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TMI Blog2009 (5) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... income filed on 6.3.2000 as return filed Under Section 148 of the Act. 3. The details of the cheques received form R.K. Aggarwal & Co., are as under: Amount Cheque Date Name Bank Branch A/c No. No. 200,000 462840 26 Aug. 98 R.K. Agarwal CORPN & Co. KB 3097 100,000 462841 28 Aug. 98 R.K. Agarwal CORPN & Co. KB 3097 200,000 462842 28 Aug. 98 R.K. Agarwal CORPN & Co. KB 3097 200,000 462821 12 June 98 R.K. Agarwal CORPN & Co. KB 3097 300,000 462822 12 June 98 R.K. Agarwal CORPN & Co. KB 3097 202,913 462820 16 June 98 R.K. Agarwal CORPN & Co. KB 3097 38326 462847 Dec.' 98 R.K. Agarwal CORPN & Co. KB 3097 4. The AO issued summons to R.K. Aggarwal & Co., but they were received back unnerved on the ground that "No such firm in this address". The Deputy Director of Income-tax (Inv.) Gurgaon, upon a search conducted in the case of R.K. Aggarwal & Co., has apprised the AO that proprietor, Shri Satish Chand Goel was using this firm for providing the accommodation entries to various beneficiaries after receiving cash from such beneficiaries, and the assessee was one of them who has received the aforesaid sum of Rs. 12,41,298. The ITO issued a show-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee and for which a request was made firstly to provide copy thereof to enable the assessee to defend and that the addition in the hands of the company in reassessment would result in double taxation of the same amount. On receipt of copies of the statements and the affidavit, the assessee stated that these were general in nature and at no place in the said documents the name of the assessee has been referred to; that Shri Satish Chand Goel had also stated to have done some actual business apart from providing accommodation entries and, therefore, no adverse inference can be drawn against the assessee. The assessee also requested for cross-examination of Shri Satish Chand Goel. It was also submitted that the assessee has declared the profit from sale and purchase of shares as his income for AY 1998-99 and 1999-2000 and the receipts of Rs. 7,02,912 as well as Rs. 5,38,386 were declared as income for the two years under consideration. It was also submitted that if the statement of Satish Chand Goel was true and correct, then he had no actual business transactions meaning thereby that the income by way of profit from sale of shares by the assessee was also liable to be reduced sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand Goel has categorically admitted in his statement that he not entered into real transaction with M/s Centurian Investment & International Pvt. Ltd., but has only provided the accommodation entries to the said company. (c) The only activity of M/s R.K. Aggarwal & Co. is providing accommodation entries does not mater for this firm whatever be the name of the beneficiary. So, the cheques given by the firm M/s R.K. Aggarwal & Co. are not the genuine transactions. These are the moneys of Ms Centurian Investment & International Trading Pvt. Ltd. which the assessee has given to M/s R.K. Aggarwal & Co. to receive back the cheques. 7. In the light of the above discussion, he observed that it was quite evident that the assessee had received cheques through R.K. Agarwal amounting to Rs. 12,41,298 were bogus transactions were in fact no real transactions took place. That the assessee completely failed to discharge its onus of proving the genuineness and creditworthiness of the entries and, therefore, such entries were to be treated as income Under Section 68 of the Act. The contention of the assessee that he had already shown such credits as receipts on sale and purchase of shares in P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome is not provided). Thus, two fundamentals out of three as required Under Section 68 is not substantiated by the appellant. Hence, the receipt of Rs. 12,41,298 cannot be treated as explained. IV. As regards appellant's objection for not providing opportunity to cross-examine Shri Satish Goel is concerned, I find that it was not onus on the AO to provide Shri Satish Goel for cross examination. On the contrary, I find that it was onus on the appellant to prove the receipt of Rs. 12,41,298 by producing Satish Goel before the AO and substantiating such receipts. Thus, there was no violation of principle of natural justice. V. I find that there is no substance in the objection for not providing full copy of statement of Shri Satish Goel as the AO provided the relevant material to the appellant for its rebuttal. The remaining part of the statement were irrelevant as it might be pertaining to other assesses. VI. In respect of determination of stipulation loss of Rs. 4,11,514, I fid that the main stress of the Ld. AR is that the appellant was falling under one of the exceptions contained in Explanation to Section 73 of the I.T. Act as its main source of income was under the hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the third party, the AO failed to provide such opportunity. In the absence of providing cross examination opportunity to the appellant by the AO as well as by the CIT(A), the assessment order of the AO violates the principles of natural justice and, therefore, the order is liable to be quashed. 3. Determination of loss of Rs. 4,11,514 by the AO as speculative loss in view of explanation to Section 73 of the I.T. Act, 1961 and confirmation of the same by the CIT(A) is contrary to facts and law and therefore, such determination of loss as speculative loss is liable to be set aside. 4. The addition of Rs. 12,41,298 on account of unexplained entries made by the AO Under Section 68 of the I.T. Act and confirmation of the same by the CIT(A) is contrary to facts and law. Therefore, the addition is liable to be deleted. 10. Ground No. l, challenging the proceedings Under Section 148 is not pressed by the Ld. Counsel for the assessee, Shri Akhilesh Sehgal. This ground is therefore, dismissed as not pressed. 11. In Ground No. 2 the assessment is challenged for not allowing cross-examination and in ground Nos. 3 and 4 the additions based on the statements and affidavit without te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pts shown by the assessee as sales has been given and reduced and, therefore, there is no question of double taxation and consequent assessment of speculation loss of Rs. 4,11,514 also is in accordance with law because the provisions of Explanation to Section 73, the assessee being a private limited company; that the statement and the affidavits were furnished and shown to the Ld. Counsel of the assessee and there was no violation of principle of natural justice and in any case, the absence of cross-examination would not render the proceedings annulled on the basis of which the addition can be deleted, but would be at best a case for setting aside the matter for allowing the cross-examination to the assessee in fresh income-tax proceedings; and that in view of the various decisions of the Supreme Court and High Courts, the proper course in such circumstances would be to set aside the assessment as against deleting the addition. 13. We have heard the parties and considered the rival submissions. We have considered the various judgements cited by both the parties. It is a matter of record that the assessee had not been allowed the cross examination of the party whose statement has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egality which vitiated proceedings after it was lawfully initiated and the notice having been remained to be still disposed of. The proceedings now started can be described as during the course of assessment proceedings, because the action will relate back to the time when the first notice was issued. 15. In somewhat similar case circumstances in the case of Assam Forest Products (P) Ltd. [1995] 211 ITR 447, before the Supreme Court, on reopening the assessment the addition was made on the basis of the information that it was only a lending of the name to accept the assessee to bring in their concealed income in the form of loans. The Assistant Commissioner confirmed the assessment. The Tribunal held that re-assessment in this case was valid and remanded the matter to the Assistant Commissioner to make enquires since the statement of 'B' had not been supplied to the assessee. It was for the assessee to prove that the statement was not correct. The High Court also upheld the validity of the notice and further held that the Tribunal was justified in remanding the matter for further enquiry. The Supreme Court following the decision in the case of Phool Chand Bajrang Lal v. IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ross profits and sales, it shall give full opportunity to the assessee to place any relevant material on the point that it has before the Tribunal, whether it is found in the books of account or elsewhere and it should also disclose the material on which the Tribunal is going to find its estimate and then afford him full opportunity to meet the substance of any private inquiries made by the ITO, if it is intended to make the estimate on the foot of those enquiries. 18. A reliance upon the decision of the Hon'ble Delhi High Court in the case of Dharam Pal Prem Chand Ltd. (supra) could be helpful to the assessee insofar as the question of resolving the issue made in holding that assessment made without allowing cross-examination is vitiated and in violation of principles of natural justice. It does not go further; it is not a valid reason to hold that the addition would be vacated for those reasons What the High Court upheld in this case is setting aside the assessment by the CIT(A)/Delhi Tribunal which is evident from the penalty made vide paragraphs of the order which reads as under: We do not find any error I the view taken by the CIT(A) or by the Income-tax Appellate Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the procedural defect from the stage at which the irregularity has occurred was not a subject matter for consideration before the High Court. There was no pleading to such an extant. In these circumstances, reliance on the three decisions of the High Court may not be of much help to the assessee in advancing the contention that the addition should be deleted. On the contrary in view of the decisions of the Supreme Court referred to above and also of P&H High Court decision, wherein the specific contention has been raised and it was held that the parties must be put back to the situation where the procedural defect has occurred and proceedings thereafter should be started for action to rectify the procedural defect and by making available the material used against the assessee and/or to cross-examine of a statement on the basis on which the assessment was reopened and addition was made. We accordingly set aside the order of the AO on this issue with a direction that the statement of Shri Satish Goel should be made available to the assessee. The assessee must be allowed for cross examination of the said person and thereafter to decide the matter afresh on the basis of the result in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances, the instant appeal is disposed of with liberty to the AO to reinitiate the proceedings, as ordered hereinabove. 23. In this case also, the statements of Shri H.S. Maheshwari, Shri Parveen Mittal, Shri Sanjay Hasija & Shri Rajinder Gulati was used by the AO in initiating proceedings for reopening the case and making the assessment without affording an opportunity to cross examine the parties whose statement was used against it. The reopening on the basis of statement is to be upheld in view of the two decisions of the Supreme Court in the case of Tin Box & Company and Phool Chand Bajrang Lal (supra). It however held that in so far as making the addition on the basis of the said statement is concerned, the opportunity for cross-examination is to be allowed to the assessee instead of vacating the assessment passed on such an assessment in the light of the aforesaid discussion. 24. From the discussion above it is evident that merely by reasons of want of cross examination the addition cannot be deleted. It will be an addition liable to be challenged and corrected. An omission to serve or any defect in the service of notices provided by procedural provisions does not effac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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