The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ) in Soman Sun Citi vs. JT.CIT held that the right of cross-examination is not absolute when the assessee had failed to discharge its primary onus.
The Assessee had allegedly purchased material to the tune of Rs.2.98 crore from 3 Companies. The Assessing Officer (AO) issued notices u/s 133(6) of the Income Tax Act, 1961 to these three parties which returned unserved. He asked the assessee to produce the three parties before him with all relevant documents. The Assessee had failed to produce any information regarding the parties.
The Purchase bills submitted by the assessee lacked many statutorily required details. The two parties namely Navkar Corporation and Om Sai Enterprises are listed as hawala dealers by Maharashtra Sales Tax Department and their sales tax registration was canceled by Maharashtra Sales Tax authorities. The Maharashtra Sales tax authorities during search operations recorded their statements wherein these parties stated that they are only issuing bogus purchase bills on papers without supplying any physical material.
The profitability of the assessee has also significantly fallen during the previous year relevant to the impugned assessment year. Under these circumstances, additions had been made of 100% of bogus purchases by the A.O which stood confirmed by Commissioner of Income Tax (Appeals). The assessee was aggrieved that the statements/affidavits of these alleged hawala dealers which were recorded at the back of the assessee were utilized by Revenue to cause prejudice to the assessee without confronting the assessee with the copies of the said statements/affidavits, and also cross-examination of these alleged bogus dealers were not allowed to the assessee by Revenue.
The bench comprising of Judicial Member Saktijit Dey & Accountant Member Ramit Kochar found that the assessee had failed to provide any relevant information regarding the purchase of materials. They noted that the authorities had taken a plausible view of disallowing 100% of bogus purchases as the genuineness of the purchases as also consumption/utilization of material was not proved.
“In these circumstances, we are of the considered view that no prejudice is caused to the assessee by non-granting of the opportunity of cross-examination by the authorities below as right of cross-examination is not absolute as in the instant case even primary onus that fell on the assessee did not stand discharged. Had assessee discharged its primary onus, but still, the authorities proceed to prejudice assessee based solely on the incriminating statements/affidavits of third parties recorded at the back of the assessee, the right of the assessee to cross-examine these third parties will become absolute. It is not a case that the authorities below have merely/solely relied on the statement/affidavit of third parties namely hawala dealers recorded at the back of the assessee to cause prejudice to the assessee rather primary onus that lay on the assessee was not discharged by the assessee.” observed the bench.
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