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M/s. Rushabh Enterprises Versus Asst. CIT CIR 4, Mumbai

2017 (11) TMI 911 - ITAT MUMBAI

Addition u/s 68 - unexplained loans - not allowing Assessee to cross-examine witnesses by adjudicating authority - violation of principles of natural justice - Held that:- To substantiate the loan transaction, assessee has filed confirmation with respect to the loan received through cheque. This loan was already repaid by cheque. Also found that AO has issued summon u/s.131 to the creditor who filed letter dated 28/02/2015 alongwith copy of ledger account, bank statement, rate of interest and pr .....

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considered view denial of such opportunity goes to the root of the matter and strike at the very foundation of the assessment order. Not providing such opportunity amounted to violation of principle of natural justice, a serious flaw which makes the order nullity. - Hon’ble Supreme Court in the case of Andaman Timber Industries [2015 (10) TMI 442 - SUPREME COURT] has held that not allowing Assessee to cross-examine witnesses by adjudicating authority though statements of those witnesses were .....

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): This is an appeal filed by the assessee against the order of CIT(A)-3, Thane dated 09/12/2016 for A.Y.2007-08 in the matter of order passed u/s. 143(3) r.w.s. 147 of the IT Act. 2. The following grounds have been taken by the assessee:- 1. On the facts and circumstances of the case and in law the learned C.I.T.(A) erred in confirming action of the Assessing Officer of making addition of ₹ 31,06,521/- u/s. 68 of the Income Tax Act 1961. 2. The learned C.I.T.(A) erred in not accepting sub .....

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ings and confirmed the loan of ₹ 30,00,000/- (Thirty Lakhs) advanced in November 2006 and repaid by the Appellants in September 2009. 4. The learned C.I.T. (A) ought to have held that the impugned reassessment order passed by the Assessing Officer without providing opportunity to Appellant to cross examine the lender whose statement was recorded by Assessing Officer was invalid and bad in law. 5. On the facts and circumstances of case and in law the learned C.I.T. (A) ought to have held th .....

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ation entries in the form of unsecured loans. Notice u/s 148 was issued on 30.03.2014 with the prior approval of CIT. In response, the AR of the assessee stated that the loan of ₹ 30,00,000/- has been obtained and interest of Rs.l,06,521/- has been paid. In support, the AR submitted confirmation of the said party. The assessee also objected to the reopening of assessment which was disposed off by the AO, vide noting dated 05.02.2015. Further, summons u/s 131 dated 20.02.2015 was issued to .....

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or the loan advances. Further, he also stated that during survey proceedings, statement was recorded forcibly. However, no documentary evidence was submitted. However, the AO made addition of ₹ 30,00,000/- to the total income of the assessee. 4. By the impugned order, CIT(A) confirmed the action of the AO. 5. It was contended by learned AR that the assessee in the course .of their scrutiny assessment had submitted inter-alia loan confirmation of M/s Mayank Impex for loan amounting to ͅ .....

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rt (S.P.Agarwala alias Sukhdev Prasad Agarwala vs ITO (1983) 140 ITR 1010 (Calcutta) wherein it was observed that a mere confessional statement of third party ( who is a lender of the assessee) that he was a mere name lender and that all his transaction of loans were bogus, without naming the assessee as one who had obtained bogus loans, would not be sufficient to hold that the assessee's income had escaped assessment. 6. As per learned AR the loan taken, interest paid and the repayment of t .....

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party. The learned ACIT made the additions without having conclusively proved of any wrong doing by the assessee. The addition of the loan and the interest amount was based on..mere conjectures and surmises on statements recorded behind the backs of the assessee and which statements had been retracted by the impugned lender party. The assessee relied upon the judgment in the case of CIT vs Kader Khan (2008) 300 ITR 157 (Madras) wherein it was held that statement in Survey operations was not a co .....

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g by the assessee. The assessee submit that they have undertaken due care and diligence in their genuine business transaction and have no control on other activities of various lender parties and also do not have any access to the financial information / financial statement of various lender parties. Inspite of having taken due care and diligence to prove the identity, capacity of the lender party and genuineness of the loan transactions, it was against the principles of natural justice for the .....

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ons were based on mere conjectures and surmises based on retracted statements which had been recorded behind the backs of the assessee and further there was no conclusive proof of any parallel cash transactions or wrong doing by the assessee. 7. On the other hand, learned DR relied on the finding recorded by lower authorities with regard to the addition made u/s.68 of the IT Act. 8. I have considered rival contentions and carefully gone through the orders of the authorities below and found from .....

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udhary, Proprietor of M/s. Mayank Impex in his statement stated that they were engaged in the business of import and trading of diamonds. I also found that assessee was not given any opportunity to cross-examine the lender party and was also not provided copy of statement / reports relied upon by the A O while making the addition. 9. As per my considered view denial of such opportunity goes to the root of the matter and strike at the very foundation of the assessment order. Not providing such op .....

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o Industrial Chem Supplies P. Ltd. According to the revenue, the Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. in his statement had stated that there were no sales / purchases but the transactions were only accommodation bills not involving any transactions. The Tribunal has recorded a finding of fact that the assessee had disputed the correctness of the above statement and admittedly the assessee was not given any opportunity to cross examine the concerned Director of M/s. Thak .....

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. 10. Hon ble Supreme Court in the case of Andaman Timber Industries 281 CTR 241 has held that not allowing Assessee to cross-examine witnesses by adjudicating authority though statements of those witnesses were made as basis of impugned order, amounted in serious flaw which made impugned order nullity as it amounted to violation of principles of natural justice. The precise observation of the Hon ble Supreme Court was as under:- Not allowing the assessee to cross-examine the witnesses by the Ad .....

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