ITO, New Delhi V. M/s. Rishi Kumar Naveen Kumar, New Delhi

ITA 4588/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5505 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 04-02-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 04-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BANITA DEV NAUREN
• Assessee Lawyers: SHARAT DEV KAPILA
• Keywords: Loose papers; Principle of natural justice; Opportunity of cross examination; Source of fund; Reassessment proceedings
• Section: 153A; 32; 148; 6; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRESI DENT AND SHRI I.P. BANSAL, JUDICIAL MEMBER ITA NO.4588/DEL/2009 ASSESSMENT YEAR : 2002-03 INCOME TAX OFFICER, WARD 28(3), NEW DELHI. VS. M/S RISHI KUMAR NAVEEN KUMAR, 6638, KHARI BAOLI, NEW DELHI 110 006. PAN : AAAFA5923G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SHARAT DEV KAPILA, ADVOCATE REVENUE BY : SMT. BANITA DEV NAUREN, SR. DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIR ECTED AGAINST THE ORDER OF THE CIT (A) DATED 29 TH SEPTEMBER, 2009 FOR ASSESSMENT YEAR 2002-03. GROU NDS OF APPEAL READ AS UNDER:- 1. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.20,00, 000/- MADE BY THE A.O. U/S 69A OF THE IT ACT, 1961. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND (S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS AP PEAL. 2. THE IMPUGNED ASSESSMENT ORDER IS DATED 29/30 TH DECEMBER, 2008 PASSED U/S 147/133 OF IT ACT, 1961 (THE ACT). THE ASSESSM ENT IN THE PRESENT CASE WAS REOPENED ON THE BASIS OF INCOME-TAX PROCEEDINGS TOO K PLACE IN THE CASE OF BRIJ MOHAN GUPTA GROUP FROM WHERE THE AO GOT AN INFORMAT ION THAT ENTRY NO.234 ITA NO.4588/DEL/2009 2 DATED JUNE, 2001 OF RS.20 LAC WAS BELONGING TO THE ASSESSEE. IT IS MENTIONED IN THE ASSESSMENT ORDER THAT A SEARCH TOOK PLACE U/S 1 32 OF THE ACT ON 15 TH DECEMBER, 2004 IN THE CASE OF SHRI BRIJ MOHAN GUPTA , GALI HINGA BEG, TILAK BAZAR, DELHI AND DURING THE COURSE OF SEARCH AND SE IZURE OPERATION VARIOUS INCRIMINATING DOCUMENTS/DIARIES/LOOSE PAPERS WERE F OUND AND SEIZED AND REFERRING TO THOSE SEARCH PROCEEDINGS AND POST SEAR CH PROCEEDINGS AND STATEMENT ON OATH RECORDED OF SAID SHRI BRIJ MOHAN GUPTA, HIS SON SHRI RAJEEV GUPTA AND ACCOUNTANT SHRI RAM AVTAR SINGHAL THE AO HAS DESCRIBED THE FOLLOWING SALIENT FEATURES:- 1. THE BRIJ MOHAN GUPTA GROUP WAS ENGAGED IN HUNDI /LOAN BUSINESS WHERE MONEY WAS ARRANGED FROM VARIOUS PART IES AND ADVANCED TO THE DIFFERENT PARTIES. THIS GROUP WAS A CTING AS MEDIATOR/BROKER IN SUCH FINANCIAL TRANSACTION WHERE IN BROKERAGE WAS CHARGED BY THEM. 2. DURING THE COURSE OF SEARCH VARIOUS LOOSE PAPERS /DIARIES WERE FOUND AND SEIZED WHICH REFLECTS DETAILS OF THE VARIOUS PARTIES ON BEHALF OF WHOM THE PARTIES WERE MENTIONED WHEREA S IN SOME OTHER PAPERS THE DETAILS WERE MENTIONED IN CODED FO RM. 3. THE CODED ENTRIES WERE WRITTEN BY SH. RAM AVTAR SINGHAL WHO WAS ACCOUNTANT OF THE GROUP. HE HAD DECODED TH ESE ENTRIES BY GIVING THE CORRECT DETAILS OF TRANSACTIONS AND P ARTIES ALONG WITH CORRESPONDING CODED ENTRIES/TRANSACTIONS. IN THE S TATEMENT RECORDED ON OATH, HE HAS EXPLAINED THE COMPLETE MOD US OPERANDI OF THE GROUP WHILE CONDUCTING THE HUNDI BUSINESS/UN ACCOUNTED CASH LOAN TRANSACTIONS. IT WAS ALSO REVEALED THAT SH. RAJIV GUPTA WHO IS SON OF SH. BRIJ MOHAN GUPTA WAS ACTIVELY INV OLVED IN SUCH UNACCOUNTED HUNDI AND CASH LOAN TRANSACTIONS. THIS DECODED INFORMATION WAS FURTHER CONFIRMED AND VERIFIED BY S H. RAJIV GUPTA. 4. THE CASES OF THE GROUP WERE CENTRALIZED WITH THE DCIT, CENTRAL CIRCLE 19, NEW DELHI WHERE ASSESSMENT OF TH E BRIJ MOHAN GUPTA GROUP CASES WERE COMPLETED U/S 153A OF THE I. T. ACT, 1961 ON 30.11.2006. 5. DURING THE COURSE OF HIS ASSESSMENT PROCEEDINGS, THE MAIN PERSON OF THE GROUP NAMELY SH. BRIJ MOHAN GUPTA ADM ITTED HAVING HIS INVOLVEMENT IN THE UNACCOUNTED CASH HUNDI TRANS ACTION/CASH LOAN TRANSACTIONS ON BEHALF OF VARIOUS PARTIES AND ALSO DISCLOSED THE BROKERAGE INCOME EARNED BY HIM IN SUCH TRANSACT IONS. IN VIEW OF THE PROVISIONS OF LAW AND THE NATURE OF DOCUMENT S FOUND AND SEIZED IN THE POSSESSION OF SH. BRIJ MOHAN GUPTA, T HE DCIT, CENTRAL CIRCLE 19, NEW DELHI HAS FORWARDED SUCH SEI ZED ITA NO.4588/DEL/2009 3 MATERIAL/INFORMATION TO THE UNDERSIGNED HAVING JURI SDICTION OVER YOUR ASSESSMENT TO TAKE ACTION U/S 148 OF THE I.T. ACT. 6. ON BEING SATISFIED WITH THE INFORMATION/DOCUMENT S SUPPLIED BY THE DCIT, CENTRAL CIRCLE 19, NEW DELHI AN ACTION U/S 148 OF THE I.T. ACT, 1961 WAS INITIATED FOR WHICH NOTICES HAVE ALREADY BEEN ISSUED. 7. IN RESPONSE TO THE NOTICE U/S 148 OF THE I.T. AC T, 1961, THE ASSESSEE VIDE ITS LETTER DATED 9.6.2008 HAS REQUEST ED TO FURNISH THE REASONS RECORDED FOR ISSUANCE OF NOTICE U/S 148 OF THE I.T. ACT AND STATED THAT ITS RETURN OF INCOME FILED ON 26.7. 2002 MAY BE TAKEN AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 . 8. ON PERUSAL OF THE RETURNS FILED U/S 139(1)/148 O F THE I.T. ACT, IT IS SEEN THAT YOU HAVE NOT DISCLOSED ANY TRANSACT IONS HAVING BEEN CARRIED OUT WITH SH. BRIJ MOHAN GUPTA GROUP IN THE NATURE OF CASH LOAN/HUNDI TRANSACTION WHEREAS, THE DEPARTMENT IS IN THE POSSESSION OF THE INFORMATION THAT DURING THE YEAR UNDER CONSIDERATION YOU HAVE TRANSACTED WITH SH. BRIJ MOH AN GUPTA AS PER DETAIL GIVEN BELOW:- ENTRY NUMBER DATE AMOUNT 234 JUNE, 2001 RS. 20,00,000/- 3. ON THE BASIS OF FACTS MENTIONED ABOVE, THE AO IS SUED A SHOW CAUSE NOTICE TO THE ASSESSEE ON 10 TH DECEMBER, 2008 IN WHICH HE NARRATED THE DETAILED REASONS FOR REOPENING OF THE CASE U/S 148 AND THE A SSESSEE WAS REQUIRED TO FURNISH THE FOLLOWING INFORMATION/DETAILS:- A) PLEASE EXPLAIN YOUR SOURCES OF INCOME, NATURE OF BUSINESS AND THE PREMISES FROM WHERE SUCH BUSINESS HAS BEEN CARRIED OUT. B) FURNISH CASH FLOW STATEMENT DURING THE YEAR UNDE R CONSIDERATION. C) FURNISH BALANCE SHEET AND PROFIT AND LOSS ACCOUN T. D) PLEASE EXPLAIN YOUR RELATIONSHIP WITH SH. BRIJ M OHAN GUPTA/RAJIV GUPTA OR ANY OF HIS FAMILY MEMBERS. E) IF YOU ARE NOT DIRECTLY RELATED TO SH. B.M. GUPT A GROUP THEN KINDLY EXPLAIN ABOUT YOUR ACQUAINTANCE WITH THIS GR OUP SINCE HOW LONG. F) PLEASE FURNISH NAMES OF THE BROKER WITH WHOM YOU HAVE CARRIED OUT CASH HUNDIES TRANSACTION WITH SH. BRIJ MOHAN GUPTA GROUP. G) PLEASE MENTION SPECIFIC DETAILS OF ALL FINANCIAL TRANSACTION WHETHER RECORDED/UNRECORDED WITH SH. BRIJ MOHAN GUP TA GROUP DURING YEAR UNDER CONSIDERATION ALONG WITH SUPPORTI NG DOCUMENTS. ITA NO.4588/DEL/2009 4 ANY OTHER INFORMATION WHICH PERTAINS TO HAVING YOUR DIRECT/INDIRECT INVOLVEMENT WITH SH. BRIJ MOHAN GUPTA/RAJESH GUPTA OR ANY OTHER ASSOCIATES FOR CARRYING OUT ANY FINANCIAL TRANSACTI ON OF WHATSOEVER NATURE WITH COMPLETE DETAILS OF SUCH TRANSACTION AL ONG WITH EVIDENCES. 4. IN RESPONSE TO AFOREMENTIONED QUERY OF AO THE AS SESSEE HAS FILED LETTER DATED 17 TH DECEMBER, 2008 AND ACCORDING TO THE AO IN THE SAID LETTER IT WAS CLAIMED BY THE ASSESSEE THAT NO TRANSACTION OF THE ASSESSEE TOOK PLACE WITH SHRI BRIJ MOHAN GUPTA AND HIS ASSOCIATES AND THE ASSESSE E ALSO PROTESTED THE INITIATION OF RE-ASSESSMENT PROCEEDINGS. THE AO FO UND THAT IN THE RETURN OF INCOME THE ASSESSEE DECLARED INCOME OF RS.13,670/- WHICH WAS FILED ON 26 TH JULY, 2002. THE ASSESSEE WAS A PARTNERSHIP FIRM AN D IN RESPONSE TO STATUTORY NOTICES SHRI R.R. MAURYA, ADVOCATE, ATTENDED THE PR OCEEDINGS AND HAS FILED THE REPLY. THE AO, REFERRING TO HIS SHOW CAUSE NOTICE DATED 10 TH DECEMBER, 2008 AND REFERRING TO THE REPLY GIVEN IN RESPONSE THERET O OBSERVED THAT THE SAID REPLY WAS NOT ACCEPTABLE AS THE ASSESSEE HAS NOT COME WIT H PROPER REPLY AND, THUS, IT WAS OBSERVED BY THE AO THAT THE ASSESSEE FAILED TO TAKE OPPORTUNITY AND DID NOT OFFER ANY EXPLANATION OF ITS TRANSACTION WITH SHRI BRIJ MOHAN GUPTA AND HIS ASSOCIATES, THEREFORE, HE IS LEFT WITH NO OTHER ALT ERNATIVE, BUT TO ADD THE SAID AMOUNT TO THE RETURNED INCOME OF THE ASSESSEE U/S 6 9-A OF THE IT ACT, 1961. IT IS IN THIS MANNER THE AO MADE THE ADDITION. 5. THE VALIDITY OF RE-ASSESSMENT PROCEEDINGS AS WEL L AS ADDITION ON MERITS, BOTH WERE CHALLENGED BY THE ASSESSEE BEFORE THE CIT (A). THE VALIDITY OF REASSESSMENT PROCEEDINGS WAS CHALLENGED BY THE ASSE SSEE ON THE GROUND THAT THE ASSESSEE HAD RAISED OBJECTIONS WITH REGARD TO R EASONS AND THE AO DID NOT PASS ANY SPEAKING ORDER ON THOSE OBJECTIONS, HENCE, THE RE-ASSESSMENT PROCEEDINGS WERE NOT VALID IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFT (INDIA) LTD. VS. ITO 259 ITR 19 (SC). THE ADDITIONS HAVE BEEN UPHELD DESPITE THE FACT THAT THE ASSESSEE HAD DENIED TO HAVE ANY TRANSACTION WITH SHRI BRIJ MOHAN GUPTA AND AN AFFID AVIT OF THE PARTNER OF THE ASSESSEE FIRM WAS ALSO FILED. THE ADDITION IS MADE WITHOUT CONFRONTING THE ASSESSEE WITH MATERIAL/STATEMENT REFERRED THEREIN A ND ALSO WITHOUT AFFORDING ANY ITA NO.4588/DEL/2009 5 OPPORTUNITY OF CROSS EXAMINATION OF THE PERSON WHOS E STATEMENTS WERE BEING RELIED UPON. 6. THE LD. CIT (A) REJECTED THE CONTENTION OF THE A SSESSEE WITH REGARD TO INVALIDITY OF RE-ASSESSMENT PROCEEDINGS ON THE GROU ND THAT THERE EXIST A MATERIAL AGAINST THE ASSESSEE AND CORRECTNESS OR SUFFICIENCY OF SUCH MATERIAL COULD NOT BE CONSIDERED AT THE STAGE OF REOPENING OF THE ASSESSM ENT. THE INFORMATION WAS AVAILABLE WITH THE AO WHICH WAS SUFFICIENT TO REOPE N THE ASSESSMENT. HE ALSO OBSERVED THAT IT IS A MATTER OF RECORD THAT THE AO DID NOT DISPOSE OF THE OBJECTIONS RAISED BY THE ASSESSEE WITH REGARD TO THE ISSUE OF NOTICE U/S 148 BY WAY OF PASSING A SPEAKING ORDER AND, THUS, THE RATIO OF DE CISION OF HONBLE SUPREME COURT AND JURISDICTIONAL HIGH COURT WILL BE APPLICA BLE. SO AS IT RELATES TO ADDITION MADE BY VIOLATING PRINCIPLES OF NATURAL JUSTICE, LD . CIT (A) OBSERVED THAT THE ASSESSEE HAD CATEGORICALLY DENIED OF HAVING ANY FIN ANCIAL OR BUSINESS TRANSACTION WITH SHRI BRIJ MOHAN GUPTA. BOOKS OF A CCOUNT WERE PRODUCED TO DEMONSTRATE THAT THERE WAS NO TRANSACTION WITH SHRI BRIJ MOHAN GUPTA OR HIS FAMILY. A SPECIFIC REQUEST WAS ALSO MADE TO PROVIDE COMPLETE STATEMENT OF THE SAID SHRI BRIJ MOHAN GUPTA, SO THAT THE OPPORTUNITY OF CROSS EXAMINATION COULD BE AVAILED. THE AO DID NOT PROVIDE COPY OF THE STATEM ENT AND ALSO DID NOT PROVIDE REQUESTED OPPORTUNITY TO CROSS EXAMINE SHRI BRIJ MO HAN GUPTA, WHOSE STATEMENT WAS BEING RELIED UPON BY HIM. LD. CIT (A) FURTHER OBSERVED THAT THE AO COMPLETELY FAILED TO ESTABLISH ANY CASE AGAINST THE ASSESSEE. THE IMPUGNED ORDER DOES NOT THROW ANY LIGHT ON ANY INQUIRY/INVES TIGATION CARRIED OUT BY THE AO THAT COULD CORROBORATE THE ENTRIES FOUND IN THE SEI ZED MATERIAL AND JUSTIFY THE ADDITION MADE IN THE CASE OF THE ASSESSEE. FURTHER INQUIRY/INVESTIGATION WAS REQUIRED TO BE CARRIED OUT ON THE INFORMATION PASSE D BY DCIT, CENTRAL CIRCLE 19, NEW DELHI, BUT APPARENTLY NO WORTHWHILE COGENT WORK WAS DONE TOWARDS THAT END. DESPITE THE SPECIFIC REQUEST OF THE ASSESSEE, COPY OF AVERMENTS/STATEMENTS ON THE BASIS OF WHICH THE ADDI TIONS WERE MADE WERE NOT PROVIDED AND OPPORTUNITY TO CROSS EXAMINE THOSE PER SONS WAS ALSO NOT GIVEN. THE AO MERELY SUMMARIZED THE SALIENT FEATURES OF TH E ASSESSMENT PROCEEDINGS RELATED TO SHRI BRIJ MOHAN GUPTA AND, THEREAFTER, S UMMARILY REJECTED THE REPLY OF ITA NO.4588/DEL/2009 6 THE ASSESSEE BEING NOT ACCEPTABLE. IN THE CIRCUMST ANCES, THE CIT (A) HAS HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITIO N OF RS.20 LAC AND HE DELETED THE ADDITION. THE DEPARTMENT IS AGGRIEVED, HENCE, IN APPEAL. 7. LD. DR, AFTER NARRATING THE FACTS, PLEADED THAT THE CIT (A) HAS WRONGLY DELETED THE ADDITION ON THE PREMISE THAT THE AO DID NOT PROVIDE COPY OF AVERMENTS/STATEMENTS AND THE OPPORTUNITY TO CROSS E XAMINE. REFERRING TO PARA 5.3 OF THE ORDER OF THE CIT (A) IT WAS PLEADED BY H ER THAT THE CIT (A) HAS OBSERVED THAT THE IMPUGNED ASSESSMENT ORDER DOES NO T THROW ANY LIGHT ON ANY INQUIRY/INVESTIGATION CARRIED OUT BY THE AO WHICH C OULD CORROBORATE THE ENTRIES FOUND IN THE SEIZED MATERIAL TO JUSTIFY THE ADDITIO N. SHE SUBMITTED THAT IT IS ALSO OBSERVED BY THE CIT (A) THAT FURTHER INQUIRY/INVEST IGATION WAS REQUIRED TO BE CARRIED OUT ON THE INFORMATION RECEIVED BY THE AO, BUT APPARENTLY NO WORTHWHILE OR COGENT WORK WAS DONE BY THE AO TOWARDS THIS. TH US, SHE PLEADED THAT IT IS A CASE WHERE LD. CIT (A) HAS DELETED THE ADDITION MER ELY ON THE GROUND THAT NO PROPER INQUIRY WAS CONDUCTED BY THE AO AND NO OPPOR TUNITY OF CROSS EXAMINATION WAS GIVEN DESPITE THE FACT THAT THE ASSESSEE HAD AS KED FOR THE SAME. SHE CONTENDED THAT ACCORDING TO WELL ESTABLISHED LAW LD . CIT (A) HAS CO-TERMINUS POWERS AND IF THE AO FAILS TO DO ANYTHING, THEN, CI T (A) COULD EXERCISE HIS POWERS TO PROVIDE THE ASSESSEE SUCH OPPORTUNITY OR COULD SEEK THE REMAND REPORT OF THE AO IN THIS REGARD. SHE SUBMITTED THA T THE CIT (A) COULD NOT DELETE THE ADDITION SIMPLY FOR THE REASON THAT THE AO HAD FAILED TO CONDUCT ANY INQUIRY OR HE FAILED TO GIVE PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, SHE SUBMITTED THAT LD. CIT (A) HAS WRONGLY DELETED THE ADDITION. INSTEAD OF DELETING THE ADDITION HE SHOULD HAVE DONE THE THINGS WHICH T HE AO FAILED TO DO. THUS, SHE SUBMITTED THAT ORDER OF THE LD. CIT (A) SHOULD BE S ET ASIDE AND THAT OF AO BE RESTORED. 8. ON THE OTHER HAND, LD. AR REFERRED TO THE REPLY SUBMITTED BY THE ASSESSEE BEFORE THE AO A COPY OF WHICH IS PLACED AT PAGES 33 -39 OF THE PAPER BOOK. REFERRING TO THE SAID REPLY HE SUBMITTED THAT THE A SSESSEE VIDE PARA 5 OF THIS REPLY HAD SPECIFICALLY ASKED THE AO THAT IT WOULD L IKE TO EXAMINE SAID SHRI BRIJ ITA NO.4588/DEL/2009 7 MOHAN GUPTA TO PROVE THAT THE ASSESSEE DID NOT HAVE ANY FINANCIAL OR BUSINESS TRANSACTION WITH HIM OR HIS ASSOCIATE CONCERN. HE SUBMITTED THAT VIDE PARA 4 IT WAS SUBMITTED THAT STATEMENT OF MR. BRIJ MOHAN GUPT A WAS ALSO NOT SUPPLIED. HE SUBMITTED THAT ALONG WITH THE SAID REPLY THE ASSESS EE HAD SUBMITTED AN AFFIDAVIT IN WHICH IT WAS DENIED THAT ANY SUCH TRANSACTION WA S ENTERED INTO BY THE ASSESSEE WITH SAID SHRI BRIJ MOHAN GUPTA OR HIS ASS OCIATE CONCERNS. THE BOOKS OF ACCOUNT AND BANK ACCOUNT, ETC. WERE ALSO PRODUCE D TO SUBSTANTIATE THE CONTENTION THAT NO SUCH TRANSACTION TOOK PLACE. HE SUBMITTED THAT BY FURNISHING THE AFFIDAVIT THE ASSESSEE HAS EXPOSED HIMSELF TO T HE PROSECUTION AND SO AS IT RELATES TO SETTING ASIDE THE MATTER, LD. AR STATED THAT SETTING ASIDE SHOULD BE IN RARE CASES AND, FOR THIS PURPOSE, HE RELIED UPON TH E DECISION OF THIRD MEMBER IN THE CASE OF ACIT VS. ANIMA INVESTMENT LTD., 73 ITD 125 (DELHI) (TM) DELHI TO CONTEND THAT ASSESSMENT COULD NOT BE REMANDED OR SE T ASIDE TO ENABLE THE AO TO MAKE UP HIS EARLIER DEFICIENT WORK BY INITIATING AS SESSMENT PROCEEDINGS FOR THE THIRD TIME. THUS, HE SUBMITTED THAT IN VIEW OF ALL THESE FACTS LD. CIT (A) WAS RIGHT IN DELETING THE ADDITION AS DESPITE ASSESSEE HAVING SUBMITTED THE AFFIDAVIT AND DENYING THE TRANSACTION WITH SAID SHRI BRIJ MOHAN G UPTA, NO PROPER OPPORTUNITY WAS PROVIDED BY THE AO IN THE SHAPE OF COPIES OF ST ATEMENT AND ALSO IN THE SHAPE OF PROVIDING OPPORTUNITY FOR CROSS EXAMINATIO N OF SHRI BRIJ MOHAN GUPTA. HE CONTENDED THAT AFFIDAVIT IS A GOOD EVIDENCE AND TO SUPPORT THE ORDER OF THE CIT (A) THAT IN THE ABSENCE OF OPPORTUNITY TO CROSS EXAMINE AND IN THE ABSENCE OF CONFRONTING THE EVIDENCE WHICH WAS RELIED UPON TO M AKE THE ADDITION, LD. CIT (A) WAS RIGHT IN DELETING THE ADDITION, HE HAS RELIED U PON THE FOLLOWING DECISIONS:- 1) CIT VS. SMC SHARE BROKERS LTD. 288 ITR 345. 2) MEHTA PARIKH & CO. VS CIT 30 ITR 181 (SC) 9. TO CONTEND THAT AFFIDAVIT IS A GOOD EVIDENCE LD . AR RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ME HTA PARIKH & CO. VS CIT (SUPRA). THUS, HE PLEADED THAT THE ORDER OF THE CI T (A) SHOULD BE UPHELD. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. IN THE PRESENT CASE TH OUGH THERE IS NO DOUBT THAT THE ITA NO.4588/DEL/2009 8 AO HAS SIMPLY REJECTED THE REPLY FILED BY THE ASSES SEE VIDE WHICH IT WAS CATEGORICALLY SUBMITTED THAT THE ASSESSEE DID NOT E NTER INTO ANY TRANSACTION WITH SAID SHRI BRIJ MOHAN GUPTA OR HIS ASSOCIATE CONCERN S AND AN AFFIDAVIT WAS ALSO FILED TO SUPPORT SUCH CONTENTION. HOWEVER, THE AO DID NOT MAKE ANY INQUIRY WITH REGARD TO THAT FACT. THE AO HAVING FAILED TO DO SO , WHETHER IT WAS PROPER BY THE COMMISSIONER OF INCOME-TAX (APPEALS) TO DELETE THE ADDITION SIMPLY ON THE GROUND THAT THE AO DID NOT MAKE FURTHER INQUIRIES W HICH WAS REQUIRED TO BE MADE AND THE AO DID NOT PROVIDE THE ASSESSEE WITH THE CO PIES OF THE STATEMENTS UPON WHICH THE RELIANCE WAS PLACED AND ALSO THAT THE AO FAILED TO PROVIDE THE OPPORTUNITY OF CROSS EXAMINATION OF THE SAID SHRI B RIJ MOHAN GUPTA. THE ANSWER TO THIS QUESTION CAN BE FOUND FROM THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT. PRABHAVATHY S. SHAH VS. CIT 230 I TR 1 (BOM) WHEREIN THEIR LORDSHIPS HAVE HELD THAT UNDER SUB-SECTION (4) OF S ECTION 250 THE APPELLATE AUTHORITY IS EMPOWERED TO MAKE SUCH FURTHER INQUIRI ES AS HE THINK FIT OR TO DIRECT THE AO TO MAKE FURTHER INQUIRY AND TO REPORT THE RE SULT OF THE SAME TO HIM. THE FIRST APPELLATE AUTHORITY IS A QUASI JUDICIAL POWER AND IT IS INCUMBENT ON HIM TO EXERCISE THE SAME IF THE FACTS AND CIRCUMSTANCES JU STIFY. IT IS ALSO OBSERVED THAT IF THE FIRST APPELLATE AUTHORITY FAILS TO EXERCISE HIS DISCRETION JUDICIALLY AND ARBITRARILY REFUSES TO MAKE INQUIRY IN A CASE WHERE THE FACTS AND CIRCUMSTANCES SO DEMAND, HIS ACTION WOULD BE OPEN FOR CORRECTION BY A HIGHER AUTHORITY. THE RELEVANT OBSERVATIONS OF THEIR LORDSHIPS FROM THE D ECISION ARE REPRODUCED BELOW:- UNDER SUB-SECTION (4) OF SECTION 250, THE AAC IS E MPOWERED TO MAKE SUCH FURTHER INQUIRY AS HE THINKS FIT OR DIREC T THE ITO TO MAKE FURTHER INQUIRY AND TO REPORT THE RESULT OF THE SAM E TO HIM. SUB- SECTION (5) OF SECTION 250 EMPOWERS THE AAC TO ALLO W THE APPELLANT, AT THE HEARING OF THE APPEAL, TO GO INT O ANY GROUND OF APPEAL NOT SPECIFIED IN GROUNDS OF APPEAL, ON HIS B EING SATISFIED THAT THE OMISSION OF THE GROUND FROM THE FORM OF AP PEAL WAS NOT WILLFUL. IT IS CLEAR FROM THE ABOVE PROVISIONS THA T THE POWERS OF THE AAC ARE MUCH WIDER THAN THE POWERS OF AN ORDINARY C OURT OF APPEAL. THE SCOPE OF HIS POWERS IS COTERMINOUS WIT H THAT OF THE ITO. HE CAN DO WHAT THE ITO CAN DO. HE CAN ALSO D IRECT THE ITO TO DO WHAT HE FAILED TO DO. THE POWER CONFERRED ON TH E AAC UNDER SUB-SECTION (4) OF SECTION 250 BEING QUASI-JUDICIAL POWER, IT IS INCUMBENT ON HIM TO EXERCISE THE SAME IF THE FACTS AND ITA NO.4588/DEL/2009 9 CIRCUMSTANCES JUSTIFY. IF THE AAC FAILS TO EXERCIS E HIS DISCRETION JUDICIALLY AND ARBITRARILY REFUSES TO MAKE INQUIRY IN A CASE WHERE THE FACTS AND CIRCUMSTANCES SO DEMAND, HIS ACTION WOULD BE OPEN FOR CORRECTION BY A HIGHER AUTHORITY. 11. IN THE PRESENT CASE, THE CIT (A) HAS DELETED TH E ADDITION SIMPLY ON THE GROUND THAT THE AO DID NOT MAKE FURTHER INQUIRIES W HICH WERE WARRANTED AND THE FOLLOWING OBSERVATIONS OF THE CIT (A) INDICATE SUCH INFERENCE:- 5.3 FROM THE FACTS ENUMERATED ABOVE, IT IS CLEAR T HAT THE ASSESSING OFFICER COMPLETELY FAILED TO ESTABLISH AN Y CASE AGAINST THE APPELLANT. THE IMPUGNED ORDER DOES NOT THROW ANY L IGHT ON ANY INQUIRY/INVESTIGATION CARRIED OUT BY THE AO THAT CO ULD CORROBORATE THE ENTRIES FOUND IN THE SEIZED MATERIAL AND JUSTIF Y THE ADDITIONS MADE IN THE CASE OF THE APPELLANT. FURTHER INQUIRY / INVESTIGATION WAS REQUIRED TO BE CARRIED OUT ON THE INFORMATION P ASSED BY THE DCIT, CENTRAL CIRCLE 19, NEW DELHI, BUT APPARENTLY NO WORTHWHILE OR COGENT WORK WAS DONE TOWARDS THIS END. DESPITE THE SPECIFIC REQUEST OF THE APPELLANT, COPY OF THE AVERMENTS/ ST ATEMENTS, ON THE BASIS OF WHICH ADDITIONS WERE MADE, WERE NOT PROVID ED NOR THE OPPORTUNITY TO CROSS EXAMINE THOSE PERSONS WAS GIVE N TO THE APPELLANT. THE AO MERELY SUMMARIZED THE SALIENT FE ATURES OF THE ASSESSMENT PROCEEDINGS RELATING TO SH. BRIJ MOHAN G UPTA AND THEREAFTER SUMMARILY REJECTED THE REPLY OF THE APPE LLANT AS NOT ACCEPTABLE. THEREFORE, THE AO WAS NOT JUSTIFIED I N MAKING THE ADDITION OF RS. 20,00,000. THERE IS ALSO MERIT IN THE CONTENTION OF THE APPELLANT THAT THE PRINCIPLE OF NATURAL JUSTICE WAS VIOLATED. ACCORDINGLY, GROUNDS 2, 4, 5 AND 6 OF THE APPEAL AR E ALLOWED. ( EMPHASIS OURS ) 12. IT CAN BE SEEN FROM THE ABOVE OBSERVATIONS OF T HE CIT (A) THAT HE HAS OBSERVED THAT THE AO HAD COMPLETELY FAILED TO ESTAB LISH ANY CASE AGAINST THE ASSESSEE AS HIS ORDER DOES NOT THROW ANY LIGHT ON A NY INQUIRY/INVESTIGATION CARRIED ON TO CORROBORATE THE ENTRIES FOUND IN THE SEIZED MATERIAL AND TO JUSTIFY THE ADDITION MADE IN THE CASE OF THE ASSESSEE. HE FURT HER OBSERVED THAT THERE WAS A REQUIREMENT OF FURTHER INQUIRY/INVESTIGATION ON THE INFORMATION RECEIVED BY THE AO FROM DCIT, CENTRAL CIRCLE-19, NEW DELHI, BUT APPARE NTLY THE AO DID NOTHING WORTHWHILE OR COGENT WORK TOWARDS THAT. THUS, THE REASON GIVEN BY CIT (A) WHILE DELETING THE ADDITION IS THAT AO DID NOT SUPPLY THE COPY OF AVERMENTS/STATEMENTS ON THE BASIS OF WHICH THE ADDITION WERE MADE AND AL SO THE AO DID NOT PROVIDE ITA NO.4588/DEL/2009 10 OPPORTUNITY TO CROSS EXAMINE THE PERSONS ON THE BAS IS OF WHOSE STATEMENT THE ADDITION WAS MADE. IT CAN BE SEEN FROM THESE OBSER VATIONS THAT THE ADDITION IS DELETED MERELY FOR THE FAILURE OF AO TO DO THE THIN GS WHICH WERE WARRANTED TO BE DONE BY THE AO. THEREFORE, THE RATIO OF AFOREMENTI ONED DECISION OF HONBLE BOMBAY HIGH COURT WILL BE SQUARELY APPLICABLE TO TH E FACTS OF THE PRESENT CASE. IN VIEW OF THESE FINDINGS, WE ARE OF THE OPINION TH AT IT WILL MEET THE INTEREST OF JUSTICE IF THE MATTER IS RESTORED BACK TO THE FILE OF AO WITH A DIRECTION TO CONFRONT THE ASSESSEE WITH THE MATERIAL BASED UPON WHICH THE ADDITION IS MADE AND TO PROVIDE THE ASSESSEE OPPORTUNITY TO CROSS EXAMINE T HE PERSONS ON THE BASIS OF WHOSE STATEMENTS THE PRESENT ADDITION IS MADE AS TH ESE POWERS WHICH SHOULD HAVE BEEN EXERCISED BY CIT (A) ARE NOT EXERCISED BY HIM. THEREFORE, WE RESTORE THIS ISSUE TO THE FILE OF AO WITH THE DIRECTIONS AS ABOVE. 13. WE MAY OBSERVE HERE THAT THE CASE LAW RELIED UP ON BY LD. AR IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE A FFIDAVIT MAY BE A GOOD EVIDENCE, BUT ON THE FACE OF IT, IT CANNOT BE ACCEP TED AS ON THAT AFFIDAVIT FURTHER INQUIRIES WERE REQUIRED TO BE MADE WHICH IS NOT DON E. IN THE CASE OF CIT VS. SMC SHARE BROKERS LTD. (SUPRA), THE ASSESSMENT WAS FRAMED UNDER THE PROVISIONS OF SECTION 158BD AND DURING THE COURSE O F ASSESSMENT PROCEEDINGS THE ASSESSEE REQUESTED THE AO TIME AND AGAIN TO PER MIT HIM TO CROSS EXAMINE SHRI MANOJ AGGARWAL. BUT, HERE, IN THE PRESENT CAS E, ONLY ONE LETTER WAS FILED BY THE ASSESSEE AND AO AND CIT (A) WITHOUT EXERCISING THEIR POWERS AND WITHOUT GIVING SUCH OPPORTUNITY WHICH SHOULD HAVE BEEN GIVE N, HAS DELETED THE ADDITION. 14. SO AS IT RELATES TO THE DECISION OF ITAT IN THE CASE OF ACIT VS. ANIMA INVESTMENT LTD. (SUPRA), THE QUESTION RELATED TO TH E POWER OF ITAT REGARDING SETTING ASIDE OF THE ASSESSMENT AND IT IS HELD THER EIN THAT SUCH POWERS ARE LARGE AND WIDE, BUT THOSE CANNOT BE EXERCISED TO ALLOW TH E AO AN OPPORTUNITY TO PATCH UP WEAK PART OF THE CASE AND TO FILL UP THE OMISSIO N. BUT, IN THE PRESENT CASE, IF AO HAD FAILED TO DO SOMETHING, SIMPLY ON THAT BASIS THE CIT (A) COULD NOT DELETE THE ADDITION AS HE WAS HAVING THE COTERMINOUS POWER AND AS PER AFOREMENTIONED ITA NO.4588/DEL/2009 11 DECISION OF HONBLE BOMBAY HIGH COURT WHEN HE IS OF THE VIEW THAT AO FAILED TO DO CERTAIN THING, IT WAS INCUMBENT ON HIM TO EXERCI SE HIS POWER TO CORRECT THE MISTAKE OF THE AO. THEREFORE, THIRD MEMBER DECISIO N ALSO CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE. 15. IN VIEW OF THE ABOVE DISCUSSION, WE ALLOW THE A PPEAL FILED BY THE REVENUE FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. . THE ORDER PRONOUNCED IN THE OPEN COURT ON 19.03.20 10. SD/- SD/- [G.E. VEERABHADRAPPA] [I.P. BANSAL] VICE PRESIDENT JUDICIAL MEMBER DATED, 19.03.2010. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES