Facts of the Case

The assessee, an individual, filed his return of income for Assessment Year 2018-19 on 22.09.2018 declaring total income of ₹17,31,310. Based on information received through the Insight Portal from the Investigation Wing alleging non-genuine purchase transactions with five entities engaged in waste paper trading, the assessment was reopened by issuing notice under Section 148 of the Income-tax Act. The assessee filed a return in response declaring income of ₹17,30,280. Notices under Sections 143(2) and 142(1) were issued. The Assessing Officer concluded that purchases aggregating to ₹2,23,71,136 from five entities were bogus and fictitious and disallowed the same by treating them as non-genuine purchases, completing the reassessment under Section 147 read with Section 144B by assessing total income at ₹2,41,01,416. The CIT(A), NFAC upheld the addition, leading to the appeal before the Tribunal.

Issues Involved

Whether disallowance of purchases of ₹2,23,71,136 treating them as bogus was justified when corresponding sales were not disputed, whether provisions of Section 37 were applicable to disallow purchase transactions, and whether denial of proper opportunity to substantiate evidence warranted interference by the Tribunal.

Petitioner’s Arguments

The assessee contended that the purchases were genuine, supported by bills, account-payee cheque payments and GST records wherein the sellers had accepted the transactions. It was argued that sales corresponding to the purchases were accepted and profits were duly offered to tax, making complete disallowance unjustified. The assessee submitted that due to non-appearance before the Assessing Officer and inability to place complete evidence before the CIT(A), adequate opportunity was denied, and requested remand of the matter for proper adjudication.

Respondent’s Arguments

The Revenue relied upon the orders of the Assessing Officer and the CIT(A) and submitted that the alleged suppliers were not traceable at their given addresses and were found to be accommodation entry providers, justifying disallowance of the entire purchase amount.

Court Order / Findings

The ITAT Kolkata observed that the assessee had sought an opportunity to place necessary evidences on record which were not examined earlier. The Tribunal held that in the interest of justice and fair play, the assessee should be afforded a proper opportunity of being heard. Without adjudicating the merits of the addition, the Tribunal set aside the order of the CIT(A) and remitted the matter back to the Assessing Officer for making the reassessment de novo after granting reasonable opportunity to the assessee to substantiate its claim with evidence.

Important Clarification

The Tribunal clarified that principles of natural justice require that an assessee must be given reasonable opportunity to produce evidence in support of its claim. Where such opportunity has not been effectively availed or granted, remand for fresh adjudication is justified. The Assessing Officer was directed to decide the matter independently on merits after considering all evidences without being influenced by earlier findings.

Final Outcome

The appeal filed by the assessee was partly allowed for statistical purposes, and the issue relating to disallowance of alleged bogus purchases of ₹2,23,71,136 for Assessment Year 2018-19 was remanded to the Assessing Officer for fresh adjudication by way of a de novo reassessment.

Source Link - https://itat.gov.in/public/files/upload/1767179148-4te5yA-1-TO.pdf

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