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2017 (6) TMI 284 - AT - Income TaxAddition u/s 68 - addition in respect of sundry creditors representing the amount advanced by them as trade advance - respective parties had chosen not to respond to summons issued by the AO, where the assessee responded and the parties have denied advancing money - Held that:- From a perusal of the assessment order, it is clear that the AO had not confronted the assessee with the material gathered by him by exercise power of commission u/s 131. The AO, no doubt, gathered information by issuing summons to the AO of the party in case of Shri Prashanth. Shri Prashanth, though admitted having purchased timber from the assessee, had denied having lent any advance in the financial year 2010-11. But the principles of natural justice demands that the assessee should be given an opportunity of rebutting this evidence which the AO has failed to do so. In case of other party i.e. K.B.Ramakrishna, he appeared in response to summons issued by the AO but denied having advanced many of ₹ 3 lakhs. But this information was also not put to the assessee for rebuttal. Thus, these two additions have been made by the AO in gross violation of the principles of natural justice. Recently in the case of Andaman Timber Industries [2015 (10) TMI 442 - SUPREME COURT] held that not granting of opportunity to cross examine witness whose statement were relied upon in making assessment is a serious flaw which makes the order nullity inasmuch as it amounts violation of principles of natural justice. Because of which assessee was adversely affected. Thus we hold that addition made in respect of Prashanth and K.B.Ramakrishna should be deleted. As regards addition of ₹ 5 lakhs standing in the name of B.Krishappa, AO made addition simply because he has not responded to the inquiry instituted against him. The AO had chosen not to seek further seek further from the assessee to enforce attendance of creditors is enforced. See CIT. CENTRAL – III Versus CHANDELA TRADING CO. (P) LTD.[2014 (11) TMI 409 - CALCUTTA HIGH COURT ] - Decided in favour of assessee.
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