M/S.. DY CIT CEN CIR-22, MUMBAI V. THE MONOPLAN SECURITIES PVT. LTD, MUMBAI

ITA 5501/MUM/2008

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83669 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-09-2014
• Assessment Year: 1992-1993
• Appeal Filed On: 01-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Principle of natural justice; Opportunity of cross examination; Assessment record
• Section: 143(3); 133A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA , A M & SHRI AMIT SHUKLA , J M ITA NO. 5501 / MUM/20 08 ( ASSESSMENT YEAR : 1992 - 93 ) DCIT CEN.CIR.22 , MUMBAI - 20 VS. M/S MONOPLAN SECURITIES LTD, 161, STARCITY, 2 ND FLOOR, MANKALA TANK ROAD, MAHIM (WEST) , MUMBAI - 16 PAN/GIR NO. : A A A C S 6162 L ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI HIRO RAI /REVENUE BY : SHRI MAURYA PRATAP DATE OF HEARING : 1 ST SEPT. 201 4 DATE OF PRONOU NCEMENT : 1 ST SEPT , 201 4 O R D E R PER R.C.SHARMA ( A .M.) : THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORDER CIT(A ) , DATED 27 - 06 - 2008 FOR ASSESSMENT YEAR 1992 - 93 , IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) R.W.S147 OF THE ACT ON THE FOLLOWING GROUNDS : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS. 99,00,000/ - BY NOT APPRECIATING THE ORDER OF THE AO WHEREIN BOGUS NATURE OF CLAIM WAS CLEARL Y BROUGHT OUT. 2. THE APPELLANT CRAVES TO LEAVE TO ADD, TO AMEND AND/OR TO ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. 3. THE APPELLANT, THEREFORE, PRAYS THAT ON THE GROUND STATED ABOVE, THE ORDER OF CIT(A), CENTRAL - IV, MUMBAI MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO DISALLOWED ITA NO. 550 1 / 08 2 ASSESSEES CLAIM FOR DEPRECIATION AMOUNTING TO RS. 99, 00,000/ - PERTAINING TO PURCHASE OF BOGUS BIO - GAS PLANT FROM M/S WESTERN PACQUES INDIA LIMITED AND SUBSEQUENT LEASE OF THE SAME TO THE LATTER. THE AO STATED THAT AFTER SEARCH CONDUCTED U/S. 132, SURVEY U/S. 133A WAS CARRIED OUT IN THE CASE OF M/S WESTERN PACQUES INDIA LIMITED, WHER EIN VARIOUS IRREGULARITIES WERE FOUND WITH REGARD TO THE LEASE TRANSACTION BETWEEN THE ASSESSEE AND M/S WESTERN PACQUES INDIA LIMITED . THE AO FURTHER STATED THAT T HE INVESTIGATION WING FOUND THAT THE ALLEGED LEASE ASSETS WERE NOT INSTALLED. ACCORDINGLY, TH E AO DECLINED ASSESSEES CLAIM OF DEPRECIATION ON THE LEASED ASSETS. 3 . THE CONTENTION OF THE LEARNED AR BEFORE THE CIT(A) WAS THAT IN SPITE OF ASKING VARIOUS TIMES THE AO HAS NOT SUPPLIED ANY STATEMENT RECORDED OF THE DIRECTOR OF M/S WESTERN PACQUES IN DIA LIMITED, BASED ON WHICH TRANSACTION WAS HELD TO BE BOGUS RESULTING INTO DISALLOWANCE OF DEPRECIATION. THE CIT(A) ASKED THE AO TO SUPPLY ENQUIRY REPORT AND THE FINDING GIVEN BY THE CONCERNED DEPARTMENTAL AUTHORITIES AND ALSO TO ALLOW CROSS EXAMINATION O F MR. S.K.GUPTA AND SHRI CHITALE , DIRECTOR OF M/ S WESTERN PACQUES INDIA LIMITED . AS PER CIT(A) THE AO HAS NEITHER SUPPLIED COPY OF ANY ENQUIRY REPORT NOR ALLOWED CROSS EXAMINATION OF THE ABOVE PERSONS EVEN AFTER GIVING DUE OPPORTUNITY TO THE AO ON VARIOUS OCCASIONS. ACCORDINGLY, THE DISALLOWANCE CLAIMED ON DEPRECIATION WAS HELD NOT JUSTIFIED. THE PRECISE OBSERVATION OF THE CIT(A) IS AS UNDER : - 10. T HE APPELLANT HAS RAISED SEVERAL OBJECTIONS TO THE FOREGOING ADDITION MADE BY THE AO, BUT, AT THE OUTSET, IT IS NECESSARY TO ADJUDICATE ON THE PRELIMINARY ARGUMENT OF THE APPELLANT THAT THE AO HAS CONTRAVENED THE PRIMARY AND FUNDAMENTAL RULES OF NATURAL JUSTICE, IN THAT, HE HAS NOT SUPPLIED TO THE APPELLANT, THE ADVERSE. MATERIALS USED BY HIM TO MAKE THE DISALLOW ANCE OF DEPRECIATION ITA NO. 550 1 / 08 3 CLAIMED BY THE A PPELL A NT. THUS, THE APPELLANT COULD NOT AVAIL THE OPPORTUNITY TO CONTROVERT THE IMPUGNED MATERIAL BY WAY OF CROSS EXAMINATION OR OTHERWISE. 11. FROM THE ASSESSMENT RECORD, IT IS SEEN THAT THE COUNSEL FOR THE APPELLANT HAD ASKED THE AO AN OPPORTUNITY TO CROSS EXAMINE SHRI S K GUPTA AND SHRI CHITALE AND HAS ALSO REQUESTED THE DEPARTMENT TO SUPPLY THE COPY OF THE STATEMENT O F SHRI NANDAN GADGIL , SHRI CHITALE AND SHRI S K GUPTA. A COPY OF THE LETTER ADDRESSED TO JT.CIT, SP L..RANGE - 19, MUMBAI DATED 22.03.1999 WAS PLACED BEFORE ME WHEREIN THE COUNSEL OF THE APPELLANT HAD STRONGLY OBJECTED TO THE PROPOSED DISALLOWANCE OF DEPRECIATION. IN THE LETTER VIDE PARAGRAPH 2, THE LD. COUNSEL ON BEHALF OF THE APPELLANT HAD REQUESTED TH E AO TO FURNISH THE DETAILS OF PLACES WHERE THE SURVEY I SEARCH & SEIZURE - PROCEEDIN G S WERE CARRIED OUT AND A COPY OF STATEMENT RECORDED OF THE DIRECTOR OF WPIL. THEY ALSO REQUESTED THE AO TO SUPPLY THE ENQUIRY REPORT AND FINDING GIVEN BY THE CONCERNED DEPA RTMENTAL AUTHORIZED OFFICER, THE ENQUIRIES MADE WITH MIS WPIL, ENQUIRY WITH THE TWO LESSEES ABOUT THE EXISTENCE OF ASSETS. VIDE PARA 3, THE LD.COUNSEL ON BE HALF OF THE APPELLANT DESIRED TO KNOW WHETHER ANY OTHER MATERIAL WAS BEING USED TO DISALLOW THE CLAI M OF DEPRECIATION. IT IS THE CONTENTION OF THE LD.COUNSEL THAT DESPITE SPECIFIC REQUESTS WITH AO, THE AO HAD IGNORED THE REQUEST OF THE APPELLANT. THEREAFTER, VIDE LETTER DT.12.03.2003, IN THE APPEAL PROCEEDINGS, THE LD.COUNSEL FOR THE APPELLANT HAS AGAIN MADE A REQUEST TO SUPPLY THEM THE DETAILS AS CALLED FOR VIDE THEIR EARLIER LETTER ADDRESSED TO THE ASSESSING OFFICER DATED 22.03.1999. THE APPELLANT ALSO REQUESTED THAT HE SHOULD BE GIVEN AN OPPORTUNITY OF CROSS EXAMINATION WHOSE STATEMENTS WERE RECORDED A ND USED AGAINST THE APPELLANT IN THE ASSESSMENT PROCEEDINGS. SUBSEQUENTLY, THIS REQUEST WAS REPEATED VIDE LETTER DT. 08 .10.2003 AS THE AO HAD NOT COMPLIED WITH THE APPELLANT'S REQUEST. THE SAID RE QU EST WAS REITERATED ON 2B.1 0.2003, 12.11.2003 & 22.06.2006. 12. THE REQUEST FOR CROSS EXAMINATION OF SHRI GUPTA AND MR. CHITALE WAS REITERATED DURING APPEAL PROCEEDINGS VIDE LETTER DATED 22.06.2006 BY THE LD.AR OF THE APPELLANT. ACCORDINGLY A LETTER WAS SENT BY ME TO THE AO ON 26.06.2006, WHEREIN THE AO WAS DIREC TED TO ALLOW CROSS EXAMINATION OF M ANAGER (OPERATIONS) DMT DIVISION, BOMBAY DYEING MFG LTD AND SHRI P B CHITALE, PARTNER OF M/ S B G CHITALE. FURTHER, THE AO WAS ALSO DIRECTED TO PROVIDE THE COPIES OF STATEMENTS RELIED UPON BY THE ASSESSING OFFICER WHILE FI NALIZING THE ASSESSMENT ORDER. 13. THE AO HAD GRANTED THE APPELLANT, THE CHANCE TO CROSS - EXAMINE MR S. K. GUPTA, MANAGER- OPERATIONS, BOMBAY DYEING AND MANUFACTURING PVT LTD AND THE CASE WAS FIXED ON 28.11.2006. THE CROSS EXAMINATION COULD NOT TAKE PLACE AS THE LD.AR OF THE APPELLANT HAD REQUESTED FOR THE COPIES OF STATEMENTS OF MR. S K GUPTA ON 21.11.2006 & 27.11.2006. THE HEARING BEFORE THE AO WAS ADJOURNED TO 04.12.2006, AS THE STATEMENTS WERE NOT MADE AVAILABLE TO THE APPELLANT AS REQUESTED BY HIM. 1 4. FURTHER, THE LD.AR OF THE APPELLANT SUBMITS, THAT NEITHER THE COPY OF THE STATEMENT WAS PROVIDED TO THE THEM, NOR MR. S. K. GUPTA APPEARED ON 04.12.2006. THESE FACTS WERE RECORDED BY THE APPELLANT VIDE LETTER DATED 15.02.2007 ADDRESSED TO THE AO WHEREIN ITA NO. 550 1 / 08 4 THE REQUEST TO FURNISH STATEMENT OF MR. S: K. GUPTA AND ALSO THE FIXING OF A FRESH DATE FOR CROSS- EXAMINATION WAS REITERATED. A SIMILAR PRAYER IN RESPECT OF MR. NANDAN GADGIL OF M/S WESTERN PACQUES INDIA LIMITED WAS ALSO INCORPORATED IN THE ABOVE MENTION ED LETTER. 15. I FIND FROM THE RECORDS AVAILABLE AND ALSO THE RECORDS AVAILABLE THAT THE INCOME TAX DEPARTMENT HAS NOT SUPPLIED THE COPY OF STATEMENT OF SHRI S K GUPTA, SHRI NANDAN GADGIL AND SHRI V G CHITALE TO THE APPELLANT TILL DATE. 16. THE PRESENT ADDL.CIT, CENTRAL RANGE - 5, MUMBAI TVAS. PERSONALLY DIRECTED BY ME VIDE LETTER DT.26.06.2006, 31.07.2006, 09.10.2006, 17.11.2006, 16.01.2007, 21.03.2007, 15.05.2007, 11.07.2007, 03.10.2007 TO INSTRUCT THE ASSESSING OFFICER TO PROVIDE THE COPY OF STATEMEN T RELIED UPON BY THE ASSESSING OFFICER AT THE TIME OF FINALIZING THE ASSESSMENT ORDER AND REPEATEDLY REQUESTED BY THE APPELLANT AT ASSESSMENT PROCEEDINGS AND ALSO APPELLATE PROCEEDINGS. THE AO AND THE ADDL.CIT, CENTRAL RANGE - 5 HAVE CONFIRMED VIDE LETTER DATED 11.04.2008 THAT THE COPY OF STATEMENT IS NOT AVAILABLE AND HENCE CANNOT BE SUPPLIED TO THE APPELLANT. A LETTER DATED 07.01.2008 WRITTEN BY ITO (INV.) (HQ) TO DIT (INV), PUNE, CONFIRMED THAT 'NO FOLDER CONTAINING THE STATEMENT OF SHRI S K GUPTA, THEN MANAGER OPERATIONS OF M/S BOMBAY DYEING MFG. CO. LTD IS TRACEABLE. THIS LETTER WAS PLACED ON RECORD BY DCIT, CENTRAL CIRCLE - 22, MUMBAI. 17. IN THE LIGHT OF THE FACTUAL CANVAS AND MORE PARTICULARLY, THE REMAND REPORT OF THE AO, I HOLD THAT IT IS NOW AN UND ISPUTED AND UNCONTROVERTED FACT THAT THE ALLEGED ADVERSE EVIDENCES GATHERED BY THE AO, CANNOT BE PRODUCED BY THE AO, SINCE THEY ARE NOT AVAILABLE WITH HIM, AS CORROBORATED BY THE REMAND REPORT AND CONSEQUENTLY, IT IS NOW NOT POSSIBLY TO SUPPLY THE SAME TO THE APPELLANT T O FILE HIS REBUTTAL. THIS HAS BEEN THE SITUATION FROM 1999 TO 2007. I FIND FROM THE ASSESSMENT RECORD THAT DESPITE SPECIFIC REQUESTS MADE BY THE COUNSEL ON BEHALF OF THE APPELLANT TO SUPPLY A COPY OF THE STATEMENT AND THE EVIDENCE COLLECTED BY THE DEPARTMENT, THE DEPARTMENT HAS BEEN UNABLE TO DO SO. 18. BY NOW IT IS A WELL SETTLED, IN FACT, A TRITE LAW OF JURISPRUDENCE THAT BEFORE AN ADVERSE AND DETRIMENTAL INFERENCE IS DRAWN AGAINST A PERSON BASED ON EVIDENCES MARSHALLED BEHIND HIS BACK AND KNOWLEDGE, THE AFFECTED PERSON MUST, IN CONSONANCE WITH THE GOLDEN RULES OF FAIR PLAY BE CONFERRED ADEQUATE OPPORTUNITY TO DEMOLISH SUCH OSTENSIBLE INIMICAL PROOFS EITHER WAY OF CROSS - EXAMINATION OR OTHERWISE AS MAY BE DEEMED FIT AND PROPER: THE, INFRINGE MENT OF THIS VERY ESSENTIAL RULE OF NATURAL JUSTICE BY THE AO GOES TO THE VERY ROOT OF THE MATTER VITIATING THE ADDITION MADE BY HIM IN THE ASSESSMENT ORDER, THEREBY RENDERING IT INFIRM AND UNTENABLE, AND I HOLD ACCORDINGLY. 19. THE PRINCIPLES OF NATURE JUSTICE EMBODY IN THE LATIN DICTUM 'AUDI ALTERARN PARTERN' ONLY MEANS THAT A PERSON HAS ARRIVED TO BE HEARD BY WAY OF AN OPPORTUNITY WHICH SHOULD BE ADEQUATE AND REASONABLE, SO AS TO ENABLE THE PERSON AFFECTED TO MEET THE CASE AGAINST HIM. IN ORDER THAT H E IS SO ENABLED, HE SHOULD KNOW THE CASE AGAINST HIM. IT IS THIS PRINCIPLE WHICH WAS ENFORCED BY A BENCH OF THREE JUDGES IN RAKESH C RASTOGI VS. APPROPRIATE AUTHORITY (2002) 253 ITR 94 (SC) SETTING ASIDE THE ORDER OF THE APPROPRIATE AUTHORITY, WHERE THE ITA NO. 550 1 / 08 5 CO MPARATIVE INSTANCES RELIED UPON BY THE APPLICANT WERE NOT CONSIDERED BEFORE AN ORDER WAS PASSED AND THE REASONS WHICH PROMPTED THE AUTHORITY TO REJECT THE COMPARABILITY OF THE CASE RELIED UPON WERE NOT DISCLOSED. IN ALL SUCH CASES, IT IS CLEAR THAT A FAIR OPPORTUNITY MEANS NOT ONLY HEARING THE ASSESSEE ON THE INFERENCE DRAWN, BUT ALSO GIVING A FURTHER OPPORTUNITY, WHEN THE EXPLANATION GIVEN IS NOT SATISFACTORY. IT IS ONLY SUCH OPPORTUNITY, WHICH MEETS THE REQUIREMENTS OF BASIC PRINCIPLES OF NATURE JUSTICE. 20. IN THIS CONNECTION, I AM RELYING ON A RULING OF THE SUPREME COURT IN KRISHINCHAND CHELLARAM V CIT (1980) 125 ITR 713, 720, 721 (SC) WHERE IN A SIMILAR CASE, THE LETTERS OF THE BANK MANAGER WERE UTILIZED BY THE AO FOR STRENGTHENING THE ADDITION MADE B Y HIM WITHOUT PERMITTING THE ASSESSEE TO ACCESS THE SAME AND THE APEX COURT HELD, THAT SUCH PROOFS COULD NOT BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF GIVING A FINDING, HOSTILE AND UNFAVOURABLE, TO THE ASSESSEE AND CONSEQUENTLY, OUGHT TO BE IGNORED AN D ELIMINATED FROM THE ADJUDICATION PROCEEDINGS. IN THE RESULT, THE SUPREME COURT REVERSED THE TRIBUNAL'S ORDER CONFIRMING THE ADDITION HOLDING THAT IT WAS UNREASONABLE AND PERVERSE. SIMILAR RATIO IS LAID DOWN IN SURAJMALL MOHTA & CO. V VISHWANATHA SASTRI ( 1954) 26 ITR 1 (SC). IN CIT V EASTERN COMMERCIAL ENTERPRISES (1994) 210 ITR 103 110 (CAL), IT HAS BEEN OBSERVED THAT IT IS TRITE LAW THAT CR.OSS EXAMINATION IS THE SINE QUA NON OF THE OBSERVANCE OF THE PRINCIPLES OF NATURAL JUSTICE A S ALSO FOR CONDUCTING T HE PROCESS OF RECEIVING EVIDENCE AND NO NEGATIVE INFERENCE CAN BE DEDUCED UNLESS THE PARTY IS PUT ON NOTICE INTER ALIA BY PROVIDING A CHANCE TO MEET THE CASE AGAINST HIM BY WAY OF CROSS EXAMINATION AS HAS BEEN EMPHATICALLY PROJECTED IN VASA JI GHELA & CO. V CI (1997) 40 STC 544. 21. THE LEARNED COUNSEL FURTHER RIGHTLY RELIED UPON DECISION OF THE ALLAHABAD HIGH COURT IN GARGI DIN JWALA PRASAD V CIT (1974) 96 ITR 97 TO PROPOUND THAT THE OPPORTUNITY AFFORDED BY THE AO TO CROSS - EXAMINE THE WITNESSES IS ILLUSOR Y, USELESS AND EMPTY FORMALITY BECAUSE THE STATEMENTS OF THE WITNESSES WERE NOT SUPPLIED DESPITE REPEATED REMINDERS. IN THAT VIEW OF THE MATTER, I HOLD THAT THE ADDITION MADE BY THE AO IS BAD IN LAW AND CANNOT BE SUSTAINED. 22. TO RECAPITULATE, THE ORIGI NAL ASSESSMENT ORDER WAS RE - OPENED ON THE BASIS OF STATEMENT MADE BY NANDAN GADGIL, MD OF WESTERN PACQUE OF INDIA LTD. THE CLAIM OF DEPRECIATION WAS DISALLOWED BASED ON THE STATEMENT OF SHRI S K GUPTA, MANAGER OPERATIONS OF MIS BOMBAY DYEING MFG CO. LTD AN D MR. P B CHITALE, PARTNER MIS B G CHITALE. THE AO DID NOT GIVE AN OPPORTUNITY TO THE APPELLANT TO CROSS EXAMINE MR. S K GUPTA AND MR. CHITALE. THE AO DID NOT PROVIDE A COPY OF THE STATEMENT RECORDED OF MR. GUPTA AND MR. CHITALE, DESPITE SEVERAL WRITTEN R EQUESTS TO THE ASSESSING OFFICER. THIS WAS A MAIN GROUND TAKEN BY THE APPELLANT IN APPEAL. DESPITE SPECIFIC DIRECTION FROM MY PREDECESSOR AND ME, THE AO HAS FAILED TO FURNISH A COPY OF THE STATEMENT RECORDED OF MR. GUPTA AND MR. CHITALE, TO THE APPELLANT. THIS WAS CONFIRMED BY THE LETTER ADDRESSED TO THE UNDERSIGNED BY THE AO DATED 16.10.2007,30.04.2008, 11.06.2008 & 17.06.2008. 23. IN VIEW OF THE ABOVE STATED FACTS, I HOLD THAT IN THE INTEREST OF NATURAL JUSTICE, THE ADDITION MADE BY THE AO CANNOT BE SUS TAINED. ITA NO. 550 1 / 08 6 4 . IT IS CLEAR FROM THE FINDINGS RECORDED BY THE CIT(A) TO THE EFFECT THAT HE HAS CALLED FOR THE REMAND REPORT AND ASKED THE AO TO FURNISH COPY OF ENQUIRY REPORT. HOWEVER, THE ASSESSEE WAS NOT GIVEN EVEN COPY OF THE ENQUIRY REPORT NOR ALLOWED CRO SS EXAMINATION OF DIRECTORS OF M/S WESTERN PACQUES INDIA LIMITED ON THE BASIS OF WHOSE STATEMENT TRANSACTION WAS HELD TO BE BOGUS RESULTING INTO DISALLOWANCE OF DEPRECIATION BY THE DEPARTMENT . ALL THESE FINDINGS HAVE NOT BEEN CONTROVERTED BY THE LEARNED DR BY BRINGING ANY POSITIVE MATERIAL ON RECORD. AS THE FINDING OF THE CIT(A) HAS NOT CONTROVERTED, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS ARRIVED AT BY THE CIT(A) AFTER CALLING AND CONSIDERING THE REMAND REPORT FROM AO. 5 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01/09/ 201 4 . 01/09/ 2014 SD/ - SD/ - ( ) ( AMIT SHUKLA ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 01/09 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//