2006 (8) TMI 272

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....Shri Permanand is a proprietor of M/s Jai Karan Dass Parmanand, Sriganganagar, who derives income from trading in narma, Kapas, foodgrains and also from commission. In his return filed for asst. yr. 1999-2000, he declared income of Rs. 98,465/-. The AO received information from the Sales-tax Department that the assessee had made bogus purchases from M/s Om Prakash Ashish Kumar and M/s Lal Chand Rai Harish Kumar. As per books of accounts, the assessee purchased goods from M/s Om Prakash Ashish Kumar and M/s Lal Chand Rai Harish Kumar for Rs. 6,52,530/- and Rs. 3,40,892/-, respectively as under: M/s Om Prakash Ashish Kumar 1,02,640 Kapas 12-11-1998 3,36,892 Cheque 5-12-1998 2,38,252 Narma 16-11-1999 3,000 C....

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....ddition can be made in the hands of the assessee on the basis of observations made by a third party. In this case, the addition rests mainly only on the observations of the Sales-tax Department. The assessee was never associated with the enquiries made by the Sales-tax Department to that extent. The satisfaction of the AO himself is of the prime importance while making assessment of an income and these duties cannot be performed by substituting the satisfaction of someone else. The assessee did pay for the purchases he made from the above two parties through cheque as is evident from the above chart. The statements or even the affidavits of the sellers named above cannot be utilized against the assessee in view of the decision of the Hon&#3....