MANJU DEVI BAID,KOLKATA vs. I.T.O.,WARD-37(2), KOLKATA

The assessee in the present case is an individual, who filed her returns of income for both the years under consideration regularly on 27.07.2009 and 28.07.2010 declaring total income of Rs.3,48,800/- and Rs.4,21,450/- for assessment years 2009-10 and 2010-11 respectively. Although the said returns were initially processed by the Assessing Officer under section 143(1) of the Income Tax Act, 1961, the assessments were subsequently reopened by him on the basis of information received from DDIT(Inv.), Tech.-II, Kolkata that the assessee was beneficiary of accommodation entries taken from one Shri Praven & 394/KOL/2019 Assessment Years: 2009-2010 & 2010-2011 Manju Devi Baid Kumar Jain for bogus purchases of Rs.3,90,665/- and Rs.3,22,750/- in A.Y. 2009-10 and 2010-11 respectively. Accordingly notices under section 148 were issued by the Assessing Officer for both the years under consideration, in response to which, a letter was filed by the assessee stating that the returns originally filed by him on 27.07.2009 and 28.07.2010 may be treated as returns filed in response to the notices issued under section 148 for A.Y. 2009-10 and 2010-11 respectively. During the course of assessment proceedings, the assessee produced the copies of three purchase bills issued by Shri Praven Kumar Jain for the purchase of diamonds and also produced her Bank account showing that the payments against the said purchases were made by account payee cheques. She also produced certain loose sheets giving the details of corresponding sales of diamonds such as date of sale, weight, item, rate, etc. The Assessing Officer found that the said sales, however, were made by the assessee in cash and in the absence of details regarding the names and addresses of the parties to whom the said sales were made, the claim of the assessee for the said sales was not verifiable. He accordingly treated the sales of Rs.4,97,000/- and Rs.4,13,000/- claimed to be made by the assessee out of purchases from Praven Kumar Jain as unproved and the proceeds of such sales were added by him to the total income of the assessee under section 68 by treating the same as unexplained cash credits in the assessments completed under section 147/143(3) for both the years under consideration vide orders dated 25.10.2016.

Against the orders passed by the Assessing Officer under section 147/143(3) for both the years under consideration, appeals were preferred by the assessee before the ld. CIT(Appeals) challenging the validity of the said assessments as well as disputing the additions made by the Assessing Officer to its total income under section 68 by treating the sale proceeds of diamonds as unexplained cash credits. The ld. CIT(Appeals), however, did not find merit in the case of the assessee and proceeded to uphold the validity of the assessments made by the & 394/KOL/2019 Assessment Years: 2009-2010 & 2010-2011 Manju Devi Baid Assessing Officer under section 147/143(3) for both the years under consideration and also confirmed the additions made by the Assessing Officer to the total income of the assessee under section 68 of the Act. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred these appeals before the Tribunal.

In Ground No. 1, which is identical for both the years under consideration, the assessee has raised a preliminary common issue challenging the additions made under section 68 on the ground that the same are beyond the scope of assessments made by the Assessing Officer under section 147/143(3) of the Act.

The ld. Counsel for the assessee, at the outset, invited our attention to the copy of reasons recorded by the Assessing Officer as furnished at page no. 5 of the paper book and pointed out that the assessments for both the years under consideration were reopened by the Assessing Officer on the basis of the alleged bogus purchases made by the assessee from Shri Praven Kumar Jain. She contended that no addition on account of such alleged bogus purchases was made by the Assessing Officer to the total income of the assessee in the assessments completed under section 147/143(3) of the Act for both the years under consideration. She contended that the said purchases were actually accepted by the Assessing Officer as genuine and what was doubted or disputed by the Assessing Officer were the corresponding sales made by the assessee. She submitted that the said sales made by the assessee in cash were held to be unverifiable/ unproved by the Assessing Officer and the proceeds of the same were added by him to the total income of the assessee under section 68 by treating the same as unexplained cash credit. She contended that the income, which according to the Assessing Officer, had escaped assessment on account of the alleged bogus purchases and which initially formed a reason to believe for reopening the assessments thus was not added by the Assessing Officer in the assessments made under & 394/KOL/2019 Assessment Years: 2009-2010 & 2010-2011 Manju Devi Baid section 147/143(3) and since the additions were made by him on a different issue by treating the sale proceeds as unexplained cash credit under section 68 without issuing any fresh notice under section 148, the said additions are not sustainable in law. In support of this contention, she relied on the decision of the Hon’ble Bombay High Court in the case of CIT –vs.- Jet Airways India Limited [331 ITR 236] and that of Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Limited –vs.- CIT [336 ITR 136].

The ld. D.R., on the other hand, submitted that even though no addition was made by the Assessing Officer on account of the alleged bogus purchases, addition made by him under section 68 is directly related to such purchases. He contended that the addition made by the Assessing Officer in the re-assessment on account of unexplained cash credit under section 68 thus was not on a separate issue and since it was directly related to the issue of the alleged bogus purchases on the basis of which belief of escapement of income was entertained by him, the said addition is sustainable in law as well as on the facts of the cases. He contended that the conclusion drawn by the Assessing Officer while making the said addition was logical and since the same was related to the issue raised in the reasons recorded, the addition made by him on this issue, which was not separate, is liable to be sustained. In support of his contention, the ld. D.R. relied on the decision of the Hon’ble Gujarat High Court in the case of Jayant Security & Finance Limited [91 taxmann.com 181].

I have considered the rival submissions and also perused the relevant material available on record. It is observed that the assessments for both the years under consideration were reopened by the Assessing Officer after recording the following identical reasons:- “Information received from DDIT(INV), Tech-II, Kolkata vide letter No. DGIT(Inv.)/Kol/Tech-II/19A/2014- 15/2826 dated 12.08.2014, it is revealed that during & 394/KOL/2019 Assessment Years: 2009-2010 & 2010-2011 Manju Devi Baid

As rightly submitted by the ld. Counsel for the assessee, the assessments for both the years under consideration thus were reopened by the Assessing Officer after having formed the belief about the escapement of income of the assessee on account of accommodation entries received in the form of bogus purchases from Shri Pravin Kumar Jain. In the assessments completed under section 147/143(3) for both the years under consideration, the genuineness of such purchases, however, was accepted by the Assessing Officer after having found that the payments against the said purchases were made by the assessee by account payee cheques and there were corresponding sales made by the & 394/KOL/2019 Assessment Years: 2009-2010 & 2010-2011 Manju Devi Baid assessee out of the said purchases. He, however, doubted the corresponding sales claimed to have been made by the assessee since the same, according to him, were unverifiable in the absence of details furnished by the assessee regarding names and addresses of the parties to whom the same were made. He accordingly treated the proceeds of such sales made by the assessee in cash as unexplained cash credits and made addition under section 68. It is thus clear that no addition was made by the Assessing Officer to the total income of the assessee in the assessments made under section 147/143(3) for both the years under consideration on account of the alleged bogus purchases, which formed the basis of reopening and the addition was made on account of different issue by treating the proceeds of the corresponding sales made out of such purchases as unexplained cash credit under section 68.

In the case of CIT –vs.- Jet Airways India Limited (supra) cited by the ld. Counsel for the assessee, it was held by the Hon’ble Bombay High Court that “if after issuing a notice under section 148, the Assessing Officer accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income and if he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee”. In another case of Ranbaxy Laboratories Limited –vs.- CIT (Supra) cited by the ld. Counsel for the assessee, the Hon’ble Delhi High Court has held that the legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. It was further held that for every new issue coming before the Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which & 394/KOL/2019 Assessment Years: 2009-2010 & 2010-2011 Manju Devi Baid he intends to take into account, he would be required to issue a fresh notice under section 148.

Keeping in view the facts and circumstances of the case, I am of the opinion that the addition made by the Assessing Officer under section 68 in the assessments completed under section 147/143(3) cannot be said to be connected or related with the reasons recorded by the Assessing Officer, wherein the belief of escapement of income was formed by him on the basis of alleged bogus purchases made by the assessee, which were finally accepted by him in the assessments as genuine. I, therefore, find no merit in the contention raised by the ld. D.R. by relying on the decision of the Hon’ble Gujarat High Court in the case of Jayant Security & Finance Limited (supra), which was rendered entirely in a different context. In my opinion, the ratio of the decision of the Hon’ble Bombay High Court in the case of Jet Airways India Limited and of Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Limited is squarely applicable in the present case and applying the same, I hold that the addition made by the Assessing Officer to the total income of the assessee in the assessments completed under section 147/143(3) for both the years under consideration on a different issue, which did not form the basis of belief entertained by the Assessing Officer as per the reasons recorded, is not sustainable and the ld. CIT(Appeals) is not justified in sustaining the same. I, therefore, delete the addition made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 68 in both the years under consideration and allow these appeals of the assessee.

In the result, both the appeals of the assessee are allowed. Order pronounced in the open Court on October 18, 2019.