Sh. Sohan Lal Prop., Bathinda V. The Income Tax Officer, Bathinda

CO 14/ASR/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6098 (ITAT-AMRITSAR)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 05-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Search and seizure; Principle of natural justice; Opportunity of cross examination; Question of law; Assessment record; Block assessment
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.L. KARWA, VICE PRESIDENT AND SH. MEHAR SINGH, ACCOUNTANT MEMBER I.T.A. NO.262(ASR)/2010 ASSESSMENT YEAR:2004-05 PAN :AAEPL2426K THE INCOME-TAX OFFICER, VS. SH. SOHAN LAL, WARD 2(1), BHATINDA. PROP. M/S. BHAGWATI COTTON C O, BHATINDA. (APPELLANT) (RESPONDENT) C.O.NO.14(ASR)/2010 (ARISING OUT OF ITA NO.262(ASR)/2010) ASSESSMENT YEAR 2010 SH. SOHAN LAL, VS. THE INCOME-TAX OFFICER, PROP. M/S. BHAGWATI COTTON CO. WARD 2(1), BHATINDA. BHATINDA. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SH. TARSEM LAL, DR ASSESSEE BY:SH. P.N. ARORA, ADV. ORDER PER MEHAR SINGH, AM, THIS APPEAL FILED BY THE REVENUE AND C.O. BY THE ASSESSE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A), BHATINDA, DATED 3 1.03.2010, PASSED UNDER SECTION 250(6) OF THE INCOME-TAX ACT, 1961 (HEREINA FTER REFERRED TO IN SHORT THE ACT) FOR THE ASSESSMENT YEAR 2004-05. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: 2 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.9,58,494/- MADE ON ACCOUNT OF UNACCOUNTED SALES MADE BY THE ASSESSEE TO M/S. BADRI PARSHAD SANJAY KUMAR, FATEHABAD, ON THE GROUND THAT CROSS EXAMINAT ION OF THE PURCHASES WAS NOT ALLOWED BY THE AO TO THE ASSESSEE. 1A` THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING TH E FACT THAT IN RESPONSE TO COMMISSIONS ISSUED B THE AO TO ITO FATEHBAD, THE PURCHASER HAD ADMITTED THE SAID PURCH ASE AND INTENTIONALLY DID NOT COMPLY WITH THE SUMMONS ISSUED BY THE A.O. TO HIM IN CONNIVANCE WITH THE ASSESSEE (SELLER) AND BENEFIT OF SUCH CONNIVANCE IS NOT TO BE GIVEN TO THE ASSESSEE. 2. THE LD. CIT(A) HAS ALSO ERRED IN DELETING THE AD DITION OF RS.21,086/- ON ACCOUNT OF PROFIT EARNED ON UNACCOUN TED SALE OF THE ASSESSEE. 3. IN GROUND NO.1, THE REVENUE CONTENDED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.9,58,494/- MADE ON ACCOUNT OF UNACCOUNTED SALES. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVES INCOME FROM COMMISSION AND TRADING OF COTTO N AND ITS BYPRODUCTS. THE RETURN FOR THE YEAR UNDER CONSIDERATION WAS FIL ED ON 30.10.2004 DECLARING AN INCOME OF RS.1,52,421/-, WHICH WAS PR OCESSED UNDER SECTION 143(1) OF THE ACT. APART FROM THIS, THE ASSESSEE IS HAVING COMMISSION INCOME. BESIDES, CERTAIN INFORMATION WAS RECEIVED FROM ADIV(INV.), HISSAR REGARDING UNACCOUNTED PURCHASE BY M/S. BADRI PARSHA D SANJAY KUMAR, FATEHABAD FROM M/S. BHAGWATI COTTON CO. DABWALI BRA NCH, H.O. BATHINDA, PROP. SH. SOHAN LAL. THE TRANSACTIONS INTIMATED BY HIM WERE NOT FOUND INCORPORATED IN THE BALANCE SHEET OF THE ASSESSEE F OR THE FINANCIAL YEAR 2003- 04 RELEVANT TO THE ASSESSMENT YEAR 2004-05. THEREFO RE, THE A.O. TREATED THE AMOUNT OF RS.9,58,494/- AS ESCAPED INCOME AND INITI ATED PROCEEDINGS UNDER SECTION 148 OF THE ACT. ON APPEAL, THE LD. CIT(A), DELETED THE ADDITION OF 3 RS.9,58,494/- MADE ON ACCOUNT OF SALES OF COTTON T O M/S. BADRI PARSHAD KUMAR, FATEHABAD BY FOLLOWING VARIOUS JUDGEMENTS. 4. THE LD. DR, RELIED ON THE ORDER OF THE ASSESSI NG OFFICER. 5. THE LD. COUNSEL FOR THE ASSESSEE, SH. P.N. ARORA , ON THE OTHER HAND, STRONGLY RELIED ON THE ORDER OF THE CIT(A) AND REIT ERATED THE SUBMISSIONS MADE BEFORE HIM. IN THE COURSE OF PRESENT APPEALLAT E PROCEEDINGS, HE ALSO FILE PAPER BOOK CONTAINING PAGES 1 TO 15, WHEREBY HE RELIED ON THE FOLLOWING DECISIONS OF HONBLE SUPREME COURT/HIGH COURT/ITAT : I) THE INCOME TAX OFFICER, WARD-3, BHATINDA VS. SH. PARSHOTAM KUMAR P/O M/S. MITTAL TRADING CO. RAMPURPHUL, ITA N O.367 (ASR).2001 FOR THE ASSESSMENT YEAR 1993-94, DATED 1 7.12.2004. II) THE INCOME-TAX OFFICER, WARD-1, MANSA VS. M/S. PAWAN KUMAR SHAM LAL, BHIKHI, ITA NO.198(ASR)/1994 FOR TH E ASSESSMENT YEAR 1988-89, DATED 11.08.2000. III) M/S. VIJAY KUMAR JINDAL CONTRACTOR, VS. ASSTT. COMMR. OF INCOME-TAX, BHATINDA ITA NO. 244 (ASR)//2006 IV) DR. USHA GUPTA PROP. BANSAL NURSING HOME ITA NO.394(ASR)/1992 V) KISHINCHAND CHELLARAM VS, CIT 125 ITR 713 (SC) VI) CIT VS. SMC SHARE BROKERS LTD. 288 ITR 345 (DEL) VII) CHIRANJIT STEEL ROLLING MILLS VS. CIT 288 IR 245 (D EL) VIII) SMT. PURNIMA BERI, (2003) 264 ITR IX) DCIT VS. ANIL KAPOOR (2007) 173 (TRIB) DELHI. 5.1. HE FURTHER STATED THAT THE CASE OF THE ASSESSE E IS ALSO COVERED BY THE DECISION OF ITAT, AMRITSAR BENCH IN THE CASE OF DR . USHA GUPTA IN ITA NO.394(ASR)/1992 WHEREIN THE JUDGMENT OF THE HONBL E SUPREME COURT IN THE CASE OF KISHIN CHAND CHELA RAM VS. CIT (125 ITR 713) HAS BEEN FOLLOWED. IT WAS HELD BY THE BENCH THAT IF THE AO R ELIES UPON THE DOCUMENTS OF THIRD PARTY FOR MAKING AN ADDITION IN THE CASE O F THE ASSESSEE THEN IT IS THE 4 DUTY OF THE AO TO ALLOW AN OPPORTUNITY TO THE ASSES SE TO CROSS EXAMINES THE THIRD PARTY IF THERE IS A SPECIFIC REQUEST OF THE A SSESSEE. THIS VIEW ALSO FINDS SUPPORT FROM THE DECISION OF DELHI HIGH COURT IN T HE CASE OF CIT VS. SMC SHARE BROKERS LTD. 288 ITR 345. 5.2. HE, FURTHER, POINTED OUT THAT ALL THE AUTHORIT IES INCLUDING THE SUPREME COURT OF INDIA ARE IN FAVOUR OF THE ASSESSEE AND T HE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE ON THE BASIS OF SO-CALLE D ENTRIES MADE IN THE CASE OF THIRD PARTY. IN VIEW OF THE ABOVE SUBMISSIONS, H E REQUESTED THAT THE ORDER OF THE CIT(A) MAY BE CONFIRMED AND THE APPEAL OF T HE ASSESSEE DISMISSED. 6. WE HAVE HEARD BOTH THE PARTIES AND GIVEN OUR TH OUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS, EXAMINED TH E FACTS OF THE CASE, EVIDENCE AND MATERIAL PLACED ON RECORD AND ALSO GON E THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CONSIDERED THE JUDGMENTS/DECISIONS RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE AND FOUND THAT THE SAME ARE APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE PR ESENT CASE, WHICH HAVE EVEN BEEN RELIED UPON BY THE CIT(A) IN HIS ORDER. A CAREFUL PERUSAL OF THE IMPUGNED APPELLATE ORDER DATED 31.03.2010, CLEARLY REVEALS THAT THE LD. CIT(A), HAS CONSIDERED AND ADJUDICATED THE ISSUE, I N QUESTION, IN GREATER DETAIL, AFTER APPRECIATION OF THE EVIDENCES AND MAT ERIAL ON RECORD, AS ALSO THE LEGAL AND FACTUAL POSITION OF THE CASE. NEEDLESS TO SAY THAT THE IMPUGNED APPELLATE ORDER IS WELL REASONED AND BASED ON THE C OGENT AND CREDIBLE MATERIAL AND FACTS OF THE CASE. HOWEVER, IT WOULD P ERTINENT TO REPRODUCE TO FINDINGS OF THE LD. CIT(A), FOR THE PURPOSE OF PR OPER APPRECIATION OF THE SAME: I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER & COMMENTS ON THE WRITTEN SUBMISSIONS BY THE AO AND THE WRITTEN SUBMI SSIONS AND 5 COUNTER COMMENTS OF THE A/R OF THE APPELLANT AND I FIND THAT THE ADDITION OF RS.9,58,494/- DESERVES TO BE DELETED BE CAUSE THE AO HAS VIOLATED THE PRINCIPAL OF NATURAL JUSTICE BY REJECT ING THE REQUEST OF THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDIN GS TO ALLOW AN OPPORTUNITY TO CROSS EXAMINE SH. RAJA RAM, PARTNER OF M/S. BADRI PARSHAD SANJAY KUMAR, FATEHABAD SINCE THE ADDITION ON ACCOUNT OF SALES OF COTTON BY THE APPELLANT TO M/S. BADRI PAR SHAD SANJAY KUMAR, FATEHABAD WAS MADE ONLY ON THE BASIS OF LEDGER ACC OUNT OF THE APPELLANT IN THE BOOKS OF M/S. BADRI PARSHAD SANJAY KUMAR, FATEHBAD. THE AO COULD HAVE ALLOWED THE OPPORTUNITY OF CROSS EXAMINATION DURING THE COURSE OF REMAND PROCEEDINGS, WHICH HE H AS FAILED TO DO. IT IS ALSO EVIDENT FROM THE LETTER NO.597 DAED 12.1 1.2009 OF THE ITO, WARD-1, FATEHABAD, ADDRESSED TO THE ITO, WARD-2(1), BATHINDA, WHEREIN SH. RAJA RAM IS STATED TO HAVE SAID THAT NO BILLS ARE AVAILABLE WITH THEREIN. THE SAID LETTER IS AVAILABLE ON THE ASSESSMENT RECORDS OF THE AO. THE CASE OF THE APPELLANT IS COVERED BY THE DECISIO N OF ITAT, AMRITSAR BENCH, AMRITSAR, IN THE CASE OF VIJAY KUMA R JINDAL VIDE ITA NO.244(ASR)/2006 IN WHICH IT HAS BEEN HELD IN PARA 7 AS UNDER: 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THERE IS MERIT IN THE PLEA OF THE ASSESSEE THAT THE AO HAS NOT PROVIDED AN OPPORTUNITY TO CROSS-EXA MINE THE PARTY I.E. M/S. VED PARKASH NARESH KUMAR, WHEN THE AO HAS RELIED ON THE STATEMENT FURNISHED BY M/S. VED PARKA SH NARESH KUMAR MFG. CO. BKO, IT IS FAIR TO GIVE OPPORTUNITY TO THE ASSESSEE TO CROSS-EXAMINE THE PERSON CONCERNED, OTH ERWISE IT AMOUNTS TO NON PROVIDING AN OPPORTUNITY TO THE ASSE SSEE TO ADDUCE ANY EVIDENCE IN SUPPORT OF THE CLAIM OF THE ASSESSEE. IN OUR OPINION, THE AO VIOLATED CERTAIN FUNDAMENTAL RU LES OF JUSTICE IN REACHING HIS CONCLUSION. SINCE THE AO HA S NOT GIVEN AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE CONCERNED PARTY AND TO REBUT THE MATERIAL COLLECTED BY HIM, T HE ASSESSMENT ORDER WAS PROCESSED AS A RESULT OF NO PARTICIPATION OF THE ASSESSEE. IF THE AO DENIED THE REQUEST TO THE ASSES SEE OF CROSS EXAMINATION OF THE THIRD PARTY AND ASSESSMENT ORDER IS MADE WITHOUT AFFORDING AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE PARTY WHOSE STATEMENT IS RELIED UPON T ANTAMOUNT TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE, SINC E THE ORDER OF THE AO IS INFLUENCED GREATLY BY THE INFORMATION, WH ICH WAS 6 OBTAINED FROM THIRD PARTY AND WITHOUT AFFORDING THE CROSS- EXAMINATION OF THAT PARTY, THE ORDER PASSED CANNOT BE SUSTAINED IN TOTALITY. FURTHER, THERE IS VIOLATION OF PRINCIP LES OF NATURAL JUSTICE BY WHICH THE ASSESSMENT ORDER IS INVALID ON LY WHEN THE AO HAS NOT GIVEN AN OPPORTUNITY OF CROSS EXAMINATI ON OF THE THIRD PARTY EVEN AFTER VALID REQUEST MADE BY THE AS SESSEE WITH THE AO FOR AN OPPORTUNITY OF CROSS-EXAMINATION OF THE THIRD PARTY. BUT IN THE PRESENT CASE, IT IS FOUND THAT TH E ASSESSEE DID NOT MAK ANY REQUEST FOR AN OPPORTUNITY OF CROSS EXA MINING THE THIRD PARTY AT THE LOWER LEVEL. NOW THE ASSESSEE BE FORE US IS PLEADING FOR AN OPPORTUNITY TO CROSS-EXAMINE THE THIRD PARTY ON WHOSE STATEMENT ASSESSMENT ORDER WAS FRAMED, HEN CE THE ORDER PASSED BY THE AUTHORITY CONCERN CANNOT BE SAI D TO BE HIT BY VIOLATION OF PRINCIPLE OF NATURAL JUSTICE. IN V IEW OF THESE CIRCUMSTANCES, THE ASSESSMENT CANNOT BE SAID TO BE INVALID AND CANNOT BE QUASHED. THE MISTAKE COMMITTED BY THE AO IN NOT GIVING AN OPPORTUNITY TO THE ASSESSEE OR NOT AVAIL ING OF AN OPPORTUNITY OF CROSS EXAMINATION BY THE ASSESSEE CA N BE RECTIFIED AT THIS STAGE BY AFFORDING TO THE ASSESSE E AN OPPORTUNITY OF CROSS EXAMINING THE THIRD PARTY AND THEREAFTER, ON THE BASIS OF WHICH ASSESSMENT COULD BE MADE. HE NCE, WE DIRECT THE AO TO GIVE AN OPPORTUNITY OF CROSS-EXAMI NING THE CONCERNED PERSON OF M/S. VED PARKASH NARESH KUMAR M FG. CO., BKO AND COMPLETE THE ASSESSMENT. ACCORDINGLY, THIS ISSUE IS SET ASIDE TO THE FILE OF THE AO WITH THE ABOVE D IRECTIONS. THE CASE OF THE APPELLANT IS ALSO COVERED BY THE DE CISION OF HONBLE ITAT, AMRITSAR BENCH, AMRITSAR IN THE CASE OF DR. USHA GUPTA IN WHICH THE JUDGMENT OF HONBLE SUPREME COUR T IN THE CASE OF KISHAN CHAND CHELA RAM VS. CIT 125 ITR 713 HAS BEEN ALLOWED. THE HONBLE ITAT HAS HELD THAT IF THE AO RELIES S U PON THE DOCUMENTS OF THIRD PARTY FOR MAKING AN ADDITION IN THE CASE OF THE ASSESSEE THEN IT IS THE DUTY OF THE AO TO ALLOW AN OPPORTUNITY TO THE ASSESSE TO CROSS EXAMINES THE THIRD PARTY IF THERE IS A SPECIFIC REQUEST OF THE ASSESSEE. THIS VIEW ALSO FINDS SUPPORT FROM THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. SMC SHARE BROKERS LTD. 288 ITR 345. THE HEAD NOTE OF JUDGMENT OF DELHI HIGH CO URT READS AS UNDER: SEARCH AND SEIZURE-BLOCK ASSESSMENT COMPUTATION O F UNDISCLOSED-BLOCK ASSESSMENT COMPLETED UNDER S. 158 BD AGAINST THE ASSESSEE ON THE BASIS OF DOCUMENTS DISC OVERED IN THE PREMISES OF ONE M AND THE STATEMENTS MADE BY HIM-DE SPITE 7 SEVERAL REQUESTS BY THE ASSESSEE, M WAS NOT MADE A VAILABLE FOR CROSS EXAMINATION THOUGH STATEMENT OF M HAD EVIDE NTIARY VALUE, WEIGHT COULD NOT BE GIVEN TO IT IN PROCEEDIN GS AGAINST THE ASSESSEE WITHOUT TESTING IT UNDER CROSS EXAMINATION . THEREFORE, IN THE ABSENCE OF M BEING MADE AVAILABLE FOR CROSS EXAMINATION, HIS STATEMENT COULD NOT BE RELIED UPON TO THE DETERIMENT OF THE ASSESSEE-TRIBUNAL WAS JUSTIFIED I N SETTING ASIDE BLOCK ASSESSMENT NO SUBSTANTIAL QUESTION OF LAW ARISES. IN VIEW OF THE FACTS AND LAW DISCUSSED SUPRA AND AF TER RESPECTFULLY FOLLOWING THE JUDGMENTS DISCUSSED SUPRA, I DIRECT T HE AO TO DELETE THE ADDITION OF RS.9,58,494/- MADE BY HIM ON ACCOUNT OF SALES OF COTTON TO M/S. BADRI PARSHAD SANJAY KUMAR, FATEHABAD. 6.1. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFI RMITY IN THE FINDINGS OF THE CIT(A), AS THE SAME ARE BASED ON P ROPER APPRECIATION OF THE LEGAL AND FACTUAL POSITION OF THE CASE. ACCORDINGLY , THIS APPEAL OF THE REVENUE IS DISMISSED. 7. IN THE SECOND GROUND, THE REVENUE CONTENDED THAT THE CIT(A), ERRED IN DELETING THE ADDITION OF RS.21,086/- ON ACCOUNT OF PROFIT EARNED ON UNACCOUNTED SALE OF THE ASSESSEE. 8. HAVING HEARD BOTH THE PARTIES, WE ARE OF THE CON SIDERED OPINION THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON ON ACCOUNT OF PROFIT EARNED ON UNDISCLOSED SALE, SINCE THE BASIC ISSUE O F UNDISCLOSED SALES HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. SIMILARLY, WE HAVE ALSO DISMISSED THE GROUND OF APPEAL FILED BY THE REVENUE ON THE ISSUE OF UNDISCLOSED SALES. AS SUCH THIS GROUND OF APPEAL IS ALSO DISMISSED. 9. IN C.O. NO.14(ASR).2010, THE ASSESSEE HAS RA ISED FOLLOWING GROUNDS: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN MAKING ASSESSMENT IN RESPONSE TO NOTICE UNDER SECTI ON 8 148 WHICH IS VOID ABINITIO AS ISSUED MERELY ON THE BASIS OF ENTRIES IN THE BOOKS OF OTHER (THIRD PARTY) AND WITHOUT ANY MATERIAL IN HIS POSSESSION. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION OF RS.40,000/- MADE DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS WHEREAS THE AO HAS NO EVIDENCE OR MATERIAL IN HIS POSSESSION THAT THE EXPENDITURE IS OF INADMISSIBLE NATURE WHICH HAS ALR EADY BEEN ALLOWED AT THE TIME OF ORIGINAL ASSESSMENT. 7.1. SINCE, WE HAVE UPHELD THE VIEW TAKEN BY THE LD . CIT(A), AND DISMISSED THE APPEAL OF THE REVENUE, THE C.O. FIL ED BY THE ASSESSEE NEEDS NO SEPARATE ADJUDICATION, AS IT FALLS IN THE REALM OF ACADEMIC INTEREST. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE A ND C.O. FILED BY THE ASSESSEE STAND DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 10TH JUNE, 2011. SD/- SD/- (H.L. KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 10TH JUNE, 2011 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE: SH. SOHAN LAL PROP. BHAGWATI COTTON C O.BHATINDA. 2. THE I.T.O. WARD 2(1), BHATINDA. 3. THE CIT(A), BHATINDA. 4. THE CIT, BHATINDA. 5. THE SR DR, ASR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR. 9