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TMI Blog2019 (7) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... ng opportunity for cross examination of the party on whose statement the A.O. is relying upon is a right of the assessee in view of the principles of natural justice. ANDAMAN TIMBER INDUSTRIES VERSUS CCE [ 2015 (10) TMI 442 - SUPREME COURT] which held not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice. We also found that even same request was made before the ld. CIT(A) but the same was not considered and plea of the assessee was rejected. Therefore, the judgment of the Hon ble Supreme Court is hold precedent and the assessee s right to seek an opportunity for cross examination is justified and the rejection of the same resulted into nullity of the assessment itself in view of the decision of the Hon ble Supreme Court in the case of Andaman Timber Industries (Supra). GP estimation on bogus purchases - in so far as the profit declared in respect of purchases from these alleged parties were more than the profit declared in respect of other parties and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing an opportunity to cross examination to the appellant while relying on a third party statement as the same was also in violation of principles of natural justice." 03. Rival contentions have been heard and record perused. The facts in brief are that the case of the assessee was reopened on the basis of the information received from the office of the DGIT (Inv.). Mumbai that certain firms are engaged in the business of providing accommodation entries and out of such parties the appellant had also purchased goods from certain firms totaling to ₹ 1,81,71,990. Based on this information A.O. formed an opinion that income to the tune of ₹ 1,81,71,990 related to concealed income. In the assessment the Id. AO has disallowed a sum of ₹ 45,42,998 being 25% of above referred sum and added the same to the income of the assessee. 04. By the impugned order, the ld. CIT(A) upheld the reopening of the assessment but given substantial relief by estimating profit rate at 8.5%, accordingly, against the addition of ₹ 45,42,998/-, the ld. CIT(A) has upheld addition of ₹ 15,41,042/-, against which the assessee is in further appeal before the ITAT. 05. At the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicate that the profit rate declared by the assessee is comparative in all the years under consideration as under: Asstt. Year Turnover Gross Profit Profit Rate 2010-11 3,70,62,443 22,54,341 6.08% 2011-12 5,42,80,906 37,27,037 6.87% 2012-13 5,78,61,983 45,13,471 7.80% 2013-14 7,06,86,095 51,74,137 7.32% 2014-15 7,89,42,771 56,70,745 7.18% 2015-16 8,53,52,037 60,66,474 7.11% 2016-17 9,51,40,396 77,63,974 8.17% 2017-18 8,62,19,742 64,83,576 7.53% Average 56,55,46,073/- 4,16,53,655/- 7.36% Our attention was also invited to the profit of 8.91% shown in respect of transaction entered with these parties which indicated that the profit shown in respect of these purchases was better than the normal profit rate of 7.32% shown during the year under consideration. Accordingly, it was pleaded that when the profit rate in respect of such purchases is more than the normal profit rate shown by the assessee and accepted by the department, no further addition is required. 07. On the other hand, the ld DR has argued that the reopening was based on valid information of the Investigation Wing to the effect that the assessee has p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of ₹ 33.34 crore. In reply to the petition, the Assessing Officer stated that the same emerges from the information received by him from the investigation wing. This clearly reflects non application of mind on the part of the Assessing Officer recording the reasons." The Pr. Commissioner of Income Tax 5 vs. 111/s. Shodiman Investments Pvt. Ltd ITA No. 1297 of 2015 (Bombay High Court)] "14. Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a reopening Notice on the basis of intimation regarding reopening notice from the DDIT (Inv) This. is clearly in breach of the settled position in law that reopening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction." Ostwal Diamond Pvt. Ltd. vs. ITO, Ward 2(5) ITA No.3653/Mum/2017 & 2270/Mum/2018 (Mumbai ITAT) "13. We have considered rival contentions and carefully gone through the orders of the authorities below. Under the provisions of Section 147, reopening solely on the basis of information received from the Investigation wing and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than the profit declared in respect of other parties and the average profit declared during the year under consideration. We also found that the assessee had consistently shown profit between 6 to 8% in the A.Y. 2013-14 and 7.80% in the A.Y. 2012-13, thus overall profit rate was 7.8%. The A.O. has made addition of 25% on alleged bogus purchases without any basis, by the impugned order, the ld. CIT(A) restricted the addition on the basis of past profit to 9.5% of alleged bogus purchases in A.Y. 2013-14 and 8.5% in the A.Y. 2012-13. We also found that over all profit declared by the assessee being 7.32% and 7.80% is substantially higher in both the years keeping in view the nature of business and industry standard. Therefore, this is not a case where it may be presumed that the assessee has made alleged bogus purchases in order to reduce its profit margin. 12. In the result, appeal of the assessee is allowed. 13. The facts and circumstances in the appeal for the A.Y. 2013-14 are pari materia, following the above reasoning passed in the appeal for the A.Y. 2012-13, the appeal of the assessee for the A.Y. 2013-14 is also allowed. 14. In the result, both the appeals of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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