Failure to Grant Cross-Examination in Bogus Purchase Cases – Bombay High Court Upholds Relief, Restricts Addition to 15%
Pr. CIT v. Ramelex Pvt. Ltd. (ITA No. 14/2022)
Facts:
1. The assessee, Ramelex Pvt. Ltd., engaged in trading activities, was subjected to reassessment under Section 147 of the Income-tax Act.
2. Reopening was based on information from the Directorate General (Investigation), Sales Tax Department, which alleged that the assessee had made bogus purchases of ₹2,05,74,750 from certain “hawala” dealers.
3. During assessment, the Assessing Officer (AO) disallowed the entire amount of alleged bogus purchases and added it to the total income.
Hon Bombay HC held as below:
1. The AO acted solely on general information from the Sales Tax Department and failed to share such material with the assessee or provide an opportunity for cross-examination of the alleged hawala suppliers, which amounted to a violation of natural justice.
2. The assessee had produced primary evidences of purchases and payments, and these were not found to be false or fabricated.
3. The CIT(A) and ITAT had both rendered concurrent findings of fact, which were well-reasoned and based on material evidence.
4. Consequently, no substantial question of law arose under Section 260A of the Income-tax Act. The Revenue’s appeal was dismissed, and the order of the ITAT restricting the disallowance to 15% of the corrected purchase figure was affirmed.
The copy of the order is as under:
