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TMI Blog2021 (11) TMI 567X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - IT(SS)A. No.78/Lkw/2019 - - - Dated:- 2-11-2021 - 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. Sheela Chopra, CIT, D.R. ORDER PER T. S. KAPOOR, A.M. This is an appeal filed by the assessee against the order of learned CIT(A)-IV, Kanpur dated 29/11/2018 pertaining to assessment years 2014- 2015. In this appeal, the assessee has taken the following grounds: 1. BECAUSE the Learned CIT(A) was wrong in law on facts in confirming the assessment order passed by AO u/s 153A of the Act as the same was not in consonance with the settled position of law vis-a-vis search cases. 2. BECAUSE the learned CIT(A) has erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AUSE in the absence of opportunity of cross examination of the persons giving statement of culpable nature, as had been sought by the appellant, the assessment stood wholly vitiated and consequently the addition made deserved to be deleted as held by the Apex Court in umpteen number of cases. 9. BECAUSE the addition for sum of ₹ 2,96,160/- 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. 10. 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. 11. BECAUSE various adverse observations and allegations made by the lower authorities are contrary to the facts, material evidences available on record. 12. BECAUSE in relation to the Grounds of Appeal, the appellant relies upon the averments made in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee submitted that when this issue was taken before learned CIT(A), he held that cross examination was not required and it was sufficient that assessee was confronted with the statements. Learned counsel for the assessee submitted that in a recent judgment in the case of Balaji Betal Nuts (P) Ltd. in I.T.A. No.105 to 108/Lkw/2019, Lucknow Bench of the Tribunal, under similar circumstances, vide order dated 14/09/2021 has reiterated the importance of cross examination and in a detailed order, the Tribunal has decided the issue in favour of the assessee and it was prayed that following the same, the appeal 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, was 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 case of the assessee was reopened a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance of such interest. In its reply the assessee filed detailed submissions vide letter dated 22/12/2017, a copy of which is placed in paper book pages 178 to 192. Besides replying to allegations of Assessing Officer, the assessee sought to cross examine the witnesses which the Assessing Officer had relied for making such disallowance. The relevant part of request of assessee has been made part of this order, which for the sake of completeness is reproduced below: The allegation about the accommodation entries in respect of the loans from the above companies are baseless and without any evidence or material. It has not been the case of the department that there is evidence of giving the cash money to such companies in lieu of the loans taken through Banking channel. In case if there is any such evidence, the same may kindly be provided, so that we may further put our submission. The Statements of the various persons - as mentioned in your notice are not relevant in our cases as we had no transaction of any kind with them. Even from their statements, it will be seen that no where they have stated our names for any type of transaction. However, since such statements were taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use to buttress main matter connected with the amount of addition, it had to be held that, there was no denial of principal of natural justice, if witness were not allowed to cross examined by the appellant. Therefore it is concluded that, AO has followed the principal of natural justice by producing and confronting all the incriminating seized documents and statements recorded in favour of Revenue to the appellant. 4.2 In the above findings, the learned CIT(A) has not appreciated that cross examination is an important aspect which an assessee is entitled specially in view of the fact that the assessee had in its possession the relevant 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 in the case of Shri Balaji Betal Nuts (P) Ltd. in I.T.A. No. 105 to 108, under similar facts and circumstances, relying on the order of Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been made part of the order and is reproduced below: 4.1 We find that the only reason for disallowing the interest is that the authorities below have held the loan creditors to be bogus and being engaged in the business of providing accommodation entries, but no material was found during the search indicating therein that such transactions were not genuine. Moreover, we find that the assessee had already repaid the whole of the loan amount during the earlier year and present year. At the time of search i.e. on 31/08/2015, both accounts stood squared up as the assessee had already repaid the loans along with interest after deduction of tax at source. The assessee, during the assessment proceedings, specifically asked the Assessing Officer to provide opportunity of cross examination to the assessee. This is apparent from the reply filed by assessee against the show cause notice dated 22/12/2017 and 24/12/2017 for disallowance of such interest. In its reply the assessee filed detailed submissions vide letter dated 26/12/2017, a copy of which is placed in paper book pages 228 to 235 and 223 to 230 respectively for assessment years 2014-15 and 2015-16. In both years bes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (172 I7R 250 at 255 SC), that when the taxing authorities are desirous of invoking the principles of the Evidence Act in proceedings before them, they are not prevented from doing so. All that is required is that whatever material they collect will have to be placed before the taxpaying assessee if adverse inference is going to be drawn - audi alteram partem is a well-known principle of natural justice. This principle is established by the judgment of the Supreme Court in Dhakeswari Cotton Mills Ltd. v. C.I.T. (26 I.T.R. 775,783), and applied by that court in Kishinchand Chellaram vs C.I.T. (125 I.T.R. 713), where an assessment based on the result of private inquiries conducted behind the back of the assessee was set aside because the evidence so gathered was not placed before the assessee. In Gunda Subbayya v. C.I.T.(7 ITR 21), Leach CJ said: 'Information which the Income-Tax Officer has received may not always be accurate and it is only fair when he proposes to act on material which he has obtained from an outside source that he should give the assessee an opportunity of showing, if he can, that the Income-Tax Officer has been misinformed; but the Income-Tax obviously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is concluded that appellant company has miserably failed to prove the vital ingredients of creditworthiness of the creditors and genuineness of the transaction. Therefore, undersigned find no reason to interfere with the addition made by Assessing Officer, u/s 68 of the Act. The same is therefore, confirmed and grounds of appeal of the appellant are dismissed for each assessment year i.e. A.Y. 2010-11 to A.Y. 2015-16. However, ld. A.R. pointed out thorough his written submission that in the assessment for A.Y. 2010-11, A.O. took wrong figure of unsecured loan at ₹ 2,04,80,000/-, whereas, actual figures of unsecured loans from M/s. Success Vyapar Ltd. and M/s. Neil Industries Ltd. is ₹ 2,03,80,000/-. In this regard, A.O. is directed to verify the facts and to take correct figures of unsecured loans and rectify the mistakes, if any, at his end. 4.2 In the above findings, the learned CIT(A) has not appreciated that cross examination is an important aspect which an assessee is entitled specially in view of the fact that the assessee had in its possession the relevant documentary evidences in support of its claim. Merely rejecting the right to cross examine and igno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62 and 64 and 55 of the paper book in the case of third assessee. The Assessing Officer, during the course of assessment proceedings, also issued notices u/s 133(6) of the Act to the above lenders and in response to the notices, the Assessing Officer received replies from the lenders with evidences of having advanced the loans to the assessees. Along with the reply, the lender companies also filed their copy of ITRs and final accounts etc. with the Assessing Officer and the Assessing Officer did not find any difference between the documents filed by the assessees and those filed by the lenders directly. Learned counsel for the assessee has also filed before us in paper book the certified copies (certified by the Assessing Officer) of such evidences which had been filed by the lender companies directly with the Assessing Officer and a copy of which is placed at pages 235 to 237, 246 to 257, 234, 238 to 245, 232, 233, 115, 120 to 128, 116 and 117 of the paper book. We further find that assessees had duly deducted TDS on the interest payments and which have been duly deposited in the Government account. The interest income of the payees has been accepted to be their incomes in their r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him for cross examination and therefore, he shifted the onus to assessees for bringing the Departmental witnesses for their cross examination. The Assessing Officer started the assessment proceedings at the fag end of time barring date as the first query letter was issued in September, 2017. These assessees were required to explain the unsecured loans from these creditors for the first time in December only by issuing show cause notice dated 14/12/2017 and through this notice dated 14/12/2017, the Assessing Officer sent to the assessees the statement of its witnesses. The assessment orders have been passed on 31/12/2017. In this brief period of sixteen days, the assessments have been completed and that too without putting full efforts to make available the witnesses for cross examination by assessees. 5.3 From the above facts and circumstances where the assessees have filed complete evidences of the transactions and the Assessing Officer has also directly obtained such evidences from the lenders u/s 133(6) and did not find any discrepancy in such evidences, the reliance placed by the Assessing Officer on the statements of Directors of the lender companies, without making the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, whereby the ld. CIT(A) has held that it cannot be said that the assessee was not provided any opportunity of cross-examination of Shri Anoop Asthana. 6. The following grounds, in this regard, were raised by the assessee before the ld. CIT(A):- 2. That the assessing officer erred on facts and in law in making addition of ₹ 64 crores alleging the same to have been received by the appellant as on-money in cash, not accounted for in the regular books, against sale/ booking of flats in Emerald Garden Project. 2.1 That the assessing officer erred on facts and in law in making the aforesaid addition by merely relying upon ex-parte statement of one Mr. Anoop Asthana, a property broker and contents of diary purportedly impounded from his premises, without any reliable/ credible material/evidence to substantiate/corroborate the same. 2.2 That the assessing officer erred on facts and in law in not appreciating that no incriminating material was found during the course of simultaneous survey at the premises of the appellant and the managing director of the appellant-company who repeatedly denied having received any on-money. 2.3 That the assessing office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Coming to the statement of Mr. Anoop Asthana, recorded during the course of survey proceedings at his premises, which has been heavily relied upon by the Assessing Officer to infer that the appellant took on money in cash from the customers on sale/booking of flats, it is respectfully submitted as under: It is submitted that the aforesaid statement could not have been relied upon by the Assessing Officer for the following reasons: (a) Copy of statement of Mr. Anoop Asthana to allege that the appellant had received cash on sale/booking of flats outside its regular books of account, was not even provided to the appellant during the course of assessment proceedings. Therefore, the appellant was denied any effective opportunity to rebut the contents of the statement so made. (b) Further, no opportunity to cross-examine Mr. Anoop Asthana was ever accorded to the appellant. In absence of copy of statement being provided to the appellant and/or opportunity to cross-examine Mr Anoop Asthana, his statement could not have been taken into consideration to draw any negative inference against the appellant. 8. The ld. CIT(A) has held, inter alia, as follows:- 5.6 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i SKJ is on very flimsy ground that he earned the undisclosed income from commodity trading. It is also interesting to note that Shri SKJ has not disclosed any profits from the commodity trading in any of the immediate previous year or subsequent year. Thus, the contention of SKJ that surrendered amount of ₹ 9 crore is on account of commodity trading remains unsubstantiated obviously because it represents on money received in the Emerald project. 5.10. During this appeal proceedings ld. A.R. of the appellant has vehemently argued that the incriminating document found and impounded from the premises of the AAP does not belong to the appellant company and since no opportunity of cross examination of Shri Anoop Asthana was ever accorded to the appellant. The contention of the appellant is hollow and are not based on the proper appreciation of the facts. it is admitted fact that Shri Anoop Asthana proprietor of AAP was acting as a property broker for the appellant company. This fact is also evident from the commission paid to Shri Anoop 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nswer that this process has been followed in minimum 12 flats of Emerald Garden, which is booked through him; that thus, it is crystal clear that the appellant company is receiving 25% consideration in cash which is not reflecting in the regular books of account; that further, as per material LP-32, 33 and 51, impounded from the premises of AAP, it is noted that these documents are the receipts of payments made by Shri Arun Kumar (LP-32), Shri Saraj Katiyar (LP-3) and Shri Himanshu Chug (LP- 51); that when confronted with the fact that some of the receipts issued by the appellant company were found in the premises of (AAP), Shri SKJ has shown his ignorance; and that this is mainly due to the fact that incriminating material was found from the premises of AAP and SKJ wished to distance the appellant company from AAP. 10. Thus, the position obtaining is that a diary was recovered from the premises of Shri Anoop Asthana during the survey. Pages 163, 164 and 165 of the diary, Annexure A-14, have been taken to go against the assessee. These three documents, firstly, were not recovered from the possession of the assessee. Then, page 163 is undated, whereas pages 164 and 165 do not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect, during preceding years. The appellant had not sold any flat through Shri Anoop Asthana during the year under consideration (i.e. F.Y. 2014-15). Pertinently, Shri Anoop Asthana, earlier in January 2014 (31/1/2014), had booked two flats with the appellant in his own wife s name in the Emerald Garden project, but since he could not make necessary payments as per the payment schedule, the appellant was constrained to cancel his booking on 8/12/2014. On account of the aforesaid, there had been differences/disputes between the appellant and Shri Anoop Asthana and accordingly, the appellant had not sold any flat through Shri Anoop Asthana during the relevant year and had not paid any commission to him during the relevant year. On account of the ongoing dispute between the appellant and Shri Anoop Asthana, any averment made by Shri Anoop Asthana against the appellant could not be taken at its face value. Further, the dates mentioned in the diary impounded relate back to January, 2014 (18/1/2014, 23/1/2014), which is the period when Shri Anoop 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Prakash Chand Mehta vs. CIT, 220 ITR 277, 279 (MP) 13. CIT vs. D.M. Doshi, 229 ITR 315 (Guj) 14. Amarjit Singh Bakshi (HUF) vs. ACIT, 263 ITR (AT) 75 (Del) (TM) 15. Mahes Gulabrai Joshi vs. CIT, 95 ITD 300 (Mum). 16. Monga Metals (O) Ltd., 67 TTJ 247 (All) 17. Verma Roadways vs. ACIT, 75 ITD 183 (All) 18. Sarita Devi Kajaria vs. ITO, 89 ITD 109 (Kol) (TM). 19. ITO vs. Pukhraj N. Jain, 95 ITD 281 (Mum) 20. Obulapuram Mining Company (P) Ltd. vs. DCIT, 160 ITD 224 (Bang.). 21. CIT vs. SMC Share Brokers Ltd., 288 ITR 345 (Del). 22. CIT vs. Dharam Pal Prem Chand Ltd., 295 ITR 105 (Del). 23. Andaman Timber Industries vs. CCE 281 CTR 241 (SC). 13. Some decisions in this regard are discussed thus. 14. In Kishinchand Chellaram vs. CIT (supra), it has been held by the Hon'ble Supreme Court that the assessment made by relying upon the statement of a third party, without giving the effected person a chance to cross-examine such third party, is liable 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 witn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s-examine witnesses by Adjudicating Authority though statements of those witnesses were made as basis of impugned order, amounted in serious flaw which make impugned order nullity as it amounted to violation of principles of natural justice. It was to be borne in mind that order of Commissioner was based upon statements given by two witnesses. Even when Assessee disputed correctness of statements and wanted to cross-examine witnesses, Adjudicating Authority did not grant opportunity to Assessee. In impugned order passed by Adjudicating Authority it was specifically mentioned that such opportunity was sought by Assessee, however, no such opportunity was granted. Assessee contested truthfulness of statements of two witnesses and wanted to discredit their testimony for which purpose opportunity of cross-examination was sought. It was not for Adjudicating Authority to presuppose as to what could be subject matter of cross-examination and deny prayer of Assessee. In case testimony of two witnesses was discredited, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year. In relation to the said receipts, Shri Sanjeev Kumar Jhunjhunwala had been extensively examined by the Authorised Officer during the course of survey and he had given name-wise details of the persons to whom the receipts in question had been issued by the appellant company. His statement was recorded on 27.06.2014, in continuation to the statement recorded on 26.06.2014. In such statement, he had declared an income of ₹ 9 crores stated to have been earned by him from commodity trading till that date. During the course of regular assessment proceedings, he was extensively examined on 01.09.2016 by issue of summons under section 131(1). In response to Question Nos.14, 15 and 16, he stated that he had done trading in commodity, and looking to the market conditions prevailing at that time, it was not improbable to have earned income of this volume. Further, in response to Question No.18, he was required to submit documentary evidences in support of income declared by him. In response to Question No.21, he gave complete details supported by documentary evidences relating to commodity trading. Further, in response to Question No.22, he gave complete information about in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be utilized against the assessee. If we ignore these statements, the rest of documentary evidences well support the claim of the assessee. Therefore, ground No. 4 to 9 are allowed. 6. In the result, both the appeals of the assessee stand partly allowed. 5. In the present case, all documentary evidences, 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. Therefore, ground No. 6 to 9 are allowed. Since we have allowed the appeal of the assessee on merits, rest of the grounds raised by assessee have not been adjudicated. 6. In the result, the appeal of the assessee stands partly allowed. (Order pronounced in the open court on 02/11/2021) - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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