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2024 (5) TMI 1118 - AT - Income TaxBogus purchases - addition as based on information from the Investigation Wing of Mumbai regarding accommodation entries - HELD THAT - Once the assessee has produced the documents evidencing the purchases of the goods from the said two entities viz. M/s. Ankia Exports and M/s. Pankaj Exports and the payments made thereto the onus to prove the negation is shifted to the Ld.AO. AO should have been examined M/s. Ankia Exports and M/s. Pankaj Exports by issuing summons U/s. 131 of the Act or calling for informations u/s 133(6) of the Act and find out whether these two entities existed or non-existed or in alternative should have been brought on record any evidence to prove that the invoices produced by the assessee were not genuine. No positive evidences were brought on record by the Revenue to show that the expenditure claimed by the assessee by way of purchase of jewellery were not genuine. We are also of the opinion that once the sales made by the assessee have been considered accepted and taxes have been collected from the assessee then it is difficult to accept the contention of the Ld. AO that the purchases made by the assessee were not genuine. In the case on hand also once the Revenue has accepted the sale of the assessee and taxed the assessee then the Revenue cannot charge solely on the basis of alleged bogus purchases. Further we may also draw the support from the decisions referred to by the assessee (supra) in support of his case wherein it was held in the case of bogus purchases only some percentage of the bogus purchases is required to be considered as additional income. In the light of the above we find no merit in the argument of the DR and therefore the same is required to be rejected. DR has referred to the decision of in the case of Nokia India Private Limited 2015 (5) TMI 820 - ITAT DELHI wherein the Tribunal has held that unless the assessee asked for the cross-examination the assessee cannot be permitted to raise such ground at a later stage. Similar view was also taken in the other judgments cited by the learned DR herein above. Though during the course of argument one of the contentions raised by the learned AR for the assessee is that the assessee has not been given the opportunity of cross-examination and therefore on that ground also the order passed by the lower authorities is not tenable. However to counter the argument of the learned AR the learned DR had filed the written submissions which are reproduced herein above. Violation of principles of natural justice and fair play - We are of the considered opinion that the right to cross-examine is a matter of right vested in the assessee by virtue of the various pronouncements of the Hon ble Supreme Court and also in the realm of principles of natural justice. The law is clearly settled that no person should be criticised and is subjected to any civil liability unless a chance to rebut and cross-examine is granted to the assessee. For the above said propositions we hereby rely upon the ratio laid down in the case of Andaman Timber Industries 2015 (10) TMI 442 - SUPREME COURT and Odeon Builders (P.) Ltd 2019 (8) TMI 1072 - SUPREME COURT Therefore in our considered view this objection of the Revenue is also without any merit. To conclude in the light of the above observations we hereby allow the appeal of the assessee.
Issues Involved:
1. Legality and factual correctness of the order passed by the Ld. CIT(A). 2. Confirmation of the addition of Rs. 38,30,824/- towards bogus purchases. 3. Violation of principles of natural justice due to lack of cross-examination opportunity. Issue-wise Detailed Analysis: 1. Legality and Factual Correctness of the Order Passed by the Ld. CIT(A): The primary contention of the assessee was that the order passed by the Ld. CIT(A) was erroneous in law and against the facts of the case. The assessee argued that the Ld. CIT(A) failed to provide adequate reasoning for confirming the addition of Rs. 38,30,824/- towards bogus purchases. The Tribunal noted that the Ld. CIT(A) had deleted a portion of the disallowance but confirmed the disallowance related to bogus purchases without substantial evidence or reasoning. The Tribunal observed that the assessee had provided invoices, bank statements, and other contemporaneous documents to support the genuineness of the purchases. However, the Ld. AO accepted similar documents for major purchases from M/s. Megha Gems but disallowed purchases from M/s. Ankita Exports and M/s. Pankaj Exports without adequate justification. 2. Confirmation of the Addition of Rs. 38,30,824/- Towards Bogus Purchases: The Tribunal scrutinized the basis for the addition made by the Ld. AO, which was primarily derived from information received from the Investigation Wing of Mumbai regarding accommodation entries provided by Mr. Bhanwarlal Jain Group. The Ld. AO had alleged bogus purchases from M/s. Ankita Exports and M/s. Pankaj Exports based on this information. However, the Tribunal noted that the assessee had submitted all necessary documents to substantiate the purchases, including purchase invoices, bank statements, and stock registers. The Tribunal emphasized that once the assessee provided evidence of the purchases, the onus shifted to the Ld. AO to disprove the genuineness of these transactions. The Tribunal found that the Ld. AO did not conduct further verification, such as issuing summons under Section 131 or calling for information under Section 133(6) of the Act, to establish the non-genuineness of the purchases. Therefore, the Tribunal concluded that the addition of Rs. 38,30,824/- was not justified. 3. Violation of Principles of Natural Justice Due to Lack of Cross-examination Opportunity: The assessee raised the issue of not being given an opportunity to cross-examine Mr. Bhanwarlal Jain, whose statement was relied upon by the Ld. AO. The Tribunal acknowledged that the right to cross-examine is a fundamental principle of natural justice. The Tribunal referred to the Hon'ble Supreme Court's rulings in Andaman Timber Industries vs. CCE and CIT vs. Odeon Builders (P.) Ltd, which affirmed the necessity of providing an opportunity for cross-examination. The Tribunal noted that the Ld. CIT(A) dismissed the ground on the basis that physical presence was not required for effective adjudication. However, the Tribunal disagreed, emphasizing that the right to cross-examine is essential for a fair trial and to rebut any adverse statements made against the assessee. Consequently, the Tribunal found that the denial of cross-examination was a violation of natural justice principles, further invalidating the addition made by the Ld. AO. Conclusion: The Tribunal allowed the appeal of the assessee, concluding that the addition of Rs. 38,30,824/- towards bogus purchases was not substantiated by adequate evidence and that the denial of cross-examination violated the principles of natural justice. The Tribunal emphasized the necessity for the Revenue to provide concrete evidence and allow cross-examination to uphold the principles of fairness and justice. Order: The appeal of the assessee was allowed, and the order was pronounced in the open court on 21st May, 2024.
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