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TMI Blog2020 (9) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... at the order of assessment as well as order of appeal is otherwise bad in law and not maintainable, since the appellant deprived from the benefit of natural justice and reasonable opportunity of being heard. 5. That the appellant begs to urge further grounds to be raised at the time of hearing. 2. Subsequently, the assessee has also filed additional grounds of appeal which read as under :- 6. "For that service of notice U/s. 143 (2) of the IT. Act alleged to have been made on 04/09/2014 against the assessee appellant is denied since was not serviced in time by the Respondent department and the objections raised before the Id.AO and Id.CIT (A) were not considered or recorded in passing orders and therefore the order has to be quashed. 7. For that amount of Sundry Creditors added automatically without application of judicious mind amounting to Rs. 1,42,05,240/- disclosed in the Balance Sheet as on 31/03/2013 in fact it was brought forwarded from the closing balance of the preceding period that is from 31/03/2012 at Rs. 1,25,24,747/- but the differential amount stood at Rs. 16,79,493/- could have been considered instead of inflating the account by making said addition. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es before the Hon'ble Bench and copies of the order supplied at the instance of the Hon'ble Bench found that there is neither any systematic orders and I issue thereof made within the scope of the statute and therefore the Assessment made beyond jurisdiction has to be quashed in the facts of the case. Other grounds may be allowed to be made at the time of hearing. PRAYER It is therefore prayed that the Additional Grounds of Appeal filed may graciously be entertained and the order of Assessment passed has to be quashed and vacated on the facts of the case, and may be permitted to argue in the matter along with Original Grounds and Additional Grounds submitted till the date, and For this act of kindness, the appellant as in duty bound shall ever pray. 4. Brief facts of the case are that the assessee is a company engaged in the business of installation of 3G telecommunication systems and also trading and manufacturing of fly ash bricks during the F.Y.2012-2013 relevant to the A.Y.2013-2014, filed its return of income on 01.10.2013 disclosing total income of Rs. 15,59,920/-. The return was processed u/s.143(1) of the Act on 18.04.2014. The case was selected for scrutiny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee and further the AO made addition of Rs. 72,97,992/- under the head salary and wages outstanding. 5. Feeling aggrieved from the order of AO, the assessee appeared before the CIT(A)., however, the CIT(A) after considering the submissions of the assessee, sustained the first two additions made by the AO and gave relief of Rs. 72,97,992/- made on account of salary & wages shown in the current liabilities. 6. Aggrieved further from the above order of CIT(A), assessee is in appeal before the Income Tax Appellate Tribunal. 7. Ld. AR of the assessee, firstly, challenged the legal grounds regarding non-service of the notice u/s.143(2) of the I.T.Act, 1961 issued by the department. Ld. AR submitted that the noticed has been issued by the ITO, Ward-2(2), Bhubaneswar but subsequently the assessment order was passed by the ITO Ward-1(1), Bhubaneswar without jurisdiction and he also submitted that the order-sheet supplied by the I.T. Department in which it is not clear as to when the order was passed. Further the ITO Ward-1(1), Bhubaneswar has not issued further fresh notice u/s.143(2) for change of the incumbency and it was also objected by the ld. AR that the notice u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the legal issue raised by the assessee. In this regard, ld. DR submitted that the Authorised Representative of the assessee appeared before the AO and did not object regarding issuance and service of notice and the ld. AR of the assessee appeared from time to time and filed details information before the AO. There is no emanating from the record of the AO as well as the CIT(A) that the assessee had taken any objections regarding service of the notice before the AO or before the CIT(A). He relied on the judgment of Hon'ble Supreme Court in the case of CIT Vs. Laxman Das Khandelwal, [2019] 108 taxmann.com 183 (SC) and according to which the assessee participated in the assessments and appeared from time to time before the AO and there is evidence regarding issuance of the notice u/s.143(2) of the Act, dated 04.09.2014, which is clear from the order-sheet before the Tribunal. He also referred to the comments sent by the ITO Ward-1(1), Bhubaneswar. As per the comments received from the AO the letter sent by dispatch No.6181 dated 12.09.2014 which has not been returned unserved. Therefore, it would be presumed that the letter sent for selection of scrutiny u/s.143(2) of the Act has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so clear from the assessment order that the assessee has appeared from time to time before the AO, which is clear from the order-sheet produced by the CIT DR and the assessee has never raised any objection regarding service of notice and jurisdiction of the AO before the AO as well as before the CIT(A). It is also clear from the record that the assessee has raised this issue first time before us, however, the documents which were produced before us, did not speak that the assessee has raised this issue before the lower authorities. However, the ld. CIT DR has produced sufficient evidences for substantiating the case in favour of Revenue and we are in agreement with the documents produced by the ld. CIT DR regarding legal issue raised by the assessee. In this regard, the CIT DR has relied on the judgment of the Hon'ble Supreme Court in the case of Laxman Das Khandelwal (supra) and submitted that from the record of the department, there should be emanated from the record of the department that the notice has been issued. The assessee will not get benefit of Section 292BB of the Act. In this regard, the Hon'ble Supreme Court in para 6 to 9 has held as under :- "6. The question, howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself." Respectfully following the above decision of Hon'ble Supreme Court, we dismiss the legal grounds raised by the assessee in the form of additional ground challenging the issuance of notice u/s.143(2) of the Act by the AO as well as the ground No.1 raised by the assessee in the grounds of appeal filed in Form 36. 12. On merits of the case, with regard to addition of Rs. 1,42,04,290/-relating to sundry creditors, there was an opening balance of Rs. 1,25,24,747/- (approx) as on first date of the financial year in the books of the assessee and the closing balance is Rs. 1,42,05,241/- (approx) On further perusal of the assessment order, the AO has doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t balances of the suppliers as on 31.3.2012 which is evident from PB 42-66. In our considered opinion, the sustaining of impugned addition is not justified due to the following reasons:- i). It has not been mentioned either by A.O or by Ld. CIT(A) as to under which section of the Income Tax Act, these closing credit balances appearing as on 31.03.2012 could be added. Therefore, non-mentioning the precise provision of law makes the impugned addition bad in law. ii) If addition has been made u/s 68, such could not be added and that too of this much of amount as there was no sum received from these parties & that too during the year under appeal which is evident from the copies of account of these parties enclosed in the paper book at PB 42-66 which would show that either there were opening credit balances or were purchases. iii). After perusing the PB Pg. 42-66 and PB Pg. 144, we find that purchases from these parties were aggregating to Rs. 1,90,88,538/- and it has been held in the following judicial decisions that credit on account of purchases cannot be added u/s 68. Addition under section 69 - Unexplained investment in purchases - Purchases made by assessee having been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pate in inquiry and furnish accounts-Does not mean that creditors lacked identity-No material to show that amounts advanced by creditors in reality represented money belonging to assessee-Sums cannot be treated as cash credits-Income-tax Act, 1961-CIT v. CHANDELA TRADING CO. P. LTD. 372 ITR 68 (Cal) Income from undisclosed sources-Addition-Alleged bogus purchases-AO was not justified in making the disallowance of purchases made by the assessee merely due to non-filing of confirmation from suppliers especially when assessee has filed certificate from the bank indicating the facts that cheques issued by it were cleared and no defect in the books of account was pointed out by AO-YFC Projects (P) Ltd. vs. Dy. CIT 46 DTR 496 (Del. 'I') iv). We note that Opening balances amounting to Rs. 1,60,19,598/- (PB 144) (PB 42-66) which is evident from copies of account of these parties enclosed in the paper book at PB 42-66 is not justified on the ground that when assessee has not claimed any expense to that extent during the year under appeal, where is the question of making disallowance of such amount? v). If addition has been mentioned u/s 41(1), ingredients of section 41(1), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to which an amount which does not have any trace of income is treated as income liable to suffer the brunt of tax. Therefore, as per the established canons of law, the burden to prove that a particular amount falls within the four corners of section 41(1) is on the shoulder of the Assessing Officer without which the addition cannot be made and if made is liable to be deleted. 6.5 The first pre-requisite for the applicability of section 41(1) is there must be a trading liability in respect of which the deduction has been claimed and allowed and burden to prove the twin conditions to the effect of the above facts, it goes without saying, is on revenue. There is not even an iota of whisper as to whether the impugned creditors were in respect of trading liability for which any deduction was ever claimed and allowed and if allowed, in which year was it allowed so on so forth. This is evident from a plain reading of the assessment order. Therefore, Ld. A.O. miserably failed to discharge the said burden in view of the following decisions and therefore this addition is liable to be deleted on this Short ground alone. There could very well be the possibility of the loan creditors or ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons including 355 ITR 290 (Guj) PB 17 is the copy of G.P. chart of various years. 6.11 We note that PB 136-143 is the copy of profit and loss account and trading account of earlier years together with assessment orders u/s 143(3) in which G.P. at the rate of 3.52%,4.13%, 2.99%, 2.~9%, 2.60%,2:21 %, 1.88% for Financial years 2007-08, 2008-09, 2009-10, 2010-11, 2012- 13, 2013-14, 2014-15 respectively has been accepted (PB 17). 6.12. Without prejudice to above, the assessee's sale was Rs. 6.21 Crores as is evident form profit and loss account enclosed at PB 13 and assessed income is at Rs. 3.54 Crores as is evident from the last page of the assessment order which would constitute 56% of the sale which is impossible and against all norms. 7. In view of above discussions, it is clear that the transactions were not bogus and therefore, the case laws relied upon by the Ld. DR are not applicable in this case. As far as case law relied upon by the Ld. CIT(A) as well as relied by the Ld. DR during the hearing i.e. La Medica 250 ITR 575(Del), we note that Hon'ble High Court has specifically noted in this decision that this was not the case of the assessee at any stage prior to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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