2021 (4) TMI 310 - AT - Income Tax

Estimation of income - bogus purchases - CIT(A) was of the opinion that actual purchases have been made from grey market in cash and such grey market purchases have been supported by purchase bills from Parvati Exports and Mukti Exports thus 25% of the total addition should have been made - HELD THAT - There is no denying that before the first appellate authority on 21.102016, the partner of Parvati Exports appeared and whose statement has been recorded by the first appellate authority. A perusal of the statement clearly shows that the partner has categorically admitted the transaction with M/s Jain Jewellery. When the bills were shown to the partner, the partner admitted that these bills have been signed by himself. Shri Lodha also explained the mode of payment received from the assessee. Since the purchases with M/s Parvati exports have been duly verified, we do not find any reason why addition should have been made in this respect. We, accordingly, direct the Assessing Officer to delete the addition on account of purchases made from M/s Parvati Exports. In so far as purchases made from Mukti exports is concerned, we find that the appellant has submitted flight/air tickets copy from Delhi to Surat. We also find that sales made out of purchases have been duly accepted by the Assessing Officer. Notice issued u/s 133(6) of the Act was fully served and replied by M/s Mukti Exports though the Assessing Officer has dismissed the reply stating that the envelopes have same handwriting but we do not find any force in this finding of the Assessing Officer as he is not a Forensic expert. Entire addition has been made solely on the statement of Shri Bhanwar Lal Jain, whose statement was never confronted to the assessee nor any opportunity of cross examination was given. We, therefore, do not find any merit in this addition also. Considering the facts of the case in totality, appeal of the assessee is allowed and the appeal of the Revenue is dismissed.

Summary

Issues:
- Restriction of addition by the CIT(A) for the Revenue
- Restriction of addition by the CIT(A) for the Assessee

Analysis:
1. Restriction of Addition by the CIT(A) for the Revenue:
- The Revenue's grievance was that the CIT(A) erred in limiting the addition of ?2,04,95,150 to ?51,23,787. The case involved search and seizure actions revealing benami concerns providing bogus purchases. The Assessing Officer concluded that purchases from Parvati Exports and Mukti Exports were bogus, leading to the addition. However, during appellate proceedings, the partner of Parvati Exports confirmed the transactions with the assessee, leading the CIT(A) to conclude that the purchases were genuine grey market transactions supported by bills. The CIT(A) restricted the addition to 25% of the alleged bogus purchases, resulting in ?51,23,787. The Tribunal upheld the CIT(A)'s decision, directing the Assessing Officer to delete the addition related to purchases from Parvati Exports.

2. Restriction of Addition by the CIT(A) for the Assessee:
- The Assessee's grievance was towards the restriction of addition to ?51,23,787. The Assessing Officer made the addition based on the belief that purchases from Parvati Exports and Mukti Exports were bogus. However, the CIT(A) found that the purchases were genuine grey market transactions supported by bills. The partner of Parvati Exports confirmed the transactions, and the CIT(A) restricted the addition to 25% of the alleged bogus purchases, resulting in ?51,23,787. The Tribunal upheld the CIT(A)'s decision, allowing the assessee's appeal and dismissing the Revenue's appeal. The Tribunal emphasized that the addition solely relied on a statement without confrontation or cross-examination, leading to the decision in favor of the assessee.

In conclusion, the Tribunal's judgment favored the assessee by allowing their appeal and dismissing the Revenue's appeal. The decision was based on the CIT(A)'s findings that the purchases were genuine grey market transactions, supported by evidence and partner statements, leading to the restriction of the addition to 25% of the alleged bogus purchases. The Tribunal highlighted the lack of merit in the addition based solely on a statement without proper confrontation or cross-examination, emphasizing the importance of thorough examination and verification in such cases.