2018 (10) TMI 1399 - AT - Income Tax

Rectification of mistake - additions u/s 69C - powers of the tribunal u/s 254(2) - disbelieve to the alleged business of gold bars conducted by the assessee - Held that - Solitary transaction was conducted in the month of July 2005 of ₹ 18.50 lacs and the concern of the assessee stood closed. The assessee did not had any infrastructure and experience to deal in huge quantities of gold bars. The VAT registration also stood cancelled by Gujarat VAT authorities in short span of time. The assessee also could not evidence movement of gold bars with respect to its alleged business. The alleged sales of more than ₹ 55 crores were made in cash to undisclosed customers and cash got deposited in assessee s bank account from undisclosed persons. The alleged sales per invoice were for more than ₹ 3.00 crores per invoice which were allegedly cash sales to undisclosed customers. AS referred to provisions of Section 106 and 114(g) of Indian Evidence Act,1872 to come to conclusion that the assessee is withholding evidences and preventing enquiry wherein presumption will be drawn against the assessee in these circumstances. The tribunal has inherent powers to pass such orders as it deemed fit within mandate of Section 254(1) of the 1961 Act and confirmation of additions u/s 69C read with its proviso was justified and was within powers of the tribunal keeping in view entire factual matrix of the case before it. The powers of the tribunal u/s 254(2) is limited and is restricted to correcting mistakes apparent from records and this powers do not extend to reviewing its own order. Thus, this contention of the assessee with respect to invocation of provisions of Section 69C by tribunal in this MA also stood rejected.Both the MA s filed by the assessee stood dismissed

Issues Involved:

1. Rectification of alleged mistakes in the Tribunal's order.
2. Non-consideration of the remand report.
3. Requirement to disclose the names of customers.
4. Acceptance of Gross Profit (GP) rate by the Assessing Officer (AO).
5. Applicability of Section 68 to cash sales.
6. Alleged double taxation of sales.
7. Invocation of Section 69C by the Tribunal.

Issue-wise Detailed Analysis:

1. Rectification of Alleged Mistakes in the Tribunal's Order:
The assessee filed two Miscellaneous Applications (MAs) seeking rectification of alleged mistakes in the Tribunal's order dated 03.10.2017. The Tribunal had confirmed additions of ?49,17,69,925/- based on the assessee's inability to substantiate the genuineness of cash sales of gold bars and the identity of buyers, invoking Section 68 and 69C of the Income-tax Act, 1961.

2. Non-Consideration of the Remand Report:
The assessee contended that the Tribunal did not consider the AO's remand report dated 28.03.2013, which indicated no abnormal variation in sales price. The Tribunal clarified that it had considered the remand report but disbelieved the entire business transactions of the assessee due to the lack of infrastructure and experience to handle such large transactions in a short span.

3. Requirement to Disclose the Names of Customers:
The assessee argued that there was no legal requirement to disclose the names of customers to whom cash sales were made. The Tribunal held that the assessee's failure to disclose the identities of buyers of gold bars, each transaction exceeding ?3 crores, prevented proper verification and inquiry, invoking Sections 106 and 114(g) of the Indian Evidence Act, 1872.

4. Acceptance of Gross Profit (GP) Rate by the AO:
The assessee claimed that the AO had accepted a GP rate of 4%-5% in the remand report. The Tribunal, however, concluded that the entire business was a facade for laundering undisclosed money, and the onus to prove the genuineness of transactions was not discharged by the assessee.

5. Applicability of Section 68 to Cash Sales:
The assessee contended that Section 68, which deals with unexplained cash credits, was not applicable to cash sales. The Tribunal rejected this argument, stating that the assessee failed to satisfactorily explain the sources of cash deposits in its bank accounts, which were allegedly from cash sales to undisclosed persons.

6. Alleged Double Taxation of Sales:
The assessee argued that the sales were taxed twice. The Tribunal clarified that it disbelieved the entire spectrum of activities related to the purchase and sale of gold bars, considering it a device to launder undisclosed money. The Tribunal confirmed the additions under Sections 68 and 69C, stating that the sources of cash deposits and the corresponding purchases were not satisfactorily explained.

7. Invocation of Section 69C by the Tribunal:
The assessee contended that the Tribunal should not have invoked Section 69C, which deals with unexplained expenditure. The Tribunal justified its action, stating that the assessee could not explain the sources of cash deposits used for purchases, invoking the deeming fiction of Section 69C read with its proviso. The Tribunal's powers under Section 254(1) allowed it to pass such orders as it deemed fit, including invoking Section 69C.

Conclusion:
The Tribunal dismissed both MAs filed by the assessee, holding that the assessee's contentions lacked merit and the Tribunal's original order was well-reasoned and justified based on the factual matrix and legal provisions. The Tribunal emphasized that its powers under Section 254(2) are limited to rectifying mistakes apparent from the record and do not extend to reviewing its own order.

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