Addition of bogus purchases deleted as opportunity of cross examination was never provided by AO despite assessee’s request
In a recent judgment ITAT Amritsar deleted addition of bogus purchases holding that an opportunity of cross examination was never provided by AO despite assessee’s request which would make the impugned addition nullity.
ABCAUS Case Law Citation:
4823 (2025) (11) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A), National Faceless Appeal Centre (NFAC) confirming addition made by Assessing Officer (AO) on account of alleged bogus purchases
The assessee was engaged in trading of molasses in its proprietorship concern. The assessee filed return of income which was subjected to scrutiny u/s 143(3) of the Income Tax Act, 1961 (the Act).
However, the case was reopened pursuant to receipt of information from the assessing another of another entity that the assessee made bogus purchase. The AO referred to the statement of a third party recorded u/s 131 wherein he admitted to have provided entries of bogus sales and purchases to various beneficiaries including the assessee.
On the basis of the same, it was alleged by the AO that the purchases made by the assessee were nothing but bogus purchases
The assessee field detailed written submission and pointed out that his books of account were duly audited. The details of creditors, sales, debtors and quantitative stock details were duly verified in scrutiny proceedings u/s 143(3) and full disclosure was made by the assessee. The assessee furnished purchase bills with goods carriage receipt evidencing delivery of goods. The bills duly reflect quantity purchased, rate, details of goods carriage, truck number, date, transporter’s name and other details. The assessee also furnished VAT returns wherein these purchases were duly disclosed in VAT returns and accepted as such. The quantitative details of stock as well as bank statements evidencing payment through banking channels were also furnished. The assessee also furnished confirmed ledger of the said party.
However, the AO made the impugned addition.
Before the CIT(A), the assessee stated that he was having regular dealing with the said party whereas entire addition was made merely on the basis of statement. However, during search / survey on that party, no supporting documents were found substantiating allegation of bogus purchases by the assessee. Further, no opportunity of cross examination was provided to the assessee despite the request of the assessee and thus, violating the principles of natural justice. Therefore, the entire assessment proceedings were without jurisdiction and bad-in-law. The statement of third-party could not be relied upon solely unless there was corroborating evidence to support the same.
The CIT(A) modified the addition made to 12.5% of impugned purchases to account for profit element.
In view of the documents furnished by the assessee, the Tribunal opined that the onus to establish that the impugned purchases were genuine was duly discharged by the assessee and the onus was on AO to disprove the same. However, no concrete material had been brought on record to disprove the documentary evidences as furnished by the assessee.
The Tribunal observed that the sole basis to make the impugned addition was the statement of prop. of the said party. However, during search / survey on that party, no incriminating material had been found to substantiate the fact that the purchases made by the assessee from that party were bogus in nature. The AO had heavily relied on third-party statements. However, no independent enquiry, whatsoever, had been carried out by AO to substantiate the allegation of bogus purchases. Pertinently, the assessee demanded cross-examination of that party during assessment proceedings but the same was not provided which was in gross violation of principle of natural justice.
The Tribunal noted that Hon’ble Supreme Court had held that held that not allowing assessee to cross-examine witnesses by adjudicating authority though statements of those witnesses were made as basis of impugned order, amount to serious flaw which make impugned order nullity as it amounted to violation of principles of natural justice.
The Tribunal opined that if the statement given is ignored, nothing was left with AO to support its allegation of alleged bogus purchases. As against this, the assessee had filed substantial documents in support of its claim that the impugned purchases were genuine. No evidence of cash exchange had been found and no evidence, in that regard, had been unearthed.
Accordingly, the Tribunal accepted the assessee’s claim and impugned addition was deleted in toto.
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- Income Tax notice by process server held invalid for non acknowledgement/endorsement
- No income tax is payable on compensation on land acquired under NHAI Act 1956
- Documents filed on the day when assessment order passed are not additional evidence
- Addition of bogus purchases deleted as opportunity of cross examination not given
- GST Registration to be granted automatically and electronically within 3 Working Days
