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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:
This appeal is filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals)-23, New Delhi dated 08.06.2016 arising from the assessment order dated 20.02.2015 passed under section 143(3) of the Income Tax Act, 1961 (herein after referred to as 'the Act') by the Assistant Commissioner of Income Tax, Central Circle-8, now Central Circle - 17, New Delhi for the Assessment Year 2012-13.
None appeared on behalf of the assessee. We accordingly decided to hear the case with the assistance of the ld DR. The ld DR appraised us with facts of the case and materials on record. The Assessee has raised the following grounds of appeal:
“1.The on the facts & circumstances of the case, the order passed by the Ld. Commissioner of Income Tax (Appeals) - 23, New Delhi is bad in law, wrong on the facts and against the principles of natural justice.
2.That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming action of Assessing Officer in making an arbitrary disallowance of Rs. 4,90,75,001/- on account of bogus claim of depreciation which needs to be deleted.
2.1That the learned CIT(A) has failed to appreciate that the order of the Ld. Assessing Officer is devoid of the principles of natural justice as the additions were made without putting forth a show cause notice of the case made out against the appellant
2.2That on the facts and in the circumstances of the case, the learned CIT(A) has failed to appreciate that the impugned assessment order is devoid of the principles of natural justice as the material seized from the persons other than appellant and statements recorded of such persons have been used against the appellant without confronting the same before the appellant.
2.3That on the facts and in the circumstances of the case, the learned CIT(A) has failed to appreciate that the order of the Ld. Assessing Officer is bad in law as the opportunity of cross examination was not provided despite of the fact that cross-examination is the sine qua non of due process of taking evidences and no adverse inference can be drawn against a party unless the party put on a notice of the case made out against him and therefore the impugned order u/s 143(3) of the Act needs to be quashed.
2.4That on the facts and in the circumstances of the case, the learned CIT(A) has failed to appreciate that the order of the Ld. Assessing Officer is against the legal principles of audi alteram partem as the statements recorded u/s 132(4) during search and seizure proceedings of persons (other than the appellant) were adversely used against the appellant without affording the appellant a reasonable opportunity to rebut the said testimony of the third party and therefore the impugned order u/s 143(3) of the Act is totally bad in law & needs to be quashed.
2.5That on the facts and in the circumstances of the case, the learned CIT(A) has failed to appreciate that the impugned order framed u/s 143(3) of the Act is against the legal intent of the section 132(4A) read with section 292C of the Act as the documents found from the possession and/or control of a person(s) other than the appellant are illegally presumed to be pertaining to the appellant based on mere suspicion, surmises and conjectures particularly when the statute mandates the presumption available u/s 132(4A) of the Act against the person(s) in whose case search is authorized and from whose possession or control the documents were found in the course of search and therefore the impugned order u/s 143(3) of the Act is totally unlawful which needs to be quashed.
2.6That on the facts and in the circumstances of the case the learned CIT(A) has failed to appreciate that the additions on account of the seized material has been made by the Ld. Assessing Officer totally on presumptive basis which has no relevance with the actual transaction undertaken by the appellant and therefore the impugned order u/s 143(3) of the Act needs to be quashed.
The appellant craves leave to add, alter amend, modify or forego any of the of appeal before or at the time of hearing.”
Brief facts of the case are that the assessee is a company and engaged in the business of manufacturing of sponge Iron, steel, structural steel, Ferro alloys, power generation, coal mining & trading. The assessee-company filed return of income on 28.09.2012 declaring income at Rs.2,35,23,11,920/-. The return was processed under section 143(1) of the Act. Subsequently, the case was selected for scrutiny and first notice was issued on 08.08.2013 which was served upon the assessee within the stipulated period.
A search and seizure operation was conducted on 19.11.2010. On the basis of seized material during the search, it was found that purchases of fixed assets were made, bills received and payments were made by cheques and thereafter, cash were received by assessee. On the basis of search at the residential premises of Sh. A. K. Jain and seized documents, it was found that actual purchases of fixed assets has not taken place rendering the transactions shown in the books becoming sham transactions. The assessee has claimed depreciation allowance on these non-existent fixed assets, which was disallowed and added back to the total income of the assessee by the AO for the block period A.Ys 2005-06 to 2011-12. In regular assessment under section 143(3) of the Act for A.Y. 2012-13, claim of depreciation on those purchases of fixed assets was disallowed by treating as bogus. Finally, the excessive/bogus depreciation amounting to Rs.6,07,71,714/- on account of bogus purchases of fixed assets is disallowed while computing the income of the assessee for the year under consideration by the AO.
Aggrieved, assessee was in appeal before the ld. CIT(A). The ld. CIT(A) given partial relief to the assessee in his appellate order dated 08.06.2016 at para 4.3.3 and restricted the disallowance to Rs.4,90,75,001/-.
Aggrieved, assessee is now in appeal before us.
Before us, ld. DR stated that this is the recalled matter wherein originally the ITAT has dismissed the appeal of the assessee vide order dated 27.09.2021 in ITA No.4470/Del/2016 on the ground that NCLT had passed an order on 18.07.2012 under Insolvency and Bankruptcy Code, 2016 and had declared a moratorium in terms of section 14 of the Code. This order was subjected to Misc. Application wherein, the ITAT vide order dated 07.01.2026 recalled the said ITAT order. The ld. DR also stated that the sole issue raised by the assessee is with regard to disallowance of Rs.4,90,75,001/- on account of bogus claim of depreciation. The ld. DR further pointed out that assessee in its ground no. 2.1 has raised the issue of violation of principle of natural justice. The ld. DR further pointed out that the AO had originally disallowed bogus depreciation amounting to Rs.6,07,71,714/- which was restricted by the ld. CIT(A) to Rs.4,90,75,001/-. The ld. DR further pointed out that the ld. CIT(A) restricted the addition on account of the reconciliation presented by the assessee with regard to depreciation allowable. The ld. CIT(A) had examined the calculation submitted by the assessee and accepted the same. In view of the same, the disallowance was restricted to 4.90 crore and may be sustained.
We have heard the ld. DR and perused the material available on record. We find that the ld. CIT(A) had examined the reconciliation made by the assessee and accepted the same. Be that as it may, the assessee has raised the issue of violation of principle of natural justice where no show-cause was given to the assessee to present its case. In view of the same and in the interest of natural justice, we are of thye view that the ld. CIT(A) may have given a further opportunity to the assessee to present its case. We accordingly, set aside the issue to the file of the ld. CIT(A) for fresh adjudication. The CIT(A) is directed to accord three effective opportunities to the assessee to present its case. Likewise, the assessee is directed to avail the opportunities and furnish evidences/documents as required by the CIT(A).
In the result, the appeal filed by the assessee in ITA No.4420/Del/2016 is allowed for statistical purposes.