ARS SYSTEMS & COMMUNICATIONS LTD,NAVI MUMBAI vs. ITO 9(1)(1), MUMBAI

O R D E R PER RAM LAL NEGI, JM These are the cross appeals filed by the assessee and the revenue against order dated 17/05/2013 passed by the Ld. CIT (A)-19, Mumbai, for the assessment year 2005-06, whereby the Ld. CIT (A) has partly allowed the appeal filed by assessee against assessment order passed under section 143(3) read with section 254 of the Income Tax Act, 1961. (for short ‘the Act’) 2. Brief facts of the case are that the assessee company filed its return of income for the assessment year under consideration declaring the total income of Rs. 21,31,650/-. The return was processed u/s 143(3) of the Act and after making certain disallowances including disallowance of Rs. 51,86,235/- on account of unexplained expenditure u/s 69C r.w.s.133(6) of the Act. In first appeal, the Ld. CIT(A) confirmed the said disallowance. Against the order of the Ld. CIT(A), the assessee preferred second appeal before the ITAT. The ITAT set aside the issue to the file of AO for fresh adjudication in the light of the additional evidence produced by the assessee during the appellate proceedings before the Ld. CIT(A).

3. During set aside proceedings the assessee submitted the details called for by the AO. The AO issued notices under section 133(6) of the Act and on the basis of the responses of the parties concerned reduced the disallowance to Rs. 22,80,512/- and accordingly determined the total income of the assessee. The assessee challenged the assessment order before the CIT(A) in the second round of appeal. The Ld. CIT(A) after hearing the grievance of the assessee obtained remand report from the AO and passed order directing the Assessment Year: 2005-06 AO to delete the addition of Rs. 19,84,682/- made on account of purchases from four parties. Still aggrieved, the assessee is in appeal before the Tribunal. The assessee has raised the following effective grounds of appeal against the impugned order passed by the Ld. CIT (A):-

A) Addition u/s. 69C on account of alleged unaccounted expenditure – Rs. 2,95,995/- 1) “The learned Commissioner of Income Tax (Appeals)- 19, Mumbai [CIT (A)] erred on facts and in law in confirming the addition made by the Income Tax Officer- 9(1)-1, Mumbai (AO) u/s 69C to the extent of Rs. 2,95,995/- as under with respect to the difference in purchases shown by the appellant and by the seller parties: a) The Best- Rs. 2,83,511/- b) M/s S & S Exim- Rs. 4,165/- c) M/s Parasuram M. Badi – Rs. 8,319/- 2) The appellant prays that the addition of Rs. 2,95,995/- as made by the AO as under and as confirmed by the CIT (A) may be deleted: a) The Best- Rs. 2,83,511/- b) M/s S & S Exim- Rs. 4,165/- c) M/s Parasuram M. Badi – Rs. 8,319/- B) General 3) The above grounds of appeal are without prejudice to one another and the appellant craves leave to add, alter, amend, delete or modify any of the above grounds of appeal.”

4. Before us, the Ld. counsel for the assessee submitted that the assessee does not want to contest the addition of Rs. 4,165/-and Rs. 8,318/- made on account of purchases made from M/s S & S Exim and M/s Parasuram M. Badi respectively, for the reason that the amounts are too small. As regards the addition of Rs. 2,83,511/-made on account of purchases from The Best, the Ld. counsel submitted that the difference of Rs. 2,83,511/-noticed by the Assessment Year: 2005-06 AO is due to the reason that cheques for Rs. 2,65,011/- issued were not honoured and if the said amount is reduced from Rs. 2,83,511/-, there remains a difference of Rs. 18,500/-. The said difference is mainly on account of bill dated 1.4.2014 which seems to have been accounted in the name of some other party. The Ld. counsel further submitted that this aspect was not considered by the authorities below.

5. On the other hand the Ld. departmental representative (DR) relying on the assessment order passed by the AO submitted that there is no merit in the contention of the assessee. The assessee has failed to explain the difference in amounts mentioned by the assessee and the amounts mentioned by the parties concerned from whom the purchases were made. The Ld. DR further submitted that the department has filed cross appeal against the relief granted by the Ld. CIT(A) in respect of the purchases from the other parties.

1. “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) was right in admitting additional evidence in form of certificate from Bank wherein the Bank confirmed the payments made to the parties by the assessee company without allowing opportunity to the Assessing Officer as required under Rule 46A(3) of the IT Act?.

2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) was right in deleting the addition u/s 69C of the I.T. Act amounting to Rs. 19,84,682/- in respect of the purchases from the parties without appreciating the fact that the parties have not confirmed the sales to the assessee to this extent in their replies to the notices issued u/s 133 (6) by the Assessing Officer. Assessment Year: 2005-06

3. The appellant prays that the order of the CIT (A) on the grounds be set aside and that of the Assessing Officer be restored.

4. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.”