The Delhi bench of Income Tax Appellate Tribunal has deleted addition based on statement of witnesssince revenue fails to provide cross-examination of material witness.
The appellant, Garg Acrylics Ltd.,is engaged in the business of manufacturing and trading of yarn and garments. During the course of scrutiny assessment, based on the information received from Investigation Wing in the course of survey carried out atM/s. Rishabh Foods cases, the genuineness of purchases made by assessee from M/s. Rishabh Foods amounting to Rs.39,98,522/- were doubted and accordingly the AO made an addition of Rs.7,99,704/- estimating profit embedded in such bogus purchase at 20%.
Aggrieved assessee preferred appeal before CIT(A) which modified and scaled down the amount of disallowance to Rs.6,50,160/- applying the average GP rate at 16.26% instead of ad hoc 20% estimated by the Assessing Officer.Aggrieved by the estimated additions of alleged bogus purchases, the assessee preferred appeal before the Tribunal.
The counsel for the appellant submitted that the purchases have been doubted discarding the cogent evidences adduced solely based on the information received from Investigation Wing and statement of Shri Ram Prakash Bhatia who controlled M/s. Rishabh Foodand without providing any opportunity to cross-examine Shri Bhatia by appellant despite specific request.The statement of Shri Bhatia has been used against the appellant-company for making additions/disallowances to the income of the appellant and therefore it was incumbent upon the revenue to provide the cross-examination of the witness of the Department as a matter of fair play and in inconsonance with sacrosanct principles of natural justice.
The Tribunal observed that the appellant is entitled to cross-examine Shri Bhatia for a just and fair decision making. The Revenue has denied this valuable right and thus infringed the salutary principles despite request from the appellant before the lower authorities. Thus, the statement of Shri Bhatia is to be regarded as an extraneous to the determination of the issue. Once the statement of Shri Bhatia has excluded, the conclusion is obvious in the light of the documentary evidences towards its bona fides as claimed.
The Coram of Mr. Pradip Kumar Kedia, Accountant Member and Mr. Yogesh Kumar US, Judicial Member has held that “we find merit in the plea of the assessee for reversal of unjustified additions. Consequently, the order of the CIT(A) is set aside and the additions made towards bogus purchases are reversed”.
Mr. Ashwani Kumar CA and MithunShete appeared on behalf of the appellant and respondent respectively.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.
