AVINASH S SADAMATE ACIT CIRCLE 3 3 1, MUMBAI vs. VIJAY SECURITY SYSTEMS PRIVATE LIMITED, MUMBAI

The Ld. CIT(A) on considering the submission of assessee noted that AO had information that assessee obtained accommodation entry from Riya Enterprises and Divine Packaging. Assessment was reopened and notice under section 148 was issued on 14.03.2014. The case was transferred from DCIT, Circle 8(3)(2) to ITO Ward 11(3)(3) who has again issued notice of hearing. As per AO, the authorized representative (Ld. AR) of the assessee appeared only once, so AO has no option but to complete the assessment order under section 144. However, the case of assessee is that notices issued by DCIT, Circle 8(3) were duly complied and the assessee furnished all details and documents required in the notice under section 142 (1) with regard to purchase of goods from both the parties. The Ld. CIT(A) on considering the material available on record noted that assessee filed document before DCIT/AO with letter dated 20.04.2014. The assessee filed voluminous document. Thereafter, case was transferred to present AO/ITO. The Ld. CIT(A) observed that it is apparently seems that the details and document filed before DCIT either not forwarded to ITO/AO or if forward it, were overlooked by ITO/AO that is why it is mentioned that no details and documents were furnished and has not taken cognizance of these details and documents. However, without prejudice contention the Ld. CIT(A) recorded that though these documents were not examined by AO at the time of assessment, however these documents were remanded as per Rule 46A(i) for fresh examination. The AO filed his remand report. The contents of remand 5 (AY 2009-10) ACIT Vs Vijay Security Services report is reproduced in para 5.3 of impugned order. The ld. CIT(A) extracted the contents of remand report, wherein the AO accepted that the detail furnished by the assessee have been verified and found to be correct. The Ld. CIT(A) on considering such report recorded that in the remand report the document submitted by the assessee were accepted as genuine. Thus, the AO was not justified in completing the assessment ex-parte and to the bank statement under section 144 as the assessee is duly complied with hearing notice and submitted the required details asked for. It is not the assessee’s fault that such document was filed before one officer but assessment was completed by another officer without examining such document. Therefore, assessment order passed under section 144 is invalid and bad in law. Aggrieved by the order of Ld. CIT(A), the revenue has filed present appeal before Tribunal.

I have heard the submission of learned senior departmental representative (Ld. DR) for the revenue and the ld. AR for the assessee. The Ld. DR for the revenue submits that assessee is a beneficiary of bogus purchases shown from the entities whose name were published by Sales Tax Department. The Sales Tax Department carried out full-fledged investigation and declared that certain parties as merely a Havala party who were involved in providing bogus accommodation without actual delivery of goods. The assessee is one of the beneficiaries who has shown purchases from such hawala parties. The Ld. CIT(A) allow the appeal of the assessee without appreciating the fact that purchases shown from such party was bogus. The assessee failed to prove the genuiness of such purchases. The notices under section 133(6) was 6 (AY 2009-10) ACIT Vs Vijay Security Services issued during remand proceedings were returned back by the postal authority by the remark “left”. The assessee failed to produce the parties for verification. The Ld. DR prayed to restore the order of AO by setting aside order of Ld. CIT(A). In support of submission the ld. DR for the revenue relied upon the latest decision Hon’ble High Court in PCIT V. Kanak Impex (India) Ltd. in of 2021 dated 03.03.2025.

On the other hand, the Ld. AR of the assessee supported the order of Ld. CIT(A). The Ld. AR of the assessee submits that assessing officer (AO) passed assessment order under section 144 despite the fact that complete evidence in response to various show cause notice were filed before him. The AO simply concluded that no details were furnished. Though, the assessee furnished complete details before AO. The jurisdiction of AO was changed and the assessment was completed in ITO Ward 11(3)(3), Mumbai who has not considered the voluminous documents filed by the assessee. Before Ld. CIT(A), the assessee again filed all the documents to prove the genuiness of purchases. The assessee proved the genuiness of purchases beyond doubt. In the remand report, the AO accepted such fact wherein the AO clearly mentioned “the same has been verified and found to be correct”. Once the documents were verified and found to be correct, the AO has no right to file appeal against his own finding. The Ld. CIT(A) on appreciation of evidence held that AO has accepted the evidence still ex-parte assessment was completed. Thus, the ld. CIT(A) rightly quashed the assessment order. The Ld. AR of the assessee submit that ratio of decision in PCIT V. Kanak Impex (India) Ltd. is not applicable on the fact of this case. In PCIT V. Kanak Impex 7 (AY 2009-10) ACIT Vs Vijay Security Services (India) Ltd, the said assessee failed to prove the genuiness of purchases and source of purchases. However, assessee has proved the purchases, source of purchase and consumption of goods purchased from both the parties, which has been accepted by AO. In support of the submissions relied upon the decision of PCIT V. Vaman International Pvt. Ltd.

I have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. I have also deliberately on case laws relied by both the parties. I have also perused the copy of remand report furnished by the AO to the ld CIT(A) during the first appellate stage. I find that the AO made addition of aggregate of purchases of Rs. 9,00,025/- shown by the assessee from both the parties that is Riya Enterprises and Divine Packaging filed by assessee. The AO made addition by disallowing the expenses of purchases from both the parties in assessment order passed under section 144, by taking view that the assessee failed to produce copy of bills with delivery challan and transportation details in support of purchase transaction. I find that before ld CIT(A), the assessee filed detailed written submissions and various evidences to substantiate the purchases from both the parties. The assessee also filed application for admission of additional evidence under Rule 46A of Income Tax Rules. The ld CIT(A) remanded all the evidence to the AO for his remand report. The AO furnished his remand report vide his report with his letter dated 04.07.2018. In the remand report the AO reported that during remand proceeding the assessee produced copy of bills voucher, ledger account delivery challan, lorry receipt with detail of payment. The AO in his remand report accepted that evidences furnished by 8 (AY 2009-10) ACIT Vs Vijay Security Services the assessee has been verified and found to be correct. The AO also reported that notice under section 133(6) was issued to both the parties which was returned back with the remark “left”. Current address was not provided by assessee. I find that in response to remand report of AO, the assessee filed his rejoinder and submitted evidences furnished by assessee are accepted by AO as correct but relied on the information received from sale tax department. The assessee further stated that they have regularly assessed to income tax. Purchases were properly reflected in the books of account; payments were made through account pay cheques. The goods were duly received and consumed / utilized in the manufacturing for providing Fire Fighting system to DLF Akruti Info Park. The assessee also provided source of expenses from Bank of Bahrain and Kuwait BSC Mumbai. No further adverse evidence was brought against such facts.

I further find that the ld CIT(A) while quashing the assessment order also held that AO had information that assessee obtained accommodation entry from Riya Enterprises and Divine Packaging. Assessment was reopened and notice under section 148 was issued on 14.03.2014. The case was transferred from DCIT, Circle 8(3)(2) to ITO Ward 11(3)(3) who has again issued notice of hearing. As per AO, the assessee appeared only once, so AO has no option but to complete the assessment order under section 144. But the assessee took his stand that notices issued by DCIT, Circle 8(3) were duly complied and the assessee furnished all details and documents required in the notice under section 142 (1) with regard to purchase of goods from both the parties. The Ld. CIT(A) on considering the material available on 9 (AY 2009-10) ACIT Vs Vijay Security Services record noted that assessee filed document before DCIT/AO with letter dated 20.04.2014. it was held that the assessee filed voluminous document. The case was transferred from DCIT to present AO/ITO. The Ld. CIT(A) held that the details and document filed before DCIT either not forwarded to ITO/AO or if forward it, were overlooked by ITO/AO that is why it is mentioned that no details and documents were furnished and has not taken cognizance of these details and documents. Thus, the AO was not justified in completing the assessment ex-parte and to the bank statement under section 144 as the assessee is duly complied with hearing notice and submitted the required details asked for. It was held it is not the assessee’s fault that such document was filed before one officer but assessment was completed by another officer without examining such document. Therefore, assessment order passed under section 144 is invalid and bad in law.

Before me, the ld Sr DR of the revenue failed to controvert the finding of ld CIT(A) as to how the same is not sustainable. Once, the AO has accepted all the evidence no space is left for sustain the addition on account of disallowance of purchases. No iota of adverse evidence is brought by AO against the evidence of purchases furnished by the assessee. I find that the assessee has not only proved the source of purchases, delivery of goods, consumption and end use of it. Thus, I do not find any reasons to interfere with the finding of ld CIT(A), which is upheld with my aforesaid additional observation.

So far as reliance by ld Sr DR for the revenue on the case law in PCIT Vs Kanak Impex (India) Ltd (supra) is concerned, I find that the facts of the said 10 (AY 2009-10) ACIT Vs Vijay Security Services case are at variance. In the said case, the assessee failed to prove the genuineness and sources of purchases. However, in the present case the assessee has proved the purchases as has been accepted by the AO in his remand report. Thus, the ratio of the decision of Hon’ble jurisdictional High Court is not applicable on the peculiar facts of the present case. In the result, the grounds of appeal