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Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI
Before: Hon’ble Shri C.N. Prasad, & Shri AshwaniTaneja
आदेश / O R D E R Per AshwaniTaneja, A.M: This appeal has been filed by the Assessee against the order of Ld. CIT(A) dated 31/10/2013 passed against the assessment order for the Assessment Year 2009-10 dated 30/12/2011 under Section 143 (3) of the Income Tax Act, 1961. During the course of hearing, the assessee filed following revised grounds: “On the facts and circumstances of the case in law, the learned Commissioner of Income Tax (Appeals) 30 erred in making the addition of i. Rs. 3,81,12,345/- as bogus expenditure on labour charges, 2 M/s. Grace Property Associates a. Without any evidence. b. merely on the presumption that the profits were “siphoned off by raising bogus bills” c. although the payments were made by cheques d. although all the parties except one were examined on oath by the AO, and they affirmed the transactions. ii. Rs. 24,62,953/- as bogus expenditure/purchases of steel from Mass Enterprises merely on the basis of the Inspector’s erroneous report that no such firm existed, although Mass Enterprises had appeared before the AO in response to summons with the confirmation of material supplied to the assessee for which payments were made by cheque. iii. Rs. 79,70,250/- as bogus expenditure for removal of debris paid to M.M. Contractors merely on the ground that the party did not appear before the Assessing officer during the remand proceedings nor has filed any confirmation of transactions. Thereby making a total addition of Rs. 4,85,45,548/- without any evidence. The appellant craves leave to add, alter, modify or delete any of the above grounds of appeal
.”
2. Ld. DR did not raise any objection on relacement of these grounds with the grounds filed with the appeal memo. Therefore, this appeal shall be decided on the basis of these revised grounds only. The issues raised in all the three grounds as reproduced above pertain to disallowance of the various expenses debited by the assessee in the Profit and Loss Account, which remained unsubstantiated and unverified during the course of assessment proceedings, and therefore these were disallowed by the AO.
3. The brief background of the case is that assessee is a partnership firm and was engaged in the construction business during the year under consideration. During the course of assessment proceedings, the AO 3 M/s. Grace Property Associates conducted enquiries under section 133(6) with regard to the labour charges paid to the following 11 parties:- 1 Attaullah Ansari 1488693 2 Azhar Ahmed 1936855 3 Danish Ansari 952175 4 M I Electricals 893922 5 Nishant Ansari 954000 6 Shabnam Ansari 973500 7 Zeeshan Ansari 908500 8 Buildtech Group 1300000 9 R A construction 10800000 10 ANZ Construction 9000000 11 Andaz Engee & Contractors 8904700 Total 38112345 4. No satisfactory response was received by the AO from these parties; therefore payment made to these parties for an amount aggregating to Rs.3,81,12,345/- was disallowed. Similarly, the AO made enquiries with regard to the payment made to M/s. Mass Enterprises on account of purchase of Steel from the said party aggregating to Rs. 24,62,953/-. However, in absence of satisfactory response, this amount was also disallowed. Similarly, it was noted by the AO that the Assessee has paid an aggregating amount of Rs. 79,70,250/- to M/s. MM Contractors on account of lifting of debris, however, in absence of proper evidence this amount was also disallowed by the AO.
5. Being aggrieved, assessee filed the first appeal before Ld. CIT(A) and submitted that proper opportunity was not granted by the AO and the suppliers might have changed the address and therefore proper verification could not be made. Ld. CIT (A) called for the remand report from the AO after carrying out detailed examination from the said parties. Thereafter, AO carried out detailed examination of these parties and submitted its remand report dated 18/06/2013 wherein he 4 M/s. Grace Property Associates confirmed the factum to appearance of various parties, confirmation of transaction by these parties and also personal appearance and recording of statements of various suppliers. However, Ld. CIT(A) did not find the remand report as sufficient and reliable, and therefore he confirmed the disallowance made by the AO disregarding the remand report and raising various doubts and queries that remained unanswered in the remand report.
Being aggrieved, the assessee filed an appeal before the Tribunal. During the course of hearing before us, Ld. Counsel of the assessee took us through the detailed remand report submitted by the AO containing detailed analysis of all the enquiries done by the AO and claimed that these were concluded in favour of the assessee. He also expressed serious objection about various doubts and questions raised by the Learned CIT (A) on the authenticity of the remand report and lacuna and defects in the evidences submitted by the assessee as well as statements recorded by the AO. It was submitted by him that there was gross violation of principles of natural justice on the part of Ld. CIT(A), because without confronting the doubts and queries in his mind, Ld. CIT(A) disbelieved the evidences submitted by the assessee as well as those gathered by the AO. It was also submitted by him that Ld. CIT(A) ought to have put these queries to the assessee, and alternatively, Ld. CIT(A) could have called for another remand report from the Assessing Officer for answering whatever further queries came to the mind of Ld. CIT(A). Thus order passed by Ld. CIT(A) suffer with the inherent jurisdictional lacuna and has been passed in violation of principles of natural justice.
Per contra, Ld. DR appearing on behalf of the Revenue supported the orders passed by the AO and Ld. CIT(A) and requested for upholding 5 M/s. Grace Property Associates the same. However, in response to our query, she was not able to demonstrate whether the queries and doubts mentioned by the Ld. CIT(A) in the appeal order were ever put to the assessee during the course of remand proceedings by the AO or during the course of appellate proceedings by Ld. CIT(A).
We have gone through the orders passed by the lower authorities and remand report sent by the AO and also submissions made by both the sides before us. It is noted that AO perusal of remand report dated 18/06/2013 shows that detailed enquiries were made by the AO with respect to all the parties. The result of enquiries have been summarised by the AO in his aforesaid remand report and same is reproduced here under for the sake of ready reference:- 11. Without prejudice the findings of the remand report proceedings are as under- 11.1. During the course of remand proceeding assessee was asked to produce various service providers/vendors along with necessary evidences to establish the genuinensee of expenses claimed/disallowed during the course of assessment proceedings. The facts are summarized as under: LABOR CHARGES: Sr. Name of the party Amount Whether Docuemnts submitted No involved appeared 1. Attaullah Ansari 14,88,693/- Yes a. copy of ask. IT/VAT returns 2. Azhar Ahmed 19,36,855 Yes for the period b. Copy of running bills issued 3. R.A. Construction 1,08,00,000 Yes by Attuallah Asnari. Proprietor: Azhar C. Copy of audit report of Ahmed Above Mass enterprise (a proprietary concern) A.Y. 2009-10 A. copy of bills isses by Azhar Ahmed and R.A. Construction b. Confirmation of account of R.A. Construction c. Copy of Acknowledgement of return of income Audit 6 M/s. Grace Property Associates report and Computation –A.Y. 2009-10 4. Mohd. Danish 9,52,175/- Yes a. Copy of bills isuses by ANZ Ansari contractors & Md. Danish Ansari.
ANZ Contractors- 90,00,000 Yes Prop: Danish Ansari B. Confirmation of accountat of ANZ construction Above C. Copy of acknowledgement of return of income, Audit Report and Computation – A.Y. 2009-10 6. Nishant Ansari 9,54,000 Yes a. Copy of bills issues by 7. 89,04,700 Yes Andaz Engee & Contractors & Nishant Ansari. b. Confirmation of account of Andaz Engee Contractors/Nishant Ansari. c. Copy of acknowledgment of return of income, Audit report and computation 8. Zeeshan Ansari 9,08,500/- Yes a. Copy of bills raised by Zeeshan Ansari and Build – 9. Buildtech Group- 13,00,000 Prop Zeeshan tech Enterprises b. copy of account Ansari-Sr.8 c. Ack of return of Income-A.Y. 2009-10 10 M.I. Eletricals – 8,93,922/- Yes a. copy of bills raised by M.I. Prop. Mr. Eletricals. Mohammed Idris b. Copy of account of M. I. Mohd. Jamil Electricals. C. Copy of ack of return, B/s Capital A/C & P & L a/c. d. Copy of bank statement. 11 Shabname Ansari 9,73,500 Yes a. copy of bill issues by Shabnam Ansari. b. copy of account of Shabnam Ansari C. Copy of ack of return & Computation. d. Copy of bank statement Total 3,81,12,345 Material Purchased 12 Mass Enterprise- 24,62,953 Yes a. copy of ack IT/VAT returns 7 M/s. Grace Property Associates Prop. Attuallah for the period. Ansari-Sr. 1 b. Copy of renning bills issued by Attaullah Ansari c. Copy of bills issued by Mass Enterprises Debris Removal Chgs
M.M. Contractors 79,70,250 No Total 1,04,33,203 /- 11.2. All the parties who appeared confirmed the transaction with the assessee. The statements of all the parties were recorded. The copies of the statements recorded along with respective bank account statements are enclosed for reference. Except Mr. Mohammed Idris Mohd Jamil-prop of M/s. M.I. Electrical all witnesses are from same family and all the parties have given identical reason of change of address/non receipt of notice/summons in time for non appearance/non furnishing of details during the course of assessment proceeding. Further it is highlighted that neither any person on behalf of M.M. Contractors appeared nor filed any confirmation even now during the course of remand proceeding so this transaction remained unverified.
During the course of appeal before Ld. CIT(A), assessee submitted detailed reply to the remand report and also produced various evidences. However, Ld. CIT(A) was not satisfied with reply to the remand report and the evidences submitted by the assessee. Various doubts were raised by him while confirming the disallowance made by the AO. In the concluding part of the order, he summarised various queries that remained unanswered to resolve the dispute which are reproduced here under: “The above discussion can be summarised, as follows: i) The Appellant or the above 7 persons have not produced or filed any proof to show that they were engaged by the 8 M/s. Grace Property Associates appellant for the work for which payments have been allegedly made to them. ii) All the essential elements to examine the propriety of payment, viz. quotation of rate, offer letter acceptance letter, copy of contract, or the invoice or bill evidencing the quantitative work done by them and the rate which is applied for billing the work done, i.e. per sq. ft. or quantity wise in the invoice or bill, have not been produced either by the appellant or the above 7 persons. iii) There is no proof to show co-relation of the alleged payment for work done during the year or earlier year. iv) Not all amounts debited during the year have been paid. Some payments have been made in the subsequent year, but no details of the same have been furnished or provided. v) Almost all payments have been made in the months of February and March 2009. vi) The bank accounts of above 7 persons do not establish the receipt of the entire amount. In fact, no proof or evidence has been furnished to show as to when bill or invoice was raised, for which payments have been credited. vii) The appellant has not only used the current account, but also savings bank accounts of the above persons to siphon off profits of the firm. In fact, bank accounts of some of these persons had nominal balances, before high value cheques were credited to their accounts. viii) There is trail of withdrawal of accounts by way of self cheques immediately after the deposit of the amounts. An inference that can be safely drawn from this is that profits of the appellant’s firm were siphoned off by raising bogus bills and invoices and, making cheque payments and immediately after, withdrawing cash by way of self chequest from the bank accounts of the above persons in this cheques had been deposited.”
During the course of hearing it transpired that these queries or doubts were not put to the assessee by the Ld. CIT(A) before drawing adverse inferences and conclusions against the assessee. It is also noted by us that in case Ld. CIT(A) was not satisfied with the exercise done by the AO in the remand proceedings than he was within all his liberty to 9 M/s. Grace Property Associates get further examination done through AO. He was also within his liberty to make further enquiries himself from assessee directly. However, without choosing any of these options he drew adverse inferences and conclusions violating the principles of natural justice. In our opinion such an approach is unfair and unjustified. Therefore, we find it appropriate to send all the issues back to the file of the AO. The AO shall go through the order of Ld. CIT(A) and shall clear all doubts as have been raised by the Ld. CIT(A) in his appeal order by raising relevant queries to the assessee and shall give adequate opportunity of hearing to the assessee to submit requisite details, explanation and documentary evidences to clarify all doubts/queries. The assessee shall also be free to raise any legal or factual issues. The AO shall decide these issues afresh after considering entire material as may be placed on record by the assessee. With these directions all the grounds are sent back to the file of the AO and may be treated as allowed for statistical purposes.
In the result, appeal filed by the assessee is allowed for statistical purposes. Order was pronounced in the open court at the conclusion of hearing. Sd/- Sd/- (C.N. Prasad) (Ashwani Taneja) �ाियकसद�/JUDICIALMEMBER लेखा सद�य/ACCOUNTANT MEMBER मुंबईMumbai; �दनांक Dated : 28/02/2017 Rahul Dhoke, P.S/.�न.स.
10 M/s. Grace Property Associates