Sandip Shantilal Khivansara, Nashik V. Dy. CIT, Circle-1, Nashik

ITA 1681/PUN/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1016 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 04-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B; DHEERAJ KUMAR JAIN JAIN
• Keywords: Reopening of assessment; Document seized; Principle of natural justice; Documents seized

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1681/PN/2013 '% % / ASSESSMENT YEAR : 2008-09 SHRI SANDIP SHANTILAL KHIVANSARA, IST FLOOR, HIRALAL TOWERS, NEAR S.T. STAND, SINNAR, NASHIK PAN NO. AGFPK4160Q . / APPELLANT V/S DCIT, CIRCLE-1, NASHIK . / RESPONDENT / APPELLANT BY : SHRI PRAMOD SHINGTE / DEPARTMENT BY : SHRI DHEERAJ KUMAR JAIN JAIN & B / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER DATED 18-07-2013 OF THE CIT(A)-I, NASHIK RELATING TO AS SESSMENT YEAR 2008-09. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A N INDIVIDUAL AND ENGAGED IN THE BUSINESS OF CIVIL CONTRACTOR AND DEVELO PERS AND TRADING IN CONSUMER GOODS ETC. HE FILED HIS RETURN OF INC OME ON 30-09-2008 DECLARING TOTAL INCOME OF RS.29,21,270/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT A SEARCH ACTION / DATE OF HEARING :08.10.2015 / DATE OF PRONOUNCEMENT:09.10.2015 2 ITA NO.1681/PN/2013 U/S.132 OF THE I.T. ACT WAS CARRIED OUT AT THE PREMISES OF PRIDE PURPLE AND BHALE GROUP OF PUNE ON 11-01-2008. FROM THE PREM ISES OF SHRI RAKESH AGARWAL, CONSULTANT OF PRIDE GROUP, A DOCUMENT NO.2 7/BUNDLE NO.2 PERTAINING TO THE ASSESSEE, I.E. SHRI SANDEEP SHANTILAL KHIVANSARA WAS SEIZED. THE SAID DOCUMENT IS RELATED TO EXECUTION OF THE TRANSACTION RELATING TO SALE OF PLOT AT PUNE ON WHICH THE ASSESSEE HAS DISCLOSED SHORT TERM CAPITAL GAIN. THE DOCUMENT CLEARLY INDICATES THAT AGAINST THE AGREEMENT COST OF RS.22 LAKHS (I.E. AMOUNT CONS IDERED BY THE ASSESSEE FOR COMPUTING SHORT TERM CAPITAL GAIN) THE T OTAL CONSIDERATION IS RS.58,83,303/- AND BROKERAGE PAID IS RS.8,1 7,660/-. SHRI RAKESH AGARWAL IN HIS DEPOSITION MADE DURING THE COUR SE OF THE SEARCH PROCEEDINGS, WHEN CONFRONTED WITH THE ABOVE DOCU MENT, ADMITTED THAT THE PRIDE GROUP HAS PAID THE AMOUNT OF RS .2,98,303/- IN CASH AS INDICATED ON THE SEIZED PAPER. THE AO HANDED O VER A COPY OF THE SEIZED PAPER AND THE STATEMENT OF SHRI RAKESH AGAR WAL TO THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ON 03-11-201 0 CALLING FOR HIS EXPLANATION/COMMENTS IN RESPECT OF THE ABOVE WITH REFEREN CE TO THE SHORT TERM CAPITAL GAIN DISCLOSED. 3. THE ASSESSEE IN HIS STATEMENT STATED THAT THE SEIZ ED PAPER IS NOT IN THE HANDWRITING OF THE ASSESSEE. THE PAYMENT FOR THE TRANSACTION OF THE PROPERTY IN QUESTION WAS RECEIVED BY HIM AT RS.22 LAK HS BY CHEQUES FOR WHICH HE HAS PAID THE BROKER A LUMPSUM BROK ERAGE OF RS. 2 LAKHS ON WHICH TDS HAS BEEN MADE. HE IS NOT IN KNOWLEDG E ABOUT THE FINANCIAL INFORMATION CONTAINED IN THE SEIZED PAPER. THE ASSESSEE DOES NOT KNOW MR. RAKESH AGARWAL, THE DEPONENT AND HE THEREFORE, DOES NOT KNOW TO WHOM THE CASH OF RS.29,83,030/- MENTIO NED IN THE STATEMENT/DOCUMENT HAS BEEN PAID AS THE STATEMENT DO ES NOT INDICATE THAT THE PAYMENT OF CASH HAS BEEN PAID TO HIM. A REQUE ST WAS 3 ITA NO.1681/PN/2013 THEREFORE MADE NOT TO HOLD THE DEPOSITION OF SHRI RAKESH AGARWAL AND THE CONTENTS OF THE SEIZED PAPER AGAINST THE ASSESSEE. IT WAS FURTHER MENTIONED THAT IF THE ABOVE EXPLANATION IS NOT ACCEPTABLE, THEN THE ASSESSEE SHOULD BE GIVEN AN OPPORTUNITY TO CROSS EXAMIN E SHRI RAKESH AGARWAL BEFORE THE ISSUE IS DECIDED. 4. HOWEVER, THE AO HELD THAT THE SEIZED PAPER AND THE DEPOSITION OF SHRI RAKESH AGARWAL RELATES TO THE TRANSACTION ENTERED INTO BY THE ASSESSEE WITH THE PRIDE GROUP ON WHICH SHORT TERM CAPIT AL GAIN HAS BEEN OFFERED TO TAX BY THE ASSESSEE ON THE CONSIDERATIO N RECEIVED AS PER THE AGREEMENT AT RS.22 LAKHS. THE SAME WAS CONFIRME D BY THE ASSESSEE AS PER HIS WRITTEN SUBMISSION DATED 16-11-2010 AFTER ACCEPTING THE NOTINGS TO BE RELATED TO THE ABOVE TRANS ACTION. IN THE WRITTEN SUBMISSIONS THE ASSESSEE HAS CHOSEN TO ISOLATE H IMSELF FROM THE ACTUAL TRANSACTION RECORDED IN THE SEIZED PAPER, UN DERSTANDABLY FOR THE REASON THAT THE CASH RECEIPT OF RS.29,83,030/- H AS NOT BEEN ACCOUNTED FOR BY HIM AND NOT CONSIDERED IN THE RETURN OF INCOME FILED. THE AO OBSERVED THAT THE SEIZED PAPER CONTAINS THE CA TEGORICAL FINDINGS. THEREFORE, THERE IS NO FORCE IN THE SUBMISSION OF THE ASSESSEE THAT HE DOES NOT KNOW ABOUT THE CASH OF RS.29,83,030/- MENTIONED IN THE SEIZED PAPER. AS THERE IS NO OTHER PARTY TO THE DE AL EXCEPT THE PRIDE GROUP, THE BROKERS WHOSE NAMES AND AMOUNTS ARE MENTI ONED AND THE ASSESSEE AND SINCE THE PRIDE GROUP HAS ALREADY ACCEPTE D THE FACT THAT THEY HAVE PAID THE CASH AMOUNT OF RS.29,83,030/- WHICH I S OVER AND ABOVE THE CONSIDERATION OF RS.22 LAKHS RECORDED IN THE DO CUMENTS, THEREFORE, THE AO RELYING ON VARIOUS DECISIONS AND OBSERV ING THAT ALL THE FACTS AND CIRCUMSTANCES POINT THAT THE ASSESSEE HA S RECEIVED CASH OF RS.29,83,030/-, HELD THAT THE REQUEST OF THE ASSESSEE T O CROSS EXAMINE SHRI RAKESH AGARWAL WOULD NOT SERVE ANY PURPOSE . HE 4 ITA NO.1681/PN/2013 THEREFORE DECLINED THE REQUEST OF THE ASSESSEE TO CROSS EXAMINE SHRI RAKESH AGARWAL AND MADE ADDITION OF RS.29,83,030/- TO THE TOTAL INCOME OF THE ASSESSEE. 5. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE AO BOT H IN MAKING ADDITION OF RS.29,83,030/- AND DENIAL OF OPPORTUNITY T O CROSS EXAMINE SHRI RAKESH AGARWAL. WHILE DOING SO, HE HELD THAT TH E SEIZED DOCUMENT AS WELL AS THE COPY OF STATEMENT OF SHRI RAKESH AGARWAL WERE GIVEN TO THE ASSESSEE BY THE AO DURING THE COURS E OF ASSESSMENT PROCEEDINGS. THE CONTENTS OF THE SEIZED DOCUMENTS CLEAR LY ESTABLISH THE NATURE AND THE AMOUNT OF THE TOTAL CONSIDERATION. T HE CONSULTANT OF PRIDE GROUP, WHO HAS PAID CASH OF RS.29,83,030/- OVER AN D ABOVE THE CHEQUE AMOUNT, HAS ADMITTED THE FACT OF MAKING UNACC OUNTED CASH PAYMENT OF RS.29,83,030/- TO THE ASSESSEE AS PART OF SALE CONSIDERATION. THE NATURE OF THE SEIZED DOCUMENT AND TH E STATEMENT OF SHRI RAKESH AGARWAL COMPLETELY JUSTIFY THE ACTION OF TH E AO IN MAKING THE ADDITION OF RS.29,83,030/- AS ASSESSEES CONCE ALED INCOME. HE ACCORDINGLY JUSTIFIED THE ACTION OF THE AO IN MAKING THE ADDITION. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND AS PER LAW, THE CIT(A)-I, NASHIK IS NOT JUSTIFIED IN CONFIRM ING THE ADDITION OF RS.29,82,030/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ALLEGED UNDISCLOSED CASH ELEMENT IN SALE OF PLOT. 2. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS NOT JUSTIFIED IN NOT GRANTING OPPORTUNITY T O CROSS EXAMINE MR. RAKESH AGARWAL, ON THE BASIS OF WHOSE STATEMENT, THE ADD ITION OF RS.29,83,030/- WAS MADE IN THE HANDS OF THE APPELLANT ON ACCOUNT OF ALLEGED UNDISCLOSED CASH ELEMENT IN SALE OF PLOT. 3. THE APPELLANT CRAVES FOR ADDITION TO, DELETION, A LTERATION, MODIFICATION, CHANGE ANY OF THE ABOVE GROUNDS. 5 ITA NO.1681/PN/2013 7. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBM ITTED THAT ADDITION HAS BEEN MADE BY THE AO AND CONFIRMED BY THE C IT(A) WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SHRI RAKESH AGARWAL, CONSULTANT OF THE PRIDE GROUP, TO WHOM TH E ASSESSEE HAS SOLD THE PROPERTY. REFERRING TO THE DECISION OF THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF R.W. PROMOTIONS PVT. LTD. VS. ACIT VIDE ITA NO.1489/2013 ORDER DATED 13-07-2015 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT THE ASSESS EE IS ENTITLED TO CROSS EXAMINE THE WITNESS WHOSE STATEMENT IS RELIED U PON BY THE REVENUE. THIS RIGHT TO EXAMINE IS A PART OF THE AUDI ALTR EM PARTEM PRINCIPLE AND THE SAME CAN BE DENIED ONLY ON STRONG REA SON TO BE RECORDED AND COMMUNICATED. OPPORTUNITY TO CROSS EXAMI NE, IF NOT GIVEN, AMOUNTS TO BREACH OF PRINCIPLES OF NATURAL JUSTICE. A CCORDINGLY, THE HONBLE HIGH COURT HAS SET ASIDE THE MATTER TO THE FILE OF THE AO FOR FRESH DISPOSAL AFTER FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE AND IN ACCORDANCE WITH LAW. HE ACCORDINGLY SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE AO WITH A DIRECTION TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SHRI RAKESH AGARWAL A ND THEN DECIDE THE ISSUE. 8. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND T HE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E DECISION RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. WE FIND THE AO ON THE BASIS OF SOME DOCUMENTS SEIZED FROM THE PREMISES OF SHRI R AKESH AGARWAL, A CONSULTANT OF PRIDE GROUP TO WHOM THE ASSESS EE HAS SOLD 6 ITA NO.1681/PN/2013 THE LAND, MADE ADDITION OF RS.29,83,030/- WHICH WAS THE AMOU NT PAID ALLEGEDLY BY THE PRIDE GROUP TO THE ASSESSEE IN CAS H AND WHICH IS OVER AND ABOVE THE AGREED PRICE OF RS.22,00,000/-. ALTHO UGH THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS H AD FLATLY DENIED TO HAVE RECEIVED ANY SUCH AMOUNT IN CASH FROM PR IDE GROUP AND HAS REQUESTED FOR CROSS EXAMINATION OF SHRI RAKESH AGARWAL WE FIND THE AO DECLINED TO ACCEDE THE REQUEST OF THE ASSES SEE ON THE GROUND THAT THE SAME WOULD NOT SERVE ANY PURPOSE IN VIEW OF THE DOCUMENT SEIZED AND THE CATEGORICAL STATEMENT OF SHRI R AKESH AGARWAL. WE FIND THE LD.CIT(A) UPHELD THIS ACTION OF THE AO. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT WITHOU T GIVING AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SHRI RAKE SH AGARWAL THE AO SHOULD NOT HAVE MADE THE ADDITION TO THE TOTAL INCOM E OF THE ASSESSEE ESPECIALLY WHEN THE ASSESSEE DOES NOT KNOW M R. RAKESH AGARWAL. FOR THE ABOVE PROPOSITION THE ASSESSEE RELIED O N THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S.R.W. PROMOT IONS PVT. LTD. (SUPRA). 10. WE FIND THE HONBLE BOMBAY HIGH COURT WHILE DECIDING AN IDENTICAL ISSUE WHERE OPPORTUNITY TO CROSS EXAMINE THE WIT NESS WHOSE STATEMENT WAS RELIED UPON BY THE REVENUE WAS NOT ALLOWE D HAD HELD THAT DENIAL OF SUCH CROSS EXAMINATION IS BREACH OF PRINCIP LES OF NATURAL JUSTICE. ACCORDINGLY, THE ORDER OF THE TRIBUNAL WAS SET AS IDE TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE AFRES H AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE WITNESS. THE RELEVANT OBSERVATION OF THE HONBLE HIGH COURT AT PA RA 11 TO 13 OF THE ORDER READS AS UNDER : 7 ITA NO.1681/PN/2013 11. WE FIND THAT THERE HAS BEEN A BREACH OF PRINCIP LES OF NATURAL JUSTICE IN AS MUCH AS THE ASSESSING OFFICER HAS IN HIS ORDER PLACED RELIANCE UPON THE STATEMENTS OF REPRESENTATIVES OF M/S. INORBIT AND M/S. NUPUR TO COME TO THE CONCLUSION THAT CLAIM FOR EXPENDITURE MADE BY THE APPELLANT IS NOT GENUINE. THUS THE APPELLANT WAS ENTITLED TO CROSS EXAM INE THEM BEFORE ANY RELIANCE COULD BE PLACED UPON THEM TO THE EXTEN T IT IS ADVERSE TO THE APPELLANT. THIS RIGHT TO CROSS EXAMINE IS A PART OF TH E AUDI ALTREM PARTEM PRINCIPLE AND THE SAME CAN BE DENIED ONLY ON STRONG R EASON TO BE RECORDED AND COMMUNICATED. THE IMPUGNED ORDER HOLD ING THAT IT WOULD HAVE DIRECTED CROSS EXAMINATION IF IT FELT IT WAS NECE SSARY, IS HARDLY A REASON IN SUPPORT OF COMING TO THE CONCLUSION THAT NO CROSS EXAMINATION WAS CALLED FOR IN THE PRESENT FACTS. THIS REASON ITSELF MAKES THE IMPUGNED ORDER VULNERABLE. 12. MOREOVER, IN THE PRESENT FACTS, THE APPELLANT HAD ALSO FILED AFFIDAVIT OF THE REPRESENTATIVES OF M/S. INORBIT AND M/S. NUPUR W HICH INDICATES THAT THEY HAD RECEIVED PAYMENT FROM THE APPELLANT FOR RE NDERING OF SERVICES TO THE APPELLANT. THESE AFFIDAVITS ALSO HAVE NOT BEEN TA KEN INTO ACCOUNT BY ANY AUTHORITY INCLUDING THE TRIBUNAL WHILE UPHOLDIN G THE DISALLOWANCE OF THE EXPENDITURE. 13. THUS THE APPELLANT WAS NOT GIVEN AN OPPORTUNITY TO CROSS EXAMINE THE WITNESSES WHOSE STATEMENT IS RELIED UPON BY THE REVEN UE AND THE EVIDENCE LED BY THE APPELLANT HAS NOT BEEN CONSIDERED . THEREFORE CLEARLY A BREACH OF PRINCIPLES OF NATURAL JUSTICE. IN VIEW O F THE ABOVE, WE SET ASIDE THE ORDER OF THE TRIBUNAL AND RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR FRESH DISPOSAL AFTER FOLLOWING THE PRINCIPLES OF NATURA L JUSTICE AND IN ACCORDANCE WITH LAW. IT IS MADE CLEAR THAT THE CHAL LENGE TO THE ISSUE OF REOPENING OF ASSESSMENT IS NOT PRESSED BEFORE US THEREFORE THAT ISSUE STANDS CONCLUDED. 11. SINCE IN THE INSTANT CASE ALSO OPPORTUNITY TO CROSS EXAMINE THE WITNESS WAS NOT GRANTED DESPITE SPECIFIC REQUEST MADE BY THE ASSESSEE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT CITED (SUPRA) WE RESTORE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SHRI RAKESH AGARWAL. THE AO SHALL DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORD INGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 8 ITA NO.1681/PN/2013 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 09-10-2015. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) ' / JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE ; DATED : 09 TH OCTOBER, 2015. ( )'+ , / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. & ( ) , / THE CIT(A)-I, NASHIK 4. & / THE CIT-I, NASHIK 5. 6. ) ,,-, -, / DR, ITAT, A PUNE; 1 / GUARD FILE. / BY ORDER , ) , //TRUE C ) , //TRUE COPY// 34 , - / SR. PRIVATE SECRETARY -, / ITAT, PUNE