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TMI Blog2020 (12) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... oods were supplied. In the overall facts and circumstances of the case, the contentious issue would be resolved through cross-examination of the parties. A proper hearing must always include a fair opportunity to those who are parties in the controversy for correcting or contradicting anything prejudicial to their view. Cross-examination is allowed by procedural rules and evidently also by the rules of natural justice. Any witness who has been sworn on behalf of any party is liable to be cross-examined on behalf of the other party to the proceedings. The Hon ble Supreme Court in State of Kerala vs. K.T. Shaduli Grocery Dealer [ 1977 (3) TMI 160 - SUPREME COURT] recognised the importance of oral evidence by holding that the opportunity to prove the correctness or completeness of the return necessarily carry with it the right to examine witnesses and that includes equally the right to cross-examine witnesses. Thus considering the above factual scenario and position of law, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to make a de novo order, after allowing the opportunity of cross-examination to the assessee. We direct the assessee to file the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substance and is based on assumption and presumption. Such order cannot be sustained in the eyes of law. It may please be quashed. 4) On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in sustaining partly the addition made by the AO, without appreciating that it is for the AO to raise specific requisition and ask the assessee to produce details, documents and records he wants the assessee to produce. If he fails to do so, he cannot fasten the blame on the door of the assessee and make addition. The AO has not pointed out even a single instance where the appellant has failed to produce the requisitioned details etc. Hence, the addition made by the AO and sustained partly by the CIT (A) is arbitrary, unwarranted and unlawful. 5) The appellant therefore submits that the addition sustained partly by the CIT(A) by treating the genuine and bona fide purchases as bogus may be deleted and such other and further reliefs, as may be favorable to the appellant, may be granted as may be thought fit to meet the ends of justice. ITA No. 5365/MUM/2016 Assessment Year: 2012-13 3. The grounds of appeal filed by the Revenue read as under : 1) On the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO to produce the above parties for verification of the genuineness of the transaction, the assessee filed the following reply : "Please appreciate that all our purchases are genuine, bona-fide, real and actual. Therefore there is no reason to raise any suspicion or question regarding purchases from these parties. Please appreciate that the onus to prove or establish genuineness of our case on is prima facie. By adducing the above evidences, we discharged the said onus. Now, the onus shifts on the department to prove why our version of the case should not be accepted by the department. For that purpose, you have to disprove our case on the basis of cogent materials. Without doing so none of our purchases can be disbelieved or disallowed." However, the AO was not convinced with the above reply on the reason that the assessee showed its inability to file the confirmation of the said purchases ; also the assessee showed its inability to produce the above parties to prove the genuineness of the purchases. As the assessee failed to discharge the onus cast on it, the AO made an addition of ₹ 1,02,07,160/- as bogus purchases. 5. Aggrieved by the order of the AO, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o furnish qualitative quantitative details i.e. O.S., Purchases, total, sales. C.S. item-wise party-wise, on month to month basis. Please also furnish comparative turnover, GP, GP rate, NP & NP for the hawala year last 2 years & subsequent 2 years & also furnish similar details after addition of purchase for the year and last 2 years and subsequent 2 years and justify the account w.r.t the provision of section 145(3) of the Act, in view of the above facts. Furnish the qualitative/quantitative details i.e. O.S., Purchases, total sales, C.S, item wise/ party-wise, on month to month basis, in the following format, for hawala parties:- Name of the Party- Date of Purchases Amount Date of payment Amount Mode of payment till date Quantitative tally with HP & without HP- Raw Material Opening Stock (Quantity) Purchase (Quantity) Total (Quantity) Consumption (Quantity) Closing Stock (Quantity) Finished Goods Opening Stock (Quantity) Production (Quantity) Total (Quantity) Sale (Quantity) Closing Stock (Quantity) As noted by the Ld. CIT(A), the assessee could not furnish those details in the prescribed format item-wise/party-wise with the plea that the required informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-estimated by rejecting the accounts. In this regard, I would like to place my reliance on the ratio laid down by the following courts - it is held by the Hon'ble Supreme Court in the case of H M Esufali H M Abdulla 90 ITR 271 (SC) that if the estimation made by the Assessing Authority is a bond fide estimate and based on a rationable basis, the fact that there is no good proof in support of that estimate is immaterial. Apex court has further held in the case of M/s. Kanchwala Gems Pvt. Ltd. vs. JCIT 288 ITR 10 (SC) that it is well settled that in a best judgment assessment, there is always a certain amount "guess work". The Hon'ble Supreme Court, in the case of CIT v. Calcutta Agency Ltd. (SC) 19 ITR 191 and Lakshimaratan Cotton Mills Co. Ltd. v. CIT (SC) 73 ITR 634 has held that in order to claim that an expenditure falls u/s 37(1) of the Act, the burden of proving the necessary facts in that connection is on the assessee and not on the Department. Similarly, the Apex Court in the case of Lakshminarayan Madan Lal v. CIT (SC) 86 ITR 439 and in the case of Swadeshi Cotton Mills Co. Ltd. v. CIT 63 ITR 57, has held that the taxing authorities have right to consider whether the expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise (Civil Appeal No. 4228 of 2006) dated 02.09.2015 that "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 in as much as it amounted to violation of principles of natural justice because of which the assessee was adversely affected". It is argued that the onus on the assessee is to adduce sufficient evidence which are in its possession to prove the transactions prima facie ; the assessee has already submitted original purchase bills of the parties in question, their ledger accounts, assessee's bank statements reflecting payments made to the parties in question against purchases made from them. It is further stated that once the assessee has adduced the evidence to prove the transaction prima facie, the onus shifts to the Revenue, whereas in the present case the AO has neither been able to disprove the documents adduced by them, nor has he explained why the assessee's case should not be accepted based on cogent material in his possession. It is further stated that the stock register filed by the assessee containe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions. The Tribunal, therefore, deleted such additions, but retained the portion of the order of the CIT(A) to that extent he permitted the AO to tax the assessee on the basis of difference in the GP rates. In further appeal before the Hon'ble Bombay High Court, the Revenue referred to the decision of the Division Bench of the Hon'ble Gujarat High Court in the case of N.K. Industries Ltd. v. DCIT in Tax Appeal No. 240 of 2003 and connected appeals decided on 20.06.2016 and also pointed out that the SLP against such decision was dismissed by the Hon'ble Supreme Court. The Hon'ble Bombay High Court held : "8. In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the Ld. counsel that the payments to those parties were made in cheques, the materials purchased were used for manufacturing/packing the goods and the corresponding sales have been recorded. It is also the contention of the Ld. counsel that the assessee had furnished all relevant details such as copies of purchase bills, ledger accounts, delivery challans, computer generated stock registers before the AO. A perusal of the order of the Ld. CIT(A) clearly shows that the assessee could not file before him the qualitative/quantitative details i.e. opening stock, purchases, total sales, closing stock, item-wise/party-wise month to month basis in the required format. During the course of hearing on 5.11.2020, the Ld. counsel emphasized again and again that the assessee was not given opportunity to cross-examine the witnesses. This is also the second ground of appeal which is closely linked with the first ground filed by the assessee. It is to this that we turn below. In Andaman Timber Industries (supra), relied on by the Ld. counsel, the assessee was engaged in the business of manufacture and sale of ply wood. Some of the products were sold directly from the factory pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue is genuineness of purchases, which arose because of the investigation done by the Sales Tax Department, Government of Maharashtra which resulted in the affidavits filed by the entry providers that they had merely provided entries and no goods were supplied. In the overall facts and circumstances of the case, the contentious issue would be resolved through cross-examination of the parties. A proper hearing must always include a fair opportunity to those who are parties in the controversy for correcting or contradicting anything prejudicial to their view. Cross-examination is allowed by procedural rules and evidently also by the rules of natural justice. Any witness who has been sworn on behalf of any party is liable to be cross-examined on behalf of the other party to the proceedings. The Hon'ble Supreme Court in State of Kerala vs. K.T. Shaduli Grocery Dealer AIR 1977 SC 1627, recognised the importance of oral evidence by holding that the opportunity to prove the correctness or completeness of the return necessarily carry with it the right to examine witnesses and that includes equally the right to cross-examine witnesses. In ITO vs. M. Pirai Choodi (2012) 20 taxmann ..... X X X X Extracts X X X X X X X X Extracts X X X X
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