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Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2009-10. The appeal is directed against the order passed by the Commissioner of Income Tax (Appeals)-24, Mumbai [in short ‘CIT(A)’] and arises out of assessment completed u/s. 143(3) r.w.s. 147 of the Income Tax Act. 1961 (the Act).
The grounds of appeal
filed by the assessee read as under:
1. The order u/s. 143(3) r.w.s. 147 of the Act of the Assessing Officer is bad in law and contrary to the facts of the case and evidence on record.
2. The learned CIT(A) erred in passing his order ex-parte and dismissing the appeal on the ground that the appellant did not attend the hearing posted by him, even while, as M/s. Aerovent Projects P. Ltd., Appellant to attend the hearing fixed before the learned CIT(A), without obtaining an adjournment granted by him; apart from the fact that the learned CIT(A), on his own, had adjourned the hearing 8 times, out of which twice, after hearing the case.
3. The learned CIT(A) erred in failing to consider the ground of appeal before him: “The Assessing Officer erred in not disposing off the objection to the issuance of Notice u/s 148 filed before him and thereby contravened the directive of the Supreme Court in this connection.”
4. The learned CIT(A) erred in holding that purchases by the Appellant during the previous year, totalling of Rs. 18,77,948/- “are unsubstantiated as have to be considered as bogus purchases”.
5. Without prejudice to the above, the learned CIT(A) erred in bringing to tax the entire amount of purchase of Rs. 18,77,948/- instead of the profit element embedded in the purchases.
3. Briefly stated, the facts of the case are that the assessee filed its return of income for the AY 2009-10 on 22.09.2009 declaring total income at Rs. 1,78,31,591/-. During the course assessment proceedings, the Assessing Officer (AO) observed that the assessee has obtained accommodation entries by bogus purchase bills amounting to Rs. 18,77,948/-. The AO received the above information from the Sales Tax Department, Govt of Maharashtra. On the basis of said information, he made an addition of Rs. 18,77,948/-.
4. Aggrieved by the order of the AO, the assessee filed an appeal before the CIT(A). It is found that the Ld. CIT(A) has dismissed the appeal filed by the assessee on the ground that though several opportunities of hearing were given to the assessee, there was no proper compliance before him. On the basis of the above, the Ld. CIT(A) decided the case on merit with the following observations:
M/s. Aerovent Projects P. Ltd., “6.1.7 It is important to note that appellant is carrying on the business as Civil Contractors and undertaking projects. The appellant has not furnished quantitative reconciliation. In which contract the goods have been used has not been furnished. Considering that the appellant has consumed the goods in execution of the contracts and not a trader, there cannot be any presumption that since the sales have been accepted by the AO, the purchases cannot be doubted. In the case of a trader, since the items purchased are sold as such without any processing/manufacturing/value addition, the fact that sales have been made goes to prove that the corresponding purchases were genuine. However, in the case of a manufacturer or contractor, such a presumption cannot be made if the standard consumption norms or standard yield of output per unit consumption of the raw material are not available and the consumption varies significantly depending on the quality of the raw material, the climatic conditions, the variations in the specifications of the output products etc. In the appellant's case, the goods purchased through alleged bogus suppliers are used for execution of contracts. Considering the same, there can be no standard or acceptable norms for the consumption of raw material or components for the contract executed by the appellant. The appellant has also not furnished any such standard consumption rates of the raw materials for different types of contracts executed by it. 6.1.8 Under such facts and circumstances, it is not possible to verify the extent of consumption of various raw materials required for execution of contracts undertaken by the appellant. In view of this, merely because the sales made by the appellant have been accepted by the A.O, no inference can be drawn regarding the genuineness of the purchases and the corresponding consumption in the execution of contracts. This is particularly true in the case of the materials involved in the alleged bogus purchases of the appellant since they represent a miniscule percentage of the total consumption of raw materials during the year. Since the value of the same is insignificant and does not reflect itself as apparent or noticeable increase in the percentage of cost of consumption over sales for this year when compared with other years. 6.1.9 Having regard to the aforesaid discussion, the facts and circumstances of the case and the material available on record, I am of the considered opinion that the appellant has failed to discharge its burden of proving the genuineness of the impugned purchases of Rs. 18,77,948/- with cogent evidences. Consequently, it is held that the said purchases are unsubstantiated and have to be considered as bogus purchases which have been debited in the books of account without the actual receipt.”
The Ld. Departmental Representative (DR) submits that as there is no compliance by the assessee in the first appellant proceedings, the Ld. CIT(A) has rightly confirmed, on merits, the addition of Rs. 18,77,948/- made by the AO.
Though the case was fixed for hearing on 07.09.2020, there is no compliance by the assessee or its authorised representatives.
As there is no compliance by the assessee to the notice of hearing issued by the Registry, we proceed to decide the case on the basis of M/s. Aerovent Projects P. Ltd., materials available on record. A perusal of the order of the Ld. CIT(A) shows that the assessee had sought adjournment on 05.11.2018 and 10.01.2019. A final opportunity was given by the CIT(A) to the assessee on 17.01.2019. As the assessee failed to appear before him, the Ld. CIT(A) proceeded to decide the case on merits. Thereby, he confirmed the addition of Rs. 18,77,948/- made by the AO. Let us discuss the backgrounds details. As mentioned earlier, the AO made an addition of Rs. 18,77,948/- on the basis of information received from the Sales Tax Department, Govt of Maharashtra that the assessee has obtained bogus purchase bills. During the course of assessment proceedings, the AO asked the assessee to produce the party i.e Hanuman Steels (Prop. Shri Jignesh K Desai) along with evidence to verify the identity of the party and the genuineness of the purchase transactions. In response to it, the assessee filed before the AO ledger extracts of the said party thereby stating that payments have been made through account payee cheque only. The assessee could not produce the said party before the AO. In view of the above facts that the issue revolves around the genuineness of the purchases and also the fact that the assessee had sought adjournment before the Ld. CIT(A) on 05.11.2018 and 10.01.2019, whereas the assessee failed to appear before him on the final opportunity given by the Ld. CIT(A) on 17.01.2019, we are of the considered view that the assessee may be given another opportunity by the first appellate authority before deciding the appeal on merit. Therefore, we set aside the order of the Ld. CIT(A) and restore the matter back to him to decide the case on merit, after given reasonable opportunity of being heard to the assessee. We direct the assessee to appear before the Ld. CIT(A) on date to be fixed for hearing. 4 M/s. Aerovent Projects P. Ltd.,