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TMI Blog2019 (7) TMI 2022X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that where revenue relies on statements of certain persons to implicate an assessee, principles of cross examination have to be invariably followed as not providing opportunity to cross examine is violative of principles of natural justice. He further stated that where revenue strongly relies on statements of certain persons to implicate an assessee, principles of cross examination have to be invariably followed if truth and justice need to be found out. He stated that the answer has been given by the Bench positive in the case Amitabh Bansal vs. Income Tax Officer, Ward 46(4), New Delhi (2019) 102 taxmann.com 229 (Supra) and therefore, requested to follow the same ratio in the case of the assessee and addition in dispute may be deleted and appeal of the assessee may be allowed. 3. On the contrary, Ld. DR relied upon the orders passed by the Revenue Authorities. He stated that the addition in dispute has been made on the basis of the information received from the Investigation Wing, after recording the valid reasons with the approval of the Competent Authority. Therefore, no irregularity has been committed by the AO as well as Ld. CIT(A), hence, he requested that the appeal f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to allow cross examination to the assessee. However, the AO has expressed his inability to allow the assessee cross examination of the witnesses due to the reason that the witnesses belong to Kolkata and it is not possible for AO to make such arrangement. The ld. CIT(A) has finally denied the cross examination to the assessee by giving his finding in para 5.11 at page 188 already reproduced in the earlier part of this order and, therefore, the only reason for denial of cross examination by the ld.CIT(A) is that the statements are so vocal and undeniable that cross examination of such accommodation entry provided by thousands of beneficiaries across India is neither practicable nor viable and therefore uncalled for. We find that the assessee has demanded the cross examination only in respect of the alleged transactions of loans and not for the entire business of the entry providers providing the bogus entries. Undisputedly, the statement of Shri Anand Sharma was recorded by the Investigation Wing Kolkata at the back of the assessee, even the proceedings by the Investigation were conducted at the back of the assessee, therefore, the said statement of Shri Anand Sharma cannot be the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of tax filings, affidavits and confirmation of the Directors, bank statements of the lender, balance sheet of the lender company, and an independent confirmation has also been obtained by the Assessing officer to satisfy the cardinal test of identity, creditworthiness and genuineness of the loan transaction. However, the Assessing officer has not given any finding in respect of such explanation, documentary evidence as well as independent confirmation. Apparently, the reason for not accepting the same is that the Assessing officer was in receipt of certain information from the investigation wing of the tax department as per which the transaction under consideration is a bogus loan transaction. The said information received from the investigation wing thus overweighed the mind of the Assessing officer. The Assessing officer stated that the primary onus is on the assessee to establish the genuineness of the transaction claimed by it and if the investigation done by the department leads to doubt regarding the genuineness of the transactions, it is incumbent on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the cross examination and if this is not done, the principles of natural justice stand violated. 2.9 In light of above discussions, in our view, the crux of the issue at hand is that whether the principle of natural justice stand violated in the instant case. In other words, where the AO doesn't want to accept the explanation of the assessee and the documentation furnished regarding the genuineness of the loan transaction and instead wants to rely upon the information independently received from the investigation wing of the department in respect of investigation carried out at a third party, can the said information be used against the assessee without sharing such information with the assessee and allowing an opportunity to the assessee to examine such information and explain its position especially when the assessee has requested the same to the Assessing officer. 2.10 In this regard, the Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775 (SC) (Copy at Case Law PB 812- 818) has held that "The rule of law on this subject ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could rely for the purpose of arriving at this finding was the letter, dated 18-2-1955 said to have been addressed by the manager of the bank to the ITO. Now it is difficult to see how this letter could at all be relied upon by the Tribunal as a material piece of evidence supportive of its finding. In the first place, this letter was not disclosed to the assessee by the ITO and even though the AAC reproduced an extract from it in his order, he did not care to produce it before the assessee or give a copy of it to the assessee. The same position obtained also before the Tribunal and the High Court and it was only when a supplemental statement of the case was called for by this Court by its order, dated 16-8-1979 that, according to the ITO, this letter was traced by him and even then it was not shown by him to the assessee but it was forwarded to the Tribunal and it was for the first time at the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case that this letter was shown to the assessee. It will, therefore, be seen that, even if we assume that this letter was in fact addressed by the manager of the bank to the ITO, no reliance could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral justice and consequently renders the assessment order based on such statement as not sustainable in law. Hence in view of the facts and circumstances of the case where the assessee has repeatedly requested and demanded the cross examination of the witnesses whose statements were relied upon by the AO in the assessment order and further the report of the DDIT Investigation Kolkata is also based on the statement of such person then the denial of cross examination by the AO as well as ld. CIT (A) despite the fact that the assessee was ready to bear the cost of the cross examination of the witnesses is a gross violation of principles of natural justice. Thus the additions made by the AO on the basis of such statement without any tangible material is not sustainable in law and liable to be deleted. Accordingly the addition made by the AO is also deleted on merits apart from the legal issue decided in favour of the assessee. APPELLATE TRIBUNAL, FOREIGN EXCHANGE MANAGEMENT ACT AT NEW DELHI Date of Decision:-13.04.2018 (1) FPA-FE-01/DLI/2018 Shri Ashwani Kumar Mehra ... Appellant Versus Shri A.H. Khan Directorate of Enforcement, Delhi ... Respondent CORAM JUS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he SD. In the circumstances, the reasons given by the SD in the impugned AO for disallowing the request of the appellants for cross-examination of the ED officials only because it would tantamount to "further delay in finalising the proceeding" were not tenable or justified. The denial of cross examination of the ED officials by the appellants indeed has caused them severe prejudice since the ED was relying on the said statements as if they were by themselves substantive evidence." (iii) The Hon'ble High Court of Delhi in Devashis Bhattacharya Vs. Union of India 159 (2009) DLT 780, while deciding a case under Foreign Exchange Regulation Act, 1973 had observed that: ―18. It is well settled that where an action under the statute entails civil consequences, then even if an opportunity of being heard may not be explicitly set out in the applicable legal provisions, the adherence to the principles of natural justice has to be read into such a statute. 19. There can be no dispute that the action permitted under section 61 of the FERA, 1973 certainly results in drastic penal consequences... (iv) The Hon'ble Supreme Court of India in Ramesh Ahluwalia Vs. State of Punjab & Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. v. Chintaman Sadashiva Vaishampayan, AIR 1961 SC 1623, has held that the Principle of Natural Justice require that a party be given the opportunity to adduce all relevant evidence upon which it relies, that evidence of the opposite party be taken in his presence, and that he be given the opportunity to crossexamine the witnesses examined by that party. Not providing the said opportunity to cross-examine is violative of the Principles of Natural Justice. (vi). In Lakshman Exports Ltd. v. Collector of Central Excise, (2005) 10 SCC 634, the Apex Court, while dealing with a case under the Central Excise Act, 1944, considered whether to grant permission for cross-examination of a witness. In that case, the assessee had specifically asked to be allowed to crossexamine the representatives of the concerned firm, in order to establish that the goods in question had been accounted for in the firm‟s books of accounts and excise duty had been paid thereof. The Court held that such a request could not be turned down, as the denial of the right to cross-examine, would amount to a denial of the right to be heard i.e. audi alteram partem. (vii). In K.L. Tripathi v. State Bank of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be held to be indefeasible right" x). The Hon‟ble Supreme Court in Needle Industries (India) Ltd. & Ors. v. N.I.N.I.H. Ltd. & Ors., AIR 1981 SC 1298, considered a case under the Indian Companies Act, and observed that: ―It is generally unsatisfactory to record a finding involving grave consequences with respect to a person, on the basis of affidavits and documents alone, without asking that person to submit to cross-examination‖ (xi). Hon‟ble High Court in Mehar Singh Vs. The Appellate Board Foreign Exchange 1986 (10) DRJ 19, while dealing with a case under the Foreign Exchange Regulation Act, 1973, decided the appeal in favour of the Appellants on the short ground that the applications made to the Director of Enforcement and before the Appellate Board during the pendency of the appeal to summon four witnesses for cross-examination, were not dealt with by the authorities below. It was held: ―5. Non-summoning of the said witnesses for purposes of cross-examination has resulted in miscarriage of justice.‖ 55. In the nature of the seriousness of present case, the right to cross examination would have been given in view of gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the opportunity of cross-examining the witnesses examined by that party, and that no material should be relied on against him without he is being given an opportunity of explaining them.‖ It was further stated that it is hardly necessary to emphasize that the right to cross-examine the witnesses who give evidences against him is a very valuable right, and if it appears that effective exercise of this right has been prevented by the enquiry officer by not giving to officer relevant documents, to which he is entitled, that inevitably would be that the enquiry had not been held in accordance with the rules of natural justice. The Hon'ble Supreme Court thereafter, referring to the another decision of the Hon'ble Supreme Court held that the importance of giving an opportunity to the public officer to defend himself by cross-examining witness produced against him is necessary for following the rules of natural justice. Further, the decision of the Hon'ble Supreme Court in case of Anadaman Timber industries vs. Commissioner of Central Excise (2015) 281 CTR 241 (SC) has held as under :- ―According to us, not allowing the assessee to cross-examine the witnesses by the Adjudica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause notice.‖ In the present case, also the assessee sought opportunity of cross-examination of the witnesses whose statements are used by the learned assessing officer against the assessee for making the addition. The assessee has contested the truthfulness of the statement of the witnesses recorded by the assessing officer. The truthfulness is also tested by the changing stands frequently. It is also not for the assessing officer to decide that no opportunity is necessary because he is not aware what could be the purpose for the cross-examination asked by the assessee. Therefore not granting of opportunity of the cross-examination of the brokers Sri RK Kedia, Manish Arora, Ankur Agarwal, directors of the companies who have purchased shares from the assessee through electronic platform of the Bombay stock exchange/ NSE and various other people as were mentioned in the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amination of the witness becomes an illegality. Therefore, in such circumstances, the order/addition made based on the statement of third parties and no opportunity has been granted to the assessee for their cross-examination despite repeated requests, addition deserves to be deleted. In view of our above findings, findings of the coordinate bench in assessee's own case for earlier years, and based on the various judicial precedent relied upon, we do not agree that document seized from third-party can be used for making addition in the hands of the assessee without assessee being granted an opportunity of cross-examination of those parties. IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI 'E' BENCH, NEW DELHI ITA No. 2576/Del/2010 Assessment year: 2003-04 Lords Distillery Limited, COMMON GRIEVANCE NO. 2 NO CROSS EXAMIANTION OF SHRI R.K. MIGLANI WAS ALLOWED BY THE REVENUE The ld. DR concluded by stating that ,in effect, Shri R.K. Miglani was an employee of the member of the UPDA and, therefore, there was no necessity for his cross examination. The contention of the ld. DR that since Shri R.K. Miglani was related to the member distilleries of UPDA, therefore it was not nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is writer thereof. So, unless and until the contents of the documents are proved against a person, the possession of the document or hand writing of that person on such document by itself cannot prove the contents of the document. 72. Considering the facts of the dispute in totality, we are of the opinion that the assessment framed u/s 153C of the Act is in gross violation of the principles of natural justice and deserve to be tagged as nullity. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: 'F', NEW DELHI ITA No. 5662/Del/2018 AY: 2014-15 Veena Gupta Date of Pronouncement: 27/11/2018 12.1 It is pertinent to note that assessee, vide letter dated 21/12/16 had asked Ld. AO to provide material based upon which various allegations have been levied by Ld. AO. These factors from para 20 of assessment order, wherein assessee raised objections, one of which is opportunity to cross examine, in case of any evidence used against assessee. 12.3 To our surprise, Ld. AO without providing any material evidence, report on which he was relying and not granting an opportunity to cross examine the persons on whose statement he arrived at certain presuppositions, made addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere (a) documents asked for have not been supplied to the assessee and (b) cross-examination of witnesses have not been provided to the assessee. Before proceeding further, it may be pointed out that the Assessing Officer refers to the proceedings before DDIT(Inv) and alleges that all the documents have been handed over by DDIT(Inv) to the assessee and hence, they were not being provided. It is not clear as to what documents were provided by DDIT(Inv). Even if it was so, then it was incumbent upon the Assessing Officer to provide the documents, which were in his possession and which he was seeking to rely on in order to complete assessment against assessee. The assessee has time and again asked for the copies of documents and even was ready to pay copying charges but the Assessing Officer had blatantly refused to give the documents on the premise that they have already been received by assessee. But no such evidences of such documents being handed over by DDIT(Inv) has been filed on record. Another aspect to be noted is that the Assessing Officer is relying on statements of two persons, the assessee had sought cross-examination of the said persons and of many evidences also, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said documents but the same have not been supplied to the assessee. The assessee has also sought cross-examination of the persons whose statements were being relied upon to propose reassessment in the hands of assessee, for which reasons were recorded for reopening the assessment but none of the cross-examinations have been allowed. The nonallowance of cross-examination has been held by the Hon'ble Supreme Court in M/s. Andaman Timber Industries Vs. Commissioner of Central Excise in Civil Appeal No.4228 of 2006, judgment dated 02.09.2015 to be most fatal. The facts of present case are similar, wherein no crossexamination has been allowed though the assessee has time and again asked for the same. Even if we accept the reasoning of Assessing Officer that seized documents have been supplied to the assessee but no cross-examination of witnesses has been provided to the assessee. In such scenario, invoking of jurisdiction under section 147/148 of the Act gets affected as the assessee has a right to file objections to reopening of assessment and such a right of assessee has been violated. The learned Authorized Representative for the assessee has pointed out that in the absence of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment and where the Assessing Officer has failed to provide such an opportunity, reassessment order cannot stand. In the facts of present case, since the assessee did not receive copies of documents relied upon and also no cross-examination of witnesses on whose statements the Assessing Officer relied upon to record reasons for reopening assessment, was provided to the assessee, hence the assessee was prevented from filing the objections to reopening of assessment. In such scenario, even if the assessee was well aware of reasons for reopening but the failure to provide opportunity to file objections to the reopening of assessment violates the governing principle of law and hence, reassessment order needs to be quashed and set aside. 25. The Hon'ble Bombay High Court in Agarwal Metals and Alloys Vs. ACIT (2012) 346 ITR 64 (Bom) has propounded such a view in turn relying on the judgment of the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. Vs. ITO (supra). The learned Authorized Representative for the assessee has raised various issues of change of opinion in the case of Shri B.N. Agarwal, wherein original assessment was completed under section 143(3) of the Act. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016, 20/10/2016 which request of assessee has not been adverted to by the AO is patent from objection disposal order dated 17/05/2016 and further notices dated 09/08/2016 u/s 142(1) and show cause notice dated 13/10/2016. In none of these notices as placed in paper book, we could find the back material being confronted to assessee as specifically requested by assessee. We note here that the Tribunal in various decisions specially one which is referred by Ld counsel for the assessee extensively in case of Moti Adhesives (ITA 3133/Del/2018) in order dated 25/06/2018 copy placed before us, has been consistently holding while taking support from Hon'ble Apex court leading decision in Andaman Timber Industries case (Civil Appeal No. 4228 OF 2006) reported at 127 DTR 241 that violation of principle of natural justice (here withholding of back material referred in reasons which is specifically requested for repeatedly) is a serious flaw and results in nullity of the order so passed, which is squarely applicable to present case." All the above decisions squarely answers the serious wrong impression in mind of revenue authorities on principle of cross examination may be compromised or e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) are not correct. Even otherwise, no specific error in the order of the ld. CIT(A) could be pointed out by the learned Department Representative. Hence, we find no good reason to interfere with the order of the ld. CIT(A) which is hereby confirmed and the grounds of appeal of the Revenue is dismissed." 9. Keeping in view of the facts and circumstances of the case and respectfully following and applying principles in aforesaid Hon'ble Supreme Court, Hon'ble High Court and this Tribunal rulings, second issue framed by me above on consequential impact of lack of cross examination and violation of principle of natural justice, I have no hesitation to accept the plea of Ld AR that lack of cross examination and violation of principle of natural justice results is total nullity of the entire addition, hence, the additions in dispute is hereby deleted." 4.1 I have gone through the aforesaid findings of the Tribunal in the case of Amitabh Bansal vs. Income Tax Officer, Ward 46(4), New Delhi (2019) 102 taxmann.com 229 and I am of the view that the issue of cross examination in dispute is squarely covered in favour of the assessee by the findings of the Tribunal, as reproduced above. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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