ACIT 24 & 26, MUMBAI V. KAPIL KANODIA, THANE

ITA 8553/MUM/2010

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0699 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 09-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN
• Keywords: Unexplained investment; Opportunity of cross examination
• Section: 143(3); 131

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI A BENCH , , BEFORE S/SH. I P BANSAL,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 8553 /MUM/201 0 , / ASSESSMENT YEAR - 200 7 - 08 INCOME TAX OFFICERWARD - 1(3) VARDAAN BLDG. MIDC, WIE THANE(W) - 400 601. VS SH. KAPIL KANODIA FLAT NO.1903, 19 TH FLOOR D - WING, ASHAR RESIDENCY , PO KHRAN RD.NO.2, VASANT VIHAR , THANE PAN: A LMPK 5768 L ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : SHRI VIMAL PUNMIYA / REVENUE BY :SHRI ASGHAR ZAIN / DATE OF HEARING : 28 - 05 - 2015 / DATE OF PRONOUNCEMENT : 28 - 05 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 19/08/2010 OF THE CIT(A) - II , THANE , THE ASSESSING OFFICER(AO) HAS RAISED FOLLOWING GROUNDS OF A PPEAL: 1. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE, THE HONBLE CIT(A ) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.21,53,067/ - ON ACCOUNT OF UNEXPLAINED INVESTMENTS. 2. THE ASSESSING OFFICER CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY GROUND OF APPEAL. ASSESSEE,AN INDIVIDUAL, TRADING IN YARN FILED HIS RETURN OF INCOME ON 29/10/2007 DECLARING INCOME OF RS.2.42 LACS. THE AO COMPLETED ASSESSEMENT ON 24/12/2009 U/S. 143(3) OF THE ACT DETERMINING THE INCOME OF THE ASSESSEE AT RS.29.25 LACS. 2. EF FECTIVE GROUND OF APPEAL IS ABOUT DELETION OF ADDITION OF RS. 21.53 LACS, MADE ON ACCO UNT OF UNEXPLAINED INVESTMENTS. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD MADE PURCH ASES FROM JAY LAXMI TRADING CO.(JLTC),AMOUNTING TO RS.79.67 LA CS, THAT IN HIS BOOKS OF ACCOUNT HE HAD SHOWN PAYMENT OF RS.58.14 LACS, THAT BALANCE PAYMENT OF RS.21.53 WAS SHOWN TO HAVE BEEN OUTSTANDING AS ON 31.3.2007. THE AO CALLED FOR INFORMATION U/S. 133 (6) OF THE ACT FROM JLTC,WHO INFORMED THE AO THAT IT HAD RECEI VED THE ENTIRE AMOUNT FROM THE ASSESSEE DURIN G THE YEAR UNDER CONSIDERATION. THE AO ISSUED SUMMONS U/S. 131 TO M . C . JOSHI (MCJ) PROPRIETOR OF JLTC. IN THE STATEMENT RECORDE D U/S. 131, MCJ STATED THAT HE HAD RECEIVED ALL THE PAYMENT DUE FROM THE ASSESSEE , THAT T HE ASSESSEE HAD MADE PAYMENT OF RS.58.14 LACS THROUGH CHEQUES , THAT BALANCE PAYMENT WAS GIVEN BY THE ASSESSEE IN FORM OF CROSS BEARER CHEQUES, THAT THE ACCOUNT OF THE A SSESSEE WAS SQUARED UP AND THERE WAS NO PAYMENT OUTSTANDING FROM HIM AS ON 31.3.2007. IN SUPPOR T OF HIS STATEMENT, MCJ PRODUCED THE THIRD PARTY CROSS BEARER CHEQUES, PAY - IN SLIPS. IT WAS FOUND THAT THE PAY IN SLIPS OF THE CROSS BEARER CHEQUES HAD SIGNATURES OF THE BROTHER OF THE ASSESSEE , S ANDEEP K ANODIA . CONSIDERING THE ABOVE THE AO ISSUED A S HOW CAUSE NOTICE TO THE ASSESSEE ASKING HIM TO EXPLAIN AS TO WHY THE PAYMENT AMOUNTING TO RS. 21.53 LACS MADE BY ITA NO. 8553 /MUM/ 10 ,AY. 0 7 - 08 - KAPIL K 2 HIM THROUGH CROSS BEARER CHEQUE TO JLTC SHOULD NOT BE TREATED AS UNEXPLAINED INVESTMENT. HE ALSO SUPPLIED THE COPY O F THE STATEMENT OF MCJ TO TH E ASSESSEE .VIDE HIS LETTER, DT.18/12/200, THE ASSESSEE STATED THAT HE HAD NOT ISSUED ANY CROSS BEARER CHEQUES TO JLTC. HE REQUESTED THE AO TO GIVE OPPORTUNITY TO CROSS - EXAMINE MCJ. IT WAS CONTENDED BEFORE THE AO THAT THE BALANCE PAYMENT WAS MADE TO JLTC I N THE NEXT F INANCIAL Y EAR .AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE THE AO HELD THAT IT WAS DIFFICULT TO BELIEVE AS TO WHY ANY PERSON WOULD DEPOSIT CHEQUES OF THIRD PARTY AGAINST THE NAME OF A PERSON FROM WHOM THE SAME AM OUNT WAS RECEIVABLE, THAT M CJ HAD SPECIFICALLY STATED THAT HE HAD REC EIVED THIRD PARTY CHEQ UE T HROUGH HIS BROTHER SANDEEEP KANODIA, THAT FROM THE COPIES OF PAY - IN SLIPS IT WAS EVIDENT THAT THE SAID THIRD PARTY CHEQUES WERE RECEIV ED AGAINST LIABILITY OF LAXMI RAYONS, THAT THE ASSES SEE HAD NOT AVAILED OPPORT UNITY OF C R OSS EXAMINING MCJ. FINALLY HE HELD THAT THE THIRD PARTY CHEQUE AMOUNTING TO RS. 21.53 LAC S BELONGED TO THE A SSESSEE . HE TREATED THE SAID AM OUNT AS UNEXPLAINED INVESTMENT OF THE A SSESSEE AND ADDED IT TO HIS TOTAL INCO ME FOR THE YEAR UNDER CONSIDERATION. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA). BEFORE HI M, THE ASSESSEE ARGUED THAT HE HAD MADE PURCHASE OF RS. 79.67 LACS FROM JTCL, THAT HE MADE THE PAYMENT OF RS. 58.14 LACS, THAT ON 31.3.2007 BALANCE OUTSTANDING W AS RS. 21.53 LACS, THAT DURING AY 20 08 - 09 RS.21.53 LACS WAS PAID TO JTCL, THAT HE HAD ASKED THE AO FOR FURTHER CROSS - VERIFIC ATION , THAT THE AO DID NOT CONSIDER HIS REQUEST, THAT CROSS BEARER CHEQUES DEPO SITED IN HIS ACCOUNT BY JLTC WERE NEVER ISSUE BY HIM, THAT MCJ HAD DEPOSITED THE SAME IN THE BANK KNOWN FOR THE REASON BEST KNOWN TO HIM, THAT THERE WAS NO EVIDENCE THAT THE CROSS BEARER CH EQUES WERE HANDED OVER BY THE ASSESSEE TO JLTC. AS PER THE FAA, DUR ING THE COURSE OF APPELLATE PROCEEDINGS THE ASSESSEE HAD FILED COPIES OF HIS BANK STATEMENT AS WELL AS THAT OF JLTC FOR THE PERIOD 1.4.2007 TO 31.5.2007. THE FAA OBSERVED THAT IN THAT ACCOUNT THE CHEQUES AMOUNTING TO 21.53 LACS ISSUED BY THE ASSESSEE , IN F AVOUR OF JLTC WERE REFLECTED,THAT DURING THAT PERIOD NO FURTHER PURCHASES HAD BEEN MADE BY THE ASSESSEE FROM JLTC , THAT JLTC FURTHER STARTED MAKING SALES TO THE ASSESSEE FIRM FROM OCT. 2007, THAT THERE WAS NO EXPLANATION ABOUT THE SQUARING UP OF THE ACCOUNT AS ON 31.3.2007 AND ACCEPTING THE PAYMENT OF RS.21.53 LACS BY JLTC. AS PER THE FAA THE AO HAD NOT QUESTION ON MCJ ON PAYMENT RECEIVED BY HIM FROM ASSESSEE S BANK A /C. MAINTAINED WITH BANK OF RAJ A STHAN. HE FURTHER OBSERVED THAT IN THE PAY - SLIPS OF THE CROSS BEARER CHEQUES THE NAME OF THE BROTHER OF THE ASSESSEE WAS APPEARING .IN THAT REGARD, HE OBSERVED THAT AO HAD NOT QUESTION ED MCJ ABOUT THE DISCREPANCY AS TO HOW THE CROSS BEARER CHEQUES WITH NAME WRITTEN AS SANDEEP KANODIA COULD BE ACCOUNTED FOR IN THE ACCOU NT OF THE ASSESSEE . THE FAA ALSO HELD THA T THE AO HAD NOT AFFORDED THE ASSESSEE AN OPPORTUNITY TO CRO SS - EXAMINE MCJ. THE FAA REFERRED TO THE JUDGMENT OF H ON BLE S UPREME C OURT DELIVERED IN THE CASE OF K .T. SAUDULI GROCERY DEALER ETC. (1977 CTR 260) AND HELD THAT BY NOT PROVI DING AN OPPORTUNITY OF CROSS EXAMINATION THE AO HAD VITIATED THE PROCESS OF JUSTICE. FINALLY, HE DELETED THE ADDITION MADE BY AO OF RS.21.53 LACS MADE UNDER THE HEAD UNEXPLAINED INVESTMENT. 4. DURING THE COURSE OF HEARING B EFORE US, DEPARTMENTAL REPRESENTATIVE (DR)STATED THAT THE AO HAD GIVEN AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE MCJ, THAT THE ASSESSEE HAD TO AVAIL THE OPPORTUNITY BY 17/12/2009, THAT THE ASSESSEE DID NOT INFORM THE AO AS TO WHETHER HE WANTED TO CROSS - EXAMINE MCJ. HE REFERRED TO PG - 25 O F THE PB FILED BY THE ASSESSEE . HE FURTH EE R ARGUED THAT FAA HAD NOT DIRE CTED TH E AO TO FILE ANY REMAND REPORT. AUTHORISED REPRESENTATIVE(AR) STATED ITA NO. 8553 /MUM/ 10 ,AY. 0 7 - 08 - KAPIL K 3 THAT THE ASSESSEE HAD MADE A REQUEST TO A O ON 18.12.2009 FOR CROSS EXAMINATION OF MCJ, THAT ASSESSEE HAD NOT ISSUED C ROSS BEARER CHEQUES TO MCJ, THAT RS.21.53 LACS WERE PAID BY THE ASSESSEE IN THE NEXT AY. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE FAA HAD HELD THAT THE AO HAD NOT QUESTIONED MCJ ABOUT THE PAYMENTS R ECEIVED BY HIM FROM THE ASSESSEE,THAT THE AO HAD NOT MADE INQUIRY ABOUT THE SIGNATURES FOUND ON THE BACK SIDE OF THE PAY IN SLIPS,THAT ASSESSEE WAS NOT AFFORDED AN OPPORTUNITY OF CROSS EXAMINATION. REFERRING TO THE CASE OF K T SALUDI GROCERY DEALERS ETC.(S UPRA),THE FAA ALLOWED THE APPEAL FILED BY THE ASSESSEE.WE FIND THAT THE ASSESSEE WAS SPECIFICALLY INFORMED AS TO WHETHER HE WOULD LIKE TO CROSS - EXAMINE ANY BODY AND , IF YE S , HE SHOULD INTIMATE THE AO BY 17.12.2009(PG.25OF PB).THE ASSESSEE DID NOT FILE REP LY TILL 17.12.2009 AND ON 18.12.2009 REQUESTED THE AO ALLOW CROSS EXAMINATION.BEING A TIME BARRING ASSESSM ENT IF THE AO DECIDED THE ISSUE ON AVAILABLE MATERIAL, THEN IN OUR OPINION HE HAD NOT COMMITTED ANY MISTAKE.THE FAA HAS ALL THE POWERS OF THE AO.SO,BEF ORE ALLOWING THE APPEAL OF THE ASSESSEE FOR NOT AFFORDING OPPORTUNITY OF CROSS EXAMINATION HE SHOULD HAVE CALLED FOR A REMAND REPORT FROM THE AO.HE HIMSELF COULD HAVE ALLOWED THE ASSESSEE TO CROSS EXAMINE MCJ.IF THE AO HAD NOT MADE NECESSARY INQUIRIES,IT W AS THE DUTY TO THE FAA TO DIRECT HIM TO DO THE NEEDFUL BEFORE ADJUDICATING THE APPEAL FILED BY THE ASSESSEE.CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION THAT IN THE INTEREST OF THE JUSTICE MATTER SHOULD BE RESTORED BAC K TO THE FILE OF THE FAA FOR FRESH ADJUDICATION.HE MAY ALLOW THE ASSESSEE TO CROSS EXAMINE MCJ HIMSELF OR THROUGH THE AO AND HE WILL ALSO DIRECT THE AO TO FILE REPORT ABOUT THE ISSUES THAT WERE NOT INVESTIGATED PROPERLY AS PER THE THEN FAA.EFFECTIVE GROUND OF APPEAL FILED BY THE AO IS DECIDED IN HIS FAVOUR,IN PART. AS A RESULT,APPEAL FILED BY THE AO STANDS PARTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH , MAY,2015. 28 , 2015 SD/ - SD/ - ( /I . P . BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 28.05. 2015 . . JV . SR.PS. ITA NO. 8553 /MUM/ 10 ,AY. 0 7 - 08 - KAPIL K 4 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY O RDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.