2018 (8) TMI 1749 - AT - Income Tax

Rectification u/s 254(2) - bogus purchases from suspicious / hawala dealers - Held that - We find that while disposing of the appeal, the ITAT has inadvertently not adjudicated specific ground taken by the assessee vide ground which go to question the principles of natural justice in the light of decision of Hon ble Supreme Court in the case of Kishanchand Chellaram vs CIT 1980 (9) TMI 3 - SUPREME COURT . Therefore, we are of the considered view that there is a mistake apparent on the order of the ITAT in not adjudicating grounds 2, 3 & 5 to 7 which requires rectification u/s 254(2) of the I.T. Act, 1961.

Summary

Issues:
Rectification of order passed by ITAT regarding alleged bogus purchases and VAT component in AY 2010-11.

Analysis:
The assessee filed a miscellaneous application against the ITAT order in ITA No.3768/Mum/2018 related to AY 2010-11. The AR for the assessee argued that certain grounds challenging the AO's order were not adjudicated by the ITAT, including issues related to the decision of the Hon'ble Supreme Court in Kishanchand Chellaram vs CIT. Specifically, the AR mentioned that the ITAT did not consider the retraction letter filed by the assessee and did not allow VAT payment on purchases while making additions for alleged bogus purchases. The AR requested the order to be rectified under section 254(2) of the Income-tax Act, 1961 for the sake of justice.

On the contrary, the DR contended that all grounds raised by the assessee were considered by the ITAT as evident from the reproduction of those grounds in the order. The DR argued that the ITAT had appropriately disposed of the appeal by considering statements recorded during a survey and investigation report. The DR opposed the rectification under section 254(2) stating that there was no error in the ITAT's order.

After hearing both parties and examining the records, it was observed that the ITAT had dismissed the appeal filed by the assessee and upheld the addition made by the AO towards alleged bogus purchases. However, the ITAT had not adjudicated specific grounds raised by the assessee, which questioned the principles of natural justice in light of the Kishanchand Chellaram case. Consequently, the ITAT acknowledged an apparent mistake in not addressing these grounds and decided to recall the order passed in ITA No.3768/Mum/2018 dated 28-02-2018. The appeal was restored to be heard afresh, and the registry was directed to schedule the appeal for a new hearing.

In conclusion, the miscellaneous application filed by the assessee was allowed, and the order was pronounced in open court on 08th August 2018.