SLGK CERA INDIA PRIVATE LIMITED, Jaipur V. ITO, Jaipur

ITA 259/JPR/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9819 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 05-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUNI PAL JCIT DHK
• Keywords: Unexplained cash credit; Search and seizure; Principle of natural justice; Opportunity of cross examination; Question of law; Tangible material; Accommodation entries; Onus to prove; Bogus loan; Set aside
• Section: 143(1); 254(2); 68; 148; 28

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH SMC, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 259/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08. M/S. S.L.G.K. CERA INDIA (P) LTD., B-609, SHIV MARG, BANI PARK, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD 7(3), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAICS 9872 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. RUNI PAL (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 20.09.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 24/09/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 25 TH JANUARY, 2017 OF LD. CIT (APPEALS)-5, JAIPUR FOR THE ASSESSM ENT YEAR 2007-08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE L EARNED ITO HAS ERRED AND LEARNED CIT (A) SUSTAIN THE ADDITION OF R S. 25,00,000/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 WHICH IS UNJUSTIFIED AND LIABLE TO BE DELETED. 2. THE ASSESSEE PRAYS YOUR INDULGENCE TO ADD, AMEND, M ODIFY OR DELETE ANY OF ALL GROUND OF APPEAL. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURING OF CERAMICS GRINDING MEDIA AND H.T. PORCELAIN INSULATO R. THE ASSESSEE FILED ITS RETURN 2 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. OF INCOME ON 1 ST NOVEMBER, 2007 DECLARING TOTAL INCOME AT RS. 14,66 ,320/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE IT ACT. SUBSEQUENTLY THE AO REOPENED THE ASSESSMENT BY ISSUING A NOTICE UNDER SECTION 14 8 ON 28 TH MARCH, 2014. THE ASSESSMENT WAS REOPENED BASED UPON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING, MUMBAI REGARDING THE COMPANIES CONTROLLED AND OPERATED BY SHRI PRAVEEN KUMAR JAIN INDULGED IN THE ACTIVITY OF PROVIDING ACCOMMODATION ENTRIES. SINCE THE ASSESSEE RECEIVED AN AMOUNT OF RS. 25,00, 000/- AS SHARE CAPITAL FROM THREE COMPANIES, THEREFORE, THE AO WANTED TO ASSESS THE SAID INCOME TO TAX. THE AO PASSED THE REASSESSMENT ORDER WHEREBY THE ADDITI ON OF RS. 25,00,000/- WAS MADE UNDER SECTION 68 OF THE ACT TREATING THE SAME AS UNEXPLAINED CASH CREDIT. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) BUT COULD NOT SUCCEED. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE RAISED THE CAPITAL THROUGH PRIVATE PLACEMENT OF ITS SHARES. THE CAPITAL RAISED BY THE ASSESSEE TO THE E XTENT OF RS. 25,00,000/- FROM THREE ENTITIES WERE TREATED BY THE AO AS NON-GENUIN E. HE HAS CONTENDED THAT THE ASSESSEE PRODUCED ALL RELEVANT DETAILS AS WELL AS D OCUMENTARY EVIDENCE TO PROVE THE IDENTITY, CREDITWORTHINESS OF THE SHARE APPLICANTS AND GENUINENESS OF THE TRANSACTIONS. HE HAS REFERRED THE CERTIFICATE OF R EGISTRATION OF THESE COMPANIES AS WELL AS STATUS OF THESE COMPANIES AS PER REGISTRAR OF COMPANIES AND SUBMITTED THAT THE IDENTITY OF THESE COMPANIES IS OTHERWISE NOT IN DISPUTE. HE HAS THEN REFERRED TO THE BANK STATEMENTS OF THESE THREE COMPANIES AND SU BMITTED THAT THE SHARE APPLICATION MONEY PAID BY THESE COMPANIES IS DULY R EFLECTED IN THE BANK STATEMENT. HE HAS ALSO REFERRED TO THE FINANCIAL STATEMENT AS FILED WITH THE ROC AND SUBMITTED 3 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. THAT WHEN THE PAYMENT IS REFLECTED IN THE BANK STAT EMENT AND IN THE FINANCIAL STATEMENTS, THEN DOUBTING THE GENUINENESS OF THE TR ANSACTION WITHOUT ANY OTHER MATERIAL IS NOT JUSTIFIED. THE LD. A/R HAS FURTHER CONTENDED THAT THE ASSESSEE HAS ALSO PRODUCED THE SHARE APPLICATIONS, BOARD RESOLUT IONS AND THE MONEY WAS RECEIVED THROUGH BANKING CHANNEL, THUS THE CREDITWO RTHINESS AS WELL AS GENUINENESS OF THE TRANSACTION WAS ESTABLISHED. APART FROM THI S, THE ASSESSEE ALSO PRODUCED THE CONFIRMATIONS FROM INVESTING COMPANIES, RESOLUTION BY THOSE COMPANIES PERMITTING THE INVESTMENT AND COPIES OF FORM NO. 23AC/23ACA FI LED BEFORE THE ROC ALONG WITH BALANCE SHEETS, PROFIT & LOSS ACCOUNTS ETC. THE LD . A/R HAS FURTHER CONTENDED THAT THE AO HAS RELIED UPON THE REPORT OF THE INVESTIGAT ION WING AND PARTICULARLY THE STATEMENT RECORDED BY THE INVESTIGATION WING OF SHR I PRAVEEN KUMAR JAIN WITHOUT GIVING AN OPPORTUNITY OF CROSS EXAMINATION TO THE A SSESSEE. HE HAS REFERRED TO THE ASSESSMENT ORDER AND SUBMITTED THAT THE ASSESSEE HA S SPECIFICALLY DEMANDED CROSS EXAMINATION OF SHRI PRAVEEN KUMAR JAIN, HOWEVER NEI THER THE AO NOR THE LD. CIT (A) HAS AFFORDED THE OPPORTUNITY OF CROSS EXAMINATION. THEREFORE, THE STATEMENT RECORDED AT THE BACK OF THE ASSESSEE BY INVESTIGATI ON WING CANNOT BE USED AGAINST THE ASSESSEE WITHOUT GIVING THE OPPORTUNITY OF CROS S EXAMINATION. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF HON BLE SUPREME COURT IN CASE OF ANDAMAN TIMBER INDUSTRIES VS. CCE, 62 TAXMANN.COM 3 (SC) AS WELL AS DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL DATED 31 ST DECEMBER, 2018 IN CASE OF KOTA DAL MILL VS. DCIT IN ITA NOS. 997 TO 1002/JP/2018 & 111 9/JP/2018. 4. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T ONCE SHRI PRAVEEN KUMAR JAIN HAS ACCEPTED THE FACT THAT HE INDULGED IN PROV IDING THE ACCOMMODATION ENTRIES RELATING TO SHARE CAPITAL ETC. THROUGH HIS COMPANIE S AND THESE COMPANIES ARE ALSO 4 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. BELONGING TO SHRI PRAVEEN KUMAR JAIN GROUP, THEN TH E AO WAS HAVING SUFFICIENT MATERIAL TO HOLD THAT THE TRANSACTIONS ARE NOT GENU INE. SHE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE PRIMARY ONUS TO PROVE THE IDENTITY, G ENUINENESS AND CREDITWORTHINESS OF THESE THREE ENTITIES. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS RECEIVED THE SHARE CAPITA L FROM THE THREE COMPANIES AS UNDER :- S.NO. NAME OF THE SUBSCRIBER AMOUNT (RS.) DATE 1. M/S. ALKA DIAMOND INDUSTRIES LTD. 10,00,000/ - 09.03.2007 2. M/S. JAVDA INDIA IMPEX LTD. 10,00,000/ - 24.03.2007 3. M/S. VENGUARD JEWELLS LTD. 5,00,000/ - 28.03.2007 THERE IS NO DISPUTE THAT THE AMOUNT OF RS. 25,00,00 0/- WAS RECEIVED BY THE ASSESSEE THROUGH CHEQUES AND IT WAS ALSO REFLECTED IN THE BA NK ACCOUNTS OF THESE COMPANIES AS WELL AS IN THE BANK ACCOUNT OF THE ASSESSEE. TH E AO HAS NOT DISPUTED THESE FACTS AS REFLECTED FROM BANK ACCOUNTS STATEMENTS OF THESE THREE COMPANIES AS WELL AS OF THE ASSESSEE. HOWEVER, THE AO HAS DOUBTED THE TRAN SACTIONS BASED UPON THE ADMISSION OF SHRI PRAVEEN KUMAR JAIN DURING THE SEA RCH AND SEIZURE OPERATION CARRIED OUT BY THE DEPARTMENT THAT HE WAS INDULGING IN THE ACTIVITY OF PROVIDING ACCOMMODATION ENTRIES. THE SAID OBSERVATION OF THE AO IS RECORDED IN PARA 2 OF THE ASSESSMENT ORDER AS UNDER :- 5 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. 2. SHARE APPLICATION MONEY : DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE C OMPANY HAS RAISED FUNDS FROM THE FOLLOWING PARTIES ALONG WITH OTHER PARTIES THROUGH SHARE APPLICATION MONEY : S.NO. NAME OF THE PARTY AMOUNT DATE THROUGH BANK A/C 1. M/S. ALKA DIAMOND INDUSTRIES LTD. 10,00,000/ - 09.03.2007 UTI BANK LTD. 2. M/S. JAVDA INDIA IMPEX LTD. 10,00,000/ - 24.03.2007 UTI BANK LTD. 3. M/S. VENGUARD JEWELLS LTD. 5,00,000/ - 28.03.2007 P N BANK TOTAL : 25,00,000/ - THE ABOVE COMPANIES HAS RUN, CONTROLLED AND OPERATE D BY SHRI PRAVIN KUMAR JAIN AND SHRI PRAVIN KUMAR JAIN WAS IN DULGED IN THE ACTIVITIES OF PROVIDING ACCOMMODATION ENTRIES AND T HIS FACT HAS BEEN ACCEPTED BY HIM DURING SEARCH AND SEIZURE OPERATION CONDUCTED BY THE DEPARTMENT AT BUSINESS PREMISES OF SHRI PRAVEEN KUM AR JAIN. THE ASSESSEE HAS BENEFICIATED ITSELF BY OBTAINING ACCOM MODATION ENTRIES AS PER ABOVE DETAILS. THEREFORE, DURING ASSESSMENT PROCEEDINGS, THE ASSES SEE WAS REQUIRED TO FURNISHED CONFIRMATION, COPIES OF ITR/B ALANCE SHEET/PROFIT AND LOSS, COPIES OF BANK ACCOUNT, AND OTHER RELATED DETAILS OF THE ABOVE MENTIONED COMPANIES FROM WHOM ENTRY OBTAINED. IN RESPONSE, THE ASSESSEE HAS FURNISHED COPY OF BANK ACCOUNTS, C OPY OF CHEQUES AND COPY OF MEMORANDUM AND ARTICLES OF ASSOCIATION. BUT THE ASSESSEE HAS NOT FURNISHED CONFIRMATION, COPY OF ITR/BALANCE SHEET/PROFIT AND LOSS/AUDIT REPORTS AND SOURCE OF INCOME OF THESE TH REE PARTIES. THEREFORE, THE IDENTITY OF THESE PARTIES, GENUINENE SS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THESE PARTIES HAVE NOT BEEN PROVED, HENCE VIDE ORDER SHEET ENTRY DATED 20.03.20 15, THE ASSESSEE COMPANY WAS REQUIRED TO SHOW CAUSE AS TO WHY ADDITI ON OF RS. 25,00,000/- MAY NOT BE MADE IN ITS INCOME UNDER SEC TION 68 OF THE INCOME TAX ACT, 1961. IN RESPONSE THE ASSESSEE HAS EXPLAINED THE SOURCE A ND ALSO PRODUCED THE DOCUMENTS TO PROVE THE IDENTITY AND CREDITWORTHINES S OF THESE THREE COMPANIES AS WELL AS GENUINENESS OF THE TRANSACTIONS. THE AO DI D NOT ACCEPT THE SAID REPLY AS WELL AS THE DOCUMENTARY EVIDENCE PRODUCED BY THE AS SESSEE ON THE GROUND THAT SHRI 6 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. PRAVEEN KUMAR JAIN IN HIS STATEMENT RECORDED DURING THE INVESTIGATION CARRIED OUT BY THE DEPARTMENT HAS ACCEPTED HIS INDULGENCE IN PROVI DING THE ACCOMMODATION ENTRIES. IT IS PERTINENT TO NOTE THAT THE ENTIRE R EASONING OF THE AO IS HIS OWN VERSION OF THE ALLEGED STATEMENT OF SHRI PRAVEEN KUMAR JAIN . EVEN THE AO HAS NOT REPRODUCED THE RELEVANT PART OF THE STATEMENT OF SH RI PRAVEEN KUMAR JAIN. THUS IT IS CLEAR THAT THE AO HAS PRESUMED THAT THE AMOUNT OF R S. 25,00,000/- IS NOTHING BUT AN ENTRY PROVIDED BY THESE COMPANIES CONTROLLED BY SHRI PRAVEEN KUMAR JAIN WITHOUT CONDUCTING ANY INDEPENDENT ENQUIRY DURING THE ASSES SMENT PROCEEDINGS. THERE IS NO DISPUTE THAT THE AO HAS NOT CONDUCTED ANY ENQUIR Y OF THE FACT OF GENUINENESS OF THE TRANSACTIONS. ON THE CONTRARY THE ASSESSEE HAS PRODUCED THE DOCUMENTARY EVIDENCE IN SUPPORT OF THE CLAIM. IF THE AO HAS TH E REASON TO DOUBT THE GENUINENESS OF THE TRANSACTIONS THEN A FURTHER INVESTIGATION WA S REQUIRED TO BE CONDUCTED TO ESTABLISH THAT THE DOCUMENTARY EVIDENCE PRODUCED BY THE ASSESSEE IS NOT REFLECTING THE CORRECT STATE OF AFFAIRS AND TRANSACTIONS. IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSEE HAS ASKED FOR THE CROSS EXAMINATION OF SHR I PRAVEEN KUMAR JAIN WHOSE STATEMENT IS RELIED UPON BY THE AO WHILE MAKING THE ADDITION BUT THE AO HAS NOT ALLOWED THE CROSS EXAMINATION. THEREFORE, IF THE A SSESSMENT ORDER IS BASED ONLY ON THE STATEMENT OF SHRI PRAVEEN KUMAR JAIN WHICH WAS RECORDED AT THE BACK OF THE ASSESSEE, THEN IN THE ABSENCE OF GIVING AN OPPORTUN ITY OF CROSS EXAMINATION, THE ORDER PASSED BY THE AO BASED ON SUCH STATEMENT IS N OT SUSTAINABLE. THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF KOTA DAL MILL VS. DCIT IN ITA NOS. 997 TO 1002/JP/2018 AND 1119/JP/2018 DATED 31.12.2018 HAS DECIDED THE ISSUE IN PARA 11.1 AS UNDER :- 7 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. 11.1. EVEN OTHERWISE, THE ASSESSMENT ORDER IS SO LELY BASED ON THE REPORT OF THE INVESTIGATION WING KOLKATA WHICH IN TURN IS NOTHING BUT THE NARRATION OF THE STATEMENTS RECORDED DURING THE INVESTIGATION AND THE AO WAS HAVING IN POSSESSION THE STATEMENT O F ONLY SHRI ANAND SHARMA. THEREFORE, ALL THESE PROCEEDINGS CONDUCTED BY THE INVESTIGATION WING KOLKATA WERE AT THE BACK OF THE ASSESSEE AND HENCE THE STATEMENT WHICH IS THE FOUNDATION OF THE REPORT OF THE INVESTIGATION WING KOLKATA AS WELL AS THE ASSESSMENT ORDER CANNOT BE ACCEPTED IN THE ABSENCE OF GIVING AN OPPORTUNITY OF CROSS EXAMI NATION TO THE ASSESSEE. WE FIND THAT THE ASSESSEE HAS INSISTED F OR CROSS EXAMINATION DURING THE ASSESSMENT PROCEEDINGS AND FURTHER DURIN G THE APPELLATE PROCEEDINGS. THE LD.CIT(A) EVEN CALLED FOR A REMAND REPORT AND DIRECTED THE AO TO ALLOW CROSS EXAMINATION TO THE A SSESSEE. HOWEVER, THE AO HAS EXPRESSED HIS INABILITY TO ALLOW THE ASS ESSEE CROSS EXAMINATION OF THE WITNESSES DUE TO THE REASON THAT THE WITNESSES BELONG TO KOLKATA AND IT IS NOT POSSIBLE FOR AO TO MAKE SUCH ARRANGEMENT. THE LD. CIT(A) HAS FINALLY DENIED THE CROSS EXAMINATION TO THE ASSESSEE BY GIVING HIS FINDING IN PARA 5.11 AT PAGE 188 ALREADY REPRODUCED IN THE EARLIER PART OF THIS ORDER AND, T HEREFORE, THE ONLY REASON FOR DENIAL OF CROSS EXAMINATION BY THE LD.CI T(A) IS THAT THE STATEMENTS ARE SO VOCAL AND UNDENIABLE THAT CROSS E XAMINATION OF SUCH ACCOMMODATION ENTRY PROVIDED BY THOUSANDS OF BENEFI CIARIES ACROSS INDIA IS NEITHER PRACTICABLE NOR VIABLE AND THEREFO RE UNCALLED FOR. WE FIND THAT THE ASSESSEE HAS DEMANDED THE CROSS EXAMI NATION ONLY IN RESPECT OF THE ALLEGED TRANSACTIONS OF LOANS AND NO T FOR THE ENTIRE BUSINESS OF THE ENTRY PROVIDERS PROVIDING THE BOGUS ENTRIES. UNDISPUTEDLY, THE STATEMENT OF SHRI ANAND SHARMA WA S RECORDED BY THE INVESTIGATION WING KOLKATA AT THE BACK OF THE A SSESSEE, EVEN THE PROCEEDINGS BY THE INVESTIGATION WERE CONDUCTED AT THE BACK OF THE ASSESSEE, THEREFORE, THE SAID STATEMENT OF SHRI ANA ND SHARMA CANNOT BE THE SOLE BASIS OF ASSESSMENT WITHOUT GIVING AN O PPORTUNITY OF CROSS 8 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. EXAMINATION TO THE ASSESSEE. THE HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VS. CCE (SUPRA) WHILE DEALING WITH THE ISSUE OF VIOLATION OF PRINCIPLES OF NATURAL JUSTICE FOR NOT PROVIDING THE OPPORTUNITY OF CROSS EXAMINATION OF THE WITNESSES W HOSE STATEMENTS WERE RELIED ON BY THE AO HAS HELD IN PARA 6 TO 9 AS UNDER :- 6. ACCORDING TO US, 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 IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNT ED 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 UPON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDIC ATING AUTHORITY DID NOT GRANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUD ICATING AUTHORITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUN ITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRAN TED AND THE AFORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDI CATING AUTHORITY. AS FAR AS THE TRIBUNAL IS CONCERNED, WE FIND THAT REJE CTION OF THIS PLEA IS TOTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED T HAT CROSS- EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROU GHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSION OF THE AP PELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX-FACTORY PRICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNAL TO HAVE GUESS WORK AS TO FOR WHAT PURP OSES THE APPELLANT WANTED TO CROSS-EXAMINE THOSE DEALERS AND WHAT EXTR ACTION THE APPELLANT WANTED FROM THEM. 7. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESS ES AND WANTED TO DISCREDIT THEIR TESTIMONY FOR WHICH PURPOSE IT WANT ED TO AVAIL THE OPPORTUNITY OF CROSS-EXAMINATION. THAT APART, THE A DJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAIN TAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OFLEVY OF EXCIS E DUTY. WHETHER THE GOODS WERE, IN FACT, SOLD TO THE SAID DEALERS.WITNE SSES AT THE PRICE WHICH IS MENTIONED IN THE PRICE LIST ITSELF COULD B E THE SUBJECT-MATTER OF CROSS-EXAMINATION. THEREFORE, IT WAS NOT FOR THE AD JUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJECT-MATTE R OF THE CROSS- EXAMINATION AND MAKE THE REMARKS AS MENTIONED ABOVE . WE MAY ALSO POINT OUT THAT ON AN EARLIER OCCASION WHEN THE MATT ER CAME UP BEFORE THIS COURT IN CCE V. ANDAMAN TIMBER INDUSTRIES LTD. , ORDER DATED 17.3.2005 WAWS PASSED REMITTING THE CASE BACK TO TH E TRIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVIN G ITS REASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. 9 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. 8. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT IF THE TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MATERIAL WITH THE DEPARTMENT ON THE BASIS OF WHICH IT COULD JUSTIFY I TS ACTION, AS THE STATEMENT OF THE AFORESAID TWO WITNESSES WAS THE ON LY BASIS OF ISSUING THE SHOW-CAUSE NOTICE. 9. WE, THUS, SET ASIDE THE IMPUGNED ORDER AS PASSED BY THE TRIBUNAL AND ALLOW THIS APPEAL. NO COSTS. ONCE THE ASSESSEE HAS DISPUTED THE CORRECTNESS OF T HE STATEMENT AND WANTED TO CROSS EXAMINE THE WITNESS WHICH WAS NOT G IVEN BY THE AO AS WELL AS LD. CIT (A), THEN THE ORDERS PASSED BASE D ON SUCH STATEMENT ARE NOT SUSTAINABLE IN LAW. THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS. ASHWANI GUPTA, 322 ITR 396 (DELHI) WHILE DEALIN G WITH THE ISSUE OF NOT PROVIDING THE OPPORTUNITY TO CROSS EXAMINE THE WITNESSES HAS HELD IN PARA 5 TO 7 AS UNDER :- 5. SECONDLY, IN FACT, A RECTIFICATION APPLICATION BEI NG MA 264/DELHI/2008 UNDER SECTION 254(2) OF THE INCOME-T AX ACT, 1961 HAD BEEN FILED BY THE REVENUE BEFORE THE SAID TRIBUNAL. IN THAT ALSO, IN PARAGRAPH ( G ) OF THE MISCELLANEOUS APPLICATION, THE REVENUE HAD SUBMITTED AS UNDER: '( G )BECAUSE, ALTHOUGH FINDINGS OF THE TRIBUNAL ARE FACTUALLY COR RECT BUT THE DECISION OF THE TRIBUNAL IS NOT ACCEPTABLE BECAUSE VIOLATION OF THE CANONS OF NATURAL JUSTICE IN ITSELF IS NOT FATA L ENOUGH SO AS TO JEOPARDIZE THE ENTIRE PROCEEDINGS. IN THE INTEREST OF JUSTICE, THE TRIBUNAL COULD HAVE SET ASIDE THE ASSESSMENT ORDER WITH THE LIMITED PURPOSE OF OFFERING ASSESSEE AN OPPORTUNITY TO CROS S-EXAMINE SHRI MANOJ AGGARWAL BEFORE COMPLETING THE PROCEEDINGS.' [EMPHASIS SUPPLIED] 6. A READING OF THE SAID PARAGRAPH ( G ) MAKES IT CLEAR THAT THE REVENUE HAD ACCEPTED THE FINDINGS OF THE TRIBUNAL ON FACTS AS ALSO THE POSITION THAT THERE HAD BEEN A VIOLATION OF PRINCIPLES OF NA TURAL JUSTICE. HOWEVER, THE REVENUE'S PLEA WAS THAT THE VIOLATION OF PRINCIPLES OF NATURAL JUSTICE WAS NOT FATAL SO AS TO JEOPARDIZE T HE ENTIRE PROCEEDINGS. THE SAID MISCELLANEOUS APPLICATION WAS ALSO REJECTE D BY THE TRIBUNAL BY ITS ORDER DATED 28-11-2008. 7. IN VIEW OF THE FOREGOING CIRCUMSTANCES, WE FEEL TH AT NO INTERFERENCE WITH THE IMPUGNED ORDER IS CALLED FOR. THE TRIBUNAL HAS CORRECTLY UNDERSTOOD THE LAW AND APPLIED IT TO THE FACTS OF T HE CASE. ONCE THERE IS A VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE IN ASMUCH AS SEIZED 10 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. MATERIAL IS NOT PROVIDED TO AN ASSESSEE NOR IS CROS S-EXAMINATION OF THE PERSON ON WHOSE STATEMENT THE ASSESSING OFFICER REL IES UPON, GRANTED, THEN, SUCH DEFICIENCIES WOULD AMOUNT TO A DENIAL OF OPPORTUNITY AND, CONSEQUENTLY, WOULD BE FATAL TO THE PROCEEDINGS. FO LLOWING APPROACH ADOPTED BY US IN SMC SHARE BROKERS LTD.'S CASE ( SUPRA ), WE SEE NO REASON TO INTERFERE WITH THE IMPUGNED ORDER. NO SUB STANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION. THUS THE HONBLE HIGH COURT HAS HELD THAT ONCE THER E IS A VIOLATION OF PRINCIPLES OF NATURAL JUSTICE INASMUCH AS SEIZED MA TERIAL IS NOT PROVIDED TO THE ASSESSEE NOR IS CROSS EXAMINATION OF THE PER SON ON WHOSE STATEMENT THE AO RELIED UPON, GRANTED, THEN, SUCH D EFICIENCIES WOULD AMOUNT TO DENIAL OF OPPORTUNITY AND CONSEQUENTLY WO ULD BE FATAL TO THE PROCEEDINGS. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF H.R. MEHTA VS. ACIT, 387 ITR 561 (BOMBAY) HAS ALSO CONSI DERED THE ISSUE OF NOT PROVIDING OPPORTUNITY OF CROSS EXAMINATION I N PARA 11 TO 17 AS UNDER :- 11. WE HAVE THEREFORE PROCEEDED TO HEAR AND DECIDE THE MATTER UNASSISTED BY THE REVENUE. IN THE COURSE OF HIS SUB MISSIONS MR. TRALSHAWALA HAD PRESSED INTO SERVICE INTER ALIA THE DECISION OF THE CALCUTTA HIGH COURT IN MATHER & PLATT (INDIA) LTD. ( SUPRA ) AND SUBMITTED THAT MERELY BECAUSE A PERSON IS NOT FOUND AT AN ADDRESS AFTER SEVERAL YEARS IT CANNOT BE HELD THAT HE IS NON EXIS TENT AND THAT THE ASSESSEE HAD DISCHARGED HIS PRIMARY ONUS BY IDENTIF YING THE SOURCE OF THE AMOUNT PAID. THE COURT OBSERVED THAT ONCE THE P RIMARY ONUS IS DISCHARGED, THE ONUS SHIFTED TO THE REVENUE TO VERI FY GENUINENESS OF THE TRANSACTION. IN THE PRESENT CASE NO SUCH EFFORT WAS MADE BY THE REVENUE. WE FIND THAT IN S. HASTIMAL ( SUPRA ) THE MADRAS HIGH COURT OBSERVED THAT AFTER A LAPSE OF SEVERAL YEARS THE AS SESSEE SHOULD NOT BE PLACED UPON THE RACK AND CALLED UPON TO EXPLAIN NOT ONLY MERELY, THE ORIGIN AND SOURCE OF HIS CAPITAL CONTRIBUTION BUT T HE ORIGIN OF ORIGIN AND THE SOURCE OF SOURCE AS WELL. IN YET ANOTHER CASE O F BAHRI BROTHERS (P) LTD. ( SUPRA ) THE DIVISION BENCH OF PATNA HIGH COURT OBSERVED T HAT WHERE THE ASSESSEE UPON WHOM THE INITIAL BURDEN LIE S, PRODUCES BANK CERTIFICATE TO ESTABLISH THAT THE TRANSACTION WAS C ARRIED OUT THROUGH ACCOUNT PAYEE CHEQUES THUS DISCLOSING THE IDENTITY OF THE CREDITORS AS ALSO THE SOURCE OF INCOME, THE BURDEN SHIFTS ON TO THE DEPARTMENT AND THE DEPARTMENT CANNOT ADD THE CASH CREDITS TO HIS I NCOME FROM UNDISCLOSED SOURCE. 11 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. 12. THE HON'BLE SUPREME COURT IN NEMI CHAND KOTHARI ( SUPRA ) OBSERVED THAT IN ORDER TO ESTABLISH THE RECEIPT OF A CASH CREDIT, THE ASSESSEE MUST SATISFY THREE CONDITIONS I.E. IDENTIT Y OF THE CREDITOR, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITOR. IN THE INSTANT CASE BY VIRTUE OF THE FACT THAT THE TRA NSACTION WAS COMPLETED BY CHEQUE PAYMENTS, THE APPELLANT HAS CONTENDED THA T IT HAD SATISFIED ALL THE THREE TESTS. 13. IN KISHANCHAND CHELLARAM ( SUPRA ) WHEREIN THE SUPREME COURT OBSERVED THAT THE REVENUE AUTHORITIES HAD NOT RECOR DED THE STATEMENT OF THE MANAGER OF THE BANK AND IT WAS DIFFICULT TO APP RECIATE AS TO WHY IT WAS NOT DONE AND WHY THE MATTER WAS NOT PROBED FURT HER BY THE REVENUE. 14. THE DELHI HIGH COURT IN ASHWANI GUPTA ( SUPRA )HELD THAT ONCE THERE IS A VIOLATION OF THE PRINCIPLES OF NATURAL J USTICE INASMUCH AS WHEN ITS SEIZED MATERIAL WAS NOT PROVIDED TO AN ASS ESSEE NOR WAS HE PERMITTED TO CROSS EXAMINE A PERSON ON WHOSE STATEM ENT THE ASSESSING OFFICER RELIED, IT WOULD AMOUNT TO DEFICIENCY, AMOU NTING TO A DENIAL OF OPPORTUNITY AND THEREFORE VIOLATION OF PRINCIPLES O F NATURAL JUSTICE. IN THAT CASE CIT (A) HAD DELETED ADDITION MADE BY THE ASSESSING OFFICER SINCE THE ASSESSING OFFICER HAD FAILED TO PROVIDE C OPIES OF SEIZED MATERIAL TO THE ASSESSEE NOR HAD HE ALLOWED THE ASS ESSEE TO CROSS- EXAMINE THE PARTY CONCERNED. THE DIVISION BENCH HEL D THAT ONCE THERE IS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE I NASMUCH AS SEIZED MATERIAL WAS NOT PROVIDED TO THE ASSESSEE NOR WAS G IVEN OPPORTUNITY OF CROSS EXAMINING THE PERSON WHOSE STATEMENT WAS BEIN G USED AGAINST THE ASSESSEE THE ORDER COULD NOT BE SUSTAINED. 15. IN ANDAMAN TIMBER INDUSTRIES ( SUPRA ) THE SUPREME COURT FOUND THAT THE ADJUDICATING AUTHORITY HAD NOT GRANTED AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE WITNESSES AND THE TRI BUNAL MERELY OBSERVED THAT THE CROSS EXAMINATION OF THE DEALERS IN THAT CASE, COULD NOT HAVE BROUGHT OUT ANY MATERIAL WHICH WOULD NOT O THERWISE BE IN POSSESSION OF THE APPELLANT-ASSESSEE. THE SUPREME C OURT SET ASIDE THE IMPUGNED ORDER AND OBSERVED THAT IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUB JECT MATTER OF THE CROSS EXAMINATION AND MAKE THE REMARKS SUCH AS WAS DONE IN THAT CASE. 16. IN THE INSTANT CASE ALTHOUGH THE APPELLANT ASSESSE E HAS CALLED UPON US TO DRAW AN INFERENCE THAT THE BURDEN SHIFTED TO THE REVENUE IN THE PRESENT CASE ONCE IT WAS ESTABLISHED THAT THE PAYME NTS WERE MADE AND REPAID BY CHEQUE WE NEED NOT HASTEN AND ADOPT THAT VIEW AFTER HAVING GIVEN OUR THOUGHT TO VARIOUS ISSUES RAISED AND THE DECISIONS CITED BY MR.TRALSHAWALLA AND FINDING THAT ON A VERY FUNDAMEN TAL ASPECT, THE REVENUE WAS NOT JUSTIFIED IN MAKING ADDITION AT THE TIME OF REASSESSMENT WITHOUT HAVING FIRST GIVEN THE ASSESSE E AN OPPORTUNITY TO CROSS EXAMINE THE DEPONENT ON THE STATEMENTS RELIED UPON BY THE ACIT. QUITE APART FROM DENIAL OF AN OPPORTUNITY OF CROSS EXAMINATION, THE REVENUE DID NOT EVEN PROVIDE THE MATERIAL ON THE BA SIS OF WHICH THE DEPARTMENT SOUGHT TO CONCLUDE THAT THE LOAN WAS A B OGUS TRANSACTION. 12 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. 17. IN OUR VIEW IN THE LIGHT OF THE FACT THAT THE MONI ES WERE ADVANCED APPARENTLY BY THE ACCOUNT PAYEE CHEQUE AND WAS REPA ID VIDE ACCOUNT PAYEE CHEQUE THE LEAST THAT THE REVENUE SHOULD HAVE DONE WAS TO GRANT AN OPPORTUNITY TO THE ASSESSEE TO MEET THE CASE AGA INST HIM BY PROVIDING THE MATERIAL SOUGHT TO BE USED AGAINST AS SESSEE IN ARRIVING BEFORE PASSING THE ORDER OF REASSESSMENT. THIS NOT HAVING BEEN DONE, THE DENIAL OF SUCH OPPORTUNITY GOES TO ROOT OF THE MATTER AND STRIKES AT THE VERY FOUNDATION OF THE REASSESSMENT AND THEREFO RE RENDERS THE ORDERS PASSED BY THE CIT (A) AND THE TRIBUNAL VULNE RABLE. IN OUR VIEW THE ASSESSEE WAS BOUND TO BE PROVIDED WITH THE MATE RIAL USED AGAINST HIM APART FROM BEING PERMITTING HIM TO CROSS EXAMIN E THE DEPONENTS. DESPITE THE REQUEST DATED 15TH FEBRUARY, 1996 SEEKI NG AN OPPORTUNITY TO CROSS EXAMINE THE DEPONENT AND FURNISH THE ASSES SEE WITH COPIES OF STATEMENT AND DISCLOSE MATERIAL, THESE WERE DENIED TO HIM. IN THIS VIEW OF THE MATTER WE ARE INCLINED TO ALLOW THE APPEAL O N THIS VERY ISSUE. THUS THE DENIAL OF OPPORTUNITY TO CROSS EXAMINE WAS CONSIDERED BY THE HONBLE HIGH COURT WHICH GOES TO THE ROOT OF THE MA TTER AND STRIKES AT THE VERY FOUNDATION OF THE ASSESSMENT AND, THEREFOR E, RENDERS THE ASSESSMENT ORDER PASSED BY THE AO NOT SUSTAINABLE. THE LD. A/R HAS SUBMITTED THAT COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. SHRI PRATEEK KOTHARI VIDE ORDER DATED 16 TH DECEMBER, 2012 IN ITA NO. 159/JP/2016 HAS CONSIDERED THIS ISSUE IN PARA 2 .8 TO 2.11 AS UNDER :- 2.8 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. THE TRANSACTION UNDER QUESTION RELATES TO UNSECURED LOANS TAKEN BY THE ASSESSEE AMOUNTING TO RS 1 CRORES FROM M/S MEHUL GEMS PVT LTD DURING THE IMPUN GED ASSESSMENT YEAR AND NOT ACCEPTING THE SAID LOAN TRA NSACTION AS A GENUINE TRANSACTION BY THE ASSESSING OFFICER AND THE RESULTANT ADDITION MADE UNDER SECTION 68 OF THE ACT. UNDISPUT EDLY, THE PRIMARY ONUS TO ESTABLISH GENUINENESS OF THE LOAN T RANSACTION IS ON THE ASSESSEE. IN THE INSTANT CASE, THE ASSESSEE HAS PROVIDED THE NECESSARY EXPLANATION, FURNISHED DOCUMENTARY EV IDENCE IN TERMS OF TAX FILINGS, AFFIDAVITS AND CONFIRMATION O F THE DIRECTORS, BANK STATEMENTS OF THE LENDER, BALANCE S HEET OF THE LENDER COMPANY, AND AN INDEPENDENT CONFIRMATION HAS ALSO BEEN OBTAINED BY THE ASSESSING OFFICER TO SATISFY T HE CARDINAL TEST OF IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE LOAN TRANSACTION. HOWEVER, THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING IN RESPECT OF SUCH EXPLANATION, DOCUMENTARY EVIDENCE AS WELL AS INDEPENDENT CONFIRMATION. APPARENTLY, TH E REASON FOR NOT ACCEPTING THE SAME IS THAT THE ASSESSING OFFICE R WAS IN RECEIPT OF CERTAIN INFORMATION FROM THE INVESTIGATI ON WING OF THE 13 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. TAX DEPARTMENT AS PER WHICH THE TRANSACTION UNDER CONSIDERATION IS A BOGUS LOAN TRANSACTION. THE SAID INFORMATION RECEIVED FROM THE INVESTIGATION WING THUS OVERWEIGH ED THE MIND OF THE ASSESSING OFFICER. THE ASSESSING OFFICER STA TED THAT THE PRIMARY ONUS IS ON THE ASSESSEE TO ESTABLISH THE GE NUINENESS OF THE TRANSACTION CLAIMED BY IT AND IF THE INVESTIGAT ION DONE BY THE DEPARTMENT LEADS TO DOUBT REGARDING THE GENUINE NESS OF THE TRANSACTIONS, IT IS INCUMBENT ON THE ASSESSEE TO PR ODUCE THE PARTIES ALONGWITH NECESSARY DOCUMENTS TO ESTABLISH THE GENUINENESS OF THE TRANSACTION. IN RESPONSE, THE AS SESSEE SUBMITTED THAT SHRI BHANWARLAL JAIN IS NOT KNOWN TO HIM AND REGARDING VARIOUS INCRIMINATING DOCUMENTARY EVIDENC ES SEIZED DURING THE COURSE OF SEARCH AND STATEMENTS RECORDED OF SHRI BHANWARLAL JAIN AND OTHER PERSONS, HE SPECIFICALLY REQUESTED THE AO TO PROVIDE COPIES OF SUCH INCRIMINATING DOCU MENTS AND STATEMENT OF ALL VARIOUS PERSONS RECORDED IN THIS R EGARD AND PROVIDE AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXA MINE SUCH PERSONS. HOWEVER, THE AO DIDNT PROVIDE TO THE ASSE SSEE COPIES OF SUCH INCRIMINATING DOCUMENTS AND STATEMENTS OF V ARIOUS PERSONS RECORDED AND ALLOW THE CROSS-EXAMINATION OF ANY OF THESE PERSONS. WHILE DOING SO, THE AO STATED THAT IN HIS STATEMENTS, BHANWARLAL JAIN HAD DESCRIBED THAT THEY ARE INDULGED IN PROVIDING ACCOMMODATION ENTRIES OF BOGU S UNSECURED LOANS AND ADVANCES THROUGH VARIOUS BENAMI CONCERNS (70) OPERATED AND MANAGED BY THEM. THIS AD MISSION AUTOMATICALLY MAKES ALL THE TRANSACTIONS DONE BY TH EM AS MERE PAPER TRANSACTIONS AND IN THESE CIRCUMSTANCES, FURT HER AS PER THE INFORMATION NAME AND ADDRESS OF ASSESSEE AND TH E BENAMI CONCERN THROUGH WHICH ACCOMMODATION ENTRY OF UNSECU RED LOANS WAS PROVIDED IS APPEARING IN THE LIST OF BENE FICIARIES TO WHOM THE SAID GROUP HAS PROVIDED. THIS ADMISSION IS SUFFICIENT TO REJECT THE CONTENTIONS OF THE ASSEESSE. FURTHER , REGARDING CROSS EXAMINATION, THE AO STATED THAT THE RIGHT OF CROSS EXAMINATION IS NOT AN ABSOLUTE RIGHT AND IT DEPENDS UPON THE CIRCUMSTANCES OF EACH CASE AND ALSO ON THE STATUTE CONCERNED. IN THE PRESENT CASE, NO SUCH CIRCUMSTANCES ARE WARR ANTED AS IN THE LIST OF BENEFICIARIES TO WHOM ACCOMMODATION ENT RIES WERE PROVIDED BY THE SAID GROUP CATEGORICALLY CONTAINS T HE NAME AND ADDRESS OF THE ASSESSEE. FURTHER THE GROUP HAS CATE GORICALLY ADMITTED TO PROVIDING OF ACCOMMODATION ENTRIES OF U NSECURED LOANS THROUGH VARIOUS BENAMI CONCERNS. THE AO FURT HER RELIED UPON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF C. VASANTLAL & CO. VS. CIT 45 ITR 206(SC) AND HO NBLE RAJASTHAN HIGH COURT IN CASE OF RAMESHWARLAL MALI V S. CIT 256 ITR 536(RAJ.) AMONG OTHERS. IN THIS REGARD, IT WAS SUBMITTED BY THE ASSESSEE THAT IF THE ENTRIES AND M ATERIAL ARE GATHERED BEHIND THE BACK OF THE ASSESSEE AND IF THE AO PROPOSES TO ACT ON SUCH MATERIAL AS HE MIGHT HAVE G ATHERED AS A RESULT OF HIS PRIVATE ENQUIRIES, HE MUST DISCLOSE ALL SUCH 14 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. MATERIAL TO THE ASSESSEE AND ALSO ALLOW THE CROSS E XAMINATION AND IF THIS IS NOT DONE, THE PRINCIPLES OF NATURAL JUSTICE STAND VIOLATED. 2.9 IN LIGHT OF ABOVE DISCUSSIONS, IN OUR VIEW, TH E CRUX OF THE ISSUE AT HAND IS THAT WHETHER THE PRINCIPLE OF NATURAL JU STICE STAND VIOLATED IN THE INSTANT CASE. IN OTHER WORDS, WHERE THE AO DOESNT WANT TO ACCEPT THE EXPLANATION OF THE ASSES SEE AND THE DOCUMENTATION FURNISHED REGARDING THE GENUINENESS O F THE LOAN TRANSACTION AND INSTEAD WANTS TO RELY UPON THE INFO RMATION INDEPENDENTLY RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT IN RESPECT OF INVESTIGATION CARRIED OUT AT A THIRD PARTY, CAN THE SAID INFORMATION BE USED AGAINST THE ASSESSEE WITHOUT SHARING SUCH INFORMATION WITH THE ASSESSEE AND ALLOWING AN OPPORTUNITY TO THE ASSESSEE TO EXAMINE SUCH INFORMATION AND EXPLAIN ITS POSITION ESPECIALLY WHE N THE ASSESSEE HAS REQUESTED THE SAME TO THE ASSESSING OF FICER. 2.10 IN THIS REGARD, THE HONBLE SUPREME COURT IN THE CASE OF DHAKESWARI COTTON MILLS LTD. V. CIT (1954) 26 ITR 7 75 (SC) (COPY AT CASE LAW PB 812-818) HAS HELD THAT THE RULE OF LAW ON THIS SUBJECT HAS BEEN FAIRLY AND RIGHTLY STA TED BY THE LAHORE HIGH COURT IN THE CASE OF SETH GURMUKH SINQH WHERE IT WAS STATED THAT WHILE PROCEEDING UNDER SUB-SECTION (3) OF SECTION 23, THE INCOME-TAX OFFICER, THOUGH NOT BOUN D TO RELY ON EVIDENCE PRODUCED BY THE ASSESSEE AS HE CONSIDERS T O BE FALSE, YET IF HE PROPOSES TO MAKE AN ESTIMATE IN DISREGARD OF THAT EVIDENCE, HE SHOULD IN FAIRNESS DISCLOSE TO THE ASS ESSEE THE MATERIAL ON WHICH HE IS GOING TO FIND THAT ESTIMATE ; AND THAT IN CASE HE PROPOSES TO USE AGAINST THE ASSESSEE THE RE SULT OF ANY PRIVATE INQUIRIES MADE BY HIM, HE MUST COMMUNICATE TO THE ASSESSEE THE SUBSTANCE OF THE INFORMATION SO PROPOS ED TO BE UTILIZED TO SUCH AN EXTENT AS TO PUT THE ASSESSEE I N POSSESSION OF FULL PARTICULARS OF THE CASE HE IS EXPECTED TO MEET AND THAT HE SHOULD FURTHER GIVE HIM AMPLE OPPORTUNITY TO MEET I T. IT WAS HELD IN THAT CASE THAT IN THIS CASE WE ARE OF THE OPINION THAT THE TRIBUNAL VIOLATED CERTAIN FUNDAMENTAL RULES OF JUSTICE IN REACHING ITS CONCLUSIONS. FIRSTLY, IT DID NOT DISCL OSE TO THE ASSESSEE WHAT INFORMATION HAD BEEN SUPPLIED TO IT B Y THE DEPARTMENTAL REPRESENTATIVE. NEXT, IT DID NOT GIVE ANY OPPORTUNITY TO THE COMPANY TO REBUT THE MATERIAL FU RNISHED TO IT BY HIM, AND LASTLY, IT DECLINED TO TAKE ALL THE MAT ERIAL THAT THE ASSESSEE WANTED TO PRODUCE IN SUPPORT OF ITS CASE. THE RESULT IS THAT THE ASSESSEE HAD NOT HAD A FAIR HEARING. THE HONBLE SUPREME COURT IN CASE OF C. VASANTLAL & CO. VS. CIT 45 ITR 206 (SC) HAS HELD THAT THE ITO IS NOT B OUND BY ANY TECHNICAL RULES OF THE LAW OF EVIDENCE. IT IS O PEN TO HIM TO COLLECT MATERIAL TO FACILITATE ASSESSMENT EVEN BY P RIVATE 15 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. ENQUIRY. BUT, IF HE DESIRES TO USE THE MATERIAL SO COLLECTED, THE ASSESSEE MUST BE INFORMED ABOUT THE MATERIAL AND GI VEN ADEQUATE OPPORTUNITY TO EXPLAIN IT. THE STATEMENTS MADE BY PRAVEEN JAIN AND GROUP WERE MATERIAL ON WHICH THE I T AUTHORITIES COULD ACT PROVIDED THE MATERIAL WAS DIS CLOSED AND THE ASSESSEE HAD AN OPPORTUNITY TO RENDER THEIR EXP LANATION IN THAT REGARD. THE HONBLE SUPREME COURT IN CASE OF KISHINCHAND CH ELLARAM V. CIT (1980) 125 ITR 713 (SC) (COPY AT CASE LAW PB 585- 591) HAS HELD THAT WHETHER THERE WAS ANY MATERIAL EVIDE NCE TO JUSTIFY THE FINDINGS OF THE TRIBUNAL THAT THE AMOUN T OF RS. 1,07,350 SAID TO HAVE BEEN REMITTED BY TILOKCHAND F ROM MADRAS REPRESENTED THE UNDISCLOSED INCOME OF THE AS SESSEE. THE ONLY EVIDENCE ON WHICH THE TRIBUNAL COULD RELY FOR THE PURPOSE OF ARRIVING AT THIS FINDING WAS THE LETTER, DATED 18-2- 1955 SAID TO HAVE BEEN ADDRESSED BY THE MANAGER OF THE BANK TO THE ITO. NOW IT IS DIFFICULT TO SEE HOW THIS LET TER COULD AT ALL BE RELIED UPON BY THE TRIBUNAL AS A MATERIAL PIECE OF EVIDENCE SUPPORTIVE OF ITS FINDING. IN THE FIRST PLACE, THIS LETTER WAS NOT DISCLOSED TO THE ASSESSEE BY THE ITO AND EVEN THOUG H THE AAC REPRODUCED AN EXTRACT FROM IT IN HIS ORDER, HE DID NOT CARE TO PRODUCE IT BEFORE THE ASSESSEE OR GIVE A COPY OF IT TO THE ASSESSEE. THE SAME POSITION OBTAINED ALSO BEFORE TH E TRIBUNAL AND THE HIGH COURT AND IT WAS ONLY WHEN A SUPPLEMEN TAL STATEMENT OF THE CASE WAS CALLED FOR BY THIS COURT BY ITS ORDER, DATED 16-8-1979 THAT, ACCORDING TO THE ITO, THIS LE TTER WAS TRACED BY HIM AND EVEN THEN IT WAS NOT SHOWN BY HIM TO THE ASSESSEE BUT IT WAS FORWARDED TO THE TRIBUNAL AND I T WAS FOR THE FIRST TIME AT THE HEARING BEFORE THE TRIBUNAL IN RE GARD TO THE PREPARATION OF THE SUPPLEMENTAL STATEMENT OF THE CA SE THAT THIS LETTER WAS SHOWN TO THE ASSESSEE. IT WILL, THEREFOR E, BE SEEN THAT, EVEN IF WE ASSUME THAT THIS LETTER WAS IN FACT ADDR ESSED BY THE MANAGER OF THE BANK TO THE ITO, NO RELIANCE COULD B E PLACED UPON IT, SINCE IT WAS NOT SHOWN TO THE ASSESSEE UNT IL AT THE STAGE OF PREPARATION OF THE SUPPLEMENTAL STATEMENT OF THE CASE AND NO OPPORTUNITY TO CROSS EXAMINE THE MANAGER OF THE BAN K COULD IN THE CIRCUMSTANCES BE SOUGHT OR AVAILED OF BY THE AS SESSEE. IT IS TRUE THAT THE PROCEEDINGS UNDER THE INCOME-TAX LAW ARE NOT GOVERNED BY THE STRICT RULES OF EVIDENCE AND, THERE FORE, IT MIGHT BE SAID THAT EVEN WITHOUT CALLING THE MANAGER OF TH E BANK IN EVIDENCE TO PROVE THIS LETTER, IT COULD BE TAKEN IN TO ACCOUNT AS EVIDENCE. BUT BEFORE THE INCOME-TAX AUTHORITIES COU LD RELY UPON IT, THEY WERE BOUND TO PRODUCE IT BEFORE THE ASSESS EE SO THAT THE ASSESSEE COULD CONTROVERT THE STATEMENTS CONTAINED IN IT BY ASKING FOR AN OPPORTUNITY TO CROSS EXAMINE THE MANA GER OF THE BANK WITH REFERENCE TO THE STATEMENTS MADE BY HIM. 16 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. 2.11 IN LIGHT OF ABOVE PROPOSITION IN LAW AND ESPE CIALLY TAKING INTO CONSIDERATION THE DECISION OF THE HONBLE SUPREME C OURT IN CASE OF C. VASANTLAL & CO. (SUPRA) RELIED UPON BY T HE REVENUE AND WHICH ACTUALLY SUPPORTS THE CASE OF THE ASSESSE E, IN THE INSTANT CASE, THE ASSESSMENT WAS COMPLETED BY THE A O RELYING SOLELY ON THE INFORMATION RECEIVED FROM THE INVESTI GATION WING, STATEMENT RECORDED U/S 132(4) OF SHRI BHANWARLAL JA IN AND OTHERS, AND VARIOUS INCRIMINATING DOCUMENTARY EVIDE NCE FOUND FROM THE SEARCH AND SEIZURE CARRIED OUT BY INVESTIG ATION WING, MUMBAI ON THE SHRI BHANWARLAL JAIN GROUP ON 03.10.2 013. IT REMAINS UNDISPUTED THAT THE ASSESSEE WAS NEVER PROV IDED COPIES OF SUCH INCRIMINATING DOCUMENTS AND STATEMEN TS OF SHRI BHANWARLAL JAIN AND VARIOUS PERSONS AND AN OPPORTUN ITY TO CROSS EXAMINE SUCH PERSONS THOUGH HE SPECIFICALLY A SKED FOR SUCH DOCUMENTS AND CROSS EXAMINATION. ON THE OTHER HAND, THE BURDEN WAS SOUGHT TO BE SHIFTED ON THE ITA NO. 159/ JP/16 THE ACIT, CENTRAL -2, JAIPUR VS. M/S PRATEEK KOTHARI, J AIPUR 21 ASSESSEE BY THE A.O. IT IS CLEAR CASE WHERE THE PRI NCIPLE OF NATURAL JUSTICE STAND VIOLATED AND THE ADDITIONS MA DE UNDER SECTION 68 THEREFORE ARE UNSUSTAINABLE IN THE EYE O F LAW AND WE HEREBY DELETE THE SAME. THE ORDER OF THE LD CIT(A) IS ACCORDINGLY CONFIRMED AND THE GROUND OF THE REVENUE IS DISMISSED. THUS WHEN THE ASSESSEE HAS SPECIFICALLY ASKED FOR C ROSS EXAMINATION OF THE WITNESSES WHOSE STATEMENTS WERE RELIED UPON BY THE AO, THEN THE DENIAL OF THE OPPORTUNITY TO CROSS EXAMINE WOULD CE RTAINLY IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AND CONSEQUENTLY R ENDERS THE ASSESSMENT ORDER BASED ON SUCH STATEMENT AS NOT SUS TAINABLE IN LAW. HENCE IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE WHERE THE ASSESSEE HAS REPEATEDLY REQUESTED AND DEMANDED THE CROSS EXAMINATION OF THE WITNESSES WHOSE STATEMENTS WERE RELIED UPON BY THE AO IN THE ASSESSMENT ORDER AND FURTHER THE REPO RT OF THE DDIT INVESTIGATION KOLKATA IS ALSO BASED ON THE STATEMEN T OF SUCH PERSON THEN THE DENIAL OF CROSS EXAMINATION BY THE AO AS W ELL AS LD. CIT (A) DESPITE THE FACT THAT THE ASSESSEE WAS READY TO BEA R THE COST OF THE CROSS EXAMINATION OF THE WITNESSES IS A GROSS VIOLA TION OF PRINCIPLES OF NATURAL JUSTICE. THUS THE ADDITIONS MADE BY THE AO ON THE BASIS OF SUCH STATEMENT WITHOUT ANY TANGIBLE MATERIAL IS NOT SUSTAINABLE IN LAW AND LIABLE TO BE DELETED. ACCORDINGLY THE ADDITION MADE BY THE AO IS 17 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. ALSO DELETED ON MERITS APART FROM THE LEGAL ISSUE D ECIDED IN FAVOUR OF THE ASSESSEE. THEREFORE, THE DOCUMENTARY EVIDENCE BROUGHT BY THE ASSESSEE ON RECORD CANNOT BE NEGATED MERELY ON THE BASIS OF THE ALLEGATIONS MADE IN THE REPORT OR IN THE STATEMENT RECORDED AT THE BACK OF THE ASSESSEE WITH OUT GIVING AN OPPORTUNITY OF CROSS EXAMINATION. THE AO HAS NOT BROUGHT ANY MATE RIAL ON RECORD TO SHOW THAT THE ASSESSEES OWN UNACCOUNTED MONEY HAS BEEN BROUGHT B ACK IN THE SHAPE OF SHARE CAPITAL. EVEN THE AO HAS NOT INDICATED ANYTHING TO SHOW THAT THE CHAIN OF TRANSACTIONS OF MOVEMENT OF MONEY FROM ONE ENTITY T O ANOTHER ENTITY IS FINALLY ESTABLISHED. THEREFORE, IN THE ABSENCE OF ANY ENQU IRY AND FINDING BY THE AO, THE ADDITION MADE MERELY ON THE BASIS OF SUSPICION AND ON THE STATEMENT RECORDED BY THE INVESTIGATION WING WHEREIN A GENERAL STATEMENT HAS BEEN MADE BY SHRI PRAVEEN KUMAR JAIN IS NOT SUSTAINABLE. ACCORDINGLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE AND IN VIEW OF THE DECISION ON THIS POINT OF NON GRANTING OF CROSS EXAMINATION, THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT (A) IS NOT JUSTIFIED AND THE SAME IS DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 24/09/ 2019. SD/- ( FOT; IKY JKWO (VIJAY PAL RAO) U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 24/09/2019. DAS/ 18 ITA NO. 259/JP/2017. M/S. SLGK CERA INDIA PVT. LTD., JAIPUR. VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. S.L.G.K. CERA INDIA PVT. LTD ., JAIPUR. 2. THE RESPONDENT THE ITO WARD 7(3), JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 259/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR