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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
AadoSa / O R D E R महावीर स ुंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
These cross appeals are arising out of the order of the Commissioner of Income Tax (Appeals)]-8, in short CIT(A), in appeal No. CIT(A)-8/IT-110/16-17 dated 04.09.2017. The Assessment was framed by the Dy. Commissioner of Income Tax, Circle 3(2)(2), Mumbai (in short DCIT/ITO/ AO) for the A.Y. 2009-10 vide order dated 28.03.2016, under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
2. The only issue in these cross appeals of Revenue and assessee is as regards to the order of CIT(A) restricting the disallowance made on account of unconfirmed purchases to the extent of 25% of such purchases. For this Revenue has raised the following three grounds: - “1. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in restricting the disallowance made on account of unconfirmed purchases to 25%, of such confirmed purchases based on appellate orders for earlier years, without appreciating that the disallowance made ITAs No.422/Mum/2018 & 7265/Mum/2017 by the AO was after analyzing the facts of the case for year under consideration are different and distinguishable from the facts of the case of the earlier years.
Whether on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in restricting the disallowance made on account of unconfirmed purchases to 25% of such unconfirmed purchases based on appellate orders for earlier years, without appreciating that during the set aside proceedings, the assessee was not able to produce even one confirmation in respect of the purchase which were treated as unconfirmed purchases by AO.
3. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in relying on the orders of his predecessors in the case of the assessee for earlier years following the principal of consistency without appreciating that the disallowance made by the AO was after analyzing the facts of the case for year under consideration are different and distinguishable from the facts of the case of the earlier years and ITAs No.422/Mum/2018 & 7265/Mum/2017 that the principal of consistency is not applicable.”
The assessee has raised the following ground No. 1: -
1. The learned Commissioner of Income Tax (Appeals) has erred in law and on the facts of the case in restricting the disallowance of unverifiable purchases at 25% of the impugned purchases.”
Brief facts relating to the main issue was disallowance of unverified purchases amounting to 21,03,67,319/- The CIT(A) allowed relief of ₹ 15,91,06,139/- After giving effect to the order of CIT(A) dated 24.09.2013, the total income was revised at Rs. 2,98,25,401/-. The ITAT in appeal No. order dated 28/21/2014 remitted the issue back to the file of assessing officer for adjudication of the issue of purchase as directed in the order. The ITAT considered the facts as under: - “Out of the above, AO made addition of ₹ 21,03,67,319/- and breakup of the same qua the filing of the confirmations, old suppliers, new suppliers application of the assessee before the Revenue Authorities are as under:
Unreported / under reported purchases as per the AO order ₹ 21,03,67,319 ITAs No.422/Mum/2018 & 7265/Mum/2017 Less: Deleted by CIT(A) ₹ 53,25,000/- ₹ 20,50,42,319/- Less Confirmations filed before CIT(A)
₹ 16,67,31,569/- ₹ 3,83,10,750/- Less Purchase made in earlier years from same parties accepted as genuine ₹ 1,01,96,250/- ₹ 2,81,14,500/-.”
Finally, the ITAT directed the AO to allow assessee to file the confirmations and accordingly examine the same after granting reasonable opportunity of being heard to the assessee. The ITAT directed as under: - “Similarly, there is another set of old suppliers, which were also examined earlier years, which accounts for Ps. 1,01,96,250/-. These are the group of suppliers which were also accepted by the Revenue in the past as genuine suppliers However, the assessee has failed to file confirmations in support of those purchases. It is clear as to why the confirmations should not be furnished meaning thereby assessee (ailed to discharge the preliminary onus const onhim in matters of the purchases of this kind. AO should examine the same alter granting a reasonable ITAs No.422/Mum/2018 & 7265/Mum/2017 opportunity of being heard to the assessee and AO should specify the party wise reasons for failure to furnish the confirmations in accordance with the law. So far as the balance of purchases amounting to Rs. 2,81,14,5001-, we are of the opinion that it is an admitted position that the assessee does not have confirmations in this regard. They are the new suppliers. AO may examine the claim of the assessee and grant him an opportunity to substantiate the claim. We accordingly remand this matter to the files of the AO with above directions".”
The AO during the second round noted with regard to purchases amounting to ₹ 1,01,96,250/- and ₹ 2,81,14,500/- that no confirmation were filed by the assessee regarding verification of purchases and hence, the AO confirmed the unverifiable purchases amounting to ₹ 1,01,96,250/- and ₹ 2,81,14,500/-. As no confirmation were filed by the assessee regarding verification of purchases and the AO made addition of unverifiable purchases amounting to ₹ 3,83,10,750/-. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) noted that the assessee is unable to file confirmations in respect of unverifiable purchases in regard to old suppliers amounting to ₹ 1,01,96,250/- and new suppliers the disallowance to the extent of amounting to ₹ 2,81,14,500/-. Therefore, the CIT(A) restricted the disallowance at 25% of ITAs No.422/Mum/2018 & 7265/Mum/2017 unverifiable purchases of ₹ 3,83,10,750/- by observing in Para 5.1.1 to 5.1.3 as under: - “5.1.1 This relates to addition of Rs. 3,83,10,750/- on account of unverifiable purchase. In the instant case, the assessment was completed making addition on Rs 21,03,67,319/- on account of unverifiable purchases. The CIT(A) allowed a relief of Rs. 15,91,06,139/- vide order dated 24/09/2013. On appeal, the Hon’ble ITAT vide order dated 28.02.2014 in (copy placed on record) directed the Assessing Officer to give an opportunity to substantiate old suppliers amounting to Rs. 1,01,96,250/- and new suppliers amounting to Rs. 2,81,14,500/-. The Assessing Officer has quoted the relevant extract of order of Hon'ble ITAT at page 2-3 of his order. Thereafter, the Assessing Officer has observed that no confirmations were filed in respect of the two categories of purchases restored to him by Hon'ble ITAT and hence added back the amount again.
5.1.2 It is admitted position that the appellant has not been able to furnish confirmations for the amounts restored by Hon'ble ITAT to the Assessing Officer for verification. In earlier years, my Ld. Predecessor has restricted the ITAs No.422/Mum/2018 & 7265/Mum/2017 disallowance of unverifiable purchases at 25% of the impugned purchases. The appellant has contended that following the principle of consistency, disallowance it any, should be restricted to 25% of unverifiable purchases.
5.1.3 In the instant appeal, there is no material difference in the nature of facts relating to unverifiable purchases. Therefore, keeping in mind the principle of consistency enunciated in A Shah and Co. Vs C.IT, 30 ITR p.618 (Bom), I deem it fair to restrict the addition to 25% of Rs. 3,83,10,750/- on account of unverifiable purchases by the appellant. Without prejudice, the ground of appellant is allowed. Accordingly, this ground is partly allowed.”
Aggrieved, both came in appeal before us.