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TMI Blog2014 (2) TMI 1296X X X X Extracts X X X X X X X X Extracts X X X X ..... ill. Therefore, the addition made by the AO on the basis of statement of Mr. Anilkumar Chahwalla which was retracted later on was not justified. Moreover the CIT(A) Valsad, while deciding the appeal of Mr. Anilkumar Chahwalla considered the transactions between the assessee and Mr. Anilkumar Chahwalla, proprietor of M/s Padmavati Ge ms and M/s Parth Corporation as genuine. Therefore, the AO is not justified in taking a divergent view. Similarly for the labour charges pa id to M/s Parth Corporation, the assessee furnished before the AO, copy of certificate dated 15.07.2005 issue by ITO Ward-1, Navsari, addressed to assessee, permitting deduction of TDS at a lower rate u/s 197 of the IT Act on the labour charges paid by the assessee to M/s Parth Corporation. Therefore, the transactions relating to the labour charges between the assessee and Mr. Anil Kumar Chahwalla, proprietor of M/s Parth Corporation, cannot be doubted particularly when the quantitative effect of the labour bills was also reflected in the stock register. - Decided against revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. 4. The AO during the course of assessment proceedings observed that Shri Anilkumar Chahwalla proprietor of M/s Padmavati Gems and M/s Parth Corporation had no infrastructure to carry out labour job and he himself had admitted in the statement recorded o n oath u/s 131 of the IT Act that he had not executed any labour work as well as purchase and sale transactions all these were only paper transactions for which he had received commission which was declared in his return of income. The AO made the impugned additions by observing in para 6 of the assessment order dated 21.12.2009, which reads as under;- "As the assessee has claimed labour charges of ₹ 59,88,389/- to M/s Parth Corporation and purchases of ₹ 2,32,25,817/ - to M/s Padmavati Gems, in view of the above mentioned intimation and also the admission by labour contractor under oath u/s 131 of the Income Tax Act , 1961 that he has not carried out any labour job to the assessee and not made nay sales to the assessee, the labour charges claim and purchases cl aim made by the assessee are held as bogus and disallowed. 5. Being aggrieved, the assessee carried the matter to the Ld. CIT(A) and submitted that ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee to examine/cross examine M r. Anilkumar Chahwalla to cross verify the records. The Ld.CIT(A ) observed that as regards the purchases from M/s Padmavati Gems, proprietory concern of Mr. Anilkumar Chahwalla, the assessee filed confirmations from the proprietor and furnished copies of purchase invoices before the AO mentioning requisite details like, name of the item, quantity, rate and the total amount besides the name and address and the f act that the goods sold and delivered at Navsari, was duly mentioned t herein. He further observed that the payments to the above parties we re also duly made by cheques and the copies of the bank statements of the assessee highlighting the above payments were produced before the AO and that the said party was not related to the assessee within the meaning of section 40A(2)(b) of the Act. The Ld. CIT(A) point ed out that as per the materials placed before the AO, the purchases were duly recorded in the books of accounts of the assessee and the quantity of purchase was included in the stocks, out of which export sales were affected. The Ld. CIT(A) also pointed out that it was evident from the copies of some of the purchase invoices, that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect of the labour bills was also reflected iln the stock register. Therefore, the expenditure of labour charges coupled with outward delivery of rough diamonds and inward delivery of polished diamonds and the consequent exports will go to show that the labour payments were done in ordinary course of the assessee's business. He, therefore, held that there was no ground to consider the labour payments made by assessee to M/s Parth Corporation, proprietary concern of Mr. Anilkumar Chahwalla as bogus. Accordingly the addition made by the AO were deleted. Aggrieved by the decision of CIT(A) the Department is in appeal before Tribunal. 9. Ld. DR strongly supported the order of AO and re iterated the observations made in the assessment order dated 21. 12.2009. It was submitted that Ld. CIT(A) without providing any opportunity of being heard to the AO, admitted the additional evidence which is the violation of the provisions contained in Rule 46A of the Inco me Tax rules. It was further stated that the Ld. CIT(A) without appreciating the facts in right perspective deleted the addition made by AO. 10. In his rival submissions, Ld. Counsel for the assessee reiterated the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hahwalla. That statement on 24.12.2008 o btained by threatening the assessee of police action and under coercive pressure and the said statement was not given by free will. Therefore, it was retracted immediately by way of an affidavit dated 27.12.2008 . It is well settled proposition that any statement obtained by coercive measures or under any pressure cannot be admitted as an evidence because it is not by free will. Therefore, the addition made by the AO on the basis of statement of Mr. Anilkumar Chahwalla which was retracted later on was not justified. Moreover the CIT(A) Valsad, while deciding the appeal of Mr. Anilkumar Chahwalla considered the transactions between the assessee and Mr. Anilkumar Chahwalla, proprietor of M/s Padmavati Ge ms and M/s Parth Corporation as genuine. Therefore, the AO is not justified in taking a divergent view. Similarly for the labour charges pa id to M/s Parth Corporation, the assessee furnished before the AO, copy of certificate dated 15.07.2005 issue by ITO Ward-1, Navsari, addressed to assessee, permitting deduction of TDS at a lower rate u/s 197 of the IT Act on the labour charges paid by the assessee to M/s Parth Corporation. Therefore, the ..... 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