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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI G. MANJUNATHA
Date of Hearing – 30.10.2017 Date of Order – 22.11.2017 O R D E R PER SAKTIJIT DEY, J.M.
Aforesaid appeal filed by the assessee is against the order dated 12th February 2015, passed by learned Commissioner (Appeals)–17, Mumbai, for the assessment year 2010–11.
Brief facts are, the assessee a partnership firm is engaged in the business of builder and developer of real estate, property dealer, etc. For the assessment year under dispute, assessee filed its return of income on 30th September 2010, declaring income of ` 4,42,39,520.
2 Karia Developers & Builders During the assessment proceedings, the Assessing Officer for verifying the purchases claimed to have been made by the assessee of ` 15.97 crore called for necessary details. After verifying the list of dealers from whom the assessee claimed to have made the purchases, the Assessing Officer issued notices under section 133(6) of the Act to the concerned parties to verify the genuineness of the purchases made by the assessee. As observed by the Assessing Officer, most of the notices issued under section 133(6) of the Act to some of the parties returned back un–served with the postal remark “not known”, “left”, etc. Though, few notices were served, however, there was no response. He further found that name of the concerned parties appears in the list of hawala dealers identified by the Sales Tax Department. He observed, the assessee was neither able to produce the concerned parties nor any confirmation from them towards the sales effected. He observed that before the Sales Tax authorities, the concerned parties have admitted of having provided accommodation bills only. He further alleged that the assessee was even not able to furnish quantitative details of purchases and sales. Thus, the Assessing Officer ultimately held that purchases worth ` 95,69,047, made from nine parties are not genuine, hence, added back to the income of the assessee. The Assessing Officer further held that in case of another three parties since notice issued under section 133(6) of the Act returned back un–served, the genuineness of such purchases could not 3 Karia Developers & Builders be verified. Accordingly, he added back further sum of ` 14,96,899. The assessee challenged the addition before the learned Commissioner (Appeals).
The learned Commissioner (Appeals) while upholding the additions made by the Assessing Officer made another addition of ` 95,690, on account of commission paid for obtaining bogus bills. Being aggrieved of the order of the learned Commissioner (Appeals), the assessee is in appeal before us.
Grounds no.1 to 5 are challenging the addition of ` 95,69,047, on account of bogus purchases. Grounds no.6 to 9 are challenging the addition of ` 14,96,899, towards unverifiable purchases and ground no.10 to 12 are on the addition made of ` 95,690 by the learned Commissioner (Appeals) on account of commission expenses for obtaining bogus bills.
Learned Authorised Representative submitted, the assessment order was passed without following due process of law. He submitted, though, the Assessing Officer relied upon the statement of the parties given before the Sales Tax authorities, however, neither such statements were provided to the assessee nor the assessee was given opportunity to cross–examine to them. Therefore, there is violation of rules of natural justice. He submitted, in the course of assessment
4 Karia Developers & Builders proceedings, the assessee had furnished purchase bills, bank statements, etc. to prove the genuineness of purchases. He submitted, one of the parties i.e., Gagangiri Transport from whom the assessee had purchased materials worth ` 14,47,892 had responded to the notice issued under section 133(6) and confirmed sales made by him. However, though, the evidence was produced before the learned Commissioner (Appeals), he did not take cognizance. As far as the addition made on account of commission expenses, the learned Authorised Representative submitted that by such additions, the learned Commissioner (Appeals) has enhanced income of the assessee without issuing notice for enhancement as per section 251(2) of the Act. Learned Authorised Representative submitted, the assessee has undertaken three projects and has declared profit at a very high rate of 23% to 25%. Therefore, without rejecting the books of account no disallowance of purchase can be made on the evidence of 3rd parties.
Learned Departmental Representative relied upon the order of the Assessing Officer.
We have heard rival contentions and perused the material available on record in the light of the decisions relied upon. As far as the issue of bogus purchases from alleged hawala dealers as identified by the Sales Tax Department, it is to be noted that the Assessing Officer has made addition by treating the purchases as bogus basically
5 Karia Developers & Builders for the reasons that the concerned parties have admitted before the Sales Tax authorities that they were providing accommodation bills only without actual delivery of goods. One more reason for making the addition by the Assessing Officer is, the notices issued under section 133(6) could not be served on the parties due to their own availability in given address. The Assessing Officer has further stated that the assessee was unable to prove the delivery of goods through documentary evidence. As against the aforesaid reasoning of the Assessing Officer the assessee’s contention is that adverse materials relied upon by the Assessing Officer such as the statement of third parties given before the Sales Tax authorities were never confronted to the assessee nor the assessee was given opportunity to cross examine them. It is the further contention of the assessee that documentary evidences like purchase invoices, bank statement evidencing payment made through cheque to the concerned parties were produced before the Assessing Officer. In our view, though, it may be a fact that the documentary evidence produced by the assessee may not be enough to prove the fact that purchases were made from the concerned parties. However, at the same time, it is necessary to examine whether the assessee could have achieved the sale turnover without such purchases. This aspect requires examination. Moreover, if any adverse material is relied upon by the Assessing Officer to make the addition, rules of natural justice require
6 Karia Developers & Builders not only confrontation of such adverse materials to the assessee but also a fair opportunity to the assessee to rebut those adverse materials. As it appears from the facts of the present case, no such opportunity has been given to the assessee. As far as the addition of ` 14,96,899 on account of bogus purchase is concerned, it has been contended before us on behalf of the assessee that after completion of assessment one of the parties has written a letter to the Assessing Officer confirming sales effected by him. As it appears, the aforesaid contention of the assessee has not been properly considered by the learned Commissioner (Appeals). As far as the addition of ` 95,690 is concerned, admittedly, the Assessing Officer has not made such addition while completing assessment. It is the first appellate authority who in the course of appellate proceeding has made the addition on account of alleged expenditure to have been incurred by the assessee towards commission for availing accommodation bills. Undisputedly, before making the disputed addition, learned Commissioner (Appeals) has not issued any show cause notice to the assessee. Since, the addition made by the learned Commissioner (Appeals) results in enhancement of income determined by the Assessing Officer, as per the mandate of section 251(2), the learned Commissioner (Appeals) should have given a show cause notice to the assessee before enhancing the income. The learned Commissioner (Appeals) having not followed the statutory mandate the addition cannot be sustained.
7 Karia Developers & Builders Therefore, on over all consideration of facts and material on record, we are of the considered view that all the issues raised by the assessee in the present appeal requires to be restored back to the Assessing Officer for denovo adjudication after providing reasonable opportunity of being heard to the assessee. We order accordingly. Grounds raised are allowed for statistical purposes.
In the result, assessee’s appeal is allowed for statistical purposes.
Order pronounced in the open Court on 22.11.2017