2018 (1) TMI 1406 - AT - Income Tax

Addition of unexplained income - search conducted upon the Mukesh Choksi group statement of Mukesh Choksi was recorded and in his statement he has admitted that he was providing accommodation entries to those who were interested to earn capital gain - Held that - There is no finding with regard to the supply of statement of Mukesh Choksi to the assessee. Moreover nothing is available on record where from it could be inferred that assessee was ever allowed to cross-examine Mr. Mukesh Choksi. It is settled position of law that statement or the evidence which is being relied upon by the AO for making the addition in the hands of assessee the same should be confronted to the assessee and the assessee should be allowed to cross-examine the witness in this regard. From a careful perusal of the orders of lower authorities it is quite evident that statement of Mr. Mukesh Choksi was relied on for making the addition but assessee was never allowed to cross-examine him. AO was not justified in making addition in the hands of assessee without allowing the assessee to cross-examine Mr. Mukesh Choksi whose statement was relied upon for making the above additions. Accordingly set aside the order of CIT(Appeals) and restore the matter to the file of AO with a direction to first confront the statement of Mr. Mukesh Choksi to the assessee and allow him to cross-examine Mr. Mukesh Choksi to dig out the truth in this regard. - decided in favour of assessee for statistical purposes.

Summary

Issues:
Assessment of total income, addition of unexplained income, treatment of share purchase transactions, addition of unexplained cash credits, denial of opportunity for cross-examination, treating transactions as accommodative and bogus, reliance on investigation report, interest levied under sections 234A, 234B, and 234C.

Assessment of Total Income:
The appellant contested the assessment of total income, claiming it should not be liable for the amount determined by the authorities. The appellant argued that the orders were against natural justice and the facts of the case. The appellant emphasized that transactions were conducted through proper banking channels without any cash payments to brokers. The appellant further challenged the treatment of share purchase transactions as sham without proper examination.

Addition of Unexplained Income:
The appellant disputed the addition of a significant amount as unexplained income, contending that the authorities erred in confirming this addition. The appellant argued that the actions were based on suspicion and surmise, lacking substantial evidence. The appellant emphasized the need for the deletion of the addition for the cause of justice and fairness.

Treatment of Share Purchase Transactions:
The authorities were criticized for treating share purchase transactions as sham without adequate examination. The appellant argued that such treatment was unwarranted and unsustainable in the eyes of the law. The appellant highlighted the lack of corroborative evidence and the necessity to delete the addition made based on these transactions.

Unexplained Cash Credits and Denial of Cross-Examination:
The appellant raised concerns regarding the addition made as unexplained cash credits under section 68 of the Income Tax Act. The appellant contended that the failure to provide an opportunity for cross-examination of a third party whose statements were used against them violated principles of natural justice. The appellant stressed the importance of such cross-examination for a fair adjudication of the case.

Reliance on Investigation Report:
The appellant challenged the reliance on an investigation report from the Kolkata Investigation Directorate, arguing that the assessing officer did not provide an opportunity to rebut the report. The appellant criticized the confirmation of additions based on this report by the authorities, stating that such actions were unwarranted given the circumstances of the case.

Interest Levied under Sections 234A, 234B, and 234C:
The appellant denied liability for interest under the specified sections of the Income Tax Act and requested the waiver of the interest levied. The appellant contended that the computation of interest was not provided adequately and urged that the interest levied should be waived off considering the facts and circumstances of the case.

In summary, the judgment addressed various issues raised by the appellant concerning the assessment of total income, addition of unexplained income, treatment of transactions, denial of cross-examination, reliance on investigation reports, and interest levied under specific sections of the Income Tax Act. The Tribunal's decision favored the appellant in setting aside the order of the CIT(Appeals) and directing a fresh adjudication by the assessing officer in line with the Tribunal's directions in a similar case. The judgment emphasized the importance of affording proper opportunities for being heard and conducting fair assessments based on evidence and legal principles.