2016 (11) TMI 451 - AT - Income Tax

Addition on account of commission out of accommodation business activities - addition made on the basis of the statement collected at the back of the assessee and the right of cross examination was not provided - Held that - In pursuance to the search conducted Mr. Himanshu Verma was examined by the Investigating Authority on 14.4.2012 and in his statement he admitted that various Chartered Accountant acted as middlemen for commission and a list of 13 Chartered Accountant was given in which the name of the assessee was appearing against Serial No. 10 alongwith his mobile number. On the basis of the statement of Sh. Himanshu Verma that in the absence of any evidence the AO made the addition on account of commission for providing accommodation entries @ 0.15% of ₹ 2.47 crores computed at ₹ 37,12,500/- and made the addition in the case of the assessee. As find considerable cogency in the contention of the Ld. Counsel of the assessee that merely on the basis of the statement of Sh. Himanshu Verma the addition in dispute has been made in the hands of the assessee which is contrary to the various decisions rendered by the Hon ble Supreme Court of India, Hon ble High Court and the Tribunals. Revenue Authority has not provided any statement of Sh. Himanshu Verma recorded during Survey to the assessee and no opportunity of cross examination has been given to the assessee which is not sustainable in the eyes of law, in view of the Hon ble Supreme Court decision in the case of Kishinchand Chellaram vs. CIT (1980 (9) TMI 3 - SUPREME Court ) wherein it has been held that evidence collected at the back of the assessee has to be confronted to the assessee to give him opportunity to rebut the evidence, otherwise, same is not admissible. Also in Andaman Timber Industries vs. Commissioner of Central Excise reported in (2015 (10) TMI 442 - SUPREME COURT ) wherein the assessee is entitled for cross examine the witness. I note that the Hon ble Apex Court concluded that not allowing assessee to cross-examine, amounting to serious flaw which make impugned order nullity and violation of principles of natural justice. Thus the addition made on the basis of the statement collected at the back of the assessee and the right of cross examination was not provided to him, hence, delete the addition in dispute made by the AO and confirmed by the Ld. CIT(A) - Decided in favour of assessee

Issues:
1. Validity of the order of the Ld. Commissioner of Income Tax (Appeals)
2. Addition of commission income in the hands of the appellant
3. Basis of addition and lack of evidence
4. Right to cross-examine a third party and evidentiary value of statements
5. Application of mind by the Ld. CIT (A) in confirming the addition
6. Opportunity to add, alter, amend, delete, or substitute grounds of appeal

Analysis:

1. The appeal challenged the order of the Ld. Commissioner of Income Tax (Appeals) dated 30.12.2015 concerning the assessment year 2012-13. The appellant contended that the order was bad on facts and in law.

2. The dispute primarily revolved around the addition of ?37,12,500 in the hands of the appellant as commission income arising from certain undisclosed activities. The appellant argued that the addition was erroneous.

3. The appellant raised concerns regarding the basis of the addition, citing that it was confirmed based on surmises, presumptions, and conjectures. Additionally, the Ld. CIT (A) was criticized for incorrectly stating that the appellant did not deny certain transactions.

4. The appellant further questioned the validity of the addition, highlighting that it was purportedly based on a third party's statement without providing a copy to the appellant or allowing for cross-examination. The appellant argued that such evidence lacks credibility and violates principles of natural justice.

5. The Ld. CIT (A) was accused of not applying her mind adequately, as evidenced by inconsistencies in the order. The appellant found the reasoning behind upholding a specific amount perplexing, given the commission added. This lack of clarity raised doubts about the decision-making process.

6. Lastly, the appellant sought the liberty to modify the grounds of appeal as needed. The Tribunal, after considering the arguments from both parties and relevant case laws, concluded that the addition made without providing an opportunity for cross-examination was unjust. Citing precedents from the Hon'ble Supreme Court, the Tribunal ruled in favor of the appellant, deleting the disputed addition and allowing the appeal.

This detailed analysis covers the various issues raised in the legal judgment, outlining the arguments presented, the basis of decision-making, and the ultimate outcome in favor of the appellant.

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