Vijay Pal Rao, Member (J) -
(1.) THESE three appeals by the assessee are directed against three separate orders of CIT(A) for A.Y. 2006 -07, 2007 -08 and 2008 -09 respectively. For the A.Y. 2006 -07, the assessee has raised following concise grounds: -
"1. That whether the Ld. CIT(A) was justified in confirming assessment order without even affording proper opportunity or appreciating the submission/evidence of the appellant.
2. THAT whether the Ld. CIT(A) was justified in confirming assessment order confirming additions of Rs. 24,73,00,784/ - towards purchases from 11 parties as non -genuine even when: -
a) There was no dispute in the quantitative figure of purchase and sale
b) Non -providing any opportunity to cross -examine to the witness of the department.
c) Not a single difference in stock records
d) No dispute on the Audited Financial Statements
e) Not an iota of evidence was found/impounded during survey either in the premises of the appellant's or in the premises of the supplier's place.
f) No dispute about payment by the banking channel
g) no rejection of books of account.
That whether the Ld. CIT(A) was justified in confirming addition of Rs. 40 lacs as a bogus purchase, even when there were no purchases from the alleged parties, just based on not specifically taken in Grounds even though it was taken in the submission.
3.THAT whether the Ld. CIT(A) was justified by restoring back to A.O. the addition of Rs. 1,67,82,274/ - on account of DEPB license even though the evidence was fully explained.
4.THAT whether the Ld. CIT(A) was justified by confirming the addition of Rs. 1,40,97,079/ - made u/s. 40A(3) even when the section was not Applicable to the exceptional circumstances Whether the Ld. CIT(A) was justified ini confirming the disallowance of Rs. 35000/ - u/s. 43B for PF & ESI without appreciating the evidence on record."
(2.) Ground no. 1 is general in nature and the same is not pressed by the assessee. Accordingly no finding is required in respect of ground no. 1 and the same is dismissed as not pressed.
(3.) Ground nos. 2 and 3 are regarding addition on account of bogus purchases from eleven parties.
3.1. The assessee is an export house exporting hosiery goods, woolens, synthetics and ready -made to CIS countries and Middle East. A survey u/s. 133 was conducted in the case of assessee group and other parties on 31.03.2006, wherein the statement of some of the parties(suppliers) were recorded. The Assessing Officer disallowed a sum of Rs. 24,73,00,784/ - out of the total purchase of Rs. 2,20,57,67,965/ - on the basis of the statements given by four persons during the course of survey proceedings on 31.03.2006 as well as supplementary statements recorded on 12/13.04.2006. The main basis for disallowance of purchases by the Assessing Officer, is the statement given by these four persons that they are engaged giving accommodation bills to the parties and returning cash after charging their commission at the specified rates. The Assessing Officer stated in the assessment order that the assessee failed to justify these purchases to his satisfaction and only at the fag end of the assessment proceedings asked for cross examination of these four parties whose statements were recorded. Thus the Assessing Officer under these circumstances, held the purchases of Rs. 24,73,00,784/ - as bogus purchases and added the same to the total income of the assessee.
3.2. Before the CIT(A), the assessee contended that the assessee was not given proper time and opportunity for filing the details and proofs and to cross examine these parties. The CIT(A) issued a remand order directing the Assessing Officer to grant an opportunity to the assessee to cross examine the four parties and then submit his report. The Assessing Officer submitted the remand report on 12.01.2011 and stated that summons issued to four parties for cross examination during the remand proceedings, were returned by the postal authorities with the remark 'Left/No such Persons' and accordingly the assessee could not be allowed the opportunity for cross examination. After considering the remand report, the CIT(A) confirmed the addition made by Assessing Officer.
3.3. Before us, the Ld. Authorized Representative of the assessee has submitted that the total sale of the assessee comprising more than 92% from exports and the remaining 8% is domestic sale. The assessee is properly maintaining Books of Accounts which were duly audited as per the provisions of the Companies Act and Tax Audit. There were no qualifications in the Auditor's reports nor was defect pointed out by the Auditors. Even the authorities below have accepted the accounts of the assessee and made the addition merely on the presumptions and assumptions on the basis of the statement recorded from for persons during the survey. The addition made on the basis on third party statement without giving an opportunity for cross examination to the assessee is not sustainable. He has further submitted that even in the statements recorded u/s. 133A, it has not been stated by any of the four persons that they have given accommodation entries to the assessee. The statement is vague and general and no specific allegation against the assessee has been made. On the same date a survey was carried out at the place of the assessee and the statement were recorded, wherein, the assessee stated and clearly shown the record that the supply were made by these parties and there was no incriminating documents found during the survey to suggest bogus transaction. The assessee categorically denied the allegations vide its letter dated 25.12.2008 and 27.12.2008. The Ld. Authorized Representative has referred the statement of one Shri Chand Gulati recorded on the date of survey and submitted that he has stated in the statement regarding accommodation bill and entries during the period July 2004 to October 2004 and not for the A.Y. under consideration. The Ld. Authorized Representative has forcefully contended that the statement recorded during the course of survey without any documentary evidence cannot be relied upon for the purpose of making addition when the assessee has produced all evidence in support of his claim of genuine purchases. In support of his contention he has relied upon the decision of Hon'ble High Court of Madras in the case of CIT Vs. Khader Khan Son. ( : 300 ITR 157) and submitted that the said decision of Hon'ble High Court has been confirmed by the Hon'ble Supreme Court vide (210 taxmann 248). Therefore, the statement recorded u/s. 133A has no evidentiary value and such statement cannot be made basis of addition. The Ld. Authorized Representative has further contended that when the export sale constitute more than 92% of the total sale and the revenue has not disputed the sale of the assessee then the corresponding purchases cannot be treated as bogus in view of the fact that the assessee has furnished all the details and supporting evidence. He has referred the purchase bills, details of export as well as domestic sales, bank statement showing the payment made to the suppliers. All the requisite information and details were furnished before the Assessing Officer in respect of 45 parties as mentioned by the Assessing Officer at page no. 2 of the assessment order. When the Assessing Officer has accepted the sale, corresponding purchase cannot be denied. In support of his contention he has relied upon the decision of Hon'ble Jurisdictional High Court in the case of Tamil Nadu Dairy Development Corporation Ltd. (216 ITR 171) He has also relied upon the decision of Hon'ble Gujarat High Court in the case of CIT Vs. Bholanath Poly Fab Pvt. Ltd. ( : 355 ITR 290) and submitted that without granting an opportunity of cross examination, the statement recorded at the back of the assessee cannot be the basis of addition. The Ld. Authorized Representative has also pointed out that for the A.Y. 2005 -06, the Assessing Officer has completed the assessment on 28.12.2007, subsequent to the survey took place on 31.03.2006 and accepted the purchases from these parties. Therefore, when the Assessing Officer has accepted the purchases in respect of these parties for the A.Y. 2005 -06 then the purchase cannot be denied merely on the basis of statement recorded in survey without specific allegation of any accommodating entries and bills by these parties to the assessee. He has referred the statement of these four parties and stated that all the statements are stereo type which is not possible because all these parties were not at single place but at different places. The assessee already submitted the quantitative details of export unit placed at page no. 44 and 45 of the paper book, there was no discrepancy found in the quantitative details filed by the assessee and also recorded in the Books of Accounts, therefore, when all the details of manufacturing unit are matching along with opening and closing stock then the purchases cannot be treated as bogus.
3.4. On the other hand, the Ld. DR has submitted that the Assessing Officer has recorded in the assessment order that cross examination was demanded by the assessee at the fag end of the assessment proceedings and, therefore, it was not possible for the Assessing Officer to allow the assessee opportunity for cross examination of the parties. He has referred the impugned order of CIT(A) and submitted that the assessee did not comply with the requirements of the remand proceedings as the assessee has not furnished the complete details before the Assessing Officer during the remand proceedings. The Assessing Officer issued letter dated 19.08.2010 asking for certain details with regard to this matter for its compliance as per the order of CIT(A) to find out the factual position of goods purchased and called for cash book, party ledgers, inward and outward registers, stock registers, transport receipts, goods loading and unloading expenses etc. The assessee did not comply with the requirements of the letter issued by the Assessing Officer, therefore, when the assessee has not furnished the requisite details and evidence and failed to explain the genuineness of the purchases, the CIT(A) was justified in confirming the addition made by Assessing Officer. The Ld. DR has relied upon the decision of Hon'ble Calcutta High Court in the case of Mriganka Mohan Sur Vs. Commissioner of Income -Tax, ( : 120 ITR 529) and submitted that the circumstantial evidence was sufficient to make the addition apart from the statements recorded during the survey. He has also relied upon the orders of authorities below.
3.5. We have considered the rival submissions and relevant material on record. The Assessing Officer made the addition in question by treating the purchases of Rs. 24,73,00,784/ - as bogus purchase, based on the four statements recorded during the survey proceedings u/s. 133A. As per these four statements the parties have stated that they are under practice of giving accommodation entries and bills against the cash after deducting the commissions cash is refunded to the parties. Accordingly, the addition in question is made by the Assessing Officer solely on the basis of these four statements recorded during the survey. The assessee demanded the opportunity for cross examination of these parties during the assessment proceedings which was denied by the Assessing Officer on the ground that it was not possible at the fag end of the assessment proceedings. On appeal, the CIT(A) issued a remand order with the direction to the Assessing Officer to grant an opportunity to the assessee to cross examine and then submit his report on the addition of purchases in para 6.4 as under:
"During the course of appellate proceedings, the A/R. of the appellant made a submission on 6.03.2010 stating that opportunity to cross examine those 4 parties on whose statements the entire additions is based has not been granted and the A/R cited various case laws on the subject wherein it has been held that assessment framed by ignoring the principles of natural justice or by relying on any statement or document for which the appellant has not been given an opportunity to cross examine is bad in law. After considering the submissions of the A.R., I called upon the A.O. to grant an opportunity to the appellant for cross examination and then submit his remand report on the addition of purchase of Rs. 24,73,00,784/ - and the disallowance of Rs. 1,40,97,079/ - u/s. 40A(3) of the Income Tax Act. The remand report was called on 18.05.2010 and the same was submitted by the A.O. on 12.01.2011."
3.6. Thus it is clear that the CIT(A) accepted the contention of the assessee that opportunity for cross examination should have been granted to the assessee and in the absence of the cross examination, the statement of these parties recorded u/s. 133A amounts violation of principle of natural justice. Once the CIT(A) found that it is proper to grant opportunity for cross examination then non grant of opportunity to the assessee in the remand proceedings on the ground that the summons issued to the parties were received back with the postal remarks 'Left/No such Persons' would not obliterate the necessity of cross examination. It is not the case of the revenue that these parties were not in existence because the revenue itself recorded the statement of these four parties during the survey and further all the four parties were assessed to income tax and their particulars were very well with the department, therefore, the statements recorded u/s. 133A cannot be used against the assessee without affording the opportunity for cross examination as it is required by the principle of natural justice. Further the Assessing Officer has not brought on record any material either found during the survey or during the assessment proceedings which shows that the purchase in question are bogus and not genuine. The addition was made purely on the basis of statement recorded u/s. 133A. It is pertinent to note that the statement recorded u/s. 133A without corroborative evidence has no evidentiary value as held by the Hon'ble Madras High Court in the case of CIT Vs. Khader Khan (supra), which has been confirmed by the Hon'ble Supreme Court in (210 taxman 248). Further we note that the Assessing Officer has not disputed the sales of the assessee and out of the total sale, export sale constitutes 92%. Apart from the sales, the Assessing Officer has also not disputed the quantitative figures regarding opening stock, purchases and closing stock as well as sales. Therefore, when there was no dispute or discrepancy in the quantitative figure of purchase, stock, sales including closing stock then the purchases cannot be treated as bogus as the corresponding sale is accepted and also the purchases from the same parties were accepted by the Assessing Officer for the A.Y. 2005 -06 completed on 28.12.2007 after survey on 31.03.2006. In the impugned order the CIT(A) without appreciating the fact that no opportunity was afforded to the assessee to cross examine despite direction and has heavily relied upon the remand report of the Assessing Officer which is not as per its direction. Therefore, in the absence of cross examination of these four parties the remand report cannot be treated as a proper and complete report on the matter. Much stress has been given by the Assessing Officer in the remand report as well as by the CIT(A) that the assessee failed to produce the proof of transportation of goods, delivery challan etc. We note that the assessee has explained before authorities below that the delivery of goods were directly made by the suppliers at the port for the purpose of export, therefore, there was no question of payment of transport charges separately by the assessee. We note that the assessee has placed on record the details and shown from the purchase bills that purchases are matched with the export sale in the case of the trading of goods for the purpose of export and therefore, there is no scope of any doubt about the purchases which are directly matching to the sale (export). Even otherwise, when the sales and all other quantitative details and figure regarding stock are accepted by the Assessing Officer then in the absence of any direct evidence showing the non genuineness of purchases in question, the addition is not sustainable on the basis of assumption and conjectures relying on the four statements recorded u/s. 133A and that too without affording an opportunity of cross examination to the assessee. In view of the facts and circumstances of the case, we are of the opinion that the addition in question on account of bogus purchase is not sustainable and accordingly the same is deleted.;