2017 (3) TMI 1612 - AT - Income Tax

Addition of bogus purchase - CIT-A deleted the addition admitting additional evidence - Held that - Lot of fresh evidences were furnished before the First Appellate Authority in respect of purchase account sundry creditors salary and wages to artists and other staff security deposits account. That however these evidences were not sent to the AO asking for a remand report on the basis of such evidence adduced in compliance with Rule 46A of the Income Tax Rules 1962 in effect the views and adjudication by the AO was not complied with so far as these fresh evidences are concerned. In the interest of natural justice the matter is set aside to the file of the AO for reassessment de novo after affording reasonable opportunity of being heard to the assessee and upon considering the fresh evidences to be supplied before him. Appeal of revenue is allowed for statistical purposes.

Summary

Issues:
1. Deletion of addition on account of bogus purchase and cash payment violation.
2. Deletion of addition on account of bogus purchase disregarding Rule 46A.
3. Deletion of addition on account of bogus expenditure under the head salary.
4. Deletion of addition on account of security deposits from unverified persons.
5. Appellant seeking leave for modification of grounds.

Analysis:
1. The appeal by revenue challenged the deletion of additions related to bogus purchases and cash payments in violation of section 40A(3). The CIT(A) had deleted the addition of Rs. 4,00,658 as bogus purchase and also the amount of Rs. 3,81,690 paid in cash. The Tribunal found that fresh evidence was submitted to the CIT(A) but not sent to the Assessing Officer (AO) for review, contravening Rule 46A. Consequently, the matter was remanded to the AO for reassessment after considering the new evidence and providing the assessee with a fair opportunity to be heard.

2. The second issue pertained to the deletion of an addition on account of bogus purchases without adhering to Rule 46A. The Tribunal noted that various fresh evidences were presented before the CIT(A) but were not forwarded to the AO for examination. As per the principles of natural justice, the Tribunal set aside the decision and directed a reassessment by the AO to consider the new evidence and grant the assessee a proper hearing.

3. The third issue involved the deletion of an addition on account of bogus expenditure under the head of salary. Similar to the previous issues, the Tribunal observed that fresh evidence was introduced before the CIT(A) without being referred to the AO, leading to a lack of compliance with Rule 46A. Consequently, the Tribunal ordered a reassessment by the AO to ensure a fair review of the new evidence and uphold principles of natural justice.

4. The fourth issue concerned the deletion of an addition related to security deposits received from unverified persons. The Tribunal found that the CIT(A) had not followed the procedure under Rule 46A by not forwarding the fresh evidence to the AO for examination. In the interest of natural justice, the Tribunal set aside the decision and remanded the matter to the AO for reassessment after affording the assessee a proper opportunity to present the new evidence.

5. Lastly, the appellant sought leave to make modifications to the grounds at the appellate stage, which was a procedural request and did not impact the substantive issues addressed in the judgment. The Tribunal allowed the appeal of the revenue for statistical purposes, indicating that the decision was based on procedural grounds rather than the substantive merits of the case.