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TMI Blog2021 (11) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... nces, for the claim made by the assessee, are available with the authorities for which they have not made any adverse comments. The only reason for making and upholding the disallowance of the interest is the statement recorded by the officers of the Department and that too not by the Assessing Officer himself and that too which were not made available to the assessee for cross examination and therefore, these statements cannot be utilized against the assessee. If we ignore these statements, the rest of documentary evidences well support the claim of the assessee. - Decided in favour of assessee. - IT(SS)A. No.523 & 524/Lkw/2019 - - - Dated:- 28-9-2021 - Shri A.D. Jain, Vice President And Shri T.S. Kapoor, Accountant Member For the Appellant : Shri P. K. Kapoor, C. A. For the Respondent : Smt. Abha Kala Chanda, CIT, D.R. ORDER PER T. S. KAPOOR, A.M. (Through Virtual Hearing) These two appeals have been filed by the assessee against the consolidated order of learned CIT(A)-IV, Kanpur dated 22/07/2019 pertaining to assessment years 2014-15 2015-16. The assessee has taken various grounds of appeals however, at the time of hearing, ground Nos. 1,2 3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases. 8. BECAUSE the addition of sum of ₹ 1,50,42,9447- made by AO and upheld by CIT(A) is based on whims, surmises and conjectures and the cases relied upon by the authorities below are distinguishable from the facts of the present case, which resulted in high pitched assessment. 9. BECAUSE the lower authorities have failed to consider various case laws relied upon by the appellant also the guidelines issued by CBDT relating to the procedure to be adopted by AO in respect of addition under section 68 of the Act and the case laws relied upon by the authorities below are distinguishable from the facts of the present case. 2. Learned counsel for the assessee, at the outset, submitted that these cases of the assessee were reopened due to a search carried out on the group on 31/08/2015 and consequently the assessee had filed returns u/s 153A of the Act. It was submitted that undisputedly no incriminating material was found during the search and the Assessing Officer has made the addition on account of interest paid by the assessee on certain unsecured loans which were raised during earlier years on the basis that the Assessing Officer held the loan creditors t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal has decided the issue in favour of the assessee and it was prayed that following the same, the appeals of the assessee may also be allowed. 3. Learned CIT, D. R., on the other hand, submitted that it is an established fact that the loan creditor, to whom interest has been paid, were involved in providing accommodation entries and therefore, the assessee has wrongly booked the expenditure and the authorities below have rightly made and upheld the disallowance. 4. We have heard the rival parties and have gone through the material placed on record. We find that due to a search conducted on the assessee and its group on 31/08/2015, the cases of the assessee were reopened and returns were filed u/s 153A of the Act. Admittedly, there was no incriminating material on the basis of which the Assessing Officer has made the additions. The Assessing Officer has made the additions on the basis of entries in the books of account of the assessee. In these cases, the interest paid by the assessee during these years, has been disallowed on the basis that the loan creditors, to whom interest was paid, were involved in providing accommodation entries only. The assessee had filed comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28 to 235 and 223 to 230 respectively for assessment years 2014-15 and 2015-16. In both years besides replying to each allegation of Assessing Officer, the assessee sought to cross examine the witnesses. The relevant part of request of assessee in assessment year 2014-15 has been made part of this order, which for the sake of completeness is reproduced below: Further, before submitting para wise reply to captioned letter dated 22.12.2017 served on 24.12.2017 , the assessee applicant may submit that in response to your earlier letters the assessee applicant has already filed detailed replies from time to time. In the said reply the assessee applicant had requested your good self to provide various details and information as well as the Cross examination of the related persons. In compliance to the opportunity provided by your Good Self for Cross Examination of the aforesaid persons the assessee applicant attended your Office with his Counsel on the appointed date to avail the Cross examination but surprisingly enough, no body turned up on the said date. From your show cause notice it is seen that heavy reliance is being placed on the statements of such persons , who had violate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing, if he can, that the Income-Tax Officer has been misinformed; but the Income-Tax obviously not bound to disclose the source of his information In the case of P. S. Barkathali v. Directorate of Enforcement, New Delhi AIR 81, the Hon'ble High Court observed as under: Even though the statement was subsequently retracted,, the significance of admission in the first place cannot be under-mined. It is well established that mere bald retraction cannot take away the importance and evidentiary value of the original confession, specially in view of the fact that in this case, the deponent of the statement had provided the minute details relating to the transactions. It appears that the retraction statement was made purely to avoid clutches of law which had caught up with him and laid bare his nefarious activities. Further, jurisdictional Hon'ble Allahabad High Court in the case of Motilal Padampat Udyog Ltd. Vs. CTT 293 ITR 656 has laid down the correct preposition of law of cross examination and held as follows; Right of cross-examination of persons from whom the Assessing Officer has collected the evidence is not required by law. The requirement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant documentary evidences in support of its claim. Merely rejecting the right to cross examine and ignoring of the important evidences to dislodge the claim of the assessee, is not in accordance with law as has been held by Hon'ble Supreme Court in the case of Andman Timber Industries vs. Commissioner of Central Excise (2015) 281 CTR 0241 (SC). The Lucknow Bench of the Tribunal in its order dated 14/09/2021, under similar facts and circumstances, relying on the order of Hon'ble Supreme Court in the case of Andman Timber Industries (supra) has decided the issue in favour of the assessee by holding as under: 5. We have heard the rival parties and have gone through the material placed on record. We find that a search was conducted on the group on 27/11/2015 and in view of that search various assessees were required to file returns u/s 153A of the Act and Assessing Officer completed the assessments u/s 153A of the Act except in the year of search where the assessment order has been passed u/s 143(3) of the Act. It is undisputed fact that additions in these cases are not based upon any incriminating material found during the search and rather have been made on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government account. The interest income of the payees has been accepted to be their incomes in their respective assessment orders and no addition has been made in their cases. The copy of assessment orders of lender companies is placed at pages 101 to 127 and 128 to 157 of the paper book. The Assessing Officer, while making additions on account of unsecured loans and on account of interest paid on such unsecured loans, has relied only on the statements of Directors of such companies which were recorded by the Investigation Wing. While making such additions, the Assessing Officer himself did not carry out any enquiry and straightforward relying on the statements recorded by some different officer, has made the additions. While making the additions he has also ignored the documentary evidences filed by the assessees and has also ignored a vital evidence that a substantial part of unsecured loans was already repaid even before the date of search. This fact of having repaid a part of unsecured loans before the date of search is apparent from the year-wise copy of account of such lenders, which for the sake of completeness has been made part of this order and is reproduced below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce placed by the Assessing Officer on the statements of Directors of the lender companies, without making the said statements available for cross examination by the assessees, is not sustainable in view of the judgment of Hon'ble Supreme Court in the case of Andman Timber Industries vs. Commissioner of Central Excise (2015) 281 CTR 0241 (SC). The Lucknow Bench of the Tribunal in the case of Morning Glory Infra Ltd. vs. DCIT, IT(SS)A No.72/Lkw/2018 has also held that additions, on the basis of statements of certain persons, cannot be sustained in the absence of cross examination by the assessee. Similar findings have been made by Lucknow Bench of the Tribunal in the case of Sigma Castings Ltd. vs. DCIT other appeals in I.T.A. No.510/Lkw/2019 and others. 5.4 The findings in the case of Morning Glory incorporating the findings of Hon'ble Supreme Court in the case of Andman Timber Industries are reproduced below: 2. The brief facts of the case are that a search and seizure operation under section 132(1) of the Income-tax Act, 1961 was carried out at the residential and business premises of Dolphin Developers/Anand/Rotomac Group of cases on 25/6/2014 at Kanpur. Sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... director of the appellant-company who repeatedly denied having received any on-money. 2.3 That the assessing officer erred on facts and in law in making the aforesaid addition on the basis of ex-parte material, in gross violation of principles of natural justice. 7. In its written submissions, the assessee, inter alia, submitted before the ld. CIT(A) that:- It is, at the outset, emphatically submitted that the aforesaid huge addition of ₹ 64 crores made by the Assessing Officer is patently illegal and bad in law since the same has been made merely on the basis of presumptions, conjectures and surmises, without any credible material/corroborative evidence to establish receipt of any income/cash, outside the books of account, as explained hereunder: The Assessing Officer, as stated above, has simply primarily relied upon the contents of a diary purportedly impounded from the premises of one property broker, Mr. Anoop Ashthana, and his exparte statement recorded during the course of survey at his premises. Re: diary impounded from premises of Mr. Anoop Asthana It is respectfully submitted that the contents of the aforesaid diary found during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration to draw any negative inference against the appellant. 8. The ld. CIT(A) has held, inter alia, as follows:- 5.6 The incriminating document at page 163, 164 and 165 contains the details related to the Emerald Garden project being developed by the appellant company. Page No.163 of the Annexure A-4 mentions certain figures which establishes that the money was receiving sale consideration in white and black for example for a 3 BHK flats 2080 square feet, the quantum of while and black mentioned are ₹ 1,20,57,600/- and ₹ 42,12,000/- respectively. Further, another entry is made for the 3 BHK flat admeasuring 2325 sq. ft. area, wherein amount of white and black mentioned is 1,34,81,400/- and ₹ 47,08,125/- respectively. Thus, Assessing Officer has calculated the quantum of black amount at 25% of the total consideration. During survey proceedings the statement of Shri Anoop Asthana, proprietor of AAP was recorded. For answer to question No.22, in the statement recorded on 25/6/2014 Shri Anoop Asthana has categorically stated that page 163 of the annexure A-4 are the entries relating to Emerald Garden and the amount of white and black represents th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oop Asthana, wherein TDS was also deducted by appellant company. It is not denied by the ld. AR that no commission whatsoever was paid to AAP. Thus the relation between the appellant company and Shri Anoop Asthana proprietor of AAP is established as property developer and the property broker. The incriminating document found from premises of AAP establishes the fact that appellant company is engaged in receiving 25% of the sale consideration in cash, which is unaccounted in the books of the appellant. Assessing Officer has correctly extrapolated the modus operandi for calculating unaccounted income of appellant. 5.11. The contention of the ld. AR that no opportunity of cross examination to Shri Anoop Asthana was ever accorded to the appellant is far away from truth and reality of the case. The incriminating document found and impounded in the business premises of the Anoop Asthana and the incriminating statements of Shri Anoop Asthana was specifically confronted to the Managing Director of the appellant company Shri Sanjeev Kumar Jhunjhunwala on 27/1/2014. This statement is part and parcel fo the assessment order page 6 to 9, therefore, the plethora of the case laws cited by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese three documents, firstly, were not recovered from the possession of the assessee. Then, page 163 is undated, whereas pages 164 and 165 do not pertain to the year under consideration. It is only in the statement of Shri Anoop Asthana, that he attributed account of these documents to the assessee. 11. First and foremost, the subject diary/pages were found and impounded from the premises of Shri Anoop Asthana, a third party, and not from the appellant. Further, Shri Anoop Asthana, in his statement, had stated that entries in the said diary were made by staff member of Shri Anoop Asthana, without providing details of the so-called staff member. Thus, the author of the so-called diary in question is not even known till date. Shri Anoop Asthana nowhere stated that the diary was written by someone on his behalf and/or on his instructions. Therefore, the entire case is fundamentally based on a mere inference drawn about the nature of the contents of the diary written by someone unknown, more particularly, only on the statement of Shri Anoop Asthana about the contents of the diary written by someone else. Since the diary was undisputedly found from the possession of Shri Anoop Ast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oop Asthana booked two flats with the appellant in his personal capacity. Therefore, the recordings in the diary could not be held to be related to the other sale of flats undertaken by the appellant, without any involvement of Shri Anoop Asthana. Even the names of the individual parties appearing in the diary alongside the amounts are, statedly, completely alien to the appellant. The appellant had not sold any flat in the Emerald Garden project to the persons named in the said diary. Therefore, the very contents of the diary are suspect and are totally unreliable/unauthentic. No adverse inference can be drawn from the payment receipts (3 in number) in respect of flats in Emerald Garden project found from the premises of Shri. Anoop Asthana, particularly when nothing adverse has been stated by Shri. Asthana in this regard. 12. These facts, as specifically contended by the assessee before the ld. CIT(A) have not been rebutted and the ld. CIT(A) has gone merely by the uncorroborated unilateral statement of Shri Anoop Asthana, qua which, no opportunity of cross-examination of the deponent, Shri Anoop Asthana, was afforded to the assessee at any stage whatsoever. It is not suffic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be held as based on no evidence and, therefore, liable to be deleted. 15. In Sona Electric Company vs. CIT (supra), it has been held that the statement of a witness recorded at the back of the assessee has to be excluded, as the same was relied on without giving any opportunity to cross-examine the person giving statement; and that the assessment based on such a statement is a statement rendered as based on no evidence and, accordingly, liable to be annulled. 16. In Amarjit Singh Bakshi (HUF) vs. ACIT (supra), it has been held that opportunity to cross-examine the person giving a statement of culpable nature has to be given; and that in the absence of such an opportunity being given to the affected person, the statement ceases to be material for the purposes of assessment. 17. In CIT vs. SMC Share Brokers Ltd. (supra), it was held that a statement given by a broker at the back of the assessee could not be used to the detriment of an assessee and dismissal of Revenue s appeal was held to be justified. 18. In the case of Andaman Timber Industries vs. Commissioner of Central Excise , 281 CTR 241(SC), it has been held that the assessee was manufacturi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there would be no material with Department to justify its action, as statement of two witnesses was only basis of issuing Show Cause Notice. Impugned order as passed by CESTAT was set aside. Appeal allowed. 19. Evidently, the three documents found during survey from the possession of Shri Anoop Asthana, in the absence of the statement of Shri Anoop Asthana, do not have any value, particularly in the face of the fact that they are not corroborated by any independent evidence. Page No. 163: This is un-dated, but name of the project 'Emerald Garden' launched by the appellant was mentioned there. With reference to this, Shri Anoop Aathana who had been examined by the Authorised Officers, stated categorically that he had been working as a broker for last 30 years and all the prominent Developers of Kanpur were his clients. In his subsequent statement which appears at page 31 to 36 of the synopsis dated 10.12.2018, and in response to question no.7, he stated that 'cash money' as mentioned there was subject to negotiation between the Customer and the Developer. He further stated in his reply that he was not concerned with the 'incoming' and 'out-going&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e complete details supported by documentary evidences relating to commodity trading. Further, in response to Question No.22, he gave complete information about income declared and income tax, wealth tax payments made by him on such income/wealth. In response to Question No.23, he gave complete information, name-wise, of the booking receipts as had been impounded during the course of survey at the office premises of Shri Anoop Asthana, and in the end, he categorically stated that it would not be proper to draw adverse inference in relation to income from commodity trading. 16. Thus, one cannot but come to the inexorable conclusion that the order under appeal suffers from the vice of not taking into consideration the assessee s contention, which contention also does not stand rebutted, that it was not provided with any opportunity of cross-examining Shri Anoop Asthana. 17. In view of the above, we hold that: (i) the case of the assessee has been prejudiced for want of providing him opportunity of cross-examination of Shri Anoop Asthana, whose unilateral statement recorded exparte qua the assessee has been made the sole basis of the addition, thereby violating the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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