Sumeera Banadey, New Delhi V. ITO Ward 69(3), New Delhi

ITA 2090/DEL/2019

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9896 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 25-07-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 07-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Search and seizure; Opportunity of cross examination; Third party statement; Borrowed satisfaction
• Section: 147; 131; 148; 132; 143(3); 133(6); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘SMC’ NEW DELHI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA No.2090/Del/2019 Assessment Year: 2010-11 Mrs. Sumeera Banday, G-47, East of Kailash, New Delhi Vs. Income Tax Officer, Ward-69(3), New Delhi PAN :BNHPB6044C (Appellant) (Respondent) ORDER This is an appeal by the assessee against order dated 20.12.2018 of learned Commissioner of Income Tax (Appeals)-21, New Delhi, for the assessment year 2010-11. 2. The assessee has raised the following grounds: 1. That having regard to the facts and circumstances of the case and in law, the Ld. CIT(A) 21 New Delhi has grossly erred in law and on facts of the case in not quashing the assessment order passed pursuant to illegal assumption of jurisdiction u/s 147/148 of the Act. 2. That having regard to the facts and circumstances of the case and in law, the Ld. CIT(A) 21 New Delhi has grossly erred in not holding that the issue of notice in this case by the Ld. AO u/s 148 of the Act is illegal, void and without jurisdiction and accordingly assessment order passed on the foundation of such notice is liable to be quashed. The reasons recorded based on borrowed satisfaction of DDIT Investigation. Appellant by Sh. Pulkit Saini, Advocate Respondent by Sh. Om Prakash, Sr. DR Date of hearing 26.07.2022 Date of pronouncement 21.10.2022 ITA No.2090/Del/2019 AY: 2010-11 2 | P a g e 3. That having regard to the facts and circumstances of the case and in law, the Ld. CIT(A) 21 New Delhi has erred in law and on facts by confirming the action of the AO in exceeding jurisdiction and framing the impugned assessment order u/s 143(3) r/w. s 147/148 and without complying the mandatory conditions u/s 147/143(2)/151/127 as envisaged under the Income Tax Act, 1961. 4. That having regard to the facts and circumstances of the case , the Ld. CIT(A) 21 New Delhi has grossly erred in confirming the addition of Rs 15,00,000/ in the income of the assessee on the basis of self prepared documents by the 1 department which are neither signed by the assessee nor the person whom statement u/s 132(4) have been recorded. 5. That having regard to the facts and circumstances of the case, the Ld. CIT(A) 21 New Delhi has grossly erred in confirming the action of the on the basis of surmises, conjectures and presumptions. 6. That the appellant craves to leave to add, amend, modify, delete any of the grounds of appeal before or at the time of hearing and all of the above grounds are without prejudice to each other. 3. Briefly the facts are, the assessee is a resident individual and is a Doctor by profession. In course of a search and seizure operation conducted under section 132 of the Income-tax Act, 1961 (in short ‘the Act’) on 27.06.2013 in Santosh group of Institutions and Sh. P Mahalingam, Ghaziabad. It came to notice that Santosh Medical College used to receive capitation fee from students who got admission. From search information, it was noticed that an amount to Rs.15 lakhs was paid in cash by the assessee towards capitation fee. Based on such information, the Assessing Officer reopened the assessment under section 147 of the Act. Though, the assessee had originally filed a return of ITA No.2090/Del/2019 AY: 2010-11 3 | P a g e income for the impugned assessment year offering income of Rs.77,520/-, however, in response to notice issued under section 148 of the Act, the assessee filed a fresh return of income offering income of Rs.1,86,176/-. In course of assessment proceeding, the Assessing Officer called upon the assessee to explain the source of capitation fee paid of Rs.15 lakhs. In response to the query raised by the Assessing Officer, the assessee emphatically denied of paying any capitation fee. It was submitted by the assessee that she paid regular fee of Rs.15,00,400/- through demand draft and has paid nothing more. The Assessing Officer, however, remained unconvinced. Relying upon the materials found in course of search and seizure operation in case of Santosh group institutions, statement of Dr. P Mahalingam, Ghaziabad and the Accounts Officer, the Assessing Officer concluded that the assessee, in fact, had paid capitation fee of Rs.15 lakhs in cash. Accordingly, he added back the amount to the income of the assessee. Though, the assessee contested the aforesaid addition before learned Commissioner (Appeals), however, the addition was sustained. 4. Before me, Sh. Pulkit Saini, learned counsel appearing for the assessee advanced elaborate argument, both on the validity of ITA No.2090/Del/2019 AY: 2010-11 4 | P a g e reopening of assessment under section 147 of the Act as well as on the merits of the addition made. Whereas, learned Departmental Representative has filed a written submission defending the action of the departmental authorities. 5. I have considered rival submissions and perused the materials on record. At the outset, I consider it expedient to address the issue on merits. Undisputedly, based on certain incriminating materials found in course of a search and seizure operation in case of Santosh group institutions and Dr. P Mahalingam, Ghaziabad, it was found that while seeking admission in institutions run by the group, the students pay capitation fee in cash. According to the Revenue, the information received revealed that the assessee, while getting admission in Santosh Medical College as a student had paid capition fee of Rs.15 lakhs in cash over and above the regular fee of Rs.15,00,400/-. While making the disputed addition, the Assessing Officer, apart from seized material has primarily relied upon the statement of Dr. P. Mahalingam wherein he allegedly had admitted of receiving capitation fee. Of course, he had also relied upon the information sought from the Account Officer of Santosh Medical College under section 133(6) of the Act. ITA No.2090/Del/2019 AY: 2010-11 5 | P a g e 6. However, it is a fact on record that from the stage of assessment proceeding itself, the assessee had emphatically denied of having paid any capitation fee in cash over and above the regular fee. Except third party evidences, being statement recorded from Dr. P Mahalingam and information received from Account Officer of the institution, no other materials have been brought on record to conclusively prove that the assessee has paid the amount of Rs.15 lakhs in cash. It is also a fact on record that, though, the third party statement/evidence were utilized in detriment to assessee’s interest, however, no opportunity of cross examination or even confrontation of the adverse material was made. This, in my view, is in gross violation of Rules of Natural Justice. When, the Assessing Officer is making an addition based on certain adverse material in his possession, it is his fundamental duty to disclose such material to the assessee and seek his rebuttal. This has not been done by the Assessing Officer in the present case. There is no conclusive evidence brought on record by the Assessing Officer to dislodge assessee’s claim that nothing has been paid over and above the regular fee. 7. Thus, in my view, the Revenue has failed to establish that the assessee, indeed, had paid capitation fee of Rs.15 lakhs. At ITA No.2090/Del/2019 AY: 2010-11 6 | P a g e this stage, it is relevant to observe, in case of identical nature wherein identical addition was made, based on the incriminating materials found and statement recorded in course of the very same search and seizure operation carried out in case of Santosh group institutions, a division Bench of the Tribunal in case of Sh. Rajendra Singh Vs. ITO, ITA No. 8320/Del/2018, dated 18.06.2020 has held as under: “8. We have considered the rival submissions and perused the material on record. It is not in dispute that the assessee has filed original return of income for the assessment year under appeal on 11.02.2011 (PB-1). Such fact is also mentioned in the assessment order. The reopening of the assessment is made subsequently in 2015. Copy of the reasons for reopening of the assessment are filed at page-13 of the PB in which the A.O. has recorded that as per information received from Investigation Wing search was carried-out on 27.06.2013 in Santosh Medical College Group of Institutions and Dr. P. Maha Lingam, who was Chairman/Director of this Institution, in which, he has admitted to have received regular fees by cash as well as unaccounted money and surrendered the same for taxation. A preliminary letter was issued to the assessee to file the documents. Since none attended, therefore, reopening of the assessment was made in the matter. Thus, the entire case is set-up against the assessee on the basis of statement recorded of Shri P. Mahalingam, Chairman/Director of Santosh Medical College Group recorded during the course of search and seizure operation. It is not brought on record if his statement was ever supplied to assessee or subjected to cross-examination on behalf of assessee. There is no other material available on record to justify the addition made against the assessee. Vide Order Dated 15.06.2020, the Ld. D.R. sought two days time to produce the evidence of payment of amount in question by assessee to the Medical College. However, nothing is produced on record if assessee made actual payment to the Medical College. The assessee since beginning of the re-assessment proceedings have denied to have paid any amount to the Medical College. The assessee in his explanation in writing as well as affidavit has affirmed that he has not paid any amount for admission of his daughter to MBBS Course because of the losses suffered by him in the business. The assessee further explained that ITA No.2090/Del/2019 AY: 2010-11 7 | P a g e amount of admission fees was paid by his brothers on behalf of his daughter which is supported by documentary evidences, though the same were not accepted by the Revenue. The daughter of the assessee has also owned-up that amount in question have been paid through her uncle for admission to the Medical College. The receipt executed by the College is also affirmed this fact that daughter of the assessee has made the payment for MBBS Course. Thus, no material is available on record to prove that assessee made any payment on behalf of the daughter for admission to the MBBS Course. Since the Revenue alleged that the amount in question is paid by assessee for admission of her daughter to the Medical Course, therefore, burden is very heavy upon Revenue to prove by positive evidence that assessee has in fact made the payment to the Medical College for admission for her daughter. However, no evidence is available on record to prove such contention rather the evidences on record and initial denial of the assessee itself supports the explanation of assessee that no amount is paid by assessee for admission of her daughter in Medical Course. The same issue have been considered by ITAT, Delhi Bench in the case of Shri Naresh Pamnani, Delhi (supra), which is reproduced as under: “IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCHES “SMC” : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA.Nos.1561/Del./2018 Assessment Year 2010-2011 Shri Rajinder Singh, A-56, New Multan Nagar, New Delhi -110 056, PAN: ACCPS9831R Vs. The Income Tax Officer, Ward-42(4), New Delhi (Appellant) (Respondent) For the Assessee : Shri Gautam Jain, Advocate For Revenue : Shri R.K. Gupta, Sr. DR ORDER PER BHAVNESH SAINI, J.M. This appeal by assessee has been directed against the Order of Ld. CIT(A)-27, New Delhi, Dated 29th January, 2018, for the assessment year 2010-2011. 2. Briefly the facts of the case are that assessee filed return of income declaring income of Rs.29,14,950/-. An information was received from DDIT, Investigation, New Delhi, on the basis of ITA No.2090/Del/2019 AY: 2010-11 8 | P a g e which, the case of the assessee was reopened under section 147 of the Income-Tax Act, 1961. The reasons are reproduced in the assessment order, in which, it is mentioned that information was received from DDIT, Investigation, New Delhi, regarding donation/ capitation fees paid for the regular course fees to Santosh Medical College, Ghaziabad, for assessment year 2009- 2010 through Pr.CIT, Delhi-15. The DDIT, Investigation New Delhi has submitted that a search and seizure action under section 132 of the Income Tax Act was carried out on 27th June, 2013 in Santosh Group of Institute & Dr. P. Mahalingam. During the search, certain documents/books of account were seized from the premises of H-1 to H-6, Santosh Nagar, Pratap Vihar. The main administrative block of the college which revealed receipts of donation/capitation fee, over and above the regular course fees, paid in cash by the parents of students admitted of accepting the donation/ capitation fees in cash and offered the unaccounted money so received for taxation in the relevant assessment year, In the case of the assessee, it was mentioned that he had made cash payment of Rs.19,75,000/- towards donation/ capitation fee over and above the regular course fees to the above college. Therefore, notice under section 148 was issued. The assessee was confronted with the query regarding cash payment to the above college. The assessee was asked to furnish documentary evidences of the source of the aforesaid payments in cash. The assessee is a Doctor by profession. During the course of assessment proceedings, statement of assessee was recorded under section 131 of the Income-Tax Act. The A.O. noted that Dr P Mahalingam has admitted in his statement under section 132(4) of the Income Tax Act that he had accepted the capitation fees from the assessee and surrendered the amount for taxation. The assessing officer, therefore, made addition of Rs.19,75,000/- in the hands of the assessee. 2.1. The assessee challenged the reopening of the assessment as well as the addition on merit before the Ld. CIT(A). However, appeal of assessee has been dismissed. 3. The assessee, in the present appeal, challenged the reopening of the assessment as well as the addition on merit. 13 ITA.No.8320/Del./2018 Shri Rajinder Singh, New Delhi. 4. I have heard the Learned Representatives of both the parties and perused the material available on record. 5. Learned Counsel for the Assessee submitted that assessee raised specific ground on merit to challenge the addition on merit, but, the Ld. CIT(A) without any reason noted in the impugned order that assessee has not raised any ground in this regard. He has submitted that Ld. CIT(A) has reproduced all the grounds in the appellate order, in which, in Ground No.6, assessee has challenged the addition of Rs.19,75,000/-. He has submitted that A.O. or the Investigation Wing have not supplied copy of the ITA No.2090/Del/2019 AY: 2010-11 9 | P a g e statement of Dr P Mahalingam to him for rebutting his statement and no cross-examination to his statement have been allowed at any stage, therefore, this statement cannot be read in evidence against the assessee. He has referred to the statement of assessee recorded at assessment stage, copy of which is filed on record, in which he has denied to have paid any amount to Dr P Mahalingam or the above college as capitation fees. He, therefore, submitted that since no material has been confronted to assessee, therefore, no addition could be made against the assessee. 6. On the other hand, Ld. D.R. relied upon orders of the authorities below. 7. After considering the rival submissions, I am of the view that addition on merit is wholly unjustified. It is well settled Law that unless the incriminating documents or statement used against the assessee are confronted to assessee and assessee have been allowed to cross-examine such statements, no such material or statement, could be read in evidence against the assessee. I rely upon the decision of the Hon’ble Supreme Court in the case of Kishan Chand Chellaram 125 ITR 713 (SC). In the present case, the A.O. has relied upon the statement of Dr P Mahalingam, recorded during the course of search, under section 132(4) of the Income Tax Act against the assessee, in which he has admitted to have received capitation fees from the assessee of Rs.19,75,000/- in cash. The assessing officer recorded statement of assessee at assessment stage, in which, the statement of Dr P Mahalingam recorded under section 132(4) of the Income Tax Act, have been referred to, but, it is nowhere mentioned in which statement, if such copy of the statement was provided to assessee for explanation of assessee. The assessee denied to have made any cash payment to Dr P Mahalingam. The assessing officer in the assessment order also did not mention any fact if statement Dr P Mahalingam have been provided to the assessee for his comments or was confronted to assessee at any stage. The assessing officer did not record in the assessment order if statement of Dr. P Mahalingam recorded at the back of the assessee by the Investigation Wing, was allowed for cross examination on behalf of the assessee at any stage, therefore, statement of third party, cannot be used against the assessee unless assessee has been allowed a right to cross-examine such statement. The A.O. in the assessment order also did not mention, if any, material found during the course of search, was confronted to the assessee. Thus, assessee was justified in denying in making any cash payment to Dr. P Mahalingam at any stage. There is no material available on record to justify the addition against the assessee on merits. In the absence of any material on record against the assessee and in the absence of cross examination to the statement of Dr P Mahalingam on behalf ITA No.2090/Del/2019 AY: 2010-11 10 | P a g e of the assessee, such material cannot be used against the assessee so as to make the impugned addition. I, accordingly, set aside the Orders of the authorities below and delete the addition of Rs.19,75,000/-. 8. Both the parties also argued on initiation of reassessment proceedings and have also cited various case Laws and Ld. D.R. also submitted written submissions. However, in view of the fact that addition on merit have been deleted, the issue of reopening of assessment is left with academic discussion only. I do not propose to decide the same. In view of the above, appeal of assessee is allowed. 9. In the result, appeal of Assessee is allowed.” 8.1. Considering the totality of the facts and circumstances of the case noted above in the light of material on record as well as Order of the Tribunal in the case of Shri Naresh Pamnani, Delhi (supra), we are of the view that no addition could be made against the assessee of the impugned amount. In view of the above, we set aside the Orders of the authorities below and delete the entire addition in the hands of the assessee. However, the Revenue is at liberty to pursue their remedy if any, against Ms. Priyanka Kadian is so advised as per Law. . Since the addition on merit have been deleted, therefore, the issue of reopening of the assessment is left with academic discussion only and we do not propose to decide the same. In view of the above, appeal of the assessee is allowed.” 8. The observations of the Tribunal in the aforesaid decision squarely apply to the facts of the present case. Thus, in view of the aforesaid, I hold that, on merits, the addition made of Rs.15 lakhs is unsustainable. Accordingly, I delete the same. Since, I have decided the issue on merits, there is no need to adjudicate on the legal grounds raised by the assessee challenging the validity of reopening of assessment, as, they have been reduced to mere academic. ITA No.2090/Del/2019 AY: 2010-11 11 | P a g e 9. In the result, the appeal is allowed, as indicated above. Order pronounced in the open court on 21 st October, 2022 Sd/- (SAKTIJIT DEY) JUDICIAL MEMBER Dated: 21 st October, 2022. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi