The Jaipur Bench of Income Tax Appellate Tribunal ( ITAT ) ruled out additions on completed assessments due to the absence of incriminating material. The tribunal noted that the Assessing Officer (AO) had not addressed the specific issues remanded by the High Court and merely repeated previous findings.
Govindam Export, the appellant-assessee, was a partnership firm engaged in exporting gemstones. Following a search on 24-06-2003, assessment proceedings under section 153A were initiated. The assessee filed a return on 02-01-2006, declaring the same income as in the original returns.
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In the first round of litigation, the assessee challenged the AO’s findings before the Commissioner of Income Tax(Appeals)[CIT(A)], who upheld the rejection of the books of accounts but reduced the additions by partially accepting the purchases as genuine. The ITAT further reduced the additions, ruling that the purchases were genuine and directing their deletion. However, the Rajasthan High Court remanded the case back to the AO for a fresh examination.
In the second round of litigation, the AO repeated the initial findings without further investigation. The CIT(A) upheld this, confirming a 25% addition for unverifiable purchases as income from other sources, reducing the business profit and the section 80HHC deduction. The assessee aggrieved appealed before the tribunal.
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The assessee challenged the validity of the assessment orders and additions for assessment year (AY) 1998-99 to AY 2001-02 and AY 2003-04.The assessee argued that no additions could be made in completed assessments without incriminating material, citing the Supreme Court decision in PCIT Central-3 v. Abhisar Buildwell Private Limited.
Additionally, it was noted that the department’s search did not reveal incriminating material to support claims of bogus purchases or inflated export profits. The AO issued notices for these years after the time limits had expired, making any additions invalid.
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The assessee had argued that the assessment orders lacked required approval from higher authorities under Section 153D, which must be substantive, not mechanical. They cited the CBDT Manual and the Orissa High Court’s decision in ACIT v. Serajuddin and Co. The Supreme Court also dismissed a related SLP, affirming that legal issues can be raised if the matter is reviewed afresh.
The two-member bench comprising Dr. S. Seethalakshmi and Rathod Kamlesh Jayantbhai noted that, despite the High Court’s direction to re-examine the genuineness of transactions as per M/s. Gems Paradise, the AO merely repeated earlier additions without addressing the High Court’s issues. The CIT(A) also upheld the previous findings without considering the High Court’s directions.
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