The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that mere search statements recorded from third parties 5 years ago would not be relevant for framing the current assessment year.
The assessee,Jagat Jewels, was an ownership firm carrying on the business of trading in jewellery. The return of income for the AY 2013-14 was filed by the assessee firm on 14.09.2013 declaring total income. During the course of assessment proceedings, the entire books of account of the assessee together with the bills and supporting documents were called for by the AO. The same were duly furnished by the assessee before the AO.
The AO, on perusal of the books of account of the assessee and on the basis of information received from the Commissioner of Income-tax observed that the assessee firm had obtained accommodation entry in the form of bogus purchases and accordingly, the AO sought to examine the veracity of the purchases made by the assessee
The AO disbelieved the entire documents filed by the assessee and proceeded to treat the purchases made from the aforesaid parties as bogus and disallowed a sum in the assessment.
Accordingly, the AO concluded that the existence of the said supplier was not proved by the assessee. Hence, he treated the purchases made from the said party as bogus and disallowed the same in the assessment.
Mayank Patawari, who appeared on behalf of the assessee submitted that a search was conducted in Surat during assessment year 2008-09 on certain parties which was five years before the transactions carried out by the assessee in AY 2013-14. Hence, the search reports of AY 2008-09 belonging to a third party in Surat could not be utilised for framing assessment for AY 2013-14 in the hands of the assessee.
He also submitted that no opportunity of cross-examination was provided to the assessee to examine these persons whose statements were relied upon by the AO.
Princy Singhla,appeared on behalf of the revenue.
The two-member Bench of Saktijit Dey, (Vice President) and M. Balaganesh, (Accountant Member) allowed the appeal observing that, “When all these facts are staring on us, there is absolutely no scope of disbelieving the purchases made by the assessee from the five suppliers merely based on search statements recorded from certain third parties at Surat during the course of search conducted in AY 2008-09 which are absolutely not relevant for framing the assessment in the AY 2013-14 in the hands of the assessee.”
It was further observed that, in any case, nonproduction of a concerned supplier for examination by the assessee would not make the transaction ingenuine.
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