DSG Papers Pvt. Ltd. Vs The ACIT / DCIT (ITAT Chandigarh)
ITAT Chandigarh held that denial of cross-examination, based on which addition on account of unrecorded sales was confirmed, demolishes the very foundation of making addition and hence such addition is unsustainable in law.
Facts-
Post search operations, AO proceeded to reopen the assessee’s case u/s 148. During the course of re-assessment proceedings, the AO proceeded to reject the books of account maintained by the assessee u/s 145(3) of the Act and, thereafter, proceeded to complete the re-assessment at an income of Rs. 46,36,749/- after making an addition of Rs. 31,40,021/- on account of additional net profit by applying the net profit rate of 4.42%. The alleged undisclosed sales for the year were computed at Rs. 3,62,60,331/-.
Aggrieved, the assessee carried the matter before Ld. First Appellate Authority challenging the rejection of books of account and also challenging the addition on merits. The Ld. CIT(A) partly allowed the appeal of the assessee.
Now the assessee has approached this Tribunal challenging the order of the Ld. First Appellate Authority.
Conclusion-
Here again, the denial of cross-examination by the Income Tax Authorities has a significant bearing on the final outcome of this batch of appeals for the simple reason that the AO has relied upon those statements which had been recorded at the back of the assessee and the assessee was not given any opportunity to effectively to rebut the same. Hon’ble Apex court in the case of M/s Andaman Timber Industries (supra) wherein it has been specifically held that where the party is being adversely affected by the statement of a third party, denial of cross-examination of such effected party would not be in accordance with law.
Held that in absence of such cross-examination having been allowed to the assessee and also in view of no incriminating material having been recovered from any of the premises searched, coupled with the fact that the statement of Shri Shiv Charan Lal, Ex-employee itself states that the parallel invoices used to be destroyed after the delivery of the consignments, the very foundation to make the additions on account of unrecorded sales stands demolished.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
All these appeals have been preferred by the Assessee as per the following details:-
