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TMI Blog2024 (5) TMI 1476X X X X Extracts X X X X X X X X Extracts X X X X ..... persons who are managing the affairs of assessee s suppliers - Both these witnesses were not subject to cross examination. Hon ble Supreme Court in the case of Andaman Timber Industries [ 2015 (10) TMI 442 - SUPREME COURT] has considered this issue as held that if the statement was recorded from the back of the assessee and assessee was not allowed to cross examine the witness by the authorities, then such statement is to be excluded from the evidence. When an explanation or defence of an assessee based on number of facts supported by evidence and circumstances required consideration, whether it is sound or not must be determined not by considering the evidence attached to each single facts in isolation, but by assessing the cumulative effects of all the facts in their setting as a whole. If we weigh both the sets of evidences discussed then, certainly scale will tilt in favour of the assessee, because when assessee made the purchases at that point of time, all the three concerns were having PAN with the Department/TIN/VAT/CST nos. It has made payments through account payee cheques. It has accounted the materials in the stocks and made sales out of that. It has produced the stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f appeal, out of which under Grounds No. 1 to 3, the assessee has challenged the reopening of assessment by issuance of a notice under section 148. However, during the course of hearing, ld. Counsel for the assessee has withdrawn this fold of grievances and did not press these three grounds. Out of the remaining three grounds, Ground No. 6 is a general ground of the appeal, which does not call for recording of any finding. This lead me to confine only two issues, which read as under:- Ground No. 4:- That the CIT(A) was not justified in upholding the addition of Rs. 86,76,315/- on account of alleged bogus purchases and he completely ignored the submissions of the appellant. That the CIT(A) failed to appreciate that no trading additions could have been made by the AO without pointing out any defect in the audited books of accounts and without rejection of the same. Ground No. 5:- Without prejudice to grounds raised above both AO and (CIT(A) failed to appreciate that if at all any addition was to be made it could have been made on the net profit arising out of the alleged bogus purchases and not the entire amount. 6. Brief facts of the case are that the assessee was engaged in the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns are made:- (a) Sh Bhanwar Lal Jain has categorically accepted that he deals in providing bogus bills. (b) Sh Bhanwar Lal Jain has accepted that M/s Daksh Diamonds and M/s Jewel Diamonds are controlled and managed by him. (c) Assessee has made purchases from M/s Daksh Diamonds and M/s Jewel Diamonds. (d) Sh. Bhanwar Lal Jain has nowhere made any exclusion vis a vis M/S Gujranwala Jewelers in his statement. Therefore it is clear that he provided bogus sale bills to M/S Gujranwala Jewelers too. (e) While examining books of account it was noticed that there were no details of disputed diamonds available in stock register rather there were only general entries, in other words total weight in carrots was added into stock register and there were no details available as to how many pieces are of 1 carrot or 2 carrot etc. further there were no corresponding sales or closing stock vis a vis purchases made from M/s Daksh Diamonds and M/s Jewel Diamonds. Moreover when Assessee was asked regarding the same he also failed to produce/show corresponding quantitative sales/closing stock vis a vis purchases made from M/s Daksh Diamonds and M/s Jewel Diamonds. Assessee did produce some sale bills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO without pointing out any defect in the audited books of accounts and without rejection of the same. Ground No. 5:- That CIT(A) failed to appreciate that addition has been made on the basis of statement of Mr. Sanjay Choudhary and despite the request of the assessee he was not produced by the AO for cross examination. Hence the action of AO and CIT(A) are against the natural justice. Ground No. 6:- That without prejudice to grounds raised above both AO CIT(A) failed to appreciate that if it all any addition was to be made it could have been made on the net profit arising out of the alleged bogus purchases and not the entire amount. 10. Brief facts of the case are that the assessee was engaged in the business of trading of gold Diamond jewellery, Platinum jewellery/silver ornaments/article and bullion etc. during the accounting year relevant to A.Y. 2013-14. It has filed its return of income on 21.09.2013 declaring total income at Rs. 1,39,10,050/-. This return was processed under section 143(1) of the Income Tax Act. The ld. Assessing Officer there after recorded reasons for reopening of the assessment and issued notice under section 148 of the Income Tax Act. In response to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing points of difference: emanating from the respective orders by the said Members: 1. Whether the disallowance of the impugned expenditure justified in the facts and circumstances of the respective cases, or has the assessee/s proved the relevant purchases, so as not to warrant any disal lowance of the expenditure claimed in its respect? 2(a) Whether the entries in the stock register prove the purchases in the facts and circumstances of the case, including as to their price? (b) Whether the stock register as maintained can be said to be a proper record, resulting in correct stock, valuation and, thus, determination of operating results, a question also considered recently by the Tribunal in Punjab Hide Co. v ITO (in ITANo. 190/Asr/2018, dated 25/2/2019)? 3. (a) Whether the plea as to cross examination applicable, in the given facts and circumstances of the respective cases, to both the appeals or only to one (i.e., ITANo. 226/Asr/2017)? (b) Whether the right to cross examination absolute and invariable, or is the nature of the right liable to be determined in the factual matrix of the case? (c) Whether, in any case of the matter, non-provision of the said right, where deemed esse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) 'Whether, as per dictum of Apex Court in the case of Andaman Timber Industry vs. CCE (Civil Appeal No. 4228 of 2006 dated 02/09/2015, the additions are not liable to be deleted in the instant cases, wherein the assessee was not granted any opportunity to cross examine the third party on the basis of whose statement, the additions were made . 15. The ld. Counsel for the assessee while impugning the orders of ld. CIT(Appeals) in both the appeals took me through synopsis of his argument, which are placed on the record. He also made reference to a large number of judgments. As far as the synopsis of arguments is concerned, both are on the same line except variation of the amount and the different concerns from whom purchases were made. For the facility of reference, I take note of synopsis filed in ITA No. 586/ASR/2017, which read as under:- Sub: Synopsis of the Arguments Most respectfully submitted as under: 1. The assessee filed the abovesaid appeal in which seven grounds of appeal have been raised. The first three grounds are legal grounds which the assessee would like to withdraw because of the fact that he ground no. 4,5 6 are fully covered by the judgment of this Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sanjay Choudhry for cross examination of his statement at page no. 71 to 72 of Paper Book. (vii) Copy of letter dated 08.03.2016 of ACIT fixing the date of cross examination of Sanjay Choudhry 14.03.2016 at page no. 73 of Paper Book (viii) Copy of letter dated 15.11 2016 of the AO directing the assessee to appear before DCIT Circle-4 of Surat for cross examination of Sanjay Choudhry at page no. 74 to 75 of Paper Book.. (ix) Copy of letter dated 17.11.2016 of the assessee requesting the AO to call her witness at Jalandhar for cross examination at page no. 76 of Paper Book. (x) Copy of letter of AO expressing her inability to produce the witness in Jalandhar at Page no. 77 to 78 of Paper Book. (xi) Copy of letter dated 01.12.2016 of the assessee again requesting the AO to produce the witness for cross examination in Jalandhar at page no. 79 to 80 of Paper Book (xii) Copy of letter dated 22.12.2016 summing up his entire case before the AO at page no. 81 of Paper Book. 4. Conclusion (g) Purchases made against Invoices from the suppler having PAN, VAT, TIN, CST numbers and payment made against those purchases through cheques. (h) The purchases have been entered in the stock registers a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 ITD (KOL) 662; (vii) Videocon industries Ltd. -vs.- DCIT [186 TTJ (Mumbai) 353; (viii) Pr. CIT -vs.- Vaman International Pvt. Ltd. [321 CTR (Bombay) 671]; (ix) DCIT -vs.- Padmini VNA Mechatronics Pvt. Ltd. [195 TTJ (Del) 649; (x) Oopal Diamond -vs.- ACIT [197 ITD (Mumbai) 827]; (xi) Jaswant Lal J. Shah -vs.- ACIT [190 ITD Mumbai) 157]; (xii) DCIT -vs.- Lucent Diamond [189 ITD (Mumbai) 581]; (xiii) DCIT -vs.- Hi-Tech Engineers (222 TTJ (Mumbai) 785]; (xiv) Pr. CIT -vs.- Tirupati Earth Neerprima JV [457 ITR (Bom) 521]; (xv) Pr. CIT -vs.- S.V. Jiwani [449 ITR (Mumbai) 583]; (xvi) Pr. CIT -vs.- Bataliboi Environmental Engineering Ltd. [446 ITR (Mumbai) 238; (xvii) Bhagat Ram -vs.- ACIT [ITA No. 1753/HYD/2018]; (xviii) Pr. CIT -vs.- Nandkishor Huaschand Jalan [412 ITR (Guj) 357]; (xix) S.I. Rooplal -vs.- Lt. Governor Delhi [AIR 2000 Supreme Court 594]; (xx) Godrej Boyce Manufacturing Co. Ltd. -vs.- DCIT [394 ITR (SC) 449]; (xxi) DCIT -vs.- Summit Securities Ltd. [132 ITD (Mumbai)]; (xxii) The Society of Presentation Sister -vs.- ITO [125 TTJ (Coch) (TM) 909]; (xxiii) Marmon Food and Beverage Technology India Pvt. Ltd. - vs.- ITO [435 ITR (Karn)327]. 17. On the other hand, ld. CIT(D.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel for the assessee took me through page no. 79 of the paper book wherein order-sheet of the proceedings before the ld. Assessing Officer has been placed on the record. On 11th of March, ld. Assessing Officer issued summons under section 131 of the Income Tax Act to Bhanwar Lal Jain for appearance on 23.02.2015, but Shri Bhanwar Lal Jain and Shri Sanjay Choudhary never appeared. The assessee thereafter brought it to the notice of the ld. Assessing Officer that a perusal of the statement given by Shri Bhanwar Lal Jain would suggest that he has not specifically taken the name of assessee disclosing therein that the assessee has availed accommodation entries. The information disclosed by him is a general nature whereby he disclosed that he controls 68 firms mentioned therein and such firms were engaged in providing accommodation entry. It is not specific whether such firm has specifically provided accommodation entry to the assessee or not. The assessee further produced details of the sales made by it. 20. It is also pertinent to note that in A.Y. 2013-14, the assessee has requested that Shri Sanjay Chaudhary managing the affairs of M/s. Nazar Impex (P) Ltd. be produced for cros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first time. It has come up on a number of occasions across the Benches of the Tribunal. The ITAT, Amritsar Bench has considered identical issue in the case of DCIT -vs.-Sunil Arora in ITA No. 563 Others (Amritsar) 2016. The Hon ble Judicial Member is Author of the order in those cases. Apart from that, the ld. Counsel for the assessee drew my attention towards the judgment of the Hon ble Supreme Court in the case of CIT -vs.- M/s. Odeon Builders Pvt. Limited, copy of this decision is available on pages no. 22 to 24 of the paper book. It is a brief decision but I deem it appropriate to take note of this decision, which reads as under:- IN THE SUPREME COURT OF INDIA INHERENT JURISDICTION REVIEW PETITION (C) DIARY NO, 22394 OF 2019 IN CIVIL APPEAL NOS, 9604-9605 OF 2018 Commissioner of Income Tax-7, Petitioner New Delhi Versus M/s Odeon Builders Pvt. Ltd. . Respondent ORDER Delay condoned. We have perused the review petition and find that the tax effect in this case is above Rs. l crore, that is, Rs. 6,59,27,298/-. Ordinarily, therefore, we would have recalled our order dated 17th September, 2018, since the order was passed only on the basis that the tax effect in this case is le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer. 25. The second aspect is that information of the DIT, Investigation Wing is based upon the statements of two persons, namely Shri Bhanwar Lal Jain and Shri Sanjay Chaudhary, who are managing the affairs of assessee s suppliers. Both these witnesses were not subject to cross examination. Hon ble Supreme Court in the case of Andaman Timber Industries -vs.- Commissioner of Central Excise reported in 281 CTR page 241 has considered this issue. The Hon ble Supreme Court has held that if the statement was recorded from the back of the assessee and assessee was not allowed to cross examine the witness by the authorities, then such statement is to be excluded from the evidence. The discussion made by the Hon ble Supreme Court in paragraphs no. 6 7 reads as under:- 6. According to us, 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 because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cumulative effects of all the facts in their setting as a whole. If I weigh both the sets of evidences discussed by me, then, certainly scale will tilt in favour of the assessee, because when assessee made the purchases at that point of time, all the three concerns were having PAN with the Department/TIN/VAT/CST nos. It has made payments through account payee cheques. It has accounted the materials in the stocks and made sales out of that. It has produced the stock register. The purchase shown from these concerns is less than 2.86%/2.76% of the total purchase made by the assessee in respective years. How it can be anticipated that such purchases would be treated as a bogus only on admission of a third party, who might have many reasons for making such statements and such witnesses were not subject to cross examination. Therefore, I am of the view that Brother Judicial Member has rightly deleted the disallowance and I concur with his order. 27. As far as the questions referred to me as noticed in paragraphs no. 13 14 of this order are concerned, I am of the view that Question No. 1 framed by the Hon ble Accountant Member and Question No. 2 framed by the Hon ble Judicial Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portunity to cross examine the third party. On the basis of whose statement, the additions were made . To my mind, this also could not be a question of difference, because the judgment of the Hon ble Supreme Court is categorical. I have already reproduced the relevant part of the judgment. It lays down the proposition that if third party statement recorded from the back of an assessee is being used as an evidence, then, the witness is to be subjected to cross examination and failure on that point would lead to exclusion of that statement from consideration. There is no dispute qua this proposition because it is a proposition laid down by the Hon ble Apex Court, the dispute is how to apply the proposition on the given facts. 29. I have also gone through all the questions framed by the Hon ble Accountant Member, but to my mind, none of the questions except Question No. 1 is directly on the issue in this dispute. They only goad the adjudicator to indulge in an academic exercise and, I resist myself to indulge in such exercise. 30. At the end, I am of the view that Hon ble Judicial Member has taken the correct view that these additions are not sustainable in both the years. 31. The fil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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