The assessee maintained proper books of accounts. The books were audited under sec.44ab. Some parties from whom the assessee purchased goods came to be Surveyed and the party confessed that he is a name lender. The said party issued bills, payments were made by cheques to that party. The GP. was normal. The surveyed party is assessed to tax. It is learnt that the AO made completed the assessment of the surveyed party on the basis of materials available and no concession was shown to him for the confession. It was argued by the assessee that the assessee discharged his primary onus - establishing the identity of the party, establlishing that the said party encashed the cheque which was an account payee cheque. No opportunity for cross examination of the surveyed party was given to the assessee. Can the averments of the surveyed party be used against the assessee on the ground that a) the assessee did not maintain stock data, b) it is for the assessee to prove the genuineness of the purchase etc.
following are the strong points:
1. Assessee has discharged his primary onus by giving the detail of the creditor.
2. All the transaction are made through the A/c payee cheque.
3. The purchase bills are maintained.
4. Most strong point is that no opportunity of cross examination is given to the assessee. for this please refer the following cases:
99 TTJ 538
99 TTJ 252
the issue is whether the third party averments could be used against the assessee even assuming an opportunity is given without bringing on record material to show that the entries in the books of the assessee is bogus. It is likely that the third party in order to escape his liability may delare himself a name lender. It is the basic assumption that the books of an assessee is true unless it is proved otherwise.
Based on above facts, similar additions were made in case of assessee in gujarat. However , additions were deleted by ITAT and confirmed by Gujarat High court.No SLp filed by the department.
can you provide me the copy of the ITAT order? I will be obliged.
and also reference of the GUJ HC order/CITATION
The legal effect of the statement recorded behind the back of the assessee and without furnishing the copy thereof to the assessee or without giving an opportunity of cross-examination, if the addition is made, the same is required to be deleted on the ground of violation of the principles of natural justice. Guj HC in Laxman S Patel 174 Taxman 206 (Also refer Raj HC in Geetanjali 174 Taxman 440 approving 114 TTJ 697; Adarsheela Towers DHC)
Even if assessee requests for confrontation of back material and AO do not provide so, said
back material will become unreliable and consequential addition will be not tenable at law
(Refer DHC in 172 Taxman 64, SC in 26 ITR 775, SC in 176 ITR 169) DHC in Jindal Vegetable
(6 Nov 2008 in ITA 428 of 2007) and Raj HC in 174 Taxman 440, Guj HC in Laxman Bhai Patel
(22/7/2008 ITR No. 41/1997), SC in 125 ITR 713.