Brief of the Case
Various additions have been made by AO without proper application of mind and has no distant connection with the material on record & third party transactions were added in the hands of the assessee without any basis or material and thus, the AO framed the assessment in a hypothetical way putting the assessee to enormous harassment and inconvenience. Similarly, the ld. CIT(A) confirmed the addition without looking into the merits and facts of the cases which are very clear and apparent from the records produced.
Facts of the Case
Facts in brief are that the assessee filed her return of income on 31.10.2007 declaring an income of Rs.3,96,505/-. The assessee is a proprietor of M/s Millenium Metals and was a engaged in the business of trading in Steels and Metals. The case of the assessee was selected for scrutiny and the notices u/s 142(1) and 143(2) were issued and served upon the assessee. During the course of scrutiny proceedings, the AO found that the assessee had entered into certain transactions which were not confirmed or partly confirmed by those parties and thus made the additions of Rs.1,40,43,154/- vide para 5(a), Rs.10,00,000/- vide para 5(b) and vide para 5(c) of the assessment order respectively. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority. The ld. CIT(A) called for the remand report from the AO and in the said remand report the AO stated that the assessee was afforded an opportunity to appear before him, however none appeared before the AO. Thereafter, the AO issued summons u/s 131 of the Act to the three parties which were returned unnerved with the remark of postal authorities “Not Known or Left Place”. Thus, the AO held that the identity of the loan creditors and their existence could not be satisfactorily verified. The AO further observed and held that none of the loan creditors seems to have creditworthiness to offer the amount of loans to the assessee. The ld. CIT(A) also furnished a copy of the remand report, which was replied by the assessee vide her reply dated 24.1.2012. The ld. CIT(A) finally observed and held that the assessee was not able to rebut the stand of the AO on the remand report and simply stated that all these transactions were through banking channels and were fully accommodated for. The ld. CIT(A) also observed that all the submissions made by the assessee were without any documentary evidence and therefore were not tenable and reliable in law. Hence, the ld. CIT(A), dismissed the appeal of the assessee. Aggrieved by the decision of the ld. CIT(A), the assessee has preferred this appeal before the Tribunal.
Contention Of Appelant:
The ld. AR submitted before us that neither the AO nor the CIT(A) had applied their mind to the various facts and record produced before them and the assessment was made on hypothetical basis by the AO and in the same fashion the ld. CIT(A) confirmed the action of the AO.
Held by Hon’ble ITAT
We have considered the rival contentions of the parties and perused the material available before us. We have also perused various certificates and bank statements which were brought to our notice during the course of hearing from page no 13 to 42 of the paper book. As discussed above we find it is a classical case where various additions have been made by the AO without proper application of mind and has no distant connection with the material on record. We find that the third party transactions were added in the hands of the assessee without without any basis or material and thus, the AO framed the assessment in a hypothetical way putting the assessee to enormous harassment and inconvenience . Similarly, the ld. CIT(A) confirmed the addition without looking into the merits and facts of the cases which are very clear and apparent from the records produced. Therefore, in view of these facts, the additions of Rs.1,40,43,154/- in Ground No.1, Rs.10 lakhs in ground no 2 and Rs.26 lakhs in ground No.3 on account of unexplained/undisclosed income are ordered to be deleted by reversing the order of First Appellate Authority. AO is directed accordingly.
In result the appeal of the assessee is allowed.