9911796707
TMI Blog2017 (2) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... d at the back of assessee and copy of which was not given to assessee and assessment order was passed relying on the same. The assessee was held liable for tax on the basis of said statement. But in case the testimony of the said witness is discarded as before the Apex Court for violation of Rule of audi alteram partem, then there is no basis for making addition in the hands of assessee, since both the authorities below have made addition on the basis of statement given by Shri Aditya Dadhe. Accordingly, for violation of principles of natural justice and Rule of audi alteram partem, the addition made by the Assessing Officer and upheld by the CIT(A) is not sustainable and hence, the same is deleted. The preliminary issue raised vide ground of appeal No.3 in this regard is allowed and the issue on merits becomes academic. - Decided in favour of assessee. - ITA No. 973/PN/2013 - - - Dated:- 28-12-2016 - Ms. Sushma Chowla, JM And Shri Anil Chaturvedi, AM Appellant by : S/Shri C.H. Naniwadekar and S.R. Nadpurohit Respondent by : Shri Suhas Kulkarni ORDER Per Sushma Chowla, JM This appeal filed by the assessee is against order of CIT(A)-I, Pune, dated 21.02.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts of the case, the assessee for the year under consideration had furnished return of income declaring total income of ₹ 16,48,090/-. The Assessing Officer recorded reasons for reopening the assessment since the assessee had formed Joint Venture with M/s. Dadhe Construction Pvt. Ltd. Subsequently, M/s. Viraj Properties Pvt. Ltd. approached the assessee in December, 2001 stating that they were taking over the project from M/s. Dadhe Construction Pvt. Ltd. and tendered 11 post dated chequues amounting to ₹ 10 lakhs each totaling ₹ 1.10 crores. The Assessing Officer noted that as per Joint Venture, the assessee had received ₹ 1.10 crores in assessment year 2003-04 which was not offered to tax, where the assessee was following mercantile system of accounting, hence reasons were recorded for reopening the assessment. The assessee in response to notice issued under section 148 of the Act stated that the return of income originally filed declaring income at ₹ 16,48,090/- may be treated as filed in compliance to notice under section 148 of the Act. The assessee asked for the reasons for reopening the assessment and thereafter, furnished objections and sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 3rd Jt. Civil Judge (Senior Division), Pune. DCP Ltd then has against the said Order preferred an appeal before Hon. Bombay High Court which is pending till date. 5. From the documents on record it will be clear that DCP td. has independently and solely entered into arrangement for assignment of their rights in the said property with M/s Viraj Properties P. Ltd as per Memorandum of Understanding dated 2.7.2001 and subsequent Deed of Assignment dated 3.6.2002 registered with the office of Sub- Registrar, Haveli-2, Pune; and neither assessee has entered into any understanding nor assessee has executed any document in respect of assignment, settlement or surrender of his rights, entitlement and / or claim whatsoever available under the JV or interest in the Project Property; and 6. Hon. Bombay High Court had passed has injunction in connection with transfer of the property under litigation between DCP Ltd and Bhushan Kulkarni Associates P. Ltd, and that the District Court has granted perpetual injunction vide their order referred to in (5) above in respect of two plots, a part of which includes an area falling in the Project Property. Therefore, the assignment of asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that he has not received the complete consideration but it is a fact that Mr. Kher has accepted the consideration for surrender of right in the above referred property and has not disputed the issue of settlement either in the court or before Dadhe Construction Pvt. Ltd or before Viraj Properties. These facts and circumstances shows that the transaction has already reached finality as soon as Mr. Kher had accepted the consideration. 8. The assessee has taken a plea that as the Hon. Bombay High Court has passed an injunction in connection with transfer of property under litigation between DCPL and Bhushan Kulkarni Associates Pvt. Ltd., the assignment of his rights and interest in the area of project property cannot be assigned. The contention of the assessee is not accepted. The dispute is between Bhushan Kulkarni Associates Pvt. Ltd. and DCPL for the interest and rights of Bhushan Kulkarni Associates Pvt. Ltd. It is a suit filed by Bhushan Kulkarni Associates Pvt. Ltd. against DCPL for the certain plot wherein assessee is one of the defendant as are other 34 defendant. Thus this litigation in various courts is not at all connected with that of assessee's so called litig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DIT (Inv) -4, Pune dated 10.02.2006 stated that he was approached by Shri Aditya Dadhe, nephew of Shri Vijay Dadhe, Director of DCPL in December, 2001, who stated that VPPL was to take over the project from DCPL. Further, as per letter dated 03.12.2001 which was addressed to the assessee by VPPL, in discharge of liability of DCPL to the assessee, it was clear that the assessee was aware that his role in the property was extinguished and a new joint venture was being proposed, which was ultimately formalized on 03.06.2002 between DCPL and VPPL. Another related aspect was that MOU was entered into by DCPL for development of property at Survey Nos.59, 60, 61, Kothrud, Pune with M/s. Bhushan Kulkarni Pvt. Associates, who in turn, had filed suit in the Court of Civil Judge, Pune against DCPL and the land owne Reference was made to the litigation in para 4.7 of the appellate order and the order of the Hon ble Bombay High Court, wherein the CIT(A) noted that the order of Civil Judge, Pune specifically mentioned the cancellation of agreement between the assessee and DCPL, which has not been challenged by the assessee and hence, the assessee had impliedly and implicitly by way of his conduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roject on the property in question had already been completed and completion certificate from the PMC had also been received. To say therefore, that the settlement between the appellant and DCPL is not complete, is in sheer contradiction to the factual position vis-a- vis the impugned property. II) The cancellation of the MOU is not a vital factor since no power of attorney has been in executed in favour of the proposed joint venture. What the MOU has done is to only create certain interest on the appellant and for cancellation of that interest he has been adequately compensated. From the deed of assignment between DCPL and VPPL dated 2.6.2002 the interest of several other parties which had entered into MOU with DCPL also stand cancelled. No specific cancellation deed is seen to have been executed with those other parties viz. Onkar Properties Pvt. Ltd., Sukhwani Associates, M/s. T.T. Gholap and Gholap Gholap Painting Co. etc. III) The appellant's contention that transaction is neither completed nor cancelled nor constructive settlement arrived at in respect of the proposed joint venture and therefore, the receipts on account of the transaction is not his business i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee stressed that statement of Shri Aditya Dadhe was recorded at the back of assessee and when he asked for copy of statement and also opportunity to cross-examine witnesses, though the copy of statement was given during remand proceedings, but the Assessing Officer stated that he himself would cross-examine. Our attention was drawn to the communication between the assessee and the Assessing Officer in this regard and also the letter to the CIT(A) giving directions to the Assessing Officer. In the remand report also, the Assessing Officer reiterates that there is no need to give cross-examination. He further pointed out that though the court cases were between M/s. Bhusan Developers and DCPL but the assessee was also the defendant in the said suit. He stressed that the document between the parties had not been cancelled till now. The learned Authorized Represent ative for the assessee placed reliance on the decision of the Hon ble Supreme Court in M/s. Andaman Timber Industries Vs. Commissioner of Central Excise in Civil Appeal No.4228 of 2006, judgment dated 02.09.2015. He states that once the statement has not been given, no addition is warranted in the hands of assessee. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the development and it was agreed that the assessee would be paid consideration of ₹ 1.59 crores, out of which ₹ 1.10 crores was to be received from Viraj Properties and ₹ 49 lakhs was to be received from DCPL. The assessee had paid ₹ 35,50,000/- for execution of project including ₹ 4 lakhs to the landlord. The assessee admits that it has received the said consideration but since no full and final settlement for transfer of rights had taken place, the assessability of said amount does not arise in the hands of assessee. In this regard, it was pointed out that certain disputes had arisen between the parties, wherein the person developing the adjacent plot of land i.e. Kurkarni Associates had filed civil suit which was pending before the Hon ble Bombay High Court. The assessee is defendant in the said suit. However, the case of Revenue against the assessee is that the amount has been received by the assessee and once it has accepted the consideration, then the same is to be assessed as business income in the hands of assessee. Since the assessee had not offered the said amount in his return of income, the Assessing Officer recorded reasons for reop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) referred to the submissions made by the assessee vis- -vis factual aspects and the disputes arising in the said deal and the claim of assessee that the Assessing Officer had erred in holding that the assessee had relinquished the rights in the project through settlement with Viraj Properties. The CIT(A) referred to further contentions of assessee that the Assessing Officer has erred in holding that the assessee had accepted consideration for relinquishing his development rights and relying solely on the statement of Shri Aditya Dadhe recorded on 20.02.2006 without being given an opportunity to cross-examine or even furnishing copy of the said statement. The CIT(A) thus, remanded the matter for further enquiry with directions to the Assessing Officer. The assessee vide letter dated 22.06.2012 requested the Assessing Officer in the remand proceedings to give the copy of statement of Shri Aditya Dadhe and also requested to give him opportunity of hearing. The assessee received statement of Shri Aditya Dadhe, which is placed at pages 96 to 102 of the Paper Book. Thereafter, the assessee vide letter dated 12.06.2012 / 12.09.2012 requested the Assessing Officer to kindly arrange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e witness in respect of statement recorded on 20.02.2006. The assessee also made a request to the Assessing Officer vide letter dated 17.10.2012 to explain that since there was confusion as to directives issued by the CIT(A), Pune under section 250(4) of the Act and he had made further reference to the CIT(A) as per the submissions, copy of which is enclosed to the said letter. He requested the Assessing Officer to withhold the report to be submitted to the CIT(A) until his further directions, copy of which is placed at page 30 of the Paper Book. The Assessing Officer however, without waiting for any directives from the CIT(A) submitted the remand report on 22.10.2012, copy of which is placed at pages 31 to 33 of the Paper Book. Thereafter, the assessee filed submissions before the CIT(A) and pointed out that since the assessee had been denied effective opportunity to prove his contentions due to absence of cross-examination of the witness and further had been prevented to present his say on the matters, the remand report furnished by the Assessing Officer should be discarded and should not be taken into consideration. The assessee stressed that despite directions of CIT(A), the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e s presence and also to allow the assessee to cross-examine him. The Assessing Officer in the first instance gave the copy of statement recorded to the assessee. However, despite several requests by the assessee to examine the said person in his presence and also allow cross-examination of the said witness, the Assessing Officer time and again rejected the plea of assessee and asked him to file his say on the averments in the statement recorded behind back of the assessee. Vide letter dated 14.09.2012, copy of which is placed at page 25 of the Paper Book, the Assessing Officer goes one step ahead and states that the said person would be cross- examined by the undersigned and report would be submitted accordingly to the CIT(A), Pune i.e. the Assessing Officer does not allow examination of the said Shri Aditya Dadhe in assessee s presence and further goes on to say that the cross- examination would be done by the Assessing Officer and report would be submitted before the CIT(A). Another request made by the assessee thereafter on 04.10.2012 was also dismissed by the Assessing Officer on similar lines. Thereafter, the assessee approached the CIT(A) for suitable directions on 17.10.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders. 19. The assessee challenged the said order of Tribunal before the Hon ble Supreme Court and it was held by the Apex Court that not allowing the assessee to cross-examine the witness by the adjudicating authority, where the statements of witnesses were made basis for impugned order, was a serious flaw which makes the order invalid in as much as it amounted to violation of principles of natural justice. The relevant findings of the Hon ble Supreme Court are as under:- According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. They do not supplant the law but supplement it. (Also see : ITO v. Madnani Engineering Works Ltd. (1979) 2 SCC 455. 12. In Swadeshi Cotton Mills Co. Ltd. v. Union of India (1981) 1 SCC 664, R. S. Sarkaria J., speaking for the majority in a three-judge Bench, lucidly explained the meaning and scope of the concept of natural justice . Referring to several decisions, his Lordship observed thus (SCC p. 666 ; headnote) : Rules of natural justice are not embodied rules. Being means to an end and not an end in themselves, it is not possible to make an exhaustive catalogue of such rules. But there are two fundamental maxims of natural justice, viz., (i) audi alteram partem, and (ii) nemo judex in re sua. The audi alteram partem rule has many facets, two of them being (a) notice of the case to be met ; and (b) opportunity to explain. This rule cannot be sacrificed at the altar of administrative convenience or celerity. The general principle as distinguished from an absolute rule of uniform application seems to be that where a statute does not, in terms, exclude t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence to earlier cases on the subject. Inter alia, observing that the principles of natural justice are those rules which have been laid down by the courts as being the minimum protection of the rights of the individual against the arbitrary procedure that may be adopted by a judicial, quasi-judicial and administrative authority while making an order affecting those rights, the court said (headnote) : Concept of natural justice has undergone a great deal of change in recent yea Rules of natural justice are not rules embodied always expressly in a statute or in rules framed thereunder. They may be implied from the nature of the duty to be performed under a statute. What particular rule of natural justice should be implied and what its context should be in a given case must depend to a great extent on the fact and circumstances of that case, the framework of the statute under which the enquiry is held. The old distinction between a judicial act and 1.[1967] 2 SCR 625 ; [1967] AIR 1967 SC 1269. 2.[2005] 6 SCC 321. an administrative act has withered away. Even an administrative order which involves civil consequences must be consistent with the rules of natural justice. The expres ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
