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2014 (2) TMI 1296 - AT - Income TaxAddition of labour charges and purchases - invoking the provisions of section 145(3) - Held that:- Addition was made by the AO merely on the basis of statement of Mr. Anilkumar Chahwalla who is a proprietor of M/s Padmavati Gems from whom the assessee purchased the goods and M/s Parth Corporation to whom the assessee made the lab our payments. The assessment framed in the case of said person Mr. Anilkumar Chahwalla was a subject matter of appeal before the Ld. CIT(A ), Valsad, vide order dated 27.12.2008, accepted the contention of the said assessee, Mr. Anilkumar Chahwalla. That statement on 24.12.2008 o btained by threatening the assessee of police action and under coercive pressure and the said statement was not given by free will. Therefore, it was retracted immediately by way of an affidavit dated 27.12.2008 . It is well settled proposition that any statement obtained by coercive measures or under any pressure cannot be admitted as an evidence because it is not by free will. Therefore, the addition made by the AO on the basis of statement of Mr. Anilkumar Chahwalla which was retracted later on was not justified. Moreover the CIT(A) Valsad, while deciding the appeal of Mr. Anilkumar Chahwalla considered the transactions between the assessee and Mr. Anilkumar Chahwalla, proprietor of M/s Padmavati Ge ms and M/s Parth Corporation as genuine. Therefore, the AO is not justified in taking a divergent view. Similarly for the labour charges pa id to M/s Parth Corporation, the assessee furnished before the AO, copy of certificate dated 15.07.2005 issue by ITO Ward-1, Navsari, addressed to assessee, permitting deduction of TDS at a lower rate u/s 197 of the IT Act on the labour charges paid by the assessee to M/s Parth Corporation. Therefore, the transactions relating to the labour charges between the assessee and Mr. Anil Kumar Chahwalla, proprietor of M/s Parth Corporation, cannot be doubted particularly when the quantitative effect of the labour bills was also reflected in the stock register. - Decided against revenue.
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