2015 (4) TMI 552 - HC - Income Tax

Reopening of assessment - Bogus purchases - Held that - The audited accounts coupled with the records submitted by the assessee go to establish that the purchase account was debited by an excess sum of ₹ 1,51,09,660/-. In seeking to explain, the assessee came out with a disclosure that it had purchased from J.J. Gold House 83 Kgs. of Gold and not 58 Kgs. of Gold. The total cost of gold purchased by the assessee furnished at the initial stage has remained unchanged. If the case of assessee is that he purchased 25 Kgs of gold in addition than what was shown originally from J. J. Gold House, then the total quantity purchased in the year has to be increased by 25 Kgs of Gold and that 25 Kgs of Gold should consequently be in the closing stock. Since the closing stock is nil a view could certainly be taken that the assessee had suppressed sale of 25 Kgs of Gold. But that does not change the original position. The original position remains the same. It transpired from the fact that the purchase account was inflated by a sum of ₹ 1,51,09,660/-. It is only on the basis of the case run by the assessee during the hearing of the appeal that the Commissioner of Income Tax held that if the case of the assessee in the appeal is true, then there should have been 25 Kgs of gold in the closing balance. Since the closing balance is nil there is suppression of sale of 25 Kgs Gold. Since the learned Tribunal was agreeing with the views of the CIT (Appeal), it was not incumbent upon them to write out an elaborate judgment or to reiterate what had already been indicated in the judgment of CIT (Appeal).The issue was whether the purchase was overstated. The assessee was given opportunities repeatedly to adduce evidence to rebut the proof adduced by the revenue in support of the aforesaid issue. The assessee failed to discharge its burden. It has not been shown to us that any question of fact essential to the right decision was left undetermined. The case sought to be built upon on the basis of the letter dated 7th June 2010 is a new case which the authorities below had no occasion to consider. The case run by the assessee before them has been falsified. We do not think for ends of justice a remand is permissible in the facts of the case. - Decided against assessee.

Summary

Issues Involved:
1. Validity of the initiation of reassessment under Section 147 read with Section 148 of the Income Tax Act, 1961.
2. Legality and correctness of the addition of Rs. 1,51,09,660/- to the income of the assessee.

Issue-wise Detailed Analysis:

1. Validity of the Initiation of Reassessment under Section 147/148:
The first issue involves whether the Tribunal misdirected itself in upholding the validity of the reassessment initiated based on the notice dated 15th September 2008 under Section 148, despite no fresh material coming into the possession of the Assessing Officer after the completion of the regular assessment on 13th November 2007.

- Court's Analysis: The court noted that the reassessment was initiated because the purchase account was debited by an excess sum of Rs. 1,51,09,660/-. The assessee's explanation did not satisfactorily account for this discrepancy. The court did not find any new arguments presented regarding this issue and thus did not address it further.

2. Legality and Correctness of the Addition of Rs. 1,51,09,660/-:
The second issue revolves around the correctness of the addition of Rs. 1,51,09,660/- to the income of the assessee, which was upheld by the Tribunal.

- Facts and Initial Proceedings: The assessment for the year 2005-06 was completed initially, determining a loss. A notice under Section 148 led to reassessment, revealing discrepancies in the purchase and sale of gold. The audit report showed a difference between the total purchase amount and the detailed purchase amount, indicating an overstatement of Rs. 1,51,09,660/-.

- Assessee's Explanation: The assessee explained that there was a typographical error in the purchase amount from M/s. J.J. Gold House, and the balance was credited as income. However, the Assessing Officer did not accept this explanation, deeming the purchase bogus.

- Remand Proceedings: During the remand, the assessee's claim about the gold received from J.J. Gold House could not be substantiated. The stock register showed different brands of gold than those claimed. The Assessing Officer concluded that the alleged gold bars were sold in the financial year 2003-04, establishing a bogus purchase for 2004-05.

- Appellate Authority's Findings: The CIT (Appeals) found that the total purchase quantity was understated, leading to a conclusion of unaccounted sale of 25 kilograms of gold. The assessee's claim of overstating purchases from M/s. Jindal Dychem Industries (P) Ltd. by 25 kilograms was not substantiated.

- Tribunal's Decision: The Tribunal upheld the addition, agreeing with the CIT (Appeals) that there was suppression of sale of 25 kilograms of gold. The Tribunal found no merit in the assessee's new explanations presented during the appeal.

- Court's Conclusion: The court found that the explanations provided by the assessee were inconsistent and did not match the actual state of affairs. The court upheld the views of the Assessing Officer, CIT (Appeals), and the Tribunal, stating that these were all possible views based on the facts and circumstances. The court dismissed the appeal, finding no perversity in the decisions of the lower authorities.

Conclusion:
The appeal was dismissed, with the court affirming the decisions of the lower authorities. The court found that the reassessment proceedings were valid and that the addition of Rs. 1,51,09,660/- was justified based on the evidence and explanations provided. The court did not find any grounds for remanding the matter for further consideration.