CIT Vs. VIGNESH KUMAR JEWELLERS

JUDGEMENT

(1.) THIS appeal is filed by the revenue under Section 260A of the Income Tax Act against the order of the Tribunal, Madras 'C' Bench, Chennai, dated 27 -7 -2007 in ITA No. 598/Mad/2005 for the assessment year 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 assessing officer relying on the decision of the Customs, Excise, Service Tax Appellate Tribunal is valid ?

(2.) THE brief facts are as follows: The assessee is a partnership firm consisting of 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 10 -2 -2002 admitting the total income of Rs. 47,060. The same was accepted under Section 143(1) of the Income Tax Act, 1961. Subsequently, a notice dated 22 -1 -2003 under Section 148 of the Act was issued to reopen the assessment. The assessee has sent a reply dated 25 -1 -2003, requesting to treat the return of income filed on 10 -2 -2002 as the one filed in response to the notice issued under Section 148 of the Act. The assessment was completed on 26 -3 -2004 and determined the total income at Rs. 4,27,56,850. While determining the total income, the. Assessing Officer made the following additions:

(3.) HEARD the counsel for the revenue. There was a raid in the business premises of the assessee by the Directorate of Revenue Intelligence on 2 -11 -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 9,819.83gms. 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 assessing officer has made additions relying on the findings of the Directorate of Revenue Intelligence and the Commissioner of Customs, dated 29 -10 -2003. As against the finding of the ComMr. of Customs, the assessee has filed an appeal before the CESTAT, South Zonal Bench, Chennai. The Tribunal, by final order dated 10 -12 -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 was 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 DRI 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 has 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 has 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, dated 20 -11 -2000 whereby it has been emphasised that seizure of gem and jewellery stock of 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 dated 20 -6 -2008, in which, the ComMr. of Customs, Chennai Sea Port has stated that the final order of the CESTAT, Chennai, dated 10 -12 -2004 has been accepted by the Commissioner 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 assessing officer 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 assessing officer. 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 assessing officer. The findings given by the authorities are based on valid materials and evidence and it is a question 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 of the order of the Tribunal and the Tax Case (Appeal) is liable to be dismissed and accordingly it is dismissed.