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TMI Blog2017 (10) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... erfere in the findings recorded by CIT(A) resulting into deletion of addition . In the result, appeal filed by revenue is dismissed. - ITA No. 3610/Mum/2017, CO No. 211/Mum/2017 - - - Dated:- 25-9-2017 - Shri R. C. Sharma, AM And Shri Ravish Sood, JM Revenue by : Shri Rajat Mittal Assessee by : Shri Sunil M. Lala / Shri Tushar Hathiramani ORDER Per R. C. Sharma ( A. M ) This is an appeal filed by the Revenue and Cross Objection by the assessee against the order of CIT(A)-9, Mumbai dated 06/02/2017 in the matter of order passed u/s.143(3) r.w.s. 147 of the IT Act. 2. In this appeal, revenue is aggrieved for deleting addition made by AO on account of bogus purchases amounting to ₹ 33,76,271/-. In the Cross Objection, assessee is aggrieved by the order of CIT(A) upholding reopening of assessment. 3. Rival contentions have been heard and record perused. 4. During the course of reassessment proceedings, AO found that assessee has purchased goods from the parties who have been declared as bogus by the Sales Tax Department, accordingly same was added in assessee s income. AO observed that from a perusal of the Profit Loss A/c, it is noticed that d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court's order, is reproduced below: 16. In the instant case although the appellant assessee has called upon us to drawn inference that the burden shifted to the revenue in the present case once it was established that the payments were made and repaid by cheque we need not hasten and adopt that view after having given our thought to various issued raised and the decisions cited by Mr.Tralshawalla and finding that on a very fundamental aspect, the revenue was not justified in making addition at the time of reassessment without having first given the assessee an opportunity to cross examine the deponent on the statements relied upon by the ACIT. Quite apart from denial of an opportunity of cross examination, the revenue did not even provide the material on the basis of which the department sought to conclude that the loan was a bogus transaction. 17. In our view in the light of the fact that the monies were advanced apparently by the account payee cheque and was repaid vide account payee cheque the least that the revenue should have done was to grant an opportunity to The assessee to meet the case against him by providing the material ought to be used against assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of natural justice have now become deeply and indelibly ingrained in the common consciousness of mankind as preeminently necessary to ensure that law is applied impartially objectively and fairly. These twin principles are (i) audialtermpartem and (ii) nemojudex in re sua. Audi altermpartem is a highly effective rule devised by the Courts to ensure that a statutory authority arrives at a just decision and it is calculated to act as a healthy check on-the abuse or misuse of power. The maxim audialtermpartem has many facets. Two of there are (a) notice of case to be met and (b) opportunity to explain. In facts and circumstances of a particular case when non-compliance with the implied requirements of the audialtermpartem, rule of natural justice at the pre decisional stage, the impugned order can be struck down as invalid on that score alone. 6.3.12. It has been also held by the Apex Court in the case of Delhi Transport Corporation vs DTC Mazdoor Congress, in 1991. AIR 101 that the audialtermpartem, rule which is essence enforces the equality clause of Article 14 of the Constitution and is applicable not only to quasi-judicial orders but to administrative orders affecting p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, statements etc.) used against it. Secondly, by withholding the said material, the AO has denied of the appellant an opportunity to rebut the evidence by cross examining the witnesses, statements, if any made by whom, incriminated the appellant. On both counts the impugned assessment order fails squarely. The following table provides details of the average value addition made by the appellant on its raw materials. It will be seen from the same that in fact the value addition is higher in the case of jewellery manufactured from raw materials purchased from the allegedly bogus parties. PANACHE EXPORTS PRIVATE LIMITED ASSESSMENT YEAR 2008-09 Comparison of Average Value Addition % in respect of sales made out of purchases during the year Date Party Name Status as per IT DiaCt Amount AvgVA % 07.04.2007 Exotic Jewels Allowed 441.66 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16.11 21.07.2007 Fine Star Allowed 42.88 24,44,160 15.26 26.07.2007 Melstar Export Allowed 64.45 9,66,750 15.26 26.07.2007 Meistar Export Allowed 21.64 6,81,660 15.26 01.08.2007 Diam International Allowed 209.92 14,66,702 18.24 02.08.2007 Diam International Allowed 33.92 7,03,842 18.24 06.08.2007 Meistar Export Allowed 204.51 21,89,405 18.85 10.08.2007 Meistar Export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 251.81 39,45,616 20.06 03.11.2007 Rahul Export Allowed 196.55 29,48,416 20.09 10.12.2007 Rahu! Export Allowed 366.18 19,34,030 20.09 01.01.2008 Meistar Export Allowed 196.43 19,96,088 21.75 01.01.2008 Meistar Export Allowed 45.83 10,67,728 21.75 02.01.2008 Manchester Overseas Allowed 138.54 22,81,913 21.75 04.01.2008 Exotic Jewels Allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34,60,054 19.19 21.08.2007 Millennium Star Disallowed 146.02 21,58,906 21.22 03.09.2007 Kittle Diam Disallowed 417.97 32,25,981 24.14 15.09.2007 Rare Diamonds Pvt Ltd Disallowed 132.3 15,38,059 21.41 06.10.2007 Rare Diamonds Pvt Ltd Disallowed 197.4 18,77,944 21.92 20.10.2007 Millennium Star Disallowed 164.79 18,70,543 23.76 23.10.2007 Rare Diamonds Disallowed 167.85 13,83,082 23.76 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally substantiate his contention that the appellant has inflated its purchases. On the other hand, the facts given above prove that in fact the value addition is higher in case of sales made from purchases from the alleged bogus parties 6.3.29. It is well settled that no disallowance can be made as a leap in the dark. The AO is not entitled to make a guess without evidence. The assessment of any particular year cannot be based on mere suspicion or bare guess, but on a legitimate material from which a reasonable inference of any expenditure being of the disallowable nature could be drawn and that the initial burden of finding such material is on the AO as held by Hon'ble High Court Orissa in the case of Bansidhar Onkarmall Vs. GIF (1953) 23 1TR 353(Orissa) where it observed as under :- There was no doubt that the view taken by the income-tax authorities bases on the alleged presumption was erroneous in law. Past history may be legitimate material, but that is not sufficient by itself without more, to justify assessment in a particular year. There must be some material relatable to the accounting year which taken with the past history may reasonably entitle the, income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made out any case that due to certain transaction/ purchases from the alleged concern of Bhanwarlal Jain, there was any fall in GP/NP ratio of the appellant and unless the same is correlated by the AO, sustaining of any addition on percentage basis on the relevant transactions, cannot be legally justified. The AO has not made out any comparative study of GP or NP ratio results of various Assessment years to arrive at any conclusion that there was any fall in GP/NP ratio in the current AY. ... Keeping in view all the facts and circumstances of the case as well as various judicial pronouncements including the decision of jurisdictional IT AT as well as High Court of Mumbai which are binding, 1 feel that the addition made by the AO for the reasons stated in the assessment order cannot be sustained. Accordingly, the addition of amount of ₹ 33,76,271/- is directed to be deleted. In the result, appellant's these grounds of appeal are Allowed. 7. Against the above order of CIT(A), revenue is in further appeal before us. 8. We have considered rival contentions and carefully gone through the orders of the authorities below and found from records that AO has made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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