The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that CIT (Appeals) cannot delete Disallowance without observing findings of the Assessing Officer (AO) and directed the CIT(A) to consider the arguments of both sides i.e. the AO and the assessee.
The assessee, Shri Piyushbhai Bhailalbhai Hirpara had filed the return for the A.Y. 2016-17 on 09.09.2016 declaring a total income of Rs.4,93,900/. As per information available on records the assessee has carried out significant financial transactions during the concerned financial year. On verification of ITD and tTBA module, it is seen that the assessee has filed his/her/its Rol on 06-Aug13 declaring a total income of Rs. 4,93,900/- for the A.Y. 2016-17 relevant to F.Y. 2015-16. The return of income was processed u/s. 143(1)(a) of the I.T. Act, 1961.
On perusal and analysis of information received, it is noticed that a current account was opened on 09.04.2012 in the name of V Nitin operated for a partnership firm Kiran Gems Pvt. Ltd. Within 30 months, the turnover of this current account was Rs.22&74 lacs. This account exhibited a transaction pattern of huge credit transactions from the other accounts of Kiran Gems Pvt. Ltd and V. Nitin. Thereafter, that amount was immediately transferred to the various entities and the funds transferred were immediately withdrawn in cash keeping the minimum balance in the account.
The AO received a report from the investigation wing that within a short span of 30 months from the opening of a current account in the name of V. Nitin, operated for Kiran Gems partnership firm, a huge turnover to the tune of Rs. 22874 lacs was made. The entries in the account exhibited a pattern of huge credit transactions from the other accounts of Kiran Gems Pvt Ltd and V. Nitin and these amounts were immediately transferred to other entities who ultimately withdrew them in cash. The CIT(A) has not dealt with this aspect of the AO’s order. Surprisingly, he has dismissed this basis of the AO for holding the transaction as ingenuine, stating that the AO has not given any details of the inquiry conducted and the modus operandi adopted by various entities.
The two-member Bench of Annapurna Gupta (Accountant Member) and Madhumita Roy (Judicial Member) observed that the CIT(A) has co-terminus power with the AO. The appeal proceedings with the CIT(A) are also a continuity of assessment proceedings, and therefore, the CIT(A) gravely erred in deleting the disallowance on the basis that adverse information in the possession of the AO was not revealed during the assessment proceedings, nor modus operandi adopted by various entities.
The Tribunal held that the CIT(A) in such circumstances was required to have called for the information from the AO, and after applying his mind, the issue should have been adjudicated in the backdrop of the explanation and the evidence filed by the assessee.
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