TMI Blog2020 (12) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... through cross-examination of the parties. A proper hearing must always include a fair opportunity to those who are parties in the controversy for correcting or contradicting anything prejudicial to their view. Cross-examination is allowed by procedural rules and evidently also by the rules of natural justice. Any witness who has been sworn on behalf of any party is liable to be cross-examined on behalf of the other party to the proceedings. The Hon'ble Supreme Court 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 witnesses and that includes equally the right to cross-examine witnesses. Thus considering the above factual scenario and position of law, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to make a de novo order, after allowing the opportunity of cross-examination to the assessee. We direct the assessee to file the relevant accounts/documents/evidence before the AO. Needless to say, the AO would give reasona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e without any substance and is based on assumption and presumption. Such order cannot be sustained in the eyes of law. It may please be quashed. 4) On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in sustaining partly the addition made by the AO, without appreciating that it is for the AO to raise specific requisition and ask the assessee to produce details, documents and records he wants the assessee to produce. If he fails to do so, he cannot fasten the blame on the door of the assessee and make addition. The AO has not pointed out even a single instance where the appellant has failed to produce the requisitioned details etc. Hence, the addition made by the AO and sustained partly by the CIT (A) is arbitrary, unwarranted and unlawful. 5) The appellant therefore submits that the addition sustained partly by the CIT(A) by treating the genuine and bona fide purchases as bogus may be deleted and such other and further reliefs, as may be favorable to the appellant, may be granted as may be thought fit to meet the ends of justice. ITA No. 5365/MUM/2016 Assessment Year: 2012-13 3. The grounds of appeal filed by the Revenue read a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,07,160 Noting that the Proprietors/Partners of the above entry providers have also filed affidavits before the Sales Tax Authorities stating that they have issued only sale bills and no real transaction has taken place, the AO asked the assessee to prove the purchases from the above 8 parties. In response to it, the assessee filed copy of purchase bills, ledger account along with sales invoice, delivery challans. However, the assessee failed to file confirmation of purchases from the above parties. In response to the action of the AO to produce the above parties for verification of the genuineness of the transaction, the assessee filed the following reply : Please appreciate that all our purchases are genuine, bona-fide, real and actual. Therefore there is no reason to raise any suspicion or question regarding purchases from these parties. Please appreciate that the onus to prove or establish genuineness of our case on is prima facie. By adducing the above evidences, we discharged the said onus. Now, the onus shifts on the department to prove why our version of the case should not be accepted by the department. For that purpose, you have to disprove our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnishing the following information : Keeping in view the above facts and submissions of the Ld. AR. the appellant was requested to establish the genuineness of these purchases, affording a fresh opportunity by furnishing the information as under: Please furnish current mailing address of the hawala parties, their confirmation of accounts, their bank statements, produce for examination, proof for delivery of goods i.e. delivery challan transport receipts, octroi receipts, loading, unloading expenses, stock register, etc. to prove the hawala purchases. Also furnish qualitative quantitative details i.e. O.S., Purchases, total, sales. C.S. item-wise party-wise, on month to month basis. Please also furnish comparative turnover, GP, GP rate, NP NP for the hawala year last 2 years subsequent 2 years also furnish similar details after addition of purchase for the year and last 2 years and subsequent 2 years and justify the account w.r.t the provision of section 145(3) of the Act, in view of the above facts. Furnish the qualitative/quantitative details i.e. O.S., Purchases, total sales, C.S, item wise/ party-wise, on month to month basis, in the following format, for hawala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009-10 9,94,11,179 4615181 4.64 1107004 1.11 2010-11 14,07,22,110 6632260 4.71 1377429 0.98 2011-12 19,19,29,209 8513330 4.44 2402434 1.25 2012-13 18,84,92,010 8678937 4.60 2737800 1.45 2013-14 18,03,16,961 11296727 6.26 (-)554514 (-)0.31 5.14 From the above chart, it is noticed that the gross profit rate has gone down from 6.26% in A Yr 2013-14 (non-hawala purchase year) to 4.44% in A Y 2011-12, the year in which the alleged hawala purchases were booked, for which the appellant could not offer any valid explanation. These facts clearly established that the appellant had suppressed its profits by booking alleged hawala purchases, as above by 1.82% (6.26 - 4.44) in A Yr 2011-12, as compared to G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s purchases i.e. ₹ 25,51,790/- (1,02,07,160 x 25/100) is considered, which is also worked out almost at par to the suppressed GP of ₹ 34,93,111/-. This squarely establishes the fact that the appellant had suppressed its profits by inflating its purchases. 5.16 By booking alleged bogus purchases, as compared to the A.Y. 2013-14. The appellant has suppressed its profit by ₹ 34,93,111/-. In compliance, the Ld. AR could not offer any valid reasons for fall in the GP rate. Considering the facts in entirety and relying on decisions in the case of M/s. Kanchwala Gems Pvt. Ltd. V/s JCIT 288 ITR 10 (SC), etc. as quoted above, in my considered opinion, the estimation of GP @ 6.26% will be justified. Therefore, the disallowance to the extent of ₹ 34,93,111/-, out of hawala purchases of ₹ 1,02,07,160/-, is sustained and balance amount of ₹ 67,14,049/- (₹ 1,02,07,160/- Less ₹ 34,93,111/-) is hereby deleted. All the grounds of appeal, as raised above, are partly allowed. 6. Before us, the Ld. counsel for the assessee files a copy of (i) the letter dated 04.03.2014 addressed to the AO, (ii) tabular statement showing purchase and supporting do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Ram Sales and Synthetics. On the basis of statement recorded during such survey operations, the AO concluded that the selling parties were engaged only in supplying the bogus bills, that the goods in question were never supplied to the assessee, and therefore, the purchases were bogus. He, therefore, added the entire sum in the hands of the assessee as its additional income. The assessee carried the matter in appeal before the CIT(A), who accepted the factum of purchases being bogus. However, he compared the purchases and sales statements of the assessee and observed that the Department had accepted the sale, and therefore, there was no reason to reject the purchases, because without purchases there cannot be sales. He, therefore, held that under these circumstances the AO was not correct in adding the entire amount of purchases as the assessee s income. He, therefore, deleted the addition restricting it to 10% of the purchase amount. He also directed the AO to make addition to the extent of difference between the gross profit rate as per the books of accounts on undisputed purchases and gross profit on sales relating to the purchases made from the said three parties. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66 %. Therefore, considering 5.66 % of ₹ 3,70,78,125/- which comes to ₹ 20,98,621.88 we think it fit to direct the revenue to add ₹ 20,98,621.88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue. 7. On the other hand, the Ld. Departmental Representative (DR) submits that as the assessee failed to file before the Ld. CIT(A) the details in the prescribed format, item-wise/party-wise [page 13 of the CIT(A) s order]; failed to file confirmed copy of ledger accounts, present mailing address; failed to produce those parties for verification, the Ld. CIT(A) should have confirmed the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal rejected the plea of the assessee to cross-examine the dealers whose statements were relied upon by the AO on the basis that cross-examination would not help the assessee as it would not bring out any material which would not already be in the possession of the appellant themselves. The Hon ble Supreme Court has held that not allowing the assessee to cross-examine the witnesses by the AO though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as it amounted to violation of principles of natural justice because of which the assessee was adversely affected; the Tribunal simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellants themselves to explain as to why their ex-factory prices remain static; it was not for the Tribunal to guess as to for what purposes the appellant wanted to cross-examine those dealers and what information the appellant wanted to extract from them. In the instant case, the assessee failed to file before the AO/CIT(A) confirmed copy of the ledger account, present mailing address of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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