9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (9) TMI 955 - AT - Income TaxProceedings initiated under section 153C - illegal payments - whether any document belonging to the assessee has been found which can form the basis of initiation of proceedings u/s 153C? - Held that - Since the instant proceedings were initiated under section 153C of the Act and no incriminating material has at all been found, as such, the additions made by the AO and sustained by the Ld. CIT (A) is wholly unsustainable in view of the judgments of jurisdictional High Court in the cases of CIT vs RRJ Securities Ltd 2015 (11) TMI 19 - DELHI HIGH COURT and CIT vs Kabul Chawala 2015 (9) TMI 80 - DELHI HIGH COURT . Hence, the aforesaid additions made by the AO and sustained by the Ld. CIT (A) are hereby deleted, being beyond the scope of section 153C of the Act. As already held that documents being relied upon by the revenue are unreliable being unauthenticated and hence dumb. The fact remains that the author of the documents has also not been produced for the cross examination and, therefore, on the basis of such documents, addition cannot be made. We also find strength in the contention of learned counsel of assessee that statements recorded behind the back of assessee, i.e. of Sh. R.K. Miglani and that of the directors of M/s Prudent Distillery cannot be relied upon and need to be excluded for consideration as none of them have been produced for cross examination. The assessee s specific request for cross examination was rejected by the AO of his order on the ground that Shri Miglani is employee of assessee. This finding of AO, as has been noted above is factually incorrect. Sh. R.K. Miglani was the General Secretary of M/s UPDA and not an employee of assessee and, therefore, it was incumbent upon the AO/ Ld. CIT (A) to have provided the opportunity to cross examine the person on whose statement reliance was being placed by the Department. This is an elementary principle of law and not providing such opportunity is fatal to the proceedings and no additions, can be made on the basis of such statement as has been held by the Hon ble Apex Court in its judgment in the case of M/s Andaman Timber Industries vs CCE (2015 (10) TMI 442 - SUPREME COURT ). Disallowance on account of Tips - Held that - With respect to the said disallowance, we find that the ITAT had held that 1/3rd of the expenditure could alone have been held to be disallowable. It is held, here as well, following the order of ITAT, that the ld. CIT (A) was not right either in law or on facts to have sustained the entire disallowance. Not allowed the carry forward of long term capital loss and also challenged the short deduction under section 80M - Held that On perusal of the assessment order, we find that no discussion has been made while making the said disallowance by the AO and further, the same has not been allowed in the computation of tax being worked out by the AO and thus, we hold here that, the same needs to be allowed in view of the inadvertent mistake having crept in the order of assessment.
Issues Involved:
1. Legality of proceedings initiated under section 153C of the Income Tax Act. 2. Admissibility of additional evidence under Rule 29 of the Income Tax Appellate Tribunal Rules. 3. Validity of additions made under section 69C of the Income Tax Act. 4. Reliance on statements of third parties without cross-examination. 5. Disallowance of business expenditures and claims for carry forward of losses and deductions. 6. Specific issues related to the assessment year 2006-07. Detailed Analysis: 1. Legality of Proceedings Initiated Under Section 153C: The Tribunal found that the proceedings initiated under section 153C were without jurisdiction as no document belonging to the assessee was found during the search conducted on Shri R.K. Miglani on 14.02.2006. The Tribunal reiterated its earlier finding that the documents seized did not belong to the assessee, as there was no evidence such as emails, faxes, or recorded messages linking the documents to the assessee. The Tribunal relied on the judgment of the Hon’ble Delhi High Court in Pepsico India Holdings Pvt. Ltd. vs ACIT, which clarified that for section 153C to apply, it must be shown that the seized documents do not belong to the searched person. 2. Admissibility of Additional Evidence Under Rule 29: The Tribunal admitted additional evidence under Rule 29, which included a letter dated 03.03.2008 and an affidavit of Shri R.K. Miglani dated 01.03.2008. These documents were already part of the record in related cases and were deemed necessary for deciding the appeals. The Tribunal cited the judgment of the Hon’ble High Court of Calcutta in Sanjay Kumar Modi vs DIT, which allows for the admission of subsequent developments having a nexus to the original cause of action. 3. Validity of Additions Made Under Section 69C: The Tribunal observed that the seized documents were unauthenticated and unreliable, describing them as "dumb documents." The documents did not record any payments made to politicians or bureaucrats, nor did they balance figures, making them unreliable for supporting the Revenue's allegations. The Tribunal held that the burden of proof under section 69C lies with the Revenue, which was not discharged. The Tribunal relied on the judgment of the Hon’ble Delhi High Court in CIT vs Ved Prakash Choudhary, which emphasizes the need for corroborative evidence to support allegations of unexplained expenditure. 4. Reliance on Statements of Third Parties Without Cross-Examination: The Tribunal excluded the statements of Shri R.K. Miglani and directors of M/s Prudent Distillery from consideration as they were not produced for cross-examination, despite specific requests from the assessee. The Tribunal cited the Hon’ble Supreme Court's judgment in Andaman Timber Industries vs CCE, which held that not allowing cross-examination of witnesses whose statements are relied upon is a violation of natural justice. Additionally, Shri Miglani had retracted his statement, further weakening the Revenue's case. 5. Disallowance of Business Expenditures and Claims for Carry Forward of Losses and Deductions: For the assessment years 2003-04 and 2005-06, the Tribunal found that the disallowance of expenditures on "tips" and the denial of carry forward of long-term capital loss and short deduction under section 80HHC were unsustainable as no incriminating material was found. The Tribunal relied on the judgments of the jurisdictional High Court in CIT vs RRJ Securities Ltd and CIT vs Kabul Chawala, which restrict additions in proceedings under section 153C to incriminating material found during the search. 6. Specific Issues Related to Assessment Year 2006-07: For the assessment year 2006-07, the Tribunal addressed the merits of the case since the assessment was pending on the date of search and stood abated. The Tribunal reiterated that the documents relied upon by the Revenue were unreliable and that the statements of Shri Miglani and directors of M/s Prudent Distillery were inadmissible without cross-examination. The Tribunal also addressed the disallowance of "tips" and the inadvertent denial of carry forward of long-term capital loss and deductions, directing that these be allowed. Conclusion: The Tribunal allowed all four appeals of the assessee, quashing the proceedings initiated under section 153C and deleting the additions made by the Assessing Officer. The Tribunal emphasized the importance of corroborative evidence, the need for cross-examination of witnesses, and the unreliability of the documents and statements relied upon by the Revenue.
|
