Jagat Jewels Vs ITO (ITAT Delhi)
he Income Tax Appellate Tribunal (ITAT) in Delhi recently passed a significant ruling in the case of Jagat Jewels Vs ITO. The case primarily focuses on the legitimacy of unverifiable purchases during income tax assessments. Both Jagat Jewels (the assessee) and the Income Tax Office (ITO) have appealed against the order by the Commissioner of Income Tax (Appeals).
Jagat Jewels, a jewelry trading firm, filed an income tax return for the Assessment Year (AY) 2013-14. The Assessing Officer (AO) raised concerns over the genuineness of purchases from multiple suppliers. Commissioner of Income Tax (Appeals) i.e. CIT(A), upheld most of the AO’s findings, leading to appeals from both sides at the ITAT.
The AO had initially disallowed the purchases on the grounds that they were ‘bogus,’ largely based on third-party search statements from years unrelated to the AY 2013-14. However, Jagat Jewels had provided comprehensive documentation, including ledger confirmations, bank statements, and notarized affidavits from suppliers confirming transactions.
The ITAT noted that the assessee had furnished all necessary documents to prove the legitimacy of the purchases. The tribunal ruled that merely disbelieving the purchases based on old, unrelated search statements was unjustifiable. The tribunal also stressed that the non-appearance of a supplier (Anshika Jewellers, in this case) doesn’t invalidate the transaction.
The ITAT referred to a Supreme Court decision in the case of Orissa Corporation Ltd., which stated that non-production of a concerned supplier for examination by the assessee does not make the transaction illegitimate.
The ITAT Delhi’s verdict in Jagat Jewels Vs ITO reaffirms the importance of procedural fairness and thorough examination in income-tax assessments. The ruling stands as a vital reference for future cases involving unverifiable purchases. It highlights that the burden of proof doesn’t solely rest on the assessee and that revenue authorities must adequately substantiate their claims when discrediting transactions.
FULL TEXT OF THE ORDER OF ITAT DELHI
These cross appeals by the assessee in ITA No.3665/Del/2019 and by the Revenue in ITA No.4707/Del/2019 for AY 2013-14, arise out of the order of the Commissioner of Income Tax (Appeals)-35, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No.150/18-19, dated 26.02.2019 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 28.03.2016 by the Assessing Officer, Ward 50(3), New Delhi (hereinafter referred to as ‘ld. AO’).
2. The issue in dispute in assessee’s appeal as well as in Revenue’s appeal is only on account of disallowance made for unverifiable purchases.
3. We have heard the rival submissions and perused the material available on record. We find that the assessee is an ownership firm carrying on the business of trading in jewellery. The return of income for the AY 2013-14 was filed by the assessee firm on 14.09.2013 declaring total income of Rs.3,82,119/-. During the course of assessment proceedings, the entire books of account of the assessee together with the bills and supporting documents were called for by the ld. AO. The same were duly furnished by the assessee before the ld. AO. The ld. AO, on perusal of the books of account of the assessee and on the basis of information received from the ld. Commissioner of Income-tax, Central Circle-4, Surat, observed that the assessee firm had obtained accommodation entry in the form of bogus purchases through Shri Rajendra Jain, Shri Sanjay Choudhary and Shri Dharmichand Jain during FY 2012-13. Accordingly, the ld. AO sought to examine veracity of the purchases made by the assessee from the following parties:-
