2011 (2) TMI 118 - HC - Income Tax

Bogus purchase and sale - Addition -Search and seizure - Refrence to Voluntary Disclosure of Income Scheme, 1997 (for short VDIS ) - Burden of proof - Held that the finding recorded by the Tribunal that addition under Section 68 in respect of alleged bogus sale of jewellery was not justified is perverse. The Tribunal has not considered the merits of the genuineness of the transaction of sale by the assessee. In the light of finding recorded by the assessing officer and the CIT(A), it was expected that the Tribunal should have gone into the question of identity of the jewellery declared under the VDIS and jewellery sold in the transaction in question. It was necessary to go into the question whether the assessee had not received any bogus accommodation book entries as inferred in the order of assessing officer and CIT(A).- ITAT order set aside - matter remanded back to tribunal.

Issues Involved:
1. Perversity of the ITAT's order ignoring evidence of Hawala transactions.
2. Erroneous reliance on findings from a different case (M/s Bemco Jewellers P. Ltd./Manoj Aggarwal).
3. Genuineness of M/s Bishan Chand Mukesh Kumar as a trader of jewellery.
4. Refusal to allow AO to examine additional evidence.
5. Reliance on sales tax assessment orders without AO verification.
6. Ignoring discrepancies and errors pointed out by the Revenue Department.
7. Conflict with the 'Normal human conduct' principle.
8. Ignoring evidence while accepting respondent's arguments.
9. Applying different standards for Revenue and respondent.
10. No finding on the genuineness of the jewellery sale.

Issue-wise Detailed Analysis:

1. Perversity of the ITAT's order ignoring evidence of Hawala transactions:
The Tribunal's decision was challenged on the grounds that it ignored substantial evidence indicating that the transactions were Hawala in nature. The assessing officer had concluded that the sale of jewellery was bogus, introducing unaccounted money under the guise of VDIS-disclosed jewellery. This conclusion was based on several factors, including the immediate sale of jewellery post-VDIS, inability to identify the introducer of the jeweller, and non-traceability of the jeweller.

2. Erroneous reliance on findings from a different case:
The Tribunal erred by relying on the factual findings from the case of M/s Bemco Jewellers P. Ltd./Manoj Aggarwal, which were not directly applicable to the present case. The Tribunal should have individually assessed the genuineness of the transactions specific to the assessee instead of applying a generalized outcome from a different case.

3. Genuineness of M/s Bishan Chand Mukesh Kumar as a trader of jewellery:
The Tribunal held M/s Bishan Chand Mukesh Kumar to be a genuine trader based on similarities with the Bemco case. However, the assessing officer and CIT(A) had found that the jeweller was involved in providing bogus accommodation book entries and was not traceable, casting doubt on the genuineness of the transactions.

4. Refusal to allow AO to examine additional evidence:
The Tribunal's refusal to allow the AO to examine additional evidence collected during the assessment of M/s Bishan Chand Mukesh Kumar was challenged. The Tribunal had earlier stated that the issue of the genuineness of transactions was not decided on merits, yet it did not permit further examination of new evidence, which was deemed necessary by the Revenue.

5. Reliance on sales tax assessment orders without AO verification:
The Tribunal relied on sales tax assessment orders without giving the AO an opportunity to verify them. This reliance was considered perverse and non-speaking as it bypassed the procedural requirement of verification by the AO.

6. Ignoring discrepancies and errors pointed out by the Revenue Department:
The Tribunal ignored significant discrepancies and errors highlighted by the Revenue, such as the valuation of jewellery in Delhi versus the issuance of cheques in Amritsar. These points were not addressed in the final order, rendering it non-speaking and perverse.

7. Conflict with the 'Normal human conduct' principle:
The Tribunal's acceptance of the genuineness of the jewellery transactions conflicted with the 'Normal human conduct' principle laid down by the Supreme Court in the cases of Durga Prasad More and Sumati Dayal. The Tribunal failed to apply this principle adequately to the respondent's conduct.

8. Ignoring evidence while accepting respondent's arguments:
The Tribunal was accused of ignoring all the evidence presented by the Revenue while accepting the respondent's arguments without sufficient scrutiny. This selective acceptance of arguments led to a biased and perverse judgment.

9. Applying different standards for Revenue and respondent:
The Tribunal applied different standards by requiring the Revenue to pass the test of cross-examination of all witnesses while accepting the respondent's averments at face value. This unequal application of standards forced the Revenue to prove its case beyond all reasonable doubt, which was deemed unfair.

10. No finding on the genuineness of the jewellery sale:
The Tribunal did not provide a clear finding on the genuineness of the jewellery sale by the respondent to M/s Bishan Chand Mukesh Kumar. This lack of a decisive finding was a significant oversight, necessitating a remand for fresh consideration.

Conclusion:
The High Court found the Tribunal's order to be perverse and lacking in a thorough examination of the merits of the case. The Tribunal's reliance on the Bemco case without individual assessment of the assessee's transactions was unjustified. The case was remanded to the Tribunal for a fresh decision on merits, allowing both parties to present relevant contentions, including the applicability of Section 68. The Tribunal was directed to consider the identity of the jewellery declared under VDIS and the genuineness of the sale transactions. The appeal was disposed of accordingly.

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