ITAT Removes Addition as A.O. Didn’t Give Option for Witness Cross-Examination

The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench ruled that Assessing Officer was unable to furnish the opportunity for cross-examination of witnesses and removes the addition on the basis of additional net profit.

The petitioner M/s. DSG Papers Pvt. Ltd., is involved in the business of manufacturing paper and paper products. The PCIT started revisionary proceedings u/s 263 of the income tax act and set aside the assessment order and renders the Assessing Officer (AO) to issue a newer assessment order. The assessment post to the revisionary proceedings gets finished in which the petitioner’s income was assessed according to the original assessment order passed u/s 143(3).

An investigation was performed via the intelligence wing of GST. According to the data available, there was proof of unaccounted sales to third parties in the form of delivery sheets and others. Provided the same details, AO has reopened the petitioner’s case under section 148 and post to denying the books of account-maintained u/s 145(3) finished re-assessment via assembling an addition on the account of additional net profit by applying the net profit rate of 4.42%.

Under the order of CIT(A) sustained the AOs action for cancelling the books of account but provided the relief for the additional net profit by maintaining that the average net profit rate of 3.64% was to be applied rather than 4.42% upholding the additional only to the scope of Rs. 16,02,706, the petitioner is dissatisfied and thus furnished the appeal to ITAT.

The division bench was headed by Mr N. K. Saini, Vice President, and Mr Sudhanshu Srivastava, Judicial Member sees that the additions on the grounds of the additional net profit on the investigation alleged unaccounted sales would be incurred exclusively on the grounds of the invoices that have been found from the residence of Shri Sanjay Dhawan and the statements of S/Shri Gulshan Gaba, Naveen Salley, Sudhir Sethi, Manish Jain, and Shiv Charan Lal.

Recommended: ITAT Directs AO to Compute the Income Accurately to See Business Loss

The Tribunal removing the addition sees towards the council cannot create the impugned additions under a valid means through putting the only support on the invoices received and the statement of different third parties that would be recorded at the back of the taxpayer without permitting the taxpayer to recheck them. Adv. Sudhir Sehgal and Smt. Priyanka Dhar appeared for the appellant and respondent respectively.