GARG ACRYLICS LTD.,NEW DELHI vs. ADDL. CIT, SPECIAL RANGE- 4, NEW DELHI

PER PRADIP KUMAR KEDIA, A.M.: The captioned Appeal has been filed by the Assessee against the order of the Commissioner of Income Tax (Appeals)-XXXV, New Delhi (‘CIT(A)’ in short) dated 24.07.2018 arising from the assessment order dated 30.12.2017 passed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2015-16.

raised by the assessee reads as under:

2. That the Ld. CIT(A) has erred in confirming the purchases as bogus, to the tune of Rs.6,50,160/-calculated at Average G.P. Rate @ 16.26% of Rs.39,98,522/-,

I.T.A. No. 5872/Del/18 2 inspite of the following facts & submission made before her. (a) That payments to the suppliers have been made through RTGS, banking channels; (b) That the assessee has paid Entry Tax of these purchases, while entering goods in Punjab; (c) That the goods so purchased are duly entered in Stock Inward Register; (d) That all such purchases were duly supported by way bills, Bilty Etc. (e) That all purchases, when sold are duly entered in Sale Register; (f) That assessee company is an excisable unit 85 excise duty has also been paid on Sales thereof; (g) That Quantitative Details of Opening Stock, Purchases, Sales, Work In Progress & Closing Stock, if OK, how the purchases can be bogus; (h) That the Ld. AO have not pointed out any discrepancy in the books of accounts;

(i) That the assessee was not provided opportunity to cross examine Sh. R.P. Bhatia, whose statements have been used for making additions in the hands of assessee;

(j) That the principle of natural justice has not been followed, while passing the assessment order and making the additions in the hands of assessee.”

I.T.A. No. 5872/Del/18 3 out at the premises of Shri Ram Prakash Bhatia and on the basis of statement recorded of Shri Ram Prakash Bhatia, the genuineness of purchases made by Assessee from M/s. Rishabh Foods amounting to Rs.39,98,522/- were doubted and aspersions were cast at the genuineness of purchases (cotton) claimed to have been made by the assessee from the aforesaid party. The Assessing Officer accordingly made an addition of Rs.7,99,704/- estimating profit embedded in such bogus purchase at 20%.

I.T.A. No. 5872/Del/18 4 upon copious documents such as copies of ledger account, invoices raised by the supplier, copy of VAT-XXXVI issued by ICC Centre at Punjab Border when the goods entered into Punjab State, copies of excisable stock register form IV and RG-1 wherein the purchase quantity has been entered and finished goods produced out of it and sold to its customers; VAT returns showing the said purchases together with bank statement showing payment made through banking channels. The assessee also contends that the quantity details have not been disturbed by the Assessing Officer nor the books of account have been rejected and / or any discrepancy was shown therein. The assessee thus contends that in the backdrop of these elaborate documentation, the purchases made by the assessee running large scale business and showing huge profits could not have been discarded summarily on the basis of some unverified statement of one Shri R.P. Bhatia whose connection with the supplier M/s. Rishabh Foods has not been established at all. It was thus contended that neither the cross-examination has been provided nor the locus standi of the deponent of so called statement has been established. The assessee further contends that the CIT(A) has also brushed aside tell-tale evidences and summarily endorsed the action of the Assessing Officer based on some unvouched information and without giving any justification for giving undue weightage to the statement of unidentified person while substituting the overwhelming evidences.

I.T.A. No. 5872/Del/18 5 channel and backed by documents showing movement and delivery thereof. The Revenue has miserably failed to dislodge the sanctity of such formidable evidences in any manner except a statement of third person whose connection with the supplier has not been established. This apart, Shri Bhatia, i.e., witness has not been confronted to the assessee to unearth the truth. The assessee is entitled to cross-examine Shri Bhatia for a just and fair decision making. The Revenue has denied this valuable right and thus infringed the salutary principles despite request from the assessee before the lower authorities. Thus, the statement of Shri Bhatia is to be regarded as an extraneous to the determination of the issue. Once the statement of Shri Bhatia has excluded, the conclusion is obvious in the light of the documentary evidences towards its bona fides as claimed. Therefore, we find merit in the plea of the assessee for reversal of unjustified additions. Consequently, the order of the CIT(A) is set aside and the additions made towards bogus purchases are reversed.

Order pronounced in the open Court on 14/06/2022.