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Income Tax Appellate Tribunal, B Bench, Mumbai
O R D E R
Per R.C. Sharma, AM
This appeal has been filed by the assessee against the order of the CIT(A)-1, Thane dated 06.03.2017 for A.Y. 2012-13, in the matter of order passed under Section 144 of the Income Tax Act (hereinafter “the Act”).
The grounds taken by the assessee reads as under: - “1. The Hon'ble CIT(A) has erred in fact and in law in confirming the addition of Rs.30,67,058/- by estimating 25% of purchases of Rs.89,01,719/-, 25% of labor charges of Rs.9,65.648/- and also confirming estimation of 25% of indirect expenses ofRs.23,97,082/-. 2. The Hon'ble CIT(A) has erred in fact and in law in determining the unproved purchases of Rs.89,01,719/-.
The Hon'ble CIT(A) has erred in fact and in law in confirming the addition and estimation at 25% of expenses of labor charges of Rs.9,65,648/- and also confirming and estimating 25% on indirect expenses of Rs.23,97,082/-.” 3. The brief facts of the case are that the assessee is engaged in trading of jewellery items. The return of income filed by the assessee was Shri Nirmal Champalal Jain taken under scrutiny, various notices were issued for scrutiny, but nobody attended. Therefore the AO completed the assessment under Section 144 of the Act. It appears that assessee has suffered heavy loss in the business, therefore the same was closed down, therefore assessee could not reply the queries raised by the AO nor appeared before him. Accordingly the AO disallowed 25% of purchases, labour charges and indirect expenses. The AO also made an addition of Rs.1,14,96,201/- and interest thereon of Rs.13,80,436/-. An addition of Rs.1,28,880/- was also made under Section 69B of the Act.
Against the order of the AO assessee approaches the CIT(A) and during the course of appellate proceedings the assessee has filed additional evidence, which was sent by him to the AO for his remand report. In the remand report dated 06.12.2016 the AO stated that notices were issued under Section 133(6) to the parties from whom assessee has made purchases and also to the loan creditors. The remand report so sent by the AO reads as under: -
Sr. Remarks Nature of Amount of Name of parties No transaction transaction I Purchases 5,86, 1 92/- M/s. Spectrum Notice return Jewellery Ltd. undelivered by post with remarks left. 2 Purchases 2, 05,35 3/- M/s. Rishabh In response to Jewellers notice u/s. 133 (6), party submitted Ledger, Bank statement 3 M/s. Jayam & Co. Purchases 1,60,143/- Notice return undelivered by postal authority with remarks Not found. 4 Purchases 141,44,012/- In response to M/s. Namrata Jewellers notice u/s. 133(6), party submitted Ledger, Bank statement 5 Shri Dinesh C. Jain Oan 6,50,0007- In response to notice u/s. 133(6), party submitted Ledger, Bank statement 6 Purchases 17,23,550/- M/s. Sangam In response to Jewellers notice u/s. 133(6), party submitted Ledger, Bank
Shri Nirmal Champalal Jain statement
7 Purchases 11,53,900/- M/s. Mayur In response to GoldPvt. Ltd. notice u/s. 133(6), party submitted Ledger, Bank statement copy ofbilh. However, the sale reported by the party is of Rs.12,51,900/- for the F.Y. 2011-12. 8 M/s. Siddhi Purchases 35,00,000/ In response to Jewellers - notice u/s. 133(6), party submitted Ledger, Bills, Bank statement. The transaction proved genuine. 9 M/s. Sai Gold Purchases 12,51,412/ Notice return - undelivered by postal authority without remarks. 10 M/s. S.M. Purchases 5,24,442/- Notice served, but Arvindkumar reply not received. Jewellers Pvt. Ltd. To sum up the confirmation received by this office : S.NO. Name of parties Nature of Amount of transaction transaction (Rs.) 1 M/s. Rishabh Jewellers Purchases 2,05,353/- 2 M/s. Namrata Jewellers Purchases 1,41,44,012/- 3 M/s. Sangam Jewellers Purchases 17,23,550 /- 4 M/s. Mayur GoldPvt. Ltd. Purchases 11,53,900/- 5 M/s. Siddhi Jewellers Purchases 35,00,000/- Total 2,07,26,815/-
Rest of the parties has not directly confirmed the transaction. Hence, out of RD purchase shown of Rs.2,27,47,863/-, purchase of Rs.20,21,048/- has remained unverified by direct verification. However, assessee has submitted confirmation from all parties during remand proceedings. Assessee has not given any proof for genuineness of URD purchase. Further, addition was made on account of unproved labour expense and indirect expense. Assessee neither during assessment proceedings nor during remand proceedings submitted any details of these expenses. Assessee has claimed before Ld CIT(A) that complete details with respect of labour expense and indirect expense were available and therefore, the Shri Nirmal Champalal Jain disallowance was not called for on this account. However, assessee apart from submitting bank statement have given no such details. Hence, these expenses have remained unverified and should be treated as non-genuine.”
The assessee has also filed rejoinder wherein it was submitted that all the details of purchases and other expenses have been filed and were again filed during the remand proceedings. However, not impressed by the remand report the CIT(A) confirmed the addition to the extent of 25% of the alleged purchases, labour charges and indirect expenses. However, considering the remand report the CIT(A) deleted the addition made on account of loan creditors. Assessee is in further appeal before us for the disallowance of purchases and other expenses. We observe that exparte assessment order was passed by AO. Therefore, during remand proceedings the AO has not properly appreciated the additional documents filed by assessee to support the genuineness of purchases. We also observe that even remand report was not considered and acted upon by CIT(A) in proper perspective.
Considering the totality of facts and the documents filed by the assessee to support the expenditure on account of purchase, labour charges and indirect expenses, we restore the matter back to the file of the AO for deciding it afresh. Needless to say that the assessee should be given due opportunity before deciding the issue.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 18th May, 2018.