TaxTMI 
TaxTMI 
2013 (9) TMI 370
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....rs, who had supposedly sold the material had confessed to the fact that they were not in the business of supplying fabrics. iv) Whether in the facts and circumstances of the case, the Ld. Commissioner of Income Tax (A) was correct in basing his findings on stock statements submitted by the assessee when the assessee did not maintain quantitative stock register and had been unable to ling purchases with corresponding production and sale. v) Whether in the facts and circumstances of the case, the Ld. Commissioner of Income Tax (A) was correct in holding that the assessee's case was not covered by the ratio of the judgement of Hon'ble Supreme Court in the case of Sumati Dayal vs. C.I.T. 214 ITR 801. vi) The appellant craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of hearing of the appeal. 3. In this case the assessee is a partnership firm and engaged in the business of manufacturing readymade garments. The assessee made sales which are export sales and sales from two Boutiques at Five Star Hotel. In the instant year assessee had claimed purchases of Rs. 44,07,271/- and sales of Rs. 64,02,504/- and declar....
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....3.4.2008 i.e. a good 14 months after these statements were made. This itself cast doubts about the retraction and affidavit that statement was recorded under pressure, threat, duress and coercion. If this were to be done genuinely, they would have been done almost immediately after the statements had been recorded. The delay in recording the affidavits is an indication of the fact that they were recorded at the behest of the assessee upon whom both Parmesh Kumar Garg and Rajeev Gupta are dependent for their livelihood. b) The affidavits from Rajeev Gupta and Parmesh Kumar Garg that they were actually purchasing fabrics from the concerned suppliers and supplying them to M/s Maharani of India Group have been sworn on 11.12.2007 that is after a gap of nearly 10 months from the period when they submitted that they had arranged bogus bills through these suppliers. Once again it is intriguing as to why these two brokers took so long to come forward and state that the statement given by them before the income tax department in February, 2007 were incorrect. c) Perusal of statements given by these persons under oath before the department reveals that they have themselves ....
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....r of great surprise how the appellant is able to furnish such a precise purchase to linkage and claim that the exports made justify and prove the purchases made. (j) Ms Shalika Trikha has stated that the sale price of fabric items are roughly three times of the cost of those items and if it stitched, the stitching are added separately. Now if this is the approximate ratio by which the cost to sale ratio is to be concluded it would be seen that there is enough scope for leakage on account of bogus purchase and yet show large turnover of exports and gross profit of the assessee. 4. Upon assessee's appeal Ld. Commissioner of Income Tax (A) considered the submissions, he observed that basis adopted by the Assessing Officer to make the disallowance of purchases is neither legally correct and nor factually tenable. He observed that foremost basis adopted by the Assessing Officer is that Sh. Pramesh Kumar Garg and Sh. Rajeev Gupta had retracted their statements before Income Tax Department on 3.4.2008 i.e. 14 months after the statements having been made and therefore, such retraction casts doubt and such affidavits have been recorded at the behest of the assessee. Ld. Commissi....
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....er observed that the bills and purchases remained undisputed. Once the bills are undisputed the supply of fabric and utilization thereof for manufacturing garments and sale of such manufacturing garments is undisputed. The payments were made by account payee cheque. The only evidence that payments was the statement recorded of two commission agents. So far as the first statement was concerned, the same was nothing, but he confirmed the nature of the assessee's business that assessee has duly purchased fabric and manufacturing garments. It was only the second statement which has been rebutted effectively by furnishing independent affidavits of both the commission agents wherein they have only confirmed the fact that the statement recorded under duress, but also the fact that they supplied fabric. Ld. Commissioner of Income Tax (A) further observed that gross profit rate declared by the assessee was commensurate with the GP rate declared in preceding assessment years. 4.3 Ld. Commissioner of Income Tax (A) further observed that the proprietors of three firms to supply fabric were Sh. Rakesh Gupta and Sh. Sat Narayan Gupta. That there were no statements recorded of Sh. Sat Narayan ....
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....e find that the addition in this case are solely based on the statements obtained by the department from the following persons:- a) Statement recorded of Sh. Rakesh Gupta - Proprietor of Piyush Textile. b) Statements of Sh. Rajeev Gupta and Sh. Parmesh Kumar Garg, who were the commission agents for fabric. 6.1 As regards the statement of Sh. Rakesh Gupta is concerned, it emanates that assessee has wanted an opportunity to cross examine. But that opportunity was not given by the Assessing Officer. Hence, statement of Sh. Rakesh Gupta cannot be the sole basis of addition. 6.2 As regards the statement of Sh. Rajeev Gupta and Sh. Parmesh Kumar Garg is concerned, when assessee was confronted the assessee immediately filed affidavits of both the persons wherein they have clearly stated that the statements were recorded under duress and undue pressure. Hence, the same cannot be the basis of treating the purchase as bogus. It is further noted that Sh. Sat Narayan Gupta, the proprietor of M/s Chaavi Trading Company and Sat Narayan & Sons (HUF) has not given any statement. Hence, purchases from these companies cannot be treated as bogus. Thus, we find that additions h....