2018 (5) TMI 1991 - AT - Income Tax

Bogus transaction relating to sale of the jewellery - addition made on account of accommodation entry - HELD THAT - For giving independent finding of the fact whether the sale of jewellery by the assessee is a genuine transaction or not , the matter need to be restored to the file of the AO. We order accordingly and direct the Assessing Officer to decide the issue following the direction of the Tribunal given in order of the tribunal in the case of Gunvir Kumar Jain 2018 (4) TMI 398 - ITAT DELHI . - Revenue appeal allowed for statistical purposes.

Summary

Issues Involved:
1. Genuineness of the transaction of sale of jewellery by the assessee to M/s Bishan Chand Mukesh Kumar/Bemco Jewellers.
2. Validity of reassessment proceedings initiated under section 148 of the Income-tax Act, 1961.
3. Adequacy of evidence provided by the assessee to substantiate the sale of jewellery.
4. Compliance with principles of natural justice by the Assessing Officer.
5. Impact of Voluntary Disclosure Income Scheme (VDIS) declarations on the genuineness of the transactions.

Detailed Analysis:

1. Genuineness of the Transaction of Sale of Jewellery:
The primary issue was to determine whether the sale of jewellery by the assessee to M/s Bishan Chand Mukesh Kumar/Bemco Jewellers was genuine. The Tribunal noted that the Hon’ble High Court had directed it to independently examine each case and return a specific finding on the genuineness of the transactions. The Tribunal observed that the declaration of jewellery under the VDIS scheme might establish possession but does not explain the genuineness of the sale and corresponding credit in the bank account. The affidavit provided by Sh. Bishan Chand was considered a self-serving document and required corroboration with other documentary evidence. The Tribunal emphasized that the onus was on the assessee to establish the genuineness of the sale by producing Sh. Bishan Chand along with documentary evidence before the Assessing Officer.

2. Validity of Reassessment Proceedings:
The reassessment proceedings were initiated based on information obtained during a search operation, which indicated that the transactions were bogus. The Ld. CIT(A) upheld the validity of the reassessment proceedings but deleted the addition made by the Assessing Officer. The Tribunal, however, noted that in similar cases, the matter was remitted to the Assessing Officer for further verification. The Tribunal directed the Assessing Officer to re-examine the genuineness of the sale transactions, following the directions given in the case of Gunvir Kumar Jain.

3. Adequacy of Evidence Provided by the Assessee:
The Tribunal found that the evidence provided by the assessee, including the affidavit of Sh. Bishan Chand and the VDIS certificate, was not sufficient to establish the genuineness of the sale. The Tribunal noted that the details of purchases and sales shown by M/s Bishan Chand Mukesh Kumar in the sales tax returns were not conclusive evidence of the sale. The Tribunal directed the assessee to produce Sh. Bishan Chand along with relevant documentary evidence before the Assessing Officer.

4. Compliance with Principles of Natural Justice:
The Tribunal observed that the Assessing Officer had not provided the assessee with an opportunity to rebut the materials relied upon for making the addition. The Tribunal emphasized the need for the Assessing Officer to summon the alleged purchaser for verification of the actual purchase/sale transaction of the jewellery. The Tribunal directed the Assessing Officer to conduct a thorough examination, including summoning the purchaser and verifying records from the Sales Tax Authorities.

5. Impact of VDIS Declarations:
The Tribunal acknowledged that the jewellery was declared under the VDIS scheme, which provided immunity for the income disclosed. However, the Tribunal noted that the declaration under VDIS did not automatically validate the genuineness of the subsequent sale transactions. The Tribunal emphasized the need for independent verification of the sale transactions, as directed by the Hon’ble High Court.

Conclusion:
The Tribunal remitted the matter to the Assessing Officer for re-examination of the genuineness of the sale transactions, following the directions given in similar cases. The Tribunal directed the Assessing Officer to verify the actual purchase/sale transaction of the jewellery from the books of accounts of the purchaser, records of the Sales Tax Authorities, and by summoning the purchaser for examination. The appeals of the Revenue were allowed for statistical purposes, and the matter was to be decided afresh by the Assessing Officer with adequate opportunity for the assessee to be heard.