Uttamchand Jain, vs Assessee

assessee before ITAT in ITA No.1410/Mum/2014, in the matter of order

passed u/s.263 of the I.T. Act for the A.Y.2009-10. 2 SA No.318/2014 & ITA No.1410/14

2. The assessee has filed this stay application for stay of demand in

respect of appeal filed before the Tribunal on 28-2-2014 in ITA

No.1410/Mum/2014. The stay application was placed before the bench

for hearing on 26-12-2014. During the course of hearing of the stay

application, the Bench observed that no demand has been raised in the

order passed by CIT u/s.263 of the Act; therefore, there is no question

of staying any demand. Accordingly, the Bench thought it appropriate

to dispose the appeal on merit. Accordingly, the stay application along

with main appeal was adjourned to 9-1-2015 and both parties were

directed to argue on merits. Accordingly, main appeal was heard on

merit on 9-1-2015.

3. Facts in brief are that assessment framed u/s.143(3) of the Act,

dated 23-12-2011 was revised by CIT u/s.263 of the Act vide order

dated 13-2-2014 on the plea that order passed by the AO was

erroneous as well as prejudicial to the interest of Revenue. The CIT

observed that there were sundry creditors of Rs.4,76,44,724/-,

however, assessee did not furnish details of these creditors along with

name and full address of the clients. The CIT further observed that

notices were served on the respective enterprises but the date, place

and manner of service was not reflected on any of the copies of the

notices available on record. Furthermore, all the nine parties on whom

notices u/s.133(6) of the Act had been shown to be served, were

apparently having similar seals. In respect of all the similar replies filed 3 SA No.318/2014 & ITA No.1410/14

by all the parties, the CIT observed that the details of materials

supplied/sold was not indicated by any of these nine parties. The CIT

also observed that how the replies of these parties were delivered in

the office of the ITO was not indicated. Whether these replies were

handed over by the assessee or by the respective parties is not known

insofar as none of these replies bears any date nor the mode of

delivery to the AO. The CIT also observed that all the covering letters

are on the similar stationary which have been typed and printed on the

same computer/printer set up and bears the same language. Thus, all

these did not appear to be genuine. As per CIT, without making further

enquiry or verification the order was passed by the AO without

application of mind. As per the CIT, the AO has merely made

perfunctory examination of the issue and has not looked into the

genuineness of the sundry creditors in the manner in which the AO is

expected to do. The CIT further observed that all this appears to be

devoid of normal functioning of an office if not akin to being collusive.

The CIT also observed that glaring discrepancies and features have

been reflected in the notices and so-called replies have not attracted

the attention of the AO. In view of these facts, the CIT observed that it

is abundantly clear that the notices u/s.133(6) of the Act have not been

served either by post or through the notice server. Service by

post/notice server were utmost necessary in this case in order to

ascertain identity, address and existence of the concerned parties. This

is at least required to ascertain genuineness of creditors. This has not 4 SA No.318/2014 & ITA No.1410/14

been done. The replies placed on the file of the AO are also not in the

normal route nor found any place on the ordersheet and are of

suspicious nature and are incomplete. These do not appear to be

prima facie genuine. The manner in which signatures have been made

also make these doubtful entities. All these factors have been noticed

and as the AO has failed to make any enquiries and examination into

facts, the CIT considered the assessment order to be erroneous insofar

as it is prejudicial to the interest of revenue.

4. It was argued by the ld. AR that all the details asked by the AO

were furnished before him. As per the ld. AR the confirmation was also

filed, however, he failed to reply the bench's query as to how in respect

of different parties, to whom notice u/s.133(6) of the Act was alleged to

be issued, was served on them, whether directly to these parties or by

the assessee himself, nor the AR could reply as to how the replies

were filed before the AO.

5. On the other hand, it was the contention of the ld. DR that the

sum and substance of CIT's order is that no enquiry was made by the

AO with regard to genuineness of the sundry creditors amounting to

Rs.4.76 crores.

6. We have considered rival contentions, carefully gone through the

orders of the CIT passed u/s.263 of the Act as well as the assessment

order passed u/s.143(3) of the Act, dated 23-12-2011. We found that

return of income filed at Rs.6,31,990/- was assessed at Rs.6,59,130/-

after making addition of Rs.27,474/- on account of disallowance at 15% 5 SA No.318/2014 & ITA No.1410/14

in various expenses. The assessee was carrying business as dealer in

ferrous and non-ferrous metals. The AO has not made any enquiry with

regard to the huge sundry creditors standing in the books of account

amounting to Rs.4,76,44,724/-. Even the manner in which the notices

alleged to be issued u/s.133(6) of the Act, mode of its reply, mode of

delivery in the office of the department, was found to be non-genuine

by the CIT. All these indicate that the AO has not made proper enquiry

with regard to these sundry creditors. The CIT further observed that the

information received from DGIT(Inv.) and Sales Tax Department also

supports his view that no enquiry with regard to the genuineness of

these creditors were made. Accordingly, the order of the AO was set

aside to be done afresh after giving opportunity to the assessee and

examining the genuineness of sale and purchase and genuineness of

the creditors.

7. In view of the above discussion, it is quite clear that order passed

by the AO was without making any enquiry and without application of

mind, which rendered the order of AO not only erroneous but also

prejudicial to the interest of revenue. Accordingly, we do not find any

infirmity in the order of the CIT passed u/s.263 of the Act, setting aside

the order of AO for fresh examination.

8. In view of the above, as we have dismissed the appeal of the

assessee on merits, therefore, the stay application filed by the

assessee has no legs to stand, and the same is also hereby dismissed. 6 SA No.318/2014 & ITA No.1410/14

9. In the result, stay application along with appeal of the assessee are dismissed.

Order pronounced in the open court on this 9th Jan.,2015.

9th Jan.,2015

Sd/- Sd/- ( ) ( ) (H.L.KARWA) (R.C.SHARMA) / PRESIDENT / ACCOUNTANT MEMBER

Mumbai; Dated 09/01/2015 /pkm, PS Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. / The CIT(A), Mumbai. 4. / CIT 5. / DR, ITAT, Mumbai

6. Guard file.

/ BY ORDER, //True Copy//

(Asstt. Registrar) / ITAT, Mumbai