Dy. Commissioner of Income Tax, Circle-16(2), Hyderabad V. Prajay Engineers Syndicate Limited, Hyderabad

ITA 1644/Hyd/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4045 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 2008-2009
• Appeal Filed On: 26-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Keywords: Principle of natural justice; Period of limitation; Agreed addition; Procedural lapse; Right to appeal; Retraction; Set aside
• Section: 142(1); 133A; 201; 143(2); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER I.T.A. NO. 1644 /HYD/2017 ASSESSMENT YEAR: 20 0 8 - 0 9 DY. COMMISSIONER OF INCOME TAX, CIRC LE - 16( 2), HYDERABAD VS M/S. PRAJAY ENGINEERS SYNDICATE LIMITED, HYDERABAD [PAN: A A CCP2287M ] (APPELLANT) (RESPONDENT) FOR REVENUE : S HRI Y. V.S.T. SAI, CIT - DR FOR ASSESSEE : SHRI MOHD. AFZAL, AR DATE OF HEARING : 05 - 0 2 - 201 9 DATE OF PRONOUNCE MENT : 08 - 03 - 2 01 9 O R D E R PER S. RIFAUR RAHMAN, A.M. : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX ( APPEAL S) - 4, HYDERABAD , DATED 31 - 0 7 - 201 7 . 2. BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSEE , A CO MPANY , ENGAGED IN THE BUSINESS OF CONSTRUCTION, DEVELOPMENT OF PROPERTY AND HOSPITALITY ETC. , FILED ITS RETURN OF INCOME FOR TH E AY 2008 - 09 ADMITTING AN INCOME OF RS. 62,40,44,910/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND ITA NO. 1644 /H YD/2017 : - 2 - : ASSESSMENT U/S. 143( 3) OF T HE INCOME TAX ACT [ACT] WAS COMPLETED ON 30 - 12 - 2010 DETERMINING THE TOTAL INCOME AT RS. 67,76,28,385/ - . 2.1 . A SURVEY OPERATION U/S. 133A OF THE ACT WAS CONDUCTED BY THE DDIT(I NV) , UNIT - 1 ( 2 ) , HYDERABAD IN THE BUSINESS PREMISES OF ASSESSEE - COMPANY ON 12 - 0 9 - 2013 . SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE U/S. 148 R.W .S. 147 OF THE ACT ON 08 - 07 - 2014 . ACCORDINGLY, THE ASSES SING OFFICER ISSUED NOTICE S U/S. 143(2) & 142(1) OF THE AC T . I N RESPONSE TO THE SAID NOTIC E S , THE ASSESSEE SUBMIT TED DETA ILED EX PLANATION ALONG WITH RELEVANT DOCUMENTS AS REQUIRED BY THE ASSESSING OFFICER . 2 . 2 . THE AO ALSO ASKED THE ASSESSEE TO SUBMIT THE DETAILS OF PURCHASE OF STEEL A ND TA R ETC., PROJECT - WISE. IN RESPONSE, ASSESSEE SUBMITTED DETAILS OF LIST OF SUPPLIERS A LONG W ITH THE I R DETAILS OF QUANTITY PARTICULARS, PAN CARD NUMBERS, ADDRESSES ALONG WITH CONFIRMATION LETTERS , EXCISE INVOICES, P U RCHASE O R DERS, DELIVERY CHALLANS, STOCK REGISTERS, PROOF OF TRANSPORTATION AND OTHER DETAILS AS REQUIRED BY THE ASSESSING OFF I C ER . AF TER GOING THROUGH THE INFORMATION FILED, THE AO COMPLETED THE ASSESSMENT BY DISALLOWING TOTAL PURCHA SES @ 13.5% AND ASSESSED THE TOTAL INCOME AT RS. 83,58,01,814/ - . 3. AGGRIEVED BY THE ORDER OF AO , T HE ASSESSEE P REFERRED AN AP PEAL BEFORE THE CIT( A ) . ITA NO. 1644 /H YD/2017 : - 3 - : 4 . BEFORE THE CIT(A), THE ASSESSEE SUBMITTED ELABORATELY, WHICH WERE EXTRACTED BY THE CIT(A) AT PAGES 4 TO 13 IN HIS ORDER. 5. AFT ER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE, THE CIT( A) , INTER - ALIA , OBSERVED THAT THE AO IN THE ASSESSMENT ORDER H I MSELF MENTIONED THAT IT IS SEEN THAT MOST OF THE SUPPLIES WERE SUPPORTED BY PROPER DOCUMENTS SUCH AS INVOICES, EXCISE INVOICES, PURCHASE ORDERS, DELIVERY CHALLANS, STOCK REGISTERS, RESPECTIVE ENTRIES IN THE PURCHASE REGISTER, PROOF OF PAYMENT OF SALE C ON SIDERAT ION AND PROOF OF TRANSPORTATIO N , HOWEVER, THE AO SIMPLY CONCLUDED TH E ASSESSMENT BY MENTIONING THAT, THE INVOICES AND VEHICLES NUMBERS ARE NOT AVAILABLE AND ADOPTED 1 3.5% O F TOTAL PURCHASES AND COMPLETE D THE ASSESSMENT. IN V IEW OF THE ABOVE CONTR A R Y FIND INGS, THE CIT(A) HELD THAT THE ACTION OF THE AO IS NOT JUSTIFIABLE AND AC CEPTING THE SUBMIS SIONS OF THE ASSESSEE BEFORE HIM, DELETED THE ADDITION MADE BY THE AO. 6 . AGGRIEVED BY THE ORD ER OF LD.CIT(A) , THE REVENUE IS IN APPEAL BEFORE US , R A ISING T H E FOLL OWING GROUNDS OF APPEAL: 1. THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 20,58,91,429/ - MADE ON ACCOUNT OF DISALLOWANCE OF 13.5% OF THE PURCHASES AS NON - GENUINE. 2. THE CIT(A) ERRED BY IGNORING THE DECISION OF JURISDICTIONAL ITAT I N THE C A SE OF D. RAJARAO (HUF) IN ITA NO. 718/HYD/2002, WHEREIN IT WAS HELD THAT AGREED ADDITIONS CANNOT BE CONTESTED IN APPEAL . ITA NO. 1644 /H YD/2017 : - 4 - : 3. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING . 7 . ON THE OTHER HAND, LD. DR FILED WRITTEN S UBMISSIONS, WHICH ARE EX T R ACTED BELOW FOR THE SAKE OF CLARITY: 1. THE FOLLOWING SUBMISSIONS ARE MADE FOR KIND CONSIDERATION OF HON'BLE ITAT IN THE APPEAL FILED BY THE DEPARTMENT. IT IS SUBMITTED THAT THREE GROUNDS OF APPEAL ARE TAKEN BUT THE ISSUE IS DELETING THE AGREED DISALLOWANCE OF RS. 20,58,91,429/ - BEING 13.5 % O F THE PURCHASES AS NON - GENUINE. 2. IT IS HUMBLY SUBMITTED THAT IN CASE OF THE ASSESSEE A SURVEY U/S 133A WAS CONDUCTED ON 12/09/2013 BY DDIT(LNV), UNIT - 1(2), HYDERABAD AND IT WAS NOTICED THAT CERTAIN PURCHASES OF T O R - STEEL ETC CLAIMED TO HAVE BEEN MAD E FROM THE CONCERNS AT MUMBAI WERE NOT GENUINE AND THE VALUE WAS QUANTIFIED AT RS. 100.60 CR. SUBSEQUENT VERIFICATION REVEALED THAT THE FIGURE WAS RS. 113,59,97,850/ - . A SHOW CAUSE NOTICE WAS ISSUED TO SHOW CAUSE WHY THE ENTIRE AMOUNT SHOULD NOT BE TREA TED AS NON - GENUINE. IN REPLY, THE ASSESSE E FURNISHED NAMES OF 17 PARTIES AND STATED THAT TO DEVELOP AND CONSTRUCT THE PROJECTS OF THE ASSESSEE, STEEL AND CEMENT ARE ESSENTIAL RAW MATERIALS. ACCORDING TO THE ASSESSEE, THE PURCHASES WERE GENUINE BECAUSE WITH OUT ADEQUATE QUANTITIES OF STEEL AND CEME NT, THE PROJECTS WOULD NOT HAVE BEEN COMPLETED. AS THE AO NOTICED THAT THE SUPPLIES ARE NOT PROPERLY SUPPORTED BY NECESSARY DOCUMENTS SUCH AS INVOICES, IN SOME CASES VEHICLE NUMBERS ARE NOT AVAILABLE AND DELIVERY CH ALL ANS WERE NOT FURNISHED. AS THE ASSESSE E COULD NOT DISCHARGE THE ONUS FULLY, THE AO PROPOSED DISALLOWANCE OF 13.5 % OF THE TOTAL PURCHASES OF RS. 152,51,21,695/ - (EXCLUDING LAND COST) I.E ADDITION OF RS. 20,58,91,429/ - . THE ASSESSEE CAME FORWARD AND AGRE ED FOR SUCH DISALLOWANCE. IT IS HUMBLY SUBMIT TED THAT THE AO REPRODUCED ORDER SHEET NOTING DATED 31/03/2016 IN THE ASSESSMENT ORDER WHEREIN THE ACCEPTANCE OF THE AR OF THE ASSESSEE IS SEEN. 3. HOWEVER, THE ASSESSEE CONTESTED THE ADDITION IN APPEAL AS WEL L A S THE REOPENING. IN THE APPELLATE PROCEE DINGS, THE ASSESSEE MENTIONED THAT DURING THE INVESTIGATION BY DDIT(LNV), NO ISSUE OF ANY SUBSTANCE , SUSPECTING GENUINENESS OF PURCHASES WAS DEDUCTED. IT WAS ALSO ARGUED THAT THE AO STARTED WITH RS. 100.60 CR AND EN DED UP DISALLOWING CERTAIN ITA NO. 1644 /H YD/2017 : - 5 - : PERCENTAGE OF PURCHASES ON ESTIMATE BASIS ON FRIVOLOUS REASONS WITHOUT EVEN A SEMBLANCE OF EVIDENCE AND HE COULD NOT HAVE TREATED 89% OF THE PURCHASE OF TAR AND STEEL TO BE NONGENUINE. THE ASSESSEE ALSO ARGUED THAT THE AO COUL D N OT HAVE REOPENED THE ASSESSMENT FOR VERI FICATION OF GENUINENESS OF PURCHASES. THE ASSESSEE ALSO ARGUED THAT WITHOUT CAUSING ANY ENQUIRY, THE AO WAS NOT CORRECT IN TREATING THE PURCHASES AS NON - GENUINE BECAUSE HE DID NOT COMMUNICATE THE SHORTCOMINGS IN T HE INVOICES OR ANY FINDINGS OF HIS ENQUIRY IF ANY WITH THE SUPPLIERS. HE ALSO STATED THAT THE ASSESSEE IS NOT BOUND TO MAINTAIN LORRY NUMBERS OR DELIVERY CHALLANS UNDER THE LAW. THE ASSESSEE ARGUED THAT IT IS MANDATORY ON THE PART OF THE AO TO GIVE FINDING S O N BOTH ISSUES BEFORE PROCEEDING TO ESTIM ATE THE DISALLOWANCE U/S 145(3). THE ESTIMATION WAS ALSO ARBITRARY ACCORDING TO THE ASSESSEE. IT WAS ALSO STATED THAT THE WAY IN WHICH THE ITO CONDUCTED HIMSELF IN OBTAINING THE SO CALLED ACCEPTANCE SHOWS THE KIND OF COERCION AND PRESSURE EXERTED ON THE AR . THE ASSESSEE STATED THAT THE AO ALSO NEVER COMMUNICATED HIS FINDINGS TILL THE LAST DATE OF ASSESSMENT AND FORCIBLY OBTAINED SIGNATURE OF AR TO REGULARIZE HIS INACTION IN FOLLOWING THE ESTABLISHED PROCEDURES. THE REF ORE, NATURAL JUSTICE WAS DENIED. 4. IT IS HUMBLY SUBMITTED THAT THE CIT(A) ACCEPTED THE SUBMISSIONS AT FACE VALUE, MORE SO WHEN THE ASSESSEE WAS RAISING SERIOUS ALLEGATIONS ON THE MANNER IN WHICH ASSESSMENT WAS COMPLETED AND ALSO WHEN THE PERSONAL CON DUC T OF THE ITO WAS BEING QUESTIONED. THERE FORE, WITHOUT GIVING ANY OPPORTUNITY TO THE AO, THE CIT(A) ALLOWED ALL THE GROUNDS OF APPEAL FILED BEFORE HER. THE CIT(A) ALSO DID NOT MAKE ANY FACT FINDING ENQUIRY ON THE ASSERTIONS MADE BY THE ASSESSEE THAT THE INV ESTIGATION WING COULD NOT FIND ANY DISCR EPANCIES. THEREFORE, THE ORDER OF CIT(A) IS PERVERSE IN THE CONTEXT THAT THE SUBMISSIONS OF ASSESSEE WERE ACCEPTED IN TOTO AT FACE AND NO QUESTIONS WERE RAISED ON THE POINT THAT WHY THE ADDITION WAS AGREED UPON IN TH E FIRST PLACE. 5. IT IS ALSO HUMBLY SU BMITTED THAT NO PROOF WAS SUBMITTED BEFORE THE CIT(A) REGARDING APPLICATION OF FORCE OR COERCION AND IF AN AR IS COERCED NOTHING PREVENTED HIM FROM RAISING THE MATTER WITH THE ADMINISTRATIVE SUPERIORS OF THE ITO. IT IS SUBMITTED THAT MERELY BECAUSE THE AO DID NOT REDUCE THE DEFECTS IN THE PURCHASES IN WRITING, THE ASSESSEE CANNOT CLAIM UNDUE ADVANTAGE OF THE SAME LATER ON BY CLAIMING THAT THE AR AGREED DUE TO FORCE AND COERCION. THE RELIANCE OF THE LEARNED ITA NO. 1644 /H YD/2017 : - 6 - : AR ON IN STR UCTION NO: 8/2011 OF CBDT IN HIS WRITTEN SUBMISSIONS RECEIVED BY THE UNDERSIGNED ON 04/02/2019 IS MISPLACED BECAUSE THE CIT(A) ACCEPTED THE ASSERTIONS OF THE ASSESSEE AT FACE VALUE AND DID NOT RECORD AN INDEPENDENT FACT FINDING NOR DID SHE AFFORD OPPOR TUN ITY OF HEARING TO THE ITO AGAINST WHOM ALLEGATIONS ARE MADE. IT IS HUMBLY SUBMITTED THAT ONCE THE ADDITION IS AGREED BEFORE THE AO, THE SAME CANNOT BE RETRACTED UNLESS ADEQUATE PROOF IS SHOWN BY THE ASSESSEE. 6. KIND ATTENTION OF THE HON'BLE BENCH IS INV ITED TO POINT (09) AT PAGE 49 OF THE P APER BOOK FILED BY THE ASSESSEE ON 04/02/2019. THE EXPLANATION FURNISHED BY THE ASSESSEE AT POINT (09) IN HIS LETTER DATED 23/03/2016 TO THE AO CLEARLY INDICATES THAT THE ALLEGED VENDORS WERE BLACK LISTED AND APPARE NTL Y THE TRADERS FROM WHOM ALLEGED PURCHA SES WERE MADE WERE NOT FOUND AT THE GIVEN ADDRESS. FRO M THE SAID LETTER ALSO, IT CAN BE CLEARLY SEEN THAT THE GENUINENESS OF PURCHASE OF TOR STEEL WAS UNDER EXAMINATION BY THE AO AND THE AO WAS QUESTIONING THE ENTIR E P URCHASES. THEREFORE, IT IS INCORRECT O N THE PART OF THE ASSESSEE TO CLAIM THAT THE ISSUE WAS NEVER RAISED AND ALL OF A SUDDEN ADDITION WAS MADE. 7. IT I S ALSO HUMBLY SUBMITTED THAT WITHOUT ADEQUATE QUANTITIES OF STEEL, THE PROJECTS WOULD NOT HAVE BEEN EX ECUTED IS DEVOID OF MERIT IN THE CONTE XT OF THE CASE. NO DOUBT, THERE COULD BE PURCHASES OF STEEL BUT IT IS NOT NECESSARY THAT THEY WERE FROM THE PARTIES IN WHOSE NAMES THE PURCHASES ARE SHOWN. 8. IT IS ALSO HUMBLY SUBMITTED THAT THE RELIANCE BY THE A SSE SSEE ON VARIOUS DECISIONS IS MISPLACED . THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF TEJUA ROHITKUMAR KAPADIA IS NOT APPLICABLE TO THE PRESENT FACTS BECAUSE AS AGREED BY THE ASSESSEE BEFORE THE AO IN THE PRESENT CASE, THE DEFECTS IN SUPPORT ING DOCUMENTS COULD NOT BE EXPLAINED. THE FACTS OF THE CASE OF CHHAT MULL AGARWAL DECIDED BY PUNJAB AND HARYANA HIGH COURT ARE ALSO TOTALLY DIFFERENT BECAUSE IN THE SAID CASE, THE ADDITION WAS ON ACCOUNT OF DIFFERENCE BETWEEN TWO REPORTS OF VALUATION OF A HOU SE. THERE IS NO SUCH DIFFICULTY IN UND ERSTANDING HERE WHILE AGREEING FOR THE ADDITION. IN CASE OF GAURI SAHAI GHISA RAM, THE CONCESSION WAS MADE ON ERRONEOUS UNDERSTANDING OF CORRECT LEGAL POSITION. IN THE CASE OF ESTER INDUSTRIES, THE ISSUE WAS RELATED TO ADDITION / DISALLOWANCE IN ORIGINAL/REV ISED RETURN THAT COULD BE CONTESTED BY THE ASSESSEE IN ASSESSMENT PROCEEDINGS. IN THE SAID CASE, NO OPPORTUNITY WAS GRANTED BY THE AO. ITA NO. 1644 /H YD/2017 : - 7 - : 9. IT IS HUMBLY SUBMITTED THAT MERE ARGUMENT BEFORE THE CIT(A) THAT THE ADMI S S ION BEFORE THE AO WAS UNDER BELIEF OF MIS TAKEN FACT OR LAW IS NOT A VALID ARGUMENT UNLESS IT IS SUPPORTED BY FACTUAL EVIDENCE. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE 'JURISDICTIONAL HIGH COURT IN THE CASE OF KERMEX MICRO SYSTEMS LTD [2014] 47 TAXMANN.COM 375 (ANDHRA PRADESH ) WHEREIN IT AT PARAGRAPH 7 IT WAS HELD THAT 'THE LEARNED COUNSEL THEREAFTER ARGUES THAT THE ADMISSION CANNOT BE LOOKED INTO UNDER THE LAW, AS IT I S A MATERIAL COLLECTED DURING THE PERIOD OF SURVEY AND THIS IS NOT A VALID PIECE OF EVIDENCE. WE THINK THERE MUST BE A DISTINCTION BETWEEN THE ADMISSION AND THE EVIDENCE COLLECTED DURING THE COURSE OF SURVEY. THIS IS A VOLUNTARY ACT OF THE ASSESSEE AND IF THE ASSESSEE ACCEPTS THE LIABILITY, THERE IS NO POINT OR SCOPE TO COLLECT FURTHER EVIDENCE OR MAKING ANY EN QUIRY. HERE EXERCISING OF POWER BY THE COMMISSIONER WAS NOT CALLED FOR. EXERCISE OF POWER EVALUATING LEGAL IMPLICATION OF ADMISSION WAS NOT CALLED FO R BECAUSE NO CASE WAS MADE OUT FACTUALLY. THEREFORE, THE DECISIONS CITED BY THE LEARNED COUNSEL FOR THE A PPELLANT BEFORE US ARE ABSOLUTELY INAPPROPRIATE. HENCE, WE IGNORE ALL THESE DECISIONS'. 10. IT IS HUMBLY SUBMITTED THAT ADMISSION SHIFTS THE ONUS ON THE ASSESSEE TO PROVE THAT SUCH ADMISSION WAS WRONG. UNLESS THE CONTENTIONS RAISED IN RETRACTING THE ADMI SSION ARE EXAMINED, THE ISSUE CANNOT BE DECIDED. IN THIS REGARD, RELIANCE IS PLACED ON THE DECISION OF HON'BLE ITAT, PUNE BENCH IN THE CASE OF HOTEL KI RAN [2002] 82 ITO 453 (PUNE), WHEREIN IT WAS HELD THAT 'IT IS SETTLED LAW THAT ADMISSION BY A PERSON IS A GOOD PIECE OF EVIDENCE THOUGH NOT CONCLUSIVE AND THE SAME CAN BE USED AGAINST A PERSON WHO MAKES IT. THE REASON BEHIND THIS IS, A PERSON MAKING A STAT EMENT STOPS THE OPPOSITE PARTY FROM MAKING FURTHER INVESTIGATION. THIS PRINCIPLE IS ALSO EMBEDDED IN THE PROVISIONS OF THE EVIDENCE ACT. BUT THE STATEMENT RECORDED UNDER SECTION 132(4) IS ON A DIFFERENT FOOTING. THE LEGISLATURE IN ITS WISDOM HAS PROVIDED T HAT SUCH A STATEMENT MAY BE USED IN EVIDENCE IN ANY PROCEEDINGS UNDER THE ACT. THEREFORE, GREAT EVIDENTIA RY VALUE HAS BEEN ATTACHED TO SUCH STATEMENT. HOWEVER, THERE ARE EXCEPTIONS TO SUCH ADMISSION WHERE THE ASSESSEE CAN RETRACT FROM SUCH ADMISSION. THE F IRST EXCEPTION EXISTS WHERE SUCH STATEMENT IS MADE INVOLUNTARILY, I.E., OBTAINED UNDER COERCION, THREAT, DURESS, UNDUE INFLUENCE, ETC. BUT THE BURDEN LIES ON THE PERSON MAKING SUCH ALLEGATIONS TO PROVE THAT STATEMENT WAS OBTAINED BY THE AFORESAID MEANS. TH E SECOND EXCEPTION IS WHERE THE STATEMENT HAS BEEN GIVEN UNDER SOME MISTAKEN BELIEF EITHER OF FACT OR LAW . IT IS WELL - ITA NO. 1644 /H YD/2017 : - 8 - : SETTLED THAT THERE CANNOT BE ESTOPPEL AGAINST THE LAW. IF A PERSON IS NOT LIABLE TO TAX IN RESPECT OF ANY RECEIPT, HE CANNOT BE MADE LIABL E TO PAY TAX MERELY BECAUSE HE HAS AGREED TO PAY THE TAX IN THE STATEMENT UNDER SECTION 132. HE CAN ALWAY S RETRACT IN SUCH SITUATION IF HE CAN SHOW THAT THE STATEMENT HAS BEEN MADE ON MISTAKEN BELIEF OF FACTS, HE CAN RETRACT FROM THE STATEMENT IF HE CAN SH OW THAT FACTS ON THE BASIS OF WHICH ADMISSION WAS MADE ARE INCORRECT'. THEREFORE, WHEN THE ASSESSE E MADE A CLAIM THAT THE AGREED ADDITION WAS MADE UNDER FORCE OR COERCION OR THE AR WHO AGREED FOR THE ADDITION COULD NOT UNDERSTAND THE IMPLICATIONS, HE HAD TO PROVE THE ALLEGATION FIRST BEFORE THE ISSUE IS DECIDED ON MERITS. THEREFORE, IN THE PRESENT CASE IT WAS INCUMBENT ON THE PART OF THE CIT(A) TO EXAMINE THE CONTENTIONS OF FORCE AND COERCION AS WELL AS THE MISCONCEPTION ON THE PART OF THE AR ABOUT THE IMP LICATIONS OF THE SAID ADMISSION BEFORE PROCEEDING TO ACCEPT THE RETRACTION ON MERITS. ON THE ISSUE OF REOPENING ALSO, THE CIT(A) ACCEPTED THE SUBMISSIONS OF THE ASSESSEE AT FACE VALUE. 11. THEREFORE, IT IS HUMBLY SUBMITTED THAT THE ORDER OF THE CIT(A) IS INCORRECT AND THE SAME MAY KINDLY BE SET ASIDE. 7 . 1 . FURTHER, H E RELIED ON THE F OLLO W ING CASE LAW : I. KERMEX MICRO SYSTEMS (I NDI A ) LTD., VS. DCIT [362 ITR 13] (AP ); II. HOTEL KIRAN VS. ACIT [82 ITD 453 (PUNE)/77 TTJ 87 (PUNE); 8 . LD.AR BESIDES RELYING ON T HE ORDER O F LD. CIT(A) , RELIED ON THE F OLLOWING DECISIONS : I. DEC ISION OF THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF PR.CIT VS. T EJUA ROHITKUMAR KAPADIA, IN TAX APPEAL NO. 691 OF 2017, DT. 18 - 09 - 2017; II. CHHAT MULL AGARWAL VS. CIT (P&H HC ) [116 ITR 694]; ITA NO. 1644 /H YD/2017 : - 9 - : III. GAURI SA H AY G HISARAM VS. CIT [120 ITR 3 38] (ALL H C ) ; IV. ESTER INDUSTRIES LTD., VS. CIT [316 ITR 260) (DEL H C); V. CB DT INSTRUCTIONS NO. 08/2011, DT. 11 - 08 - 2011; VI. ABDUL HAMEED KHAN VS. CIT [63 ITR 738) (AP - HC); 9 . CONSIDERED THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD. W E NOTICE THAT SUBSEQ UENT TO SURVEY OPERATION S, THE GENUINENESS OF THE PURCHASES OF T AR AND STEEL ETC., FROM SOME OF THE CONCERNS AT MUMBAI WERE QUESTIONABLE AND I N ORDER TO VERIFY THE SAME, THE ASSESSMENT WAS RE - OP ENED. D URING ASSESSMENT, AFTER V ERIFICATI ON O F PURCHASE S, ASSESSING OFFICER OBSERVED THAT I N SOME OF THE CASES , THE SUPPLIES ARE NOT PROPERLY SUPPORTED BY DOCUMENTS SUCH AS INVOICES, INVOICES AVAILABLE BUT NO VEHICL E DETAILS OF DELIVERY OR NO DELIVERY CHALLA NS ETC. S INCE ASSESSEE COULD N OT EXPLAIN THOS E D EFICIENCIES, HE PROPOSED DISALLOWANCE OF 13.5% OF THE TOTAL PURCHASES WHICH WAS AGREED BY LD.AR ON THE LAST DAY OF THE ASSESSMENT I .E., 31 - 03 - 2 016 IN TH E ORDER SHEET. 9 .1. FURTHER, ASSESSEE OBJECTED BEFORE THE CIT(A) THAT THE RE - OPENIN G U/S. 147 OF T HE ACT WAS NOT IN ACCORDANCE WITH LAW, ASSESSING OFFICER HAS NOT CONDUCTED ENQUIRIES PROPERLY, BOOKS WERE NOT REJECTED, ADOPTING ARBIT RARY FIGURE OF 13.5% TO DISALLOW THE TOTAL PURCHASES, ASSESSING OFFICER HAS NOT PROPOSED ANY DISALLOWANCE O R CALLED FOR ANY OBJECT ION FROM ASSESSEE BEFORE MAKING ANY DISALLOWANCE. B UT THE LD.CIT(A) HAS NOT DEALT WITH MOST OF THE OBJ ECTIONS RAISED BY ASSESSEE EX C EP T DEALT WITH M ERITS OF THE CASE I.E., ON ADOPTING 13.5% OF ITA NO. 1644 /H YD/2017 : - 10 - : THE DISALLOWANCE AND MERIT S O F REJECTION OF SUPPORTING DOCUMENT S SU BMITTED IN SUPPORT OF THE PURCHASES. 9 .2. THE LD.DR MADE SUBMISSION THAT I T IS A GREED ADDITION, ASSESSING OFFICER HAS MADE ADDITION PROPERLY AND OBJECTED THAT LD.CIT(A) HAS NOT ADDRESSED THE ISSUE RAISED BY ASSESSEE ON THE CON D UCT OF ASSESSING OFFIC ER . E VEN THOUGH , ASSESSEE MADE OBJECTION S BEFORE LD.CIT(A) ON VARIOUS ISSUES BUT LD.CIT(A) HAD CHOSEN NOT TO ADDRESS OTHER ISSUES EXCEPT ADJUDICATING ON MERIT. T HEREFORE, WE ALSO WOULD LIKE TO ADDRESS ONLY T W O ISSUES, I.E., WHETHER I T IS AGREED ADDITION O R NO T AND ON MERIT OF MAKING DISALLOWANCES ADOPTING THE METHOD OF ESTIMATION. 9 .3. WITH REGARD TO THE ISSUE OF AGREED ADDITION, WE NOTICE THAT ASSESSING OFFICER HAS TAKEN SIGNATURE OF AR ON THE LAST DAY OF YEAR IN WHICH THE ASSESSME N T HAS TO BE COMPLETED , IT COULD BE DUE TO PERIOD OF LIMITATION. T H E ISSUE IS NOT THAT IT WAS AGREED ON LAST DAY OF ASSESSMENT , BUT THE REAL ISSUE IS WHETHER THE ASSESSING OFFICER WAS RIGHT IN OBTAINING CONSENT ON MAKING ADDITIONS FROM THE LD.AR INSTEAD OF ASSESSEE ITSELF F OR MAKI NG SUCH HUGE DISAL LOW ANCE ? AR MAY BE A U THORISED TO REPRESENT BUT NOT FOR ACCEPTING SUCH HUGE DISALLOWANCE. WE D RAW FORCE FROM THE FOLLOWING DECISION S TO HOLD THAT ASSESSEE HAS A RIGHT TO APPEAL IN CASE OF AGREEMENT BY LD. AR BEFO RE AO. A) GAURI SAHAI GHISA RAM VS. CIT, [1979] 120 ITR 338 (ALL. HC) . B) H IMALAYAN COOPERATIVE GROUP HOUSING SOCIETY VS. BALWAN SING, CIVIL APPEAL NOS. 4360 - 43 61 OF 2015 AND ITA NO. 1644 /H YD/2017 : - 11 - : OTHERS , JUDGMENT DATED 29 TH APRIL, 2015 . IN THIS CASE, THE HON BLE SUPREME COUR T HAS HELD AS UNDER: 32. THEREFORE, IT IS THE SOLEMN DUTY OF AN ADVOCATE NOT TO TRANSGRESS THE AUTHORITY CONFERRED HIM BY THE CLIENT. IT IS ALWAYS BETTER TO SEEK APPROPRIATE INSTRUCTIONS FROM THE CLIENT OR HIS AUTHORIZED AGENT BEFORE MAKING ANY CONCESSIO N WHICH MAY, DIRECTLY OR REMOTELY, AFFECT THE RIGHTFUL LEGAL RIGHT OF THE CLIENT. THE ADVOCATE REPRESENTS THE CLIENT BEFORE THE COURT AND CONDUCTS PROCEEDINGS ON BE HALF OF THE CLIENT. HE IS THE ONLY LINK BETWEEN THE COURT AND THE CLIENT. THEREFORE HIS RESP ONSIBILITY IS ONEROUS. HE IS EXPECTED TO FOLLOW THE INSTRUCTIONS OF HIS CLIENT RATHER THAN SUBSTITUTE HIS JUDGMENT. 33. GENERALLY, ADMISSIONS OF FACT MADE BY A COUN SEL IS BINDING UPON THEIR PRINCIPALS AS LONG AS THEY ARE UNEQUIVOCAL; WHERE, HOWEVER, DOUB T EXISTS AS TO A PURPORTED ADMISSION, THE COURT SHOULD BE WARY TO ACCEPT SUCH ADMISSIONS UNTIL AND UNLESS THE COUNSEL OR THE ADVOCATE IS AUTHORISED BY HIS PRINCIPAL T O MAKE SUCH ADMISSIONS. FURTHERMORE, A CLIENT IS NOT BOUND BY A STATEMENT OR ADMISSION WHI CH HE OR HIS LAWYER WAS NOT AUTHORISED TO MAKE. LAWYER GENERALLY HAS NO IMPLIED OR APPARENT AUTHORITY TO MAKE AN ADMISSION OR STA TEMENT WHICH WOULD DIRECTLY SURRENDER OR CONCLUDE THE SUBSTANTIAL LEGAL RIGHTS OF THE CLIENT UNLESS SUCH AN ADMISSION OR STATEM ENT IS CLEARLY A PROPER STEP IN ACCOMPLISHING THE PURPOSE FOR WHICH THE LAWYER WAS EMPLOYED. WE HASTEN TO ADD NEITHER THE CLIENT NOR THE COURT IS BOUND BY THE LAWYERS STATEMENTS OR ADMISSIONS AS TO MATTERS OF LAW OR LEGAL CONCLUSIONS. THUS, ACCORDING TO G ENERALLY ACCEPTED NOTIONS OF PROFESSIONAL RESPONSIBILITY, LAWYERS SHOULD FOLLOW THE CLIENTS INSTRUCTIONS RATHER THAN SUBSTITUTE THEIR JUDGMENT FOR THAT OF THE CLIENT. WE MAY ADD THAT IN SOME CASES, LAWYERS CAN MAKE DECISIONS WITHOUT CONSULTING CLIENT. WHI LE IN OTHERS, THE DECISION IS RESERVED FOR THE CLIENT. IT IS OFTEN SAID THAT THE LAWYER CAN MAKE DECISIONS AS TO TACTICS WITHOUT CONSULTING THE CLIENT, WHILE THE CLIENT HAS A RIGHT TO MAKE DECISIONS THAT CAN AFFECT HIS RIGHTS. WE DO NOT INTEND TO PROLONG T HIS DISCUSSION. WE MAY CONCLUDE BY NOTICING A FAMOUS STATEMENT OF LORD BROUGHAM: AN ADVOCAT E, IN THE DISCHARGE OF HIS DUTY KNOWS BUT ONE PERSON IN THE WORLD AND THAT PERSON IS HIS CLIENT. FROM THE ABOVE D ECISIONS, I T SHOWS THAT ASSESSING OFFICER HAS N OT FOLLOWED DUE PROCESS AND MADE PROCEDURAL LAPSE. S INCE, ASSESSEE ITSELF HAS NOT GIVEN ANY CONSENT FOR THE DISA LLOWANCE, ASSESSEE H AS A RIGHT TO APPEAL BEFORE HIGHER FORUM. T HE ARGUMENT OF LD.DR CANNOT BE ACCEPTED AND CAS E LAWS RE LIE D BY ITA NO. 1644 /H YD/2017 : - 12 - : HIM ARE RELAT ING TO THE AGREED ADDITION BY THE ASSESSEE ITSELF. TH EREFORE, CASE LAW RELIED BY HIM ARE DISTINGUISHABLE. 9 .4. C OMING TO THE MERITS, ASSESSING OFFICER HAS VERIFIED THE DOCUMENT SUBMIT TE D FOR PURCHASE S , HE OBSERVED THAT IN SOME CASES THE DO CUMENTATIONS A RE NOT PROPER AND HE HAS NOT QUANTIFIED THE EX T ENT OF SUCH DISCREPANCIES IN THE DOCUMENTATION. HE DISALLOWED 13.5% OF TOTAL PURCHASES AND HE HAD NOT JUSTIFIED FOR MAKING SUCH ESTIMATION IN THE ASSESSMENT ORDER OR REASONS FOR ADOPTING SUCH PERCENTAGE . AT THE SAME T IME, IN THE ASSESSMENT ORDER, HE ALSO EXPRESSES T HAT MOST OF THE SUPPLIE S WERE SUPPORTED BY PROPER DOCUMENTS AND ENTRIE S IN THE BO OKS. I T CLEARLY SHOWS THAT ASSESSING OFFICER HAD ADOPTED AND COMPLETED THE ASSESSMENT ARBITRARILY WITHOUT ANY JUSTI FICATION OR PROOF OF DI SCREPANCIES. C ONSIDERING THE OVERALL CIRCUMSTANCES AND ACTION OF ASSESSING OFFICER , WE DO NOT FIND ANY INFIRMITY IN T HE ORDER OF LD.CIT(A). T HEREFORE , THE GROUND S RAISED BY REVENUE ARE DISMISSED. 10. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORD ER P RONOUNCED I N THE OP EN C OURT ON 8 TH MARCH, 201 9 SD/ - SD/ - (P . MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERA B AD, DATED 8 TH MARCH , 201 9 KV ITA NO. 1644 /H YD/2017 : - 13 - : COPY TO : 1. DY. C OMMISSIONER OF INCOME TAX, CIR CLE - 16(2) , HYDERABAD. 2. M/S. PRAJAY ENGINEERS SYNDICATE LIMITED, 8 - 2 - 293/82/A, PLOT NO. 1091, ROAD NO. 41, NEAR P EDDAMMA TEMPLE, JUBI LEE HILLS, HYDERABAD. 3 . CIT( APPEALS ) - 4, HYDE RABAD . 4. PR. CIT - 4, HYDERABAD. 5 . D.R. I TAT, HYDERABAD. 6 . GUARD FILE.