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2017 (5) TMI 1152 - AT - Income TaxBogus purchases - A.O. has exclusively relied on the information received from the Sales Tax Department (Investigation Wing), Mumbai - Held that:- A.O. has not gone beyond the findings of the Sales Tax Department. In Income-tax proceedings, there is extensive use of oral examination of witness or the assessee to ascertain and establish facts. Oral examination provides information, confirmation or contradiction useful in these 8 proceedings. The statement is recorded in oath. The witness is obliged to state the truth and if he makes a false statement he is punishable for perjury. The assessee or the department, as the case may be, can cross-examine the witness to test the truth of his statement. 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 the witnesses and that includes equally the right to cross – examine witnesses. At least in the cases where details were filed by the assessee (para 5.4 and 5.5 of the assessment order), the A.O. could have examined the witness. The A.O. has failed to do so. Addition of entire amount of purchases to gross profit of the assessee - Held that:- We have to ascertain the profit element embedded in such purchases which can be added to the income of the assessee. We find it just and fair to estimate 12.5% of the purchase cost of ₹ 62,40,000/- as the profit element and direct the A.O. to adopt the same and make disallowance. As the enhancement of ₹ 3,12,000/- made by the learned CIT(A) is bereft of any objective yardstick as the same has been estimated @ 5% of the value of bills on the presumption that the assessee might have incurred expenditure in cash to secure bogus bills, the A.O. is directed to delete the same.
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