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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO & SHRI PAWAN SINGH
PER D. KARUNAKARA RAO, AM: This is the appeal by the assessee against the order of CIT (A) - 33 Mumbai dated 28. 3. 2011 for the assessment year 2007-08. The only issue raised in this appeal relates to the addition of Rs. 36,03,196/- u/s 69C of the Act. The ground raised in this appeal reads as under: – “on the facts and in the circumstances of the case the CIT(A) Mumbai erred in law in confirming addition made of Rs. 36,03,196/- of the Act in order of assessment passed without affording real under reasonable opportunity to the appellant to prove the purchases debited to the profit and loss account.”
Briefly stated relevant facts of this case include that the assessee is a proprietor of M/s Kreisel Pumps, which is engaged in the business of manufacturing of pumps and spares. During the proceedings, AO noticed sharp fall in the GP from 20.2% ( AY 2006-
07) to 18.7%. AO invoked the provisions of section 133 (6) of the Act and examined the purchases in the P&L Account. Eventually, AO made addition of Rs. 36,30,196/- on account of „unexplained expenditure‟ u/s 69C of the Act in the assessment order dated 30th December 2009. Aggrieved with the above addition, assessee filed the appeal before the CIT (A).
During the proceedings before the CIT (A), assessee filed confirmation letters supporting the claims of purchases. With regard to aforementioned addition made by the AO, it is submitted the said purchases were made from M/s. Navkar Enterprise (Rs. 10,76,541/-) and M/s. Manav Impex (Rs 26,78,409/-). The CIT (A) remanded these conformations to the AO for his report. AO furnished his reply dated 28th February 2011 to the CIT (A). In his report, AO narrated the non-cooperative attitude of the assessee and highlighted the repeated adjournments during the remand proceedings. Eventually, considering the above report of the AO (supra), the CIT (A) concluded his proceedings by conforming the additions made by the AO on account of bogus purchases. Para 5.4 of the CIT (A)‟s order is relevant and the same reads as under: – “5. 4. In view of this, I understand that appellant has been purposely avoiding verification from the AO and has chosen not to cooperate. In view of the fact that more than sufficient time has been given from the date of demanding the matter ie 29 September 2010 till the date of remand ie 28th February 2011. In view of this I‟m convinced that appellant has nothing to contradict the findings made by the AO during the assessment order passed after necessary verification and due enquiry conducted through Ward Inspector which revealed that these parties could not be traced on the addresses given. Consequently, then assessee was appraised of this and asked by the AO to produce the parties whose statements were recorded by the Assessing Officer and it was found that they are only dummies. The Assessing Officer has discussed this issue at length before concluding that these parties have been utilised only for creating bogus purchases as brought out in Para three of the assessment order reproduced above already. Hence I‟m convinced that appellant is pure purposely trying to avoid the verification. Accordingly addition made for the amount of Rs. 30,63,196/- under the head bogus purchase is sustained as such.” Aggrieved with the above decision of the CIT (A), the assessee is in appeal before the Tribunal raising the ground already extracted above.
Before us, Ld Counsel for the assessee narrated the above facts of the case and submitted that the CIT (A) completed the first appellate proceedings without relying on the proper remand report of the AO. He has not utilised the confirmation letters which are genuinely given by the sellers of the raw material. As raised in the ground, proper
opportunity was not granted by this CIT (A). CIT (A) did not pass a proper order going into the genuineness of the purchases, phenomenal increase in the GP rates for the year under consideration with huge additions made by the AO etc. Order of the CIT (A) cannot be considered as a speaking order as it is completely dependent on the order of the AO which is challenged by the assessee. Bringing our attention to page 194, 195 and 196 of the paper book, Ld Counsel submitted these papers reflect on the GP rates among the three assessment years with and without additions made by the AO in assessment year 2007-08. The GP rates of 35.40% and 40.04% were never reported by the assessee in the past. The GP rates revolve around 20.29% and 20.25% in the assessment years 2005-06 and 2006-07. From the paper book, Ld Counsel for assessee brought our attention to the copies of relevant invoices and the bank extracts and the payments to sellers.
Per contra, ld DR for the revenue relied heavily on the order of the AO and the CIT (A) as well as the documents furnished for the first time before the first appellate authority – CIT (A). He also relied on the outcome of the proceedings invoked by the AO u/s 133 (6) of the Act. He also highlighted the non-cooperative attitude of the assessee during the remand proceedings before the AO.
We heard both the parties on the issue of addition u/s 69C of the Act. The case of the assessee includes, with the above said addition of Rs. 36,03,196/-, the GP rate has gone up phenomenally high, which was never reported by the assessee in the past. The CIT (A) ignored this fact while confirming the addition of the AO without giving appropriate explanation for this high GP rates. The said appeal did not give any finding of fact on the genuineness of the confirmation letters furnished by the assessee before him. She has not commented on the banking transactions, underpayments of money paid by the assessee to banks to the sellers. Further, it is the case of the assessee that the CIT (A) did not grant any fair and reasonable opportunity to the assessee before the first appellate proceedings were concluded. Considering these aspects, we are of the opinion that the order of the CIT (A) cannot be considered as a speaking order as it does not produce sufficient light on the issues narrated in this paragraph above.
Assessee has some explanation for his non-attendance before the AO, during remand proceedings, which were completely ignored by the AO and the CIT (A). The contents of Para 5.2 of the impugned order throw some light on the number of such adjournments in the reasons mentioned by the assessee before the AO during remand proceedings. In all fairness, we are of the opinion that this issue should be remanded to the file of the AO with the direction to the Assessing Officer to complete the proceedings de novo restricting to the addition made u/s 69C of the Act. In the set aside proceedings, the Assessing Officer shall consider all the evidence furnished by the assessee before the conclusion of proceedings. It is our direction to the assessee also to comply with the notices of the Assessing Officer and avoid frivolous adjournments, if any. AO should also entertain any other evidence that may be necessary, in his opinion, for proper adjudication of this issue under consideration. He shall not reject them for one reason or other. With these directions, we set aside the issue raised in the ground to the file of the AO for fresh examination and decision. AO shall grant reasonable opportunity of being heard to the assessee in accordance with the set principles of natural justice. Accordingly, the ground raised by the assessee is allowed for statistical purpose.
In the result, appeal of the assessee is allowed for statistical purposes. Order is pronounced in the open court on 22nd April, 2016. (PAWAN SINGH) ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक 22.4.2016 व.नन.स./ OKK , Sr. PS आदेश की प्रतिलऱपि अग्रेपिि/Copy of the Order forwarded to : 1. अऩीराथी / The Appellant 2. प्रत्मथी / The Respondent. आमकय आमुक्त(अऩीर) / The CIT(A)- 3. 5 आमकय आमुक्त / CIT 4. ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR,
ITAT, Mumbai गार्ड पाईर / Guard file. 6. सत्मावऩत प्रनत ////
आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt.