High Court Of Madras
CIT vs. Vignesh Kumar Jewellers
Section 4, 69A
Asst. Year 2001-02
K. Raviraja Pandian, & P.P.S. Janarthana Raja, JJ.
Tax Case (Appeal) No. 374 of 2008
25th June, 2008
Counsel Appeared : J. Naresh Kumar, for the Appellant
JUDGMENT
P.P.S. JANARTHANA RAJA, J. :
This appeal is filed by the Revenue under s. 260A of the IT Act against the order of the Tribunal Madras ‘C’ Bench, Chennai, dt. 27th July, 2007 in ITA No. 598/Mad/2005 for the asst. yr. 2001-02 by raising the following questions of law :
“Whether on the facts and in the circumstances of the case, the Tribunal was right in allowing the appeal by deleting the additions made by the AO relying on the decision of the Customs Excise Service Tax Tribunal is valid ?”
2. The brief facts are as follows : The assessee is a partnership firm consisting or two partners, which is engaged in the business of purchasing gold bullion and converting the same into ornaments and the converted ornaments are exported to Singapore and Dubai. The assessee has filed a return of income on 10th Feb., 2002 admitting the total income of Rs. 47,060. The same was accepted under s. 143(1) of the IT Act, 1961. Subsequently, a notice dt. 22nd Jan., 2003 under s. 148 of the Act was issued to reopen the assessment. The assessee has sent a reply dt. 25th Jan., 2003, requesting to treat the return of income filed on 10th Feb., 2002 as the one filed in response to the notice issued under s. 148 of the Act. The assessment was completed on 26th March, 2004 and determined the total income at Rs. 4,27,56,850. While determining the total income, the AO made the following additions :
Add :
(i) Unexplained jewellery under s. 69A of the IT Act, 1961 as 45,64,720 discussed vide para (2.3)
(ii) Unaccounted sales with reference to deficit stock as discussed 19,730 vide para (3.3)
(iii) Unaccounted sales with reference to loose sheets vide para 1,05,87,702 (4.9)
(iv) Unexplained jewellery under s. 69A of the Act, with reference 2,75,37,535 to para Nos. 4 and 10 4,27,09,687
The AO made the above additions by relying on the findings of the Directorate of Revenue Intelligence as well as the subsequent finding of the Commr. of Customs (Adjudication Sea Port) dt. 29th Oct., 2003. Aggrieved by that order, the assessee has filed an appeal to the CIT(A)-X, Chennai. The said CIT(A) deleted the additions stated above except item No. (ii) relating to the unaccounted sales with reference to deficit stock to the tune of Rs. 19,730. Aggrieved by that order, the Revenue has filed an appeal to the Tribunal, in which, the Tribunal has rejected the contention of the Revenue and confirmed the order of the CIT(A)-X, Chennai. Challenging the said order, the Revenue has filed the above appeal.
Learned counsel appearing for the Revenue submitted that the authorities below are wrong in deleting the additions made by the AO. The AO has made additions on the basis or the finding given by the central excise authority. These findings are based on valid materials. Therefore, the learned counsel has submitted that the order passed by the Tribunal deleting the additions is not in accordance with law and the same has to be set aside. Heard the counsel for the Revenue. There was a raid in the business premises of the assessee by the Directorate of Revenue Intelligence on 2nd Nov., 2000. At that time, the managing partner N.S. Chengalvarayan was away at Singapore. Hence, the statement was recorded from N.S. Balaji, his brother and also from one Dhanasekar, who is an employee of the assessee. During the raid, the Directorate of Revenue Intelligence found stock of jewellery to the extent of 9,819.83 gms. and 1,058.890 gms. of gold idols and they were seized as they are of foreign origin and smuggled goods and has no valid import document. The AO has made additions relying on the findings of the Directorate of Revenue Intelligence and the Commr. of Customs dt. 29th Oct., 2003. As against the finding of the Commr. of Customs, the assessee has filed an appeal before the Customs, Excise and Service-tax Tribunal, South Zonal Bench, Chennai. The Tribunal, by final order dt. 10th Dec., 2004 in Nos. 1034 to 1040 in Appeal Nos. C/354 to 360/03, has allowed the appeal filed by the assessee and held as follows :
“It appears from the above observation, of the adjudicating authority that he was more concerned about the availability of gold jewellery in the shop which were meant for export, rather than going into the evidence to support his finding that the smuggled gold was used for making ornaments. Merely because certain quantity of jewellery manufactured out of imported gold purchased by them and which were meant for export has been kept in the jewellery shop, that by itself cannot be a ground to hold that the jewellery found in the shop was made out of smuggled gold. Such finding should be supported by concrete evidence which is totally absent in the present case. Even if some of the gold jewellery meant for export has been displayed in the jewellery, that cannot be reason to order confiscation of the same. We are against at the way in which search has been made in the jewellery shop as in the present case. It is reminiscent of a situation when Gold (Control) Act was in existence. It seems that the DRT Officers were ignorant of the fact that Gold (Control) Act, has been repealed as far back as in 1990. Even if there was reasonable belief that smuggled gold has been kept, the basis for entertaining such reasonable belie should have been shown. There should have been some prima facie reasonable belief, which is absent in the present case, more particularly, in the fact of the admitted position by the Department itself that the foreign gold purchased by the appellants have been accounted for fully. There was, therefore, no cause for entertaining reasonable belief that the gold ornaments were made out of smuggled gold as has been sought to be made out in this case. We also take note of the fact that Central Board of Excise and Customs have issued Circular No. 91 of 2000-Cus dt. 20th Nov., 2000 whereby it has been emphasised that seizure of gem and jewellery stock off the exporter shall not be effected for technical reasons. Needless to say that this circular was binding on the. authorities. Despite that, this circular has been given a go by, by the officers as the seizure has been effected based on no materials. We, therefore, come to the inevitable conclusion that the Department has utterly failed to bring home the charge against the appellants. The impugned order therefore has to be set aside and we do so and all the appeals are allowed with consequential relief, if any.”
Learned counsel appearing for the Revenue has also brought to our notice the letter dt. 20th June, 2008, in which, the CIT of Customs Chennai Sea-Port has stated that the final order of the CESTAT, Chennai, dt. 10th Dec., 2004 has been accepted by the Commr. of Customs and the same has reached its finality. The additions were made only by relying on the findings of the customs authorities and the said findings, which are the basis for making additions, are now set aside by the appellate authority. The AO has not made any independent enquiry and also there is no corroborating evidence to support the case of the Revenue. It is also found that even the assessee, whose statement was recorded by the Central Excise, has not been examined by the AO. Further, the assessee was not given an opportunity to cross-examine them. Based on the above findings, we are of the view that both the authorities are correct in deleting the additions made by the AO. The findings given by the authorities are based on valid materials and evidence and it is a questions of fact and not perverse. Further, the Revenue has not produced any material evidence to take a contrary view that of the Tribunal. Hence, we do not find any error or illegality in the order of the Tribunal warranting interference and the order of the Tribunal is in accordance with law and the same is confirmed. In these circumstances, no substantial question of law arises out off the order of the Tribunal and the Tax Case (Appeal) is liable to be dismissed and accordingly it is dismissed.
[Citation : 330 ITR 209]
