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Facts
The appellant, Amrit Corporation, filed appeals for AY 2019-20, 2020-21, and 2021-22 concerning unaccounted purchases from Ratnakala Exports Pvt. Limited. The Revenue added these purchases under Section 69C, and the CIT(A) restricted the addition to the gross profit element.
Held
The Tribunal held that the disallowance confirmed by the CIT(A) was reasonable, as the appellant did not dispute the authenticity of the seized material. Grounds related to reopening of assessment and denial of cross-examination were dismissed.
Key Issues
Whether the reopening of assessment was valid and whether the denial of cross-examination of third-party statements breached principles of natural justice, when other circumstantial evidence was available.
Sections Cited
148, 69C
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Income Tax Appellate Tribunal, Mumbai “A” Bench, Mumbai.
Before: Smt. Beena Pillai (JM) & Shri Omkareshwar Chidara (AM)
Per Bench :- In the above cited cases, the appellant filed appeals for A.Y. 2019-20, 2020-21 and 2021-22 and in all these three years, the issues and Grounds of Appeals are the same, the assessment order and Ld. CIT(A) orders are framed on similar lines. Hence, all the three appeals are clubbed and a consolidated order is passed. The crux of the information available with the Department in all these appeals is that the appellant firm has made certain unaccounted purchases from Ratnakala Exports Pvt. Limited. Based on the search conducted on Ratnakala group, the Department reopened Amrit Corporation case because the they certain seized information relating to unaccounted cash purchases from the Mirekal and DOS Software system maintained by Ratnakala group. A detailed five page note was available on file (page 76 to 80 of the written submission of appellant) which deals with various unaccounted transactions of appellant with Ratnakala group. As per the information with the Department, M/s. Ratnakala group sold a huge amount of Rs. 422.36 crore sales to various parties through cash and M/s.
1. 2 Amrit Corporation Amrit Corporation is one party. The Revenue added all the unaccounted purchases under section 69C as unexplained expenditure. On appeal, Ld. CIT(A) has confirmed reopening of the assessment, but restricted the addition to gross profit element of unaccounted purchases.
Aggrieved by the Ld. CIT(A) order, the appellant filed afore cited appeals. The following grounds of appeal are filed by the appellant before the Tribunal for A.Y. 2019-20 :- 1 . Under the facts and circumstances of the case and the law the Ld. CIT (A) has erred in conforming the AO action in completing the Assessment u/s 148 of the Income Tax Act, 1961 without any material evidences on records thereby rendering the assessment is bad-in-law.
2. Under the facts and circumstances of the case and in law the Ld. CIT (A) has erred in conforming an addition of Rs. 1,98,776/- being @ 8.36% of Rs.23,77,700/- of alleged purchase from M/s Ratnakala Exports Pvt. Ltd.
3. Under the facts and circumstances of the case and in law the Ld. CIT (A) has erred in ignoring the sworn affidavits of the Directors of Ratnakala Exports Pvt. Ltd. of retraction.
4. Under the facts and circumstances of the case and in law the Ld. CIT(A) has erred in ignoring the principles of natural justice for affording an opportunity to the appellant to cross examine the alleged evidences collated and relied upon in the reassessment proceedings.
5. The appellant craves right to alter, amend, withdraw or substitute any ground or grounds or to add any new ground or grounds of appeal on or before the hearing
For A.Y. 2020-21, 2021-22 similar grounds of appeal were filed and only the amounts involved are changed.
4. The first ground taken by the appellant relates to challenging the reopening of the assessment because there is no material available with the Department to reopening of assessment and hence it is bad in law.
During the hearing before ITAT, the Ld. AR of the appellant requested the Bench to keep the ground of “reopening” of the case, open and not argued the case. Hence, the same is not adjudicated and dismissed.
3 Amrit Corporation 6. Ground No. 2 to 5 relates to applying the gross profit rate of 8.3% of unaccounted purchases as additional income which was confirmed by Ld. CIT(A).
During the hearing proceedings before Bench, the Ld. AR of appellant relied on grounds of appeal and Ld. DR relied on assessment order.
8. Heard both sides. From the order of Ld. CIT(A), it is observed that an amount of 8.3% of unaccounted cash purchases were confirmed and 91.7% was deleted. The Ld. CIT(A) in A.Y. 2019-20, confirmed an amount of Rs. 3,19,669/- which is 8.36% of total unaccounted purchases. The logic of Ld. CIT(A) is that the appellant had admitted a gross profit on sales as per books @ 8.36% and hence on unaccounted purchases too, 8.36% was adopted as additional income and upheld the addition to this extent. The appellant’s ground is that “under the facts and circumstances of the case and in law, Ld. CIT(A) has erred in confirming the addition of Rs. 1,98,776/- being 8.36% of Rs. 23,77,700/- alleged purchases from Ratnakala Exports Pvt. Limited. The Ld. CIT(A) did not touch the aspect of section 69C of the Act as per which total unaccounted purchases are to be added in the absence of source for investment of unaccounted purchases. Instead, 8.3% of unaccounted cash purchases were confirmed by Ld. CIT(A) on the basis of gross profit admitted by appellant on accounted sales as per books. Strictly speaking, there is no relation between addition under section 69C of the Act by AO, and adopting 8.3% which is the percentage of gross profit admitted by appellant. The appellant filed an appeal questioning even the 8.3% of unaccounted cash purchases. There is no appeal nor Cross Objection by Revenue with respect to deleting 91.7% of unaccounted purchases deleted by Ld. CIT(A). Hence, the adjudication is confined to appellant’s appeal. The Bench is of the view that the disallowance confirmed by Ld. CIT(A) is most reasonable because even before ITAT, the appellant has not disputed the authenticity of seized material with evidence. On this ground, the appeal of appellant is dismissed.
4 Amrit Corporation 9. The fourth ground of appeal relates to not following principles of natural justice by not giving cross-examination opportunity and ignoring the sworn affidavits of Directors of Ratnakala Exports Pvt. Limited. As far as the issue of not providing opportunity of cross examination, the Bench concurs with the view of Ld. CIT(A), mentioned in para 10.11 to 10.16 of the order of Ld. CIT(A), which is reproduced below :-
10.11 It is also an established position that that statement of a third party cannot be relied upon unless there is contemporaneous evidence to support the statement. In the present case there was enough incriminating material in the form of ledgers maintained in various softwares and the modus operand] was also clarified & established during the search.
10.12 With regard to the issue of cross examination, reliance is placed on the decision of Hon'ble ITAT, Mumbai in the case of GTC Industries [1998] 65 ITD 380 (Bombay) wherein it is held that where statements of witnesses were only secondary and of subordinate material used to buttress main matter connected with amount of additions, it had to be held that there was no denial of principles of natural justice if witnesses were not allowed to be cross-examined by assessee.
10.13 Similar view was also taken by Hon'ble ITAT Delhi "G" Bench in case of Shri Satish Kishore, Shri Nawal Kishore Vs. ITO Ward 47(2) and 47(4) Delhi (ITA No.1705/Del/2019 dated. 06-09-2019]. In the instant case the assessee had contended that no opportunity of cross-examination of the statement of share brokers relied upon by the Assessing Officer has been offered to assessee. The assessee further relied on judgment of Hon'ble Supreme court in case of M/s Andman Timber Industries Vs. Commissioner of Central Excise, Kolkata-II reported in (2015) 281 CTR 241 (SC). The Hon'ble Supreme court had held that failure to give the assessee the right to cross-examine witnesses whose statements are relied up results in breach of principles of natural justice and held that it is a serious flaw which renders the order a nullity. However, Hon'ble ITAT gave a finding of fact that the authorities have not merely relied on the statement of the relevant brokers, but also has taken into account other circumstantial evidences and the assessee was asked to justify the genuineness of the transactions, which the assessee has failed.
10.14 In this regard, it would be pertinent to state that the Apex Court in the case of M/s. Nath International sales Vs. Union of India AIR 1992 (Del) 295 has stated that "The right of cross examination is not an absolute right". The Hon'ble Supreme Court has also held that the right of hearing does not necessarily include right of cross examination. The right of cross examination must depend upon the circumstances of each case and also on the statute concerned (State of J&K vs. Bakshi Gulam Mohammad AIR 196 7 SC 122).
5 Amrit Corporation 10.15 In the present case no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the appellant, further the group has categorically admitted to providing of accommodation entries of unsecured loans through various benami concerns. 10.16 The Hon'ble Rjasthan High Court in the case of Rameshwarlal Mali vs. CIT256 ITR 536(Raj.) has held that "there is no provision for permitting the cross examination of the persons whose statements were recorded during survey."
Hence, this ground of appeal relating to cross-examination is dismissed.
11. Ground No. 3 of the appellant relates to Ld. CIT(A) erred in ignoring the sworn affidavit of Directors of Ratnakala group. In the case of Meghamala Vs. G. Narsimla Reddy (2010) 8 SCC 383, the relevance of affidavit was held as follows :-
The Hon'ble Supreme Court held that affidavits are self-serving document which does not having substantive evidence
12. Moreover, the affidavit filed by appellant does not talk about the incriminating material available during the search. In the impugned case, the Revenue got all evidences of unaccounted evidences from computer systems of Ratnakala group, which clearly shows the unaccounted cash purchases and cash payments by appellant. Hence, there is no need to give any importance to the affidavit of Directors of Ratnakala group who had vested interest as these transactions were not reflected in their books of account. Moreover, these affidavits simply show the accounted transactions of Ratnakala group with appellant and the affidavit is silent on the unaccounted purchases found and seized from their premises.
13. Thus, all the grounds raised by appellant are dismissed for the reasons mentioned in this order. This is the consolidated order for all 3 appeals mentioned in the beginning of this order and this order is applicable to all appeals as the facts and circumstances are same.
6 Amrit Corporation 14. The appeals of appellant are dismissed.
Order pronounced in the open Court on 08/10/2025.