Considering AO’s improper verification and not providing adequate opportunity for a hearing, ITAT remanded the matter.

The New Delhi Bench of the Income Tax Appellate Tribunal ( ITAT ) remanded the disallowance of purchases matter back to the file of the assessing officer for verification ensuring justice should not only be done but also appears to be done. Vayam Technologies Ltd., the assessee claimed exemption of purchases worth over Rs. 2.89 billion for the assessment year 2015-16. Regrettably, the income tax assessing officer disallowed these purchases, estimating a profit margin of 12.50% on the transactions, which resulted in an additional tax liability of over Rs. 36 crores for the company. Get a Copy of Income Tax Rules, Click here Aggrieved by this decision, the assessee appealed before the Commissioner of Income Tax (Appeals), which was dismissed, and the AO’s order was upheld. The assessee brought the matter before the ITAT, New Delhi. The assessee’s legal representative Praveen K. Katiyal argued that the AO’s decision was arbitrary and based on mere presumptions. The counsel asserted that all transactions were reported to the relevant tax authorities (VAT and Service Tax Department) and supported by proper documentation. Get a Copy of Income Tax Rules, Click here The counsel submitted that the AO did not provide adequate opportunities to present or cross-examine evidence. It was contended that disallowing purchases without rejecting sales is illogical, as sales are contingent on purchases. On the other hand, the revenue’s legal representative Sapna Bhatia supported the AO’s decision to disallow the purchase based on the evidence presented during the assessment. Get a Copy of Income Tax Rules, Click here The two member bench comprising Shamim Yahya (Accountant Member) and Sudhir Pareek (Judicial Member) heard both side’s arguments. The bench highlighted the importance of justice and giving opportunities by stating justice should not only be done but also appears to be done. In order to provide fair justice, the ITAT decided to remand the matter back to the assessing officer for verification of the material/ documents produced by the assessee during the proceedings. Thus, the tribunal directed the assessing officer to verify all the documents and to provide one more opportunity to the assessee before deciding the matter.