Shri Hasmukhlal K.Mehta, Surat V. The Income tax Officer,Ward-6(2), Surat

ITA 1136/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9773 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 09-09-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 31-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Assessee Lawyers: RASESH SHAH
• Keywords: Bogus purchase; Principle of natural justice; Additional evidence; Corroborative evidences; TDS
• Section: 147; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER AND N.S. SAINI , ACCOUNTANT MEMBER) ITA.NO.912/AHD/2008 [ASSTT.YEAR : 2004-2005] ITO, WARD-6(2) SURAT. VS. M/S.HASMUKH K. MEHTA PROP. HARDIK GEMS & M/S.PADMAVATI EXPORTS 206, PUJA BUILDING, HAVADA SHERI MAHIDARPURA, SURAT. ITA.NO.1136/AHD/2008 [ASSTT.YEAR : 2004-2005] M/S.HASMUKH K. MEHTA PROP. HARDIK GEMS & M/S.PADMAVATI EXPORTS 206, PUJA BUILDING, HAVADA SHERI MAHIDARPURA, SURAT. VS. ITO, WARD-6(2) SURAT. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.M. MAHESH ASSESSEE BY : SHRI RASESH SHAH O R D E R MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER : THESE ARE CROSS- APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE. BOTH HAVE EMANATED FROM THE ORDER OF THE COMMISSIONER OF INCO ME-TAX (APPEALS)-IV, SURAT DATED 26.12.2007. FOR THE SAKE OF CONVENIENC E, THESE TWO APPEALS HAVE BEEN CONSOLIDATED AND HEREBY DECIDED BY THIS COMMON ORDER. ASSESSEES APPEAL: 2. GROUND NO.1 READS AS UNDER: 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CON FIRMING THE ACTION OF THE AO IN PASSING EX-PARTE ORDER U/S.144 OF THE I.T.ACT, WITHOUT GIVING PROPER OPPORTUNITY OF HEARING TO ASSESSEE. EVEN OTHERWISE ITA.NO.912 AND 1136/AHD/2008 -2- ALSO, AO ERRED IN PASSING THE ORDER U/S.147 OF THE ACT WITHOUT ISSUING NOTICE U/S.148 OF THE ACT. THUS, ASSESSMEN T IS REQUIRED TO BE QUASHED. 3. THE LEARNED AR HAS NOT PRESSED THIS GROUND SERIO USLY, BECAUSE ACCORDING TO HIM A REFERENCE OF SECTION 147 IN THE NOMENCLATURE COULD HAVE BEEN A MISNOMER BEING A TYPING MISTAKE. IN VIEW OF THIS STATEMENT OF LEARNED AR, THIS GROUND IS HEREBY DISMISSED BEING NOT PRESS ED. 4. GROUND NO.2 AND 3 READ AS UNDER: 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIR MING THE ACTION FO THE AO IN MAKING ADDITION OF RS.2,69,340/- AT THE RATE OF 1% OF JOB WORK TURNOVER OF RS.2,69,33,997/- 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIR MING THE ACTION OF THE AO IN MAKING ADDITION OF RS.95,69,643/- BEING 25% O F TOTAL PURCHASES OF RS.3,82,78,574/- AS BOGUS PURCHASES. 5. THE ADMITTED FACTUAL POSITION IS THAT THE IMPUGN ED ASSESSMENT WAS MADE UNDER SECTION 144 VIDE ORDER DATED 20.11.2006. THE ASSESSEE IN HIS INDIVIDUAL CAPACITY HAS FILED RETURN OF INCOME AT RS.2,15,527/ -. IN THE ASSESSMENT ORDER IT HAS ALSO BEEN MENTIONED THAT THE SAID RETURN WAS AC COMPANIED WITH AN AUDIT REPORT ALONG WITH THE PRESCRIBED FORMS ANNEXED WITH THE AUDIT REPORT. SINCE THE CASE WAS SELECTED FOR SCRUTINY, THEREFORE, CERTAIN NOTICES WERE ISSUED TIME AND AGAIN BY THE AO. THE AO HAS MENTIONED SERIES OF DE FAULT OF NON-APPEARANCE FROM THE SIDE OF THE ASSESSEE. SINCE THE COMPLIANC E HAS NOT BEEN MADE, THEREFORE, THE AO HAS FINALLY HELD THAT HE HAD NO A LTERNATIVE BUT TO PROCEED EX PARTE QUA THE ASSESSEE. THEREAFTER, ON VERIFICATION OF THE PROFIT AND LOSS ACCOUNT, IT WAS NOTICED THAT CERTAIN EXPENSES WERE CLAIMED. IN RESPECT OF LABOUR PAYMENT, THE AO HAS HELD THAT THE TOTAL TURNOVER OF JOB WORK WAS RS.2,69,33,997/- AND IN THE ABSENCE OF VERIFICATION , ESTIMATED 1% OF THE SAME FOR NON-GENUINE EXPENSES. WITH THE RESULT, AN ADDI TION OF RS.2,69,340/- WAS MADE. ANOTHER ADDITION IN RESPECT OF UNVERIFIABLE PURCHASES HAS ALSO BEEN ITA.NO.912 AND 1136/AHD/2008 -3- MADE. THE APPELLANT HAD SHOWN TOTAL PURCHASES OF R S.3,82,78,574/- AND FOLLOWING THE DECISION OF ACIT VS. VIJAY PROTEINS L TD., 55 TTJ (AHD)76, HE HAS DISALLOWED 25% OF THE SAME BEING UNVERIFIABLE P URCHASES, WITH THE RESULT ADDITION OF RS.95,69,643/- WAS MADE. THERE WAS ONE MORE ADDITION OF RS.14,94,187/- WHICH WAS ON ACCOUNT OF SOME DIFFERE NCE IN THE INTEREST SHOWN AND INTEREST DECLARED AS PER THE TDS CERTIFICATE. 6. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLAT E AUTHORITY. BEFORE THE LEARNED CIT(A), THE APPELLANT HAS TRIED TO FURNISH CERTAIN EVIDENCES TO EXPLAIN CORRECTNESS OF THE INCOME. HOWEVER, THE LEARNED CI T(A) HAS REFUSED TO ADMIT ANY SUCH FRESH EVIDENCE ON THE GROUND THAT THESE EV IDENCES WERE NOT FILED BEFORE THE AO AND NO COGENT REASON FOR NON-APPEARAN CE WAS FURNISHED. WITH THE RESULT, IN RESPECT OF LABOUR PAYMENT HE AFFIRME D THE ACTION OF THE AO, PRIMARILY ON THE GROUND THAT CONFIRMATIONS OF THE L ABOUR PAYMENTS WERE NOT FURNISHED. IN RESPECT OF PURCHASE OF DIAMONDS, THE ACTION OF THE AO WAS UPHELD PRIMARILY BECAUSE OF THE REASON THAT NO VERI FICATION OF PURCHASES WAS MADE AVAILABLE TO HIM. HE HAS HELD THAT IN THE ABS ENCE OF PROPER VERIFICATION, IT COULD BE PRESUMED THAT THE PURCHASES MIGHT HAVE BEE N INFLATED. LIKEWISE, THE APPELLANT HAS TRIED TO RECONCILE THE INTEREST INCOM E AS SHOWN AS PER THE TDS CERTIFICATE AND THAT RECONCILIATION WAS FOUND CORRE CT BY THE LEARNED CIT(A), HENCE HE HAS GRANTED NECESSARY RELIEF. 7. THE FIRST AND THE FOREMOST GRIEVANCE OF THE ASSE SSEE IS THAT THE FIRST APPELLATE AUTHORITY SHOULD HAVE GRANTED THE PROPER OPPORTUNITY OF FURNISHING OF EVIDENCES AS PRESCRIBED UNDER RULE 46A OF THE I.T.R ULES. WE FIND FORCE IN THIS ARGUMENT OF THE LEARNED AR BECAUSE OF THE REASON TH AT UNDISPUTEDLY, THE AO HAS PASSED EX PARTE ORDER BY INVOKING THE PROVISIONS OF THE SECTION 14 4 OF THE ACT. THEREFORE, THE ADMITTED POSITION IS THAT THE ASSESSEE HAS NOT FURNISHED THE CORROBORATIVE EVIDENCES IN SUPPORT OF THE CORRECTNE SS OF THE INCOME DISCLOSED AS PER THE RETURN. OTHERWISE ALSO, IT IS NOT IN DI SPUTE THAT ALONG WITH THE RETURN, THE ASSESSEE HAS FURNISHED HIS AUDITED ACCOUNTS. I N VIEW OF THIS, IF WE EXAMINE ITA.NO.912 AND 1136/AHD/2008 -4- THE RULE 46A, THEN IT IS EVIDENT THAT AN ADDITIONAL EVIDENCE CAN BE PRODUCED BEFORE THE CIT(A), BUT AN APPELLANT SHALL NOT BE EN TITLED TO FURNISH ANY EVIDENCE OTHER THAN THE EVIDENCES PRODUCED BEFORE THE AO, EX CEPT IF THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FOR NOT PRODUCING THE EVIDENCES BEFORE THE AO OR IN A SITUATION WHERE THE AO HAD NOT GRANTED SUFFICI ENT OPPORTUNITY TO ADDUCE THOSE EVIDENCE. THUS, THE RULE PRESCRIBES THAT THE CIT(A) CAN ENTERTAIN SUCH EVIDENCES BUT ONLY AFTER PROVIDING AN OPPORTUNITY T O THE AO TO EXAMINE THE SAME. IN THIS CONNECTION, WE RELY ON A DECISION IN THE CASE OF MOHINDAR KAUR (SMT.) VS. CENTRAL GOVERNMENT, 104 ITR 120 (ALL) WH ERE THE AO HAD MADE CERTAIN ADDITIONS DUE TO NON-PRODUCTION OF CONFIRMA TION LETTERS FROM THE CREDITORS AND THE CIT(A) REJECTED THE ADMISSION OF THESE CONFIRMATION LETTERS. HOWEVER, THE TRIBUNAL HAD HELD THAT THE FIRST APPEL LATE AUTHORITY OUGHT NOT TO HAVE REJECTED THESE ADDITIONAL EVIDENCES, BUT SHOUL D HAVE DIRECTED THE AO TO CONSIDER THESE CONFIRMATIONS LETTERS. FOLLOWING TH IS VERDICT AND CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES OF THE CASE, WE ARE O F THE VIEW THAT THE NATURAL JUSTICE DEMANDS TO RESTORE THIS ISSUE BACK TO THE S TAGE OF THE FIRST APPELLATE AUTHORITY WITH THE DIRECTION THAT INSTEAD OF THROWI NG THOSE EVIDENCES AT THE VERY THRESHOLD, IT IS BETTER TO ALLOW THE ASSESSEE TO FU RNISH THOSE EVIDENCES WHICH COULD NOT HAVE BEEN FURNISHED BEFORE THE AO AND EX PARTE DECISION WAS TAKEN AT THAT TIME. NEEDLESS TO SAY THAT WHILE ALLOWING FRESH EVIDENCES, THE LEARNED CIT(A) SHOULD FOLLOW CONDITIONS OF RULE 46A BY GRAN TING AN OPPORTUNITY OF EXAMINATION BY THE AO. SIMULTANEOUSLY, WE HEREBY D IRECT THE ASSESSEE TO PROMPTLY COMPLY WITH THE NOTICES OF THE REVENUE DEP ARTMENT WITHOUT FAIL AND CO-OPERATE FOR EARLY DISPOSAL OF THE APPEAL AND CON TACT SUO MOTO WITHIN FIFTEEN DAYS OF RECEIPT OF THIS ORDER OF THE TRIBUNAL THE O FFICE OF THE LEARNED CIT(A) AND MARK HIS PRESENCE AND TAKE NECESSARY DIRECTIONS FOR FINALIZATION OF APPELLATE PROCEEDINGS. WITH THESE DIRECTIONS, BOTH THE GROUNDS RAISED BY THE ASSESSEE BE TREATED AS ALLOWED ONLY FOR STATISTICAL PURPOSE. REVENUES APPEAL: 8. THE ONLY SUBSTANTIVE GROUND RAISED IN THE APPEAL READS AS UNDER: ITA.NO.912 AND 1136/AHD/2008 -5- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .14,94,187/- MADE BY THE AO ON ACCOUNT OF DIFFERENCE IN INTEREST ACCOUNT SHOWN IN RETURN OF INCOME WITH COMPARISON WITH TDS CERTIFICATE. 9. AS WE HAVE DISCUSSED IN PARA 5 AND 6 ABOVE, THE GRIEVANCE OF THE REVENUE IN RESPECT OF DIFFERENCE IN THE INTEREST IN COME AS MENTIONED IN THE TDS CERTIFICATE SHALL ALSO BE REDRESSED IF THE FIRS T APPELLATE AUTHORITY PASS ON THE INFORMATION TO THE AO FOR HIS COMMENTS ON THE R ECONCILIATION SUBMITTED BY THE ASSESSEE. BECAUSE OF THIS REASON, WE RESTORE T HIS GROUND AS WELL BACK TO THE LEARNED CIT(A). HENCE, THIS GROUND IS TREATED AS A LLOWED ONLY FOR STATISTICAL PURPOSE. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AND THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 17 TH SEPTEMBER, 2010. SD/- SD/- (N.S. SAINI ) ACCOUNTANT MEMBER (MUKUL KUMAR SHRAWAT) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 17-09-2010 COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD