DCIT 1(1), MUMBAI V. ALUMILITE ARCHITECTURAL P.LTD, MUMBAI

ITA 4803/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8010 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 21-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Keywords: Opportunity of being heard; Additional evidence
• Section: 133(6); 131; 144

Judgement Text

P AGE | 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE SHRI R.C. SHARMA , AM AND SHRI RAVISH SOOD , JM ITA NO. 4254/MUM/2013 ASSESSMENT YEAR: 2009 - 10 ALLUMILITE ARCHITECTURAL P. L TD. 502 DHIRAJ CHAMBERS, HAZARIMAL SOMANI MARG, FO RT , MUMBAI - 400020 PAN: AA B C A0567C VS. ITO 1(1)(1) R.NO. 533 , AAYAKAR BHAVAN, M.K. RD. MUMBAI - 40002O (APPELLANT) (RESPONDENT) & ITA NO. 4803/MUM/2013 ASSESSMENT YEAR: 2009 - 10 DCIT 1(1) R. NO.579 , AAYAKAR BHAVAN MUMBAI 400020 VS. ALLUMILITE ARCHITECTURAL P. LTD. 5 TH FLOOR DHIRAJ CHAMBERS, HAZARIMAL SOMANI MARG, FORT MUMBAI - 400020 PAN: AABCA0567C (APPELLANT) (RESPONDENT) / ASSESSEE BY : SHRI BIREN GABHAWALA / REVENUE BY : SHRI SAURABH KUMAR / DATE OF HEARING : 10/02 /2017 / DATE OF PRONOUNCEMENT : 28 /02/2017 P AGE | 2 O R D E R PER RAVISH SOOD , JM THE PRESENT APPEAL S FILED BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 1, MUMBAI, DATED 31.03.2013 , WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A . O U NDER SEC. 144 OF THE INCOME TAX ACT 1961 (FOR SHORT ACT ) , DATED 28.12.2011. WE HEREIN ADVERT TO THE APPEAL FILED BY THE ASSESSE COMPANY: - ITA NO. 4255/MUM/2013: THE ASSESSEE A SSAILING THE ORDER OF THE CIT(A) HAD RAISED THE FOLLOWING GROUNDS OF APPEAL BEFORE US : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSI O NER OF INCOME TAX (APPEAL) ERRED IN UPHOLDING THE DISALLOWANCE OF RS.1,25,92,563/ - MADE BY THE LEARNED ASSESSING OFFICER OUT OF PURCHASES ALLEGING WANT OF VERIFICATION. 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN UPHOLDING DISALLOWANCE TO THE EXTENT OF 25% VALUE OF 59% OF TOTAL PURCHASES FOR THE REASON THAT OUT OF 49 PARTIES YOUR APPELLANT COULD FURNISH CONFIRMATION ONLY FROM 26 PARTIES WITHIN THE PERIOD ALLOWED FOR COMPLIANCE, IGNORING THE FACT THAT FULL DETAILS OF ALL TH E 49 PARTIES FROM WHOM PURCHASES WERE MADE WERE FILED, AS EVIDENCED FROM THE REMAND REPORT. P AGE | 3 1.2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN FAILING TO APPRECIATE THAT THOUGH THE APPE LLANT COULD NOT FURNISH CONFIRMATIONS FROM THE REMAINING PARTIES DUE TO TIME CONSTRAINT AS ALSO SOME OF THEM WERE OUTSTATION PARTIES, THE LEARNED ASSESSING OFFICER OUGHT TO HAVE EITHER ISSUED SUMMONS U/S. 131 OF THE ACT AND EXAMINED THE PARTIES OR CALLE D FOR INFORMATION U/S. 133(6) OF THE ACT AND VERIFIED THE DETAILS FURNISHED BY THE APPELLANT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN UPHOLDING THE DISALLOWANCE OF RS.94,36,17 0/ - BEING 25% OF OTHER EXPENSES AMOUNTING TO RS.3,77,44,683/ - , OBSERVING THAT MOST OF THESE EXPENSES ARE INCURRED IN CASH AND SUPPORTED ONLY BY SELF MADE VOUCHERS. 2.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FAILING TO ADJUDGE THE EXPENSES BASED ON REASONABLENESS CONSIDERING THE HUGE VOLUME OF TURNOVER ETC. RATHER THAN GOING BY THE CRITERIA O F SELF MADE VOUCHERS. 3. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY OF THE ABOVE GROUNDS OF APPEAL OR MAKE FRESH GROUND/GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. 2. BRIEFLY STATED , THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WHICH IS ENGAGED IN BUSINESS OF MANUFACTURING ALUMINIUM WINDOWS AND DOORS HA D E - FILED ITS RETURN OF INCOME ON 30.09.2009 P AGE | 4 DECLARING TOTAL TAXABLE INCOME OF RS.29,9 1 ,280/ - , WHICH WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT . THE CASE OF THE ASSESSEE WAS THERE AFTER TAKEN UP FOR SCRUTINY ASSESSMENT UNDER SEC. 143( 2 ). THAT DURING THE COURSE OF THE ASSESSMEN T PROCEEDINGS ON THE FAILURE ON THE PART OF THE ASSESSEE TO FURNISH COMPLETE DETAILS AS CALLED FOR BY THE A . O, THE LATTER THEREIN ASSESSED THE INCOME OF THE ASSESSEE AT RS.5,33,52,215/ - UNDER SEC. 144 OF THE ACT . 3. THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A . O OBSERVING THAT THE ASSESSEE HAD INCURRED AN EXPENDITURE OF RS.19,23,06,494/ - , WHICH COMPRISED OF P URCHASES OF RS.12,48,05,498/ - , O THER EXPENSES OF RS.3,77,44,683/ - AND M ANUFACTURING EXPENSES OF RS.2,97,56,313/ - , BUT HAD FAILED TO FURNISH DETAILS OF THE SAID EXPENDITURE ALONG WITH DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE GENUINENESS AND VE RACITY OF INCURRING OF THE SAME, THEREFORE PROCEEDED WITH AND CARRIED OUT AN AD - HOC DISALLOWANCE OF 25% OF THE SAID EXPENDITURE , WHICH WORKED OUT TO RS.4,80,76,623/ - . THE A . O AFTER TELESCOPING THE AFORESAID DISALLOWANCE OF RS.4,80,76,623/ - (SUPRA) AS AGAINST CERTAIN OTHER SEPARATE DISALLOWANCE S AGGREGATING TO R S . 1,25,23,923/ - MADE BY HIM, THUS DISALLOWED THE BALANCE AMOUNT OF RS.3,55,52,700/ - AND ADDED THE SAME TO THE RETURN ED OF INCOME OF THE AS SESSEE COMPANY. THE A . O AFTER DELIBERATING ON CERTAIN OTHER DISALLOWANCES THEREIN ASSESSED THE INCOME OF THE ASSESSEE COMPANY AT RS.5,33,52,215/ - UNDER SEC. 144 OF THE ACT . 4. THE A SSESSEE ASSAILED THE ASSESSMENT ORDER IN APPEAL BEFORE THE CIT(A). THAT DURING THE COURSE OF THE APPELLATE PROCEEDINGS THE CIT(A) P AGE | 5 CALLED FOR A REMAND REPORT FROM THE A . O AS REGARDS THE AD HOC DISALLOWANCE OF RS.3,55,52,700/ - . THE FINDINGS OF THE A . O IN HIS REMAND REPORT ALONG WITH THE ADJUDICATION OF THE CIT(A) AS REGARDS THE SAID RESPECTIVE ISSUES , ARE BRIEFLY CULLED OUT AS UNDER : - (A). AS REGARDS DISALLOWANCE BY THE A . O OF 25% OF PURCHASES AGGREGATING THE RS.12,48,05,498/ - . (I) REPORT OF THE A . O : . THE A . O IN HIS REMAND REPORT SUBMITTED THAT THE ASSESSEE DURING THE COURSE OF THE APPEAL/REMAND PROCEEDINGS THOUGH HAD SUBMITTED A LIST OF 49 PARTIES FROM WHOM PURCHASES IN EXCESS OF RS.1 LA C WAS MADE , BUT HOWEVER HAD PLACED ON RECORD THE CONF I RMATION OF ONLY 26 PARTIES (II). FINDINGS OF CIT(A) THE CIT(A) BE ING OF THE VIEW THAT AS THE ASSESSEE HAD PLACED ON RECORD CONF I RMATION S OF ONLY 26 PARTIES AS AGAINST TOTAL 49 PARIES , AND AS SUCH CONFIRMATIONS OF ABOUT 59% OF THE PARTIES HAD BEEN PLACED ON RECORD , THEREFORE HELD THAT THE EXPENDITURE IN THE SAME RATIO , VIZ. AMOUNTING TO 59% OF RS.12,48,05,498/ - , WHICH WORKED OUT TO RS.7,36,35,243/ - WAS TO BE HELD AS PROVED . THE CIT(A) THUS ON THE BASIS OF HIS AFORESAID OBSERVATIONS RESTRICTED THE DISALLOWANCE TO 25% OF THE BALANCE PURCHASES OF RS.5,11,70,454/ - , WHICH WORKED OUT AT RS.1,27,92,563/ - (B). AS REGARDS DISALLOWANCE BY THE A . O OF 25% OF O THER EXPENSES OF RS. 3,77,44,683/ - : P AGE | 6 (I) REPORT OF THE A . O THE A . O SUBMITTED IN HIS REMAND REPORT THAT AS PER THE DETAILS FILED IT EMERGED THAT MOST OF THE EXPENSES WERE INCURRED IN CASH AND SUPPORTED BY SELF MADE VOUCHERS, AND THUS THE GENUINENESS OF THE SAID EXPENSES COULD NOT BE ESTABLISHED. (II) FINDING OF THE CIT(A) THE CIT(A) GOING BY THE OBSERVATIONS OF THE A . O IN THE REMAND REPORT THAT THE ADMINISTRATIVE AND OTHER EXPENDITURE WERE FOUND TO BE INCURRED IN CASH , AND EXCEPT FOR SELF MADE VOUCHERS NO EVIDENCE WAS PLACED ON RECORD BY THE ASSESSEE TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE SAID EXPENSES, THEREFORE DECLINED TO INTERVENE AND SUSTAINED T HE DISALLOWANCE MADE BY THE A.O AT 25% OF THE AFORESAID EXPENDITURE. (C). AS REGARDS DISALLOWANCE BY THE A . O OF 25% OF MANUFACTURING EXPENSES OF RS.2,97,56,313/ - : (I). REPORT OF THE A . O THE A . O IN HIS REMAND REPORT SUBMITTED THAT THE MANUFACTURING EXPENSES WHICH INCLUDED EXPENSES ON RAW MATERIAL, WAGES, LABO U R CHARGES, LOADING AND UNLOADING CHARGES HAD BEEN GOT VERIFIED BY THE ASSESSEE DURING THE COURSE OF THE REMAND PROCEEDINGS. P AGE | 7 (II). FINDING OF THE CIT(A) THE CIT(A) GOING BY THE OBSERVATIONS OF THE A . O IN THE REMAND REPORT THAT THE SAID EXPENSES HAD BEEN VERIFIED, THUS DELETED THE SAME. THE CIT(A) THUS ON THE BASIS OF HIS AFORESAID OBSERVATIONS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THAT DURING THE COURSE OF HEARING OF THE APPEAL , IT WAS AT TH E VERY OUTSET SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A . R) FOR THE ASSESSEE THAT NO COPY OF THE REMAND REPORT WAS MADE AVAILABLE TO THE ASSESSEE, AS A RESULT WHEREOF T HE LATTER HAD REMAND DIVESTED OF FURNISHING ANY REPLICATI ON AS REGARDS THE SAME. IT WAS SUBMITTED BY THE LD. A . R THAT THE A .O HAD HUSHED THROUGH THE MATTE R AND ON THE BASIS OF PREMATURE OBSERVATIONS HAD DRAWN ADVERSE INFERENCES AS REGARDS THE GENUINENESS AND VERACITY OF THE PURCHASES AND OTHER EXPENSES INCURRED BY THE ASSESSEE IN THE NORMAL COURSE OF ITS BUSINESS. THE LD. A . R IN ORDER TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE P URCHASES , THEREIN SUBMITTED THAT THOUGH DUE TO PAUCITY OF TIME AFFORDED BY THE A . O , THE ASSESSEE FOR REASONS BEYOND ITS CONTROL WAS UNABLE TO PLACE ON RECORD THE CONF I RMATIONS OF ALL THE PARTIES FROM WHOM PURCHASES AGGREGATING TO RS.12,48,05,498/ - HAD BEEN CARRIED OUT DURING THE YEAR UNDER CONSIDERATION , HOWEVER, THE SAME HAD BEEN COLLECTED SUBSEQUENTLY. THE LD. A . R IN SUPPORT OF HIS CONTENTION DREW OUR ATTENTION TO P AGE N O.1 TO 3 OF HIS P APER BOOK (FOR SHORT APB ) , WHICH REVEALED THE CLAIM OF THE ASSESS EE THAT THE CONFIRMATIONS OF P AGE | 8 CERTAIN PARTIES WHICH COULD NOT BE FURNISHED WITH THE A.O UPTO THE REMAND PROCEEDINGS, HAD THEREAFTER BEEN OBTAINED, AND AS CLAIMED BY THE ASSESSEE THEREIN, WE ARE MADE TO UNDERSTAND THAT CONFIRMATIONS OF ALL OF THE AFORESAID R ESPECTIVE PARTIES WITH DULY RECONCILED BALANCES, ARE AS ON DATE AVAILABLE WITH THE ASSESSEE. THE LD. A . R FURTHER ADVERTING TO THE DISALLOWANCE OF 25% OF THE O THER EXPENSES SO MADE BY THE A.O, WHICH THEREAFTER HAD BEEN SUSTAINED BY THE CIT( A) , AS SUCH, THEREIN REITERATED THAT IN THE ABSENCE OF THE COPY OF THE REMAND REPORT BEING MADE AVAILABLE TO HIM, HE WAS UNABLE TO REBUT THE FINDINGS OF THE A . O CONTAINED THEREIN. I T WAS FURTHER AVERRED BY THE LD. A . R THAT THE FINDINGS OF THE A . O IN HIS REMAN D REPORT THAT MAJORITY OF THE EXPENSES WERE INCURRE D IN CASH AND MERELY SUPPORTED BY SELF MADE VOUCHERS, WHICH OBSERVATIONS OF THE A.O HAD THEREAFTER SUMMARILY BEEN ACTED UPON AND ACCEPTED BY THE CIT(A) , AS SUCH, W ERE ABSOLUTELY MISCONCEIVED AND INCORRECT . THE LD. A . R IN SUPPORT OF HIS AFORESAID CONTENTION THEREIN TOOK US TO P AGE 5 OF THE APB , WHICH IS A BIFURCATION OF THE OTHER EXPENSES AGGREGATING TO RS. 3,77,44,684/ - , ALONG WITH THE MODE OF PAYMENT OF THE SAME, VIZ. C HEQU E/CASH. IT WAS THUS SUBMITTED BY THE LD. A . R THAT THE CIT(A ) HAD GONE BY THE MISCONCEIVED OBSERVATIONS OF THE A .O AND WRONGLY SUSTAINED THE DISALLOWANCE OF RS. 94,36,170/ - (I.E 25% OF THE O THER EXPENSES AGGREGATING TO RS.3,77,44,683/ - ) . THAT ON THE OTHER HAND THE LD. D . R STRONGLY RE LIED ON THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT IN THE BACKDROP OF THE FAILURE ON THE PART OF THE ASSESSEE TO PLACE ON RECORD THE CONFIRMATIONS OF THE PARTIES FROM WHOM PURCHASES AGGREGATING TO RS.12,48,05,498/ - WERE CLAIMED TO HAVE BEEN MAD E BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION , A PROPORTIONATE P AGE | 9 DISALLOWANCE OF THE SAID PURCHASES WHICH WERE NOT OPEN FOR VERIFICATION, WAS CALLED FOR , AND THE A.O HAD IN ALL FAIRNESS CARRIED OUT THE SAME . IT WAS FURTHER AVERRED BY THE LD. A.R THAT THE A.O HAD RIGHTLY CARRIED OUT THE DISALLOWANCE OF 25% OF THE OTHER EXPENSES IN THE HANDS OF THE ASSESSEE. IT WAS THUS AVERRED BY THE LD. D . R THAT THE APPEAL OF THE ASSESSEE WAS DEVOID AND BEREFT OF ANY MERITS AND AS SUCH WAS LIABLE TO BE DISMISSED. 6. WE HAVE HEARD THE LD. REPRESENTATIVE S FOR BOTH THE PARTIES , PERUSED THE ORDERS OF THE LOWER AUTHORITIES AS WELL AS THE MATERIAL PLACED BEFORE US. WE HAVE GIVEN A THOUGH T FUL CONSIDERATION TO THE FACTS OF THE CASE AN D THOUGH ARE NOT OBLIVIOUS OF THE SETT LED POSITION OF LAW THAT NON - COOPERATION ON THE PART OF AN ASSESSEE AND FAILURE TO COMPLY WITH THE NOTICES AND INFORMATION CALLED FOR BY THE A.O DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS WOULD THEREIN BRING HIM WITHIN THE SWEEP OF SEC. 144(1)(B), AND INESCAPABLY INVITE FRAMING OF A BEST JUDGMENT ASSESSMENT IN HIS HANDS , AND AS SUCH, NOW WHEN IN THE BACKDROP OF THE FACT S INVOLVED IN THE PRESENT CASE, IT EMERGES THAT THE ASSESSEE HAD FAILED TO COMPLY WITH THE NOTICES ISSUED BY THE A.O AND EVADED FURNI SH ING OF THE REQUISITE INFORMATION , DESPITE SPECIFICALLY BEEN CALLED UPON TO FURNISH THE SAME DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE FRAMING OF THE ASSESSMENT THUS CANNOT BE PRINCIPALLY FAULTED WITH . H OWEVER , WE ALSO CANNOT SHUT OUR EYES TO THE FACT THAT FRAMING OF SUCH AN ASSESSMENT CANNOT BE ALLOWED TO GO WILD , AND RATHER MAKES IT ALL THE MORE OBLIGATORY ON THE PART OF THE A.O TO PROCEED WITH CAUTIOUSLY AND THEREIN ASSESS THE INCOME OF THE ASSESSEE IN A MOST FAIR AND JUDICIOUS MANNER. WE AR E OF THE CONSIDERED VIEW THAT THE A.O WHO REMAINS UNDER A STATUTORY P AGE | 10 OBLIGATION TO ASSESS THE TRUE INCOME OF AN ASSESSEE, THOUGH IN THE ABSENCE OF THE REQUISITE DOCUMENTARY EVIDENCES AS WELL AS PROPER ASSISTANCE FROM THE ASSESSEE WHO ALONE IS SEIZED OF TH E FACTS OF HIS CASE , THUS COMES ACROSS A MORE ONEROUS TASK TO ARRIVE AT A FAIR ASSESSMENT , BUT THEN THE FRAMING OF SUCH BEST JUDGMENT ASSESSMENT, AS THE NAME SO CONVEYS , HAS TO BE GUIDED BY ALL FAIRNESS AND AT NO STAGE SHOULD SMELL OF A N ARBITRARY OR VIN DICTIVE APPROACH ON THE PART OF THE A.O, AS THE SAME IS THE LEAST EXPECTED FROM HIM. WE ARE OF THE CONSIDERED VIEW THAT THE FRAMING OF A BEST JUDGMENT ASSESSMENT SHOULD NOT BE A REFLECTION OF WHIMSICAL AND FANCIFUL EXERCISE OF POWERS BY THE A.O , AND WHIL E FRAMING SUCH AN ASSESSMENT , NOT ONLY THE MATERIAL COLLECTED BY THE A.O DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS SHOULD BE CONSIDERED, BUT THE SAME SHOULD BE CARRIED OUT BY ADOPTING A REASONABLE YARD STICK, VIZ. REFERRING TO THE PROFITS SHOWN BY SIMILARLY PLACED ASSESSES, PAST HISTORY OF THE ASSESSEE, PROFIT SHOWN IN THE TRADE LINE ETC. , WHICH PROMPTED BY A LOGICAL REASONING SHOULD CULMINATE INTO FRAMING OF A FAIR ASSESSMENT IN THE HANDS OF THE ASSESSEE. 7. WE NOW ADVERT TO THE FACTS OF THE PRE SENT CASE . WE FIND SUBSTANTIAL FORCE IN THE CONTENTION OF THE LD. A.R THAT IN THE ABSENCE OF THE COPY OF THE REMAND REPORT BEING MADE AVAILABLE , THE ASSESSEE WAS KEPT IN THE DARK AS REGARDS THE ADVERSE INFERENCES WHICH WERE DRAWN BY THE A.O , AND THUS REMAI NED DIVESTED OF ANY OPPORTUNITY TO FILE A REPLICATION TO MEET OUT THE SAME. WE FIND THAT THE CIT(A) HAD ERRED BY MOST ARBITRARILY ACCEPTING THE AVERMENTS OF THE A.O IN THE REMAND REPORT , BY DISPENSING WITH THE STATUTORY REQUIREMENT OF CONFRONTING OF THE SA ME TO THE ASSESSEE AND SEEKING HIS REJOINDER TO P AGE | 11 THE SAME. WE ARE OF THE CONSIDERED VIEW THAT IN THE ABSENCE OF A COPY OF THE REMAND REPORT BEING MADE AVAILABLE TO THE ASSESSEE, THE LATTER HAD REMA INED D IVESTED OF ANY OPPORTUNITY OF MEETING OUT THE ADVERSE INFERENCES RECORDED BY THE A . O IN THE SAID REPORT. 8. WE HAVE FURTHER GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND ARE O F THE CONSIDERED VIEW THAT THE OBSERVATIONS OF THE A . O THAT MAJORITY OF THE O THER EXPENSES AGGREGATING TO RS.3,77,44,684/ - HAD BEEN INCURRED BY THE ASSESSEE IN CASH AND WERE SUPPORTED BY SELF MADE VOUCHERS, AS A RESULT W HEREOF THE GENUINENESS OF THE SAME COULD NOT BE ESTABLI SHED , IS FOUND TO BE IN ABSOLUTE CONTRADICTION AND SERIOUS CONFLICT WITH THE FACTS PROJ ECTED BEFORE US BY THE ASSESSEE ON THE BASIS OF THE BIFURCATED DETAILS OF THE OTHER EXPENSE S , VIZ. NATURE OF EXPENSES AND THE MODE OF PAYMENT AS REGARDS THE SAME ( PAGE 5 OF APB). THAT A PERUSAL OF THE DETAILS OF THE O THER EXPENSE AGGREGATING TO RS.3, 77,44,684/ - (SUPRA) REVEALS THAT THE SAME COMPRISE D OF EXPENSES IN THE NATURE OF GOVT. DUES OF RS.1,0 0 ,33,581/ - PAID BY THE ASSESSEE, WHILE FOR OUT OF THE REMAINING EXPENSES OF RS. 2,77,11,103/ - , EXPENSES AGGREGATING TO RS.2,35,87,815/ - HAD BEEN INCURRED BY THE ASSESSEE VIDE CHEQUES , AND AS SUCH EXPENSES ONLY TO THE TUNE OF RS. 41,23,288/ - WERE MET OUT IN CASH. THUS FROM THE AFORESAID DETAILS AS HAD BEEN BROUGHT TO OUR NOTICE BY THE LD. A . R , WE FIND THAT EXPENSES OF RS.41,23,288/ - OUT OF TOTAL EXPENSES OF RS. 3,77,44,684/ - , WHICH THEREIN WORKS OUT TO 10.92% ARE FOUND TO HAVE BEEN INCURRED BY THE ASSESSEE IN CASH. THUS IN LIGHT OF THE AFORESAID FACTS AS HAVE BEEN PLACED ON RECORD BY THE LD. A . R, WHICH THOUGH ARE SUBJECT TO VERIFICATION, WE ARE UNABLE TO PER SUADE OURSELVES TO SUBSCRIBE TO THE FINDING OF THE A . O IN THE P AGE | 12 REMAND REPORT THAT MOST OF THE EXPENSE WERE INCURRED IN CASH , AND AS SUCH THE GENUINENESS OF THE SAME COULD NOT BE ESTABLISHED. WE ARE FURTHER OF THE CONSIDERED VIEW THAT IN THE ABSENCE OF A COP Y OF THE REMAND REPORT BEING MADE AVAILABLE TO THE ASSESSEE, THE LATTER HAD REMA I N E D DIVESTED OF ANY OPPORTUNITY OF BRINGING THE AFORESAID SERIOUS INFIRMITIES IN THE BODY OF THE REMAND REPORT TO THE NOTICE OF THE CIT(A). WE ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF THE AFORESAID FACTS AS THEY SO REMAIN, SPECIFICALLY NOW WHEN AS PER THE DETAILS MADE AVAILABLE ON RECORD BY THE ASSESSEE ( PAGE 5 OF APB), THE OBSERVATIONS OF THE A . O IN THE BODY OF THE REMAND REPORT DO NOT INSPIRE ANY CONFIDENCE , AND T HE SAME WHEN PITTED AGAINST THE FACTS PROJECTED BEFORE US BY THE ASSESSEE ARE APPARENTLY FOUND TO BE INCORRECT . THAT STILL FURTHER IN THE ABSENCE OF BEING SERVED WITH A COPY OF THE REMAND REPORT , WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAD REMAIN ED DIVESTED OF ANY OPPORTUNITY TO MEET OUT THE ALLEGED ILL FOUNDED OBSERVATIONS OF THE A.O IN THE REMAND REPORT. THUS IN ALL FAIRNESS , KEEPING IN VIEW THE TOTALITY OF THE FACTS INVOLVED IN THE PRESENT CASE, WE HEREIN REMAND THE MATTER TO THE FILE OF THE A . O FOR MAKING NECESSARY VERIFICATIONS AS REGARDS THE CLAIM OF THE ASSESSEE. THE A . O IS HEREIN D IRECTED TO VERIFY THE GENUINENESS AND VERACITY OF THE BIFURCATED DETAILS OF THE O THER EXPENSE AGGREGATING TO RS.3,77,44,684/ - AS HAD BEEN FURNISHED BY ASSESSEE AT P AGE 5 OF APB FURNISHED BEFORE US , AND IN THE BACKDROP OF THE FACT THAT THE DETAILS AS REGARDS THE SAME WERE NOT OPEN FOR VERIFICATION BEFORE THE A.O DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS, SHALL THEREIN PROCEED WITH AND MAKE NECESSARY VERIFICATION S AS REGARDS THE ALLOWABILITY OF THE SAME AS PER THE STATUTORY PROVISIONS CONTEMPLATED P AGE | 13 UNDER THE INCOME TAX STATUTE. NEEDLESS TO SAY , THE A.O SHALL DURING THE COURSE OF THE SET ASIDE PROCEEDINGS AFFORD REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, AND THE LATTER SHALL REMAIN AT A LIBERTY TO SUBSTANTIATE THE ALLOWABILITY OF ITS CLAIM BY PLACING ON RECORD DOCUMENTARY EVIDENCE OR LEADING ANY FURTHER EVIDENCE AS IT DEEMS FIT. THAT IF THE A . O FIND S THE CLAIM OF THE ASSESSE E AS NOT BEING IN ORDER, THEN HE SHALL PASS A SPEAKING ORDER GIV ING CLEAR AND SPECIFIC REASONS FOR SO CONCLUDING , BEFORE DISALLOWING ANY PART OF THE SAID EXPENSES IN THE HANDS OF THE ASSESSEE. THE ISSUE PERTAINING TO THE DISALLOWANCE OF OTHER EXPENSES OF RS. 94,36,170/ - (I.E 25% OF RS. 3,77,44,683/ - ) AS SUSTAINED BY THE CIT(A) IS THUS SET ASIDE TO THE FILE OF THE A.O FOR FRESH ADJUDICATION, STRICTLY IN LIGHT OF OUR AFORESAID DIRECTIONS. THE GROUND OF APPEAL NO. 2 IS THUS ALLOWED FOR STATISTICAL PURPOS ES IN LIGHT OF OUR AFORESAID OBSERVATIONS. 9 . WE NOW ADVERT TO THE DISALLOWANCE OF PURCHASE S WHICH HA D BEEN SUSTAINED BY THE CIT(A) TO THE EXTENT OF RS.1,27,92,563/ - . WE FIND THAT THE OBSERVATIONS OF THE CIT(A) THAT THE ASSESSEE HAD FILED CONFIRMATIONS IN 26 OUT 49 CASES , ARE NOT FOUND TO BE IN CONFORMITY WITH THE DETAILS OF PURCHASES FURNISHED BY THE ASSESSEE AT PAGE 1 TO 3 OF THE APB , WHICH THEREIN REVEALS T HAT THE ASSESSEE HAD CARRIED OUT PURCHASES FROM 78 PARTIES [ GROUP A : 48 PARTIES FROM WHOM PURCH ASES ABOVE RS. 1 LAC MADE + GROUP B : 30 PARTIES FROM WHOM PURCHASES BELOW RS. 1 LAC MADE]. WE FIND THAT THE ASSESSEE HAD GROUPED THE AGGREGATE OF THE GROUP B (I.E 30 PARTIES) AND PLACED THE AGGREGATE OF THE SAME, AS S.NO. 49 OF THE GROUP A , A S A RESULT WHEREOF THE CIT(A) HAD WRONGLY CONCLUDED THAT THE TOTAL NUMBER OF PARTIES FROM WHOM THE ASSESSEE HAD CARRIED OUT PURCHASES ARE 49, P AGE | 14 AND ON THE SAID BASIS CONCLUDED THAT THE PURCHASES FROM 59% OF THE PARTIES (I.E % AGE OF 26 PARTIES/49 PARTIES) HA VE BEEN CONFIRMED . WE HOWEVER ARE NOT IMPRESSED BY THE MODUS OPERANDI ADOPTED BY THE CIT(A), ON THE BASIS OF WHICH AN ADDITION/DISALLOWANCE OF PURCHASES AMOUNTING TO RS. 1,27,92,563/ - HAD BEEN SUSTAINED , AS WE FIND THAT THE SAID PROCESS OF CALCULATION IS M ORE OF AN ARITHMETIC APPROACH, RATHER THAN PARTY VISE VERIFICATION OF THE GENUINENESS OF PURCHASES, WHICH TO OUR UNDERSTANDING WOULD HAD LED TO FAIR AND LOGICAL REASONING FOR SUSTAINING DISALLOWANCE OF ANY PART OF THE AFOREMENTIONED PURCHASES. WE ARE OF TH E CONSIDERED VIEW THAT AS THE ENTIRE PROCESS OF CALCULATING THE DISALLOWANCE OF RS. 1,27,92,563/ - IN ITSELF IS FOUND TO BE BASED ON MISCONCEIVED FACTS , AND THUS ILL FOUNDED , THEREFORE THE SAME ON THE SAID COUN T ITSELF CANNOT BE SUSTAINED . WE HOWEVER REFRAI N FROM COMMENTING ON THE MERITS OF THE ADDITION, FOR THE VERY REASON THAT NOW WHEN IT IS AVERRED BY THE LD. A.R THAT IN THE ABSENCE OF A COPY OF THE REMAND REPORT BEING MADE AVAILABLE TO THE ASSESSE E , THE LATTER HAD REMAIN DIVESTED OF FILING REPLICATION IN SUPPORT OF TH E GENUINENESS OF THE PURCHASES OF RS.12,48,05,498/ - . W E ARE OF THE CONSIDERED VIEW THAT A BLATANT VIOLATION OF THE AFORESAID BASIC RIGHT OF THE ASSESSEE TO BE CONFRONTED WITH THE REPORT OF THE A.O, CANNOT BE ALLOWED TO PERPETUATE, AND THUS IN ALL FAIRNESS , BEFORE ANY INFERENCES AS REGARDS THE ALLOWABILITY OF THE PURCHASES IS LOOKED INTO IN THE HANDS OF THE ASSESSEE, THE LATTER HAS TO BE CONFRONTED WITH THE ADVERSE INFERENCES DRAWN BY THE A.O IN THE REMAND REPORT FILED WITH THE CIT(A). W E FURTHER FIND , THAT AS AVERRED BY THE LD. A . R , THOUGH DUE TO PAUCITY OF TIME THE REQUISITE C ONFI RMATIONS COULD NOT BE COLLECTED FROM ALL OF THE RESPECTIVE PARTIES P AGE | 15 DURING THE COURSE OF PROCEEDINGS BEFORE THE LOWER AUTHORITIES, HOWEVER THE SAME AS ON DATE, AS CLAIMED BY THE LD. A.R BY DRAWING SUPPORT FROM PAGE 1 TO 3 OF THE APB , HAD BEEN GATHERED FROM THE SAID REMAINING PARTIES. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE AFORESAID FACTS AND ARE OF THE CONSIDERED VIEW THAT IN LIGHT OF THE CLAIM OF THE AS SESSEE THAT NO COPY OF THE REMAND REPORT WAS MADE AVAILABLE DURING THE COURSE OF THE APPELLATE PROCEEDINGS , COUPLED WITH THE FACT THAT THOUGH T HE CONFI RMATIONS O F THE REMAINING PARTIES COULD NOT BE COLLECTED DURING THE COURSE OF PROCEEDINGS BEFORE THE LOW ER AUTHORITIES DUE TO REASONS BEYOND THE CONTROL OF THE ASSESSEE, BUT HAD NOW BEEN COLLECTED, AND LAST BUT NOT THE LEAST THE METHODOLOGY ADOPTED BY THE CIT(A) FOR WORKING OUT THE DISALLOWANCE BEING BASED ON MISCONCEIVED FACTS AND ALL THE MORE ADOPTING AN IRRATIONAL METHOD , THUS DOES NOT INSPIRE ANY CONFIDENCE, WE THEREFORE IN ALL FAIRNESS AND IN TOTALITY OF THE AFORESAID FACTS THEREIN RESTORE THE ISSUE TO THE FILE OF THE A . O FOR MAKING NECESSARY VERIFICATIONS. THE A . O SHALL DU RING THE COURSE OF THE SET ASIDE PROCEEDINGS AFFORD REASONABLE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE THE GENUINE NESS AND VERACITY OF THE PURCHASE S , AND THE ASSESSEE SHALL REMAIN AT A LIBE RTY TO PLACE ON RECORD THE CONFI RMATIONS AS REGARDS THE REMAINI NG PARTIES , WHICH COULD NOT BE PLACED ON RECORD OF THE A.O TILL DATE. WE MAY HOWEVER CLARIFY THAT THE A . O SHALL REMAIN AT A LIBERTY TO MAKE FURTHER INDEPENDENT ENQUIRIES AS HE REASONABLY DEEMS FIT TO VERIFY THE GENUINENESS OF THE PURCHASE TRANSACTIONS , AND OUR AFORESAID OBSERVATIONS IN NO MANNER WILL BIND H IM TO SUMMARILY ACCEPT THE CONFI RMATIONS OF THE PARTIES AT THE VERY FACE OF IT. THE ISSUE PERTAINING TO THE DISALLOWANCE OF PURCHASES OF RS. 1,27,92,563/ - AS P AGE | 16 SUSTAINED BY THE CIT(A) IS THUS SET ASIDE TO T HE FILE OF THE A.O FOR FRESH ADJUDICATION, STRICTLY IN LIGHT OF OUR AFORESAID DIRECTIONS. THE GROUND OF APPEAL NO.1 IS THUS ALLOWED FOR STATISTICAL PURPOSES IN LIGHT OF OUR AFORESAID OBSERVATIONS. 10 . TH AT AS NOT H ING HAS BEEN AVERRED BEFORE US BY THE LD. A . R IN SUPPORT OF GROUND OF APPEAL NO. 3 , THE SAME IS THUS DISMISSED AS NOT PRESSED. 11. THE A PPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 4803/MUMBAI/2013 THE AFORESAID APPEAL HAD BEEN FILED BY THE REVENUE , THEREIN ASSAILING THE ORDER OF THE CIT( A) BY RAISING THE FOLLOWING GROUNDS OF APPEAL: - GROUNDS OF APPEAL 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING VARIOUS ADDITIONS RELYING UPON THE ADDITIONAL E VIDENCE AND REMAND REPORT DESPITE CONFIRMING THE ACTION OF A.O IN ASSESSING THE INCOME BY EX - PARTE ORDER U/S. 144 OF THE IT ACT. 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) OUGHT TO HAVE RESTRICTED HIS DECISION ON VARIOUS ISSUES/ADDITIONS TO EVALUATING THE BEST JUDGMENT OF ASSESSING OFFICER ONLY IN THE LIGHT OF CONFIRMING THE ACTION OF A.O OF PASSING AN EX - PARTE ASSESSMENT ORDER U/S. 144 OF THE IT ACT. P AGE | 17 2. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR WITHDRAW THE AFORESAID G ROUND OF APPEAL. 2. T HAT THE REVENUE HAD ASSAILED THE ORDER OF THE CIT(A) , THEREIN AVERRING THAT NOW WHEN THE EX - PARTE ORDER PASSED UNDER SE C. 144 OF THE ACT HAD BEEN CONFI RMED BY THE CIT(A), THEREFORE, THE LATTER IN TH E BACKDROP OF THE SAID FACTUAL POSITION HAD ERRED IN DELETING VARIOUS ADDITIONS ON THE BASIS OF THE ADDITIONAL EVIDENCE AND REMAND REPORT FURNISHED DURING THE COURSE OF THE APPELLATE PROCEEDINGS. 3. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE CONTENTION OF THE REVENUE AND ARE UN ABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE SAME. WE THOUGH ARE NOT OBLIVIOUS OF THE SETTLED POSITION OF LAW THAT AS PER SECTION 144(1)(B) , ON THE FAILURE ON THE PART OF THE ASSESSEE TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED DURING THE COURSE OF T HE ASSESSMENT PROCEEDINGS, THE A.O. THEREIN GETS VESTED WITH THE JURISDICTION TO FRAME THE ASSESSMENT TO THE BEST OF HIS JUDGMENT , AND TO THE SAID EXTENT FIND OURSELVES TO BE IN AGREEMENT WITH THE CONTENTION RAISED BY THE REVENUE AS REGARDS THE VALIDITY OF THE ASSUMPTION OF JURISDICTION BY THE A.O TO FRAME A BEST JUDGMENT ASSESSMENT U/S 144 IN THE AFORESAID SET OF CIRCUMSTANCES, BUT THEN THE SAID POWERS ARE NOT UNBRIDLED , AND THE A.O IN THE GARB OF FRAMING A BEST JUDGMENT ASSESSMENT UNDER SEC.144 CANNOT BE SAID TO HAVE OBTAINED A LICENSE TO FRAME AN ARBITRARY ASSESSMENT IN THE HANDS OF THE ASSESSEE . WE ARE OF THE CONSIDERED VIEW THAT DESPITE ASSUMING JURISDICTION TO FRAME AN ASSESSMENT UNDER SEC. 144, THE A.O CONTINUES TO REMAIN UNDER A STATUTORY OBLIGATION TO ACT IN A P AGE | 18 FAIR MANNER AND FRAME THE ASSESSMENT BY ADOPTING A JUDICIOUS APPROACH ON THE BASIS OF THE MATERIAL COLLECTED BY HIM DURING THE COURSE OF THE SAID ASSESSMENT PROCEEDINGS , AS WELL AS BY ADOPTING A REASONABLE YARD STICK FOR FACILITATING A FAIR EST IMATION , WHICH SHOULD SOLELY BE GUIDED WITH THE SOLE INTENT TO DEDUCE THE TRUE INCOME OF THE ASSESSEE TO THE BEST OF HIS JUDGMENT. WE HOWEVER ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE CONTENTION OF THE REVENUE THAT AN APPELLATE AUTHORITY AFTER JUSTIFYING THE VALIDITY OF FRAMING OF A BEST JUDGMENT ASSESSMENT, IN THE BACKDROP OF THE FACTS ATTENDING THERETO, THEREAFTER STANDS DIVESTED OF ITS JURISDICTION TO MODIFY THE ASSESSMENT ON MERITS. WE ARE OF THE CON SIDERED VIEW THAT T HE APPELLATE COURTS O N COMING ACROSS A BEST JUDGMENT ASSESSMENT WHICH IS ASSAILED BEFORE IT, ON FINDING THAT THE INCOME OF THE ASSESSEE HAS BEEN UNREASONABLY ASSESSED AT A HIGH PITCHED AMOUNT, WHICH IS EITHER NOT FOUND JUSTIFIABLE IN THE BACKDROP OF THE METHOD ADOPTED FOR F RAMING OF SUCH AN ASSESSMENT, OR IS FOUND TO BE BASED ON ILLOGICAL REASONINGS, THEREIN DULY STANDS VESTED WITH THE JURISDICTION TO MODIFY SUCH AN ASSESSMENT, AND THEREIN BRING THE SAME WITHIN THE PARAMETERS OF AN ASSESSMENT WHICH CAN SAFELY BE HELD AS A FA IR ASSESSMENT OF THE INCOME OF THE ASSESSEE. 4. WE ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF THE AFORESAID SCOPE AND GAMUT OF THE POWERS OF THE CIT(A) WHILE ADJUDICATING AN APPEAL INVOLVING A BEST JUDGMENT ASSESSMENT UNDER SEC. 144, THE ORDER PASSED BY THE CIT(A) IN THE CASE OF THE PRESENT ASSESSEE , REMAINING WITHIN THE ARENA OF HIS JURISDICTION,THUS CANNOT BE PRINCIPALLY FAULTED WITH. WE ARE UNABLE TO SUBSCRIBE TO THE CONTENTION OF THE REVENUE THAT THE P AGE | 19 ADDITIONS/DISALLOWANCES MADE BY AN A.O IN AN ASSESSMENT FRAMED UNDER SEC. 144 CANNOT BE DISLODG ED BY AN APPELLATE AUTHORITY ON MERITS. WE ARE OF THE CONSIDE RED VIEW THAT IF THE AFORESAID CONTENTION OF THE DEPARTMENT IS AC CEPTED , THEN THE SAME WOULD THEREIN LEAD TO INCONGRUOUS RESULTS AND WO ULD CONSEQUENTLY LEAD TO VESTING AN INDEFEASIBLE RIGHT WITH THE A.O TO SEEK ALLOWING OF A MISTAKE ON HIS PART, HOWSOEVER GRAVE IT MAY BE, TO PERPETUATE, DESPITE THE FACT THAT THE SAME IS NOT SUSTAINABLE EITHER ON FACTS OR IN LAW . WE THUS IN LIGHT OF OUR AF ORESAID OBSERVATIONS UPHOLD THE ORDER OF THE CIT(A) , WHO WE ARE OF THE CONSIDERED VIEW HAD ACTED WITHIN THE SCOPE OF HIS JURISDICTION AND DELETED THE ADDITIONS IN THE HANDS OF THE ASSESSEE COMPANY. 5. THAT IN LIGHT OF OUR AFORESAID OBSERVATIONS WE UPHOLD THE ORDER OF THE CIT(A) TO THE EXTENT THE SAME HAS BEEN ASSAILED BY THE REVENUE BEFORE US AND DISMISS THE APPEAL OF THE REVENUE . THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES, AND THE APPEAL OF THE REVENUE IS DISMI S SED. ORDER PRONOU N CED IN THE OPEN COURT ON 28 /02/2017 SD/ - SD/ - (R.C. SHARMA) (RAVISH SOOD) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 28 .02.2017 PS ROHIT KUMAR P AGE | 20 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI P AGE | 21