TMI Blog2010 (3) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... got an information that entry No.234 dated June, 2001 of ₹ 20 lac was belonging to the assessee. It is mentioned in the assessment order that a search took place u/s 132 of the Act on 15th December, 2004 in the case of Shri Brij Mohan Gupta, Gali Hinga Beg, Tilak Bazar, Delhi and during the course of search and seizure operation various incriminating documents/diaries/loose papers were found and seized and referring to those search proceedings and post search proceedings and statement on oath recorded of said Shri Brij Mohan Gupta, his son Shri Rajeev Gupta and accountant Shri Ram Avtar Singhal the AO has described the following salient features:- 1. The Brij Mohan Gupta Group was engaged in hundi/loan business where money was arranged from various parties and advanced to the different parties. This group was acting as mediator/broker in such financial transaction wherein brokerage was charged by them. 2. During the course of search various loose papers/diaries were found and seized which reflects details of the various parties on behalf of whom the parties were mentioned whereas in some other papers the details were mentioned in coded form. 3. The coded entries wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Date Amount 234 June, 2001 ₹ 20,00,000/- 3. On the basis of facts mentioned above, the AO issued a show cause notice to the assessee on 10th December, 2008 in which he narrated the detailed reasons for reopening of the case u/s 148 and the assessee was required to furnish the following information/details:- a) Please explain your sources of income, nature of business and the premises from where such business has been carried out. b) Furnish cash flow statement during the year under consideration. c) Furnish balance sheet and profit and loss account. d) Please explain your relationship with Sh. Brij Mohan Gupta/Rajiv Gupta or any of his family members. e) If you are not directly related to Sh. B.M. Gupta group then kindly explain about your acquaintance with this group since how long. f) Please furnish names of the broker with whom you have carried out cash hundies transaction with Sh. Brij Mohan Gupta Group. g) Please mention specific details of all financial transaction whether recorded/unrecorded with Sh. Brij Mohan Gupta Group during year under conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the person whose statements were being relied upon. 6. The Ld. CIT (A) rejected the contention of the assessee with regard to invalidity of re-assessment proceedings on the ground that there exist a material against the assessee and correctness or sufficiency of such material could not be considered at the stage of reopening of the assessment. The information was available with the AO which was sufficient to reopen the assessment. He also observed that it is a matter of record that the AO did not dispose of the objections raised by the assessee with regard to the issue of notice u/s 148 by way of passing a speaking order and, thus, the ratio of decision of Hon ble Supreme Court and jurisdictional High Court will be applicable. So as it relates to addition made by violating principles of natural justice, Ld. CIT (A) observed that the assessee had categorically denied of having any financial or business transaction with Shri Brij Mohan Gupta. Books of account were produced to demonstrate that there was no transaction with Shri Brij Mohan Gupta or his family. A specific request was also made to provide complete statement of the said Shri Brij Mohan Gupta, so that the opportun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -terminus powers and if the AO fails to do anything, then, CIT (A) could exercise his powers to provide the assessee such opportunity or could seek the remand report of the AO in this regard. She submitted that the CIT (A) could not delete the addition simply for the reason that the AO had failed to conduct any inquiry or he failed to give proper opportunity of hearing to the assessee. Thus, she submitted that Ld. CIT (A) has wrongly deleted the addition. Instead of deleting the addition he should have done the things which the AO failed to do. Thus, she submitted that order of the Ld. CIT (A) should be set aside and that of AO be restored. 8. On the other hand, Ld. AR referred to the reply submitted by the assessee before the AO a copy of which is placed at pages 33-39 of the paper book. Referring to the said reply he submitted that the assessee vide para 5 of this reply had specifically asked the AO that it would like to examine said Shri Brij Mohan Gupta to prove that the assessee did not have any financial or business transaction with him or his associate concern. He submitted that vide para 4 it was submitted that statement of Mr. Brij Mohan Gupta was also not supplied. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO having failed to do so, whether it was proper by the Commissioner of Income-tax (Appeals) to delete the addition simply on the ground that the AO did not make further inquiries which was required to be made and the AO did not provide the assessee with the copies of the statements upon which the reliance was placed and also that the AO failed to provide the opportunity of cross examination of the said Shri Brij Mohan Gupta. The answer to this question can be found from the decision of Hon ble Bombay High Court in the case of Smt. Prabhavathy S. Shah vs. CIT 230 ITR 1 (Bom) wherein their Lordships have held that under sub-section (4) of Section 250 the appellate authority is empowered to make such further inquiries as he think fit or to direct the AO to make further inquiry and to report the result of the same to him. The first appellate authority is a quasi judicial power and it is incumbent on him to exercise the same if the facts and circumstances justify. It is also observed that if the first appellate authority fails to exercise his discretion judicially and arbitrarily refuses to make inquiry in a case where the facts and circumstances so demand, his action would be open ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejected the reply of the appellant as not acceptable . Therefore, the AO was not justified in making the addition of ₹ 20,00,000. There is also merit in the contention of the appellant that the principle of natural justice was violated. Accordingly, grounds 2, 4, 5 and 6 of the appeal are allowed. (Emphasis ours) 12. It can be seen from the above observations of the CIT (A) that he has observed that the AO had completely failed to establish any case against the assessee as his order does not throw any light on any inquiry/investigation carried on to corroborate the entries found in the seized material and to justify the addition made in the case of the assessee. He further observed that there was a requirement of further inquiry/investigation on the information received by the AO from DCIT, Central Circle-19, New Delhi, but apparently the AO did nothing worthwhile or cogent work towards that. Thus, the reason given by CIT (A) while deleting the addition is that AO did not supply the copy of averments/statements on the basis of which the addition were made and also the AO did not provide opportunity to cross examine the persons on the basis of whose statement the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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