LATE SHARMISHTA MAFATLAL MEHTA,MUMBAI vs. COMMISSIONR OF INCOME TAX (A), NFAC , DELHI, MUMBAI
Facts
The Assessee is in appeal against the order of the CIT(A) which dismissed the appeal and enhanced income. The Assessee's late mother and husband passed away, and the son, as legal heir, took over the matters. The appeal was filed with a delay of 9 days due to challenges in receiving the order and filing. The delay was condoned. The core issue pertains to the disallowance of purchases claimed as bogus accommodation entries.
Held
The Tribunal noted that the previous order from the ITAT had directed the AO to provide an opportunity for cross-examination and a fair hearing. The Assessee contended that this opportunity was not granted by the AO and subsequent CIT(A). The Tribunal found merit in this contention. The Tribunal held that a proper hearing must include a fair opportunity for cross-examination and that the AO failed to provide this. The Tribunal also acknowledged that the genuineness of purchases could have been established if this opportunity was given.
Key Issues
Whether the Assessing Officer and CIT(A) erred in disallowing purchases without providing the Assessee an opportunity for cross-examination of vendors and a fair hearing, as directed by the Tribunal in a prior order.
Sections Cited
143(3), 254, 143(4), 147, 69C, 133(6), 142(1), 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, G BENCH, MUMBAI
Per Rahul Chaudhary, Judicial Member:
By way of the present appeal the Assessee has challenged the order, dated 14/09/2023, passed by the Learned Commissioner of Income Tax (Appeals)-57, Mumbai, [hereinafter referred to as the ‘CIT(A)’] for the Assessment Year 2010-11, whereby the Ld. CIT(A) had dismissed the appeal of the Assessee and enhanced the income assessed by the Assessing Officer, vide Order, dated 12/09/2019, passed under Section 143(3) read with Section 254 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), in pursuance of the directions issued by the Tribunal, vide Order, dated 30/12/2019, passed in ITA No. 1710/MUM/2017. 2. We note that there is a delay of 9 days in filing the appeal. In Assessment Year: 2010-11 the application, seeking condonation of delay, it has been stated that the Assessee (i.e. Late Mrs. Sharmista Maftlal Mehta) had passed away on 11/12/2020. Thereafter, on 31/07/2022, her husband (i.e. Late Mr. Maftlal Mehta) also passed away. Therefore, son of the Assessee (i.e. Mr. Hemant Maftlal Mehta) took over the pending matters/compliances relating to the Assessee. Since the physical copy of the order passed by CIT(A) was not served, her son, being the legal heirs, came to know about the order passed by the CIT(A) only on going through the Income Tax Business Application Portal. Soon thereafter, steps were taken to file the present Appeal. In the process, the time for filing the present appeal expired and the appeal could be filed only after the expiry of 9 days. It was contended on behalf of the Assessee that the delay in filing appeal was not intentional and had occurred on account of bonafide reasons. Therefore, the same be condoned. Learned Departmental representative, did not have any serious objections to condone the delay in filing the appeal on account of explanation provided. Accordingly, we condoned the delay of 9 days in filing the present Appeal as the Assessee has reasonable cause for not filing the Appeal within limitation. We now proceed to adjudicate the appeal on merits.
We note that the order, dated 14/09/2023, passed by the CIT(A), has been challenged on following grounds:
1(a) The Ld. CIT(A) NFAC, Delhi not justified in allowing the order passed by the ITO u/s. 27(3) (3) u/s. 143(3) read with Section 254 of Income Tax Act 1961 on 30.12.2019 which was time barred because the ITAT judgment for Remand back was pronounced vide order in ITAT No. 1780/MUM/2017 dated 23/10/2018. Order was passed after 14 months and 9 days without giving proper opportunity of hearing to the assessee. 1(b) The Ld. ITO 27(3)(3) neither issued any notice u/s 142(1) nor issued any show cause notice nor intimated his intention to complete assessment on 30.12.200 The Ld. ITO 27(3) (3)
2 Assessment Year: 2010-11 mentioned in body of AO that assessee has been given opportunity vide letter dt.27.12.2019, but the said notice was never served on the assessee. 1(c) The Ld. CIT(A) NFAC, Delhi did not even go through the documents available on record and simply relied on the order of the AO before finalizing this appeal. 1(d) The Ld. CIT(A) NFAC, Delhi not considered the facts that Ld. ITO 27(3)(3) never applied his mind, has not even send the confirmation notices u/s 133(6) to either of the suppliers before completing the assessment. 1(e) The Ld CIT(A) NFAC, Delhi not considered the fact that without purchase how sales can be affected? 1(f) The Ld. ITAT has specifically directed AO to give opportunity to cross examine the dealers. However AO has failed to give this opportunity to the assessee and still Ld CIT(A) NFAC, Delhi dismissed the appeal without giving any relief. 1(g) The Ld. CIT(A) not considered the facts that the Hon,ble ITAT deleted the adhoc additions fully in similar cases. We relied on the following judgments of higher forum………”
We have heard both the sides and perused material on record.
It is admitted position that this is the second round of litigation.
In the first round, reassessment proceedings were initiated against the Assessee on the basis of information received from the Director General Income Tax, (Investigation), Mumbai to the effect that the Assessee had accommodation entries for bogus purchase bills. The aforesaid reassessment proceedings culminate into order, dated 26/03/2014, passed under Section 143(3) read with Section 147 of the Act, whereby addition of INR.1,67,41,917/- was made in the hands of the Assessee under Section 69C of the Act holding the peak of aggregate purchases reflected in the name of alleged accommodation entry providers for bogus purchases as unexplained expenses. In the appeal preferred by the Assessee, the CIT(A) restricted the addition to 3 Assessment Year: 2010-11 INR 1,29,61,913/- being 25% of aggregate bogus purchasers of INR 5,18,47,653/-. Being aggrieved by aforesaid orders, both, the Assessee as well as the Revenue preferred the appeal before the Tribunal. Vide Order dated 15/09/2017, passed in ITA No. 1710/MUM/2017, the appeal preferred by the Revenue was dismissed, whereas in the appeal preferred by the Assessee (ITA No. 1780/MUM/2017), vide Order, dated 23/10/2018, the Tribunal sent back the issue to the file of the Assessing Officer with certain directions [reproduced in paragraph 11 below]
Pursuant to the above directions issued by the Tribunal, the Assessing Officer passed, order dated 30/12/2019, under Section 143(4) read with Section 254 of the Act, restricting the addition on account of the bogus purchases to INR 1,29,61,913/- being 25% of the aggregate bogus purchasers of INR 5,18,47,653/- by placing reliance on the order, dated 12/12/2016 passed by the CIT(A) in the first round and the order, dated 15/09/2017, passed by the Tribunal in ITA No. 1710/MUM/2021, whereby the appeal preferred by the Revenue against the aforesaid order of the CIT(A) was dismissed by the Tribunal.
Being aggrieved, the Assessee preferred appeal before the CIT(A) against the above order dated, 30/12/2019, passed by the Assessing Officer. The CIT(A) observed that the Assessee had failed to produce any documentary evidence to substantiate the identity of the parties and genuineness of purchase transactions. Therefore, the Assessing Officer was correct in concluding that 25% of the bogus purchase should be disallowed. However, the CIT(A), noted that the Assessing Officer had incorrectly calculated the quantum of disallowance of INR 37,80,004/- in place of 1,29,61,913/-, and, therefore, the CIT(A) enhanced the addition from 37,80,004/- to 1,29,61,913/- [being 25% of the alleged bogus purchasers aggregating to INR 5,18,47,653/-].
4 Assessment Year: 2010-11 The aforesaid order dated 30/12/2019 has been challenged by way of present appeal before the Tribunal on the grounds reproduced in paragraph 2 above.
Before us, it was contended on behalf of the Appellant that order passed by the Assessing Officer was bad in law, since the Assessing Officer had failed to comply with the directions issued by the Tribunal. The opportunity of cross examination of the alleged entry providers was not granted. It was further submitted that the Assessing Officer had not disturbed the sales and there could not be sales without purchase. The details/addresses of the suppliers/vendors were available on record. The Assessing Officer failed to send notices under Section 133(6) of the Act before passing order, dated 30/12/2019, under Section 143(3) read with Section 254 of the Act. It was also contended that neither notice under Section 142(1) of the Act nor any show cause was issued to the Assessee. While the aforesaid order, dated 30/12/2019, passed records that an opportunity was given to the Assessee vide letter, dated 27/12/2019. However, no such notice was ever served on the Assessee. It was contended that since the order had been passed by the Assessing Officer without granting opportunity of being heard. The Assessee should have been granted opportunity of being heard and also an opportunity of cross-examining the alleged accommodation entry providers as per directions issued by the Tribunal. It was vehemently contended on behalf of the Appellant that entire purchases were genuine and that the Appellant would be able to establish the same before the Assessing Officer in case reasonable opportunity of being heard and opportunity of cross-examination was granted to the Appellant as per the directions issued by the Tribunal.
Per contra, the Learned Departmental Representative, placed
5 Assessment Year: 2010-11 reliance upon the Order, dated 30/12/2019, passed under Section 143(3) read with Section 254 of the Act and submitted that in paragraph number 7 of the said order, the Assessing Officer, has clearly recorded that the Assessee had filed to furnish relevant documents/evidence and to produce the parties for cross examination as directed by the Tribunal. The onus was on the Assessee to prove genuineness of the expenditure claimed as deduction and for the same, the Assessee was granted an opportunity vide notice, dated 27/12/2019, to produce the parties and furnish relevant documents/details to verify the identity of the parties and prove the genuineness of the purchase transactions. However, Assessee failed to comply with the aforesaid notice and therefore, the Assessing Officer had no option but to pass the order on the basis of the material on record. It was further submitted that even during the appellate proceedings before the CIT(A), the Assessee had failed to substantiate the purchase transactions. The CIT(A) had categorically recorded that no further submissions were made before the CIT(A). Therefore, CIT(A) was correct in dismissing the appeal preferred by the Assessee. It was also submitted that there was no enhancement by the CIT(A) since the CIT(A) had merely corrected computational error made by the Assessing Officer.
Having given thoughtful consideration to the rival submissions and on perusal of material on record, we find that the directions issued by the Tribunal vide Order, dated 23/10/2018, passed in ITA No. 1780/Mum/2017, had attain finality. There is nothing on record to show that the aforesaid order passed by the Tribunal was challenged by the Revenue. On perusal of paragraph 7 of the aforesaid order, we find that the Tribunal had observed as under:
6 Assessment Year: 2010-11 “7. We have heard the rival submissions and perused the relevant materials on record. We deal with the 1st and 2nd ground of appeal together as they address a common issue. The reasons for our decisions are given below. We find that the notices issued u/s 133(6) by the AO to 24 parties calling for copy of the ledger account of the assessee, nature of goods sold, sample copy of bills issued, copy of delivery challans of goods dispatched along with transport bills, copy of bank statement were returned back by the postal authorities as unserved. Thereafter, the AO requested the assessee to produce the above parties along with their books of accounts for examination. The assessee failed to produce the above parties before the AO. We are of the considered view that the contentious issues in the instant case could be resolved by examining the above parties. It is the duty of the AO to enforce attendance of a witness if his evidence is material. At the same time the assessee must furnish the complete address of such person. A proper hearing must always include a fair opportunity to those who are parties in the controversy for correcting or contradicting anything prejudicial to their view. Cross-examination is allowed by procedural rules and evidently also by the rules of natural justice. Any witness who has been sworn on behalf of any party is liable to be cross-examined on behalf of the other party to She proceedings. The Hon'ble Supreme Court in State of Kerala vs. K.T. Shaduli Grocery Dealer AIR 1977 SC 1627, recognised the importance of oral evidence by holding that the opportunity to prove the correctness or completeness of the return necessarily carry with it the right to examine witnesses and that includes equally the right to cross- examine witnesses. In ITO vs. M. Pirai Choodi (2012) 20 taxmann.com 733 (SC), the Hon'ble Supreme Court has held that "Order of assessment passed without granting an opportunity to assessee to cross-examine, should not have been set aside by High Court; at most, High Court should have directed Assessing Officer to grant an opportunity to assessee to cross-examine concerned witness."
7 Assessment Year: 2010-11 The importance of cross-examination has been emphasized by the Hon'ble Bombay High Court in the case of Om Vinyls P. Ltd. vs. ITO [WP(L) No. 3114 of 2014]. There is no basis in the order of the Ld. CIT(A) in estimating the profit @ 25% in the case of a transaction in which the genuineness is not proved by the assessee. In view of the above, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to make a fresh assessment in the light of our observation hereinbefore after giving opportunity to the assessee to cross-examine the concerned parties. We also direct the assessee to file the relevant documents/evidence before the AO. Needless to say the AO would give reasonable opportunity of being heard to the assessee before finalizing the assessment order. Thus the 1st and 2nd ground of appeal are allowed for statistical purposes. In respect of the 3rd ground of appeal, we agree with the Ld. CIT(A) that the AO has failed to mention any specific ground while making an addition of Rs.2,58,637/- u/s. 68 of the Act. Thus we uphold the order of the Ld.CIT(A) and dismiss the 3rd ground of appeal. In the result, the appeal is partly allowed." (Emphasis Supplied)
On perusal of the above order, it can be seen that the Assessee was under obligation to file relevant documents/evidence before the Assessing Officer, while the Assessing Officer was required to grant to the Assessee an opportunity to cross examination of the relevant parties/suppliers as well as a reasonable opportunity of being heard to the Assessee. It is the case of the Appellant that neither reasonable opportunity of being heard nor opportunity of cross examination was granted to the Appellant. We find merit in the aforesaid contentions of the Appellant. During the course of hearing it was vehemently contended on behalf of the Appellant, that in case the same was granted to the Appellant, the genuineness of the purchases could have been established by the Appellant. Therefore, accepting the submissions made on behalf
8 Assessment Year: 2010-11 of the Appellant, we set aside the order, dated 14/09/2023, passed by the CIT(A) and the order, dated 30/12/2019, passed by the Assessing Officer under Section 143(3) read with Section 254 of the Act, and restore the issue back to the file of the Assessing Officer for passing order afresh after complying with the directions issued by the Tribunal, vide Order, dated 23/10/2018, passed in ITA No. 1780/Mum/2017 (reproduced in paragraph 11 above). During the course of hearing, it was contended on behalf of the Appellant that the relevant details of the parties were already available on record as the notices under Section 133(6) of the Act was issued by the Assessing Officer at the time of passing the assessment Order, dated 23/06/2014, passed under Section 143(3) read with Section 147 of the Act. However, we note that in paragraph 7 of the order, 23/10/2018, ITA No. 1780/Mum/2017 [reproduced in paragraph 11 above], the Tribunal has recorded that the notices issued to parties under Section 133(6) of the Act were returned unserved. Therefore, the Appellant is directed to furnish the names, addresses and Permanent Account Numbers of the parties listed in paragraph 5 of the order, dated 30/12/2019 passed under Section 143(3) read with Section 254 of the Act. However, it is clarified that once the complete address of the supplier/vendor is furnished by the Appellant, then as per the order, dated 23/10/2018, passed by the Tribunal in ITA No.1780/Mum/2017 (which has attained finality), it shall be duty of the Assessing Officer to enforce attendance of the supplier/vendor on whose statement reliance in sought to be placed by the Assessing Officer. The Assessing Officer shall grant reasonable opportunity of being heard to the Appellant. The Appellant would be at liberty to place before the Assessing Officer all documents/evidence to support the claim of genuineness of purchases. The Assessing Officer shall also be at liberty to carry out such verification/inquiry as the Assessing Officer may deem fit in this regard. In terms of the aforesaid, 9 Assessment Year: 2010-11 Ground No. 1(a) to (f) reproduced in paragraph 3 above are allowed for statistical purposes, while balance grounds are dismissed as being infructuous.
In result, in terms of paragraph 12 above, appeal preferred by the Assessee is allowed for statistical purposes.
Order pronounced on 27.08.2024. (Prashant Maharishi) Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 27.08.2024 Patil, Sr.P.S.
10 Assessment Year: 2010-11
आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त/ The CIT 4. प्रध न आयकर आय क्त / Pr.CIT 5. दिभ गीय प्रदिदनदध, आयकर अपीलीय अदधकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.
आिेश न स र/ BY ORDER, सत्य दपि प्रदि //// उप/सह यक पुंजीक र /(Dy./Asstt.
