TMI Blog2019 (7) TMI 1758X X X X Extracts X X X X X X X X Extracts X X X X ..... 5951, 5945 & 5946, 4723, 5947 & 5948, 5954 & 5955, 5959/Del/2018 - - - Dated:- 30-7-2019 - SHRI H.S. SIDHU AND SHRI B.R.R. KUMAR, JJ. Appellant by: Shri Kapil Goel, ADV. Respondent by: Shri S.S. Rana, CIT DR ORDER SH. H.S. SIDHU, J. The aforementioned different Assessees have filed these 11 appeals against the exactly similar orders passed by the Ld. CIT(A), New Delhi in respect of the different assessment years. In these cases the assessment orders were passed by the same Assessing Officer u/s. 153A/143(3) of the Income Tax Act, 1961 (in short Act ). Since the issue involved in all these appeals are identical and common, therefore, we have heard all the appeals of different assesses together being related to assessee and his family members and these appeals are being disposed of by this common order for the sake of convenience by dealing with the facts of ITA No. 5949/Del/2018 (AY 2013-14) and the decision thereof will apply mutatis mutandis to all other appeals. The grounds of ITA No. 5949/Del/2018 (AY 2013-14) read as under:- Jurisdictional Assail 1. That order passed by Ld. AO dated 29/12/2017 and further order passed by Ld. CIT (A) dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance on statement of Pradeep Kumar Jindal is absolutely bad as there is no cross examination offered of Mr. Jindal and contrary version given in impugned orders is totally perverse and deserves to be reversed and ergo we pray for deletion of additions made. Independent corroboration missing 5. That order passed by Ld. AO dated 29/12/2017 and further order passed by Ld. CIT(A) dated 18/07/2018 are bad in law in as much as reliance on statement of Pradeep Kumar Jindal is absolutely bad as there is no independent/valid rational connect in form of any tangible material found from stated search on Pradeep Kumar Jindal in absence of which we pray for deletion of additions made. Assessee s own deposition ignored 6. That order passed by Ld. AO dated 29/12/2017 and further order passed by Ld. CIT(A) dated 18/07/2018 are bad in law in as much as assessee s own statement u/s 132(4)/131(IA) are aborted from unknown reasons which supports assessee s stand and position taken on impugned transactions which are stated to be genuine and free from any taint. Merits of the cases: assessee s version on facts glossed over like rip van winkleism 7. That order passed by Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consequently, this case was centralized from Circle No. 1, Faridabad to the Circle of the present Assessing Officer i.e. DCIT, CC-25, New Delhi in pursuance of the Pr. CIT, Faridabad order issued vide F.No. Pr.CIT/Kiros/Tech/FBD/2017-18/2953 dated 21.9.2017 u/s. 127 of the Act. A notice u/s. 153A of the Act was issued on 22.9.2017 asking the assessee to file his return within 15 days of the receipt of the notice. The assessee filed return of income u/s. 153A of the Act on 09.10.2017 declaring income of ₹ 2,45,91,210/-. Subsequently, notice u/s. 143(2) 142(1) of the Act alognwith questionnaire were issued on 16.1.2017. In response to the same, assessee filed his return of income on 9.10.2017 declaring income of ₹ 2,45,91,210/-. Subsequently, the AO also issued notice u/s. 143(2) and 142(1) of the Act alongwith questionnaire dated 16.10.2017. In response to the same, the AR of the assessee appeared and filed the details as called for. 2.1 Assessee has declared income under head income from salary, house property and profits and gain from business and profession . The AO issued show cause notice to the assesee and his group of companies as to why their share premium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,035,536 20.3.2013 16,54,307 15,506,771 2.2 The AO vide his questionnaire dated 16.10.2017 asked the assessee to explain the said exempt long term capital gain amounting to ₹ 1,55,06,771/- for the year under consideration with reference to his books and accounts and was also asked why the entire capital gain should not be added to his income under consideration. In response to the same, assessee filed his reply dated 27.11.2017 denying the allegation leveled by the AO and submitted that this capital gain had arisen to the assessee during the year under consideration against the sale of listed shares at Bombay Stock Exchange, a recognized Stock Exchange. Assessee further submitted that he had purchased 14,400 shares of M/s Instant Travels and Tours @ ₹ 139/- per share and paid ₹ 20,00,000/- through bank account, copy of the bank statement showing the details of payment made for purchase of these shares with payment receipt and confirmation was attached. Subsequently, these shares were dematerialized by the company and transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of assessee with the broker reflecting the details of amount due to the Assessee on account of sale of shares with the details of payments made to the assessee against sale of shares from time to time. Your goodself can confirm and verify these transactions from the broker also. Under section 10(38) of the Income Tax act, any gain arising on the sale of shares holding for more than 12 months and the transaction are done at Recognised stock exchange and STT is paid on every transaction will be exempt from tax. In the case of assessee also, the shares were purchased during the year 2010 and sold during the year under consideration at Bombay stock exchange and STT had been paid. Hence, the gain arisen on the sale of these shares has been rightly claimed 'as 'exempt under section 10(38) of the Act in the return filed. At page Number 31, your goodself, have asked to explain purchase and redemption of 14400 shares of M/s Instant Travels and Tour (P) Ltd., by the scheme of Amalgamation and Bonus shares 11,28,960 of M/s Focus Industrial Resources Ltd with documentary evidences, in this regard, we respectfully submitted that we have already submitted above the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd his family members to be mere accommodation entries in lieu of cash. AO is also of the view that Sh. Pradeep Kumar Jindal in his statement u/s. 132(4) of the Act had vehemently admitted that he was engaged in the business of providing accommodation entries and for this purpose he had been managing and controlling the 33 paper companies for the purpose of accommodation entries in lieu of cash receipts and these companies were not doing any business and all the Directors of these paper companies are dummy who also in their statements recorded u/s. 132(4) of the Act vehemently deposed that they were only signing the documents and they were not aware of the business activities of these companies. These 33 fronts companies of Sh. Pradeep Kumar Jindal also include the name of company namely M/s Instant Travels and Tours Pvt. Ltd. from which the assessee has purchased shares and also the company M/s Focus Industrial Resources Ltd. in which M/s Instant Travels and Tours Private Limited got amalgamated. The AO is of the view that assessee had taken exempt long term capital gain accommodation entries from Sh. Pradeep Kumar Jindal. This version of the assessee is on the basis of the invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned orders namely the statement of Sh. Pradeep Kumar Jindal and the material found from search; lack of cross examination of Sh. Pradeep Kumar Jindal whose statement is major basis for making the additions in dispute in the assessment order. Ld. Counsel for the assessee further stated that the orders passed by the Assessing Officer dated 29.12.2017 which was upheld by the Ld. CIT(A) vide order dated 18.7.2018 are bad in law, because no incriminating material / documents was found from assessee s own premises during search seizure operation u/s 132 of the Act. Therefore, the applicability of section 133A of the I.T. Act is not applicable in the case of the assessee. Secondly, the addition in dispute has been made by the revenue authority in the case of the assessee only on the basis of statement of Sh. Pradeep Kumar Jindal which has not been supplied to the assessee in spite of the request made by the assessee to the revenue authority. Ld. Counsel for the assessee also argued that if this Bench perused the assessment proceedings, there is no proceedings recorded by the AO regarding summoning Sh. Pradeep Kumar Jindal for cross examination on the request of the assessee and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or ₹ 1,65,42,307 declaring LTCG of ₹ 1,55,06,771 which was claimed exempt u/s 10(38) of IT Act. A search was conducted in the case of Pradeep Kumar Jindal, who in his statement u/s 132(4) admitted that he was engaged in providing accommodation entries, managing and controlling a web of 33 paper companies including M/s Instant Travel and Tours Pvt Ltd. He stated that these companies were not doing any investment and finance business but only providing entries to different beneficiaries. Ld. CIT(DR) further stated that the Statement on oath recorded u/s 132(4) of Sh Pawan Arya was recorded on 02.06.2016 in which he admitted that he had utilized services of Sh. Sudhir Chaurdhary, CA, for arranging accommodation entries from Sh Pradeep Kumar Jindal and offered it to tax. Sh. Sudhir Chaurdhary, CA, has represented the assessee before AO as well as Ld. CIT(A). Ld. CIT(DR) stated that on the basis of the detailed report of the Investigation Wing regarding modus operandi of accommodation entries provided by Pradeep Kumar Jindal, various documentary evidences as well as statement of Pradeep Kumar Jindal, the addition in dispute in the case of the assessee has been made. He furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that following decisions may kindly be considered with regard to validity of proceedings u/s. 153A of the Act. i) EN Gopalkumar vs. CIT (2016) 75 taxmann.com 215 (Kerala). ii) CIT vs. Raj Kumaer Arora (2014) 52 taxmann.com 172 (Allahabad) iii) CIT vs. Kesarwani Zarda Bhandar Sahson All. (ITA No. 270 of 2014) (Allahabad). iv) Dr. AV Sreekumar vs. CIT (2018) 90 taxmann.com 355 (Kerala) v) Hon ble Delhi High Court decision dated 12.3.2018 in the case of Vinod Kumar Gupta vs. DCIT 2018-TIOL-580-HC-Del-IT). 4.2 He further placed reliance on the following judgments to show that additions can be made u/s. 153A on the basis of incriminating statements: - i) Video Master vs. JCIT 66 taxmann.com 361 (SC). ii) B. Kishore Kumar vs. CIT 62 taxmann.com 215. iii) Bhagirath Aggarwal vs. CIT 31 taxmann.com 274 iv) CIT vs. MS Aggarwal (2018) 93 taxmann.com 247 (Delhi) v) Smt. Dayawanti vs. CIT 29016) 75 taxmann.com 308 (Delhi). vi) M/s Peeble Investment and Finance Ltd. Vs. ITO (2017-TIOL-238-SC-IT) M/s Peeble Investment and Finance Ltd. Vs. ITO (2017-TIOL-188-HC-MUM-IT) vii) Raj Hans Towers P Ltd. Vs. CIT 56 taxmann.com 67 viii) PCIT vs. Avinash Kumar Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to crossexamine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that crossexamination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to crossexamine those dealers and what extraction the appellant wanted from them. As mentioned above, the appellant had con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kabul Chawla (supra). In the above mentioned case, Hon'ble Jurisdictional High Court has considered all earlier decisions of Hon'ble Delhi High Court and has also considered the decisions of other High Courts and Tribunals and summarized the legal position in paragraph 37 and at the conclusion of the case in paragraph 38, which are reproduced below:- Summary of the legal position. 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:- i. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the abated assessment or reassessment can be made . In clause (vii), it is stated Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search . 12. Similar view was expressed by their Lordships in the case of CIT Vs. RRJ Securities Ltd. [2016] 380 ITR 612 (Delhi). 13. In the case of Principal CIT, Delhi-2 Vs. Best Infrastructure (India) (P.) Ltd. [2017] 397 ITR 82 (Delhi), their Lordships of Jurisdictional High Court reiterated the similar view in paragraph 33 of the order, which reads as under :- 33. At this stage, it requires to be noticed that the decision of this Court in Commissioner of Income Tax (Central-III) v. Kabul Chawla (supra) took note inter alia of the decision of the Bombay High Court in Commissioner of Income Tax v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 (Bom), wherein it was held that if no incriminating material was found during the course of search, in respect of each issue, then no addition in respect of any such issue can be made to the assessment under Sections 153A and 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person] [and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person [for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment year or years referred to in sub-section (1) of section 153A]:]. 15. Thus, when during the course of search of an assessee any books, document or money, bullion, jewellery etc. is found which relates to a person other than the person searched, then the Assessing Officer of the person searched shall hand over such books of account, documents, or valuables to the Assessing Officer of such other person and thereafter, the Assessing Officer of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld result in ignoring an important check on the power of the AO and would expose assessees to arbitrary assessments based only on the statements, which we are conscious are sometimes extracted by exerting undue influence or by coercion. Sometimes statements are recorded by officers in circumstances which can most charitably be described as oppressive and in most such cases, are subsequently retracted. Therefore, it is necessary to ensure that such statements, which are retracted subsequently, do not form the sole basis for computing undisclosed income of an assessee. 17. Thus, Hon'ble Jurisdictional High Court has held The words evidence found as a result of search would not take within its sweep statements recorded during search and seizure operations . Their Lordships further observed However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation . In paragraph 24, their Lordships have mentioned about the prevailing practice of extracting statement by exerting undue i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r :- Held, dismissing the appeal, that it was the assessee who had admitted and surrendered a sum of ₹ 1.75 crores as his undisclosed income. It was incumbent upon him to show that he had made a mistake in making that admission and that the admission was incorrect. He had access to all the documents which had been seized inasmuch as copies had been supplied to him. However, he did not produce anything to establish that the admission was incorrect in any way. Thus, the assessee could not resile from his statements made on November 10, 11, 2005, and November 21, 2005. The statements recorded under section 132(4) were clearly relevant and admissible and they could be used as evidence. In fact, once there was a clear admission, voluntarily made, on the part of the assessee, that would constitute a good piece of evidence for the Revenue. (emphasis by underlining provided by us) 21. From the above, it is evident that in this case also, certain documents were seized and copies of which were supplied to the assessee. Thus, admittedly, there was incriminating material in the above case. 22. The next decision relied upon by the learned DR is M.S. Aggarwal (supra). In this ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w by the Apex Court. The ld.AR placed on record a report pointing out that the above appeal referred to a larger bench in Dynamic Orthopaedics is still pending before the Hon'ble Supreme Court. The position, which therefore, emerges is that the decision in the case of Malayala Manorama (SC)(supra) cannot be construed as overruled. It still holds the field as a binding precedent. 23. The identical situation is here. The decision of Hon'ble Delhi High Court in the case of Harjeev Aggarwal (supra) is referred to for consideration by the Larger Bench. Therefore, following the above decision of ITAT, we hold that merely by reference to Larger Bench, it cannot be construed that decision in the case of Harjeev Aggarwal (supra) is overruled. The above decision continues to be binding precedent. 24. Learned DR has also relied upon the decision of Hon'ble Jurisdictional High Court in the case of Smt. Dayawanti (supra). However, we find that Hon ble Apex Court in the case of Smt. Dayawanti vide order dated 3rd October, 2017 have stayed the operation of this order. Once the operation of the order of Hon'ble Delhi High Court in the case of Smt. Dayawanti (supra) has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e admitted in his statement of making cash investment in the above stated projects of AEZ group. The relevant extracts of his statement are reproduced here below in respect of project at Indirapuram Habitat Centre :- Que.6 Please give details of consideration paid for booking of 20,000 sq.ft space in Indirapuram Habitant Centre as stated by you. Please also state when these spaces were booked. Ans. The details in respect of booking of spaces in Indirapuram Habitant Centre is as under: S.No. Name of Investor Area/Unit No. Amount paid in cheque Amount paid in cash 1 Smt. Rinku Mahajan 2000 sq.ft 30,80,000 99,92,000 2 Sh. Nitin Mahajan 3500 sq.ft 53,90,000 1,75,26,000 3 Smt. Shivali Mahajan 2000 sq.ft 30,80,000 99,92,000 4 Sh. Jatin Mahajan 3500 sq.ft 53,90,000 1,75,26,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are that a search took place on 1 th August, 2011 in the corporate office of AEZ Group at 301-303, Bakshi House, Nehru Place, New Delhi during which a hard disc was found and seized from which, a print out of a file named D.P. Correction Sheet.xls was taken. This sheet contained details of Sales Status lndirapuram Habitant Centre and at serial o. 32 of the said sheet, the name of the Assessee appeared. According to the Revenue, the Assessee had invested a sum of ₹ 20 crores. Therefore, on 10lh February, 2012, a search operation was undertaken under Section 132 of the Act in the case of the Assessee. There is no dispute that this search did not result in the discovery of any incriminating material qua the Assessee. 4. The case of the Revenue is that on 21st February, 2012 a letter was written to the AO by the Authorized Representative of the Assessee inter alia stating that: To the best of our assessee knowledge and records, the assessee have not made any cash payment in the project of M/s Aerens Group. However to avoid any litigation/duress and to buy peace of mind the assessee state that the payment to Mis Aerens group payment have been made as reflected in the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. 10. We heard the rival submissions and perused the material on record. The short issue involved in the present appeal revolves around the findings of the Assessing Officer that the purchases made by the Respondent - assessee from Shri. Bhanwarlal M Jain Group are bogus. Admittedly, the Assessing Officer had come to a conclusion that the purchases made from Shri. Bhanwarlal M Jain Group are bogus not based on the incriminating material found during the search and seizure operation conducted in Respondent assessee but based on the statement recorded from Shri. Bhanwarlal M Jain during the course of search and seizure operation of that group and the statements recorded from the Director of said group. In the backdrop of these facts, the question that may arise is whether is Assessing Officer justified in making an addition on account of alleged bogus purchases in the assessment made pursuant to notice issue u/s.153A of the Act. It is settled preposition of law that third party statements recorded during the course of search action shall not constitute incriminating materials for the purpose of making addition in the hands of assessee other than the searched person that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of material found and seized from the premises of Shri. Manoj Kumar Jain. It is also amply clear that the AO did not invoke the provisions of Section 153C of the Act on receipt of the material; but rather chose to take cognizance of these materials (i.e., seized in the case of Shri. Manoj Kumar Jain) in the course of pending assessment proceedings under section 143(3) of the Act for Assessment Year 2008-09 that were before him. It is therefore clearly established that the AO has used seized material / documents found in the course of search conducted in the case of a third party (i.e., search of Shri. Manoj Kumar Jain) for making the additions in the hands of the assessee, although, on protective and substantive basis; which was later on modified as substantive by the CIT(A). 7.6.2 The provisions of Section 153C of the Act enjoins upon the AO of the person searched; that on being satisfied that books of account seized or requisitioned belongs to or pertain to some other persons, to handover the books of account to the AO having jurisdiction over such other person. Thereafter, the second AO, on being satisfied that the books of account and documents received have a bearing on the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... faction is reached that the materials found in the course of search of some other person have a bearing on the determination of the income of the assessee. Further, in the first proviso to section 153C of the Act, it is provided that the reference to the date of search in the second proviso to section 153A of the Act; dealing with abatement of pending proceedings on the date of search; shall for the purpose of the persons proceeded under section 153C of the Act be construed as the date on which the seized materials are received by the AO. 7.6.4 In the case on hand, we find that there was a search under section 132 of the Act in the case of the assessee on 26.10.2007. After the regular assessments proceedings under section 143(3) of the Act were taken up by the assessee and during the pendency thereof; the AO received material / information from the AO of Shri. Manoj Kumar Jain. As per the second proviso to section 153C of the Act, the assessment proceedings pending under section 153A of the Act in the case of the assessee before the AO would abate on the date the AO received the seized material from the AO of Shri. Manoj Kumar Jain and fresh proceedings under section 153C of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hom presumption is drawn , has got every right to state that the said documents does not belong to him / them . The Id AO if he is satisfied with such explanation , has got recourse to proceed on such other person (i.e the person to whom the said documents actually belong to) in terms of section 153C of the Act by recording satisfaction to that effect by way of transfer of those materials to the AO assessing the such other person. This is the mandate provided in section 153C of the Act. In the instant case, if at all, the seized documents referred to in CG/1 to 11 and CG/HD/1 is stated to be belonging to assessee herein, then the only legal recourse available to the department is to proceed on the assessee herein in terms of section 153C of the Act. In this regard, we would like to place reliance on the recent decision of the Hon'ble Delhi High Court in the case of CIT v. Pinaki Misra Sangeeta Misra [(2017) 148 DTR 219 (Delhi)] = [TS-5161-HC-2017(DELHI)-0] wherein it was held that, no addition could be made on the basis of evidence gathered from extraneous source and on the basis of statement or document received subsequent to search. Hence we hold that the said materials can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recording his satisfaction based on material sent by the AO of Shri. Manoj Kumar Jain. This jurisdictional precondition laid down by the Legislature of recording of satisfaction for taking action under section 153C of the Act cannot be side-stepped / brushed aside and additions be made in proceedings pending under section 143(3) of the Act as the scope of assessments framed under sections 143(3) and 153C of the Act are quite different. In that view of the matter, we hold that the protective additions made by the AO in the impugned order of assessment for Assessment Year 2008-09 dated 31.12.2009, are contrary to the provisions of the Act and are therefore to be deleted. Similarly, the addition sustained by the CIT(A) of ₹ 6,45,000/- on substantive basis as profit from trading in ironore based on the material found and seized in the search conducted in the case of Shri. Manoj Kumar Jain is also hereby deleted. It is accordingly ordered. Consequently, the additional grounds raised by the assessee are allowed. (F) ITAT, G Bench Delhi decision dated 13.6.2019 in the case of Urmila Devi Charitable Trust vs. CIT(E) passed in ITA 4136/Del/2017 (AY 2011-12). 8. We have c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cancelling the registration of such trust or institution : Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.] [(4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No.2) Act, 1996 (33 of 1996)] and subsequently it is noticed that the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, then, the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution: Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner.]. 9. From a plain reading of the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtunity for cross examination of the concerned person may kindly be given. 8. Since, no information has been received by the assessee on the above request from your honor s office, this reply to the show cause notice under reference may kindly be considered as an interim reply only. It is again requested that the impugned information/documents may kindly be supplied to the assessee at the earliest so that a final reply can be filed. 11. Thus, the assessee made a specific request for the supply of material on the basis of which the allegation of receiving the donation in lieu of cash is levied against the assessee. The assessee has also requested for supply of the copy of the statement, if any, recorded by the Revenue of any person in this regard. He has also requested for allowing an opportunity of cross examination of the concerned person whose statement is recorded. The CIT has considered the assessee s written submission at pages 6 7 of his order. However, in the CIT s finding, it is nowhere mentioned that the material which is being used against the assessee has been supplied to him. In paragraph 9, the CIT has considered and relied upon the report of CIT(Exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Apex Court in the case of M/s Andaman Timber Industries (supra) held the order of the adjudicating authority which was based upon the statement of two witnesses relied upon by the adjudicating authority without allowing the crossexamination to the assessee. The relevant finding of the said decision reads 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 because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to crossexamine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the request of the assessee in his order which has already been reproduced by us above. However, he adjudicated the matter relying upon the same material without supplying the copy to the assessee and also the said statement without allowing cross-examination to the assessee. As was pleaded before the Tribunal in the case of M/s Andaman Timber Industries (supra), in this case before us also, it is pleaded that the crossexamination of such witness was not essential because he is the person from whom the assessee received the donation and therefore, he is the witness of the assessee and not of the Revenue. We find that in the aforesaid case before the Hon ble Apex Court, the Tribunal had accepted the request of the Revenue which was deprecated by the Hon ble Apex Court. Hon ble Apex Court came to the conclusion 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. Identical is the situation in the appeal before us. If the material collected behind the back of the assessee and the statement recorded behind the back of the assessee is discredited or ignored, there was no material with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we hold that the material collected behind the back of the assessee cannot be utilized against the assessee unless the copy of the same is supplied to the assessee and he is given an opportunity to rebut the same. Similarly, the statement of office bearers of HHBRF cannot be utilized against the assessee because neither the copy of the statement was supplied to the assessee nor the assessee was allowed an opportunity to cross-examine such person whose statement is being sought to be relied upon by the CIT(Exemptions). Once these two documents are ignored, there remains no material for the Department to hold that the assessee received the donation from HHBRF in lieu of cash. The CIT(Exemption) s finding, that the assessee was not carrying out activities in accordance with the objects of the society and no genuine activities are being carried out by the society, is solely based upon the allegation that the assessee received the donation of ₹ 85 lakhs in lieu of cash. As we have already stated, there is no basis for the Department to hold that the assessee received the donation of ₹ 85 lakhs from HHBRF in lieu of cash. Further, merely because the genuineness of one donatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the view that the cancellation of the assessee s registration under Section 12-A of the Act, if at all, could be done only prospectively and not retrospectively as had been done by the Commissioner in this case. Thus, question no.1 is answered in the negative that is in favour of the assessee and against the revenue. 18. In view of the above, we, respectfully following the decision of Hon ble Apex Court in the case of M/s Andaman Timber Industries (supra) as well as of Hon'ble Jurisdictional High Court in the case of Agra Development Authority (supra), cancel the order passed under Section 12AA(3) dated 22nd April, 2016 cancelling the registration with effect from 1st April, 2010. 19. In the result, the appeal of the assessee is allowed. 5.1 As regards the arguments advanced by the Ld. CIT(DR) are concerned, the same are not applicable in the present case because keeping in view of the assessment order passed by the AO, we have not seen from the proceedings of the AO regarding providing any statement of Sh. Pradeep Kumar Jindal to the assessee and providing opportunity of cross examination of Sh. Pradeep Kumar Jindal to the assessee meaning thereby the Revenue A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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