2021 (9) TMI 845 - AT - Income Tax

Tribunal overturns CIT(A) decision, orders fresh assessment. Verify invoices, unbiased assessment crucial.

The tribunal set aside the CIT(A)'s decision due to overlooking critical aspects and ordered a fresh decision. The CIT(A) was directed to verify the ... Bogus purchases - AO had not issued the notices u/s 133(6) of the Act by summoning M/s. Asian Tube Trading and verifying about the bogus bills issued by the said company - HELD THAT:- AO while passing the assessment order had issued the notices under section 133(6) to Asian tube trading, Mumbai however the notices sent were written undelivered on account of known was available at the premises to receive the notices. Moreover in reply submitted to the AO, on 21 January 2014, assessee, had admitted that bills issued by Asian tube trading were fictitious and the assessee had deposited the sale tax demand of M/s. Asian Tube Trading with the department so that the demand against M/s. Asian Tube Trading be not enforced and recovered from the assessee. It was also the case of the assessee that the first information report was registered against the company on the complaint of the assessee. All the above said aspects were required to be examined and considered by the CIT(A) while passing the impugned order, however none were considered by CIT(A) and he had passed order in stero type and criptic manner - As the order was passed by the CIT(A), in stero type and criptic manner, after ignoring the important admitted facts regarding the issuing of notices under section 133(6) of the Act, admissions of assessee of paying the Sales tax on behalf of Asian Tube Trading, registration of FIR, etc therefore In our considered opinion, the matter is required to be remanded back to the file of CIT(A) to decide the grounds raised by the assessee, a fresh following law. We set aside the order passed by the Commissioner and remand the matter to CIT (A). CIT(A) is directed to decide the Novo all the grounds raised by the assessee in the memo of appeal filled before him, after following the principle of natural justice and affording the opportunity of hearing to the assessee and to AO. As we are remanding back the entire matter to the CIT(A) file, we deem it appropriate not to adjudicate the other grounds raised by the revenue and assessee. Issues Involved:1. Whether the CIT(A) erred in not taking cognizance of the assessee's admission regarding M/s. Asian Tube Trading being a fictitious firm.2. Whether the CIT(A) ignored the fact that M/s. Rupani Trading Co admitted to providing accommodation entries without delivering any material.3. Whether the CIT(A) overlooked discrepancies in the quality and quantity of goods purchased and sold by the assessee.4. The enhancement of the Gross Profit (GP) rate to 25% by the CIT(A).Issue-wise Detailed Analysis:1. Admission of M/s. Asian Tube Trading as a Fictitious Firm:The revenue argued that the CIT(A) failed to consider the assessee's own admission that M/s. Asian Tube Trading was a fictitious firm. The assessee had admitted to receiving bogus purchase bills from this firm and had deposited sales tax to avoid enforcement of the demand against M/s. Asian Tube Trading. The CIT(A) was criticized for not considering this admission and for not issuing notices under section 133(6) to verify the authenticity of the transactions. The tribunal found that the CIT(A) had indeed overlooked these critical aspects.2. Accommodation Entries by M/s. Rupani Trading Co:The revenue contended that the CIT(A) ignored the fact that M/s. Rupani Trading Co admitted before the Sales Tax Department that it provided accommodation entries without delivering any material. The tribunal noted that the CIT(A) did not adequately address this issue, which was crucial for determining the genuineness of the transactions.3. Discrepancies in Quality and Quantity of Goods:The revenue pointed out that there were discrepancies in the quality and quantity of goods purchased and sold by the assessee, which contradicted the assessee's claim of direct sales without taking delivery. The tribunal observed that the CIT(A) did not thoroughly examine these discrepancies, which were essential for verifying the legitimacy of the transactions.4. Enhancement of GP Rate to 25%:The assessee filed a cross-objection against the CIT(A)'s decision to enhance the GP rate to 25%. The CIT(A) justified this enhancement by referencing similar cases and the need to cover possible tax avoidance. However, the assessee argued that no defects were pointed out in their books of account, and the GP rate should be maintained at 18.14%. The tribunal noted that the CIT(A) did not provide a solid basis for the 25% GP rate and failed to consider the actual evidence and records.Tribunal's Decision:The tribunal found that the CIT(A) passed the order in a 'stereo type and cryptic manner' and ignored significant facts and admissions. Therefore, the tribunal set aside the CIT(A)'s order and remanded the matter back to the CIT(A) for a fresh decision. The CIT(A) was directed to:- Issue notices to M/s. Asian Tube Trading or any other relevant party to verify the authenticity of the invoices.- Record categorical findings on whether the assessee received goods from M/s. Asian Tube Trading.- Consider the replies filed by the assessee and the FIR registered against M/s. Asian Tube Trading.- Summon and examine records from the Sales Tax Department, Mumbai.- Grant the assessee an opportunity to file additional documents or evidence.The tribunal emphasized that the CIT(A) should decide all grounds raised by the assessee without being influenced by the tribunal's observations. Consequently, the appeal of the revenue and the cross-objection of the assessee were allowed for statistical purposes.