PRAKASH K SHAH, MUMBAI V. ITO 17(2)(1), MUMBAI

ITA 3127/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9319 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 25-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Principle of natural justice; Opportunity of cross examination; Accommodation entries
• Section: 133(6)

Judgement Text

, L LL LH HH H INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C BENCH. , ! , BEFORE S/SH.VIJAY PAL RAO, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA/3127/MUM/2013, ' ' ' ' # # # # / ASSESSMENT YEAR-2009-10 PRAKASH K. SHAH, 26, 2ND FLOOR, 234, OM NIWAS, R.A.KIDWAI ROAD, WADALA, MUMBAI-400031 PAN:AAPKS5648G VS ITO 17(2)(1), PIRAMAL CHAMBERS, LOWER PAREL, MUMBAI-400013 ( $% / ASSESSEE) ( &'$% / RESPONDENT) '() '() '() '() * * * * / ASSESSEE BY :SHRI SANJAY R. PARIKH + * / REVENUE BY :SHRI PREMANAND J. ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING : 11.03.2015 -.# + ), / DATE OF PRONOUNCEMENT : 11.03.2015 ' ' ' '1961 1961 1961 1961 + + + + 254 254 254 254( (( (1 11 1) )) ) )7) )7) )7) )7) 8 8 8 8 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DT.12.03.2013 OF CIT (A)-XXIX ,MUMBAI THE ASSESSEE HAD FILED FOLLOWING GROUNDS OF APPEAL:- BEING AGGRIEVED BY THE ORDER DATED 12.03.2013 PASSE D BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) XXIX, MUMBAI, YOUR ASSESSEE THIS APPE AL, AMONG OTHERS, ON THE FOLLOWING GROUNDS OF APPEAL, EACH OF WHICH IS INDEPENDENT OF, AND WIT HOUT PREJUDICE TO, THE OTHERS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN ADDING UNEXPLAINED LIABILITY OF RS.34,00,0 00/-. YOUR ASSESSEE, THEREFORE, PRAYS THAT THE SAID DISALLOWANCE ON ACCOUNT OF UNEXPLAINED LIABILI TY OF RS. 34,00,0001- SHOULD BE DELETED IN TOTO. 2. THE LEARNED OFFICER ERRED IN LAW IN DISALLOWING INTEREST PAID TO MR.MUKESH SHAH AMOUNTING TO RS.7,40,587/-.LOOKING TO THE FACTS & CIRCUMSTANCES OF THE CASE, YOUR ASSESSEE REQUEST YOUR HONOR THAT THE ASSESSING OFFICER MAY BE DIRECTED TO DELET E THE SAID ADDITION OF RS.7,40,587/- IN TOTO. 3. YOUR ASSESSEE CRAVES LEAVE TO ADD, TO AMEND AND 1 OR TO ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. ASSESSEE,AN INDIVIDUAL,ENGAGED IN THE BUSINESS OF T RADING DEALING AND IMPORTING OF CRGO AND CRNGO MATERIAL,FILED HIS RETURN OF INCOME ON 21.09 .2009,DECLARING TOTAL INCOME OF RS.7,62,302 /-.ASSESSING OFFICER(AO)FINALISED THE ASSESSMENT U/ S.143(3) OF THE ACT,ON 29.12.2011,DETERMINING THE TOTAL INCOME AT RS. 96,11,080/-. 2. THE EFFECTIVE GROUND OF APPEAL DEALS WITH THE ADDIT ION,AMOUNTING TO RS.34 LAKHS, MADE BY THE AO,ON ACCOUNT OF UNEXPLAINED LIABILITY AND INTEREST OF RS.7.40 LAKHS PAID ON THE DISPUTED AMOUNT. DURING THE ASSESSMENT PROCEEDING,THE AO FOUND THAT THE ASSESSEE HAD TAKEN LOANS FROM VARIOUS PARTIES.HE ISSUED NOTICES U/S. 133(6) OF THE ACT T O DIFFERENT PARTIES WHO HAD GIVEN UNSECURED LOANS TO THE ASSESSEE.ONE OF THESE PARTIES WAS MUKE SH G. SHAH(MGS) WHO ATTENDED BEFORE THE AO AND DENIED GIVING ANY UNSECURED LOANS TO THE ASS ESSEE.THE STATEMENT WAS RECORDED ON OATH BY THE AO IN WHICH HE CATEGORICALLY STATED THAT HE WAS WORKING AS A SMALL ENTRY PROVIDER AT THE RELEVANT TIME AND HE PROVIDED ONLY ACCOMMODATION EN TRY TO THE ASSESSEE FOR RS.34,00,000/- DURING THE YEAR. IT WAS EXPLAINED BY HIM THAT EITHE R THE CASH WAS DEPOSITED IN HIS ACCOUNT OR THIRD PARTY CHEQUES TO WHOM THE CASH WAS GIVEN WERE DEPOS ITED IN HIS ACCOUNT AND AFTERWARDS HE WOULD 2 ITA NO.3127/MUM/2013-AY.2009-10/PKS 2 ISSUE CHEQUES IN FAVOUR OF THE ASSESSEE. THE AO ALS O VERIFIED THE COPY OF BANK STATEMENT OF MGS FROM WHICH IT WAS NOTICED THAT THERE WERE CERTAIN C ASH DEPOSITS AND ALSO THIRD PARTY ADVANCES CREDITED TO THIS ACCOUNT BEFORE MGS ISSUED LOAN CH EQUES TO THE ASSESSEE FROM THIS BANK ACCOUNT. MGS EXPLAINED THAT HIS FINANCIAL CONDITION WAS VERY BAD AND TO MEET HIS FINANCIAL REQUIREMENTS HE HAD STARTED GIVING ACCOMMODATION ENTRIES FOR WHI CH HE USED TO GET 10 PAISE TO 15 PAISE PER RS.100/-.IN VIEW OF THESE REVELATIONS BY MGS, THE A O VIDE LETTER DATED 16.12.2011 ASKED THE ASSESSEE TO SHOW CAUSE WHY THIS UNSECURED LOAN OF R S. 34,00,000/- AND THE CORRESPOND INTEREST THERE UPON SHOULD NOT BE DISALLOWED. BY LETTER DATE D 22.12.2011,THE ASSESSEE CLAIMED THAT LOAN GIVEN BY MGS WAS GENUINE, PAID BY ACCOUNT PAYEE CHE QUE AND INTEREST WAS ALSO PAID ON THIS AMOUNT AFTER DEDUCTING TAX AT SOURCE. IT WAS ALSO C LAIMED THAT IN FY.201 0-11 THIS LOAN HAD BEEN REPAID.A CONFIRMATION LETTER OF MGS WAS ALSO SUBMIT TED. HOWEVER, IN VIEW OF THE STATEMENT OF MGS,HE DID NOT ACCEPT THE ABOVE EXPLANATION OF THE ASSESSEE AND ADDED RS. 34,00,000/- AND INTEREST OF RS.7,40,587/- TO THE INCOME OF THE ASSE SSEE. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM IT WAS ARGUED THAT DURIN G THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD TAKEN A LOAN OF RS. 34,00,000/- FROM MGS,THAT T HE AO HAD ASKED FOR THE CONFIRMATION FROM THE SAID PARTY, WHICH WAS DULY FILED,THAT THE AO HA D ISSUED SUMMONS TO THE PARTY AND HAD RECORDED HIS STATEMENTS,THAT VIDE LETTER DATED 22ND DECEMBER, 2011 HE REQUESTED A COPY OF THE STATEMENT RECORDED OF MGS TO BE SUPPLIED AND ALSO R EQUESTED THAT THEY BE GIVEN AN OPPORTUNITY TO CROSS EXAMINE MGS,THAT THE AO HAD WITHOUT GIVING A COPY OF STATEMENT RECORDED OR WITHOUT AFFORDING AN OPPORTUNITY OF CROSS EXAMINATION, HAD ADDED THE LOAN AS THE INCOME OF THE ASSESSEE AND. HAD ALSO DISALLOWED THE INTEREST PAID TO THE S AID PARTY,THAT THE STATEMENT OF MGS COULD NOT BE USED AGAINST THE ASSESSEE AS IT VIOLATED THE PRINCI PLES OF NATURAL JUSTICE,THAT THE CONFIRMATION LETTE R ISSUED BY MGS CONFIRMED THE GIVING OF LOAN TO THE A SSESSEE,THAT THE LOAN HAD BEEN RECEIVED BY CHEQUE AN REPAID BY CHEQUE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER THE FAA DIRECTED THE AO TO PROVIDE THE COPY OF THE STATEMENT TO MGS AND ALLOW HIM TO CROSS EXAMINE MGS.IN PURSUANCE OF THE DIRECTIONS OF THE FAA,THE AO SUBMI TTED A REMAND REPORT AFTER THE CROSS EXAMINA -TION.THE ASSESSEE AGAIN APPROACHED HIM AND STATED THAT THE AO AND DURING THE COURSE OF CROSS EXAMINATION HE WAS NOT GRANTED A FAIR CHANCE TO CRO SS EXAMINE MGS.AFTER CONSIDERING THE REMAND REPORT AND OBJECTIONS OF THE ASSESSEE,THE FA A HELD THAT THE CONTENTION OF THE ASSESSEE COULD NOT BE ACCEPTED,THAT IT WAS TRUE THAT THE LOA N WAS GIVEN BY ACCOUNT PAYEE CHEQUE,THAT CONFIRMATION WAS ALSO GIVEN BY MGS,THAT INTEREST WA S PAID BY THE ASSESSEE AFTER DEDUCTING TDS BUT MGS IN HIS STATEMENT RECORDED ON OATH DURING AS SESSMENT PROCEEDINGS HAD CLEARLY DENIED OF GIVING ANY GENUINE LOAN OF RS.34,00,000/- TO THE AS SESSEE,THAT MGS HAD SPECIFICALLY INFORMED THAT ONLY AN ACCOMMODATION ENTRY WAS PROVIDED TO THE ASS ESSEE IN WHICH CASH WAS GIVEN BY THE ASSESSEE EITHER DIRECTLY TO MGS WHO WOULD DEPOSIT T HE SAME IN HIS BANK ACCOUNT BEFORE PROVIDING CHEQUE TO THE ASSESSEE OR THE CASH WAS FIRST DEPOSI TED IN OTHER THIRD PARTY ACCOUNT AND FROM THERE CHEQUE WOULD BE ISSUED TO MGS, WHO IN TURN ISSUED C HEQUE TO THE ASSESSEE,THAT THE ACT OF GIVING INTEREST AND DEDUCTION OF TAX AT SOURCE WAS ONLY TO MAKE THE TRANSACTION LOOK GENUINE,THAT EVEN DURING CROSS-EXAMINATION PROCEEDINGS MGS, IN REPLY TO QUESTION 4 HAD AGAIN REITERATED THAT HE HAD NOT GIVEN ANY LOAN TO THE ASSESSEE AND HE GAVE ONLY AN ENTRY TO HIM,THAT THOUGH THE CONTENTION OF THE ASSESSEE THAT CROSS-EXAMINATION WAS NOT DONE IN A PROPER MANNER WAS ACCEPTABLE BUT THE FINDINGS RECORDED IN THAT STATEMENT COULD NOT BE IG NORED,THAT EVEN IF THE AO HAD NOT FOLLOWED CORRECT PROCEDURE IN PROCEEDINGS, CONTENT OF THE EN QUIRY/ VERIFICATION HAD EVIDENTIARY VALUE. 4. BEFORE US,AUTHORISED REPRESENTATIVE(AR)STATED THE A O HAD RECORDED THE STATEMENT OF MGS BEHIND THE BACK OF THE ASSESSEE,THAT HE WAS NOT SUP PLIED THE COPY OF THE STATEMENT OF THE CREDITOR, THAT NO CROSS EXAMINATION OF MGS WAS ALLOWED BY THE AO,THAT THE FAA HAD DIRECTED THE AO TO 3 ITA NO.3127/MUM/2013-AY.2009-10/PKS 3 PROVIDE THE A COPY OF STATEMENT OF MGS TO THE ASSE SSEE AND TO ALLOW CROSS EXAMINATION, THAT NO EFFECTIVE CROSS EXAMINATION TOOK PLACE,THAT THE FAA HAD ALSO ADMITTED THAT PROPER CROSS EXAMINATION WAS NOT ALLOWED,THAT EVEN AFTER THAT FI NDING THE FAA ENDORSED THE VIEW OF THE AO. DEPARTMENTAL REPRESENTATIVE(DR)LEFT THE MATTER TO T HE DISCRETION OF THE BENCH. 5 .WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD TAKEN A LOAN OF RS.34 LAKHS FROM MGS,T HAT THE ASSESSEE HAD FILED CONFIRMATION BEFORE THE AO, THAT AO HAD RECORDED THE STATEMENT O F THE LENDER AND MADE AN ADDITION OF THE PRINCIPLE AMOUNT AND INTEREST AMOUNT TO THE INCOME OF THE ASSESSEE,THAT HE DID NOT SUPPLY THE COPY OF THE STATEMENT OF MGS TO THE ASSESSEE BEFORE MAKI NG ADDITION,THAT ONLY AFTER THE DIRECTIONS OF THE FAA THE AO COMPLIED WITH THE PRINCIPLES OF NATU RAL JUSTICE,THAT THE FAA HAD MENTIONED THAT OPPORTUNITY OF PROPER CROSS EXAMINATION WAS NOT PR OVIDED TO THE ASSESSEE.WE HAVE GONE THROUGH THE STATEMENTS RECORDED BY THE AO OF MGS AND THE AS SESSEE IN PURSUANCE OF THE DIRECTIONS OF THE FAA(PAGE NO.55-56 OF PAPER BOOK).WE FIND THAT IT IS THE AO WHO IS ASKING THE QUESTIONS TO BOTH OF THEM.IN OUR OPINION NO MEANINGFUL PURPOSE WAS SE RVED BY IT.IT APPEARS THAT IN THE NAME OF ALLEGED CROSS EXAMINATION THE AO HAD COMPLETED A FO RMALITY-THERE WAS NO EFFECTIVE CROSS EXAMINA -TION.THE ASSESSEE SHOULD HAVE BEEN ALLOWED TO QUES TIONS MGS ABOUT THE DISPUTED TRANSACTION AND AFTER THAT IF THE AO HAD SOME DOUBT HE SHOULD HAVE CLARIFIED IT.INSTEAD OF FOLLOWING THE VALID COURSE OF CROSS EXAMINATION THE AO SHORT -CIRCUITED IT FOR NAMESAKE. AS A REPRESENTATIVE OF THE SOVEREIGN,THE AO IS AUTH ORISED TO COLLECT DUE TAXES ONLY AND HE HAD TO FOLLOW A PROCEDURE,AS ENVISAGED BY THE ACT,TO DETER MINE TAXABILITY OF AN ASSESSEE.AS THE AO HAD FAILED TO AFFORD A FAIR CHANCE TO THE ASSESSEE FOR CROSS EXAMINING MGS,SO,IN OUR OPINION,IN THER INTEREST OF JUSTICE,MATTER DESERVES TO BE REMITTED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION. THE AO IS DIRECTED TO AFFORD AN EFFECTIVE AND MEANI NGFUL OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE OF MGS,AS MENTIONED BY US,IN THE EARLIER P ART OF OUR ORDER.REVERSING THE ORDER OF THE FAA,WE DECIDE BOTH THE GROUNDS IN FAVOUR OF THE ASS ESSEE,IN PART. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ( 9 '() + 8): ; + ) < =. ORDER PRONOUNCE D IN THE OPEN COURT ON 11 TH ,MARCH,2015 . 8 + -.# ? @' 11, EKPZ , 201 5 . + 7 A SD/- SD/- ( / VIJAY PAL RAO) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, @' /DATE:11.03 . 2015. SK 8 8 8 8 + ++ + &) &) &) &) B #) B #) B #) B #) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ C D , 4. THE CONCERNED CIT / C D 5. DR C BENCH, ITAT, MUMBAI / E7 &)' L LL LH HH H , . . . 6. GUARD FILE/ 7 F ') ') ') ') &) &)&) &) //TRUE COPY// 8' / BY ORDER, G / < DY./ASST. REGISTRAR , /ITAT, MUMBAI.