2015 (10) TMI 740 - AT - Income Tax

Appeal dismissed due to lack of evidence on unverifiable purchases; reassessment allowed for consistency

The Tribunal dismissed the appellant's appeal against the denial of cross-examination opportunity by CIT(A) due to failure in proving the genuineness of ... Bogus purchases - not providing opportunity of cross examination of the persons whose statements have been used against the assessee - Held that:- This Bench of ITAT has taken decision to apply 15% net profit rate on unverifiable purchases in the cases of Anuj Kumar Varshney and others vs. ITO (2015 (4) TMI 533 - ITAT JAIPUR). However, assessee's request is accepted and the AO is directed to reframe assessment order by considering outcome on this issue as appeal in case of un-verifiable purchases/ bogus purchases is pending before Hon'ble Rajasthan High Court. As regards the first ground of the assessee for not providing opportunity of cross examination, we find that this issue has not been seriously argued by the ld. AR of the assessee. However, the Bench has offered to allow cross examination by setting aside the orders of the lower authorities. The facts as available on records that the assessee was directed to produce the parties for verification by the AO but the assessee showed inability to produce the parties. The AO sent his Circle Inspector to verify the facts about the existence of the parties but they were not found at the given addresses. Therefore, the assessee has not discharged its onus to prove the purchases debited in profit and loss account as genuine and the assessee has not shifted his onus on the Revenue - Decided against assessee. Issues:1. Cross-examination opportunity denial by CIT(A)2. Confirmation of purchases as bogus3. Rejection of books of account under Section 145(3) and trading addition4. Appeal against CIT(A) dismissalIssue 1: Cross-examination Opportunity DenialThe appellant contested the denial of cross-examination opportunity by CIT(A), alleging violation of natural justice principles. The AO had noted unverifiable purchases from specific parties, leading to an addition in income. The appellant failed to produce these parties for verification, and no confirmation of their existence was obtained. The Tribunal dismissed this ground, stating the appellant did not discharge the onus to prove the purchases' genuineness.Issue 2: Confirmation of Purchases as BogusThe AO observed unverifiable purchases from certain parties, suspecting them to be entry providers issuing bogus bills without physical goods delivery. The CIT(A) upheld the AO's decision due to non-production of parties for examination. The Tribunal directed the AO to reframe the assessment considering the outcome of similar cases pending in the High Court, acknowledging the appellant's plea for consistency in treatment.Issue 3: Rejection of Books of Account and Trading AdditionThe AO rejected the books of account under Section 145(3) due to unverifiable purchases, estimating a trading addition based on higher gross profit rates. The CIT(A) affirmed this decision, emphasizing the serious defect in the books and sustained the trading addition. The Tribunal partially allowed the appeal for statistical purposes, directing a reassessment based on pending High Court cases.Issue 4: Appeal Against CIT(A) DismissalThe appellant's appeal before the CIT(A) challenging the rejection of books of account and trading addition was dismissed. The CIT(A) justified the rejection of books due to non-verifiable purchases and sustained the trading addition. The Tribunal considered the appellant's arguments and previous decisions, ultimately allowing the appeal partially and setting the case for reassessment based on pending High Court cases.In conclusion, the Tribunal addressed the issues of cross-examination denial, confirmation of purchases as bogus, rejection of books of account, and trading addition in a detailed manner, providing insights into the legal principles applied and the rationale behind the decisions. The judgment balanced the appellant's arguments with the authorities' observations, ensuring a fair and thorough analysis of the case.