ITO 27(2)(2), NAVI MUMBAI vs. MANISHA HEMANT MEHTA, MUMBAI

ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the Revenue. The relevant assessment year is 2010-11. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-25, Mumbai and arises out of the assessment completed u/s 143(3) r.w.s. 148 of the Income Tax Act 1961, (the ‘Act’). 2. The grounds of appeal filed by the Revenue read as under:

1. On the facts and circumstances of the case the Ld. CIT(A) erred in deleting the addition of Rs.90,56,115/- on account of bogus purchases, without Smt. Manisha Hemant Mehta appreciating the fact that the assessee has failed to produce bills, vouchers and other documentary evidence in support of his claim.

2. On the facts and circumstances of the case the Ld. CIT(A) erred in estimating the profit from hawala purchases by disallowing only 25% of the bogus purchases, as even the basic onus of producing bill of purchases ledger account, transport bills delivery challans was not fulfilled by the assessee.

3. On the facts and circumstances of the case the Ld. CIT(A) erred in deleting the addition of Rs.2,58,637/- on account of cash credit u/s 68 of the I.T. Act, 1961.

4. The appellant pray that the order of the Ld. CIT(A) on the above grounds be reserved and that of the Assessing Officer be restored.

3. Briefly stated, the facts of the case are that the assessee filed her return of income for the AY 2010-11 on 12.10.2010 declaring total income of Rs.3,23,230/-. The return of income was processed u/s 143(1). Then the Department conducted a survey u/s 133A in the business premises of the assessee on 22.01.2013. During the course of survey, it was found that the assessee had made purchases from the parties who were held as bogus by the Sales Tax Department, Government of Maharashtra. Then the Assessing Officer (AO) issued notice u/s 148 to reopen the assessment done u/s 143(1). During the course of reassessment proceedings, the AO issued notice u/s 133(6) to 24 parties from whom the assessee had made purchases in order to verify the genuineness of transactions. These notices were returned back by the postal authorities as unserved. The AO then requested the assessee to produce the above parties along with copy of ledger account, bills, bank statement for verification. It is found that the assessee failed to produce the above parties before the AO for examination. The Smt. Manisha Hemant Mehta AO evidence of the purchases like delivery challans, transport bills etc. In view of the above, the AO made an addition of Rs.2,08,70,690/- as unexplained expenditure u/s 69C. 3.1 The AO on perusal of the capital account found that the assessee had introduced fresh capital of Rs.2,58,639/-. It consisted of introduction of new capital of Rs.1,75,000/- and FD maturity of Rs.83,637/-. The AO was not convinced with the source of the above amount and therefore, made an addition of Rs.2,58,637/- as unexplained cash credit u/s 68 of the Act.

4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that the Ld. CIT(A) has followed the decision in the case of Vijay Proteins Pvt. Ltd. vs. CIT 58 ITD 428 and restricted the disallowance to 25% on such alleged bogus purchases. However, in the case of the addition of Rs.2,58,637/- made by the AO as unexplained cash credit u/s 68, the Ld. CIT(A) deleted the same on the reason that no specific ground has been made by the AO in the assessment order.

5. Before us, the Ld. DR submits that as the assessee failed to produce before the AO the 24 parties and also failed to file delivery challans, transport bills etc., the Ld. CIT(A) should have confirmed the total disallowance of Rs.2,08,70,690/-. The DR also submits that the Ld. CIT(A) should have confirmed the addition of Rs.2,58,637/- made by the AO as unexplained cash credit Smt. Manisha Hemant Mehta 68 as the assessee failed to file the corroborative evidence before the AO.

6. On the other hand, the Ld. counsel of the assessee submits that the assessee had submitted the corresponding details before the AO. He submits that the goods were received and entered into stock register and the corresponding sales were accounted. Since the sales were not suspect, no one could doubt about the purchases. In respect of the addition made by the AO of Rs.2,58,637/- u/s 68 as unexplained cash credit, the Ld. counsel relied on the order of the Ld. CIT(A).

Smt. Manisha Hemant Mehta 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.

8. 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.