Addition based on statement recorded behind back of assessee without affording cross examination cannot be sustained

ITO Vs Vohra Solvex (P.) Ltd (ITAT Amritsar)

ITAT Amritsar held that the statements recorded behind the back of the assessee cannot be used for making addition unless and an opportunity to cross examine the witness is allowed. Accordingly, addition towards bogus purchases duly restricted to 1.2%.

Facts- The present appeal has been preferred by the revenue. It is mainly contested that CIT(A) has erred in limiting the addition only to the extent of 1.2% of bogus purchases as against 100% made by the AO u/s 69C of the Act by not appreciating the judgment of the Hon’ble Supreme Court in the case of N.K. Proteins Ltd. v. DCIT [2017] 84 taxmann.com 195 (SC) in which the Hon’ble Apex Court has dismissed the SLP of the assessee against the decision of the Gujarat High Court [N.K. Industries Ltd. v. DCIT (2016) 72 taxmann.com 289 (Gujarat)] wherein 100% of bogus purchases were added to the total income of the assessee.

Conclusion- Held that the entire addition of disallowances has been made on the basis of third party statement which has been recorded behind the back of the assessee without affording any opportunity to the assessee of cross examination of witnesses. As such, we are of the opinion that the statements recorded behind the back of the assessee cannot be used for making addition unless and an opportunity to cross examine the witness is allowed.