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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Before: Shri A. T. Varkey, JM & Dr. A. L. Saini, AM]
This appeal preferred by the assessee is against the order of the Ld. CIT(A)-23, Kolkata dated 11.06.2018 for AY 2015-16.
The sole issue involved in this appeal of assessee is against the action of Ld. CIT(A) in confirming the addition of purchase as unexplained expenditure u/s. 69C of the Income- tax Act, 1961 (hereinafter referred to as the “Act”).
Briefly stated facts as observed by the AO are that during the assessment proceedings, the assessee was asked to furnish the details of purchases along with copies of purchase ledger. The assessee furnished reply vide letter dated 25.09.2017. Notices u/s. 133(6) of the Act were issued on test check basis to verify the veracity of the expense/purchases as claimed by the assessee. On examination of the replies received and material on records, the AO found that the purchase amount was overstated by an amount of Rs.16,96,686/-. According to AO, the assessee was not able to reconcile the difference in purchase amount. Thereafter, the assessee was show caused as to why the differential amount of Rs.16,96,686/- should not be disallowed. The assessee furnished reply vide letter dated 07.12.2017 and accepted the proposed disallowance of Rs.16,96,686/-. Accordingly, Bhojori Manna Restaurants India P. Ltd., AY 2015-16 the AO disallowed the purchase expenses amounting to Rs.16,96,686/- and added back the same to the total income of the assessee. Aggrieved, assessee preferred an appeal before the Ld. CIT(A), who confirmed the action of AO. Aggrieved, the assessee is before us.
4. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the AO in order to verify the veracity of the sundry creditors issued notices u/s. 133(6) of the Act and after receiving their replies has found the difference which has been added to the total income of the assessee. We note that when the assessee was confronted by the AO about the fact that there were certain discrepancies/differences in the amount as shown by the assessee as well as that of the sundry creditors, the assessee in turn had requested for the copy of the replies of the sundry creditors. However, the AO without furnishing any copy of the replies of the sundry creditors, the AO has made the addition which is in violation of the Natural Justice. In this case, the only adverse material in the hand of the AO to make the addition against the assessee was the replies he received from the sundry creditors pursuant to the notice issued u/s. 133(6) of the Act. So, when the assessee requested for a copy of the adverse material/reply of sundry creditors, the AO ought to have furnished a copy of the same. The AO cannot keep the assessee in the dark and use the material he collected against the assessee, so the order of AO is vitiated for non- adherence of Natural Justice. Therefore, we set aside the order of the Ld. CIT(A) and remand the matter back to the file of the AO to decide the issue de novo. We also direct the AO to furnish copies of the replies of the sundry creditors which was received by AO pursuant to sec. 133(6) notices so that the assessee would be able to defend/explain its stand in accordance to law. Therefore, on this limited issue, the AO is directed to frame fresh assessment as per law after hearing the assessee.
In the result, the appeal of assessee is allowed for statistical purposes.
Order is pronounced in the open court on 3rd January, 2020.
Sd/- Sd/- (Dr. A. L. Saini) (Aby. T. Varkey) Accountant Member Judicial Member Dated :3rd January, 2020 Jd.(Sr.P.S.)
Bhojori Manna Restaurants India P. Ltd., AY 2015-16 Copy of the order forwarded to:
Appellant – M/s. Bhojori Manna Restaurants India Pvt. Ltd.P-33, Phase- 1, Kasba Industrial Estate, Kasba, Kolkata-700107. Respondent – DCIT, Circle-8(1), Kolkata. 2 3. CIT(A)-23, Kolkata. (sent through e-mail)
CIT , Kolkata 5. DR, ITAT, Kolkata. (sent through e-mail)