2014 (11) TMI 885 - HC - Income Tax

High Court affirms Tribunal's decision to remand for fresh examination of purchase statement; emphasizes genuineness verification

The High Court upheld the decision of the Income Tax Appellate Tribunal to remand the matter back to the assessing officer for a fresh examination of the ... Matter remitted by Tribunal to AO for fresh consideration – Whether the assessee's statement that the purchase of raw materials for construction of the building complex was made from genuine parties – Held that:- Since the Tribunal has made an open remand for de novo consideration of the materials that may be placed by the assessee, the original authority as well as the appellate authority was rightly of the view that no material was produced by the assessee at the first instance - Therefore, on remand, it is incumbent on the part of the officer to verify the genuineness of any document that may be produced by the assessee, in the light of what has been recorded earlier by the original authority and the appellate authority - The de novo proceedings should not be taken as a ruse by the assessee to fill up the lacuna and create records to supplement for what was missing earlier - The original authority, on remand, should go into the explanation submitted by the assessee on merits and the genuineness of the purchases alleged to have been made and thereafter decide the issue for the relevant assessment years – thus, there was no reason to entertain the appeal – Decided against revenue. Issues:Challenging remand order by Income Tax Appellate Tribunal for de novo consideration of purchase of raw materials for construction by the respondent-assessee.Analysis:The High Court dealt with the appeals filed by the Revenue against the order of the Income Tax Appellate Tribunal remanding the matter to the assessing officer for reevaluation of the respondent-assessee's statement regarding the purchase of raw materials for a building complex. The assessment period in question ranged from 2005-06 to 2008-09. The respondent-assessee, a developer and builder of residential units, had a search and seizure operation conducted under Section 132 of the Income Tax Act, resulting in the seizure of materials related to cash receipts for raw material purchases. The assessing officer deemed these purchases as bogus based on a statement by the Managing Director of the company, leading to assessment orders for each relevant year.The assessee challenged the assessing officer's decision before the Commissioner of Income Tax (Appeals), who upheld the decision citing lack of documentary evidence to prove the genuineness of the transactions. The appeals were dismissed by the appellate authority. Subsequently, the assessee appealed to the Income Tax Appellate Tribunal, which remitted the matter back to the assessing officer for a fresh examination of the issue with the opportunity for the assessee to present evidence. The Revenue then appealed this decision before the High Court.During the arguments, the counsel for the respondent-assessee mentioned the ongoing de novo proceedings before the Assistant Commissioner of Income Tax, requesting the appeals not be entertained but to allow the department to review the submitted materials. Conversely, the department's counsel argued against the remand, claiming it as a futile attempt to rectify deficiencies in evidence. The High Court carefully considered the arguments and emphasized the importance of verifying any new evidence presented by the assessee during the de novo proceedings. It stressed that the reassessment should not be used to cover previous shortcomings but should focus on the merits and genuineness of the purchases. Ultimately, the High Court upheld the Tribunal's decision, emphasizing the need for a thorough examination by the assessing officer without allowing the reassessment to be misused to create records to fill gaps from the initial assessment. The appeals were disposed of with the order of the Tribunal confirmed, and costs were not awarded.