Case Law Details
ACIT Vs Sabari Switch Gear (P) Ltd. (ITAT Cochin)
The issue under consideration is whether the addition under section 68 is done by AO is justified in law whenm addition was based on third party statements which were retracted by them and Assessee was not given opportunity to cross examine them and when Addition are based merely on Surmises?
In the present case, assessee carried on trading activities with certain parties from whom assessee claimed to have received loans and advances. AO suspected extending such huge advances to assessee. Because of low profit margin of parties who had advanced money to assessee. Also, AO took note of statement of one ‘M’ who who managed the affairs of trading parties, wherein he admitted that business activities, books of accounts, etc., in respect of those concerns were performed and maintained by assessee and they were used only for signing authorities and in lieu of signature they got commission from assessee. Accordingly, AO treated loan received by assessee as unexplained credit liable for addition under section 68.The assessee asked for an opportunity of cross examination of the parties whose statements were relied on by the Assessing Officer while framing the assessment, though the said parties retracted the statements, AO rejected that request and passed the order.
ITAT states that, not allowing the assessee to cross examine the parties whose statements were relied upon to make addition in the impugned assessment order is a serious flaw which makes the order null and void in as much as it amounted to violation of principles of natural justice because of which the assesses were adversely affected. In the present case, the entire evidence has to be appreciated in a wholesome manner and even when there is a documentary evidence, the same can be overlooked if there are surrounding circumstances to show that the claim of the assessee is opposed to the normal course of human thinking and conduct or human probabilities. The evidence collected by the lower authorities was not enough to establish their stand that the main transactions carried out by the assessee with the above parties were only paper transactions and only accommodation entries. As discussed earlier, there is no evidence which was brought on record to directly show that these transactions are accommodation entries. Therefore, no addition could be made on account of these alleged transactions in the hands of the assessee by treating them as unexplained credits u/s. 68 of the Act. Hence, transaction shall be accepted to be real as there is no evidence showing otherwise. Therefore, the addition made by the Assessing Officer cannot be sustained and the appeals of the Revenue is dismissed.
FULL TEXT OF THE ITAT JUDGEMENT
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