TMI Blog2021 (10) TMI 1064X X X X Extracts X X X X X X X X Extracts X X X X ..... nsible for producing the witnesses but it is not a valid argument for not giving opportunity to the assessee for cross examination as the Department is all powerful to make sure that these witnesses are present for the cross examination by the assessee. Under similar circumstances, the Hon'ble Delhi High Court in the case of Pr. CIT vs. Best Infrastructure (India) (P.) Ltd. [ 2017 (8) TMI 250 - DELHI HIGH COURT ] has held that Revenue cannot shift the onus of producing its witnesses to the assessee. AO did not make sufficient efforts to produce its witnesses before the assessee for cross examination therefore, such statements taken behind the back of the assessee and not confronted to the assessee do not have any evidentiary value and therefore, if we ignore such statements, taken behind the back of the assessee and not confronted to the assessee and take into account all other evidences filed by the assessee which are in favour of the assessee and wherein the Assessing Officer has also not found any discrepancy, the additions sustained by learned CIT(A) are liable to be deleted. Additions have been made on the basis of statements of witness and the witnesses have not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos.110 to 112/Lkw/2019, I.T.(SS)A. No.114/Lkw/2019, I.T.(SS)A. Nos.116 & 117/Lkw/2019 - - - Dated:- 14-9-2021 - SHRI A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER For the Appellant : Shri P. K. Kapoor, C. A. For the Respondent : Smt. Abha Kala Chanda, CIT, (DR) ORDER PER T. S. KAPOOR, A.M. These are ten appeals filed by different assessees against the separate orders of learned CIT(A), all dated 29/11/2018. These appeals were earlier physically heard on 18/03/2021 but due to long gap between the date of hearing and dictation, the cases were refixed for hearing and were finally heard through virtual hearing on 12/08/2021. Common issues are involved in these appeals which were heard together and therefore, for the sake of convenience a common and consolidated order is being passed. The grounds of appeal taken by the assessee in all the appeals are similar therefore, for the sake of completeness, the grounds of appeal in I.T.A. No.114/Lkw/2019 are reproduced below: 1. BECAUSE the Learned CIT(A) was wrong in law on facts in confirming the assessment order passed by AO u/s 153A of the Act as the same was not in consonance with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer had tried his best to provide cross examination of concerned persons whereas virtually required efforts were not made by the AO in enforcing the presence of such persons for their cross examination and even no penal action and no coersive measure as provided under the Act was initiated against such persons. 8. BECAUSE in the absence of opportunity of cross examination of the persons giving statement of culpable nature, as had been sought by the appellant, the assessment stood wholly vitiated and consequently the addition made deserved to be deleted as held by the Apex Court in umpteen number of cases. 9. BECAUSE the addition for sum of ₹ 14662039/- made by AO and upheld by CIT(A) is based on whims, surmises and conjectures and the cases relied upon by the authorities below are distinguishable from the facts of the present case, which resulted in high pitched assessment. 10. BECAUSE the lower authorities have failed to consider various case laws relied upon by the appellant also the guidelines issued by CBDT relating to the procedure to be adopted by AO in respect of addition under section 68 of the Act and the case laws relied upon by the autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h these companies, in various years were accommodation entries only. However, in order to fulfill the requirement of natural justice, the Assessing Officer noted in the order that he has issued summons u/s 131 of the Act to the persons who had given such statements. Such summons were issued to provide an opportunity for cross examination to the assessees. The Assessing Officer observed that despite of the fact that the Department was to incur expenses for their fooding, lodging and travelling, no one had appeared. Therefore, Assessing Officer held that non appearance of the above persons may be construed in the light of the fact that the above persons may be getting 100 of summons per day for such cross examination. The Assessing Officer held that in a plethora of court judgments, the Hon'ble courts have held that the Assessing Officer should make all efforts to give an opportunity for cross examination as part of natural justice but Evidence Act was not applicable to Income Tax cases even then the Department had tried its level best to fulfill such requirements. The Assessing Officer held that assessees had also not made any effort to produce such persons as these witnesses ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly deducted and was being deposited in the Government account. During the course of assessment proceedings the Assessing Officer required the assessees to explain the unsecured loan creditors and also asked the assessees to file documentary evidences. It was submitted that assessees filed detailed replies and filed documentary evidences regarding receipt of these unsecured loans. It was submitted that along with replies the assessees also filed confirmed copy of account, copy of bank statement of loan creditor, copy of ITR and in this respect our attention was invited to paper book pages 70 to 78. Learned counsel for the assessees further invited our attention to the copy of notices issued u/s 133(6) by the Assessing Officer to the loan creditors placed in paper book pages 272, 366367, 259, 340, 341, 250, 331, 332, 230, 12 16 and it was submitted that in view of notices u/s 133(6), the loan creditors had directly replied to Assessing Officer and had filed the documents required by the Assessing Officer and in this respect our attention was invited to paper book pages 368, 418 and paper book pages 273 to 418 where copies of direct replies by the loan creditors along with confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to a chart wherein the year-wise receipt and repayments of loan was mentioned. Further it was argued that these statements recorded at the back of the assessees cannot be relied by the Revenue as the assessees were not provided sufficient opportunity of cross examination. 4.1 Learned counsel for the assessees submitted that ground No. 3,7 8 are for the proposition that where the Assessing Officer relies on the statements of certain persons for making addition to the income of the assessee and those persons on whose statement the additions have been made are not made available to the assessee for its cross examination, the addition is not sustainable and reliance in this respect was placed on the following judgments: (i) Andman Timber Industries vs. Commissioner of Central Excise (2015) 281 CTR 0241 (SC) (ii) Morning Glory Infra Ltd. vs. DCIT, IT(SS)A No.72/Lkw/2018 (iii) Sigma Castings Ltd. vs. DCIT other appeals in I.T.A. No.510/Lkw/2019 and others (iv) Pr. CIT vs. Best Infrastructure (India) (P.) Ltd. [2017] 397 ITR 82 (Delhi) Learned counsel for the assessee submitted that in these cases though in the assessment order the Assessing Officer has mentioned t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usal of the statement it is not known that in whose presence and at what place statement of Shri Anil Kumar Khemka was recorded and which officer had recorded his statement. It was further argued that Shri Anil Kumar Khemka was not director in Success Vyapar Limited and Neil Industries Ltd. and therefore, his statement has no relevance. As regards statement of Shri Raj Kumar Tharad, it was submitted that the assessees had no transactions with him or with companies in which he is a director. Similarly, it was argued that there was no transaction of assessee with Sunil Kaya and therefore, the statement of Shri Sunil Kaya is also not relevant and therefore, also it was argued that the statements cannot be relied against the entire evidence which the assessees had filed before the Assessing Officer. 4.3 Coming to the merits of the additions, Learned counsel for the assessee submitted that the assessees had completed its part of onus which is required to be fulfilled by the assessee as the identity of the lender company is not in doubt, creditworthiness of the company is not in doubt as these companies had sufficient funds to advance the loans. As regards the genuineness of the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan creditors were clear cut entry providers from whom the assessees had taken accommodation entries. The fact of these companies, being engaged in accommodation entries, is apparent from the fact that Director of these companies himself has admitted that they were engaged in providing accommodation entries and therefore, the learned CIT(A) has rightly sustained the addition. As regards the cross examination, the learned CIT, D.R. stated that the Assessing Officer took sufficient steps to make the presence of witnesses for cross examination by the assessees but despite of giving notices u/s 131 of the Act, nobody appeared as the entry providers were hand in gloove with the assessees. It was submitted that the assessees themselves could have arranged their presence and therefore, it was argued that only because the witnesses could not be cross examined by the assessees, the additions sustained by learned CIT(A) cannot be deleted and it was prayed that the appeals may be dismissed. 5. We have heard the rival parties and have gone through the material placed on record. We find that a search was conducted on the group on 27/11/2015 and in view of that search various assessees were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer) of such evidences which had been filed by the lender companies directly with the Assessing Officer and a copy of which is placed at pages 235 to 237, 246 to 257, 234, 238 to 245, 232, 233, 115, 120 to 128, 116 and 117 of the paper book. We further find that assessees had duly deducted TDS on the interest payments and which have been duly deposited in the Government account. The interest income of the payees has been accepted to be their incomes in their respective assessment orders and no addition has been made in their cases. The copy of assessment orders of lender companies is placed at pages 101 to 127 and 128 to 157 of the paper book. The Assessing Officer, while making additions on account of unsecured loans and on account of interest paid on such unsecured loans, has relied only on the statements of Directors of such companies which were recorded by the Investigation Wing. While making such additions, the Assessing Officer himself did not carry out any enquiry and straightforward relying on the statements recorded by some different officer, has made the additions. While making the additions he has also ignored the documentary evidences filed by the assessees an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted and that too without putting full efforts to make available the witnesses for cross examination by assessees. 5.3 From the above facts and circumstances where the assessees have filed complete evidences of the transactions and the Assessing Officer has also directly obtained such evidences from the lenders u/s 133(6) and did not find any discrepancy in such evidences, the reliance placed by the Assessing Officer on the statements of Directors of the lender companies, without making the said statements available for cross examination by the assessees, is not sustainable in view of the judgment of Hon'ble Supreme Court in the case of Andman Timber Industries vs. Commissioner of Central Excise (2015) 281 CTR 0241 (SC). The Lucknow Bench of the Tribunal in the case of Morning Glory Infra Ltd. vs. DCIT, IT(SS)A No.72/Lkw/2018 has also held that additions, on the basis of statements of certain persons, cannot be sustained in the absence of cross examination by the assessee. Similar findings have been made by Lucknow Bench of the Tribunal in the case of Sigma Castings Ltd. vs. DCIT other appeals in I.T.A. No.510/Lkw/2019 and others. 5.4 The findings in the case of Morning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d contents of diary purportedly impounded from his premises, without any reliable/ credible material/evidence to substantiate/corroborate the same. 2.2 That the assessing officer erred on facts and in law in not appreciating that no incriminating material was found during the course of simultaneous survey at the premises of the appellant and the managing director of the appellant-company who repeatedly denied having received any on-money. 2.3 That the assessing officer erred on facts and in law in making the aforesaid addition on the basis of ex-parte material, in gross violation of principles of natural justice. 7. In its written submissions, the assessee, inter alia, submitted before the ld. CIT(A) that:- It is, at the outset, emphatically submitted that the aforesaid huge addition of ₹ 64 crores made by the Assessing Officer is patently illegal and bad in law since the same has been made merely on the basis of presumptions, conjectures and surmises, without any credible material/corroborative evidence to establish receipt of any income/cash, outside the books of account, as explained hereunder: The Assessing Officer, as stated above, has simply primarily r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebut the contents of the statement so made. (b) Further, no opportunity to cross-examine Mr. Anoop Asthana was ever accorded to the appellant. In absence of copy of statement being provided to the appellant and/or opportunity to cross-examine Mr Anoop Asthana, his statement could not have been taken into consideration to draw any negative inference against the appellant. 8. The ld. CIT(A) has held, inter alia, as follows:- 5.6 The incriminating document at page 163, 164 and 165 contains the details related to the Emerald Garden project being developed by the appellant company. Page No.163 of the Annexure A-4 mentions certain figures which establishes that the money was receiving sale consideration in white and black for example for a 3 BHK flats 2080 square feet, the quantum of while and black mentioned are ₹ 1,20,57,600/- and ₹ 42,12,000/- respectively. Further, another entry is made for the 3 BHK flat admeasuring 2325 sq. ft. area, wherein amount of white and black mentioned is 1,34,81,400/- and ₹ 47,08,125/- respectively. Thus, Assessing Officer has calculated the quantum of black amount at 25% of the total consideration. During survey proceedings th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant. The contention of the appellant is hollow and are not based on the proper appreciation of the facts. it is admitted fact that Shri Anoop Asthana proprietor of AAP was acting as a property broker for the appellant company. This fact is also evident from the commission paid to Shri Anoop Asthana, wherein TDS was also deducted by appellant company. It is not denied by the ld. AR that no commission whatsoever was paid to AAP. Thus the relation between the appellant company and Shri Anoop Asthana proprietor of AAP is established as property developer and the property broker. The incriminating document found from premises of AAP establishes the fact that appellant company is engaged in receiving 25% of the sale consideration in cash, which is unaccounted in the books of the appellant. Assessing Officer has correctly extrapolated the modus operandi for calculating unaccounted income of appellant. 5.11. The contention of the ld. AR that no opportunity of cross examination to Shri Anoop Asthana was ever accorded to the appellant is far away from truth and reality of the case. The incriminating document found and impounded in the business premises of the Anoop Asthana and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AAP and SKJ wished to distance the appellant company from AAP. 10. Thus, the position obtaining is that a diary was recovered from the premises of Shri Anoop Asthana during the survey. Pages 163, 164 and 165 of the diary, Annexure A-14, have been taken to go against the assessee. These three documents, firstly, were not recovered from the possession of the assessee. Then, page 163 is undated, whereas pages 164 and 165 do not pertain to the year under consideration. It is only in the statement of Shri Anoop Asthana, that he attributed account of these documents to the assessee. 11. First and foremost, the subject diary/pages were found and impounded from the premises of Shri Anoop Asthana, a third party, and not from the appellant. Further, Shri Anoop Asthana, in his statement, had stated that entries in the said diary were made by staff member of Shri Anoop Asthana, without providing details of the so-called staff member. Thus, the author of the so-called diary in question is not even known till date. Shri Anoop Asthana nowhere stated that the diary was written by someone on his behalf and/or on his instructions. Therefore, the entire case is fundamentally based on a mere in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the appellant and Shri Anoop Asthana, any averment made by Shri Anoop Asthana against the appellant could not be taken at its face value. Further, the dates mentioned in the diary impounded relate back to January, 2014 (18/1/2014, 23/1/2014), which is the period when Shri Anoop Asthana booked two flats with the appellant in his personal capacity. Therefore, the recordings in the diary could not be held to be related to the other sale of flats undertaken by the appellant, without any involvement of Shri Anoop Asthana. Even the names of the individual parties appearing in the diary alongside the amounts are, statedly, completely alien to the appellant. The appellant had not sold any flat in the Emerald Garden project to the persons named in the said diary. Therefore, the very contents of the diary are suspect and are totally unreliable/unauthentic. No adverse inference can be drawn from the payment receipts (3 in number) in respect of flats in Emerald Garden project found from the premises of Shri. Anoop Asthana, particularly when nothing adverse has been stated by Shri. Asthana in this regard. 12. These facts, as specifically contended by the assessee before the ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been held by the Hon'ble Supreme Court that the assessment made by relying upon the statement of a third party, without giving the effected person a chance to cross-examine such third party, is liable to be held as based on no evidence and, therefore, liable to be deleted. 15. In Sona Electric Company vs. CIT (supra), it has been held that the statement of a witness recorded at the back of the assessee has to be excluded, as the same was relied on without giving any opportunity to cross-examine the person giving statement; and that the assessment based on such a statement is a statement rendered as based on no evidence and, accordingly, liable to be annulled. 16. In Amarjit Singh Bakshi (HUF) vs. ACIT (supra), it has been held that opportunity to cross-examine the person giving a statement of culpable nature has to be given; and that in the absence of such an opportunity being given to the affected person, the statement ceases to be material for the purposes of assessment. 17. In CIT vs. SMC Share Brokers Ltd. (supra), it was held that a statement given by a broker at the back of the assessee could not be used to the detriment of an assessee and dismissal of Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought. It was not for Adjudicating Authority to presuppose as to what could be subject matter of cross-examination and deny prayer of Assessee. In case testimony of two witnesses was discredited, there would be no material with Department to justify its action, as statement of two witnesses was only basis of issuing Show Cause Notice. Impugned order as passed by CESTAT was set aside. Appeal allowed. 19. Evidently, the three documents found during survey from the possession of Shri Anoop Asthana, in the absence of the statement of Shri Anoop Asthana, do not have any value, particularly in the face of the fact that they are not corroborated by any independent evidence. Page No. 163: This is un-dated, but name of the project 'Emerald Garden' launched by the appellant was mentioned there. With reference to this, Shri Anoop Aathana who had been examined by the Authorised Officers, stated categorically that he had been working as a broker for last 30 years and all the prominent Developers of Kanpur were his clients. In his subsequent statement which appears at page 31 to 36 of the synopsis dated 10.12.2018, and in response to question no.7, he stated that 'cash money' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of this volume. Further, in response to Question No.18, he was required to submit documentary evidences in support of income declared by him. In response to Question No.21, he gave complete details supported by documentary evidences relating to commodity trading. Further, in response to Question No.22, he gave complete information about income declared and income tax, wealth tax payments made by him on such income/wealth. In response to Question No.23, he gave complete information, name-wise, of the booking receipts as had been impounded during the course of survey at the office premises of Shri Anoop Asthana, and in the end, he categorically stated that it would not be proper to draw adverse inference in relation to income from commodity trading. 16. Thus, one cannot but come to the inexorable conclusion that the order under appeal suffers from the vice of not taking into consideration the assessee s contention, which contention also does not stand rebutted, that it was not provided with any opportunity of cross-examining Shri Anoop Asthana. 17. In view of the above, we hold that: (i) the case of the assessee has been prejudiced for want of providing him opportunit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the CIT(A) unmistakably showed that the attempts by the AO, in ensuring the presence of Mr. Tarun Goyal for cross-examination by the Assessees, did not succeed. The onus of ensuring the presence of Mr. Tarun Goyal, whom the Assessees clearly stated that they did not know, could not have been shifted to the Assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross- examination is sufficient to discard his statement. 6.1 Similarly, Hon'ble Allahabad High Court in the case of Nathuram Premchand 49 ITR 561 (All) has clearly laid down the procedure for making the presence of witnesses. The relevant findings of Hon'ble court are reproduced below: The facts, as they emerge from the statement of the case, are as follows: The assessee is a Hindu undivided family and carries on sarrafa business, purchase and sale of gold and silver bullion, purchase and sale of silver ornaments in the name and style of Nathu Ram Premchand. For the accounting year ending November 11, 1947, the relevant assessment year being 1948-49, the assessee submitted a return s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence but in those relating to the assessment of Banarasidas. Section 37(1) of the Act confers on the Income-tax Officer, the Appellate Assistant Commissioner, the Commissioner and the AppellateTribunal the powers vested in a court under the Code of Civil Procedure when trying a suit in respect of the following matters, viz.: (a) Enforcing the attendance of any person including any officer of a banking company and examining him on oath. The provisions of Order XVI of the Civil Procedure Code deal with the examination and attendance of witnesses. Rule 1 of Order XVI provides that by making an application any party to a suit may summon in court a witness whose attendance is required either to give evidence or to produce documents. In the present case the assessee was given dasti summons for the production of Banarasidas but his case was that Banarasidas refused to accept the same. In a situation like this, the provisions of Order XVI, rule 10, are attracted, which read as follows : 10.(1) Where a person to whom a summons has been issued either to attend, to give evidence or to produce a document fails to attend or to produce the document in compliance with such summons, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to a contrary conclusion. Consequently, we are of opinion that the question of law referred to us by the Tribunal should be answered in favour of the assessee and against the department with costs. 7. In view of the above judgment of Hon'ble Delhi High Court and Hon'ble Allahabad High Court and in view of the fact that the Assessing Officer did not make sufficient efforts to produce its witnesses before the assessees for cross examination therefore, such statements taken behind the back of the assessees and not confronted to the assessees do not have any evidentiary value and therefore, if we ignore such statements, taken behind the back of the assessees and not confronted to the assessee and take into account all other evidences filed by the assessees which are in favour of the assessees and wherein the Assessing Officer has also not found any discrepancy, the additions sustained by learned CIT(A) are liable to be deleted. 8. Further we note that the statement of Abhiset Basu forming part of assessment order does not carry signature of the officer who had recorded his statement. Moreover, nowhere in the statement, he has mentioned the name of assessees as bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are so vocal and undeniable that as mentioned in some of the case laws above, crossexamination of such accommodation entry provides by thousands of beneficiaries across India is neither practicable nor viable and therefore uncalled for. iii. It is undisputed fact that in the statement dated 06.02.2014 Shri Anand Sharma had admitted to be one of such accommodation entry providers. The sum and substance of the said statement is that the concern M/s Jalsagar Commerce Pvt. Ltd. was engaged in the activities of providing accommodation entries and the appellant happened to be one of such beneficiary of such concern. It is also admitted fact that Shri Anand Sharma had been running the affair of the said company. iv. The statement of Shri Anand Sharma in which name of M/s Jalsagar Commerce Pvt. Ltd. cannot be completely ignored solely on the legal grounds raised by the Appellant. 11.1 Against the order of learned CIT(A), the Tribunal allowed relief to the assessee by holding as under: 5.12 In view of above discussion, it is clear that the incriminating material had been found during the course of search of accommodation entry provider. Further incriminating material had been g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s crepted in his statement, the AO has presumed that the loan provided by M/s. Jalsagar Commerce Pvt Ltd is nothing but the bogus accommodation entry provided by Shri Anand Sharma through M/s. Royal Crystal Dealers Pvt. Ltd. The AO has tried to establish the nexus of the loan received by the assessee through the statement of Shri Anand Sharma where he has purported to have provided the alleged entry. Since there is no direct allegation or admission of providing loan by Shri Anand Sharma to the assessee through M/s.Royal Crystal Dealers Pvt. Ltd., then even if there is a possibility of bogus accommodation entry routed through another intermediary company M/s.Jalsagar Commerce Pvt. Ltd., it requires a definite link of the transactions from M/s.Royal Crystal Dealers Pvt. Ltd. to M/s.Jalsagar Commerce Pvt. Ltd. and then the loan to the assessee. Once the chain of transactions and flow of money from one entity to another entity and finally to the assessee has not been established, then the addition made merely on suspicion, how so strong it may be, is not sustainable. On the contrary, when the assessee produced all the relevant record which contains their financial statements, bank acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Pvt. Ltd. was also recorded by the AO wherein the Director has confirmed the transaction of loan. There are various reports of the DDIT Kolkata which are placed at pages 406 to 422 of the paper book. We find that all these reports are based on the statements recorded during the investigation but no documentary evidence was either gathered or has been referred in these reports. Therefore, even if these reports are to be taken into consideration, these are nothing but narration of the statements of various persons taken during the investigation. It is well settled principle as well as the directions of the CBDT issued under the Circulars that during the course of investigation, the department should concentrate and focus on collecting documentary evidence disclosing undisclosed income instead of obtaining the statement and then support of their claim merely on the basis of the statement. Therefore, the statements recorded by the DDIT Kolkata are also not based on any documentary evidence so as to have an evidentiary value for sustaining the additions made by the AO. The entire report of the Investigation Wing is based on statements recorded during survey and search. Once the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not even a conclusive proof of transaction of bogus entry to the assessee, the additions made by the AO are not sustainable. 11.1. Even otherwise, the assessment order is solely based on the report of the Investigation Wing Kolkata which in turn is nothing but the narration of the statements recorded during the investigation and the AO was having in possession the statement of only Shri Anand Sharma. Therefore, all these proceedings conducted by the Investigation Wing Kolkata were at the back of the assessee and hence the statement which is the foundation of the report of the Investigation Wing Kolkata as well as the assessment order cannot be accepted in the absence of giving an opportunity of cross examination to the assessee. We find that the assessee has insisted for cross examination during the assessment proceedings and further during the appellate proceedings. The ld.CIT(A) even called for a remand report and directed the AO to allow cross examination to the assessee. However, the AO has expressed his inability to allow the assessee cross examination of the witnesses due to the reason that the witnesses belong to Kolkata and it is not possible for AO to make such arran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable. The Tribunal has simply stated that cross-examination 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 . 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the adjudicating authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers witnesses at the price which is mentioned in the price list itself could be the subject-matter of crossexamination. Therefore, it was not for the adjudicating authority to presuppose as to what could be the subject-matter of the crossexamination and make the remarks as mentioned above. We may also point out that on an earlier occasio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances, we feel that no interference with the impugned order is called for. The Tribunal has correctly understood the law and applied it to the facts of the case. Once there is a violation of the principles of natural justice inasmuch as seized material is not provided to an assessee nor is cross-examination of the person on whose statement the Assessing Officer relies upon, granted, then, such deficiencies would amount to a denial of opportunity and, consequently, would be fatal to the proceedings. Following approach adopted by us in SMC Share Brokers Ltd.'s case (supra), we see no reason to interfere with the impugned order. No substantial question of law arises for our consideration. Thus the Hon ble High Court has held that once there is a violation of principles of natural justice inasmuch as seized material is not provided to the assessee nor is cross examination of the person on whose statement the AO relied upon, granted, then, such deficiencies would amount to denial of opportunity and consequently would be fatal to the proceedings. The Hon ble Bombay High Court in the case of H.R. Mehta vs. ACIT, 387 ITR 561 (Bombay) has also considered the issue of not providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial was not provided to an assessee nor was he permitted to cross examine a person on whose statement the Assessing Officer relied, it would amount to deficiency, amounting to a denial of opportunity and therefore violation of principles of natural justice. In that case CIT (A) had deleted addition made by the Assessing Officer since the Assessing Officer had failed to provide copies of seized material to the assessee nor had he allowed the assessee to cross-examine the party concerned. The Division Bench held that once there is violation of the principles of natural justice inasmuch as seized material was not provided to the assessee nor was given opportunity of cross examining the person whose statement was being used against the assessee the order could not be sustained. 15. In Andaman Timber Industries (supra) the Supreme Court found that the Adjudicating Authority had not granted an opportunity to the assessee to cross examine the witnesses and the tribunal merely observed that the cross examination of the dealers in that case, could not have brought out any material which would not otherwise be in possession of the appellant-assessee. The Supreme Court set aside the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of DCIT vs. Shri Prateek Kothari vide order dated 16th December, 2012 in ITA No. 159/JP/2016 has considered this issue in para 2.8 to 2.11 as under :- 2.8 We have heard the rival contentions and perused the material available on record. The transaction under question relates to unsecured loans taken by the assessee amounting to ₹ 1 Crores from M/s Mehul Gems Pvt Ltd during the impugned assessment year and not accepting the said loan transaction as a genuine transaction by the Assessing officer and the resultant addition made under section 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of tax filings, affidavits and confirmation of the Directors, bank statements of the lender, balance sheet of the lender company, and an independent confirmation has also been obtained by the Assessing officer to satisfy the cardinal test of identity, creditworthiness and genuineness of the loan transaction. However, the Assessing officer has not given any finding in respect of such explanation, documenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmodation entries were provided by the said group categorically contains the name and address of the assessee. Further the group has categorically admitted to providing of accommodation entries of unsecured loans through various benami concerns. The AO further relied upon the decision of Hon ble Supreme Court in the case of C. Vasantlal Co. Vs. CIT 45 ITR 206(SC) and Hon ble Rajasthan High Court in case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) among others. In this regard, it was submitted by the assessee that if the entries and material are 84 ITA Nos. 997 to 1002 1119/JP/2018 and ITA Nos. 1057 to 1062 1210/JP/2018. M/s. Kota Dall Mill, Kota. gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the cross examination and if this is not done, the principles of natural justice stand violated. 2.9 In light of above discussions, in our view, the crux of the issue at hand is that whether the principle of natural justice stand violated in the instant case. In other words, where the AO doesn t want to accept th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The statements made by Praveen Jain and group were material on which the IT authorities could act provided the material was disclosed and the assessee had an opportunity to render their explanation in that regard. The Hon ble Supreme Court in case of Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) (Copy at Case Law PB 585- 591) has held that whether there was any material evidence to justify the findings of the Tribunal that the amount of ₹ 1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee. The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter, dated 18-2- 1955 said to have been addressed by the manager of the bank to the ITO. Now it is difficult to see how this letter could at all be relied upon by the Tribunal as a material piece of evidence supportive of its finding. In the first place, this letter was not disclosed to the assessee by the ITO and even though the AAC reproduced an extract f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamine such persons though he specifically asked for such documents and cross examination. On the other hand, the burden was sought to be shifted on the ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur 21 assessee by the A.O. It is clear case where the principle of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same. The order of the ld CIT(A) is accordingly confirmed and the ground of the Revenue is dismissed. Thus when the assessee has specifically asked for cross examination of the witnesses whose statements were relied upon by the AO, then the denial of the opportunity to cross examine would certainly in violation of principles of natural justice and consequently renders the assessment order based on such statement as not sustainable in law. Hence in view of the facts and circumstances of the case where the assessee has repeatedly requested and demanded the cross examination of the witnesses whose statements were relied upon by the AO in the assessment order and further the report of the DDIT Investigation Kolkata is also based on the statement of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returned back with interest even before the date of search and this proves that the transactions were genuine. The authorities, during the search on the assessees, did not find any incriminating material and any money trail to establish that cash had exchanged in lieu of transactions of loans received and repayments thereof. The assessments of these companies, wherein the interest paid by the assessees, has been accepted to be their income, also proves that the transactions were genuine. Therefore, all the three ingredients of section 68 are fulfilled and therefore, also the additions confirmed by learned CIT(A) cannot be sustained. The Learned counsel for the assessee has relied on a number of case laws for the proposition that once the assessee fulfilled its part of onus, the addition u/s 68 cannot be made unless proved otherwise by the Assessing Officer. In the present cases, other than the statements recorded by another officer (which we have already held to be of no evidentiary value) there is no material before the Assessing Officer to disapprove the evidences filed by assessees. 15. The Hon'ble Delhi High Court in the case of CIT vs. Kamdhenu Steel Alloys Ltd. [201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare applicants. All these applicants were private limited companies. The AO was of the opinion that the creditors were not genuine parties and were only entry providers. He referred to the report dated 02.3.2006 of the Directorate of Income Tax (Investigation), Unit-V, New Delhi in this behalf. He issued detailed questionnaire on 09.11.2006 wherein he also gave specific reasons in respect of each of the applicant which was of the following nature: (i) In the bank account of the various share applicants, they had deposited cash for specific purpose for applying for share in addition to providing entry to the assessee, the same modus was adopted in the other cases as well. (ii) Many companies did not exist at the addresses furnished. The registered letters sent to them had been received back undelivered. (iii) There were reports of the Inspectors (Income Tax) that many parties were not genuine assessees and were not in existence. 8. The assessee had given reply to the said questionnaire in which it had summed the position as under: 1. All the share applicants are existing assessees. 2. These companies are registered with the Registrar of Companies. 3. The share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the accounts of the share applicants before being transferred to the account of the assessee company. This anomaly is almost universal except in a few cases where transfer entries have been rotated. In certain other cases both cash has been deposited and entries rotated. The claim of the assessee that he was unaware of this state of affairs is much too difficult to digest. In the light of this fact, other contentions of the assessee company in its representation dated 17.11.2006 become redundant. The claim of the assessee company of its inability to produce the shareholders physically is hollow because no such shareholder exists to be physically present for any deposition. 10. We have taken note of the aforesaid assessment order in detail as the entire argument of the learned Counsel for the Revenue was backed by and based upon the reasons given by the learned AO(s). In support thereof, Mr. N.P. Sahni, learned counsel for the Revenue, also furnished Brief Note on Accommodation Entries as prepared by the Directorate of Income Tax (Investigation), the gist whereof is noted above as recorded in the orders of the AO. In the light of the aforesaid, Mr. Sahni referred to the judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee cannot be treated as unexplained cash credits in the hands of the assessee. However, respectfully following the decision of the Hon'ble Court referred to supra, it is directed that the Department is free to proceed to re-open the individual assessments of such alleged bogus shareholders. The direction is being given under Section 151(i) read with section 153(3) of the Income Tax Act. 12. What does follow from the aforesaid? It is not in doubt that the assessee had given the particulars of registration of the investing/applicant companies; confirmation from the share applicants; bank accounts details; shown payment through account payee cheques, etc. As stated by us in the beginning, with these documents, it can be said that the assessee has discharged its initial onus. With the registration of the companies, its identity stands established, the applicant companies were having bank accounts, it had made the payment through account payee cheques. 13. No doubt, what the AO observed may make him suspicious about such companies, either their existence, which may be only on papers and/or genuineness of the transactions. When he found that investing companies are not av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be another factor leading towards the suspicion nurtured by the AO. Further, if the returns were filed and scrutiny thereof reveals that such returns were for namesake, this could yet another be contributing factor in the direction AO wanted to go. Likewise, when the bank statements were filed, the AO could find out the address given by those applicant companies in the bank, who opened the bank accounts and are the signatories, who introduced those bank accounts and the manner in which transactions were carried out and the bank accounts operated. This kind of inquiry would have given some more material to the AO to find out as to whether the assessee can be convicted with the transactions which were allegedly bogus and or companies were also bogus and were treated for namesake. We say so with more emphasis because of the reason that normally such kind of presumption against the assessee cannot be made as per the law laid down in various judgments noted above. Just because of the creditors/share applicants could not be found at the address given it would not give the Revenue a right to invoke Section 68 of the Act without any additional material to support such a move. We are remi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is unfortunate that all this exercise is going in vain as few more steps which should have been taken by the Revenue in order to find out causal connection between the cash deposited in the bank accounts of the applicant banks and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability. 18. We may repeat what is often said, that a delicate balance has to be maintained while walking on the tight rope of Sections 68 and 69 of the Act. On the on hand, no doubt, such kind of dubious practices are rampant, on the other hand, merely because there is an acknowledgement of such practices would not mean that in any of such cases coming before the Court, the Court has to presume that the assessee in questions as indulged in that practice. To make the assessee responsible, there has to be proper evidence. It is equally important that an innocent person cannot be fastened with liability without cogent evidence. One has to see the matter from the point of view of such companies (like the assessees herein) who invite the share application money from different sources or even p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me out with any cogent evidence to make the additions. No doubt, as indicate by us above, the AO(s) could have embark upon further inquiry. If that is not done and the AO(s) did not care to discharge the onus which was laid down, for this negligence on the part of the AO(s), he cannot be provided with fresh innings . (iii) The order of the AO(s) had merged in the order of the CIT(A) and in some of the cases before us and before the CIT(A), the assessees had succeeded. (iv) This Court is acting as appellate Court and has to act within the limitations provided under Section 26A of the Act. The appeals can be entertained only on substantial questions of law. In the process, this Court is to examine as to whether the order of the Tribunal is correct and any substantial question of law arises therefrom. The Tribunal has passed the impugned orders, sitting as appellate authority, on the basis of available record. When the matter is to be examined from this angle, there is no reason or scope to remit the case back to the AO(s) once it is found that on the basis of material on record, the order of the Tribunal is justified. Even the Tribunal acts purely as an appellate authority. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
