017 on following ground of appeal: - On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing to AO to delete the addition made towards unexplained cash credits u/s. 68 of the Act, of Rs.1,86,18,353/-.
The assessee, in its cross-objection, has raised the following grounds: -
1. On the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) - 9, Mumbai erred in affirming the action of the AO in confirming the addition made u/s. 143(3) r.w.s. 153C of the Act in absence of any notice issued u/s. 142(1) r.w.s. 153C of the Income-tax Act, 1961 ("the Act"), or warrant issued u/s. 132 of the Income-tax Act, 1961 ("the Act"), or assets / documents requisitioned u/s. 132A.
2. He failed to appreciate and ought to have held that no assessment u/s. 143(3) r.w.s. 153 A can be made since the petition of DDlT(lnv), Tirunelveli was rejected by the Court of Judicial Magistrate Nagercoil and the assets seized by the police were released by the court.
3. The Respondent, therefore, prays that the assessment proceedings u/s. 143(3) r.w.s. 153C of the Act be held as void ab initio and bad in law.
2.1 Facts on record reveal that the assessee being resident corporate assessee stated to be engaged in the business of manufacturing and trading in gold was assessed for impugned AY 143(3) r.w.s. 153C on 28/03/2016 wherein the income of the assessee was determined at Rs.200.58 Lacs after certain additions as against returned income of Rs.14.39 Lacs filed by the assessee on 22/11/2014. 2.2 During assessment proceedings, it transpired that Police authorities of Nagercoil arrested one Sh. Dhiraj Kumar, employee of assessee on 04/09/2013 under suspicious circumstances along with 6093.93 grams of gold ornaments and cash of Rs.3 Lacs vide FIR No.612/2013. The DDIT (investigation), Tirunelveli recorded statement of Sh. Dhiraj Kumar u/s 131 on 07/09/2013 wherein it was submitted that Sh. Dhiraj Kumar was the employee of the assessee and the jewellery was handed over to Sh. Dhiraj Kumar by the assessee for onward delivery to 3 parties situated at Nagercoil area. These 3 parties were stated to be M/s Swasthikas Jewellers, M/s Pereppadans Gold Park & M/s Shajahanas Jewellers. However, upon inquiry, these parties denied having placing any work order with the assessee. The statement of director of the assessee company was also recorded wherein it was submitted that the jewellery belonged to the assessee and the same was handed over for onward delivery. Accordingly, the assessee was directed to substantiate the same. 2.3 The assessee, vide reply dated 10/03/2016 reiterated that jewellery was handed over for onward delivery to following customers of the assessee: - No. Name of Customers Grams 1. Shajahans Jewellers,Nagercoil, Tamil Nadu 3097.400 2. Pereppadanas Gold Park, Neyyattinkara, Kerala 1443.210 3. Swasthikas Jewellers, Thiruvantmpuram, Kerala 1553.320 Total 6093.30 In support, it was also submitted that Mr. Dhiraj Kumar was given gold bars weighing 796.810 grams collected from M/s Swasthikas Jewellers for making ornaments at Mumbai. This stock was also with him when he was intercepted under suspicion. The attention was drawn to the fact that the entire stock of gold ornaments was duly accounted for in the books of account maintained in the regular course of business by the assessee company. Copies of stock register reflecting relevant entries for issue of gold jewellery to the above said customers for onward delivery, sales invoices, authorization letter issued by company in respect of goods to be delivered to the aforesaid parties, copy of issue vouchers for gold bars weighing 796.810 grams issued by M/s Swasthikas Jewelers etc. was placed on record. Attention was also drawn to the fact that upon satisfactory production of proof of ownership, Hon’ble Judicial Magistrate, Nagercoil as per order No. CMP 94/14 dated 27/01/2014 of Judicial Magistrate No. II, Court Nagercoil ordered for the release of seized gold and directed for handing over the same to the authorized person of the assessee company. In this background, it was submitted that gold was duly accounted for in the books of accounts and the same was handed over by the assessee for onward delivery in regular course of business. 2.4 However, Ld. AO opined that the assessee failed to submit any documentary evidence or credible evidence to satisfy that 3 parties placed any work order of jewellery with the assessee. It was also noted that the 3 parties denied that the items in possession of Sh. Dhiraj Kumar belonged to them. In the above background, an aggregate amount of Rs.186.18 Lacs comprising-off of gold jewellery for Rs.183.18 Lacs and cash of Rs.3 Lacs was treated as unexplained cash credit u/s 68 and added to the income of the assessee. 3.1 The assessee reiterated the submission before Ld. first appellate authority and contested the additions on legal grounds as well as on merits. The Ld. first appellate authority, while upholding the assessment proceedings, observed that the assessee was not provided with opportunity of cross-examination of the 3 parties, whose statements formed the basis of making the impugned additions. It was further observed that the opportunity of cross-examination was an essential ingredient of principle of natural justice as held by Hon’ble Apex Court in Andaman Timber Industries [Civil Appeal No.4228 of 2006 02/09/2015]. Therefore, mere denial of the 3 parties could not lead to addition u/s 68 in the hands of the assessee.
3.2 Proceeding further, the order passed by Hon’ble Judicial Magistrate directing release of the jewellery was also examined and found that DDIT, Tirunelveli could not produce any evidence to substantiate that the gold jewellery was unaccounted for. Also, Police Authorities dropped the proceeding and FIR was closed. The jewellery was directed to be handed over to the assessee company under due process of law. It was also observed that no discrepancies could be pointed out by Ld. AO in stock register, sales invoices etc. submitted by the assessee during assessment proceedings and the said jewellery was properly accounted for in the books of accounts. 3.3 In the above background, the Ld. first appellate authority, concurring with assessee’s submissions, deleted the additions by making following observations: - 6.3.6. Based on these peculiar facts and circumstances of the case along with documentary evidences like the Court orders, confirmation by the purchase parties, confirmation by the sale party for having placed order in one case, etc, I find strong substance in the case of the Appellant Company as it was proved at the stage of criminal proceedings itself that the gold jewellery is not unaccounted. Further, as far as the source of such gold jewellery is concerned, I have also examined the sample letter placed in the paper book where the purchase party has confirmed having sold the gold to the Appellant Company out of which the impugned gold jewellery has been manufactured. Hence, the AO has fully verified the source of the gold jewellery. Once having proved that the gold jewellery is accounted for by the Court of Judicial Magistrate and that the source of such jewellery has been verified by the AO, there cannot be any ground for additions in the present case, u/s 68 of the Act. 6.3.7. As far the ground of the AO of the sales parties denial of the placing of orders is concerned, it has already been proved that the same stock of gold jewellery has been sold by the Appellant Company to two of such parties. At no point of time, the gold/ jewellery was seized by the Department even though requisition was made by the Department before the court for handing over/ giving custody of the said gold /jewellery and cash but, the same was not allowed by the court after hearing the concerned parties. In view of the totality of the facts and the orders of the Judicial Magistrate , I am inclined to agree with the Appellant Company that the gold /jewellery as well as cash was not unaccounted and hence no addition can be made u/s 68 of the Act. Accordingly, the AO is directed to delete the addition of Rs. Rs.1,86,18,353/-. Aggrieved, the revenue is in further appeal before us.
The Ld. DR submitted that the 3 parties categorically denied having placing any work order with the assessee and the release of jewellery by Hon’ble Judicial Magistrate would not substantiate the source of the jewellery and the complete onus to prove the same was on assessee. Per contra, Ld. AR, on the strength of documents placed in the paper- book, submitted that the stock of seized gold was duly accounted for in the books of accounts and the conclusive documentary evidences were furnished by the assessee to substantiate the source of the same.
We have carefully deliberated on the issue. The undisputed fact that emerges from the record are that the gold jewellery which was intercepted by the Police Authorities under suspicious circumstances, has been declared by Hon’ble Judicial Magistrate as belonging to Sh. Dhiraj Kumar, the possessor thereof which is evident from the orders of Hon’ble court as placed on record. Nothing on record suggest that Sh. Dhiraj Kumar was not an employee of the assessee company and the said jewellery did not belong to assessee company. In fact, the statement of Sh. Dhiraj Kumar as well as the director of the assessee company, in unison, confirm the said facts. Proceeding further, the said jewellery was duly accounted for in the stock registers submitted by the assessee during assessment proceedings and the assessee produced documentary evidences in the shape of sales invoices, authorization letter issued by assessee in respect of goods to be delivered to the aforesaid parties, copy of issue vouchers for gold bars weighing 796.810 grams issued by M/s Swasthikas Jewelers. The stock of gold jewellery under dispute, upon release by judicial authorities, has been received back in the stock register maintained by the assessee and hence, duly accounted for. Lastly, the whole basis of making additions i.e. denial by the 3 parties as to placing any work order with the assessee, was never confronted to the assessee which was in violation of principle of natural justice. It is trite law that no addition could be made merely on the basis of suspicion, conjectures or surmises. In fact, the assessee has supplied the jewellery to few of these parties subsequently during the impugned AY itself which further weakens that stand of Ld.AO. 6. The given factual matrix convinces us to concur with the stand taken by Ld. first appellate authority in the impugned order. By confirming the same, we dismiss revenue’s appeal. 7. The assessee’s cross objections contest assessment proceedings on legal grounds. Since, we have adjudicated the issue on merits in assessee’s favor, delving into the same would be merely academic in nature and hence, not dealt with. The cross-objections stands dismissed as infructuous. 8. The revenue’s appeal as well as assessee’s cross-objections stands dismissed in terms of our above order. Order pronounced in the open court on16/05/2019. (Mahavir Singh) (Manoj Kumar Aggarwal) "ाियक सद" / Judicial Member लेखा सद" / Accountant Member मुंबई Mumbai; िदनांक Dated :16/05/2019 Sr.PS, Jaisy Varghese आदेशकी"ितिलिपअ"ेिषत/Copy of the Order forwarded to : अपीलाथ"/ The Appellant 1. ""थ"/ The Respondent 2. आयकरआयु"(अपील) / The CIT(A) 3. आयकरआयु"/ CIT– concerned 4. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड"फाईल / Guard File 6. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.