CIT(A) Shall Not Delete Disallowance Merely By Accepting Taxpayer's Contentions Without Dealing With Findings Of AO: Ahmedabad ITAT

Finding that the CIT(A) has deleted the disallowance merely by accepting the contentions of the assessee before it without dealing with the finding of the AO, the Ahmedabad ITAT directed the CIT(A) to consider the arguments of both the sides before him, i.e. the AO and the assessee, and thereafter adjudicate the issue in accordance with law. The Bench of Annapurna Gupta (Accountant Member) and Madhumita Roy (Judicial Member) observed that “The CIT(A) has co-terminus power with that the AO. The appeal proceedings with the CIT(A) is 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”. (Para 10) “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”, added the Bench. (Para 10) As per the brief fact of the case, AO received report from the investigation wing that within a short span of 30 months from opening of a current account in the name of V. Nitin, operated for Kiran Gems partnership firm, 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 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 Bench observed that the CIT(A) has co-terminus power with that the AO, 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 Bench also observed that the case of the AO was completely different that these were suspicious transaction initiated by M/s.V. Nitin and routed to the assessee as beneficiary, who had withdrawn the amounts subsequently in cash; that these were mere accommodation entries, of which, the assessee was the beneficiary. The Bench found that AO mentions all facts relating to the above received from the investigation wing of the department that within a short span of 30 months from opening of a current account in the name of V. Nitin, operated for Kiran Gems partnership firm, huge turnover to the tune of Rs. 22874 lacs was made. The Bench noted that 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 immediately transferred to other entities who ultimately withdrew them in cash. The Bench further found that the CIT(A) has not dealt with this aspect of the AO's order, and has surprisingly 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. Counsel for Appellant/ Revenue: Saumya Pandey Jain Counsel for Respondent/ Assessee: Dhrunal Bhatt Case Title: ITO verses Shri Piyushbhai Bhailalbhai Hirpara Case Number: ITA No.553/Ahd/2023 Click here to read/ download the Order

CIT(A) Shall Not Delete Disallowance Merely By Accepting Taxpayer's Contentions Without Dealing With Findings Of AO: Ahmedabad ITAT

Pankaj Bajpai

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