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Facts
The assessee-company declared income of Rs. 65,57,000/-, which was selected for scrutiny. An addition of Rs. 20,79,81,565/- was made under Section 69C for unverified purchases. The CIT(A) allowed the assessee's appeal, holding that the AO overlooked confirmations from certain parties.
Held
The Tribunal held that the CIT(A) erred by not calling for a remand report from the AO, especially when the Revenue disputed the filing of confirmations before the AO. The matter was remitted back to the CIT(A) to obtain a remand report.
Key Issues
Whether the CIT(A) was justified in allowing relief without obtaining a remand report from the AO when the genuineness of party confirmations was disputed.
Sections Cited
133(6), 143(2), 142(1), 69C
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Income Tax Appellate Tribunal, MUMBAI “A” BENCH : MUMBAI
Before: SHRI VIKRAM SINGH YADAV & SHRI ANIKESH BANERJEE
PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [„Ld. CIT(A)‟], dated 25-04-2025, pertaining to Assessment Year (AY) 2020-21, wherein the Revenue has taken the following grounds of appeal:
1. “1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in accepting the assessee's contention that the 8 parties from whom the assessee had made purchases amounting to Rs. 20,79,81,565/ had filed their reply to the notice u/s 133(6) when the case history notings of the proceedings before the Faceless Assessing Officer (FAO) does not show any reply to have been received by the FAO from the said 8 parties.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in directing to verify the party responses omitted to be considered while completing the assessment and allow relief to the assessee when no such responses had been received and, consequently, no relief can be granted to the assessee.”
None appeared on behalf of the assessee nor was any adjournment application filed. The matter was initially fixed for hearing on 12-08-2025 and thereafter, it was adjourned to 11-09-2025 and it has come up for hearing today i.e., on 16-09-2025. There is complete non-compliance on the part of the assessee. At the same time, the Ld. DR has submitted that at the earlier occasion, the Bench has directed to serve notice on the assessee company and a compliance report has been placed on record dt. 15-09-2025 by the O/o. the CIT, Circle-14(1)(2), Mumbai. Considering the facts and circumstances of the present matter, it was decided to proceed with the matter as no useful purpose would be served in adjourning the matter any further and to decide the issue, basis material available on record.
Briefly the facts of the case are that the assessee-company filed its return of income, declaring total income of Rs. 65,57,000/- which was selected for scrutiny and notices u/s. 143(2) and 142(1) of the Act were issued and also show cause was also issued during the course of assessment proceedings. In response, the assessee filed its submissions which were considered, but found not fully acceptable to the AO and an addition of Rs. 20,79,81,565/- was made u/s. 69C of the Act towards un- verified purchases and the same was brought to tax and the assessed income was determined at Rs. 21,45,38,565/-. The assessee carried the matter in appeal before the Ld.CIT(A), who has since decided the matter in favour of the assessee and the appeal of the assessee has been allowed. Against the said order, the Revenue is in appeal before us.
During the course of hearing, the Ld. DR submitted that the case of the assessee was selected for complete scrutiny and notices were issued during the course of assessment proceedings. It was submitted that the AO also issued notices u/s. 133(6) of the Act to eight parties, from whom the assessee have shown purchases of goods and services amounting to Rs. 20,79,81,565/-. It was submitted that the sellers did not confirm the transactions, in fact, as per the case history notings, no reply was received from these parties in response to notices u/s. 133(6) of the Act, thereby rendering the purchases un-verifiable. It was submitted that in the absence of supplier‟s confirmations and un-verifiable nature of purchases, the AO made the disallowance, treating the purchases as non-genuine. It was submitted that on appeal by the assessee, the Ld.CIT(A) has erred in accepting the assessee‟s contention that eight parties from whom the assessee had made purchases, had filed reply to the notices u/s. 133(6) of the Act, where the case history notings of the proceedings before the FAO does not show any reply to have been received by the FAO from the said eight parties. It was submitted that when the confirmations are not available in the assessment proceedings, suspicion around the genuineness and actual occurrence of the purchases is justified and, therefore, accepting the assessee‟s version, without documentary reply received by the AO, undermines the assessment process and opens the system to possible misuse by introducing unverifiable or fictitious entries. It was submitted that where the assessee is submitting the additional evidences, the ld CIT(A) ought to have called for the remand report from the AO and the AO could have verified the same and given his report. However, ld CIT(A) has proceeded ahead with examining the additional evidences and allowed relief to the assessee. It was further submitted that the Ld. CIT(A) has erred in directing to verify the parties‟s responses omitted to be considered while completing the assessment and allowing relief to the assessee when no such responses had been received and consequently, no relief can be granted to the assessee. It was submitted that relief from addition can only be granted when verification of third- party evidence is possible and if there are no replies on file, there is nothing to verify and hence, the Ld.CIT(A) could not have ordered relief and such directions amount to giving benefit without satisfying the minimum evidentiary threshold and reliance was placed on the decision of the Hon‟ble Calcutta High Court decision in the case of CIT vs. Precision Finance (P.) Ltd. [1995] 82 TAXMAN 31 (Cal.). It was accordingly submitted that the order of the Ld.CIT(A) be set aside and that of the AO be sustained.
We have heard the Ld.DR and perused the material available on record. On perusal of the impugned order, it is noted that the assessee as part of its submissions, reproduced in the impugned order, has submitted that five parties out of eight parties have replied to the notices u/s. 133(6) of the Act on or before passing of the assessment order and one of the parties has filed the confirmation on 07-04-2023 and the relevant contents of the assessee‟s submissions read as under:
“2. As submitted in above paras that the alleged parties have replied to notice u/s 133(6), kindly find below table to substantiate the fact-
Sr Party Name Amount Reply Reply u/s Evidences Submitted in No (In Rs.) u/s 133(6) reply to notice u/s 133(6) 133(6) filed on filed 1 Alligator 5,56,28,724 Yes 21.03.2024 1. Ledger statement Automations Private Limited 2.Details of transactions entered during the year under appeal; 1. Copies of invoices; and 2. Bank Statements showing payment for purchases to the party. 2 Axaykumar 4,15,152 Yes 07.04.2024 Ledger Statement Popatlal Vora 3 Axitec Energy 9,47,60,786 Yes 22.03.2024 i. Ledger statement ii. India Private Details of transactions Limited entered during the year under appeal; a. Copies of invoices; and b. Bank Statements showing payment for party. Purchases to the party. 4 Bizbezzie Private 15,000 - - Limited 5 Kumkum Goel 1,70,24,545 Yes 27.03.2024 i. Ledger statement ii. Copies of invoices 6 Madhu Agarwal 3,98,13,158 Yes 19.03.2024 i. Ledger statement ii. Details of transactions entered during the year under appeal; Copies of invoices; and 2. Bank Statements showing payment for purchases to the party. 7 Ranjeet Arun 3,20,000 Yes 20.03.2024 1. Ledger statement Metkar 2. Details of transactions entered during the year under appeal:
1. 1. Copies of invoices; and 2. Bank Statements showing payment for purchases to the party.
3. Online Extract of GSTR 1 filed 8 Ravindra 4,200 - - - Dhondibhau Bhujabal Total 20,79,81,565 We are submitting herewith the Acknowledgments of reply u/s 133(6) and all copies of the evidences submitted by all the above parties as per Annexure B.”
Considering the submissions and the documentation so filed, the Ld.CIT(A) has thereafter given the findings which are contained in para 4 of the impugned order, which reads as under:
4. I have carefully considered the assessment order, the grounds of appeal, and the written submission of the appellant along with the supporting documents furnished. From the assessment order, it is noted that after reviewing the appellant's explanation for the discrepancies noted in the amount of expenses claimed against the GSTR data, the assessing officer accepted the appellant's explanation and the confirmation provided by the parties involved. However, the assessing officer proceeded to assess purchases of Rs.20,79,81,565 related to M/s Alligator Automations Private Limited and 7 others because the parties did not respond to the notice issued under section 133(6) of the Act to confirm the transactions with the appellant. On the other hand, the appellant submitted before this authority that these parties had replied to the notice under section 133(6) of the Act before the passing of the assessment order, and the aggregate transaction in respect of those responses amount to Rs.20,75,47,213 (99.79% of the total addition) in the assessment. The appellant further submitted that another party, Ajay Kumar Popatlal Vora, responded on 07/04/2024. In support of this claim, the appellant also provided copies of the e-proceeding response acknowledgments for the parties involved, along with ledger confirmations and invoices submitted by them. I have carefully reviewed the above submissions from the appellant, as well as the confirmations and other details submitted by the parties in the e-proceeding before the assessing officer, which confirmed that out of the parties listed by the assessing officer, five responded to the notice under section 133(6), confirming the transactions with the appellant. This fact appears to have been overlooked by the assessing officer while completing the assessment. Additionally, the appellant explained the transactions before the assessing officer while reconciling the differences found in the claim of purchases and other expenses against the GST data, along with confirmation of the ledger accounts. According to the assessing officer's remarks in the assessment order, the addition was made solely due to the non-response from the parties concerned to the notices issued under section 133(6) of the Act. There are no adverse materials warranting the addition under section 69C of the Act. In the above facts and circumstances, I find merit in the appellant argument for relief. Accordingly, the assessing officer is directed to verify the party responses omitted to be considered while completing the assessment and allow relief to the appellant. In the result, the appeal is allowed
7. We, therefore, find that it is the claim of the assessee before the Ld.CIT(A) that the five parties have responded and confirmed the transaction so undertaken with the assessee before completion of the assessment proceedings and one of the parties have responded subsequent to the completion of the assessment proceedings and as far as the parties who have responded before the completion of the assessment proceedings, the AO has failed to take into consideration the confirmations and proceeded with making the additions. The Ld.CIT(A) has accepted the assessee‟s explanation and has held that the AO has apparently overlooked this fact and has directed the AO to verify all the responses and allow relief to the assessee and appeal of the assessee has been allowed. The Revenue is disputing this fact before us that these confirmations were infact not filed before the AO either before and after completion of the assessment proceedings and has submitted that the sellers did not confirm the transactions, in fact, as per the case history notings, no reply was received from these parties in response to notices u/s. 133(6) of the Act, thereby rendering the purchases un-verifiable.
8. In such a situation, we find that where certain additional evidences/documentation have been submitted before the ld CIT(A) during the appellate proceedings for the first time and certain claims are made by the assessee especially where the claims are made that the documents were filed but not considered by AO, it would have been proper, as is the accepted practice and also in consonance with principle of equal opportunity to both the parties, to call for the necessary remand report from the AO and necessary opportunity would have been granted to the AO to verify the documentation so submitted and the assessee‟s further explanation could have called where required. However, in the instant case, we find that the Ld.CIT(A) without calling for a remand report has proceeded ahead and basis his verification of explanation and documentation so filed by the assessee, the Ld.CIT(A) has allowed relief to the assessee. Given that the Revenue is disputing before us that these confirmations were in fact not filed before the AO either before and after completion of the assessment proceedings and the fact that even remand report was not called for, in such circumstances, we deem it appropriate to remit the matter to the file of the Ld.CIT(A) to call for the remand report from the AO and decide the matter afresh as per law after providing reasonable opportunity to the assessee.