Ahluwalia Contracts India Ltd. Vs DCIT (ITAT Delhi)
A search under section 132 was conducted on the Sanjay Jain Group on 26.10.2020, during which Sanjay Jain allegedly admitted that entities controlled by him were engaged in issuing accommodation purchase bills without actual supply of goods. Based on seized tally data, the department alleged that the assessee had made purchases of cement and steel materials from concerns controlled by Sanjay Jain. For AY 2019-20, purchases aggregating to ₹4.89 crore (excluding GST) were questioned. The assessee furnished extensive documentary evidence including invoices, e-way bills, bank statements, gate entry registers, stock registers, store records and supplier confirmations to establish the genuineness of the purchases. The Assessing Officer accepted that quantitative details and movement of goods were available but, relying primarily on Sanjay Jain’s statement, treated the transactions as untested purchases and added ₹72.84 lakh being the gross profit element. Similar addition of ₹42.18 lakh was made for AY 2020-21 and both additions were confirmed by the CIT(A).
The Tribunal observed that neither the Assessing Officer nor the CIT(A) pointed out any discrepancy, infirmity or defect in the documentary evidence produced by the assessee. The entire case of the Revenue rested substantially on the statement of Sanjay Jain. The Tribunal held that once the Revenue sought to discredit the assessee’s documentary evidence on the basis of a third-party statement, the right of cross-examination became a vital requirement. However, the Assessing Officer had specifically taken the stand that cross-examination was not required, whereas the CIT(A) incorrectly recorded that such opportunity had been offered and declined by the assessee. Thus, the additions were sustained on the basis of an untested oral statement without affording the assessee an effective opportunity to cross-examine the witness.
