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- Reliance on statements of karkhanadars without providing full copies to assessee for cross-examination - Addition made in trading account due to inflation in purchases Analysis: The High Court of Allahabad addressed the issue of reliance on statements of karkhanadars without providing full copies to the assessee for cross-examination. The Income-tax Officer noticed defects in the maintenance of account books by the assessee, leading to additions in the trading account for suppression of sales and inflation of purchases. The Tribunal examined five karkhanadars whose statements indicated that the assessee had inflated purchase rates, leading to the addition of Rs. 1,11,813 in the trading account. The Commissioner of Income-tax (Appeals) deleted this addition, but the Appellate Tribunal upheld it based on the karkhanadars' statements. The High Court found that the assessee had the opportunity for cross-examination after the statements were recorded, and since the assessee did not request copies of the statements earlier, it was aware of the contents. Therefore, the Court upheld the Tribunal's reliance on the karkhanadars' statements in determining the inflation in purchases. Regarding the addition made in the trading account due to inflation in purchases, the High Court analyzed the Tribunal's decision. The Tribunal considered various factors, including the past history of the assessee, inflation in purchases, and lack of evidence to support suppression of sales. The Court noted discrepancies between actual purchase rates and those recorded in the books of account, highlighting the inflation in purchases. The Court also discussed the unreliability of payment vouchers maintained by the assessee. Ultimately, the Court agreed with the Tribunal's decision to uphold the addition in the trading account, as the inflation in purchases was substantiated by the statements of karkhanadars and other evidence presented. Therefore, the Court answered the question in favor of the Revenue and against the assessee, affirming the addition in the trading account due to inflation in purchases.
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