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TMI Blog2017 (3) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... the case and in law, the learned Commissioner of Income Tax (Appeal) erred in upholding disallowance to the extent of 25% value of 59% of total purchases for the reason that out of 49 parties your appellant could furnish confirmation only from 26 parties within the period allowed for compliance, ignoring the fact that full details of all the 49 parties from whom purchases were made were filed, as evidenced from the remand report. 1.2 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (appeal) erred in failing to appreciate that though the appellant could not furnish confirmations from the remaining parties due to time constraint as also some of them were outstation parties, the learned Assessing Officer ought to have either issued summons u/s. 131 of the Act and examined the parties or called for information u/s. 133(6) of the Act and verified the details furnished by the appellant. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal) erred in upholding the disallowance of Rs. 94,36,170/- being 25% of other expenses amounting to Rs. 3,77,44,683/-, observing that most o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as regards the adhoc disallowance of Rs. 3,55,52,700/-. The findings of the A.O in his remand report along with the adjudication of the CIT(A) as regards the said respective issues, are briefly culled out as under:- (A). As regards disallowance by the A.O of 25% of purchases aggregating the Rs. 12,48,05,498/-. (i) Report of the A.O:. The A.O in his remand report submitted that the assessee during the course of the appeal/remand proceedings though had submitted a list of 49 parties from whom purchases in excess of Rs. 1 lac was made, but however had placed on record the confirmation of only 26 parties (ii). Findings of CIT(A) The CIT(A) being of the view that as the assessee had placed on record confirmations of only 26 parties as against total 49 paries, and as such confirmations of about 59% of the parties had been placed on record, therefore held that the expenditure in the same ratio, viz. amounting to 59% of Rs. 12,48,05,498/-, which worked out to Rs. 7,36,35,243/- was to be held as proved. The CIT(A) thus on the basis of his aforesaid observations restricted the disallowance to 25% of the balance purchases of Rs. 5,11,70,454/-, which worked out at Rs. 1,27,92,563/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmations of all the parties from whom purchases aggregating to Rs. 12,48,05,498/- had been carried out during the year under consideration, however, the same had been collected subsequently. The Ld. A.R in support of his contention drew our attention to Page No.1 to 3 of his 'Paper book' (for short 'APB'), which revealed the claim of the assessee that the confirmations of certain parties which could not be furnished with the A.O upto the remand proceedings, had thereafter been obtained, and as claimed by the assessee therein, we are made to understand that confirmations of all of the aforesaid respective parties with duly reconciled balances, are as on date available with the assessee. The Ld. A.R further adverting to the disallowance of 25% of the 'Other expenses' so made by the A.O, which thereafter had been sustained by the CIT(A), as such, therein reiterated that in the absence of the copy of the remand report being made available to him, he was unable to rebut the findings of the A.O contained therein. It was further averred by the ld. A.R that the findings of the A.O in his remand report that majority of the expenses were incurred in cash and merely supported by self made v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pally faulted with. However, we also cannot shut our eyes to the fact that framing of such an assessment cannot be allowed to go wild, and rather makes it all the more obligatory on the part of the A.O to proceed with cautiously and therein assess the income of the assessee in a most fair and judicious manner. We are of the considered view that the A.O who remains under a statutory obligation to assess the 'True income' of an assessee, though in the absence of the requisite documentary evidences as well as proper assistance from the assessee who alone is seized of the facts of his case, thus comes across a more onerous task to arrive at a fair assessment, but then the framing of such 'best judgment' assessment, as the name so conveys, has to be guided by all fairness and at no stage should smell of an arbitrary or vindictive approach on the part of the A.O, as the same is the least expected from him. We are of the considered view that the framing of a 'best judgment' assessment should not be a reflection of whimsical and fanciful exercise of powers by the A.O, and while framing such an assessment, not only the material collected by the A.O during the course of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that expenses of Rs. 41,23,288/- out of total expenses of Rs. 3,77,44,684/-, which therein works out to 10.92% are found to have been incurred by the assessee in cash. Thus in light of the aforesaid facts as have been placed on record by the Ld. A.R, which though are subject to verification, we are unable to persuade ourselves to subscribe to the finding of the A.O in the remand report that most of the expense were incurred in cash, and as such the genuineness of the same could not be established. We are further of the considered view that in the absence of a copy of the remand report being made available to the assessee, the latter had remained divested of any opportunity of bringing the aforesaid serious infirmities in the body of the remand report to the notice of the CIT(A). We are of the considered view that in the backdrop of the aforesaid facts as they so remain, specifically now when as per the details made available on record by the assessee (Page 5 of 'APB'), the observations of the A.O in the body of the remand report do not inspire any confidence, and the same when pitted against the facts projected before us by the assessee are apparently found to be incorrect. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roup A: 48 Parties from whom purchases above Rs. 1 lac made + Group B: 30 Parties from whom purchases below Rs. 1 lac made]. We find that the assessee had grouped the aggregate of the 'Group B' (i.e 30 parties) and placed the aggregate of the same, as S.No. 49 of the 'Group A', as a result whereof the CIT(A) had wrongly concluded that the total number of parties from whom the assessee had carried out purchases are 49, and on the said basis concluded that the purchases from 59% of the parties (i.e % age of 26 parties/49 parties) have been confirmed. We however are not impressed by the modus operandi adopted by the CIT(A), on the basis of which an addition/disallowance of purchases amounting to Rs. 1,27,92,563/- had been sustained, as we find that the said process of calculation is more of an arithmetic approach, rather than party vise verification of the genuineness of purchases, which to our understanding would had led to fair and logical reasoning for sustaining disallowance of any part of the aforementioned purchases. We are of the considered view that as the entire process of calculating the disallowance of Rs. 1,27,92,563/- in itself is found to be based on misconceived facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be placed on record of the A.O till date. We may however clarify that the A.O shall remain at a liberty to make further independent enquiries as he reasonably deems fit to verify the genuineness of the purchase transactions, and our aforesaid observations in no manner will bind him to summarily accept the confirmations of the parties at the very face of it. The issue pertaining to the disallowance of purchases of Rs. 1,27,92,563/- as sustained by the CIT(A) is thus set aside to the file of the A.O for fresh adjudication, strictly in light of our aforesaid directions. The 'Ground of appeal No.1' is thus allowed for statistical purposes in light of our aforesaid observations. 10. That as nothing has been averred before us by the Ld. A.R in support of ground of appeal no. 3, the same is thus dismissed as not pressed. 11. The appeal of the assessee is allowed for statistical purpose. ITA NO. 4803/MUMBAI/2013 The aforesaid appeal had been filed by the revenue, therein assailing the order of the CIT(A) by raising the following grounds of appeal:- "Grounds of appeal 1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting various add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to deduce the 'true income' of the assessee to the best of his judgment. We however are unable to persuade ourselves to subscribe to the contention of the revenue that an appellate authority after justifying the validity of framing of a 'best judgment' assessment, in the backdrop of the facts attending thereto, thereafter stands divested of its jurisdiction to modify the assessment on merits. We are of the considered view that the appellate courts on coming across a 'best judgment' assessment which is assailed before it, on finding that the income of the assessee has been unreasonably assessed at a high pitched amount, which is either not found justifiable in the backdrop of the method adopted for framing of such an assessment, or is found to be based on illogical reasonings, therein duly stands vested with the jurisdiction to modify such an assessment, and therein bring the same within the parameters of an assessment which can safely be held as a fair assessment of the income of the assessee. 4. We are of the considered view that in the backdrop of the aforesaid scope and gamut of the powers of the CIT(A) while adjudicating an appeal involving a 'best judgment' assessment und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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