ITO 26(3)(4), MUMBAI vs. M/S VIVAAN CORPORATION , MUMBAI

This appeal is filed by The Income Tax Officer 26 (3) (4), Mumbai (the learned AO) against the appellate order passed by the Commissioner of income tax (appeals) – 38, Mumbai dated 30/9/2019 wherein the appeal filed by the assessee against the assessment order dated 29-12- 2017 passed u/s 143 (3) of the income tax act 1961 (the act) for the assessment year 2015 – 16 by the learned AO was partly allowed.

The learned AO examined the Ledger account of both the parties. The Ledger account on analysis were tabulated and page number 6 and 7 of the assessment order. The finding of the AO was that party number 1 supplied goods to the assessee amounting to ₹ 96,237,353/– from

Aggrieved with the assessment order assessee preferred appeal before the learned CIT – A. Before him, assessee submitted additional evidences with respect to the advances received of ₹ 581,201,658/–. The matter was

The learned AO is aggrieved with that order and is in appeal before us. The learned AO raised three grounds challenging the deletion of addition of ₹ 581,201,658/–. The learned CIT DR vehemently submitted that the learned CIT – A has erred in deleting the addition in the hence of the assessee u/s 68 of the income tax act. It was stated that the money is received in the bank account of the assessee and therefore party number one and party number 2 on behalf of which the advances was received is clearly a make-believe story made by the assessee which was believed by the CIT – A. He submitted that during assessment assessee created one story and in remand proceedings it created another story. The learned CIT – A

Despite notice to the assessee appeared on the appointed date of hearing despite there was proper service of notice by the learned AO wherein the reports are also submitted that the directors who appeared in the remand proceedings have received the notice of hearing. This appeal is also fixed for hearing earlier ten times, despite service of notice, none appeared on any of the occasions. Therefore, we do not have any other option but to dispose of this appeal on the merits of the case as per information available on record.

We have carefully considered the contention raised by the learned CIT DR and carefully perused the orders of the lower authorities. We find that during the course of assessment proceedings it was found that there is a youth sum credited in the bank account of the assessee. The assessee did not give proper reply before the assessing officer during the course of assessment proceedings. In the appellate proceedings, the learned CIT – A called for remand report wherein assessee produced the “7. I have considered the facts of the case, the oral arguments of the Learned. ASSESSMENT ORDER as well as written submission of the appellant, material on record and case laws relied upon by the appellant as against the observations and findings of the Assessing Officer in the assessment order and in remand report. The submissions and contentions of the appellant are being discussed and decided as under:

First, the learned CIT – A failed to make any order of admitting additional evidence Under rule 46A of the act. This is a mandatory requirement whenever the learned CIT – A admits any additional evidence which were not before the learned assessing officer. He has limited power to admit such evidence. In the present case there is no lack of opportunity before the learned AO to the assessee. There are no other reasons shown where assessee was prevented from sufficient cause for not producing those

Secondly the learned CIT – A has deleted the addition as per para number 7. In paragraph number 7.1.4 the amount credited in the bank account of ₹ 583,048,458/– has been accepted by the learned CIT – A that it did not belong to the appellant. This finding of fact is contrary that originally advances were given by the assessee to two different parties for supply of material, who could not supply the material, therefore advances given to them were recovered by the assessee from other parties on behalf of those 2 parties. Therefore in fact at the most it can be said that the amount that is credited in the bank account is an advance received back by the assessee from 3rd party which was given to 2 related parties. Therefore mainly the assessee has to justify the amount credited in the books of accounts of the assessee itself with the identity, creditworthiness and genuineness of the world transaction. Here the assessee has diverted the attention of the learned CIT – A producing the directors of 2 related parties. In fact the AO/CIT – A should have examined the parties were given credit in the books of the assessee/credited in the bank account of the assessee. This exercise is missing.

It is also worth noting that there is no independent evidence available with the learned CIT – A to delete the addition. He has deleted the addition merely on the basis of statement of the directors of 2 related parties, statement of the partner of the assessee who is also director in one of the company which is involved in the world transaction as per the statement of the assessee. Thus, lack of independent evidence makes the order of the learned CIT – A not sustainable.

The learned CIT – A has also wrongly held that when the amount is deposited in the bank account with HDFC bank of the assessee the deeming provisions of Section 68 is not applicable to the said receipt as it is credited in the bank account of the appellant. The learned CIT – A has ignored the fact that the amount which is credited in the bank account of the assessee is also credited in the books of accounts of the assessee and therefore the provisions of Section 68 are definitely attracted.

In the result, we set aside whole issue back to the file of the ld. CIT (A) with a direction to pass decide whether the additional evidences submitted by the assessee were admitted or not giving reasons for his order. Thereafter he

In the result, Appeal of the learned AO is allowed for statistical purposes.