SHAILESH D. MEHTA,MUMBAI vs. INCOME TAX OFFICER 17(3)(3), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य, राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार -PER RAJENDRA, AM- अनुसार Challenging the order dated 05/04/2017 of CIT(A)-28, Mumbai, the assessee has filed the present appeal.Assessee-company,is a whole-seller of Iron & Steel,filed its eturn of income on 28/09/2010 ,declaring total income at Rs.5.05 lakhs.The Assessing Officer (AO)completed assessment u/s.143(3)r.w.s.147 of the Act on 12/02/2016,determining the income of the assessee at Rs.90.85 lakhs. 2.Effective ground of appeal is about confirming addition of Rs. 85.79 lakhs.During the assessment proceedings,the AO received information from the investigation wing that certain parties were indulging in issuing bogus bills,that they were not supplied goods to the purchas -ers,that the Maharashtra VAT Department had prepared a list of such hawala dealers and the beneficiaries of such transactions.He directed the assessee to furnish details of purchases made from nine parties,amounting to Rs.6.86 crores.He further directed it to produce the parties along with the bills,delivery challans,payment details etc.for verification.The assessee did not produce the parties for confirmation of the purchases.However,it furnished copies of Ledger account,bills and bank statements.The AO had issued notices u/s.133 (6) of the Act. But,same remained unclaimed/unserved.The AO held that the suppliers were not genuine parties,that the onus to prove the purchases was on the assessee, that the purchases amounting to Rs.6,86,39,723/-remained unverifiable,that same were inflated and were debited to trading 4913/M/17-Shaillesh D.Mehta account to suppress the true profits.Estimating the GP percentage at 12.5,he made an addition of Rs.85,79, 965/-to the total income of the assessee. 3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA)and made submissions before him.After considering the available material,he referred to certain case laws.Relying upon an order of the Tribunal in the case of Kiran Navin Doshi(ITA/2601/Mum/2016,dated 18/01/2017),he confirmed the order of the AO. 4.During the course of hearing before us,the Authorised Representative (AR) contended that the assessee had purchased goods,that payments were made through banking channels,that it was a wholesale trader of Iron and steel,that it was maintaining regular stock register, that the books were audited, that no mistake was pointed out in the books maintained by it, that the FAA did not consider the submissions made by the assessee,that the GP returned by the assessee ranged between 0.5% - 0.7%, that the AO had not given any comparable for adopting GP rate of 12.5%.He referred to the case of Hiralal C.Jain( ITA/4547/M/2014,dtd. 01.01.2016;AY-09-10);M/s. Steel Line (India)(ITA/1321-1323/ Mum/ 2016)and stated that in similar type of cases the Tribunal had held that addition should be restricted to 2%.The DR stated that assessee had not produced the parties before the AO,that genuineness of the transactions was not proved. 5.We have heard the rival submissions.We find that while deciding the appeals the FAA has not passed speaking and reasoned order. In his 21 pages’order we do not find any logic as to why he was confirming the order of the AO.He has reproduced orders of various judicial authorities without mentioning as to how they were applicable to the facts of the present case. We do not want to mention as to how an FAA should write his order.But,we would like to mention that as an appellate authority,he should give the reasons for approving or rejecting the claim made before him.We would like to refer to the case of Buildwell Assam P.Ltd. (133 ITR 336),wherein the Hon’ble Gauhati High Court has held as under: “Section 250(6) of the I.T. Act, 1961, prescribes the manner of disposal of an appeal. An order must be in writing containing the points for determination and decision. The object is obvious. It enables a party to know the precise points decided in his favour or against him. Absence of formulation of points for decision or want of clarity in decision puts a party in a quandary. A decision against a party enables him to go up in appeal. A decision by its very nature must be firm and should not be vague and unclear. If there is a direction by the appellate authority to the ITO, the latter is bound to carry out the direction. Refusal to carry out a direction is a denial of justice and destructive of one of the basic principles in the administration of justice based on the hierarchy of the authorities. Therefore, when a subordinate authority is directed to carry out certain directions by a superior authority, the 2 4913/M/17-Shaillesh D.Mehta tenor and colour of the order of the superior authority must be firm, clear, certain, definite and without any ambiguity. Considering the fact that order of the FAA is not a reasoned order,we are of the opinion that, in the interest of justice,the matter should be restored to his file for passing a reasoned and speaking order.He is directed to afford a reasonable opportunity to assessee and to consider the material submitted before us by the assessee.Effective Ground of appeal is allowed in favour,of the assessee,in part.