The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench has held that Assessing Officer fails to provide an opportunity for cross-examination of witnesses and deletes addition on account of additional net profit.
The appellant, M/s. DSG Papers Pvt. Ltd., is engaged in the business of manufacturing paper and paper products. The PCIT initiated revisionary proceedings u/s 263 of the Act and set aside the assessment order and directed the Assessing Officer (AO) to pass a fresh assessment order. The assessment after the revisionary proceedings was completed wherein the income of the appellant was assessed as per the original assessment order passed u/s 143(3).
Meanwhile, a search and seizure operation was conducted by the Intelligence Wing of GST. As per the information available, there was evidence of unaccounted sales to third parties in the form of delivery sheets, etc. Given this information, the AO reopened the appellant’s case u/s 148 and after rejecting the books of account-maintained u/s 145(3) completed re-assessment by making an addition on account of additional net profit by applying the net profit rate of 4.42%.
On appeal, the CIT(A) upheld the action of the AO in rejecting the books of account but gave part relief in respect of additional net profit by holding that the average net profit rate of 3.64% was to be applied rather than 4.42% thereby sustaining the addition only to the extent of Rs. 16,02,706/-. Aggrieved, the appellant filed an appeal before the ITAT.
The division bench was presided by Mr. N. K. Saini, Vice President, and Mr. Sudhanshu Srivastava, Judicial Member observed that the additions on account of the undisclosed/additional net profit on search alleged unaccounted sales have been made only based on invoices recovered from the residence of Shri Sanjay Dhawan as well as the statements of S/Shri Gulshan Gaba, Naveen Salley, Sudhir Sethi, Manish Jain, and Shiv Charan Lal.
The Tribunal while deleting the addition further observed that the Department could not have validly made the impugned additions by placing sole reliance on the invoices recovered as well as on the statement of the various third parties which were recorded at the back of the assessee without allowing the assessee to cross-examine them.
Adv. Sudhir Sehgal and Smt. Priyanka Dhar appeared on behalf of the appellant and respondent respectively.
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