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Income Tax Appellate Tribunal, DELHI
(A.Y. 2018-19) NV International Pvt. Ltd., Vs DCIT, 10th Floor, Vandana Building, Central Circle-31, 11, Tolstoy Marg, Connaught Income Tax Building, ARA Place, New Delhi-110001 Centre, Jhandewalan Extension, PAN: AAACN3085B New Delhi-110055 Appellant Respondent Assessee by Sh. Nirbhay Mehta, Adv. & Ms. Vanshika Mehta, Adv. Revenue by Ms. Amisha S. Gupta, CIT-DR Date of Hearing 19/08/2025 Date of Pronouncement 29/09/2025 ORDER
PER YOGESH KUMAR, U.S. JM:
The present appeal is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals) (‘Ld. CIT(A)’ for short), New Delhi dated 27/02/2024 for the Assessment Year 2018-19.
Grounds of appeal are as under:
“1 .That on the facts and circumstances of the case and in law, the appellate order passed by CIT (Appeals) -30 New Delhi is contrary to the facts and bad in law.
2. That on the facts and circumstances of the case and in law, the CIT(Appeals) was not justified in sustaining the addition of Rs.43,25,382/-made by the AO by estimating the GP @ 20% as against the GP @ 16.65% declared by the appellant on certain purchases by holding that the same are bogus purchases taken by appellant company from entities controlled and managed by Mr. Ashok Kumar Gupta who in survey action on him had admitted that he is an accommodation entry provider. 2.1 The CIT-Appeals failed to consider the submission of the appellant that the addition is not sustainable as neither the copy of statement of Mr. Ashok Kumar Gupta nor the cross-examination of Mr. Ashok Kumar Gupta was given before making the addition though the same was specifically asked by the appellant. 2.2 That CIT-Appeals failed to consider the fact no addition can be made on the basis of statement given during the course of survey without any corroborative material on record. 2.3 The CIT- Appeals has failed to consider the submission that on the alleged bogus purchases the appellant company had already declared GP @ 16.65% and the AO had not provided any basis for estimating higher GP on the alleged purchases. 2.4 That the CIT-A fails to consider submission of the appellant that there is no cause of estimating higher GP as the average purchase price of rice purchased from these alleged to bogus parties is less than the average purchase price from other j parties. 2.5 That the CIT-Appeals failed to consider the submission of the appellant that as per the statement of Mr. Ashok Kumar Gupta, Mr. Ashok Kumar Gupta is neither the proprietor nor the partner of the alleged to bogus entities and therefore his statement cannot be relied upon for making the addition without any corroborative material. 2.6 That the CIT- Appeals has failed to consider the submission of the appellant that addition is not sustainable as against these purchases the appellant company had made corresponding sales which have not been doubted by the AO. 2.7 That the addition is not sustainable as before making addition by estimating higher profit the AO had not rejected the books of the accounts of the appellant company.
3. That on the facts and circumstances of the case and in law, the CIT-Appeals was not justified in making an enhancement of Rs.23,20,782/- @3.35% on Rs.6,92,77,085/- by holding that the AO had wrongly taken the amount of bogus bills of Rs.12,91,15,901/- instead of Rs. 19,83,92,985/-.”
Brief facts of the case are that, a search and seizure action has been carried out on the assessee on 20.04.2017 along with other group entities. Pursuant to the search action, an assessment order came to be passed u/s 153A of the Income Tax Act, 1961 ('Act' for short) for A.Y. 2018-19. AO made addition of Rs.64,99,050/- u/s 68 of the Act and addition of Rs. 43,25,382/- on account of bogus purchases by estimating additional GP at 20% as against the GP of 16.65% declared by the assessee.
Aggrieved by the assessment order dated 31.12.2019, assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 27/02/2024, deleted addition of Rs.64,99,050/- made u/s 68 of the Act, sustained the GP addition of Rs.43,25,382/- and also made enhancement of GP at 3.35% (20% as against the GP at 16.65% declared by the assessee) on purchases amounting to Rs.6,92,77,085/-. As against the order of the Ld. CIT(A) dated 27/02/2024, assessee preferred the present appeal on the grounds mentioned above.
Learned counsel for the assessee submitted that the AO made addition solely based on the self-serving statement given by one Mr. Ashok Kumar Gupta during the course of survey without any corroborative material on record. The ld. Counsel for the assessee further submitted that the AO has not provided opportunity of cross- examination of the said Mr. Ashok Kumar Gupta though assessee has asked for the cross-examination during the assessment proceedings.
The ld. Counsel for the assessee relying on the ratio laid down in the case of Andaman Timbers industries Vs. CCE, 62 Taxman.com 3 (SC)
2015 and others plethora of judgment and submitted that the addition sustained/enhanced by the ld. CIT(A) deserves to be deleted. The ld. Counsel also submitted that the ld. CIT(A) failed to consider that as against the purchases, the assessee company had made corresponding sales which has not been objected by the AO in the assessment order.Further submitted the books of account of the assessee company have not been rejected before estimating the GP in the hands of the assessee. Thus, ld. AR sought for allowing the Appeal.
Per contra, Ld. DR submitted that Sh. Ashok Kumar Gupta has categorically admitted that he used to operate and control various paper companies which are engaged in providing accommodation entries of bogus purchases and sales of various beneficiaries. The ld. DR further submitted that the purchases made by the assessee company from M/s Kalki Trading and M/s Mahavir Prasad Suresh Kumar are also controlled by the said Ashok Kumar, which are nothing but accommodation entries and the clarification given by the assessee before the authorities below was not satisfactory, therefore, the ld. DR relying on the order of the ld. CIT(A), sought for dismissal of the appeal.
We have heard both the parties and perused the material available on the record. During the course of survey proceedings on 30.11.2018, the Revenue recorded the statement of Mr. Ashok Kumar Gupta who admitted that he is engaged in providing accommodation entries of purchase and sales and those entities are controlled and managed by Ashok Kumar and his family members. As per digital data impounded during the course of survey, it is found that the assessee company made purchases from two entities i.e. M/s Kalki Trading and M/s Mahavir Prasad Suresh Kumar which are also managed and controlled by the said Mr. Ashok Kumar Gupta. The assessee has declared GP rate at 16.65% and the AO applied GP rate of 20% on alleged of bogus purchases. The ld. CIT(A) further enhanced the said addition.
As could be seen from the record, the sole reason for making the said addition was the statement of Sh. Ashok Kumar Gupta. During the course of assessment proceedings, assessee sought for cross- examination of the said Mr. Ashok Kumar Gupta. However, the opportunity of cross-examination has been denied by the AO. It is well settled law that no addition can be made on the basis of statement of third party without providing the opportunities of cross-examination of the same. The Hon’ble Supreme Court in the case of Andaman Timbers Industries Vs. CCE (supra) held as under:
“According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of crossexamination. 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 crossexamination and make 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 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 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. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal.”
It is evident from the record though the AO/CIT(A) treated the declared purchases as bogus, however, A.O. has not disputed the corresponding sales made by the assessee. Further the Books of Accounts of the assessee has not been rejected and without rejecting the books of account, proceeded to estimate the higher GP which is contrary to the settled principles of law. Further as per the statement of the said Mr. Ashok Kumar Gupta himself he is neither the proprietor nor a partner of M/s Kalki Trading and M/s Mahavir Prasad Suresh Kumar and as per the statement of Mr. Ashok Kumar Gupta, one Sh. Deepesh Goel is the proprietor of M/s Kalki Trading and Sh. Suresh Kumar is the proprietor of M/s Mahavir Prasad Suresh Kumar. Such being the case, the department committed serious error in relying on the sole statement of the said Mr. Ashok Kumar Gupta which has not been even tested by way of cross- examination by the assessee.
In view of the above, we are of the opinion that the ld. CIT(A) committed error in confirming as well as enhancing the addition, which will not survive in the eyes of law. Accordingly, the order of the ld. CIT(A) is hereby set aside.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 26th September, 2025