TaxTMI 
TaxTMI 
2015 (5) TMI 346
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....port sale of Rs. 4,59,95,595/- against which certain expenses under various heads were claimed. The AO considering the fact that the major expenses consisted of consumable store, dyeing and processing embroidery charges, fabrication charges, packing material and labour charges etc. and guided by the fact that in the preceding assessment year, it had been held that the major expenses were bogus wherein the export sale were also found to be not genuine in the in Date of Hearing 05.03.2015 Date of Pronouncement 16.04.2015 depth investigation done by the Investigation Wing, addition of the said amount was made by him observing as under:- 1. "During the year, the assessee has declared total export sale of Rs. 4,59,95,595/-. Against this export sale, the assessee has claimed expenses under various heads. The major expenses claimed are on account of purchases, consumable store, dyeing and processing, embroidery charges, fabrication charges, packing material and labour charges etc. In the preceding assessment year in the assessee's own case, it was held that the major expenses under the above heads are bogus and consequently, the export sales of the assessee were also not found genuine.....
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....genuine and thus income from undisclosed sources. Hence, the assessee's claim under the various heads of expenses during the instant year too are evidently pretentious and bogus. The assessee has thus not conducted any business of the nature claimed by him during the year and consequently the entire expenses claimed by him are hereby disallowed and added back to the declared total income. Correspondingly, the income declared by him in the stated garb of job/work/sales are held to be generated from undisclosed sources as the assessee has failed to produce any verifiable evidence." 3. Aggrieved by this the assessee came in appeal before the First Appellant Authority. The facts were in the following manner summed up by the CIT(A):- 4. "In Ground No.3 the appellant has contested the action of the AO in making an addition of Rs. 4,59,94,594/- having disallowed the entire expenses claimed by the appellant and holding the same as bogus. From the assessment order it is noted that the AO, during the assessment proceedings, found that the appellant has declared total export sales of Rs. 4,59,94,595/- against which there is a claim of expenses under various heads. Major expenses claimed....
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....ition and the submission made on behalf of the appellant are reproduced as under: The assessing officer has been, by and large, influenced by the findings recorded in the assessment for earlier years in the appellant's own case and has brushed aside the relevant material placed before him. The books of account alongwith complete vouchers had been produced and the assessing officer has not found any fault in the books of account maintained by the assessee in the regular course of business. Question arises as to how the information emanating from the earlier years assessments are to be used and no doubt such information cannot be ignored but such information cannot have overriding effect, so as to change the complexion of the things which are duly supported with the evidences placed before the assessing officer. We shall be offering comment on the nature of objections and their fate in the appellate proceedings of the observations and findings made in the assessments of the earlier years but the issue is, can the evidences furnished during the course of assessment proceedings for a particular year can be summarily rejected and instead the information and inferences-of the earl....
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....he material and the facts relevant for concerned assessment year, In view of this it is prayed that both the above findings are perverse and are contrary to the facts and material available on record, therefore, inferences drawn on the basis of the above findings need be quashed as null and void Coming to the observations in the earlier assessment years, it is submitted that so far as the observations made by the then assessing officer in the assessment for assessment year 2001-02 is concerned it may pleased be noted that there were adverse observations with regard to the following trade creditors who were the suppliers of the raw material or who were the job workers for the purpose of manufacture of products for exports. The names of the concerns, in regard to which adverse finding has been given in the above assessment year are as under:- 1. Naina Fab 2. Paul International 3. Goswmy India 4. Elegance Fabrics 5. Archana Enterprises In the other years i.e. assessment year 2002-03, again parties at serial nos. 1, 2 and 5 have been mentioned against which there is adverse finding by the then assessing officer. Further in assessment year 2003-04, there is no specific....
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....y and essential for discharge of his function as assessing officer. Otherwise what is the purpose of allowing the powers to the assessing officer equivalent to a civil court u/s 131 of the Income Tax Act? The Hon'ble Supreme Court in CIT vs Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78 laid down that it is the bounden duty of the assessing officer to examine evidence fairly, objectively, independently and without bias. It is a judicial act to be performed judiciously, with all earnestness and to arrive at the truth. The Apex court further held that when names and address of the creditors with income tax particulars were provided to the assessing officer should make proper enquiry to find out the reliability of the evidences produced. In view of above it is submitted that the addition of Rs. 4,59,94,595/- is therefore based on the wrong appreciation of facts and as a result thereof the addition in question need be deleted." 3.2. A perusal of the impugned order shows that these submissions were forwarded by the CIT(A) to the AO as is evident from the extract of the following from the impugned order:- 5. "The above submission along with the copies of accounts/confirma....
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....firmation which were filed in the Paper Book running in 43-125 pages. This fact it was submitted is evident from the fact that the assessment was completed on 31.12.2007. Referring to the confirmations filed in the Paper Book it was submitted that it would show that a large number of parties were involved whose confirmations could not have been filed within a period of 35 days only. The argument was also put forth that since complete address of the parties alongwith vouchers in support of the purchases made from these parties and the fabrication work done by them were already placed before the AO thus the primary onus of the assessee stood discharged. This fact has not been disputed by the AO either in the assessment order or in the Remand Report. Accordingly filing of the confirmation at this stage it was submitted is merely to strengthen the claim but the fact remains that the primary onus to support the expenses claimed in the P&L A/c by supporting vouchers stood discharged. It was also canvassed that even if the confirmations are considered to be additional evidence than the fact remains that the supporting vouchers were all along produced before the AO and have not been advers....
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....was not provided and the evidence on record was discarded only on the basis of the past history which is not the correct approach as it does not justify non-consideration of primary evidence in the year under consideration. 3.5. A perusal of the impugned order further shows that the assessee was required by the CIT(A) to furnish an affidavit confirming the fact that the parties from whom purchases were made and /or fabrication work done during the year under consideration were different from the parties which were found to be non-genuine in the earlier assessment year. A finding of fact has been recorded that these affidavits were inconfirmation of the above facts were placed before the CIT(A). The need for the assessee to do so it was re-iterated is not necessary as the primary onus to prove the expenditure claim stood discharged once the vouchers and supporting evidences are produced before the AO, in support of the various expenses claimed as per the P&L A/c including purchases and fabrication expenses. These facts are found recorded in para 7 of the impugned order and reproduced hereunder for readyreference:- 7. "The appellant was subsequently required by my predecessor C....
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....ving sold the sample to the extent of Rs. 920/-. There are no purchases from M/s Pal International or other concerns from whom purchases were made during assessment year 2001-02. Therefore, the reasoning as adopted for assessment year 2001-02 cannot be applied for assessment year 2003-04. Since, there is no dispute regarding export of goods, it cannot be said that the amount received by the assessee in convertible foreign exchange is hawala transaction. At least, there is no material brought out for raising such contention. We, therefore, are in agreement with the reasoning adopted by Commissioner's (Appeals) in deleting the addition. The grounds no. J &2 accordingly fails. " (emphasis provided) 4. Considering these facts the CIT(A) allowed the appeal of the assessee. The ld. Sr. DR relying upon the assessment order contended that the AO was justified on facts based on the past history of the assessee and reliance as such was placed upon the assessment order. The AR of the assessee on the other hand relying upon the impugned order submitted that merely because in the past the assessee could not prove certain purchases/expenses of fabrication work etc. is no reason to igno....
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....to consideration by the CIT(A) also and on a consideration thereof we are of the view that in the absence of any specific infirmity pointed out by the Revenue interference in the finding arrived at is not warranted on facts. It is seen that the CIT(A) before arriving at the conclusion took into consideration the fact that the predecessor CIT(A) in the course of the appeal proceedings had required the assessee to state on an affidavit that none of the parties to whom payments were claimed to be made were the same parties which were a subject matter of consideration in 2001-02 assessment year wherein the assessee's expenses were partly considered to be bogus. It is seen that the assessee objected to the need and necessity on the part of the assessee to do so on the ground that when all necessary primary vouchers in support of the expenses claimed in the P&L A/c were available before the AO the onus accordingly placed on the assessee it was stated stood discharged and it was submitted that there should be no need for the assessee to consequently file an affidavit before the CIT(A) in the manner directed. However affidavit to this extent was filed and considered. The relevant finding h....
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..... I, therefore, allow the above ground of appeal in favour of the appellant and accordingly, the addition of Rs. 4,59,94,594/- is directed to be deleted." 6. The next issue agitated by the Revenue is addressed in para 3 of the assessment order. The same is reproduced hereunder for ready-reference:- 3. "During the year, the assessee has made an addition of Rs. 22,88,000/- to her Capital Account. Neither the source of addition in Capital Account has been explained nor any confirmation been furnished in this regard. Hence, the same is added to the income of the assessee under the head Income from Other Sources as unexplained investment. Penalty proceedings u/s 271(1)(c) for furnishing inaccurate particulars of income or concealment of income, as discussed above, are also being initiated separately. (Addition: Rs. 22,88,000/-) 7. The assessee aggrieved by this assailed the same before the CIT(A). In appeal on behalf of the assessee it was submitted that all the relevant details in support of the source of investment was submitted during the assessment proceedings. A chart giving detail of sources of investment filed in the Paper Book page 165 explaining the same was referred t....
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....nd even if the evidences were considered to be fresh evidence it goes to the root of the matter. Considering these facts, submissions and arguments the CIT(A) came to the following conclusion reproduced hereunder for ready-reference:- 10. "I have carefully considered the facts of the case, arguments of the appellant, alongwith the evidences furnished during appellate proceeding and also the remand report of the AO and the counter comment of the appellant. So far as the additional evidences are concerned. I find that these evidences are material to the issue in hand and therefore, by virtue u/s 250(4), I am inclined to admit these evidences which are relevant for deciding the issue at hand. In the remand report taking the addition Rs. 12,88,000/- (other than credit of Rs. 10 lakh by way of FDR), the AO has raised further objection about the opening capital of the appellant and sources of credits in the bank accounts. I have during the present proceedings asked the appellant to furnish the statement of affairs of the appellant as on 31/3/04 which is the basis for assessment for the preceding assessment year i.e. assessment year 2004-05. I have also required appellant to produce th....