2017 (11) TMI 1349 - AT - Income Tax

Tribunal orders reassessment for 2010-11 due to procedural lapses. Fair hearings and statutory compliance emphasized.

Karia Developers & Builders Versus Asstt. Commissioner of Income Tax, Circle–29 (2), Mumbai

Karia Developers & Builders Versus Asstt. Commissioner of Income Tax, Circle–29 (2), Mumbai - Tmi Issues:Challenging the addition of bogus purchases, unverifiable purchases, and commission expenses.Analysis:The appeal was against an order dated 12th February 2015 for the assessment year 2010-11. The assessee, a partnership firm engaged in real estate business, filed its return declaring income of Rs. 4,42,39,520. The Assessing Officer raised concerns about purchases totaling Rs. 15.97 crore, issuing notices under section 133(6) to verify genuineness. Many notices returned unserved, some parties were identified as hawala dealers, and lack of responses led to additions of Rs. 95,69,047 and Rs. 14,96,899 to the assessee's income. The Commissioner (Appeals) upheld these additions and added Rs. 95,690 as commission expenses, leading to the appeal.The grounds for appeal challenged the additions made by the Assessing Officer and the Commissioner (Appeals) regarding bogus purchases, unverifiable purchases, and commission expenses. The Authorized Representative argued that due process wasn't followed, adverse materials weren't provided for cross-examination, and the Commissioner (Appeals) enhanced income without proper notice. The Departmental Representative supported the Assessing Officer's order.The Tribunal considered the contentions and evidence. Regarding bogus purchases, the Tribunal noted the lack of opportunity for the assessee to rebut adverse materials and the need to examine if sales turnover was possible without the purchases. The issue of unverifiable purchases was raised due to a party confirming sales post-assessment, indicating oversight by the Commissioner (Appeals). The addition of commission expenses by the Commissioner (Appeals) without issuing a show cause notice was deemed improper under section 251(2). Consequently, the Tribunal ordered a denovo adjudication by the Assessing Officer after providing a fair hearing to the assessee. All issues were remanded back for proper consideration, and the appeal was allowed for statistical purposes.In conclusion, the Tribunal found procedural lapses in the assessment leading to unjust additions to the assessee's income. The need for fair hearings, proper confrontation of adverse materials, and adherence to statutory requirements were emphasized, warranting a fresh assessment to ensure justice and proper adjudication of the issues raised in the appeal.