TMI Blog2020 (4) TMI 787X X X X Extracts X X X X X X X X Extracts X X X X ..... made the basis of impugned order is a serious flaw which makes the order nullity as well as it amounts to violation of principles of natural justice. In the case in hand, when the assessee has demanded the cross examination, the AO instead of giving the opportunity to the assessee to cross examine the witnesses has rather asked the assessee to produce those witnesses. Purchases made by the assessee in the said case from M/s. Avi Exports were treated by the AO as bogus, however, the Tribunal after considering the voluminous documents filed by the assessee before the lower authorities has set aside the orders of the lower authorities and deleted the addition made on account of alleged bogus purchases. It is pertinent to note that the addition made by the AO in the said case of M/s. Haryana Jewellers Pvt. Ltd. vs. ITO (supra) was also on the basis of statement of Shri Rajendra Jain. Where the assessee has produced all the relevant documentary evidences which prove the genuineness of the purchases as well as following the decisions as relied upon by the assessee, we delete the addition sustained by the ld. CIT (A) on account of bogus purchases. - Appeal of the assessee is allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear as against actual gross profit rate of 3.98% for the A.Y. 2008-09 and average gross profit rate of 4.43% of preceding three years in diamond segment. (c) in not allowing reduction from 18% gross profit rate on purchase of Diamonds (alleged as bogus) aggregating ₹ 36651505/=, the gross profit already included in the aggregate gross profit declared in the Trading Account. (d) in sustaining disallowance of ₹ 7533550/= calculated by applying gross profit rate of 18%, whereas the amount in fact works out to ₹ 6597271/-. 4. That the appellant craves leave to add, alter, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal. 2. The assessee is an Individual and proprietor of M/s. Neer Gems and engaged in the business of trading and export of Gem Stones rough and polished, diamonds. The assessee filed her return of income on 30th September, 2009 declaring total income of ₹ 55,11,580/-. The return was processed under section 143(1) on 15.12.2010. Subsequently, the AO reopened the assessment by issuing the notice under section 148 on 26th March, 2016 on the basis of the information received fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resulted an addition of ₹ 75,33,550/-. 3. Before us, the ld. A/R of the assessee has submitted that the AO has made the addition only on the basis of the 3rd Party information without subjecting the same to further scrutiny. He has further contended that the assessee produced bills/invoices issued by the suppliers of the goods along with export bills which show the purchases made by the assessee were exported and were also cleared by the Customs Department. The description of the goods purchased by the assessee and the exports made by the assessee is matching and the quantity is also reflected in the Stock Register showing inward and outward of the goods. The assessee also produced payment details and supporting evidence which is the bank statement showing the payment was made through banking channel. Thus when the sale of the assessee is not in dispute which is the export made by the assessee of these goods, then the purchases of the assessee cannot be held as bogus. The ld. A/R of the assessee has further submitted that the AO has not brought any tangible material on record except the statement of the 3rd Party recorded by the Investigation Wing Mumbai which cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, once the quantitative details have been verified and reconciled from the stock register, ledger account as well as sales/exports of the assessee, then the purchases cannot be doubted. In support of his contention, he has relied upon the decision dated 10th September, 2018 of the Delhi Benches of the Tribunal in case of Haryana Jewellers Pvt. Ltd. vs. ITO in ITA No. 2315/Del/2018 and submitted that an identical issue of purchases made from the concerns allegedly controlled by Shri Rajendra Jain Group and particularly M/s. Avi Exports was considered by the Delhi Benches of the Tribunal and the addition made by the AO and sustained by the ld. CIT (A) was deleted. The ld. A/R has also relied upon the decision of the Coordinate Bench of this Tribunal dated 4th November, 2019 in case of M/s. Sunny Gems India Pvt. Ltd. vs. ITO in ITA No. 445/JP/2018. Hence the ld. A/R has pleaded that the addition sustained by the ld. CIT (A) may be deleted. 4. On the other hand, the ld. D/R has submitted that the AO has clearly made the reference of the statements recorded by the Investigation Wing Mumbai and the relevant part of the statements of Shri Rajendra Jain, Shri Mudit Karnawat and Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard quantity is also reflected in the stock register which is on account of export. Therefore, when the same quantity which is claimed to have been purchased from these concerns is exported and reflected in the stock register, which can be reconciled with the transactions of purchase and inward entries in the stock register as well as outward entries with the concerned vouchers/bills, then the purchases cannot be held as bogus. Once these transactions of purchases are recorded in the Stock Register giving the details and particulars of the quantity as well as the corresponding bill and the corresponding outward quantity also reflected which is the export of the assessee and not disputed by any of the authorities including the Customs, then the purchases of the said quantity cannot be held as bogus though there may be an issue of purchase price as claimed by the assessee from these concerns. However, once the quantitative details of the purchases and exports are matching as per the Stock Register and these quantities can be identified with the purchases and concerned vouchers/bills, then the assessee has prima facie discharged her onus to prove that the purchases are genuine. Though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, VAT Registration of the sellers their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for ₹ 19,39,60,866/-, is directed to be deleted. 4. The ITAT by its judgment dated 16th May, 2014 relied on the self-same reasoning and dismissed the appeal of the revenue. Likewise, the High Court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT. Thus the disallowance made by the AO based on the 3rd party information gathered by the Investigation Wing of the Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross -examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and made the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000 , order dated 17.2.2005 was passed remitting the case back the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 8. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice. 9. We, thus set aside the impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urat and affidavit of Shri Rajendra Jain regarding retraction of statement. A perusal of the order of the lower authorities shows that all these documents were completely disregarded by the lower authorities without assigning any reason. It is also noteworthy that the sales as declared by the assessee were accepted to be genuine by the department and it is only purchases which are being doubted by the department. However, no cogent reason has been given by the department for treating the purchases as not being genuine but accepting the sales made against the said bogus purchases as genuine. Therefore, on overall facts of the case, it is our considered opinion that the Ld. Commissioner of Income Tax (A) was not correct in sustaining the disallowance to the tune of 25% of the alleged bogus purchase when the very basis on which the bogus purchases have been alleged to have been made does not stand in view of the retraction of statement by Shri Rajendra Jain as well as the voluminous documentary evidences which were filed by the assessee before the lower authorities and which substantiate the genuineness of the purchases from M/s Avi Exports. Therefore, under the circumstances, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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