MEHTA KARYANA STORE,YAMUNA NAGAR vs. INCOME TAX OFFICER, WARD-3, YAMUNA NAGAR, YAMUNA NAGAR,

Now the assessee is in appeal before us on the grounds mentioned in the present appeal. 5. The Ld. AR reiterated the stand taken before the lower authorities. Reliance was placed upon written replies reproduced by the AO and CIT(A), which form part of the record. Our attention was drawn to the assessment order (para 4, page 2–3), wherein it was categorically stated: “We had made sales of Rs. 65,50,492.35 to M/s Gayatri Maa Enterprises during FY 2013-14, of which Rs. 18,99,589.35 were returned. Net sales of Rs. 46,50,903/- were made, for which payments of Rs. 45,32,323/- were received through cheques in bank and Rs. 1,18,580/- in cash. Likewise, sales of Rs. 33,10,022.40 were made to M/s Ridhi Sidhi Impex, for which Rs. 32,26,329/- was received in bank and Rs. 83,693/- in cash. All sales were genuine and duly supported by bank entries.”

1 Further, Ld. AR for the assessee explained that no purchases were made from these parties. He drawn our attention to the assessment order (para 4, page 3), wherein the stand of the assessee was recorded as under:- “Our financial statements clearly show total purchases of Rs. 6,18,87,496.40 from all parties during the year. Hence, the figure of Rs. 10,04,45,407/- as alleged purchases from M/s Ridhi Sidhi Impex is factually impossible and about four crores more than our total purchases. There is definitely some mistake.”

2 Similarly, before the CIT(A), in Grounds of Appeal (paras 2–4, pages 3–4 of appellate order), the assessee reiterated that the sales of Rs. 46,50,903/- to M/s Gayatri Maa Enterprises and Rs. 33,10,022.40 to M/s Ridhi Sidhi Impex tallied with the figures in the notice and were duly recorded. No purchases were made from the said parties. It was contended that the AO ignored ledgers, VAT returns, audited accounts and bank statements already produced. 5.3 The assessee also emphasized before the CIT(A) that statements of Shri Ashok Kumar Gupta cannot be used against it without opportunity of cross- examination (para 7.2 of CIT(A)’s order). 5.4 Thus, Ld. AR submitted that the entire addition was based on incorrect figures and uncorroborated third-party statement, whereas all its accounts were fully verifiable from books and banks.

Per contras Ld. DR relied on the orders of the AO and CIT(A). He submitted that investigation reports and the statement of Shri Ashok Kumar Gupta established that the assessee was a beneficiary of accommodation entries, and that the onus under sections 68 and 69A was not discharged. 7. We have heard the rival contention of the parties and perused the material available on the record. At the outset, we must emphasise that the power vested in the Revenue to assess and reopen cases is a solemn one, to be exercised with responsibility and fairness. Revenue power is not meant to create fear and goosebumps in the minds of small taxpayers by making exorbitant or unwarranted additions. The authorities are expected to act sensibly and sensitively towards the citizens and taxpayers, ensuring that their actions are based on evidence and not merely on suspicion or borrowed conclusions. 7.1 In the present case, the Assessing Officer made huge additions of Rs. 10.84 crores based on an investigation report and the statement of a third party, without undertaking any independent verification. The assessee, on the other hand, produced ledger accounts, bank statements, audited financial statements, and VAT returns, demonstrating genuine sales aggregating to Rs. 98,60,514/- to the said two concerns. Payments were mostly through banking channels and duly reflected in its accounts. Ironically, although a remand report was called for during the appellate proceedings, it did not address or contradict the clinching evidence furnished by the assessee. Instead, it merely reiterated the earlier allegations. This shows that the Revenue has not discharged its burden of proof. It is also a trite law that third-party statements, without the opportunity of cross-examination, cannot form the sole basis of addition. 7.2 The allegation of bogus purchases of Rs. 9.85 crores is, on the face of it, factually untenable since the assessee’s entire purchases for the year were only Rs. 6.18 crores. The Revenue has presented no material to demonstrate, before us, that the assessee ever made such large purchases during the year under consideration. The bank statement, ledger, and other documents conspicuously do not support the case of the Revenue; rather, they support the case of the assessee, i.e, no bogus purchases were made from these two entities. In these circumstances, the additions made are not only baseless but also result in undue harassment of the assessee. 7.3 In our considered opinion, the additions made by the Assessing Officer and sustained by the CIT(A) are wholly without foundation and cannot stand judicial scrutiny. In the light of the above, and more particularly when the Revenue failed to bring any evidence for purchase of bogus from these two entities the addition made in the hands of the assessee are totally unsustainable and are required to be deleted. Accordingly, we delete the additions of Rs. 98,60,514/- u/s 68 and Rs. 9,85,45,818/- u/s 69A. 8. In the result, appeal of the Assessee is allowed.