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TMI Blog2019 (10) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... bad in law. 3. That the A.O. is not justifying in disallowing the sundry debtors of Rs. 8,58,44,005/- and added in the total income of the assessee and confirmation of the order passed by A.O. by Ld. CIT(A) s erroneous and bad in law. 4. That the total assessment made by Ld. A.O. of Rs. 25,94,15,964/- is arbitrary, unjust and illegal on the various legal facts and circumstances and action of Ld. A.O. cannot be said justified and he has not reject the books of account, which was duly audited as required U/s 44AB. Ld. CIT(A) ignored the fact that trading result are accepted by the trade tax authority and Police authority however, he took action against Radhey Shyam Mittal therefore, the assessment framed by Ld. A.O. and confirmed by CIT(A) is erroneous and against the facts and law. 5. That without prejudice to ground no. 1, 2, 3 & 4 the assessment completed u/s 143(3) for the A.Y. 2009-10 on the similar facts and circumstances @ 1% so called bogus receipt of Sh. Radhey Shyam Mittal. AO assessed income @ 1% and Ld. CIT(A) totally ignored this fact hence order passed by Ld. CIT(A) without considering the assessment for the A.Y. 2009-10 is bad in law. 6. That the penalty p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of Mittal Paper Mart amounting to Rs. 1,73,12,52,389/- is bogus and, accordingly, made addition of Rs. 17.31 crores as unexplained credit. 9. While making the addition, the Assessing Officer drew support from: 10. Proceeding further, the Assessing Officer noticed that the assessee has shown total sundry debtors of Rs. 17,41,65,793/-. Notices u/s 133(6) were issued to the debtors and the status of the notices is as under: 1. M/s Arshia Enterprises. 514, Kamla nagar, Meeru Rs. 7,91,545 Not known 6.5.10 2. M/s Gyan Industries T.P. Nagar, Meerut Rs. 70,000 Not known 6.5.10 3. M/s Shree Adinath Enterprises Mahaveer Ji Nagar, Baghpat Road, Meerut Rs. 2,65,000 5.5.10 4. M/s AARU Enterprises Bhopa Road, Muzaflar Nagar Rs. 28,54,908 5.5.10 5. M/s Adinath Enterpeises 16, Dwarikapuri, MZF Rs. 5,84,900 5.5.10 6. M/s S.S. Marketing Nandan Garden W.K. Road, Meerut Rs. 73,02.781 5.5.10 7. M/s Gokul Enterprises 160/51 Mark Ganj, Lucknow Rs. 6,95,87,579 5.5.10 8. M/s Sincere Marketing Co. Sect. 8, Noida Rs. 5,55,580 5 . 5.10 9. Corrupack India C -97, A, Horiary Complex Ph - II, Noida Rs. 19,85,663 10.5.10 10. Aryan Print & Pack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his summon and again summon u/s 131 was issued and served upon Sh. Puneet Jain to furnish all the details as asked in earlier summons. But the assessee did not comply to these summons also. However, During the course of hearing, in response to summons u/s 131, the sundry creditor Sh. Radhy Shyam Mittal Prop. M/s Mittal Paper Mart attended on along with his son Sh. Rajnish Mittal and got his statement on oath recorded. Statement on oath and affidavit of Sh. Radhey Shyam Mittal is part of assessment order. On the basis of statement given, the Assessing Officer treated the sundry creditor of Rs. 17,31,25,389/- as bogus. The Trade Tax Department and Police Department have confirmed that the purchases made by Shri Radhey Shyam Mittal M/s Mittal Paper Mart from M/s Saifali Paper Mart were bogus as the said company had closed and stopped manufacturing and from 1999-2000 is not manufacturing, purchasing and sales, which stands confirmed also by Trade Tax Authorities. As the addition was made on the basis of statement of Shri Radehy Shyam Mittal and Sh. Radehy Shyam Mittal was not got cross examined, during the course of remand proceedings, to verify the statement of Shri Radhey Shyam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that you and your father have not attended in person for examination. He was also informed that in the month of December on 21.12.2007, you have purchased goods 42 times in a day, on 24.12.2007- 22 times, on 25.12.2007- 44 times, on 26.12.2007- 42 times, on 27.12.2007 -13 times, on 28.12.2007 - 15 times and on 29.12.2007- 14 times and after that no purchases were made. He was required to furnish the name and complete addresses of the parties to whom corresponding sales were made by him on these dates. The counsel of the assessee vide letter dated 09.12.2011 received in this office on 16.12.2011 stated that Punit Jain was seriously injured in an accident between car and tractor-trolly on 02.12.2011 at Nawab Ganj Disttl. Gaunda, Faizabad and he has multiple fractures in his both arms and have an injury in his head. He is on complete rest. So he is unable to attend the office. As regards the purchases made from M/s Mittal Paper Mart, the counsel stated that the purchases were made on FOR basis so he could not produce transport documents because that record would be kept by M/s Mittal Paper Mart for claiming the expenses in his books of accounts. On 16.12.2001 also the assessee did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is being enclosed herewith. The handwriting of Shri Praveen Kumar Jain, father of the assessee on the available 54 bearer cheques of Shri Radhey Shyam Mittal from which the cash withdrawals were made, confirms the statement of Shri Radhey Shyam Mittal bank account was got opened and introduced by the assessee and cash withdrawals from his bank account were made by Sh. Puneet Jain and his father Shri Praveen Kumar Jain. Handwriting of Shri Puneet Jain could not be verified as he has not been produced for examination. The handwriting on the sale bills of M/s Mittal Paper Mart issued to M/s Paras Paper Centre could not be verified in absence of the examination of Shri Praveen Kumar, Prop. M/s Paras Paper Centre. Further, as regards addition of Rs. 8,58,55,005/- on account of unexplained debtors, vide letter dated 08.11.2011, the assessee was required as under: "In the written submission before the CIT(Appeals) you have taken a ground that you were not provided proper and reasonable opportunity. The A.O. while making the assessment had made an addition of Rs. 8,58,55,005/- towards sundry debtors being unexplained as the letter issued to them were returned back. Since, the debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing grounds: a) The he is registered under both UP. VAT Act as well as Central Sales Tax Act and M/s Mittal Paper Mart is duly registered under UPTT-MF0055531 dated 01.10.2005 CST No. MF 5044141 dated 28.10.2006 from whom he has made purchases of Rs. 41,76,22,254/- b) That because of the reason that FIR was made by Commercial Tax Department, the assessee suffered shock and mental agony and he was unable to give any reply to the notices, issued by the A.O. c) That the statement of Sh. Radhey Shyam Mittal and affidavit is contradictory to the fact that the return filed by him after auditing his books of accounts by a C.A. voluntary and if any wrong committed by Radhey Shyam Mittal then he should be punished if his statement is found true but assessee cannot be penalized until the assessee cross examine the witness. d) That the assessee was not allowed sufficient opportunity even the request of the assesss's counsel was turndown in which he wanted to inspect the record and required the certified copies to proceed the case but the A.O. refused to receive the letter and the person on the Dak Counter also refused to receive it which shows that the A.O. was prejudiced agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made on the mother of the assessee as the assessee in the records had given his residential address. But, since the assessee had complied the said notice, it cannot be challenged at this stage and the service of this notice is held to be proper service. In view of the above facts and circumstances, it is proved that fake/bogus purchases and sales through fake bills were made by M/s Mittal Paper Mart and M/s Paras Paper centre in connivance with each other through the firm M/s Mittal Paper Mart. In view of my above comments, the appeal proceedings may kindly be decided on merits." 14. After considering the facts and remand report of the Assessing Officer, the ld. CIT(A) confirmed the additions made by the Assessing Officer. 15. Before us, the ld. counsel for the assessee reiterated what has been stated before the lower authorities. It is the say of the ld. counsel for the assessee that by not allowing any opportunity to cross examine Shri Radhey Shyam Mittal, the lower authorities have violated the principles of natural justice, which is against the ratio laid down by the Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. CIT Civil Appeal No. 4228 OF 2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sake of convenience, the same is extracted hereunder: "Hon'ble Supreme Court in the case of Indian & Eastern Newspaper Society v. CIT 119 ITR 996 has held that the proceedings for assessment before the Assessing Officer have been described as quasi-judicial in character. The Hon'ble Supreme Court in S.S. Gadgil v. Lal & Co. 53 ITR 231 has held that a proceeding for assessment is not a suit for adjudication of a civil dispute. That an income-tax proceeding is in the nature of a judicial proceeding between contesting parties, is a matter which is not capable of even a plausible argument. The income-tax authorities who have power to assess and recover tax are not acting as judges deciding a litigation between the citizen and the State: they are administrative authorities whose proceedings are regulated by statute, but whose function is to estimate the income of the taxpayer and to assess him to tax on the basis of that estimate. Tax legislation necessitates the setting up of machinery to ascertain the taxable income, and to assess tax on the income, but that does not impress the proceeding with the character of an action between the citizen and the State. Dhakeswari Cotto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voking the principles of the Act in proceedings before them, they are prevented from doing so. All that is required is that if they want to use any material collected by them which is adverse to the assessee, then the assessee must be given a chance to make his submissions thereon. The principles of natural justice are violated if an adverse order is made on an assessee on the basis of the material not brought to his notice. Surrounding circumstances must be considered while scrutinizing the documents - as Hon'ble Supreme Court has said in the case of Durga Prasad and that the taxing authorities are not required to put on blinkers while looking at the documents produced before them. They are entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. Powers of AO under Income Tax Act - under the Income Tax Act the Assessing Officer are empowered to give notice to the assessee to substantiate its Return of Income by producing the necessary materials as under section 143(2) the claims made in the return has to be justified by the assessee. If the Assessing Officer wants to make addition on any new fact outside the reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has gathered" for the purpose of making an assessment. While the word "evidence" may recall the oral and documentary evidence as may be admissible under the Indian Evidence Act, the use of the word "material" shows that the ITO not being a court can rely upon material which may not be strictly evidence admissible under the Indian Evidence Act for the purpose of making an order of assessment. The courts often take judicial notice of certain facts which need not be proved, while administrative and quasi-judicial authorities can take "official notice" of wider varieties of facts which need not be proved before them. Thus, not only in respect of the relevancy but also in respect of proof the material which can be taken into consideration by the ITO and other authorities under the Act is far wider than the evidence which is strictly relevant and admissible under the Evidence Act. In the case of Hersh Win Chadha Vs DCIT 135 TTJ 513 Hon'ble ITAT Delhi has analysed the Nature of income-tax proceedings and powers of Assessing Officer and held that the dispute concerned the determination of the income-tax liability of the assessee rather than fixing any criminal liability or accountabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nokia India (P.) Ltd. v. DDIT 59 taxmann.com 212 Hon'ble ITAT DELHI BENCH has relied upon the decision of Hon'ble Calcutta High Court in the case of Kisanlal Agarwalla v. Collector of Land Customs AIR 1967 & Cal. 80 where the Hon'ble Court has held the following in para 28 - "28. There is a good deal of misconception on this question of the right of cross- examination as part of natural justice Natural justice is fast becoming the most unnatural and artificial justice and for that confusion the Courts are no less responsible than the litigants. Ordinarily the principle of natural justice is that no man shall be a judge in his own cause and that no man should be condemned unheard. This latter doctrine is known as audi alteram parlem. It is on this principle that natural justice ensures that both sides should be heard fairly and reasonably. A part of this principle is that if any reliance is plated on evidence or record against a person then that evidence or record must be placed before him for his information, comment and criticism. That is all that is meant by the doctrine of audi alteram partem, that no party should be condemned unheard. No natural justice requires that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition of law that the revenue could not rely on any evidence which had not been subjected to cross39 examination. However, if a witness has given directly incriminating statement and the addition in the assessment is based solely or mainly on such statement, in that eventuality it is incumbent on the Assessing Officer to allow crossexamination. Adverse evidence and material, relied upon in the order, to reach the finality, should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of collateral nature. " In the case of Smt. Kusum Lata Thakral v. CIT 150 ITR 714 Hon'ble Punjab & Haryana High Court has held that it was clear from the findings recorded by the Tribunal that there was no relationship between the donors and the assessee and there was no natural love and affection. The Tribunal had followed the judgment of the jurisdictional High Court in Shri Tirath Ram Gupta v. CIT [20081 304 ITR 145/[20091 177 Taxman 294 (Punj. & Har ), laying down that in the absence of natural love and affection, the gift could not be accepted as genuine. [Para 6] The question whether denial of opportunity of crossexamination results in violatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not attempted it. Wide though his powers be, he must act in consonance with rules of natural justice. One such rule is that he shall not use any material against the assessee without giving him an opportunity to meet it. In the case of ITO v. M. Pirai Choodi 334 ITR 261 Hon'ble Supreme Court of India has held that in this case, the High Court has set aside the order of assessment on the ground that no opportunity to cross-examine was granted, as sought by the assessee. We are of the view that the High Court should not have set aside the entire assessment order. At the highest, the High Court should have directed the Assessing Officer to grant an opportunity to the assessee to crossexamine the concerned witness. Be that as it may, we are of the view that, even on this particular aspect, the assessee could have gone in appeal to the Commissioner of Income-tax (Appeals). The assessee has failed to avail of the statutory remedy. In the circumstances, we are of the view that the High Court should not have quashed the assessment proceedings vide the impugned order. In the case of Dr. Gauri Shankar Prasad v. ITO 393 ITR 635 Hon'ble High Court of Patna has held that the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule of evidence the right to cross examine is given for the witness of the opposite party. For example, if the assessee makes a claim of purchase/investment/transaction in the return of income and filed the necessary details of the parties in support of the claim as witness and if the Revenue has collected the material to rebut such claim which may be in the form of the statement recorded, the appellant has to discharge the onus which was casted upon him and in such condition cannot take the plea of cross examination of his own witnesses unless he claims / proves in the proceedings that the witnesses on which he relied upon turned hostile. Further, this case was earlier set aside to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions of the appellant for giving the opportunity of cross examination and in the second round also the Tribunal has stated that crossexamination of the said dealers could not have brought out any material which was taken by Hon'ble Supreme Court adversely. Relevant observation of Hon'ble Supreme Court is as under: "According to us, not allowing the assessee to cross-examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r accepting or rejecting the submissions. We are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice. " 22. Replying to the written submissions of the ld. DR, the ld. counsel for the assessee in his rejoinder has stated as under: "Summons u/s 131 of the Act were not served on Sri R.S. Mittal. This is acknowledged by the Assessing Officer in the assessment order itself; 2. Suddenly Sri R.S. Miftal is stated to have appeared before the Assessing Officer without any notice or appointment and tendered a statement whose spontaneity and veracity is highly doubtful. Besides collusion cannot be ruled out; 3. The Assessing Officer has framed the assessment without neither confronting the statement nor the affidavit of Sri R.S. Mittal to the Appellant for comments. Evidence as used for making the additions was clearly inadmissible in law. To verify the averments of the Appellant's father forensic help was sought by the Assessing Officer. No opportunity is given to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that Sri R.S. Mittal was not the department's witness and that, therefore, Department was not under any obligation to produce him for the Appellant for cross examining him. This averment is blatantly wrong. It is the statement of Sri R.S. Mittal and his affidavit which have been relied upon entirely by the Assessing Officer to propose the addition in the Appellant's case. Having relied upon such material which emanated from Sri R.S. Mittal and utilized as evidence against the Appellant by the Department, it cannot now be pleaded by the Department that Sri R.S. Mittal was not its witness. Sri R.S. Mittal in a way was the person on whose accusations and allegations the adverse action against the Appellant has originated and culminated in the impugned additions. It is, therefore, inconceivable for Sri R.S. Mittal to be designated as the Appellant's witness. The CIT(DR)'s plea is totally fallacious on this point. 10. The proceedings for assessment under the Income-tax Act and the Customs & Excise Act are based on the same foundations as to the applicability of the Evidence Act. It was wrongly suggested on behalf of the Department that the law differ in application to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in Nova Promoters (2012) 342 ITR 169 (Del) case is of cardinal importance and only goes to endorse the assessee's plea regarding shifting or onus u/s 68 of the Act. 13. On the aspect of natural justice and cross examination cases cited as Nokia India Pvt. Ltd. vs. DDIT (2015) 59 Taxman.com 212 (Delhi.Trib), CIT vs. Kuber Fibers Pvt. Ltd. (2017) 77 Taxman.com 345 (Delhi) and GTC Industries Ltd. vs. ACIT (1998) 65 ITD 380 (Bom) are all decided on the basis of the facts appertaining to those cases. Even while doing so, the factum of the cross examination being part of the inalienable norm of natural justice, has been asserted. Being so, the judgements as cited are all distinguishable and inapplicable and need not be elaborately committed upon. As to note dated 19.09.2019 : 14.1 The cases cited by the Id. CIT(DR) are all distinguishable for the reasons as indicated against each of them. 14.2 Indian & Eastern Newspaper Society Vs. CIT fl 979) 119 ITR 996 (SC): It is an accepted proposition, endorsed by different courts at all times, that the proceedings for assessment before the Assessing Officer are quasi-judicial in character. All proceedings, whether judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That principles of natural justice are contravened if evidence used by the Assessing Officer is not confronted to the assessee for rebuttal. This citation as pressed by the Id. CIT(DR) only goes to fortify assessee's submissions. 14.4 Dhakeswari Cotton Mills Ltd. Vs. Vs. CIT (1954) 26 ITR 775 (SC): This decision as cited by the Id. CIT(DR) is clearly in favour of the assessee's contention that the evidence as utilized in assessment is required to be tested both for its authenticity and its relevance before any such use. The citation supports the contentions of the assessee and is of no help to the Department. 14.5 CIT Vs. East Coast Commercial Co. Ltd. (1967) 63 ITR 449: In this decision too the principle that Income Tax proceedings are not strictly bound by the technical rules of evidence is stated. That, however, does not mean that the rules of evidence are not applicable to the proceedings at all. This proposition has been explained in greater detail by the apex court in the later decision in Chuharmal Vs. CIT (1988) 172 ITR 250 (SC) which the Id. CIT(DR) has quoted immediately after citing this judgement. The quotation as extracted by the Id. CIT(DR) is self-exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble High Courts and the apex court have been adopted by the Hon'ble Tribunal in the cited orders. Being so, they do not require any separate comment. 15.1 CIT Vs. Metal Products of India (1984) 150 ITR 714 (P &H): The High Court has only gone by the principle. The Id. CIT(DR) has missed to notice and quote the more relevant part of the judgement which reads on page 717 of the Report as under: "Now the word "evidence" as a term of law is not an arrested one. In the context of the Indian Evidence Act, "evidence" means and includes all statements made before the court which are called "oral evidence" and all documents produced before it for inspection which are called "documentary evidence". That is a controlled meaning of the word for that Act. Yet, in certain proceedings, evidence in the form of affidavits, declarations and other means of the same kind is allowed to be adduced. But all such exercise is made before a court or a quasi-judicial Tribunal to make things obvious or manifest. In other words, the effort is to make things plainly visible or conspicuous. The object can also be achieved by a positive suggestion indicating an inference which adds to the plain vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rit does not create a precedent. Dr. Gauri Shankar Prasad Vs. iTQ f2017) 393 ITR 635 (Pat.): In the cited case request for cross-examine was never expressed by the litigant. In the subject case cross-examination has been sought at the first available opportunity during assessment. Facts being different and distinguishable the cited ratio has no application. 18. Andaman Timber Industries Vs. CCE (2015) 281 CTR 241 (SC): The observations of the apex court as extracted in the department's written submissions have not been followed in the narrative of the Id. CIT (DR) in the earlier part of the submissions. Being so, the observations as made are erroneous and so do not merit any consideration." 23. We have given thoughtful consideration to the rival submissions and have carefully perused the orders of the authorities below as well as the written submissions by the respective representatives. On perusal of the facts on record, we can safely conclude that it is not a case of non issue of notice u/s 143(2) of the Act. The Assessing Officer did issue notice u/s 143(2) which was served at the residence of the assessee. As mentioned elsewhere, this issue was not seriously conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Paper Mart had its bank account, was summoned by the Assessing Officer alongwith the pay in slips prepared by Shri Puneet Jain/Shri Praveen Kumar Jain. Those pay in slips were referred to a forensic expert, report is exhibited at pages 58 to 63 of the paper book, in which the forensic expert has categorically given his conclusion that in all the cheques, hand writing matches with that of Shri Praveen Kumar Jain. The claim of the ld. counsel for the assessee that no opportunity to cross examine Shri Radhey Shyam Mittal was given does not hold any water as we find that several opportunities were given to the assessee but for reasons best known to him, he kept himself absent from the proceedings and did not avail any opportunity to cross examine Shri Radhey Shyam Mittal. 29. Moreover, as Shri Radhey Shyam Mittal was drawing salary of Rs. 25,000/- from the assessee himself, it cannot be said that he was a stranger to the assessee. The report of the forensic expert clearly establishes the fact that the bank account of Mittal Paper Mart was operated by Shri Puneet Jain and all the deposits and withdrawals were made in his own handwriting or handwriting of his father Shri Praveen Kum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf, it can be seen that several notices were served upon the assessee during the assessment proceedings itself but the assessee chose not to respond and capture the opportunity to cross examine Shri Radhey Shyam Mittal. 34. Moreover, the statement of Shri Radhey Shyam Mittal did not surprise the assessee as the facts mentioned therein in relation to operation of bank account of Mittal Paper Mart by Shri Puneet Jain/Shri Praveen Jain were known to the assessee. Further, Mittal Paper Mart was shown as a creditor in the books of account of the assessee. Therefore, the onus was upon the assessee to explain the genuineness of the credit entries and since Mittal Paper Mart was creditor of the assessee, Shri Radhey Shyam Mittal appeared before the Assessing Officer in response to the summons issued u/s 131 of the Act for and behalf of the assessee. Therefore, technically, Shri Radhey Shyam Mittal was assessee's own witness. 35. In our understanding of the law, all that is meant by the principle 'Audi Alteram Partem' is that no party should be condemned unheard. Once the evidences are collected by the Assessing Officer have been placed before the assessee for his information, com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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