VIMAL M. LODHA,MUMBAI vs. ITO WD 25(2)(4), MUMBAI

The facts of the case, briefly, are as under: - 2.1 The assessee, proprietor of M/s. Sunder Shirtings, engaged in the business of trading in synthetic fabrics and textiles filed his return of income for A.Y. 2006-07 on 31.10.2006 declaring income of `1,38,673/-. The return was processed under section 143(1) of the Income Tax Act, 1961 (in short 'the Act') and the case was subsequently taken up for scrutiny. In the course of assessment proceedings, the Assessing Officer (AO) issued notices under section 133(6) of the Act to five parties, in order to verify the genuineness of the transactions carried out by the assessee, which were returned back unserved. The AO then required the assessee to give the correct addresses of these five parties and/or to produce the said five parties. On eliciting no response from the assessee in this regard, the AO proceeded to complete the assessment under section 143(3) of the Act vide Shri Vimal M. Lodha order dated 23.12.2003, estimating the GP @ 12% of turnover and further disallowed 50% of the expenses claimed after rejecting the assessee’s books of accounts. In this manner, the assessee’s income was determined at `7,86,092/-. 2.2 Aggrieved by the order of the assessment for A.Y. 2006-07 dated 23.12.2008, the assessee preferred an appeal before the CIT(A)-35, Mumbai. The learned CIT(A) dismissed the assessee’s appeal vide the impugned order dated 29.11.2012. 3.1 Aggrieved by the order of the CIT(A)-35, Mumbai dated 29.11.2012 for A.Y. 2006-07, the assessee has raised the following grounds of appeal: - “I. FIRST GROUND OF APPEAL: 1.1. The Learned Commissioner of Income Tax (Appeals) has erred in confirming the order of Assessing Officer (AO) rejecting the books of accounts of the Appellant with any express reason and conclusive evidence. 1.2. The Learned Commissioner of Income Tax (Appeals) failed to consider that the Assessing Officer can invoke provisions of section 145 in rejecting the books of accounts relating to method of accounting or being not satisfied about the correctness or completeness of the account of the Appellant.

On the facts and in the circumstances of the case and in law, the learned C.13(A) erred in observing "As regards the impact of this on the other Assessment Years, since these five parties were adversely commented upon by the A.O. in A.Y 2006-07 the A.O. is directed to go through the assessment records for A.Y. 200708,2008-09, & 2009-10 and consider to take remedial measures either u/s 148 or consider to submit a proposal before CIT-25, Mumbai for enhancement in assessment year 2007-08,2008-09 & 2009-10." 3.1.2 The learned A.R. for the assessee was heard in respect of the admission of additional grounds raised (supra). It was submitted that these grounds now sought to be raised are purely legal grounds that go to the root of the matter and were inadvertently omitted to be taken earlier. Placing reliance on the decision of the Hon'ble Apex Court in the case of National Thermal Power Corporation vs. CIT (229 ITR 383) (SC), it was prayed that the additional grounds raised be admitted for consideration and adjudication. 3.1.3 We have heard the rival contentions and carefully perused the additional grounds raised by the assessee. We are of the view that these grounds are purely legal grounds and would go to the root of the matter pertaining to this appeal. We also find that the additional grounds raised would not require examination of any fact not already on record. In these circumstances and in the interest of equity and justice, we admit these additional grounds raised (supra) for consideration and adjudication. 3.2.1 In respect of the grounds raised at S.Nos. 1 to 3 and the additional grounds of appeal (supra) the learned A.R. for the assessee was heard at length. At the outset it was submitted in respect of additional ground No. 2 that in the course of assessment proceedings, the AO, inter alia, issued notices under section 133(6) of the Act to the five parties, listed out on page 2 of the order of assessment, in order to verify the genuineness of purchase transaction, but the notices returned unserved. The AO then citing the failure of the assessee to produce the parties or furnish details in this Shri Vimal M. Lodha regard, rejected the assessee’s books of account under section 145 of the Act and proceeded to estimate the gross profit @12% of total sales and disallowed 50% of the expenses claimed. 3.2.2 It is submitted by the learned A.R. for the assessee that on appeal, the learned CIT(A), after considering the averments of the assessee, vide order dated 15.12.2009, remanded the issues raised and submission filed in the appeal before him to the file of the AO for examination/verification and report thereon. The learned A.R. for the assessee submitted that in the remand report dated 06.02.2012, the AO reported to the learned CIT(A) that since the assessee failed to avail, attend and comply with any of the opportunities provided to the assessee to submit details in this regard on 28.01.2010, 22.09.2011 and 31.01.2012, the assessee has no explanation to offer in respect of his claims and therefore the appeal may be decided on the basis of the material on record. The learned A.R. for the assessee contends that the above remand report of the AO is factually erroneous and misleading, as the details called for by the AO in remand proceedings were in fact furnished to the AO vide letter dated 08.09.2010. The learned A.R. for the assessee brought to the notice of the Bench that the enclosures vide letter dated 08.09.2010 placed before the AO, the same submission enclosed therewith are placed at page 41 to 210 of the assessee’s paper book. It was contended by the learned A.R. for the assessee that this can be ascertained by the Bench by calling for the records of assessment for A.Y. 2006-07. It is submitted by the learned A.R. for the assessee that these averments would clearly establish that, as contended in ground No. 2 of the additional grounds (supra), the learned CIT(A) erred in dismissing the assessee’s appeal without affording the assessee adequate opportunity of being heard in the matter since the authorities below had not examined and considered the aforesaid details furnished by the assessee before the learned CIT(A) in appellate proceedings and before the AO in remand proceedings. It is contended by the learned A.R. for the assessee that in the above factual matrix of the case, the orders of the authorities below ought to be set aside and the matter restored to the file of the AO for de novo adjudication in terms of ground No. 2 of the additional grounds raised.