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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai
This appeal by the assessee is directed against the order of learned CIT(A) dated 30.4.2019 pertaining to A.Y. 2010-11.
The grounds of appeal
read as under :
1. In the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals)-40, Mumbai has erred in upholding the assessment which was made by Ld. Assessing Officer without issuing notice u/s. 143(2).
2. In the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) - 40, Mumbai has erred in confirming the action of Ld. Assessing Officer in making addition u/s. 69C of Rs. 1,123/- being 12.5% of alleged bogus purchases of Rs. 8,981/-.
3. In the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals)-40, Mumbai has erred in confirming the action of Ld. Assessing Officer in making ad-hoc disallowance of the expenses amounting to Rs. 5,23,190/- which was not even mentioned in reasons for reopening, thereby travelling beyond the scope of re-assessment.
4. The appellant craves leave to add, alter, delete or modify all or any of the above grounds of appeal. All the above grounds are without prejudice to each other.
2 Shri Parasnath H. Bharti
The assessee in this case is in receipt of income from business and profession. In the assessment order the AO noted that the assessee is carrying on business activity of iron and steel. That during the year has purchased materials of Rs. 8981/- from Global Trade Impex. That as per commission received from DG(Inv) that the purchases made by the assessee from the above parties are not genuine. That the assessee has not submitted copies of receipts of VAT paid, sales tax, transport receipts etc. For the purchase of Rs. 8981/-. Hence the AO disallowed the disallowance under section 69C of the Act. The AO further made certain adhoc disallowance on the ground that proper supporting were not there. Assessment order in this regard reads as under :-
“Assessee has debited on account of freight and octroi charges of Rs.292545/- out of which Rs. 87764A being 30% are not supported by evidence and not verifiable and are added to the total income of the assessee. Assessee has debited on account of labour charges of Rs.697598/- out of which Rs.209279/- being 30% are not supported by evidence and not verifiable and are added to the total income of the assessee. Assessee has debited on account of salaries of Rs. 179314/- out of which Rs. 53794/- being 30% are not supported by evidence and not verifiable and are added to the total income of the assessee. Assessee has debited on account of society charges of Rs. 98274/- out of which Rs. 29482/- being 30% are not supported by evidence and not verifiable and are added to the total income of the assessee. Assessee has debited on account of telephone charges of Rs. 31733/- out of which Rs. l2693 being 40% are not supported by evidence and not verifiable and are added to the total income of the assessee u/s. 38(2) as element of personal use cannot be ruled out. Assessee has debited on account of depreciation on motor car of Rs. 138200/- out of which Rs.55280/- being 40% are not supported by evidence and not verifiable and are added to the total income of the assessee u/s 38(2) as element of personal use cannot be ruled out. Assessee has debited on account of interest on vehicle loan of Rs. 74315/- out of which Rs.29726/- being 40% are not supported by evidence and not verifiable and are added to the total income of the assessee under section 38(2) as element of personal use cannot be ruled out. Assessee has debited on account of interest paid on loan of Rs.45000/- out of which Rs. 13500/- being 30% are not supported by evidence and not verifiable and are added to the total income of the assessee. Assessee has debited on account of supervision charges of Rs. 24000/- out of which Rs.7200/- being 30% are not supported by evidence and not verifiable and are added to the total income of the assessee. Assessee has debited on account of vehicle expenses of Rs. 61179/- out of which Rs. 24472/- being 40% are not supported by evidence and not verifiable and are added to the total income of the assessee u/s. 38(2) as element of personal use cannot be ruled out. Hence as discussed above sum total of Rs. 523190/- as claimed by 3 Shri Parasnath H. Bharti the assessee is added as unexplained expenditure u/s 69 C of I.T. Act, 1961 to the total income of the assessee.”
Against the above order the assessee appealed before the learned Commissioner of Income Tax (Appeals). Learned CIT(A) upheld the order of the Assessing Officer by holding as under :- The AO made addition of Rs. 5,32,171/- on account of bogus billing to the extent of Rs. 8,981/- and an account of unexplained expenditure of Rs. 5,23,190/-The AR of appellant objected to the reopening of the assessment u/s. 148 of the IT Act and also claimed that the AO has not issued notice u/s. 143(2) of the IT Act. When the matter was reminded back to the AO to intern send his report stated that no return of income was filed by the assessee within the time specified in the notice u/s. 148 of the IT Act. When there was no return income from the assesse's side, filed u/s. 148, naturally the AO could not issue notice u/s. 143(2) of the IT Act a part from above the assessee has not brought this issue before the AO during the course of re- assessment proceedings. Keeping in view of the remind proceedings, the AO is justified in finazyling assessment proceedings based on the material available on record therefore Ground 1 and 2 regarding reopening of assessment are dismissed.
The AR of the appellant objected to the addition made at 100% of purchases from Global Trade Impex of Rs. 8,981/-treating as non genuine purchase instead of adding entire purchase of Rs. 8,981/-, the AO is directed to calculated the gross profit at 12.5% on bogus purchases. Thus an amount of Rs. 1,123/- is directed to be added to the total income of the appellant. The appellant succeeded partly on this ground of appeal.
The AO disallowed expenditure on various Items to the tune of 30% to 40% totalling to Rs. 5,23,190/- on the ground that vouchers are not properly maintained, involvement of personal element which cannot be denied. The AO reasonably disallowed a part of the expenditure ranging for 30% to 40 % of the expenses. I am in agreement with the AO making such disallowances and hence the same is confirmed dismissing this ground of appeal as well.”
Against the above order assessee is in appeal before ITAT.
I have heard both the parties and perused the record. Upon careful consideration, I note that the first contention of the assessee in this case is that notice under section 143(2) of the Act has not been issued to the assessee. Learned CIT(A) has dismissed the said issue raised on the ground that since return of income was not filed by the assessee within the time specified in the notice under section 148 of the Act the AO could not issue notice under section 143(2) of the Act. Furthermore learned CIT(A) has referred that the 4 Shri Parasnath H. Bharti assessee has not brought this issue before the AO during the course of reassessment proceedings. I find that in several case laws it has been settled by Honourable higher courts that non issuance of the notice u/s. 143(2) of the Act is not a curable defect, and framing of assessment without issuance of notice under section 143(2) is fatal to the assessment. Nowhere of the Act provides if assessment under section 143(3) read with section 147 of the Act is framed requirement of issuance of notice under section 143(3) is dispensed with if the assessee has not filed return of income under section 148 of the Act. In this view of the matter the order of learned CIT(A) that the assessee has not raised this issue before the AO etc. are not sustainable. Hence, I set aside the orders of the authorities below and hold that without issuing of notice under section 143(2) assessment framed suffers from jurisdictional defect and is liable to be quashed.
Since I have quashed the assessment on account of jurisdictional defect adjudication of the issue on merits is only of academic, hence, I am not engaging into the same.
In the result, this appeal of the assessee stands allowed.