SACHINKUMAR SURYA, MUMBAI V. ITO 18(3)(2), MUMBAI

ITA 6237/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9778 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 21-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Assessee Lawyers: JAYANT R BHAT
• Keywords: Bogus purchase; Unexplained investment; Search and seizure; Principle of natural justice; Question of law; Reason to believe; Borrowed satisfaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 6237 / MUM/20 1 6 ( ASSESSMENT YEAR : 2007 - 08 ) SHRI SACHINKUMAR SURYA 63, DR. DEHBRI BUILDING, FANASWADI, S.P. SCHOOL MARG MUMBAI 400 002 VS. ITO 18(3)(2), 6 TH FLOOR, EARNEST HOUSE, MUMBAI PAN/GIR NO. ACKPS7629B APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI JAYANT R. BHAT REVENUE BY MS. BEENA SANTOSH DATE OF HEARING 27 / 04 /201 7 DATE OF PRONOUNCEME NT 25 / 07 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) 29, MUMBAI DATED 19/08/2016 FOR THE A.Y. 2007 - 08 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. 2. FOLLOWING GROUNDS HAVE B EEN TAKEN BY THE ASSESSEE: - 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ID. CIT(A) HAS ERRED IN CONFIRMING THE AO'S ACTION OF REOPENING THE ASSESSMENT U/S 147 WITHOUT APPRECIATING THE FACTS AND RECORDS AVAILABLE WITH AO AS ALSO WITHOU T APPRECIATING THE FACT THAT AO HAD ACTED ON BORROWED SATISFACTION AS AGAINST HIS OWN ASSESSMENT FOR MAKING THE SATISFACTION. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN'LAW THE ID. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.40 LACS MADE BY THE AO INVOKING THE PROVISIONS OF SEC 69B OF THE ACT 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ID. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE AO HAD NOT PROVIDED PROPER OPPORTUNITY TO REBUT NOR ALLOWED CROSS EX AMINATION ITA NO. 6237/MUM/2016 SHRI SACHINKUMAR SURYA 2 OF THE PARTY ON WHOSE STATEMENT AO HAD RELIED UPON TO MAKE SUCH ADDITION . 4. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ID. CIT(A) HAS ERRED IN NOT ALLOWING THE ASSESSEE'S DEMAND FOR ALLOWING PROPER DOCUMENTS FOR VERIFICATION IN ITS ENTIRETY TO REBUT THE ALLEGATION MADE BY THE AO AND THEREFORE ADDITION CONFIRMED WITHOUT ALLOWING PROPER OPPORTUNITY BEING BAD IN LAW THE ORDER SHOULD BE STRUCK DOWN 5. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ID. THE ORDER PA SSED BY THE AO AND CONFIRMED BY THE ID. CIT(A) BEING IN VIOLATION OF NATURAL JUSTICE THE ORDER SHOULD BE ANNULLED 3. RIVAL CONTENTIONS HAVE BEEN HE ARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT T HE A SSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRA DING IN FERROUS AND NON - FERROUS MATERIAL. THE RETURN OF INCOME WAS FILED ON 31.10.07 DECLARING INCOME OF RS.7,95,750/ - . THE AO HAS RECEIVED INFORMATION FROM THE DIT(INV) ABOUT A SEARCH AND SEIZURE OPERATION CARRIED OUT IN THE CASE OF HIRANANDAN I GROUP . THE DIRECTOR AND PRO MOTER OF THE HIRANANDANI GROUP, HAD ACCEPTED THE FACT THAT ON - MONEY WAS RECEIVED FROM SALE OF FLATS . THE AO FURTHER STATED THAT ASSESSEE SHRI. SACHIN SURYA HAS BOOKED FLATS, I.E. 1503 - A AND 1504 - A IN THE BUILDING KNOWN AS RICHMOND' AT HIR ANANDANI GARDENS, POWAI, MUMBAI. THE AGREEMENT VALUE OF EACH FLAT IS RS.62,42,500/ - . THE INFORMATION RECEIVED FROM THE INVESTIG ATION WING IS THAT THE ASSESSEE HAS MADE CASH PAYMENT OF RS.40 LAKH S, I.E. RS . 20 LAKH S EACH FOR BOTH THE FLATS . 4. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAS SUPPLIED THE REASONS RECORDED FOR REOPENING, COPY OF THE INFORMATION RECEIVED FROM THE WING AND A COPY OF THE RELEVANT EXTRACT OF THE STATEMENT FOR SHRI. ITA NO. 6237/MUM/2016 SHRI SACHINKUMAR SURYA 3 NIRANJAN H I RANANDANI , MANAGING DIRECTOR OF HIRANANDANI GROUP RECORDED ON OATH ON 14/03/2014 U/S. 132(4) OF THE IT ACT . THE ASSESSEE CONTESTED THE RELIANCE PLACED BY AO ON THE IN FORMATION IN POSSESSION OF THE AO REFERRING TO IT AS A DUMB DOCUMENT AND COULD NOT BE RELIED UPON. ASSESSEE ASKED FOR CROSS EXAMINAT ION OF NIRANJAN HIRANANDANI ON WHOSE STATEMENT , ADDITION WAS MADE BY AO VIDE LETTER DATED 09/03/2015, HOWEVER, THE AO CATEGORICALLY DENIED THE CROSS EXAMINATION. 5. WITHOUT AFFORDING CROSS EXAMINATION AO MADE ADDITION O N THE BASIS OF STATEMENT OF DIRECTOR OF HIRANANDANI GROUP U/S.69B BEING UNEXPLAINED INVESTMENT AND ADDED THE SAME IN ASSESSEES INCOME. 6. BY THE IMPUGNED ORDER CIT(A) CONFIRMED THE REOPENING AND ALSO ADDITION OF RS.40 LAKHS MADE U/S.69B. 7. AGAINST THE ABOVE ORDER OF CIT(A) ASSESSEE IS IN FU RTHER APPEAL BEFORE ME . IT WAS ARGUED BY LEARNED AR THAT REOPENING CANNOT BE MADE MERELY ON THE BASIS OF SUSPICION. HE SUBMITTED THAT REOPENING IS MAINLY BASED ON THE INFORMATION RECEIVED FROM THE DIT(INV) WITHOUT CHECKING THE PRIMA FACIE VERACITY BEFORE A RRIVING AT THE SATISFACTION TO ASSUME REASON TO BELIEVE. 8. WITH REGARD TO THE MERIT OF THE ADDITION, IT WAS CONTENDED THAT SINCE ASSESSEE WAS NOT PROVIDED WITH OPPORTUNITY TO CROSS - EXAMINE THE PERSON ON WHOSE STATEMENT SUCH ADDITION WAS MADE, RELYING ON T HE DECISION OF BOMBAY HIGH COURT IN THE CASE OF ASHISH INTERNATIONAL IN ITA ITA NO. 6237/MUM/2016 SHRI SACHINKUMAR SURYA 4 NO.4299/MUM/2009 DATED 22/02/2011, IT WAS CONTENDED THAT NO ADDITION WAS WARRANTED. 9. ON THE OTHER HAND, IT WAS CONTENDED BY LEARNED DR THAT THERE WAS DEFINITE INFORMATION WITH TH E DEPARTMENT AND ALSO STATEMENT OF BUILDER TO THE EFFECT THAT ASSESSEE HAS PAID ON - MONEY, THEREFORE, AO HAS SUFFICIENT REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, THE REOPENING WAS WELL JUSTIFIED. ON MERIT OF THE ADDITION HE RELIED ON THE ORDER O F THE AO AND CIT(A) CONTENDED THAT IN CASE OF ACQUISITION OF HOUSE PROPERTY, PAYMENT OF ON - MONEY I S A NORMAL PRACTICE, THEREFORE, AO WAS JUSTIFIED IN MAKING THE ADDITION. 10. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FROM THE RECORD, I FOUND THAT ASSESSEE HAS TAKEN FLATS IN THE BUILDING KNOWN AS RICHMOND BUILDING AT HIRANANDANI GARDEN, POWAI, MUMBAI. THERE WAS A SEARCH ON THE HIRANANDANI GROUP, WHEREIN DIRECTOR OF THE COMPANY ACCEPTED RECEIPT OF ON - M ONEY FROM THE PERSONS WHO HAVE T AKEN FLAT IN THEIR BUILDING. STATEMENT OF DIRECTOR WAS RECORDED. THE CASE OF ASSESSEE WAS REOPENED BY ISSUE OF NOTICE U/S.148. AO HAS RECORDED REASONS FOR REOPENING AND ALSO SUPPLIED THE SAME TO THE ASSESSEE. I HAD CAREFULLY GONE THROUGH THE REASONS SO RECORDED AND FOUND THAT AO HAS SUFFICIENT REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, ACCORDINGLY REOPENING WAS JUSTIFIED. WITH REGARD TO THE MERIT OF THE ADDITION, I FOUND THAT O N THE BASIS OF STATEMENT OF NIRANJAN H IRANANDANI ADDITION WAS MADE BY THE AO. I ITA NO. 6237/MUM/2016 SHRI SACHINKUMAR SURYA 5 FOUND THAT ASSESSEE VIDE LETTER DATED 09/03/2015 ASKED FOR CROSS EXAMINATION OF THE PERSON ON WHOSE STATEMENT SUCH ADDITION WA S SOUGHT TO BE MADE. HOWEVER, AO VIDE LETTER DATED 12/03/2015 DECLINED A REQUEST OF THE ASSESSEE FOR CROSS EXAMINATION OF THE PERSON GIVING STATEMENT I.E., SHRI NIRANJAN HIRANANDANI . THUS, IT IS CLEAR FROM THE ORDER OF THE AO THAT ASSESSEE HAS A SKED FOR THE CROSS EXAMINATION OF THE PERSON ON WHOSE STATEMENT ADDITION WAS MADE. IT IS ALSO CRYST AL CLEAR IN PARA 4.1 AND 4.2 OF AOS ORDER DATED 16/03/2015 THAT AO HAS CATEGORICALLY DECLINED CROSS EXAMINATION OF THE PERSON GIVING THE STATEMENT ON THE BASIS OF WHICH ADDITION WAS MADE . HOWEVER , THE CROSS EXAMINATION WAS ALSO NOT ALLOWED BY THE CIT(A). AS PER MY CONSIDERED VIEW DENIAL OF SUCH OPPORTUNITY GOES TO THE ROOT OF THE MATTER AND STRIKE AT THE VERY FOUNDATION OF THE ASSESSMENT ORDER. NOT PROVIDING SUCH OPPORTUNITY AMOUNTED TO VIOLATION OF PRINCIPLE OF NATURAL JUSTICE, A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY. UNDER THESE FACTS AND CIRCUMSTANCES, THE JUDICIAL PRONOUNCEMENTS LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN CASE OF ASHISH INTERNATIONAL IS CLEARLY APPLICABLE WHEREIN HONBLE BOMBAY HIGH COURT HELD AS UNDER: - THE QUESTION RAISED IN TH IS APPEAL IS, WHETHER THE TRIBUNAL JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF BOGUS PURCHASES ALLEGEDLY MADE BY THE ASSESSEE FROM M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. ACCORDING TO THE REVENUE, THE DIRECTOR OF M/S. THAKKAR AGRO INDUSTRIA L CHEM SUPPLIES P. LTD. IN HIS STATEMENT HAD STATED THAT THERE WERE NO SALES / PURCHASES BUT THE TRANSACTIONS WERE ONLY ACCOMMODATION BILLS NOT INVOLVING ANY TRANSACTIONS. THE TRIBUNAL HAS RECORDED A FINDING OF FACT THAT THE ASSESSEE HAD DISPUTED THE CORRE CTNESS OF THE ABOVE STATEMENT AND ADMITTEDLY THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE THE CONCERNED DIRECTOR OF M/S. THAKKA R AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. WHO HAD MADE THE AB OVE STATEMENT. THE APPELLATE AUTHORITY HAD SOUG HT REMAND REPORT AT THAT STAGE THE GENUINENESS OF THE STATEMENT HAS NOT BEE N ESTABLISHED BY ALLOWING CROSS EXAMINATION OF THE PERSON WHOSE STATEMENT WAS RELIED UPON BY THE ITA NO. 6237/MUM/2016 SHRI SACHINKUMAR SURYA 6 REVENUE. IN THESE CIRCUMSTANCES, THE DECISION OF THE TRIBUNAL BEING BASED ON THE FAC T, NO SUBSTANTIAL QUESTION OF LAW CAN BE SAID TO ARISE FROM THE ORDER OF THE TRIBUNAL. THE APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS 11. HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES 281 CTR 241 HAS HELD THAT NOT ALLOWING ASSESSEE TO CROSS - EXAMINE WITNESSES BY ADJUDICATING AUTHORITY THOUGH STATEMENTS OF THOSE WITNESSES WERE MADE AS BASIS OF IMPUGNED ORDER, AMOUNTED IN SERIOUS FLAW WHICH MADE IMPUGNED ORDER NULLITY AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. THE PRECIS E OBSERVATION OF THE HONBLE SUPREME COURT WAS AS UNDER: - 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 MAK ES THE ORDER NULLITY INASMUCH AS IT AMOUNTED 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 AFORESA ID TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS - EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY T HE ADJUDICATING AUTHORITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDICATING AUTHORITY. A PPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DISCREDIT THEIR TESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS - EXAMINATION. THAT APART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAINTAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS WERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE WHICH IS MENTIONED IN THE PRICE LIST ITSELF COULD BE THE SUBJECT MATTER OF CROSS - EXAMINATION. THERE FORE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJECT MATTER OF THE CROSS - EXAMINATION AND MAKE THE REMARKS AS MENTIONED ABOVE. ITA NO. 6237/MUM/2016 SHRI SACHINKUMAR SURYA 7 12. SIMILAR VIEW HAS BEEN TAKEN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF H.R.MEH TA IN ITS ORDER DATED 07/07/2016. THE HONBLE HIGH COURT HELD AS UNDER: - THE ASSESSEE IS BOUND TO BE PROVIDED WITH THE MATERIAL USED AGAINST HIM APART FROM BEING PERMITTED TO CROSS EXAMINE THE DEPONENTS. THE DENIAL OF SUCH OPPORTUNITY GOES TO ROOT OF THE MATTER AND STRIKES AT THE VERY FOUNDATION OF THE ASSESSMENT ORDER AND RENDERS IT VULNERABLE. 13. APPLYING THE PROPOSITION OF LAW LAID DOWN BY HONBLE BOMBAY HIGH COURT AND HONBLE SUPREME COURT TO THE FACTS OF THE INSTANT CASE, I DO NOT FIND ANY MERIT FOR THE ADDITION MADE BY AO WITHOUT ALLOWING ASSESSEE AN OPPORTUNITY TO CROSS EXAMINE THE PERSON ON WHOSE STATEMENT ADDITION WAS MADE. 14 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS INDICATED HEREINABOVE . O RDER PRONOUNCED IN THE OPEN COURT ON T HIS 25 / 07 /2017 S D/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 25 / 07 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUM BAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//