ITAT Remits Bogus Depreciation Disallowance for Fresh Adjudication :

The assessee is M/s. Monnet Ispat & Energy Ltd. and is engaged in manufacturing of sponge iron, steel, structural steel, ferro alloys, power generation, coal mining and trading, filed its return for AY 2012-13 declaring income of Rs. 2,35,23,11,920. The assessment was completed under Section 143(3) of the Income Tax Act, 1961.

A search and seizure operation conducted on 19/11/2010 revealed material indicating that certain fixed-asset purchases shown by the assessee were not genuine. According to the AO, bills were received and payments were made through cheques, followed by receipt of cash, and the underlying purchases were treated as sham transactions. Consequently, depreciation claimed on such assets was treated as bogus. The AO originally disallowed Rs. 6,07,71,714 towards bogus depreciation. On appeal, the CIT(A), restricted the disallowance to Rs. 4,90,75,001/-. Aggrieved, the assessee approached the Tribunal.

Before the Tribunal, the assessee had argued that the assessment violated the principles of natural justice, since the material seized from third parties and statements recorded from them had allegedly been relied upon without confronting the same to the assessee or providing an opportunity of cross-examination. The Tribunal found substance in the assessee's grievance that no show-cause opportunity had been provided to present its case. In the interest of natural justice, the Tribunal held that the matter required reconsideration by the CIT(A).

Accordingly, the Tribunal set aside the issue to the file of the CIT(A) for fresh adjudication. The CIT(A) was specifically directed to provide the assessee three effective opportunities to present its case, while the assessee was directed to avail those opportunities and furnish the necessary evidence and documents.