2017 (11) TMI 1066 - AT - Income Tax

Validity of assessment order by invoking the provisions of Sec. 144 - Held that - CIT(A) while deciding this grounds have taken into consideration the facts of the present case and had rightly held that in the assessment order, the AO has already narrated in detail the various opportunities given to the assessee and non-compliance on the part of the assessee. Even before Ld. CIT(A) the necessary opportunity was granted to the assessee and the written submissions as well as additional evidence was also considered by Ld. CIT(A). The Ld. CIT(A) also called for the remand report from the AO and assessee was further provided opportunity to file rejoinder to the remand report, therefore in our view, sufficient opportunities have already been availed by the assessee at every stage, therefore this ground raised by the assessee contains no merits. Rejecting the book results u/s 145(3) - Held that - CIT(A) while deciding this grounds have taken into consideration the facts of the present case had rightly decided this ground on merits. The Ld. CIT(A) has rightly conclude that during the search, purchase bills and other papers found were verified against the records as per books maintained. The Ld. CIT(A) had sought remand report from the AO and found that in the remand proceedings, the details filed by the assessee were examined. The Ld. CIT(A) after relying upon the judgments of different judicial authority had rightly concluded that section 145(3) of the I.T. Act applies. Disallowance being 15% of the total purchases - Held that - Considering the profit element embedded in these purchase transactions to factorize profit earned by assessee against purchase of material in the grey market and undue benefit of VAT against bogus purchases, we are of the considered view that restricting the additions @ 15% of purchases by Ld. CIT(A) is unreasonable. The ends of justice would be met in case the additions are restricted @ 12.5 % of purchased. Consequently orders passed by Ld. CIT(A) are set aside and hence we direct the AO to restrict the additions to the extent of 12.5% of the bogus purchases made from the parties. Accordingly this ground raised by the assessee is partly allowed. Addition on account of unsecured loans - assessee has not explained the purpose of loans taken and complete information like copy of IT returns, Balance-sheet or bank statement of the lenders were not filed - CIT- A deleted the addition - Held that - AO had made the additions on the ground that only loan confirmations were filed but copy of ITR, bank statements of the lenders were not furnished. However, during the appellate proceedings, the assessee furnished all the details regarding which remand report was sought by the CIT(A) from the AO and the AO in the remand report had accepted the said facts and nothing adverse had pointed out. Therefore, the Ld. CIT(A) while relying upon the remand reports submitted by the AO had deleted the additions. Moreover, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A).- Decided against revenue Addition on account of sundry creditors - major creditors for the year are Bright Global Paper Limited and Paper Plus Technologies Private Limited and it has been established that there has been no genuine purchase from these parties - CIT-A deleted the addition - Held that - CIT(A) while deciding this grounds have taken into consideration the facts of the present case and also considered the remand report wherein the AO has not found anything adverse in respect of documents submitted by the assessee in the remand report. Therefore Ld. CIT(A) deleted the additions. Moreover, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). - Decided against revenue

Summary

Issues Involved:
1. Invocation of Section 144 of the Income Tax Act, 1961.
2. Rejection of book results under Section 145(3) of the Income Tax Act.
3. Disallowance of purchases as bogus.
4. Deletion of additions on account of estimation of Gross Profit (G.P.).
5. Deletion of additions on account of unsecured loans.
6. Deletion of additions on account of equity share capital treated as unexplained cash credit under Section 68.
7. Deletion of additions on account of sundry creditors.

Issue-wise Detailed Analysis:

1. Invocation of Section 144 of the Income Tax Act, 1961:
The assessee challenged the invocation of Section 144 by the Assessing Officer (A.O.) for passing the assessment order. The CIT(A) confirmed the A.O.'s action, stating that the A.O. had provided various opportunities to the assessee, which were not adequately complied with. The Tribunal found that sufficient opportunities were given at every stage, and no new facts or contrary judgments were presented to rebut the findings of the CIT(A). Therefore, this ground raised by the assessee was dismissed.

2. Rejection of Book Results Under Section 145(3) of the Income Tax Act:
The A.O. rejected the book results due to the non-production of books of accounts. The CIT(A) upheld this rejection, noting that during the search, purchase bills and other records were seized, and the A.O. did not point out any specific defects in the books. The Tribunal agreed with the CIT(A) that the rejection of books under Section 145(3) was justified, as the A.O. had not disproved the details filed by the assessee. Consequently, this ground raised by the assessee was dismissed.

3. Disallowance of Purchases as Bogus:
The A.O. disallowed purchases amounting to ?2,99,32,190/- as bogus, based on the findings from the search and the non-availability of delivery challans. The CIT(A) restricted the disallowance to 15% of the purchases, considering that the sales were not disputed, and the purchases might have been made from the grey market. The Tribunal further reduced the disallowance to 12.5%, stating that the A.O. did not provide an opportunity for cross-examination and relied on judicial precedents that supported a lower disallowance rate. This ground was partly allowed in favor of the assessee.

4. Deletion of Additions on Account of Estimation of Gross Profit (G.P.):
The revenue challenged the CIT(A)'s deletion of additions based on the estimation of G.P. at 28%. The Tribunal applied its previous decision, restricting the addition to 12.5% of the bogus purchases, and modified the CIT(A)'s order accordingly. This ground raised by the revenue was partly allowed.

5. Deletion of Additions on Account of Unsecured Loans:
The A.O. added ?4,17,45,129/- as unexplained loan creditors under Section 68, citing the lack of supporting documents. The CIT(A) deleted the addition after the assessee provided the necessary details during the appellate proceedings, which were verified by the A.O. in the remand report. The Tribunal found no reason to interfere with the CIT(A)'s findings, and this ground raised by the revenue was dismissed.

6. Deletion of Additions on Account of Equity Share Capital Treated as Unexplained Cash Credit Under Section 68:
The revenue contested the CIT(A)'s deletion of ?1,25,00,000/- added as unexplained cash credit. The CIT(A) noted that the amounts were received from family members who were assessed by the same A.O., and no adverse findings were reported in the remand report. The Tribunal upheld the CIT(A)'s decision, dismissing this ground raised by the revenue.

7. Deletion of Additions on Account of Sundry Creditors:
The A.O. added ?3,87,53,155/- as cessation of liability under Section 41(1)(a), due to the assessee's failure to provide details of sundry creditors. The CIT(A) deleted the addition, noting that the major amounts were from Ballarpur Industries Ltd., and the liabilities were subsequently paid. The Tribunal found no new facts or contrary judgments to rebut the CIT(A)'s findings and dismissed this ground raised by the revenue.

Conclusion:
The appeals filed by the assessee were partly allowed, and the appeals filed by the revenue were dismissed. The Tribunal's decisions were based on detailed evaluations of the CIT(A)'s orders, remand reports, and judicial precedents. The Tribunal emphasized the importance of providing sufficient opportunities for cross-examination and the need for concrete evidence to support disallowances.