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Income Tax Appellate Tribunal, MUMBAI BENCH “I” MUMBAI
Before: SHRI C.N. PRASAD & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2004-05. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-I, Thane and arises out of the assessment completed u/s 143(3) r.w.s. 147 of the Income Tax Act 1961, (the ‘Act’).
The ground of appeal filed by the assessee reads as under: The Ld. CIT(A) grossly erred in confirming addition of Rs.68,78,995/- on alleged unexplained expenditure of purchase as per para 9 of the CIT(A) order.
3. Briefly stated, the facts of the case are that the assessee was the proprietor of M/s Lal Shah Overseas, a 100% export oriented unit. The said unit was granted permission by the Central Excise Department for manufacturing knitted fabrics, scarfs etc. subject to the condition that the unit should export its entire product. During the year under consideration, the assessee had shown purchases of duty free indigenous raw material totalling to Rs.2,31,61,985/-. The assessee also had made deemed exports valued at Rs.1,62,83,000/-. During the course of re-assessment proceedings, the AO asked the assessee to file relevant details of purchase, sale and payment made in respect of the same. The assessee expressed his inability to file any details on the ground that the officers of DGCEI, regional unit, Nasik had conducted a search and seizure action on the appellant on 09.04.2004 and had impounded all the documents, office books, registers etc. The AO was not convinced with the above explanation of the assessee, as it failed to file a copy of the audit report u/s 44AB. The AO further observed that the assessee failed to substantiate purchases amounting to Rs.2,31,61,985/-. Therefore, the AO made an addition of Rs.2,31,61,985/- 4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). During the course of appellate proceedings, the assessee filed documentary evidence in support of the purchases and a copy of the bank account with HDFC Bank, where the amount of sale was credited and the payments to the suppliers have been made. As it was an additional evidence, the Ld. CIT(A) forwarded the same to the AO to examine it and send a remand report.
After going through the remand report sent by the AO, the Ld. CIT(A) held that purchases had been made to the extent of Rs.2,31,61,985/- and the payment for the same stood explained to the extent of Rs.1,62,83,000/- only. As the assessee failed to explain the remaining amount, the Ld. CIT(A) restricted the addition made by AO as unexplained expenditure to Rs.68,78,985/-.
Before us, the Ld. counsel of the assessee files a copy of the (i) profit and loss account, (ii) confirmation of creditors namely Devyani Processors (P) Ltd. and Bhatapara Polytex P. Ltd. (iii) bank statement with HDFC Bank A/c No. 06700330000783 and bank book with narration. It is stated by him that on the basis of the above documents that there is no merit in the order of the Ld. CIT(A) in restricting the addition made by the AO on account of unexplained expenditure in respect of purchases to Rs.68,78,985/- and the same may be deleted.
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 reasons for our decisions are given below. Admittedly, the assessee failed to file a copy of the tax audit report u/s 44AB either before the AO or the Ld. CIT(A). A proper audit for tax purposes would ensure that the books of account and other records are properly maintained, that they faithfully reflect the income of the taxpayer and claims for deduction are correctly made by him. Such audit would also help in checking fraudulent practices. It can also facilitate the administration of tax laws by proper presentation of the accounts before the tax authorities and considerably saving the time of Assessing Officer in carrying out routine verifications, like checking correctness of totals and verifying whether purchases and sales are properly vouched or not. We find that the assessee filed a copy of confirmation from Devyani Processors P. Ltd. and Bhatapara Polytex P. Ltd. for the first time before the Tribunal. These documents are at page 161 to 162 of the Paper Book filed by the assessee. It is certified on behalf of the assessee that these were not produced before the lower authorities. We are of the considered view that the contentious issue of addition of Rs.68,78,995/- confirmed by the Ld. CIT(A) in the instant case can be resolved by examining the confirmations filed by the assessee from Devyani Processors P. Ltd. and Bhatapara Polytex P. Ltd. As these were not filed by the assessee either before the AO or the Ld. CIT(A), we deem it fit to set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO for a de novo assessment order after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant details before the AO. As the case has been restored to the file of the AO, we are not adverting to the case-laws relied on by the Ld. counsel.