TMI Blog2018 (11) TMI 1583X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and hold that assessment order passed in the case without jurisdiction is both invalid and bad in law. The grounds of appeal No.1 to 3 raised by assessee are thus, allowed. - ITA No.1666 And 1667/PUN/2015, Assessment Year : 2007-08 - - - Dated:- 29-11-2018 - Ms. Sushma Chowla And Shri Anil Chaturvedi, JJ. Assessee by : Shri Neelesh Khandelwal Revenue by : Shri S.B. Prasad ORDER Sushma Chowla, Both the appeals filed by different assessee are against separate orders of CIT(A)-12, Pune, both dated 27.10.2015 relating to assessment year 2007-08 against respective orders passed under section 143(3) r.w.s. 147 of the Income-tax Act, 1961 (in short the Act ). 2. The connected appeals on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience. In order to adjudicate the issues, first we are making reference to the facts and issues in ITA No.1666/PUN/2015. 3. The assessee in ITA No.1666/PUN/2015 has raised the following grounds of appeal:- 1. On facts and circumstances prevailing in the case and as per provisions scheme of the Act it be held that framing of assessment under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsecured loans is improper, unjustified and contrary to the provisions and scheme of the Act and facts prevailing in the case. The addition made be deleted. Just and proper relief be granted to the appellant in this respect. 6. On facts and circumstancing prevailing in the case and as per provisions scheme of the Act it be held that the AO erred in presuming and the Hon'ble CIT(A) erred in confirming that an amount of ₹ 15,00,000/- has been paid in cash for purchase of immovable property by the appellant and his brother jointly on the basis of document found and seized in the course of search conducted at the premises of a third party. 7. On facts and circumstances prevailing in the case and as per provisions scheme of the Act, it be held that an adhoc addition made of ₹ 7,50,000/- on account of alleged unexplained investment merely on the basis of presumption is improper, unjustified and contrary to the provisions and scheme of the Act and facts prevailing in the case. The addition so made be deleted. Appellant be granted just and proper relief in this respect. 8. Assuming without admitting that the addition of ₹ 7,50,000/- on account of alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the records of Shri S.N. Agarwal and that of assessee; however, cash payment of ₹ 15 lakhs was not found in their records. The Assessing Officer further observed that exact copy of said page No.10 was also found and seized as paper No.30 of Bundle No.1 on 20.12.2013 from the corporate office premises of M/s. Veena Industries Ltd., wherein the assessee was Director and it was seized by Party No.AOX-1. In his explanation on the seized paper No.30 before DDIT(Inv), Shri S.N. Agarwal referred to his reply submitted vide letter dated 03.03.2014, which has already been referred. The seized document is scanned under para 2.3 at page 3 of assessment order. The Assessing Officer then, observed that page pertained to transaction of land bearing Gat No.150, Ambethan, Tal. Khed, Pune. The said land was purchased by assessee and his brother Shri S.N. Agarwal from Chavan family vide registered document dated 22.02.2007 for agreed consideration of about ₹ 2.90 crores. But apart from the said consideration, cash payment of ₹ 15 lakhs was also reflected on the said page. The Assessing Officer then notes that as the assessee and his brother had failed to explain the source of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee requested for copy of reasons to believe recorded under section 147 of the Act, which were supplied by the Assessing Officer vide letter dated 25.04.2014. The assessee was asked to file objections, if any. However, the assessee did not submit any objections during the course of assessment proceedings. Subsequently, notice under section 143(2) of the Act was issued to the assessee and the case of assessee was taken up for scrutiny. 7. The assessee in appeal before the CIT(A) challenged the assessment framed under section 143(3) r.w.s. 147 of the Act on the ground that framing of assessment under section 147 of the Act after issue of notice under section 153A of the Act was bad in law and invalid. The assessee also challenged the proceedings initiated and completed under section 147/148 of the Act, wherein the assessment was framed without granting opportunity to raise objections on reopening of assessment proceedings. Further issues were raised on merits of additions. The CIT(A) vide para 3.1 took note of reasons recorded for reopening the assessment, which are reproduced at pages 6 and 7 of appellate order. The CIT(A) also took note of the fact that the assessee fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and documents seized and forwarded and hence, notice issued under section 148 of the Act was a valid notice. 8. The assessee was given an opportunity to comment on the report and he commented that during the course of appeal hearing, the assessee had moved an application for admission of additional evidence and the Assessing Officer was requested to give his comments on the same. However, the Assessing Officer resorted to give his comments on the grounds raised by the assessee and wanted to improve or enlarge his assessment order, which was not permissible. The CIT(A) noted that no notice under section 153A of the Act could be issued for assessment year 2007-08. Therefore, notice issued by Assessing Officer in this regard was void ab initio and had no legal force. The said proceedings were also dropped by the Assessing Officer. The CIT(A) further goes on to say that Issuance of invalid notice u/s 153A by no means would result in abatement of proceedings as per second proviso to section 153A of the Act. Ongoing proceedings u/s 147 were neither dropped nor got abated. He further held that since notice under section 147 of the Act was validly initiated and the assessee did not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs under section 147 of the Act be held to be invalid. He further goes on to state that the assessee had not only sought the copies of documents / information / statements but also asked cross-examination of the evidences and parties whose statements were relied upon for reopening the assessment. However, the Assessing Officer denied the said request by stating that information received being internal departmental document, could not be shared. The assessee stressed that since the documents were not shared, they had no evidentiary value and further the assessee was not given an opportunity to cross-examine the evidences and witnesses, which was patent violation of natural justice. He stressed that assessment could be completed only if the documents were provided, but the CIT(A) agreed with the Assessing Officer that due procedure was followed and sufficient opportunity was given. The assessee was specifically asked to raise objections, if any, against reopening of assessment proceedings and all the relevant material was also supplied to the assessee. He further submits that where the assessee had taken accommodation entries and the information was gathered on the basis of statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Inv), which is placed at pages 6 to 11 of Paper Book. However, verbatim copy of reasons for reopening the assessment were not given. All other issues raised by assessee were not referred and even the copy of letter of Shri Pravin Kumar Jain was not given. He stressed that cross-examination was not allowed. In respect of documents found at CIIL i.e. land deal and documents found at M/s. Veena Industries Ltd., where the assessee was Director, the name of assessee was not there at pages 14 and 15 of Paper Book. He referred to sale deed at page 60 of Paper Book and pointed out that the assessee never paid cash amount. The learned Authorized Representative for the assessee pointed out that 148 proceedings were started on account of two issues i.e. accommodation entries of Shri Pravin Kumar Jain and entry of cash in the land purchase of ₹ 15 lakhs. However, no opportunity was given to assessee to rebut the documents seized and even no cross-examination was allowed, hence the proceedings initiated under section 148 of the Act fails. In addition, he pointed out that even if 153A notice issued was not valid notice but once 153A notice has been issued to the assessee, then proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been raised in the present appeal is in respect of proceedings initiated under section 147/148 of the Act by way of grounds of appeal No.1 to 3. The learned Departmental Representative for the Revenue has furnished chronological sequence of events in the case of Agarwal Group Corporate Holding Pvt. Ltd. and has also remarked that almost identical sequence of even had occurred in the case of Shri Brijendra Nath Agarwal. The assessee in the case of Shri B.N. Agarwal has filed Paper Book, wherein documents have been taken note of and it transpires that some letters of same dates have been issued in both the cases. We are referring to the chronological sequence of events, documents filed by learned Departmental Representative for the Revenue but for the contents, we will refer to the letter filed in the case of assessee i.e. Shri B.N. Agarwal first. The case of assessee was reopened under section 147 of the Act by recording reasons for reopening the assessment and notice under section 148 of the Act was issued on 23.03.2014. In response, the assessee filed return of income on 23.04.2014, copy of which is placed at pages 3 and 4 of Paper Book. Thereafter, the assessee furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuments, if any. 16. The assessee then again reiterates that after issuing the said documents, an opportunity to cross-examine all evidences relied upon may be given. He also says that he is ready to pay compliance or fees for the issue of copies. The assessee further states that he would file detailed objections, if any, for reopening of assessment thereafter. The Assessing Officer vide letter dated 15.09.2014 alleges that the copies of statements recorded during the course of search and in post-search verification along with copies of seized material had already been issued to the assessee by the office of DDIT(Inv) and as far as the copy of information forwarded by DDIT(Inv) was concerned, the Assessing Officer pointed out that the said document was an internal departmental document and cannot be issued to assessee. However, gist of the same was given, which is placed at pages 6 to 11 of Paper Book. The Assessing Officer concludes at page 11 as under:- In my opinion, the abovestated details would address the issues raised by you in your abovereferred letter. As far the your others contentions are concerned the same may be addressed during the course of making final assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of cheque payments, name of assessee is missing. Further, on the said document itself, there is cash payment of ₹ 15 lakhs, which also do not relate to the assessee as the name of assessee is missing. He then referred to the affidavit of Shri Pravin Kumar Jain, which is placed at pages 16 to 20 of Paper Book, wherein he has retracted the statement recorded at the time of search. The said retraction statement was submitted by the assessee vide letter dated 05.02.2015 to the Assessing Officer, copy of which is placed at page 21 of Paper Book. 20. The issue which arises in the present appeal in such scenario, is whether re-assessment proceedings which have been completed against assessee, can stand in the eyes of law, where (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. 22. The issue which needs to be addressed is non providing of copies of documents and non affording of cross-examination of the witnesses is whether fatal to the assessment proceedings. The Assessing Officer alleges that the documents were provided by DDIT(Inv). However, it is not clear as to copies of what documents have been given by DDIT(Inv). In any case, the investigation was carried out not in the hands of assessee but in the hands of other person, so once the assessee asks that the documents be issued to it on which reliance is placed upon for reopening the assessment, then it was incumbent upon the Assessing Officer to provide the same to the assessee in order to enable the assessee to peruse the same and then point out whether by relying on the said documents, the re-assessment has been validly reopened. May be, the letter which is forwarded by DDIT(Inv) to the Assessing Officer is an internal document and the Assessing Officer has provided gist of the same to the assessee. However, there are other documents the assessee has asked for i.e. copies of page No.6 to 15 of bundle No.1 seized from the office of CIIL, Bhosari, the details of Directors of the companies as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act considered the submissions of assessee and remanded the issue to the file of Assessing Officer to carry out further investigations and also directed the Assessing Officer to give the copy of statement of Shri Aditya Dadhe to the assessee and also examine the said person in assessee s presence and also to allow the assessee to cross-examine him. The Assessing Officer in the first instance gave the copy of statement recorded to the assessee. However, despite several requests by the assessee to examine the said person in his presence and also allow cross-examination of the said witness, the Assessing Officer time and again rejected the plea of assessee and asked him to file his say on the averments in the statement recorded behind back of the assessee. Vide letter dated 14.09.2012, copy of which is placed at page 25 of the Paper Book, the Assessing Officer goes one step ahead and states that the said person would be cross-examined by the undersigned and report would be submitted accordingly to the CIT(A), Pune i.e. the Assessing Officer does not allow examination of the said Shri Aditya Dadhe in assessee s presence and further goes on to say that the cross-examination would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex factory prices remain static. Since we are not upholding and applying the ex factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders. 19. The assessee challenged the said order of Tribunal before the Hon ble Supreme Court and it was held by the Apex Court that not allowing the assessee to cross-examine the witness by the adjudicating authority, where the statements of witnesses were made basis for impugned order, was a serious flaw which makes the order invalid in as much as it amounted to violation of principles of natural justice. The relevant findings of the Hon ble Supreme Court are as under:- According to us, 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise of power by the State or its functionaries. Therefore, the principle implies a duty to act fairly, i.e., fair play in action. As observed by this court in A. K. Kraipak v. Union of India (1969) 2 SCC 262, the aim of rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. They do not supplant the law but supplement it. (Also see : ITO v. Madnani Engineering Works Ltd. (1979) 2 SCC 455. 12. In Swadeshi Cotton Mills Co. Ltd. v. Union of India (1981) 1 SCC 664, R. S. Sarkaria J., speaking for the majority in a three-judge Bench, lucidly explained the meaning and scope of the concept of natural justice . Referring to several decisions, his Lordship observed thus (SCC p. 666 ; headnote) : Rules of natural justice are not embodied rules. Being means to an end and not an end in themselves, it is not possible to make an exhaustive catalogue of such rules. But there are two fundamental maxims of natural justice, viz., (i) audi alteram partem, and (ii) nemo judex in re sua. The audi alteram partem rule has many facets, two of them being (a) notice of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless the statute, conferring power, excludes its application by express language. 14. Recently, in Canara Bank v. V. K. Awasthy(2), the concept, scope, history of development and significance of the principles of natural justice have been discussed in extenso, with reference to earlier cases on the subject. Inter alia, observing that the principles of natural justice are those rules which have been laid down by the courts as being the minimum protection of the rights of the individual against the arbitrary procedure that may be adopted by a judicial, quasi-judicial and administrative authority while making an order affecting those rights, the court said (headnote) : Concept of natural justice has undergone a great deal of change in recent years. Rules of natural justice are not rules embodied always expressly in a statute or in rules framed thereunder. They may be implied from the nature of the duty to be performed under a statute. What particular rule of natural justice should be implied and what its context should be in a given case must depend to a great extent on the fact and circumstances of that case, the framework of the statute under which the enquiry is held. The o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition made by the Assessing Officer and upheld by the CIT(A) is not sustainable and hence, the same is deleted. The preliminary issue raised vide ground of appeal No.3 in this regard is allowed and the issue on merits becomes academic. 23. The facts of present case are similar, wherein no cross-examination 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 getting the documents relied upon and in not allowing cross-examination of witnesses, the assessee was not in a position to file objections against reopening of assessment. The jurisdiction is conferred upon the Assessing Officer for making re-assessment in the case of assessee only on the basis of aforesaid seized docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd 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, re-assessment 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). 26. 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. However, since we have decided the issue on the other aspects of case and held the assessment order invalid and bad in law, we are not addressing the same. It may be pointed out herein itself that since the Assessing Officer did not provide copies of statements and did not allow cross-examination, then the plea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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