2023 (10) TMI 1098

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ts are that the assessee is a partnership firm engaged in the business of manufacturing of gold jewellery and cut and polish diamonds and also exporting the same outside India. The assessee filed its return of income dated 15.10.2010, declaring total loss of Rs. 63,92,92,710/- and the same was processed u/s.143(1) of the Act. The assessee's case was selected for scrutiny and the assessment order dated 15.03.2013 was passed by the A.O., rejecting the books of accounts of the assessee, where the A.O., determined the gross loss at Rs. 12,66,71,272/-, thereby making an addition of Rs. 51,26,21,438/-. The assessee's case was reopened u/s. 147 of the Act and the assessment order u/s. 144 r.w.s. 147 of the Act was passed by the A.O. dated 29.12.2017, where the A.O. made an addition of Rs. 107,53,11,047/- on account of unexplained sundry creditors. 4. The assessee was in appeal before the ld. CIT(A), challenging the addition made by the A.O. The ld. CIT(A) then confirmed the addition stating that the assessee has failed to substantiate its claim by any cogent evidence. 5. The assessee is in appeal before us, challenging the impugned order of the ld. CIT(A). The assessee vide its subm....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....s escaped assessment, the case was reopened. The reasons recorded for reopening of the assessment is cited hereunder for ease of reference: The DDIT (Inv) Unit 6 (1, Mumbai vide his letter dated 17.03.2017 has intimated that the above assessee is a diamond trader and manufacturer, borrowed substantial sums with interest from Antwerp Diamond Bank (ADB), at Mumbai to import rough diamonds and then to cut and polish them before export as finished goods. The loan was sanctioned on the basis of its status and credit rating as a DTC (Diamond Trading Co.) sight holder meaning thereby a recognized customer in trader parlance as more than three years has elapsed since the money was lent by the Bank and as yet Minsone has not returned/repaid the loan bank had advanced, there apparently is a suspicious activity. Mine stone also did not initiate any legal action from their side to recover its due from their defaulting buyers. Also no request were made by Minestone to extend the period for realization of export bills where one could except that at least some bills could be genuinely realized. One of the buyers of Mine stone is Rolling Stone in Hongkong, ADB is informed that Rolling Sto....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....d polish them before exporting the same as finished goods. The ld. A.O. stated that the assessee has not repaid the said loans to the banks. The ld. A.O. also observed that the assessee has shown secured loan amounting to Rs. 140 crores from Rs. 160 crores and sundry creditors amounting to Rs.86 crores to Rs. 107 crores as per the return of income filed by the assessee for A.Ys. 2010-11 to 2015-16. The ld. A.O. has also stated that ADB had sought for signing a deed of Assignment of debt by the assessee in favour of the ADB for the purpose of recovery of export bills due to the assessee from various defaulting buyers of the assessee and thereby recover the monies due to the ADB. It is found that the assessee failed to accept the said proposal and had rather suggested for a one time settlement proposal (OTS) from ADB for a lesser amount than that which was due. The ld. A.O. then reopened the assessment u/s. 147 of the Act on the reason to believe that there was cessation of liability to the extent of Rs.86 crores which was income escaped to tax. The assessee had duly filed its objection to the notice issued u/s. 148 of the Act vide letter dated 24.10.2017. The ld. A.O. rejected the o....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....n the form of cessation of liability. However, the ld. A.O. has added sundry creditors balance of Rs. 107.00 crores but has not assessed bank loan of Rs. 86.00 crores for which the reopening was done. The ld. AR relied on the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Jet Airways (I) Limited (supra), wherein it was held that the A.O. has to assess or reassess such income for which reopening was made along with any other income chargeable to tax which comes to the notice during the assessment proceeding and failure to make an addition on the grounds for which the reopening was done while passing the assessment order will make it null and void. The relevant extract of the said decision is cited hereunder for ease of reference: The rival submissions which have been urged on behalf of the Revenue and the assessee can be dealt with both as a matter of first principle, interpreting the section as it stands and on the basis of precedent on the subject. Interpreting the provision as it stands and without adding or deducting from the words used by Parliament, it is clear that upon the formation of a reason to believe under section 147 and following....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....uently in the course of the proceedings under the section as having escaped assessment. If upon the issuance of a notice under section 148(2), the Assessing Officer accepts the objections of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assess income under some other issue independently. Parliament when it enacted the provisions of section 147 with effect from April 1, 1989 clearly stipulated that the Assessing Officer has to assess to reassess the income which he had reason to believe had escaped assessment and also any other income chargeable to tax which carne to his notice during the proceeding. In the absence of the assessment or reassessment of the former, he cannot independently assess the latter. 11. From the above observation, it is evident that the ld. A.O. cannot make an addition on any other income chargeable to tax without making an addition on the grounds for which the reopening was done. In the present case in hand, the ld. A.O. in the last paragraph of the reasons for reopening has belief that income has escaped assessment amounting to Rs. 86.00 crores in the form of cessation of liabilit....