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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Smt. P. Madhavi Devi & Shri Laxmi Prasad Sahu
This is assessee’s appeal for the A.Y 2008-09 against the order of the CIT (A)-1, Hyderabad, dated 28.03.2019.
Brief facts of the case are that the assessee company which is engaged in the business of trading in steel items, filed its return of income on 30.09.08 for the A.Y 2008-09 declaring a loss of Rs.27,53,88,115/- under the regular provisions of the I.T. Act. On selection of the return of income for scrutiny under CASS, the assessment proceedings u/s 143(3) were taken up,
During such assessment proceedings, the Assessing Officer observed that the assessee’s registered office was earlier in Chennai, but the assessee has filed an application for transfer of its files to Hyderabad on the ground that the registered office has been shifted to Hyderabad. The Assessing Officer accordingly issued notices u/s 143(2) and also u/s 142(1) to the assessee’s address in Hyderabad. However, the same could not be served on the address given by the assessee and therefore, the notice was served on the said address by affixture on 8/12/2010. Thereafter, the Assessing Officer had also sent notices to the email address given in the return of income. The Assessing Officer observed that the said email pertains to the C.A connected with M/s. Sujana Group of Companies and that in response to the email notice, Mr. K.H.B. Atmaram, stated to be representing Sujana Group of Companies appeared for the assessee on 20.12.2010 and he was asked to furnish the required details. The Assessing Officer observed that on 24.12.2010, Mr. Atmaram appeared and produced two computerized books stated to be ledgers relating to purchases and sales and bank ledger. After going through the same, the Assessing Officer observed that the assessee’s entire dealing (both purchases and sales) are between 13 group companies and that there was no contemporary evidence for the actual purchase and sale of goods. Therefore, he held that no credence could be given to the so called books of account. He also held that when all the purchases and sales are made within the group companies, it is not clear as to why the assessee incurred loss of Rs.27.53 crores. He therefore, held that the assessee company did not carry on any trading activity and therefore, the question of incurring loss does not arise. He further held that even if it is so, the assessee has not submitted purchases and sales invoices nor has furnished any evidence in respect of sale or transport of steel to the godowns etc., Thus, he disallowed the trading loss claimed by the assessee. Against the same, the assessee preferred an appeal before the CIT (A), who confirmed Page 2 of 5 the order of the Assessing Officer and the assessee is in second appeal before the Tribunal by raising the following grounds of appeal: “
1. The learned CIT (A) erred in dismissing the appeal without proper appreciation of the facts of the case, which is against both on facts of the case and law.
2. The learned CIT (A) ought to have held that the Assessing Officer erred both on the facts of the case and in law while finalizing the assessment u/s 143(3) of the I.T. Act, 1961 for the A.Y 2008-09.
3. The learned CIT (A) ought to have also held that the Assessing Officer erred in disallowing the entire business loss of Rs.27,53,88,115/- claimed by the assessee without appreciating the facts of the case.
The learned CIT (A) ought to have appreciated the fact that trading with group companies cannot be the basis for rejecting the books of account of the assessee which is against the provisions u/s 145 of the Act.
5. The learned CIT (A) ought to have considered that purchases and sales made with group companies cannot be the basis for considering the company as paper company or sham, without having any tangible evidence for coming to the above conclusion.
6. The learned CIT (A) ought to have considered the documents furnished by the appellant to show that the company is not a bogus company and all the purchases and sales made by the company are genuine and all the payments and receipts are through banking channels.
7. The learned CIT (A) ought to have held that the Assessing Officer erred in rejecting the books of account with the presumption that the transactions of the company are bogus, even when the assessee has submitted the required documents.
The learned CIT (A) ought to have held that the Assessing Officer erred in not considering the documents and VAT returns submitted by the assessee.
The learned CIT (A) ought to have appreciated the fact that when the assessee has furnished the VAT returns admitting the sale made by it sand the same has been accepted by the Department, the then Assessing Officer treating the same as sham transactions is not acceptable.
The learned CIT (A) ought to have appreciated the fact that mere rejection of the books of account of assessee without making enquiry is against the provisions of the Act u/s 143 and 145 of the Act.
The learned CIT (A) ought to have appreciated the fact that the Assessing Officer erred in rejecting the books of account of the assessee which were duly audited by a CA under the Companies Act as well as under the I.T. Act. 12. The learned CIT (A) ought to have also held that the Assessing Officer erred in rejecting the books of account without any discrepancies found which is against the section 145 of the Act. 13. The learned CIT (A) ought to have appreciated the fact that the accounting treatment which is adopted by the assessee company is in accordance with accounting standards and the same is accepted by independent auditors of the company. 14. The appellant may add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal”.
4. The learned Counsel for the assessee submitted that only on the ground that the assessee has made transactions with its group of companies, the Assessing Officer has disallowed the claim of loss totally disregarding the evidence filed by the assessee before him. He has drawn our attention to the details filed by the assessee before the Assessing Officer as well as the CIT (A), which are filed before the Tribunal in the form of a Paper Book. He submitted that none of these details were considered by the Assessing Officer and therefore, prayed that the issue may be remanded to the file of the Assessing Officer for verification and reconsideration in accordance with law.
The learned DR was also heard.
Having gone through the details, we find that the assessee has, in fact, filed many details before both the Assessing Officer as well as the CIT (A), but none of them have considered any of them. Therefore, in the interest of justice, we deem it fit and proper to remand the issue to the file of the Assessing Officer for denovo consideration in accordance with law, after giving the assessee a fair opportunity of hearing.
In the result, assessee’s appeal is treated as allowed for statistical purposes.
Order pronounced in the Open Court on 23rd August, 2021.