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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 ..... et Jain, and all deposits and withdrawals were made in the handwriting of Shri Puneet Jain. 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. 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, comment and criticism, it meets all the requirements of principles of natural justice. Natural justice certainly includes that any statement of a person before it is accepted against somebody else, that somebody else should have an opportunity of meeting it by way of interrogation or by way of comment does not matter so long as the party charged has a fair and reasonable opportunity to see, comment or criticise the evidences. The statement of Shri Radhey Shyam Mittal prompted the Assessing Officer to make further en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts 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 proceeding initiated U/s 271(1)(c) and interest charged U/s 234A, 234B 234C is not according to law. 3. Briefly stated, the facts of the case are that the appellant is proprietor of M/s Paras Paper Center and filed his return of income on 30.09.2008 returning income of ₹ 44,65,570/-. The return was selected for scr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. Proceeding further, the Assessing Officer noticed that the assessee has shown total sundry debtors of ₹ 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 ₹ 7,91,545 Not known 6.5.10 2. M/s Gyan Industries T.P. Nagar, Meerut ₹ 70,000 Not known 6.5.10 3. M/s Shree Adinath Enterprises Mahaveer Ji Nagar, Baghpat Road, Meerut ₹ 2,65,000 5.5.10 4. M/s AARU Enterprises Bhopa Road, Muzaflar Nagar ₹ 28,54,908 5.5.10 5. M/s Adinath Enterpeises 16, Dwarikapuri, MZF ₹ 5,84,900 5.5.10 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 vide order dated 04.06.2010 as against returned income of ₹ 4,46,570/-. The additions made were as under: Bogus sundry creditors. ₹ 17,31,25,389 Undisclosed income/ sundry debtors. ₹ 8,58.44.005 ₹ 25,89,69,394 During the course of assessment proceedings, the assessee filed the confirmation from sundry creditor M/s Mittal Paper Mart on 26.02.2010. As the confirmation filed by the assessee was doubtful, the A.O. issued summons to Sh. Radhey Shyam Mittal, Prop, of M/s Mittal Paper Mart fixing the date for compliance for requiring him to produce copy of bank account, and all the books of accounts relating to A.V. 2008-09. The summons were received back in this office on with the remarks of postal authorities The tenant told that the recipient is outside for his treated and not know when he will be back . After it summons were ssued to Sh. Puneet Jain on 19.03.2010 requiring to furnish cash book, ledger and all the bills and vouchers/copy of bank account in this office on 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jab National Bank, Baghpat Road, Meerut was required to furnish this office the name of the person who had actually presented the bearer cheque to your branch and made the withdrawals. He was also required to furnish the photocopy of such cheques both side and documentary evidence with regard to identity of the person who withdrew the cash. The branch manger supplied some photocopies of the bearer cheques through which the cash withdrawals were made from the bank account of Shri Radhey Shyam Mittal, Prop. M/s Mittal Paper Mart. 5. In between letter dated 14.12.2011 was again issued to Shri Puneet Jain with regard to furnish certain information (Copy of letter enclosed). Vide this letter, the assessee was informed that he has only filed the G.R.of Transports, Truck Nos. Bilty Not. Etc. which relate to purchases made from the parties other than M/s Mittal Paper Mart. He was also required to furnish reply to para-3 of notice dated 08.11.2011 to explain as to whether the goods were sold by you on FOR basis or the purchaser had made its own arrangement for carrying the goods. He was again required to produce the sale bills in original and evidence of transportation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt by filling the cheque. In Q..No. 13, he was apprised of the fact that the withdrawals were made by your employees from the account of Sh. Radhey Shyam Mittal and how it was possible that the cheques of Shri Radhey Shyam Mittal were being withdrawn by your employees. He stated that this is not in his knowledge. In the last question No. 14, he was asked to write down five words/sentences for matching his hand writing. The word written by him match with the words written on the self cheques, the self withdrawals through which were made from the account of Shri Radhey Shyam Mittal. He was shown Cheque No.943305 dated 08.08.2007 for ₹ 4,00,000/- and was mad6 aware that the hand writing on this cheque matches with his handwriting whereas in his reply to a question mentioned above, he had stated that no such cheque books was in his knowledge. He was asked to explain as to how he filled up this cheque. He stated that this cheque is not in his handwriting. 7. In order to verify the correctness and matching of his handwriting, copy of 54 such cheques was given to Hand Writing Expert. Sh. Sanjeev Tomar, 77-Old Prempuri, Railway Road, Meerut who confirmed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d involved in this action and no evidences are their against it. The final report from Police Department does not exonerate Shri Puneet Jain for his involvement in fake/bogus purchase and sales in view of above mentioned discussions. 9. A copy of tax audit report of Sh. Radhey Shyam Mittal, Prop. M/s Mittal paper Mart was obtained from the ITO, Ward-2(2), Meerut which reveals that M/s Mittal Paper Mart had not shown any debit balance of ₹ 17,31,25,389/- in his books, though during the course of assessment proceedings for the A.Y. 2009-10 of M/s Paras Paper Centre it is noticed that payment through cheques of ₹ 9,80,80,000/- have been issued by M/s Paras Paper Centre to M/s Mittal paper Mart during the period 1.4.08 to 31.3.2009 whereas M/s Mittal Paper Mart had not shown any creditor in his balance sheet for the A.Y. 2008-09 and has also not made any sales during the period 1.4.08 to 31.3.09. It is also noticed that during the financial year 2008-09, M/s Paras Paper Centre has debited the account of M/s Mittal Paper amount for ₹ 8,97,000/- and credited the amount of M/s Aryan Print and Pack and further debited the account of M/s Mittal Paper Mart by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been mentioned in that letter that the assessee came to know that the A.O. has been transferred to other place and to keep the assessment pending for another Assessing Officer so that the assessee could collect all the details. A perusal of assessee s letter reveals that the assessee had changed his counsel and new engaged wanted which was not allowed. The assessee in his letter dated 26.05.2010 which not alleged received at Dak Counter itself proves that the assessee was allowed sufficient opportunities and the assessee himself wanted to escape from the assessment proceedings before the then A.O. but from the another A.O. for the reasons best known to him. First notice u/s 143(2) dated 18.09.2009 was served upon the assessee on 22.02.2009 and during the period of almost 9 months, the assessee did not change his counsel and furnished the details from time to time and on one ground or other lingered the assessment, hence the A.O. completed the assessment. Para-10(e) is also covered with the comments given above. Since, the party who had made purchases only through fake bills from M/s Saifali Paper Ltd. how could it make the sales to the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on account of commission on fake/bogus bills. The ld. counsel for the assessee further drew our attention to the decision of the Additional Commissioner Grade 2, [Appeal 2] Commercial Taxes, Meerut and pointed out that the Commercial Taxes Department has accepted the trading results of the appellant. 18. Per contra, the ld. DR strongly supported the findings of the lower authorities. It is the say of the ld. DR that in respect of service of notice u/s 143(2) of the Act, the ld. CIT(A) has categorically mentioned that the ld. counsel for the assessee during the appellate proceedings has made no submissions in this regard and thereafter, dismissed this grievance of the assessee. 19. The ld. DR vehemently stated that there should be no grievance caused to the assessee once the matter is not pressed before the ld. CIT(A). On merits of the additions, the ld. DR drew our attention to the relevant observations made by the Assessing Officer in the assessment order and the ld. CIT(A) in his appellate order, and stated that the Assessing Officer has demonstrated by bringing clinching evidences in support of his additions and has not simply made the additions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the assessee had not had a fair hearing. CIT v. East Coast Commercial Co. Ltd. 63 ITR 449 - We may observe that the High Court appears to have felt some doubt as to the admissibility of the Report of the Income-tax Investigation Commission. But the income-tax authorities are not strictly bound by the rules of evidence, and the mere fact that certain provisions of the Taxation of Income (Investigation Commission) Act relating to the inquiries to be held were declared to be ultra vires by this court did not render the Commission an unlawful body ; and in any event the admissions which are recorded by the Commission, as having been made before them, cannot be ignored. The report had evidentiary value and could be taken into account. Undoubtedly the Report had to be brought to the notice of the company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the assessee must be confronted with the evidences gathered from any confidential source and the opportunity to the assessee must be offered. Hon ble Allahabad High Court in the case of Motilal Padampat Udyog Ltd. vs CIT 293 ITR 565 after considering the judgment of Hon ble Supreme Court in the case of Krishna Chand Chela Ram vs. CIT has held that right of cross examination from whom the AO has collected the evidence is not required under the income tax law and such assessment was valid under the Act. In the instant case, the copies of the rough cash books and the statements of the partners of V which were recorded, had been provided to the assessee and, in fact, the assessee had also submitted its reply. In the letter an opportunity to cross-examine was asked for only in case the statements had not been recorded. As, in the instant case, the assessee had proper opportunity to controvert the material gathered by the assessing authority and used against it, there had been compliance of the principle of natural justice. In the case of CIT v. Jay Engineering Works Ltd. 113 ITR 389 Hon ble Delhi High Court has held that the ITO and certain other aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overn the income-tax proceedings, as the proceedings under the Income-tax Act are not judicial proceedings in the sense in which the phrase judicial proceedings is ordinarily used. The Assessing Officer is not fettered or bound by technical rules about evidence contained in the Indian Evidence Act, and he is entitled to act on material which may not be accepted as evidence in a Court of law. [Para 6.3] In the case of CIT v. Metal Products of India 150 ITR 714 Hon ble Punjab Haryana High Court has held that 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 circumstances, evidence in the form of affidavits, declarations and other means of the same kind are 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonable opportunity to see. comment am criticise the evidence, statement or record on which the charge is being made against him the demands and the test of natural justice are satisfied. Cross-examination in that sense is not the technical cross-examination in a Court of law in the witness-box. In the case of CIT v. Kuwer Fibers (P.) Ltd. 77 taxmann.com 345 Hon ble High Court of Delhi has held that The statements-recorded on 20-3-1996 were corroborated by the materials. As far as the question relating to cross examination is concerned, the court notices that though the documents were furnished to the assessee, it had not sought opportunity of cross examination; this was made at the fag end, in March, 1997. This court finds no justification to reject the statements, which merely explain the documents seized; the assessee could well have given a full explanation instead of seeking rejection of the documents. In the case of GTC Industries Ltd. vs. ACIT 65 ITD 380 Hon ble ITAT Bombay has held that As regards the dictum Audi Alteram Partem the assessee s basic contention was that the statements of witnesses and materials which were relied upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, no substantial question of law arose. The appeal was to be dismissed. [Para 12] In the case of Hindustan Tabacco Company v. CIT 27 taxmann.com 155 Hon ble Calcutta High Court has held that If the assessee feels that cross-examining of any person is necessary for establishing its case it is incumbent upon assessee to make such prayer before Assessing officer during the assessment proceeding and if a party fails to avail of opportunity to cross-examine a person at appropriate stage in proceeding, the said party would be precluded from raising such issue at a later stage of proceeding. Therefore, the belated claim of assessee at appellate stage that it is denied the opportunity of cross-examining witnesses in assessment proceeding is wholly untenable in law. [Para 34] Plea of violation of natural justice taken at the appellate stage appears to be belated and clearly an afterthought. It appears that no prejudice had been suffered by the appellant assessee in the manner the proceeding was conducted by the Assessing Officer and the assessee was not aggrieved at that stage. Only when the assessment order went against it, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n could not be used against him. Considering the entirety of the evidence and materials which had come up against the assessee, including the huge amount of assets both movable and immovable, investments made by the assessee, it could not be said that the said statements, which had been concurrently accepted as relevant or corroborative evidence or material used for the purpose of addition, could not have been taken into consideration. Why the decision of Hon ble Supreme Court in the case of Andaman Timber of Central Excise is not applicable on the facts and circumstances of the case of the appellant under Income Tax proceedings- Reliance has been placed by the appellant on the judgement of Hon ble Supreme Court in the case of Andaman timber of Central Excise which is not applicable in the matter of income tax as in the Adjudicating Manual of Customs and Central Excise there is a provision of Cross Examination and there is no parallel provision in the Income tax Act for giving the opportunity of cross examination while giving the opportunity of hearing. This is a thumb rule that decisions/judgment of any court is given in the light of the Rules/Acts/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rne 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 Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions were made a part of those proceedings. After protracted consideration at different hierarchical levels the appellant was completely exonerated by the Department in terms of their order dated 30.07.2016. The entry tax paid on purchases by the Appellant was directed to be retained by the Addl. Commissioner of Sales-tax and the returns filed were held as correct and valid. The allegations of the Appellant having not made any purchases from Sri R.S. Mittal were fully rejected. That order of the Sales-tax Appellant Authority has become final with no appeal being filed against that order by the S.T. Department; 6. In sum, therefore, the unverified, uncorroborated and untested statement of Sri R.S. Mittal was set to a naught by the aforesaid sales-tax appellate authority s order. Thus the only evidence which thereafter remained is the one in support of authenticity of transactions of the purchases of the Appellant. All payments were made by account payee cheques with there being absolutely no evidence of teaming and lading or any other form of abstraction; 7. In the note of the Ld. CIT(DR) several averments with selective quotations from authorities, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income Tax Act. A shinning illustration of this principle is decision on concealment penalty in UOI vs. Dharmendra Textile Processors (2008) 306 ITR 277(SC). On identical facts the Income-tax Appellate Tribunal has deleted the additions for AY 2009-10 and AY 2010-11. Copies of the Tribunal orders have been placed on the records. As to the note dated 26.03.2019:- 11. Submissions made under Para (A) regarding Ground No.l are wrong and misconceived. The factum of the assessee agitating this ground is clearly mentioned in the Written Submission filed by the assessee before the CIT(A). (Please see Page-3 of the Paper Book). In fact the CIT(DR), despite denying the fact that no submissions were made on this ground, has unwittingly produced the relevant submissions in the later Para of his impugned order on Pages 8 and 32. The averments made by the Ld. CIT(A)-DR citing several case laws including Section 292B of the Act on this ground as contained in pages 2-7 of the note are all extraneous and superfluous and being devoid of merit deserve to be completely ignored. 12. Submissions made on Ground No. 2 on Page 7 regarding fundamen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l or quasi-judicial are to be based on evidence. Being so the cited authority only endorses the Appellant s contention for the order to be passed on valid and admissible evidence. evidence of any abstraction or repayment of those in cheques, in cash or otherwise by the assessee. In such circumstances the invocation of Section 68 of the Act is ab initio fallacious and untenable. None of the cases as cited by the Ld. CIT(DR) are relevant to the issue in hand. In particular Para of the judgement and order of the Delhi High 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 judgemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(DR) has quoted immediately after citing this judgement. The quotation as extracted by the Id. CIT(DR) is self-explanatory and going as it does the support the assessee s contention needs no further elucidation. 14.6 On surrounding circumstances as dilated in the note The factum of surrounding circumstances and also the other point as to human behavior are factors which can be made applicable to substantive provisions. Ideally they are in-applicable to deeming provisions for the deeming provisions themselves are based on assumptions and presumptions. Legally no addition can be made to the assumptions and presumptions incorporated through law by the Legislature. Still however, any act of the authority, has to be strictly evidence based. Both for surrounding circumstances or human behavior, there must be proper evidence. Assumptions and presumptions are inadmissible as valid material for any act. 14.7 Motilal Padampat Udyoa Ltd. Vs. CIT (2007) 293 ITR 565 (All.): The citation as extracted is done contextually. The principle of law as stated in Kishnachand Chelaram Vs. CIT (1980) 125 ITR 713 (SC) has been referred to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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 visibility or manifestation. For the cause before it, the court or the Tribunal must have before it, in all events, the correct perspective of things, and what is helpful or valuable in that direction is evidence in the larger context or in the generic sense. As is well known, strict rules of evidence, as are known to the Indian Evidence Act, are not applicable to income-tax proceedings, and thus the word evidence in the question under reference has fo be understood in the generic sense, and not in the arrested sense so as to be either oral or documentary evidence, or both. These observations are in direct contradiction to the Department's contention of the Evidence Act being not applicable in the facts of the Appellant s case. 15.2 CIT Vs. Kuwer Fibers (P.) Ltd. (2017) 77 taxmann.com 345 (Del.): In the cited case cross-examination was sought by that assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... houghtful 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 contested before the ld. CIT(A). Even before us, the ld. counsel for the assessee did mention a passing reference to improper service of notice. But thereafter, he did not make any submissions and was emphatically relying upon the decisions of the co-ordinate benches in Assessment Year 2009-10 and 2010-11. Therefore, this grievance is dismissed as it was not seriously contested. 24. As mentioned hereinabove, the ld. counsel for the assessee has placed heavy reliance on the decision of the co-ordinate benches in Assessment Years 2009-10 and 2010-11. In A.Y 2009-10, the Assessing Officer himself has treated the business of the assessee as fake business and estimated the commission income on sale @ 1%. The Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsent 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 ₹ 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 Kumar Jain. Question Nos. 7 and 8 of the Statement of Shri Radhey Shyam Mittal clearly establish these facts. 30. Considering the report of the forensic expert, it can be safely concluded that the additions are not solely based upon the statement of Shri Radhey Shyam Mittal but on facts and evidences unearthed during the assessment proceedings. 31. The forensic expert s report remains unchallenged even before us because the ld. counsel for the assessee has never pointed out any defect in the said report and moreover, the said forensic report is part of the paper book submitted by the assessee himself. Moreover, we find that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see 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, comment and criticism, it meets all the requirements of principles of natural justice. Natural justice certainly includes that any statement of a person before it is accepted against somebody else, that somebody else should have an opportunity of meeting it by way of interrogation or by way of comment does not matter so long as the party charged has a fair and reasonable opportunity to see, comment or criticise the evidences. 36. As mentioned elsewhere, the statement of Shri Radhey Shyam Mittal prompted the Assessing Officer to make further enquiry from the bank and the evi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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