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TMI Blog2022 (12) TMI 495X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived from the outside party and that too based on search and consequently disclosure was made before the settlement commission. Thus, to our mind there was sufficient material available with the AO to draw an inference that the income of the assessee has escaped assessment. At this juncture, the AO while initiating the proceedings under section 147 has to make a prima facie opinion about the escapement of income which must be based on some tangible material. As such the AO is not expected to draw a conclusion that the income of the assessee has escaped assessment while recording the reasons to believe. In holding so, we draw support and guidance from the judgement of Zaveri Company (P.) Ltd.[ 2021 (7) TMI 312 - GUJARAT HIGH COURT] Thus we are of the view that there was no illegality in the initiation of the proceedings under section 147 of the Act and therefore the issue raised by the assessee on technical ground fails. Hence, the ground of appeal of the assessee is hereby dismissed. Addition of cash payment against the purchase of flat - Relevance of document found from the premises of 3rd party - whether document found from the premises of 3rd party and the discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... INFRSTRUCTURE wherein incriminating evidences/document were seized in respect of ON MONEY received from various persons/parties/customers. During the course of the hearing before the Settlement Commission the Company Dharmdev Infrastructure Ltd. admitted receipt of Rs.85.45 Crore from various persons/parties as on money. The assessee Shri Kiritbhai K Gajjar has also advanced cash and booked/purchased the property from M/s.Dharamdev Infrastructure Ltd and paid on money of Rs.4,00,000/- As the said payment of Rs.4,00,000/- has not been recorded by the assessee in his books of accounts/purchase deed, the same is unexplained investment which required to be disallowed and added to the total income of the assessee by taking action as per provisions of section 148 of the Act. By not doing so resulted in underassessment of Rs.4,00,000/- the escapement has occurred on the part of assessee and the income is required to be brought to tax. 4. Based on the above reasons recorded by the AO, it is revealed that there were recovered various evidences/documents, on account of search operation carried out at the premises of Dharmdev Infrastructure Ltd , which were showing the receipt of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the proceedings under section 147 of the Act are valid. 5. Aggrieved assessee preferred an appeal before the learned CIT-A 6. The assessee before the learned CIT-A vide letter dated 22nd October 2018 contended that the AO has not brought anything on record suggesting that the disclosure made by the company namely Dharmdev Infrastructure Ltd was representing the on money paid by the assessee in cash. As such the AO has not established any vital nexus and the live link between the income admitted by the Dharmdev Infrastructure Ltd before the settlement commission viz a viz the cash payment made by the assessee for Rs. 4 lakhs towards the purchase of flat which was not accounted. The assessee further submitted that the admission of the 3rd party before settlement commission about the receipt of on money is not a conclusive evidence or binding upon the assessee that any unaccounted cash payment was made by him (the assessee). The assessee in support of his contention relied on the judgement of Hon ble Supreme Court in the case of CIT versus Gangasaran Co reported in 120 ITR 1. 6.1 The assessee further submitted that the AO while recording the reasons for reope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusive proof for payment On Money by the appellant. Further, there is no substance in the contention of the appellant that he was not provided the document on the basis on which the additions has been made./The AO has reproduced the ledger account of the appellant which was obtained from the Dharamdev Group in the assessment order. Case laws relied on by the appellant do not apply to the present case as the facts are different. 8. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 9. The learned AR before us filed a paper book running from pages 1 to 50 and reiterated the contentions made before the authorities below whereas the learned DR before us vehemently supported the order of the authorities below. 10. We have heard the rival contentions of both the parties and perused the materials available on record. The prerequisite for initiating the proceedings under section 147 of the Act is this that the AO should have reasons to believe that the income of the assessee has escaped assessment. The controversy arises whether the reasons to believe formed by the AO are within the provisions of law or the AO without having proper reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having been received as a result of the search made by the office of Deputy Director (Investigation) conducted at the premises of SS and JS and as a result of the investigation carried out during the search proceedings conducted by the office of Pr. Director (Investigation) at the premises of NJ and his associates that the petitioner-company was one of the beneficiaries of the accommodation entries as the petitioner had entered into the transactions in penny stock with two companies, which companies were used for bogus LTCG and contrived losses. The Assessing Officer had also received specific information from the said investigating wings outlining the systemic evasion of taxes by the petitioner and others, and had therefore reason to believe that the petitioner had sold scrips to said two companies, which were penny stock to the extent of Rs. 97 lakhs during financial year 2011-12. Such satisfaction arrived at by the Assessing Officer being subjective in nature and based on the fresh material for coming to the prima facie conclusion that the petitioner had failed to disclose fully and truly all material facts necessary for his assessment for the assessment year 2012-13, it could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O also noted that such party namely Dharmdev Infrastructure Ltd has also admitted to have received on money to the tune of ₹85.45 crores before the settlement commission. As such, the builder Dharmdev Infrastructure Ltd in the disclosure made before the settlement commission has computed the receipt of on money from the assessee to the tune of ₹4 lakhs in cash based on such ledger. Thus the AO concluded that information received was reliable and tangible. Thus the AO made the addition of ₹3.85 lakhs to the total income of the assessee being difference between the sale shown by the builder (Rs. 22 lakh) and investment shown by the assessee (Rs. 18.15). 13. Aggrieved assessee preferred an appeal to the learned CIT-A who confirmed the order of the AO by observing as under: A perusal of the above shows that payments in the ledger account of the appellant in the books of builder and payments as per the appellant match except the cash payments mentioned in the ledger of the appellant in the books of builder. It is further seen that cash payments have been made after every cheque payment, Further, also four (4) cash payments have been made before payment from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ats. It can also be said that there are enough materials and circumstantial evidences suggesting the unaccounted cash payment of ₹3.85 lakhs. 17.1 However, the controversy arises whether document found from the premises of 3rd party and the disclosure made by such 3rd party before the settlement commission can be used against the assessee without affording the opportunity of cross-examination. Admittedly, the assessee while raising the objection against the initiation of the proceedings under section 147 of the Act has made the following submission before the AO: Please provide copy of material/records on the basis of which you form a belief that assessee had paid on money of Rs.4 Lakh. In case any statement is made by any party of Dharmadev Infrasture Ltd, in this regards copy of statement may be furnished to us and opportunity may be provided for cross verification. 17.2 Likewise, the assessee before the learned CIT-A has also made the submission as detailed below: Secondly, the AO has placed sole reliance on the said ledger account in books of the said company for the purpose of making impugned addition. However, such account cannot be said to be conclusive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the 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 wan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. Ground No.5 6 raised by the assessee becomes merely academic in nature as we have already deleted the addition allowing ground no.4 of the assessee. Ground no.7 is general in nature which needs no adjudication. 17.4 From the above, it is revealed that the opportunity of cross-examination was sine quo non before making any addition to the total income of the assessee based on the 3rd party information especially in the circumstances when the assessee time and again has demanded for such cross examination opportunity. Thus, in the absence of such cross-examination opportunity, to our understanding the addition is not sustainable despite the fact that there are material evidence available before the AO which are against the assessee. 17.5 A question also arises whether the revenue should be directed to provide the opportunity of cross-examination at this stage. The answer stands in negative. In this regard, we draw support and guidance from order of Delhi Tribunal in the case the ACIT Vs. Sh. Subash Dabas in ITA No. 2399/Del/2016 vide order dated 25-11- 2021 wherein it was held under: In this regard we are of the opinion that the Revenue is not entitled to second ..... X X X X Extracts X X X X X X X X Extracts X X X X
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