TMI Blog2008 (4) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... ct which cannot be cured and assessment has to be held to be invalid because the AO did not have any jurisdiction to assess the assessee without adopting the procedure laid down in s. 153C as the search was neither initiated nor conducted in the case of assessee. There was no warrant of authorization to conduct search on the assessee and no search was initiated or conducted in the case of the assessee. To further explain that the assessments framed in the hands of assessee company under s. 153A are not valid, it is observed that the provisions of s. 153C(1) are almost similar to provisions of s. 158BD which is applicable to the searches conducted upto the day of 31st May, 2003. In view of these observations, it will be incorrect to say that non-fulfilment of conditions precedent for invoking provisions of s. 153C is merely a technical defect which can be cured. Reference here also can be made to the decision of Hon'ble Calcutta High Court in the case of Sunrolling Mills (P) Ltd. vs. ITO [ 1985 (5) TMI 9 - CALCUTTA HIGH COURT] , wherein the AO had proceeded on the basis of s. 147(b) and AO sought to justify the proceedings at the time of reassessment as if they were taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same has no relevance to draw a conclusion that in respect of over-billing also, the record seized will be correct as the said conclusion will be based on mere presumption without verifying the truth thereof. Allegation of the AO regarding payments received on account of over-billing from Chopra Group of cases, no material has been brought on record by the Revenue that in fact any extra amount was received by the assessee from Chopra Group. It has already been pointed out that it was a matter of investigation and enquiry on the basis of which alone such addition could have been made. Keeping in view the above facts, it is clear that addition has been made in violation of principle of natural justice as no opportunity was afforded by the AO to the assessee for cross-examination of said Shri Sandeep Bansal despite the repeated requests made in this regard. Therefore, also, the addition is liable to be deleted. To support such conclusion, reliance can be placed on the decision in the case of Kalra Glue Factory vs. Sales-tax Tribunal Ors.[ 1987 (3) TMI 110 - SUPREME COURT] . In the said case the appeal of the assessee was allowed solely on the ground that the statement of Banke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, Ld. CIT(A) has upheld the disallowance on the ground that no proof of payment was furnished with the return of income. After hearing both the parties on this issue we restore this issue to the file of AO with a direction to verify the payment. If the payment is made before the due date if filling the income tax return than the same will be allowed. We direct accordingly. This ground is allowed for statistical purposes. In the result appeals filed by the assessee are allowed. - Hon'ble Judges I.P. Bansal, Judicial Member and R.C. Sharma, Accountant Member For The Appellent : Ashwani Kumar For The Respondent : S. Venkateshwarlu ORDER I.P. Bansal, Judicial Member These appeals filed by the assessee are directed against the consolidated order of learned CIT(A). dt. 21st Sept., 2006 in respect of asst. yrs. 2003-04 and 2004-05. Grounds of appeal of ITA No. 3480: 1. That the learned CIT(A) has erred both on facts and in law in upholding the assessment framed on the assessee under s. 153A of the IT Act. He has failed to appreciate that in the instant case, neither any search was initiated against the assessee under s. 132(1) of the IT Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has failed to appreciate that all supplies made by it were to verifiable existing parties and there was no evidence on the basis whereof it could even be validly suspected that the supplies made were under-invoiced. 6. That the learned CIT(A) has completely overlooked the evidence furnished by the assessee in the course of assessment proceedings and relied on by the assessee in the course of appellate proceedings. There was no valid justification to have brushed aside all such evidences and that too without discharging even the initial burden which admittedly was on the Revenue, to establish there was any under invoicing made by the assessee. 7. The learned CIT(A) has failed to appreciate that the learned AO having accepted the books of accounts which showed that the sale prices of the stocks supplied were duly recorded which were comparable to the sale value of the stocks sold in the broken period during the financial year. He has failed to comprehend that how could it be accepted that, only for a part of broken period, there could be such substantial difference in the sale value, so as to support an allegation of an under-invoicing of the stocks. 8. That the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had any connection or nexus with the alleged cash collection by Shri Sandeep Bansal. The findings 'that the AO after verification of the seized material vis-a-vis entries in the books of accounts had explained in order to prove the entries of cash collection in seized documents were genuine' is misconceived. In fact, this could have alone been so done only after establishing that the customers had made any such alleged payments and not on the basis of purported documents allegedly found and seized, which had been fabricated by a disgruntled employee. The basis of an allegation that it has been established that the entries were genuine is itself misconceived. 13. That the findings of the learned CIT(A), the statement of Shri Sandeep Bansal during the course of search under s. 132(4) of the IT Act was binding on the assessee, are contrary to well-settled legal position. It is well-settled that before any adverse inference is drawn on the basis of any statement, the same has to be confronted to the person against whom the said evidence/statement is to be used. 14. That the finding of the learned CIT(A) that it was the burden of the assessee to have produced Shri San ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Act, 1922, or under sub-s. (1) of s. 142 of the IT Act, 1961, is issued to Shri Sandeep Bansal (name of the person) to produce, or cause to be produced, books of account or other documents which will be useful for, or relevant to, proceedings under the Indian IT Act, 1922, or under the IT Act, 1961, he would not produce, or cause to be produced, such books of account or other documents as required by such summons or notice; Sarvashri/Shri/Shrimati Shri Sandeep Bansal are/is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian IT Act, 1922, or the IT Act, 1961; And whereas I have reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable articles or things have been kept and are to be found in Sector A, Shastri Nagar, Near Mahaveer Mandir, Jodhpur (specify particulars of the building/place/vessel/vehicle/aircraft); This is to authorise and require you as overleaf (name of the Dy. Director or of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat sales bills were issued by the employees of the company as per his instructions. He also explained the entire system of cash collection on account of under-billing on sale of SS flats to all re-rolling mills at Jodhpur. He also stated that in addition to receipts of payments in cheques against sale proceedings, payment in cash for under-billing is also received. Payments in cheques were received in Jodhpur and Mumbai and cash from parties on account of under-billing was collected by him at Jodhpur and by Shri Jhala Ram at Mumbai, who was the former agent of the company. It is on the basis of that statement of Shri Sandeep Bansal, notice was issued to the assessee under the provisions of s. 153A of the IT Act, 1961 on 4th Feb., 2005 in response to which return of income was filed at the same income which was originally filed i.e. at an income of Rs. 20,06,83,700. AO issued a questionnaire to the assessee to explain as to why the excess amount received on account of under-billing as stated by said Shri Sandeep Bansal should not be treated as income of the assessee. AO has reproduced certain parts of statement of said Shri Sandeep Bansal in the assessment order. In response it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. The AO found that the expenditure on account of rent, house rent, TDS and other day-to-day expenditure written by said Shri Sandeep Bansal in his own handwriting in the notebook were tallying with the regular books of account whereas in the same notebook the other entries regarding cash collections in the names of different persons were not accepted. Thus, AO pointed out that the assessee has been accepting some part of the notebook and denying the other part of the note book. It was submitted vide reply dt. 18th Feb., 2006 that Annexs. A1 to A11 which were admittedly seized from the residence of said Shri Sandeep Bansal when search was conducted in his case and the assessee company has no connection whatsoever with those documents and since those documents neither belonged to the assessee nor have been seized from office premises of the assessee, therefore, no adverse inference could be drawn against the assessee on the basis of such documents. Assessee also submitted affidavit of said Shri Sandeep Bansal which is dt. 5th Nov., 2003 wherein said Shri Sandeep Bansal had submitted that the alleged statement on the basis of which adverse inference is sought to be drawn against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 15 of the assessment order. 7. Referring to Annex. A2 seized from residence of Shri Sandeep Bansal, AO observed that it is a ledger maintained on account of under-billing amount received from different parts of Jodhpur during the months of February and March, 2003, and totals of these are a sum of Rs. 2,58,41,760 which was collected by said Shri Sandeep Bansal and such figure more or less tallies with the under-billing payment received during the months of February and March and thus, it is a corroborative evidence which goes to prove that assessee company was receiving under-billing amount from said Shri Sandeep Bansal and the same constituted the concealed income of the assessee. 8. Assessee was duty-bound to produce said Shri Sandeep Bansal for examination and it was not done. Thus, assessee has failed to produce its witness and the Department has discharged its burden as the statement of said Shri Sandeep Bansal was recorded at the time of search in which all the facts were categorically admitted. Therefore, AO observed that the plea of the assessee that opportunity has not been given to cross-examine the witness is not acceptable as the witness is an employee of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and questioning made by the assessee about the contents of his alleged statement, has submitted an affidavit dt. 5th Nov., 2003 [a copy was submitted to the learned CIT(A)] in which it was admitted by said Shri Sandeep Bansal that he had been planning to use the fabricated records against the assessee company. Thus, it was pleaded that no adverse influence can be drawn on the basis of statement of said Shri Sandeep Bansal which was recorded during the course of search proceedings against him. It was again submitted that Sandeep Bansal should be produced before the assessee for cross-examination in order to enable the assessee to rebut the purported statement which was admittedly made by him to cause financial loss to the assessee company on the basis of fabricated material. It was further submitted that a letter was filed before the AO on 25th Feb., 2006, wherein a chart of selling rate at Jodhpur by different manufacturers of the material was furnished and it was submitted that selling prices of the assessee company shown in the books of account were duly comparable with the selling prices of the other manufacturers who were selling their products in the market. 9. Considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by producing Shri San deep Bansal before the AO particularly when a summon under s. 131 was issued. With regard to the comparability of rates with other parties, learned CIT(A) observed that the same is not acceptable as the quality in the case of assessee may be better and also because of the popularity of brand of the assessee company. Learned CIT(A) further observed that the rate chart is not supported with prevailing price evidence by the assessee and other suppliers. He observed that there is emphatic evidence of cash collection over and above the bill amount. Keeping in view all these facts learned CIT(A) has upheld the addition. The assessee is aggrieved hence in appeal. 10. Learned Authorised Representative after narrating the facts arguing on the issue of validity or otherwise of search assessment, pleaded that search assessments suffer from legal infirmities as no search operation has been carried out in the case of assessee company. Therefore, he pleaded that assumption of jurisdiction by the AO under s. 153A is illegal and invalid. Before the AO as well as CIT(A) it has been repeatedly argued that there being no search carried out on the assessee, the search assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business premises of the branch office of the assessee. It was pleaded that on this ground itself the impugned assessment orders are liable to be quashed. It was contended that all these facts are clear and undisputable to support the contention that assessment is liable to be quashed on this ground. Reliance was placed on the decisions in the cases of Nenmal Shankarlal Parmer vs. Asstt. CIT (Inv.) (1992) 102 CTR (Kar) 64 : (1992) 195 ITR 582 (Kar), CIT vs. Tirupati Oil Corporation (2001) 167 CTR (Bom) 77 : (2001) 248 ITR 194 (Bom), Rudrachar vs. Director of IT (Inv.) (2002) 178 CTR (Kar) 314 : (2002) 257 ITR 549 (Kar) and Smt. Sita Devi vs. CIT (1979) 12 CTR (P H) 108 : (1980) 122 ITR 105 (P H). 12. It was further submitted that no incriminating evidence or material has been found at the business premises of the branch office. It was pointed out that the documents which have been found and inventoried from the business premises of the assessee are Annex. A (serial No. 1) from pp. 1-40 and 1-383 and Annex. A (serial No. 2) pp. 1-320. 13. It was pointed out that documents at Annex. A (serial No. 1) are computerized sheets which are statement of accounts duly entered in the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd her father-in-law Shri P.C. Mathur were residents of the same house and are not independent witnesses. Thus, it was pleaded by learned Authorised Representative Chat entire search action at the residence of said Shri San deep Bansal is a mere facade and said Shri Sandeep Bansal is in fact the kingpin of the entire conspiracy and engineered against the assessee. 16. With regard to statement of Shri Sandeep Bansal recorded on the date of search at his residence, learned Authorised Representative referred to the explanation of the assessee furnished vide letter dt. 15th Feb., 2006 of the paper book. In the said letter, it was submitted that statement of said Shri Sandeep Bansal was recorded at the back of the assessee and no opportunity. was ever allowed to the assessee to cross-examine said Shri Sandeep Bansal. The assessee has conduced enquiries from Shri Sandeep Bansal about the contents of his statement and he has furnished to the assessee company an affidavit dt. 5th Nov., 2003, a copy of which was submitted to the AO. It was submitted that it is evident from the affidavit that what was stated in the statement recorded at the time of search was totally untrue and the statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment. Thus, he pleaded that it is incorrect to say that affidavit is an afterthought. 17. So, as it relates to findings of learned CIT(A) that statement of said Shri San deep Bansal which was recorded under s. 132(4) is binding on the assessee company, learned Authorised Representative argued that the same is factually and legally wrong. It was submitted that statement may be relevant and admissible in his individual case but the same is not binding on the assessee company. If the said statement is to be used against the assessee then it is imperative on the Department to give opportunity to the assessee for cross-examination. To support contention, reliance was placed on the decisions in the cases of Kalra Glue Factory vs. Sales-tax Tribunal Ors. (1987) 65 CTR (SC) 233 : (1987) 167 ITR 498 (SC), Kishinchand Chellaram vs. CIT (1980) 19 CTR (SC) 360 : (1980) 125 ITR 713 (SC) and CIT vs. SMC Share Brokers Ltd. (2007) 210 CTR (Del) 353 : (2007) 288 ITR 345 (Del). 18. It was further submitted that CIT(A) was wrong in holding that onus was on assessee to produce said Shri Sandeep Bansal and the said stand of Revenue is contrary to the following decisions: (1) Munnalal Murlid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examination and re-examination, if necessary. Without the truth being tested, no oral evidence can be admissible evidence and could not form the basis of any inference against the adverse party. Similar view has been expressed in the decision of Bombay High Court in the case of Vasanji Chela Co. vs. CST 40 STC 544. Reference was also made to the decision of Bangalore Bench in the case of Kirloskar Investments Finance Ltd. vs. Asstt. CIT (1998) 67 ITD 504 (Bang) for raising similar proposition. 21. Referring to all these decisions, it was vehemently pleaded that despite repeated requests made on behalf of assessee company during the assessment proceedings, the opportunity of cross-examining Shri Sandeep Bansal has been denied in gross violation of the well accepted principle of natural justice and thus, statement of said Shri Sandeep Bansal recorded on 17th Sept., 2003 cannot be used against the assessee. 22. Arguing further, learned Authorised Representative pleaded that it has been clearly stated in the affidavit filed by said Shri Sandeep Bansal that the seized records are false and have been fabricated by him to cause financial harm to the assessee company. He pleaded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries recorded therein. It was pleaded that such fabricated evidence prepared by disgruntled employee and found at his residential premises cannot be used against the assessee unless independent corroborative evidence to support the entries, is adduced by the Revenue. It was pleaded that not a shred of evidence has been produced by the Revenue to establish that any such cash on account of under-billing has found its way into the coffers of the assessee company. It was pleaded that on the contrary, the investigation made by the Department and the statement of various persons like Jhala Ram, Shanti Saxena, etc. recorded by the Department proved that no such cash amounts have been paid by the purchasers and the affidavit of said Shri Sandeep Bansal further demolishes the false story to under-billing. 24. Reference was made to the decision of Hon'ble Supreme Court in the case of Kishinchand Chellaram vs. CIT to contend that the denial of opportunity to controvert evidence collected at the back of the assessee would disentitle the AO from using the said evidence in taxation proceedings. In that case the addition was deleted on the ground that evidence was not confronted to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicated that rates charged by the assessee were higher than the rates charged by those parties. Thus, there was no scope for indulging in alleged malpractice of charging any further cash amounts from the purchasers. 29. It was further submitted that AO has heavily relied on appraisal report prepare(j by Director of IT (Inv.), Jaipur, on the Chopra Group of cases and it is observed by the AO that clinching evidence has been provided against the assessee. It was submitted that no such material or evidence, allegedly collected by Director of IT (Inv.) during the course of search operations carried out at Chopra Group, has been confronted to the assessee and thus, reliance placed by AO on the appraisal report in the Chopra Group is in total violation of principle of natural justice and on this ground alone impugned assessment as well as additions are liable to be treated as void ab initio and deserve to be cancelled. Concluding his arguments learned Authorised Representative submitted as under: (i) The Department has, inter alia, carried out search operations at the business premises of the company at Jodhpur on the strength of the warrant of authorization issued in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstant case. It has been held by the Kerala High Court in CIT vs. Smt. K.C. Agnes (2003) 183 CTR (Ker) 29 : (2003) 262 ITR 354 (Ker) that when a document shows a fixed price, there will be a presumption that that is the correct price agreed upon by the parties. According to the High Court, if sale deed shows lower sale consideration than the consideration mentioned in the, agreement to sell and both documents are found during search, sale deed may be accepted as the actual price for sale. In the instant case of the assessee, sale bills of the transactions as well as ledger accounts and other books of accounts of the assessee have been seized from the office premises which indicate the sale rates and the consideration accruing or received by the assessee and there is no admissible evidence that on-money has been charged or received. (iv) The undisputed fact is that Shri Bansal is a disgruntled employee of the company and fabricated the record for harming the employer company. His affidavit dt. 5th Nov., 2003 brings out the sinister motives and intention to blackmail the company. In fact the entire conduct and action of this employee during the course of the search at his house, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the records had been fabricated by him for ulterior motives. (x) The Department has recorded the statements of Shri Jhala Ram and Shri Shanti Saxena who have categorically denied the charging of on-money or receipt of any such cash amounts from Shri Bansal. Statements of Shri Vikram Jindal, Shri Rattan Jindal, directors and Shri Bikram Kumar, senior vice president of the company have also been recorded by the Department which clearly falsify the earlier statement of Shri Bansal regarding over-billing. These statements provide irrefutable evidence regarding fabrication of records by Shri Bansal. The AO has unfortunately ignored this direct evidence which supports the case of the assessee company. Obviously, the AO found this evidence much too inconvenient to consider and refute it. The studied silence of the AO regarding this crucial evidence collected by the Department itself supports the assessee. The misplaced zeal of the AO in adopting the earlier statement of Shri Bansal dt. 13th Sept., 2003 as the mainstay of the Department's case ignoring a mass of evidence supporting the truthfulness of assessee's accounts cannot but be deprecated as illegal, vitiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e light of provisions of s. 292B. Reference was made to the decision of Hon'ble Kerala High Court in the case of T.A. Abdul Khader vs. CWT (2007) 208 CTR (Ker) 173 : (2008) 296 ITR 20 (Ker) in which it has been held that mistaken or defective actions or omissions should not invalidate proceedings initiated or completed which are in substantial compliance with statutory scheme. Thus, learned Departmental Representative pleaded that in order to uphold a defective proceedings, what has to be considered is whether the action taken is in substance and is in conformity with the intent and purposes of Act. 33. Further reference was made to the decision of Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji Ors. (1987) 62 CTR (SC) 23 : (1987) 167 ITR 471 (SC) in which it has been observed by Hon'ble Supreme Court that when substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred. 34. Further reference was made to the decision of Allahabad High Court in the case of Atul Traders vs. ITO (2006) 200 CTR (All) 71 : (2006) 282 ITR 536 (All) to contend that wherein it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance was placed on this decision in the case of Mange Ram Mittal vs. Asstt. CIT (2006) 105 TTJ (Del)(SB) 594 : (2007) 289 ITR 112 (Del) (SB)(Trib). Learned Departmental Representative pleaded that theory of fabrication of evidence by disgruntled employee cannot be believed since no police complaint has been lodged against that employee. 38. On the issue of cross-examination, learned. Departmental Representative pleaded that affidavit given by said Shri Sandeep Bansal is a self-serving evidence which is afterthought. It was pleaded that it cannot be relied on. Reference was made to the decision of Hon'ble Supreme Court in the case of CIT vs. Durga Prasad More 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC) to contend that it was neither a rule of prudence nor a rule of law that a statement made in the affidavit which remains uncontroverted must-invariably be accepted as true and reliable. It was pleaded that it is also a duty of the assessee company to explain its case and also produce Shri Sandeep Bansal for cross-examination and what prevented the assessee from producing him before the AO when assessee could get affidavit from him. 39. On the issue of principle of natural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of six assessment years preceding the assessment year relevant to the previous year in which search was conducted or requisition made. Thus, the prerequisite of s. 153A is that assessment under this section can be made only in a case of a person where a search is initiated under s. 132 or books of account or other documents or any assets are requisitioned under s. 132A after 31st May, 2003. As the present case is not a case of requisition as described in s. 132A, therefore, the prerequisite condition for application of s. 153A is that assessment under this section can be made against a person in the case of whom a search is initiated under s. 132 of the Act. It is the case of the assessee that no search has been initiated in its case therefore, resort to s. 153A was in violation of law. To examine such contention it has to be seen that whether any search has been initiated in the case of the assessee. Copies of two Panchnamas on the basis of which search was conducted in the case of Shri San deep Bansal at his residential premises as well as Jodhpur branch office of the assessee, where the person searched was an employee, are placed at pp. 1-6 and 7717 of the paper ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O who has jurisdiction over such other person and notice will be issued accordingly under s. 153C of the Act. There is no material on record to suggest that any exercise which has been mentioned in the provisions of s. 153C has been adopted. There is no force in the argument of learned Departmental Representative that such argument of the assessee is only technical, therefore, assessment framed on the assessee without following the procedure laid down in s. 153C cannot be held to be invalid. There may be a valid search in the case of said Shri Sandeep Bansal but assessment under s. 153A could be made only in his hands and not in the case of assessee unless procedure laid down in s. 153C is followed. Such defect in framing the assessment is a jurisdictional defect which cannot be cured and assessment has to be held to be invalid because the AO did not have any jurisdiction to assess the assessee without adopting the procedure laid down in s. 153C as the search was neither initiated nor conducted in the case of assessee. There was no warrant of authorization to conduct search on the assessee and no search was initiated or conducted in the case of the assessee. 46. To further expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der s. 132 or documents or assets have been requisitioned under s. 132A. Sec. 158BD, however, provides for taking recourse to a block assessment in terms of s. 158BC in respect of any other person, the conditions precedent wherefor are: (i) satisfaction must be recorded by the AO that any undisclosed income belongs to any person, other than the person with respect to whom search was made under s. 132 of the Act; (ii) the books of account or other documents or assets seized or requisitioned had been handed over to the AO having jurisdiction over such other person; and (iii) the AO has proceeded under s. 158BC against such other person. T he conditions precedent for invoking the provisions of s. 158BD, thus, are required to be satisfied before the provisions of the said chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under s. 132A of the Act. (emphasis ours) 48. It is further observed as under: The provisions contained in Chapter XIV-B are drastic in nature. It has draconian consequences. Such a proceeding can be initiated, it would bear repetition t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llahabad High Court in the case of CIT vs. Shital Prasad Kharag Prasad (2005) 196 CTR (All) 162 : (2006) 280 ITR 541 (All), wherein notice under s. 148 was not served on all the adult members of HUF after partition. Notice was served on B having authority on behalf of Karta J. It was observed that after the death of J service was invalid as authority had lapsed on the death of J and such invalidity could not be cured by invoking s. 292B. Their Lordships observed as under: In view of above, the Tribunal has rightly held that s. 292B of the Act will have no application to the facts of the present case. The said section condones the invalidity which arise merely by reason of any mistake, defect or omission in a notice, if in substance and effect, it is in conformity with the or according to the intent and purpose of the Act. The notice in question was not served on all the adult members of the family, as required under s. 283(1) of the Act. This mistake goes to the very root of the matter. It is fairly settled that an assessing authority gets jurisdiction to reopen a concluded assessment only after serving a valid notice on the assessee. A notice contemplated under s. 148 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of condonation of delay should be interpreted with a view to do even handed justice on merits in preference to approach which scuttles a decision on merits. And the power to condone a delay is conferred with a view to enable the Courts to do substantial justice to the litigants by disposing of the cases on merits. This decision has been relied upon by learned Authorised Representative to contend that substantial justice deserves to be preferred ignoring the technical aspect of the issue. In the present case no issue is involved regarding condonation of delay. So as it relates to the contention that it is merely a technical defect, it has already been observed that the framing of assessment under s. 153A cannot be said to be a technical defect as no search has been conducted in the case of the assessee. Thus, no support can be derived by Revenue from the said decision. 54. In the case of Hindustan Transport Co. vs. IAC a writ petition was filed by the assessee against the assessment on the ground that the officer lacked jurisdiction to make the assessment. It was contended that CBDT vide its order dt. 31st Dec., 1987 passed under s. 127 of the Act had transferred the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vide letter dt. 15th Feb., 2006, again vide para (e), it was submitted that the statement of said Shri Sandeep Bansal was recorded behind the back of the assessee and no opportunity was ever allowed to the assessee to cross-examine said Shri Sandeep Bansal. It was pointed out that assessee has obtained affidavit from said Shri Sandeep Bansal which is dt. 5th Nov., 2003. The same was submitted by the assessee to the AO. In the affidavit said Shri Sandeep Bansal had admitted that he had been planning to use the fabricated records against the assessee company. It was also submitted that in view of the affidavit filed by said Shri Sandeep Bansal, no adverse inference should be drawn against the assessee by taking recourse to the statement recorded at the back of the assessee and in the alternative, it was submitted that Shri Sandeep Bansal may be produced for cross-examination in order to enable the assessee to rebut the purported statement which was admittedly made by him to cause financial loss to the assessee company on the basis of fabricated material. Copy of affidavit has been filed at pp. 103-104 of the paper book. In the said affidavit it has been stated by said Shri Sandeep B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a conclusion that affidavit of said Shri Sandeep Bansal is an afterthought, the AO has relied on the statement given by him during the course of search. According to AO. the said statement had evidentiary value as the same was given voluntarily. No doubt, the statement given during the course of search has evidentiary value but such evidentiary value is attached to the person who has been searched. Even in the case of a person who has been searched the statement given by him can be rebutted by producing evidence that such statement is contrary to the existing facts. But, for framing the assessment in the case of a third party (the assessee) the statement could not be relied upon by the AO, if a request has been made for the cross-examination of the deposer. In the present case. as already mentioned, the assessee had obtained affidavit from the deposer during the course of in-house enquiry and the same was submitted to the AO, therefore, it was requirement of law to provide the assessee with an opportunity to cross-examine him, if the same is demanded. If such opportunity is not provided then additions cannot be made in the case of a third party by relying on the said statement. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned decision of the Hon'ble jurisdictional High Court in the case of CIT vs. SMC Share Brokers Ltd. 61. Moreover, the documents recovered from the residential premises of said Shri Sandeep Bansal can by no stretch of imagination be related to the assessee for framing the assessment under s. 153A without resorting to s. 153C. Thus, the documents recovered from the residential premises of said Shri Sandeep Bansal cannot be the basis for making addition. 62. It has been the contention of the learned Departmental Representative that evidence gathered during the course of search clearly established the collection of money, outside the books of account maintained by way of under-billing and for such contention reliance was placed by him on the decision of Special Bench in the case of Mange Ram Mittal vs. Asstt. CIT. Such contention of learned Departmental Representative is incorrect as the evidence gathered from the residence of Shri Sandeep Bansal does not in any way establish the collection of money outside the books of account as for holding so, Department has relied only on the statement given by Shri Sandeep Bansal and there is no independent material/evidence to est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of account regarding collection and payment of extra amount, it has already been pointed out that no independent evidence has been brought on record to show the authenticity of such record as if the said account were so perfect then the matter could have been inquired from the parties who had paid such extra amount. 66. So as it relates to allegation of the AO regarding payments received on account of over-billing from Chopra Group of cases, no material has been brought on record by the Revenue that in fact any extra amount was received by the assessee from Chopra Group. It has already been pointed out that it was a matter of investigation and enquiry on the basis of which alone such addition could have been made. 67. Keeping in view the above facts, it is clear that addition has been made in violation of principle of natural justice as no opportunity was afforded by the AO to the assessee for cross-examination of said Shri Sandeep Bansal despite the repeated requests made in this regard. Therefore, also, the addition is liable to be deleted. To support such conclusion, reliance can be placed on the decision in the case of Kalra Glue Factory vs. Sales-tax Tribunal Ors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the additions made cannot be held to be rightly made and are liable to be deleted. 71. Coming to the merits of the addition, it was pointed out by learned Authorised Representative that there was no on-money received by the assessee company on account of sale of SS flats. Reference in this regard was made to the letter filed before AO which is dt. 25th Feb., 2006, a copy of which is placed at pp. 111-112 of the paper book. Vide this letter assessee had submitted a comparative chart showing sale price of SS flats by the assessee company during the period January, 2003 to October, 2003, vis-a-vis the selling price of SS flats by other competitors in the open market. Not only the comparative chart was furnished but copies of sale invoices of the assessee company as well as copies of sales invoices of the other parties were furnished to support the contention that the prices of assessee company are duly comparable with the selling prices of the other manufacturers. The chart is based at p. 113 of the paper book and invoices are furnished at pp. 114-234 of the paper book. Before CIT(A) also, such submissions were made and comparable rates were furnished vide letter dt. 31st Aug., ..... X X X X Extracts X X X X X X X X Extracts X X X X
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