2017 (2) TMI 541 - AT - Income Tax

Addition on the basis of statements recorded by the Sales Tax Department (STD) from two of the suppliers of the assessee - Held that - FAA called for a remand report that in the report the AO did not comment upon the statements of the suppliers that the assessee was not given any opportunity to cross examine the parties who had supplied the goods to it that the AO had not rejected the books of accounts of the assessee that he had accepted the sales made by it. The FAA has mentioned that the AO did not comment upon as to whether the suppliers had implicated the assessee specifically or the statements were general in nature. In case the statements were about providing accommodation entry in general in our opinion the issue should have been investigated further. The assessee had produced documentary evidences including the proof of payment through banking channel. We further find that the AO has not mentioned in his order as to what documents were produced before him-though he stated that same are being reject - ed. Without giving the details of the documents and reasons for rejecting the same is arbitrary use of the powers. The information received from the STD was a good starting point for making further investigation. But same had to be taken to the logical end the documents produced by the assessee had to be rebutted. - Decided against revenue

Summary

Issues:
1. Addition of &8377; 74.28 lakhs based on purchases found to be bogus.
2. Failure to produce suppliers for verification.
3. Disallowance of purchases and subsequent appeal.

Analysis:
1. The Assessing Officer (AO) added &8377; 74.28 lakhs to the total income of the assessee after finding that purchases made were not verifiable and that the suppliers admitted to providing accommodation entries. The AO issued a show cause notice but the assessee failed to produce the suppliers for verification, leading to the addition.

2. The assessee appealed before the First Appellate Authority (FAA), providing documentary evidence of genuine purchases and highlighting that the suppliers' statements were general in nature. The FAA noted that the AO failed to allow cross-examination of the suppliers and did not consider the specific documents provided by the assessee. Referring to relevant cases, the FAA deleted the addition made by the AO.

3. The Departmental Representative (DR) supported the AO's order, emphasizing the non-production of suppliers. The Authorized Representative (AR) defended the assessee's position, stating that all necessary evidence was submitted. The ITAT Mumbai considered the material before them, noting the lack of consideration of documentary evidence by the AO and the failure to provide an opportunity for cross-examination. Referring to precedents, the ITAT upheld the FAA's decision and dismissed the AO's appeal.