Case Law Details
RELEVANT PARAGRAPH
9. We have considered the rival submissions and perused the material on record. In our considered view, there is no case for interfering in the order of the Id. Commissioner (Appeals). So far as addition u/s 40A(3) is concerned, the undisputed facts are that assessee has purchased raw hides/skins for the purposes of manufacturing leather and leather products from local producers either directly or through their agents. Even though the Assessing Officer issued letters to various producers and some of these have come back unserved but it does not prove that the producers of the skin from whom assessee had made purchases are non-existent. Assessee had requested to issue commission for examining those persons or to issue letters afresh at the new addresses or permit him to produce the parties who sold the raw skin and hides to the assessee, but this request seems to have been not accepted by the Assessing Officer, The Assessing Officer also did not make any request to the Id. CIT(A) to provide him an opportunity to verify whether new addresses provided or to be provided by the assessee are correct or not. Even on demand, opportunity for producing the producers of hides and skin was not granted by the Assessing Officer or no such request was made to the Id. CIT(A) to give this opportunity to him. It seems that Assessing Officer has simply relied on the non-service of some of the letters for his inference that purchases are not verifiable. It may be noted that Assessing Officer has not rejected the books of account. He has only invoked the provisions of Section 40A(3) which presupposes that purchases are genuine but payments have been in cash in violation of Rule 6DD, therefore, question of considering the addition on account of non-genuineness of purchases does not arise. The Assessing Officer has not made out a case for holding that purchases are not genuine because onus shifted back by the assessee to the Assessing Officer by way of insisting for giving opportunity to produce concerned persons is not discharged. In our considered view, where letters sent to the creditors/sellers of the goods to the assessee returned back unserved then it will not be proper to draw inference that such creditors/sellers of the goods to the assessee are non-existent. The Assessing Officer must give an opportunity to the assessee to produce them or to provide new addresses on which enquiries should have been directed. When assessee fails to produce them coupled with non service of the letters/notices, then it can be fairly inferred that the purchases/credits are not genuine and onus will shift back to the assessee to produce evidence to prove his stand. Therefore, we are unable to accept the findings of the Assessing Officer that purchases made by the assessee are bogus merely because certain letters have come back unserved.
10. When we examine the applicability of Section 40A(3), we find that purchases made directly from producers are covered under Rule 6DD(f)(ii). In this regard, we refer to Rule 6DD(f) as under:
“(f) Where the payment is made for purchase of (i) agriculture or forest produce; or (ii) the produce of Animal Husbandry (including hides and skins) or dairy poultry farming; of
(i) fish or fish products; or
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