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Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
1. This is an appeal filed by the assessee. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-28, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).
2. The 1st ground of appeal is general in nature. So we begin with the 2nd ground of appeal which is as under: i. The Ld. CIT(A) erred in confirming the action of the Ld. A.O. in making addition of Rs.34,26,754/- under section 40A(2)(b) of the Act without Amulakh Hatichand Vora appreciating the facts and circumstances of the case. Hence, the addition of Rs.34,26,754/- made under section 40A(2)(b) is unjustified and the same may be deleted, ii. The Ld. CIT(A) failed to appreciate the fact that the expenses of Rs.34,26,754/- have been incurred by the Appellant during the course of business activities and the same are supported with proper documentary evidences. Hence, the addition of Rs.34,26,754/- made under section 40A(2)(b) is unjustified and the same may be deleted.
3. Briefly stated, the facts are that during the course of assessment proceedings, the Assessing Officer (AO) issued notices u/s 133(6) to the commission agents to ascertain the genuineness of the transactions. The AO found that in the case of ten parties, the notices issued by him u/s 133(6) remained un-served and the assessee also failed to submit confirmation from them. The commission paid amounted to Rs.63,520/-.
Also the AO observed that the payment of commission to sons and near relatives as detailed below was not incurred for the purpose of business:
Sr. No. Name of Relatives Amount (Rs.)
Jignesh Vora (HUF) 3,53,987/-
Pinal Vora (HUF) 3,76,891/-
Pinal Vora 11,52,200/-
Rupesh Vora 4,730/-
Jignesh Vora 11,25,580/-
Rupesh Vora 2,49,846/- Total 33,63,234/- Thus the AO made and addition of Rs.34,26,754/- (Rs.33,63,234 + Rs.63,520). 4. In appeal, the Ld. CIT(A) agreed with findings of the AO and confirmed the addition of Rs.34,26,754/-. 5. Before us, the Ld. counsel of the assessee submits that the said expenses of Rs.34,26,754/- are supported with proper documentary evidence and hence the disallowance made u/s 40A(2)(b) is unjustified. The Ld. counsel also refers to the Paper Book (P/B) filed before the Tribunal containing inter alia (i) copy of letter dated 11.12.2013 filed by Jignesh A Vora (HUF) in response to the notice u/s 133(6) along with IT return, Bank Statement and Commission invoice, (ii) copy of letter dated 11.12.2013 filed by Pinal A Vora (HUF) in response to the notice u/s 133(6) along with IT return, Bank Statement and Commission invoice, (iii) copy of letter dated 11.12.2013 filed by Pinal A Vora in response to the notice u/s 133(6) along with IT return, Bank Statement and Commission invoice, (iv) copy of letter dated 11.12.2013 filed by Rupesh A Vora (HUF) in response to the notice u/s 133(6) along with IT return, Bank Statement and Commission invoice, (v) copy of letter dated 11.12.2013 filed by Jignesh A Vora in response to the notice u/s 133(6) along with IT return, Bank Statement and Commission invoice and (vi) copy of letter dated 11.12.2013 filed by Rupesh A Vora (HUF) in Amulakh Hatichand Vora 133(6) along with IT return, Bank Statement and Commission invoice. On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A). 6. We have heard the rival submissions and perused the relevant materials on record. We are of the considered view that the disallowance made by the AO of payment of commission and brokerage needs verification. Therefore, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to make an order afresh after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the AO. Thus the 2nd ground of appeal
is allowed for statistical purposes.
7. The 3rd ground of appeal i. The Ld. CIT(A) erred in confirming the action of Ld. A.O, in making addition of Rs.29,48,332/- being purchases made during the previous year relevant to impugned assessment year by treating the same as bogus without appreciating the facts and circumstances of the case. Hence, the estimation of profit amounting to Rs.29,48,332/- on alleged bogus purchases is unjustified and the same may be deleted. ii. The Ld. CIT(A) failed to appreciate that the material purchased during the year are duly accounted in the book of the Appellant and the same are supported by proper documentary evidences. The said material was subsequently sold by the Appellant and the profit earned thereon is offered for tax. Hence, the addition of Rs.29,48,332/- by treating the purchases as bogus is unjustified and the same may be deleted.
Amulakh Hatichand Vora iii. The Ld. CIT(A) further, failed to the appreciate that the Ld. A.O. has neither rejected the books of accounts of the Appellant nor pointed any discrepancies in the same. The Ld. A.O. also accepted the sales made during the year. Hence, the addition (if Rs.29,48,332/- is unjustified and the same may be deleted. iv. Without prejudice to the above the Ld. CIT (A) erred in upholding the action of Ld. A.O. by treating the purchases as bogus on the basis of the certain information received from Sales Tax Department without providing the Appellant an opportunity to cross examine the persons relying on whose statement an adverse inference has been drawn against the Appellant. Hence, the addition of Rs.29,48,332/- is unjustified and the same may be deleted.
The AO noted that the assessee was involved in bogus billings without delivery of goods as reported by the Sales Tax Department, Government of Maharashtra. In order to verify the genuineness of purchases, the AO issued notice u/s 133(6) to the parties in the address given by the assessee. However, the notices were either returned by the postal authorities or no reply was received from those parties. The AO apprised these facts to the Authorized Representative of the assessee. However, neither the new address of the parties were furnished nor these parties were produced before the AO along with confirmation of accounts. Also the AO found that in some cases, the liability has ceased to exist. Therefore, the AO made an addition of Rs.29,48,332/-.
In appeal, the Ld. CIT(A) followed his order for the earlier assessment year and confirmed the addition of Rs.29,48,332/- made by the AO.
Amulakh Hatichand Vora
Before us, the Ld. counsel of the assessee submits that merely on the basis of the findings that the notices issued u/s 133(6) were returned back by the postal authorities in some cases and no reply was received in some cases would not be a ground to make a disallowance of Rs.29,48,332/-.
On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A).
We have heard the rival submissions and perused the relevant materials on record. The nature of business of the assessee in the present case is that of a supplier and stockiest of pipes and tubes. Similar issue arose in the case of the assessee in AY 2010-11 (ITA No. 520/Mum/2015). The Tribunal vide order dated 14.09.2017 held as under :