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TMI Blog2023 (11) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... , the petitioner, in fact, provided the reasons which necessitated to cross-examine the witnesses whose statements were relied upon by the 1st respondent and a perusal of the reasons mentioned by the petitioner, appear to be just and reasonable and the 1st respondent ought to have provided the opportunity, but unfortunately, no opportunity was provided by which, right to lead rebuttal evidence is deprived of. It is clear that not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the 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. In the present case, the statements of the employees of the petitioner company have been relied upon by the AO while passing the impugned order of assessment. When such being the situation, it is bounden duty of the AO to permit the petitioner to cross-examine the witnesses and not allowing the petitioner to cross-examine the said witnesses whose statements were made the basis of the impugned order, is no doubt, a serious fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel Mr.A.N.R.Jayaprathap Standing Counsel. W.P.Nos. 2094,201844,21568,21571 of 2023 For the Petitioner : Mr.M.P.Senthil Kumar, I. Dinesh. For the Respondents : Mr.A.P.Srinivas, Sr.Standing Counsel and Mr.A.N.R.Jayaprathap Standing Counsel COMMON ORDER Since the facts and circumstances are similar and also as common issues are involved in these Writ Petitions, they are taken up together for final disposal. 2. For effective disposal of these Writ Petitions on hand, it would be appropriate at first to deal with the Writ Petition in W.P.No.2225 of 2023. 3. This Writ Petition has been filed, praying for issuance of a Writ of Certiorari, to call for the records in DIN ITBA/AST/S143(3)/2022- 23/1048350023(1) dated 30.12.2022, DIN ITBA/ PNL/ F/ 271AAD (1)(i)/ 2023-24/ 1054034897(1) dated 28.06.2023, DIN ITBA/PNL/F/271AAD(1)(i)/2023-24/1054034897(1) dated 28.06.2023, DIN ITBA/AST/S 143(3) / 2022-23 / 1048347029 (1) dated 29.12.2022 and DIN ITBA/PNL/F/271AAB/2023-24/1054034880(1) dated 28.06.2023 on the files of the 1st respondent relating to A.Y. 2021-2022 and to quash them all. 4. The facts of case in W.P.2225 of 2023 are as follows: 4.1. The Petitioner is a company, engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide response dated 04.11.2022 requested for 3 weeks adjournment. The 1st Respondent in a reply notice dated 14.11.2022, cited the limitation of time required for the Petitioner to file the details required vide notice dated 26.10.2022 on or before 17.11.2022, by stating that details sworn statements / hard / soft copies are given already and most of the basic details are already available with the petitioner. In response, the petitioner through a notice dated 17.11.2022 filed the required details in elaboration. Again the 1st respondent has sent a notice u/S.142(1) dated 08.12.2022 required petitioner for various details to be filed on or before 12.12.2022. Then the petitioner responded through the a letter dated 10.12.2022 stating that the details were already filed in previous response dated 17.11.2022 and also attached the covering letter and annexures thereto once again. This pattern didn't stop and 1st respondent again requested the petitioner for various details to be filed on or before 16.11.2022. The petitioner had also responded vide a letter dated 16.12.2022 on 19.12.2022 after handing over the annexures to the response in a pen drive. 4.6. Thereafter, a Show-Cause N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Senior counsel contends that the 1st respondent passed an impugned assessment order in a hurried manner without providing an opportunity for cross-examination and without even referring to the petitioner's request for cross examination which is illegal, contrary to law and in gross violation to the principles of natural justice and thus the impugned assessment order passed by the 1st respondent is liable to be quashed. He also contends that how can the 1st respondent put forth questions to the employees who do not even have the locus standi for replying such questions and such the statements of the employees cannot be relied on unless the veracity of the same is tested by way of cross examination. 7. The Learned Senior Counsel would further contend that the petitioner is not seeking cross-examination as a ritualistic formality to delay the proceedings, but certain relevant and crucial questions have to be put forth to the witnesses to test the veracity of the statements given by them to the 1st respondents during the search conducted under Section 132 of the Income Tax Act,1961. He conceded that the witnesses are the employees of the petitioner Company, but contends that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instructions of the Managing Director. He further pleaded that MS Excel sheet contains the chart of unaccounted receipts and payments which were shown to the employees as well as the Managing Director who admitted that the modus operandi and the accumulation of unaccounted money. He also pleaded that the petitioners have an alternative remedy before the Commissioner of Income Tax (Appeals) whose powers are co-terminus with that of the Assessing Officer and therefore, prayed for dismissal of the Writ Petitions while directing the petitioners to work out their remedy by way of appeal before the Commissioner of Income Tax (Appeals). 10. Heard the learned Senior counsel and the learned counsel appearing for the petitioners and the learned Senior Standing counsel appearing for the respondents and peruse the entire materials placed on record. 11. In the present case, a challenge was made to the impugned order dated 30.12.2022 passed by the 1st respondent pertaining to the assessment year 2021-22. The 1st respondent issued a show cause notice on 19.12.2022 directing the petitioner to file reply on or before 23.12.2022. Pursuant to the same, on 21.12.2022, the petitioner sought for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lleged to be representing unaccounted transactions. Need to verify the veracity of facts given in the statements. 2. Mr.T.Mohanraj AGM Accounts 3 The Statements recorded on 30.10.2021 and on 09.02.22 as far as the alleged payments made to contractors appears to be contradictory. As he has not handled cash, he does not have the "Locus Standi" to give statements about the receipts and payments of cash concerning the alleged unaccounted transactions. Need to verify the veracity of the facts given in the statements. 3. Mr.P.Mohandas AGM, Purchase 1.2 He Joined the service of the company only during January 2014. Therefore obviously and logically his statement cannot be taken as sacrosanct for the alleged unaccounted transactions for all the ten years. 4. Mr.K.S.Gopalakrishnan Assistant Manager-Cash 1 to 6 (all) He was transferred to Cash Section only on 1.3.2016. Therefore he cannot give statement for 10 years. For Example; 1) with reference to the cash memo dated 16.03.2020 mentioning the name of the purchaser of old culled birds, along with the total amount and denomination of the currency, he has stated it is unaccounted, which is contrary to the fact. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner to cross-examine the witnesses. Nowhere in the correspondence, the 1st respondent ever mentioned about the personal hearing and providing opportunity for cross-examination. These are all admitted facts and not denied on behalf of the respondents. This attitude of the 1st respondent clearly amounts to violation of principles of natural justice which would ultimately deprive of the legal rights of the petitioner. Further, the time provided to the petitioner for filing the reply was hardly 3 days, which in the opinion of this Court, is not reasonable one and it appears to be only a nominal in nature. Even though, the 1st respondent provided very short time of 3 days, the petitioner filed their reply, but what they sought for was only personal hearing as well as cross-examination of the witnesses. 14. The law has been well settled by this Court as well as Apex Court in umpteen number of cases that right of cross-examination is part of one of the most essential rights and whenever a request is made for cross-examination of the witnesses to test the veracity of their statements, the authority have to necessarily grant the said request. In the case of "Thilagarathinam Match Work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re made the basis of the 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 pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Brij Bhushan Singal vs. Assistant Commissioner of Income Tax reported in 2018 SCC Online ITAT 2891, held as follows:~ "It is true that the proceedings under the Income Tax Act law are not governed by the strict rules of evidence and therefore, it may be said that even without calling the Manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the Income Tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for the opportunity to cross examine the Manager of the bank with reference to the statement made by him." "23. The counsel for the petitioners also placed the recent judgment of the Supreme Court in the case of ICDS Ltd., reported in 2020 10 SCC 529, wherein, the Apex Court has remanded back the matter on account of the assessee being deprived of cross examination. Therefore, the respondent either should not have relied on the statements recorded under Section 132(4) or in case, if they want to rely on the same, they should not have denied the opportunity to the petitioners when they demanded of cross examining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment, the Commissioner (Appeals) may not set aside the assessment or refer the case back to the Assessing Officer for making fresh assessment, This amendment will take effect from 1st June, 2001." 21. By not providing an opportunity of hearing, the person can approach the appellate authority, who in turn can permit him to cross examine the witnesses and thereafter he can pass orders. The cross-examination conducted before the Assessment Officer before making assessment and the cross-examination to be conducted before the appellate authority after the assessment which was passed without cross-examination, cannot be equated. That apart, under the frame work of law, it is a legal right of the petitioner before concluding the assessment to provide reply. In the event if anything is required for cross-examination, the same has to be permitted to putforth his case and thereafter, the Assessment Officer has to give his opinion. In the event of failure to provide an opportunity for cross-examination of the witnesses, no doubt the petitioner will loose the opportunity of well considered assessment order to be made by the Assessment Officer along with his points raised in the cross-e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of an electronic record under the Evidence Act, in view of Sections 59 and 65A, can be proved only in accordance with the procedure prescribed under Section 65B. Section 65B deals with the admissibility of the electronic record. The purpose of these provisions is to sanctify secondary evidence in electronic form, generated by a computer. It may be noted that the Section starts with a non obstante clause. Thus, notwithstanding anything contained in the Evidence Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document only if the conditions mentioned under sub~ Section (2) are satisfied, without further proof or production of the original. The very admissibility of such a document, i.e., electronic record which is called as computer output, depends on the satisfaction of the four conditions under Section 65B(2). Following are the specified conditions under Section 65B(2) of the Evidence Act: (i) The electronic record containing the information should have been produced by the computer during the period over which the same was regularly us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 65B of the Evidence Act, the question would arise as to the genuineness thereof and in that situation, resort can be made to Section 45A opinion of examiner of electronic evidence. 18.The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if requirements under Section 65B of the Evidence Act are not complied with, as the law now stands in India. "25. In view of the violation of the principles of natural justice and also due to the non compliance of Section 65(B) of the Indian Evidence Act, this Court feels that it is a fit case for setting aside the assessment orders. The alternative remedy under the statute is in the case of violation of principles of natural justice should be an effective one capable of remedying the violations by providing afresh, but however, it remains the fact that after amendment to Section 251(1)(a) of the Income Tax Act on 01.06.2001, the CIT(Appeals) does not have the power of remand. Therefore, in the facts and circumstances of the case, since the petitioners have made out a clear case of violation of principles of natural justice and the statute, this Court feels that it is a fit case for interferin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2225 of 2023 has been filed challenging the original assessment order dated 30.12.2022 and requested to keep the present penalty proceedings in abeyance till disposal of the said Writ Petition. However, the 1st respondent proceeded with the matter and by proceedings dated 28.06.2023, levied penalty of Rs. 19,79,91,600/- . Challenging the same, the present Writ Petition has been filed by the petitioner. 27. As far as the Writ Petition in W.P.No.21571 of 2023 is concerned, consequent to the impugned assessment order, dated 30.12.2022, which is subject matter of challenge in W.P.No.2225 of 2023, the 1st respondent initiated the penalty proceedings under Section 271 AAD (1)(i) of the Act by issuing a show cause notice dated 20.01.2023 on the ground that during the couse of proceedings under the Act for the A.Y.2021-22, there was a false entry within the meaning of the provisions Clause (i) to Sub Section (1) of Section 271AAD of the Act, which invites penalty. It appears that the petitioner filed their detailed reply on 26.06.2023 and allso brought to the notice of the 1st respondent that the Writ Petition in W.P.No.2225 of 2023 has been filed challenging the original assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) of the Act vide proceedings dated 29.12.2022, wherein, while making additions, determined the assessed income at Rs. 1,35,64,710/-. Challenging the same, the petitioner has come forward with the present Writ Petition. 32. As far as the Writ Petition in W.P.No.21844 of 2023 is concerned, consequent to the issuance of the impugned assessment order, dated 30.12.2023, which is the subject matter of challenge in W.P.No.2094 of 2023, the 1st respondent initiated the penalty proceedings under Section 271AAB(1A) of the Act by issuing a show cause notice dated 06.01.2023. It appears that the petitioner filed their detailed reply on 31.01.2023 and also brought to the notice of the 1st respondent that the Writ Petition in W.P.No.2094 of 2023 has been filed challenging the original assessment order dated 30.12.2022 and requested to keep the present penalty proceedings in abeyance till disposal of the said Writ Petition. However, the 1st respondent proceeded with the matter and by proceedings dated 28.06.2023, levied penalty of Rs. 79,20,000/-. Challenging the same, the present Writ Petition has been filed by the petitioner. 33. In fact, during the course of same search conducted in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 and 21571 of 2023 are allowed and the respective impugned orders dated 30.12.2022 and 28.06.2022 are set aside. ii) Inasmuch as the impugned orders are set aside on the grounds of violation of principles of natural justice and also due to noncompliance of Section 65(B) of the Indian Evidence Act, this Court feels it appropriate to remand the matters back to the 1st respondent Assessing Officer for de novo assessment. iii) While venturing to de novo assessment, the 1st respondent shall, a) provide all the details of the seized materials and furnish copies of the sworn statements of the witnesses; b) afford an opportunity to the petitioners to cross-examine the persons whose statements are relied upon by the 1st respondent for making additions or dis-allowances; c) strictly comply with Section 65-B of the Indian Evidence Act in case the 1st respondent wants to use the electronic document way of secondary evidence; d) after cross-examination by the petitioner, 1st respondent shall provide a personal hearing to the petitioner or their representative to advance their submissions in person; iv) The 1st respondent shall pass a fresh assessment order after taking into consi ..... 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