M/s. Kesar Enterprises Limited, Mumbai V. Addl. CIT, New Delhi

ITA 1632/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3011 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 23-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 19-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAVEEN CHANDRA
• Assessee Lawyers: G N GUPTA I T PRACTITIONER
• Keywords: Unexplained expenditure; Opportunity of being heard; Opportunity of cross examination; Third party statement; Retraction; Documents seized
• Section: 32; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO. 1632 / DEL/2014 A.Y. : 2006 - 2007 M/S KESAR ENTERPRISES LIMITED, 6 TH FLOOR, ORIENTAL HOUSE, 7, JAMSHEDJI TATA ROAD, CHURCHGATE, MUMBAI-400 020 (PAN: AABCK7328R) VS. DCIT, CENTRAL RANGE - 19, ROOM NO. 319/E-2, ARA CENTRE, JHANDEWALAN EXTENSION, NEW DELHI 110 055 (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. G.N. GUPTA, (I.T. PRACTITIONER) DEPARTMENT BY : SH. NAVEEN CHANDRA, CIT(DR) ORDER PER H.S. SIDHU, JM THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE IMPUGNED ORDER DATED 1/10/2013 PASSED BY THE LD. COMMISSIONER OF INCOME TAX(APPEALS)-XII, NEW DELHI. 2. THE GROUNDS RAISED IN THIS APPEAL READ AS UNDER :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) GROSSLY ERRED IN HOLDING THAT THE DOCUMENTS SEIZED ON 14.2.2006 DURING THE COURSE OF A SEARCH U/S. 132 OF THE I.T. ACT, 1961 2 FROM THE RESIDENTIAL PREMISE OF SH. RK MIGLANI, SECRETARY GENERAL OF UTTAR PRADESH DISTILLERY ASSOCIATION BELONGED TO THE APPELLANT PARTICULARLY IN VIEW OF THE FACT THAT IN THE APPELLANTS OWN CASE, THE ASSESSMENT ORDERS FOR ASSESSMENT YEARS 2002- 03, 2003-04, 2004-05 AND 2005-06 FRAMED U/S. 153C OF THE ACT WERE QUASHED BY ITAT, DELHI BENCH-E VIDE THEIR ORDERS DATED 23.11.2012 ON THE SPECIFIC GROUND THAT THE AFORESAID DOCUMENTS DID NOT BELONG TO THE APPELLANT. 2. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, CIT(A) ERRED IN REJECTING THE CONTENTION OF THE APPELLANT THAT AS FAR AS ASSESSMENT YEAR 2006-07 UNDER CONSIDERATION WAS CONCERNED, THE APPELLANT HAVING RESIGNED FROM THE MEMBERSHIP OF UPDA FROM MARCH, 2005, HAD NO LINKS WHATSOEVER WITH EITHER UPDA OR WITH ITS SECRETARY GENERAL SHR. RK MIGLANI. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, CIT(A) ERRED IN HOLDING THAT THE DCIT COULD VALIDLY RELY ON THE STATEMENTS OF SH. RK MIGLANI RECORDED BEHIND THE BACK OF THE APPELLANT AND THAT IT WAS NOT INCUMBENT ON THE DCIT TO HAVE ARRANGED FOR THE CROSS EXAMINATION OF SH. RK MIGLANI BY THE APPELLANT IF HE WANTED TO RELY ON THE STATEMENTS OF SH. RK MIGLANI RECORDED ON 14.2.2006. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 3 91,51,500/- INCLUDED BY THE AO IN THE INCOME OF THE APPELLANT ON ACCOUNT OF UNEXPLAINED PAYMENTS ALLEGED TO HAVE BEEN MADE BY THE APPELLANT OUT OF UNDISCLOSED SOURCSE. 5. THAT THE APPELLANT CRAVES LIBERTY TO ADD, ALTER, VARY OR AMEND ANY GROUND OF APPEAL. 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED BY TH E LD. COUNSEL OF THE ASSESSEE THAT THE ONLY DISPUTE IN THIS APPEAL IS WITH REGARD TO THE ADDITION OF RS. 91,51,500/- MADE BY THE AO ON THE BASIS OF STATEMENT OF SH. RK MIGLANI. THAT THE AO HAS NEVER ALLO WED ANY OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SH. MIG LANI. HE FURTHER STATED THAT ON THE BASIS OF STATEMENT OF SH. M IGLANI, THE ADDITION WAS MADE IN THE CASE OF SIR SHADI LAL ENTERP RISES, IN WHOSE CASE, THE ITAT SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORED THE MATTER TO THE FILE OF THE AO VIDE ORDER DA TED 18.12.2015 IN ITA NO. 4993/DEL/2011. HE FURTHER STATE D ITAT ALSO ON SIMILAR LINES SET ASIDE AND RESTORED BACK THE ISS UE TO THE FILE OF THE AO IN THE CASE OF NATIONAL INDUSTRIAL CORPORATION L IMITED VS. DCIT DECIDED IN ITA NO. 2116/DEL/2012 VIDE ORDER DA TED 30.03.2016. HE SUBMITTED THAT THE FACTS BEING IDENTICA L, THE ISSUE UNDER CONSIDERATION SHOULD ALSO BE SET ASIDE TO THE F ILE OF THE AO WITH THE IDENTICAL DIRECTION. 4 4. LD. D.R., ON THE OTHER HAND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED MATERIAL PLACED BEFORE US. WE FIND THAT THE IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE BY THE ITAT IN THE CASE OF NATIONAL INDUSTRIAL CORPORATION LIMITED VS. D CIT DECIDED IN ITA NO. 2116/DEL/2012 (AY 2006-07) VIDE ORDER DATED 30.03.2016, WHEREIN THE ITAT SET ASIDE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO ALLOW OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SH. MIGLANI. THE RELEVANT FINDINGS OF THE ITAT READS AS UNDER:- 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND HAVE PERUSED MATERIAL PLACED BEFORE US. WE FIND THAT THE IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE ITAT IN THE CASE OF M/S SIR SHADI LAL ENTERPRISES LTD., WHEREIN THE ITAT SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO ALLOW OPPORTUNITY TO THE ASSESSEE TO CROSS-EXAMINE SHRI MIGLANI. THE RELEVANT FINDING OF THE ITAT READS AS UNDER:- 19. WE FIND THAT THE STATEMENT GIVEN BY MR. MIGLANI IN 14.02.2006 HAS BEEN RETRACTED BY MR. MIGLANI ON 03.03.2008 (I.E. AFTER MORE 5 THAN 2 YEARS) BY FILING AN AFFIDAVIT. IT HAS TO BE SEEN UNDER WHAT CIRCUMSTANCES HE HAS RES/LED FROM THE EARLIER STATEMENT AND REASONS FOR DOING SO AFTER 2 YEARS AND IT HAS TO BE EXAMINED WHETHER THE RETRACTION AFTER SUCH A LONG TIME INSPIRES CONFIDENCE AND WHETHER ANY WEIGHTAGE NEED TO BE GIVING TO IT HAS TO BE EXAMINED BY THE AO. HOWEVER, THE AO SHOULD KEEP IN MIND THAT BEFORE MAKING AN ADDITION BY THE DEPARTMENT AGAINST THE ASSESSEE, IF MR. MIGLANI'S STATEMENT HAS BEEN RELIED ON BY THE AD, THEN MR. MIGLANI SHOULD HAVE BEEN ALLOWED TO BE CROSS EXAMINED BY THE ASSESSEE. WE FIND THAT THE ASSESSEE HAD REQUESTED FOR CROSS-EXAMINING MR. MIGLANI WHICH HAS NOT BEEN DONE IN THIS MATTER. THE AO SIMPLY HAS SENT SOME SUMMONS AND HAS ASKED THE ASSESSEE TO PRODUCE MR. MIGLANI. WE TAKE NOTE THAT IN THE ABSENCE OF MR. MIGLANI NOT COMING BEFORE HIM, THE AD PUT THE RESPONSIBILITY ON THE ASSESSEE TO PRODUCE HIM AND WHEN THE ASSESSEE FAILED TO PRODUCE MIGLANI BEFORE THE AO, THEN HE WENT AHEAD WITH THE IMPUGNED ADDITION WHICH CANNOT BE COUNTENANCED. IN CASE, IF MR. MIGLANI IS NOT KEEPING WELL THEN THE AD SHOULD CONSIDER TO ISSUE A COMMISSION U/S 131(D) OF THE ACT TO COLLECT EVIDENCE AND ALLOWING THE ASSESSEE ALSO TO CROSS EXAMINE HIM. THE EVIDENCES COULD HAVE BEEN COLLECTED 6 NOT ONLY FROM MR. MIGLANI, IT COULD HAVE BEEN COLLECTED BY INVESTIGATING FURTHER FROM 23 DISTILLERIES WHICH COULD HAVE THROWN LIGHT OF THE MODUS OPERANDI OF THESE DISTILLERIES AS HAS BEEN SAID BY MR. MR. MIGLANI DURING SEARCH. WE FIND A THOROUGH INVESTIGATION IS NEEDED IN THIS CASE. 20. FROM A PERUSAL OF PAGE 4 OF THE AO'5 ORDER, WE NOTE THAT ASSESSES PILKHANI AND SHAMLI DISTELLERIES, ACCORDING TO AO, INCURRED UNEXPLAINED EXPENDITURE OF RS.214 LAKHS. SINCE THE ASSESSEE IS ONE OF THE MEMBER OF THE SOCIETY REGISTERED AS UPDA, WHICH WAS INVOLVED IN ILLEGAL ACTIVITIES AS STATED BY THE AO, THEN NOTHING PREVENTED THE AO TO HAVE PIERCED THE VEIL AND EXAMINE/INVESTIGATE THE SAID ILLEGAL ACTIVITIES IN DETAIL TO BRING OUT THE UNEXPLAINED EXPENDITURE INCURRED BY THE ASSESSEE AND UNDISCLOSED INCOME IN THE HANDS OF UPDA. IT IS WELL SETTLED THAT THE AO IS NOT TIED DOWN BY THE STRICT APPLICATION OF EVIDENCE ACT AND HE CAN USE THE INFORMATION FROM HIS ENQUIRY FROM THIRD PERSONS ALSO, HOWEVER, IT HAS TO BE KEPT IN MIND THAT, IF THE AO IS GOING TO MAKE ANY ADDITION/DISALLOWANCE BASED ON THIRD PARTY INFORMATION, THEN HE IS BOUND TO GIVE A COPY OF THE INFORMATION TO THE ASSESSEE AND GIVE AN OPPORTUNITY TO THE ESSESSEE TO REBUT THE SAME AND ALLOW THE 7 ASSESSEE TO TEST THE THIRD PARTY STATEMENT BY ALLOWING THE ASSESSEE TO CROSS-EXAMINE THE THIRD PARTY. IN CASE, IF THE THIRD PARTY CANNOT BE TRACED OR DIES, APPLICATION OF SECTION 32 OF THE INDIAN EVIDENCE ACT NEED TO BE EXAMINED, HOWEVER, THE AO SHOULD MAKE ALL ENDEAVOR TO TRACE THE THIRD PARTY AND SHOULD NOT PUT THE BURDEN ON THE ASSESSEE TO PRODUCE THE THIRD PARTY INFORMATION ON WHICH HE INTENDS TO MAKE ADVERSE FINDING OR ADDITION OR DISALLOWANCE ON THE ASSESSEE. 22. FROM MR. MIGLANI STATEMENT AND OTHER EVIDENCES, IT HAS TO BE ESTABLISHED THAT ASSESSEE WAS A MEMBER OF UPDA, THEN MR. MIGLANI'S STATEMENT THAT MONEY USED TO BE COLLECTED BY CORE DISTILLERY IN THE CASE OF ASSESSEE, IT IS SAID TO BE LORD DISTILLERY AND A LEAD DISTILLERY, M/S SSL WHETHER ANY EVIDENCE IS COLLECTED TO CORROBORATE THIS FACT. 23. THEREFORE, WE ARE INCLINED TO SET ASIDE THE ORDER OF THE LOWER AUTHORITIES AND REMAND THIS ISSUE I.E. GROUNDS NO.1 TO 2.4 BACK TO THE FILE OF THE AO TO DE NOVO DECIDE ON THESE ISSUES IMPUGNING ADDITION OF RS.2,14,39,OOO/- AFTER GIVING OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE MR. MIGLANI AND TO COLLECT EVIDENCES IN THE LIGHT OF THE ABOVE DIRECTION OF OURS. WE WOULD LIKE TO MAKE IT CLEAR THAT ANY 8 OBSERVATION OF OURS MADE ABOVE SHALL NOT INFLUENCE IN ANY MANNER THE OUTCOME OF THE ADJUDICATION THE ISSUES HAVE TO BE DEALT WITH ON ITS OWN MERITS AND NOTHING SHOULD BE READ TO ADVERSELY AFFECT THE ASSESSEE. WE ORDER ACCORDINGLY.' 6. ADMITTEDLY, THE FACTS IN THE APPEAL UNDER CONSIDERATION ARE IDENTICAL. THEREFORE, RESPECTFULLY FOLLOWING THE-ABOVE DECISION OF ITAT, WE ALSO SET ASIDE THE ORDERS OF AUTHORITIES BELOW ON THIS POINT AND DIRECT THE ASSESSING OFFICER TO READJUDICATE THE ISSUE IN THE LIGHT OF THE ORDER OF THE ITAT IN THE ABOVE APPEAL. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES. 6. AFTER PERUSING THE AFORESAID FINDING OF THE COORDI NATE BENCH, WE ARE OF THE CONSIDERED VIEW THAT ADMITTEDLY THE FAC TS IN THE PRESENT APPEAL ARE ALSO IDENTICAL. HENCE, RESPECTFUL LY FOLLOWING THE AFORESAID DECISION DATED 30.3.2016 OF THE ITAT, WE AL SO SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS POINT AND DIRECT THE AO TO DECIDE THE ISSUE IN DISPUTE AFRESH, IN LIGHT OF THE O RDER OF THE ITAT, AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30/05/2017. SD/- SD/- (O.P. KANT) [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE30/05/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES