RUSHABH ENTERPRISES, THANE V. ASST CIT CIR 4, THANE

ITA 1580/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8522 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 07-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: ASHOK J PATIL
• Keywords: Reopening of assessment; Bogus purchase; Search and seizure; Principle of natural justice; Question of law; Accommodation entries; Bogus loan
• Section: 143(3); 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 1580 / MUM/20 17 ( ASSESSMENT YEAR : 2007 - 08 ) M/S. RUSHABH ENTERPRISES 108, AMBIKA COMMERCIAL COMPLEX, NAVGHAR ROAD VASAI (E) THANE - 410210 VS. ASST. CIT CIR 4 PAN/GIR NO. AAIFR2402F APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI ASHOK J PATIL REVENUE BY SHRI RAM TIWARI DATE OF HEARING 27 / 09 /2017 DATE OF PRONOUNCEMENT 15 / 11 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 3, THANE DATED 09/12/2016 FOR A.Y.2007 - 08 IN THE MATTER OF ORDER PASSED U/S. 143(3) R.W.S. 147 OF THE IT ACT. 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED C.I.T.(A) ERRED IN CONFIRMING ACTION OF THE ASSESSING OFFICER OF MAKING ADDITION OF RS. 31,06,521/ - U/S. 68 OF THE INCOME TAX ACT 1961. 2. THE LEARNED C.I.T.(A) ERRED IN NOT ACCEPTING SUBMISSION OF THE APPELLANT THAT RELIANCE BY ASSESSING OFFICER ON STATEMENTS OF PARTIES RECORDED BEHIND THE BACK OF THE APPELLANT AND NOT MADE AVAILABLE TO THE APPELLANT AND ALSO NOT MAKING THE SAID PARTIES AVAILABLE FOR CROSS EXAMIN ATION BY THE APPELLANT WAS FATAL TO THE PROCEEDINGS INITIATED AND ADDITION MADE U/S 68 OF RS. 31,06,521/ - ITA NO. 1580/MUM/2017 RUSHABH ENTERPRISES 2 3. THE LEARNED C.I.T. (A) FURTHER ERRED IN DISREGARDING THE FACT THAT THE LENDER HAD ATTENDED BEFORE THE ASSESSING OFFICER IN THE COURSE OF REASSESSM ENT PROCEEDINGS AND CONFIRMED THE LOAN OF RS. 30,00,000/ - (THIRTY LAKHS) ADVANCED IN NOVEMBER 2006 AND REPAID BY THE APPELLANTS IN SEPTEMBER 2009. 4. THE LEARNED C.I.T. (A) OUGHT TO HAVE HELD THAT THE IMPUGNED REASSESSMENT ORDER PASSED BY THE ASSESSING OF FICER WITHOUT PROVIDING OPPORTUNITY TO APPELLANT TO CROSS EXAMINE THE LENDER WHOSE STATEMENT WAS RECORDED BY ASSESSING OFFICER WAS INVALID AND BAD IN LAW. 5. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW THE LEARNED C.I.T. (A) OUGHT TO HAVE HELD THAT IMPUGNED REASSESSMENT ORDER WAS AB INITIO VOID AND BAD IN LAW. 6. THE APPELLANTS CRAVES LEAVE TO ADD TO, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL OR TO ADD NEW GROUNDS OF APPEAL IF CONSIDERED ESSENTIAL. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE ASSESSEE IS ENGAGED IN .THE BUSINESS OF REAL ESTATE DEVELOPMENT. THE CASE WAS REOPENED ON THE BASIS OF INFORMATION RECEIVED FROM THE DG I T (INVESTIGATION), MUMBAI THAT ASSESSEE HAS RECEIVED ACCOMMO DATION ENTRIES IN THE FORM OF UNSECURED LOAN S . NOTICE U/S 148 WAS ISSUED ON 30.03.2014 WITH THE PRIOR APPROVAL OF CIT. IN RESPONSE, THE AR OF THE ASSESSEE STATED THAT THE LOAN OF RS.30,00,000/ - HAS BEEN OBTAINED AND INTEREST OF RS.L,06,521/ - HAS BEEN PAID . IN SUPPORT, THE AR SUBMITTED CONFIRMATION OF THE SAID PARTY. THE ASSESSEE ALSO OBJECTED TO THE REOPENING OF ASSESSMENT WHICH WAS DISPOSED OFF BY THE AO, VIDE NOTING DATED 05.02.2015. FURTHER, SUMMONS U/S 131 DATED 20.02.2015 WAS ISSUED TO THE CREDITOR M/S. MAYANK IMPEX TO ATTEND PERSONALLY. HOWEVER, M/S. MAYANK IMPEX, VIDE LETTER DATED. 28.02.2015 FILED REPLY ENCLOSING COPY OF LEDGER ACCOUNT, BANK ITA NO. 1580/MUM/2017 RUSHABH ENTERPRISES 3 STATEMENT, RATE OF INTEREST AND PROOF OF REPAYMENT OF LOAN ON 23.09.2009. ON 20.03.20 15, THE PROPRIETOR OF M/S. MAYANK IMPEX ATTENDED AND STATEMENT WAS RECORDED U/S 131. MR. SANJAY K . CHOUDHARY IN HIS STATEMENT STATED THAT THEY IMPORT DIAMONDS ON A CREDIT UPTO 180 DAYS AND THESE DIAMONDS ARE SOLD LOCALLY AND SALE PROCEEDS ARE UTILIZED FOR THE LOAN ADVANCES. FURTHER, HE ALSO STATED THAT DURING SURVEY PROCEEDINGS, STATEMENT WAS RECORDED FORCIBLY. HOWEVER, NO DOCUMENTARY EVIDENCE WAS SUBMITTED. HOWEVER , THE AO MADE ADDITION OF RS.30,00,000/ - TO THE TOTAL INCOME OF THE ASSESSEE. 4. BY THE IMP UGNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO. 5. IT WAS CONTENDED BY LEARNED AR THAT THE ASSESSEE IN THE COURSE .OF THEIR SCRUTINY ASSESSMENT HAD SUBMITTED INTER - ALIA LOAN CONFIRMATION OF M/S MAYANK IMPEX FOR LOAN AMOUNTING TO RS. 30,06,000/ - WHICH WAS PURPORTED TO BE BOGUS AS PER THE REASONS GIVEN FOR REOPENING THE ASSESSMENT. THE SAID IMPUGNED LOAN HAD BEEN TAKEN BY ACCOUNT PAYEE CHEQUES AND INTEREST - THEREON HAD ALSO BEEN PAID BY ACCOUNT PAYEE CHEQUES AND SUBJECTED TO TDS. THE SAID IMPUGNED LO AN HAD BEEN ACCEPTED IN THE COURSE OF THE SCRUTINY PROCEEDINGS. THE ASSESSEE STATE D THAT THERE WAS NO FRESH INFORMATION WHICH WARRANTED REOPENING OF THEIR ASSESSMENT. THE ASSESSEE RELIED UPON THE OBSERVATION OF CALCUTTA HIG H COURT (S.P.AGARWALA ALIAS SUKHDEV PRASAD AGARWALA VS ITO (1983) 140 ITR 1010 (CALCUTTA) WHEREIN IT WAS OBSERVED THAT A MERE CONFESSIONAL STATEMENT OF THIRD PARTY ( WHO IS A LENDER OF THE ASSESSEE) THAT HE WAS A MERE NAME LENDER AND THAT ALL HIS TRA NSACTION OF LOANS WERE BOGUS, ITA NO. 1580/MUM/2017 RUSHABH ENTERPRISES 4 WITHOUT NAMING THE ASSESSEE AS ONE WHO HAD OBTAINED BOGUS LOANS, WOULD NOT BE SUFFICIENT TO HOLD THAT THE ASSESSEE'S INCOME HAD ESCAPED ASSESSMENT. 6. AS PER LEARNED AR THE LOAN TAKEN, INTEREST PAID AND THE REPAYMENT OF THE LO AN ON 23/09/2009 WERE GENUINE BUSINESS TRANSACTIONS. THE LEARNED ACIT WHILE MAKING THE ADDITION OF THE LOAN AND INTEREST AMOUNT WAS RELYING UPON FINDINGS OF SOME SEARCH AND SEIZURE REPORT OF DDIT (INVESTIGATIONS) WHEREIN THE IMPUGNED LENDER PARTY HAD BEEN MADE TO GIVE A STATEMENT THAT ALL THEIR ACTIVITIES WERE IN THE NATURE OF ACCOMMODATION ENTRIES AND WHICH STATEMENT HAD BEEN LATER RETRACTED BY HIM. NOWHERE THE ASSESSEE HAD BEEN SPECIFICALLY NAMED IN SUCH STATEMENTS OF THE IMPUGNED LENDER PARTY. THE LEARNE D ACIT MADE THE ADDITIONS WITHOUT HAVING CONCLUSIVELY PROVED OF ANY WRONG DOING BY THE ASSESSEE . THE ADDITION OF THE LOAN AND THE INTEREST AMOUNT WAS BASED ON..MERE CONJECTURES AND SURMISES ON STATEMENTS RECORDED BEHIND THE BACKS OF THE ASSESSEE AND WHICH STATEMENTS HAD BEEN RETRACTED BY THE IMPUGNED LENDER PARTY. THE ASSESSEE REL IED UPON THE JUDGMENT IN THE CASE OF CIT VS KADER KHAN (2008) 300 ITR 157 (MADRAS) WHEREIN IT WAS HELD THAT STATEMENT IN SURVEY OPERATIONS WAS NOT A CONCLUSIVE PROOF OF EVIDENCE. T HE ASSESSEE HAD PROVED THE IDENTITY OF THE CREDITOR AS THE CONCERNED LENDER PARTY APPEARED BEFORE THE LEARNED ACIT AND CONFIRMED GENUINENESS OF THE LOAN TRANSACTIONS. THE ASSESSEE SUBMIT TED THAT THE ACCEPTANCE AND REPAYMENT OF LOAN AND PAYMENT OF INTEREST WERE ALL BY ACCOUNT PAYEE CHEQUES AND WERE GENUINE TRANSACTIONS. THE LEARNED ACIT MADE THE ADDITIONS BASED ON MERE DOUBT AND SUSPICION WITHOUT ANY CONCLUSIVE PROOF OF ANY PARALLEL CASH TRANSACTIONS OR ANY WRONG DOING BY THE ASSESSEE . THE ASSESSEE SUBMIT T HAT THEY HAVE UNDERTA KEN DUE ITA NO. 1580/MUM/2017 RUSHABH ENTERPRISES 5 CARE AND DILIGENCE IN THEIR GENUINE BUSINESS TRANSACTION AND HAVE NO CONTROL ON OTHER ACTIVITIES OF VARIOUS LENDER PARTIES AND ALSO DO NOT HAVE ANY ACCESS TO THE FINANCIAL INFORMATION / FINANCIAL STATEMENT OF VARIOUS LENDER PAR TIES. INSPITE OF HAVING TAKEN DUE CARE AND DILIGENCE TO PROVE THE IDENTITY, CAPACITY OF THE LENDER PARTY AND GENUINENESS OF THE LOAN TRANSACTIONS, IT WAS AGAINST THE PRINCIPLES OF NATURAL JUSTICE FOR THE ACIT TO MAKE ADDITIONS OF THE LOAN AND INTEREST AMOUNT TO THEIR TOTAL INCOME BASED ON MERE CONJECTURES AND SURMISES WHICH WERE DERIVED FROM CERTAIN STATEMENTS APPEARING IN THEIR CONFIDENTIAL REPORT WHICH HAD BEEN RETRACTED BY THE LENDER PARTY. THE ADDITIONS GROSSLY VIOLATE PRINCIPLES OF NATURAL JUSTICE AS THE ASSESSEE WAS NOT GIVEN ANY OP PORTUNITY TO CROSS EXAMINE THE L ENDER PARTY AND FURTHER WERE NOT PROVIDED COPY OF THE STATEMENTS / REPORTS RELIED UPON BY THE LEARNED ACIT. IN EFFECT THE ADDITIONS WERE BASED ON MERE CONJECTURES AND SU RMISES BASED ON RETRACTED STATEMENTS WHICH HAD BEEN RECORDED BEHIND THE BACKS OF THE ASSESSEE AND FURTHER THERE WAS NO CONCLUSIVE PROOF OF ANY PARALLEL CASH TRANSACTIONS OR WRONG DOING BY THE ASSESSEE. 7. ON THE OTHER HAND, LEARNED DR RELIED ON THE FI NDING RECORDED BY LOWER AUTHORITIES WITH REGARD TO THE ADDITION MADE U/S.68 OF THE IT ACT. 8. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT TO SUBSTANTIATE THE LOAN TRANSACTIO N, ASSESSEE HAS FILED CONFIRMATION WITH RESPECT TO THE LOAN RECEIVED THROUGH CHEQUE. THIS LOAN WAS ALREADY REPAID BY CHEQUE. I ALSO FOUND THAT AO HAS ISSUED SUMMON U/S.131 TO THE CREDITOR WHO FILED LETTER DATED 28/02/2015 ALONGWITH COPY OF LEDGER ACCOU NT, BANK STATEMENT, ITA NO. 1580/MUM/2017 RUSHABH ENTERPRISES 6 RATE OF INTEREST AND PROOF OF REPAYMENT OF LOAN. I ALSO FOUND THAT PROPRIETOR OF M/S. MAYANK IMPEX (CREDITOR) ATTENDED AND HIS STATEMENT HAD ALSO RECORDED U/S.131. MR. SANJAY K, CHOUDHARY , PROPRIETOR OF M/S. MAYANK IMPEX IN HIS STATEM ENT STATED THAT THEY WERE ENGAGED IN THE BUSINESS OF IMPORT AND TRADING OF DIAMONDS. I ALSO FOUND THAT ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO CROSS - EXAMINE THE LENDER PARTY AND WAS ALSO NOT PROVIDED COPY OF STATEMENT / REPORTS RELIED UPON BY THE A O W HILE MAKING THE ADDITION. 9. AS PER MY CONSIDERED VIEW DENIAL OF SUCH OPPORTUNITY GOES TO THE ROOT OF THE MATTER AND STRIKE AT THE VERY FOUNDATION OF THE ASSESSMENT ORDER. NOT PROVIDING SUCH OPPORTUNITY AMOUNTED TO VIOLATION OF PRINCIPLE OF NATURAL JUSTICE, A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY. UNDER THESE FACTS AND CIRCUMSTANCES, THE JUDICIAL PRONOUNCEMENTS LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN CASE OF ASHISH INTERNATIONAL IS CLEARLY APPLICABLE WHEREIN HONBLE BOMBAY HIGH COURT HELD AS UNDER: - THE QUESTION RAISED IN THIS APPEAL IS, WHETHER THE TRIBUNAL JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF BOGUS PURCHASES ALLEGEDLY MADE BY THE ASSESSEE FROM M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. ACCORDING TO THE REVENUE, THE DI RECTOR OF M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. IN HIS STATEMENT HAD STATED THAT THERE WERE NO SALES / PURCHASES BUT THE TRANSACTIONS WERE ONLY ACCOMMODATION BILLS NOT INVOLVING ANY TRANSACTIONS. THE TRIBUNAL HAS RECORDED A FINDING OF FACT THA T THE ASSESSEE HAD DISPUTED THE CORRECTNESS OF THE ABOVE STATEMENT AND ADMITTEDLY THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE THE CONCERNED DIRECTOR OF M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. WHO HAD MADE THE ABOVE STATEMEN T. THE APPELLATE AUTHORITY HAD SOUGHT REMAND REPORT AT THAT STAGE THE GENUINENESS OF THE STATEMENT HAS NOT BEEN ESTABLISHED BY ALLOWING CROSS EXAMINATION OF THE PERSON WHOSE STATEMENT WAS RELIED UPON BY THE REVENUE. IN THESE CIRCUMSTANCES, THE DECISION O F THE TRIBUNAL BEING BASED ON THE FACT, NO SUBSTANTIAL QUESTION OF LAW CAN BE SAID TO ARISE FROM THE ORDER OF THE TRIBUNAL. THE APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS . ITA NO. 1580/MUM/2017 RUSHABH ENTERPRISES 7 10. HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES 281 CTR 241 HAS HELD THAT NOT ALLOWING ASSESSEE TO CROSS - EXAMINE WITNESSES BY ADJUDICATING AUTHORITY THOUGH STATEMENTS OF THOSE WITNESSES WERE MADE AS BASIS OF IMPUGNED ORDER, AMOUNTED IN SERIOUS FLAW WHICH MADE IMPUGNED ORDER NULLITY AS IT AMOUNTED TO VIOLATION OF PR INCIPLES OF NATURAL JUSTICE. THE PRECISE OBSERVATION OF THE HONBLE SUPREME COURT WAS AS UNDER: - 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 IMP UGNED 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 U PON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS - EXAMINE, 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 A UTHORITY. A PPELLANT 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 RE LIED 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 SUB JECT MATTER OF CROSS - EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJECT MATTER OF THE CROSS - EXAMINATION AND MAKE THE REMARKS AS MENTIONED ABOVE. 11. SIMILAR VIEW HAS BEEN TAKEN BY THE JURISDICT IONAL HIGH COURT IN THE CASE OF H.R.MEHTA IN ITS ORDER DATED 07/07/2016. THE HONBLE HIGH COURT HELD AS UNDER: - ITA NO. 1580/MUM/2017 RUSHABH ENTERPRISES 8 THE ASSESSEE IS BOUND TO BE PROVIDED WITH THE MATERIAL USED AGAINST HIM APART FROM BEING PERMITTED TO CROSS EXAMINE THE DEPONENTS. THE DENIAL O F SUCH OPPORTUNITY GOES TO ROOT OF THE MATTER AND STRIKES AT THE VERY FOUNDATION OF THE ASSESSMENT ORDER AND RENDERS IT VULNERABLE. 12. APPLYING THE PROPOSITION OF LAW LAID DOWN BY HONBLE BOMBAY HIGH COURT AND HONBLE SUPREME COURT TO THE FACTS OF THE IN STANT CASE, I DO NOT FIND ANY MERIT FOR THE ADDITION MADE BY AO WITHOUT ALLOWING ASSESSEE AN OPPORTUNITY TO CROSS EXAMINE THE PERSON ON WHOSE STATEMENT ADDITION WAS MADE. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 / 11 /2017 SD/ - (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI ; DATED 15 / 11 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//