A C I T - 7(3), Mumbai v. M/s. Vasant Construction Company (I)
[Citation -2016-LL-0928-59]

Citation 2016-LL-0928-59
Appellant Name A C I T - 7(3), Mumbai
Respondent Name M/s. Vasant Construction Company (I)
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 28/09/2016
Assessment Year 2010-11
Judgment View Judgment
Keyword Tags opportunity of being heard • reasonable opportunity • imposition of penalty • additional evidence • additional income • civil contractor • new ground
Bot Summary: The assessee s above explanations and evidences furnished did not find favour with the AO, who was of the view that since the assessee was unable to produce the parties for verification and relying on the enquiries conducted by the Sales Tax authorities, held that these purchases were bogus and the assessee had failed to establish the genuineness of these purchases amounting to 63,70,684/- and disallowed the same. Ground No. 3: 4.2.2 At the outset, the learned D.R. was heard in respect of ground No. 3 in which it was contended that the learned CIT(A) had erred in admitting additional evidences in violation of Rule 46A of the I.T. Rules, 1962 without affording the AO any opportunity to verify and rebut the same before adjudicating the matter of bogus purchases and therefore the impugned order of the learned CIT(A) is not sustainable. According to the 4 ITA No. 251/Mum/2015 M/s. Vasant Construction Compnay learned D.R., even though the learned CIT(A) had not specifically mentioned admission of any additional evidence, it is clear from the impugned order that the assessee had infact adduced additional evidences in the form of filing various documents, inter alia, in respect of the purchases from these three parties that resulted in the learned CIT(A) deciding the appeal partly in favour of the assessee. The learned D.R. drew the attention of the Bench to the paper book-I filed by the assessee vide letter dated 12.08.2016 containing items at Sr. No. 1 to 11 consisting of pages 1 to 346; wherein the assessee has certified that only items at Sr. No. 1 to 3 have been filed before the AO and that items at Sr. No. 4 to 11 been filed before the learned CIT(A) only. 4.3 Per contra, the learned A.R. for the assessee supported the impugned order of the learned CIT(A) as being in order in all respects. The Deputy Commissioner or, as the case may be, the Commissioner shall not take into account any evidence produced under sub-rule unless the Assessing Officer has been allowed a reasonable opportunity to examine the evidence or document or to cross-examine the witness produced by the appellant, or to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. 4.4.3 In the case on hand, as contended by the learned D.R., we find that the learned CIT(A) has infact admitted additional evidence put forth by the assessee as admitted by the assessee in certifying its paper book-I that only details at Sr. No. 1 to 3 were filed before the AO and that the details/documents at Sr. HO. 4 to 11 were filed only before the learned CIT(A).


IN INCOME TAX APPELLATE TRIBUNAL "F" Bench, Mumbai Before Shri Jason P. Boaz, Accountant Member and Shri Sandeep Gosain, Judicial Member ITA No. 251/Mum/2015 (Assessment Year:2010-11) C I T - 7(3) M/s. Vasant Construction Room No. 137, 1st Floor Company (I) Aayakar Bhavan, M.K. Road Vs. 33/37, 1st Floor Mumbai 400020 Chandra Bhuvan Building Mumbai 400003 PAN - AAAFV0909M Appellant Respondent Appellant by: Shri Rajneesh K. Arvind Respondent by: Shri Ajay R. Singh Date of Hearing: 21.09.2016 Date of Pronouncement: 28.09.2016 ORDER Per Jason P. Boaz, A.M. This appeal by Revenue is directed against order of CIT(A)-26, Mumbai dated 27.10.2014 for A.Y. 2010-11. 2. facts of case, briefly, are as under: - 2.1 assessee, firm engaged in business as government civil contractor, filed its return of income for A.Y. 2010-11 on 28.09 2010 declaring income of `58,43,650/-. return was processed under section 143(1) of Income Tax Act, 1961 (in short 'the Act') and case was subsequently taken up for scrutiny. In course of assessment proceedings, Assessing Officer (AO) on basis of list of 2000 dealers brought out by Sales Tax Department of Government of Maharashtra, who had filed affidavits admitting that they were engaged in providing bogus bills, in which three parties from whom assessee had purchased goods figured therein, issued notice under section 133(6) of 2 ITA No. 251/Mum/2015 M/s. Vasant Construction Compnay (I) Act and then required assessee to establish genuineness of these purchases. details thereof are as under: - S.No. Name of party Amount Remarks involved (In `) 1 M/s. Shyam 17,83,589/- Unclaimed Corporation 2 M/s. Shree Yamuna 28,49,990/- Declared that his firm Impex is closed and he did t do any transaction 3 M/s. Darshan Sales 17,37,105/- No reply Corporation Total 63,70,684/- 2.2 In response there to assessee filed copies of purchase bills, copies of ledger accounts, payment details for these purchases, copies of bank account evidencing payments by cheque and submitted that said purchases (supra) were made through brokers and that brokerage and transportation charges are paid by suppliers of goods. assessee s above explanations and evidences furnished did not find favour with AO, who was of view that since assessee was unable to produce parties for verification and relying on enquiries conducted by Sales Tax authorities, held that these purchases were bogus and assessee had failed to establish genuineness of these purchases amounting to `63,70,684/- and disallowed same. assessment was concluded by order under section 143(3) of Act vide order dated 21.03.2013; wherein income of assessee was determined at `1,22,14,330/- as against returned income of `58,43,646/- in view of disallowance of purchases amounting to `63,70,684/- being treated as bogus. 3. Aggrieved by order of assessment dated 21.03.2013 for A.Y. 2010-11, assessee preferred appeal before CIT(A)-26, Mumbai challenging aforesaid disallowance of purchases amounting to `63,70,684/- held to be bogus by AO. learned CIT(A) disposed appeal vide order dated 27.10.2014 allowing assessee partial relief; by directing AO to assess additional income estimated from these purchases of `63,70,684/- from bogus parties @25% thereof. 3 ITA No. 251/Mum/2015 M/s. Vasant Construction Compnay (I) 4.1 Revenue, being aggrieved by order of CIT(A)-26, Mumbai dated 27.10.2014 for A.Y. 2010-11, has preferred this appeal raising following grounds: - 1. On facts and in circumstances of case and in law, Ld. CIT(A) has erred in holding purchases from parties M/s. Shyam Corporation, M/s. Shree Yamuna Impex, M/s. Darshan Sales Corporation as genuine ignoring fact that quantitative details were not produced by assessee during course of assessment proceedings. 2. On facts and in circumstances of case and in law, Ld. CIT(A) has erred in considering purchases to be genuine when vendor parties have been considered bogus. 3. On facts and in circumstances of case and in law, Ld. CIT(A) has erred in admitting additional evidences in violation of rule 46A without giving opportunity to A.O. to verify same. 4. appellant prays that order of CIT(A) on above ground(s) be set aside and that of Assessing Officer be restored. 6. appellant craves leave to amend or alter any ground or add new ground which may be necessary. 4.2.1 learned D.R. for Revenue was heard in support of grounds raised. He placed strong reliance on findings of AO that total purchases of `63,70,684/- from M/s. Shyam Corporation, M/s. Shree Yamuna Impex and Ms. Darshan Sales Corporation were bogus and contended that learned CIT(A) had erroneously held said purchases to be genuine and in restricting addition to 25% thereof; being profits/benefit that assessee would have earned from out of transaction with aforesaid three parties. Ground No. 3: 4.2.2 At outset, learned D.R. was heard in respect of ground No. 3 (supra) in which it was contended that learned CIT(A) had erred in admitting additional evidences in violation of Rule 46A of I.T. Rules, 1962 without affording AO any opportunity to verify and rebut same before adjudicating matter of bogus purchases and therefore impugned order of learned CIT(A) is not sustainable. According to 4 ITA No. 251/Mum/2015 M/s. Vasant Construction Compnay (I) learned D.R., even though learned CIT(A) had not specifically mentioned admission of any additional evidence, it is clear from impugned order that assessee had infact adduced additional evidences in form of filing various documents, inter alia, in respect of purchases from these three parties that resulted in learned CIT(A) deciding appeal partly in favour of assessee. learned D.R. drew attention of Bench to paper book-I filed by assessee vide letter dated 12.08.2016 containing items at Sr. No. 1 to 11 consisting of pages 1 to 346; wherein assessee has certified that only items at Sr. No. 1 to 3 (pages 1 to 80) have been filed before AO and that items at Sr. No. 4 to 11 (pages 8 to 346) been filed before learned CIT(A) only. It is argued that though learned CIT(A) had not passed only order admitting additional evidences, certificate/admission of assessee in paper book-I filed by it and reference to these documents having also been only filed before learned CIT(A), as acknowledged by him by various mentions in his order at paras 3.3.1 to 3.5.4 thereof, wherein he has recorded assessee s submissions and details filed by it before him, clearly indicate that learned CIT(A) had admitted and acted favourably upon additional evidence placed before him by assessee without affording to AO opportunity to rebut same, as is required by provisions of Rule 46A. It is pleaded by learned D.R. that on this short point alone, as raised in ground No. 2 of this appeal (supra), order of learned CIT(A) is not sustainable and ought to be set aside. 4.3 Per contra, learned A.R. for assessee supported impugned order of learned CIT(A) as being in order in all respects. 4.4.1 We have heard rival contentions of both parties in respect of ground at Sr. No. 3 raised in this appeal and perused and carefully considered material on record. On appreciation of averments of learned D.R. and material on record, we are of considered view that Rule 46A of Income Tax Rules, 1962 (in short Rules ) has direct bearing on controversy. Therefore it would only be in fitness of things for us to take note of Rule. Rule 46A reads as under: - 5 ITA No. 251/Mum/2015 M/s. Vasant Construction Compnay (I) 46A. (1) appellant shall not be entitled to produce before [Deputy Commissioner (Appeals)] [or, as case may be, Commissioner (Appeals)], any evidence, whether oral or documentary, other than evidence produced by him during course of proceedings before [Assessing Officer], except in following circumstances, namely : (a) where [Assessing Officer] has refused to admit evidence which ought to have been admitted ; or (b) where appellant was prevented by sufficient cause from producing evidence which he was called upon to produce by [Assessing Officer] ; or (c) where appellant was prevented by sufficient cause from producing before [Assessing Officer] any evidence which is relevant to any ground of appeal ; or (d) where [Assessing Officer] has made order appealed against without giving sufficient opportunity to appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless [Deputy Commissioner (Appeals)] [or, as case may be, Commissioner (Appeals)] records in writing reasons for its admission. (3) [Deputy Commissioner (Appeals)] [or, as case may be, Commissioner (Appeals)] shall not take into account any evidence produced under sub-rule (1) unless [Assessing Officer] has been allowed reasonable opportunity (a) to examine evidence or document or to cross-examine witness produced by appellant, or (b) to produce any evidence or document or any witness in rebuttal of additional evidence produced by appellant. (4) Nothing contained in this rule shall affect power of [Deputy Commissioner (Appeals)] [or, as case may be, Commissioner (Appeals)] to direct production of any document, or examination of any witness, to enable him to dispose of appeal, or for any other substantial cause including enhancement of assessment or penalty (whether on his own motion or on request of [Assessing Officer]) under clause (a) of sub-section (1) of section 251 or imposition of penalty under section 271.] 4.4.2 perusal of this Rule would suggest that sub-Rule-1 puts embargo upon assessee to seek permission for producing additional evidence either oral or documentary. Such evidence can only be permitted to be produced, if conditions enumerated in sub-clauses (a) to (d) are available. learned Commissioner has to record in writing as to why he had admitted additional evidence. Sub-Rule-3 contemplates that if 6 ITA No. 251/Mum/2015 M/s. Vasant Construction Compnay (I) additional evidence is taken on record, then it cannot be considered on merit, unless opportunity to Assessing Officer is being given to comment evidence or documents or to cross examine witness produced by assessee. Apart from that learned Assessing Officer would be given opportunity to produce any evidence or documents or any evidence in rebuttal of additional evidence produced by assessee. Sub Rule-4 is exception to all other sub-rules. This rule authorizes CIT(A) to direct any party for production of any documents or examination of any witness to enable him to dispose of appeal or for arriving at just conclusion. 4.4.3 In case on hand, as contended by learned D.R., we find that learned CIT(A) has infact admitted additional evidence put forth by assessee as admitted by assessee in certifying its paper book-I (page 1 to 346) that only details at Sr. No. 1 to 3 (pages 1 to 80) were filed before AO and that details/documents at Sr. HO. 4 to 11 (pages 86 to 346) were filed only before learned CIT(A). fact that learned CIT(A) acted on this additional evidence favourably is, in our view, evident from mention of same having also been filed before him in appellate proceedings at paras 3.3.1 to 3.5.4 of impugned order while recording assessee s arguments, submissions and details and evidences filed. In light of factual matrix above, we find that learned CIT(A) has failed to afford AO opportunity of being heard in matter and to verify and rebut same and therefore in our view, conditions mentioned in sub-Rule-3 of Rule 46A of Rules remain uncomplied. We therefore set aside finding of learned CIT(A) in impugned order in respect of issue of purchases from three parties, viz., M/s. Shyam Corporation, M/s. Shree Yamuna Impex and M/s. Darshan Sales Corporation amounting to `63,70,684/- and restore matter to his file for fresh consideration and adjudication thereon after affording AO due opportunity under Rule 46A(3) of Rules. We hold and direct accordingly. Ground No. 3 of Revenue s appeal is accordingly disposed off. 7 ITA No. 251/Mum/2015 M/s. Vasant Construction Compnay (I) 5. In view of our findings in respect of ground No. 3 supra, there is no requirement for us to adjudicate grounds raised by Revenue at Sr. No. 1, 2, 4 & 5. 6. In result, Revenue s appeal is allowed for statistical purposes. Order pronounced in open court on 28th September, 2016. Sd/- Sd/- (Sandeep Gosain) (Jason P. Boaz) Judicial Member Accountant Member Mumbai, Dated: 28th September, 2016 Copy to: 1. Appellant 2. Respondent 3. CIT(A) -26, Mumbai 4. CIT - 15, Mumbai 5. DR, F Bench, ITAT, Mumbai By Order //True Copy// Assistant Registrar ITAT, Mumbai Benches, Mumbai n.p. C I T - 7(3), Mumbai v. M/s. Vasant Construction Company (I)
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