2024 (12) TMI 1342 - AT - Income Tax

Bogus purchases - GST authorities found the seller (from whom the purchases were made) was a bogus entity issuing accommodation bills to generate fake Input Tax Credit - CIT(A) deleted addition - HELD THAT - The powers of the CIT(A) are in the nature of reassessment and once an assessment order is brought before CIT(A) his power is not restricted to examining only those aspects of the assessment about which the assessee makes a grievance but his powers range over the whole assessment to correct the AO not only with regard to a matter raised by the assessee in appeal but also with regard to any other matter which has been considered by the AO and determined in the course of assessment. Under sec 250(4)) of the Income-tax Act the CIT-A is competent to make such further enquiry as he thinks fit or cause further enquiries to be made by the AO under remand. He is further empowered to make such fresh assessment and determine where necessary the amount of tax payable on the basis of such fresh assessment. If an income is the subject-matter of consideration by the AO and even though the AO might have come to the conclusion that that income is not subject to tax still it would be open to the CIT-A to take different view and to bring that income to tax. In cases of Kapoorchand Srimal 1981 (8) TMI 2 - SUPREME COURT and Jute Corporation of India Ltd. 1990 (9) TMI 6 - SUPREME COURT likewise held that the appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations if any prescribed by the statutory provisions. In absence of any such restriction the appellate authority is vested with all the powers of the assessing authority. Thus we deem it appropriate to allow the appeal for statistical purposes emphasizing the need for a thorough and compliant adjudication process. Appeal is allowed for statistical purposes.

Summary

Issues Involved:

1. Deletion of addition by CIT(A) on account of bogus purchases from M/s. One Point One Solution Ltd.
2. Justification of CIT(A) in deleting the addition without further investigation by the AO.
3. Adequacy of opportunities provided to the assessee to submit supporting documents and cross-examine concerned parties.

Detailed Analysis:

1. Deletion of Addition by CIT(A) on Account of Bogus Purchases:

The primary issue revolves around the deletion of the addition made by the Assessing Officer (AO) concerning alleged bogus purchases from M/s. One Point One Solution Ltd. The AO had disallowed the expenses claimed by the assessee, amounting to Rs. 1,02,23,236/-, based on information from the CGST authorities that M/s. One Point One Solution Ltd. was involved in issuing fake invoices to avail fraudulent input tax credit. The AO concluded that the transactions were not genuine and disallowed the expenses. However, the CIT(A) deleted this addition, noting that the AO failed to conduct a thorough investigation and relied merely on suspicion without verifying the evidence provided by the assessee, such as ledger accounts, invoices, and bank statements.

2. Justification of CIT(A) in Deleting the Addition Without Further Investigation by the AO:

The CIT(A) observed that the AO did not undertake any further investigation to substantiate the claim of bogus purchases. The CIT(A) emphasized that once the assessee provided supporting documents, it was incumbent upon the AO to verify these details, which was not done. The CIT(A) also highlighted the lack of cross-examination of the supplier by the AO. The CIT(A) relied on judicial precedents that underscored the necessity of allowing cross-examination and the importance of adhering to principles of natural justice. The CIT(A) concluded that the deletion of the addition was justified as the AO's assessment was based on unverified information and lacked substantive evidence.

3. Adequacy of Opportunities Provided to the Assessee to Submit Supporting Documents and Cross-Examine Concerned Parties:

The judgment also addressed whether the assessee was given adequate opportunities to submit documents and cross-examine the parties involved. The assessee contended that the AO did not allow cross-examination of the parties whose statements were relied upon. The CIT(A) supported this contention by referencing the Supreme Court's decision in M/s. Andaman Timber Industries Vs. CCE, which emphasized the right to cross-examination as a fundamental principle of natural justice. The CIT(A) noted that the AO's failure to provide such opportunities and the reliance on third-party information without verification were significant procedural lapses. Consequently, the CIT(A) held that the deletion of the addition was warranted.

Conclusion:

The Tribunal, after considering the submissions, noted that the CIT(A) had the authority to conduct further investigations or direct the AO to do so, which was not exercised. The Tribunal emphasized the CIT(A)'s role as a revising authority with the power to reassess the entire matter. It highlighted the need for a thorough investigation and proper adjudication, ensuring compliance with the principles of natural justice. Therefore, the Tribunal set aside the matter to the AO for fresh assessment, directing a de novo adjudication with an opportunity for the assessee to be heard, thus allowing the appeal for statistical purposes.