Jaydeep M Kher, Pune V. Dy. CIT, Circle 1(1), Pune

ITA 973/PUN/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0245 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-08-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 03-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S R NADPUROHIT
• Keywords: Business income; Opportunity of being heard; Principle of natural justice; Capital receipt; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 973 /PN/20 1 3 / ASSESSMENT YEAR: 200 3 - 0 4 JAYDEEP M. KHER, 2, RAM - KRIPA APARTMENTS, 759/70, DECCAN GYMKHANA, PUNE 411004 . / APPELLANT PAN: A BKPK8987D VS. THE DY . COMMISSIONER OF INCOME TAX, CIRCLE - 1 (1 ) , PUNE . / RESPONDENT CIRCLE - 1 (1 ) , PUNE . / RESPONDENT / APPELLANT BY : S /S HRI C.H. NANIWADEKAR AND S.R. NADPUROHIT / RESPOND ENT BY : SHRI SUHAS KULKARNI / DATE OF HEARING : 19 . 12 .201 6 / DATE OF PRONOUNCEMENT: 28 . 12 .201 6 / ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST ORDER OF CIT (A) - I , PUNE , DATED 21 . 0 2 .201 3 RELATING TO ASSESSMENT YEAR 200 3 - 0 4 AGAINST ORDER PASSED UNDER SECTION 143(3) R.W.S. 1 47 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . SECTION 143(3) R.W.S. 1 47 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 2 1. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) (I.E. 'CIT(A)') ERRED IN HOLDING THAT ADVANCE RECEIVED AGAINST AN UNRESOLVED DISPUTE I S INCOME OF THE PREVIOUS YEAR AND WHICH HAD NOT IN FACT ACCRUED DURING THE RELEVANT YEAR AND EVEN OTHERWISE FAILED TO APPRECIATE THAT ASSESSEE HAD NOT RELINQUISHED ANY RIGHT DURING THE YEAR. 2. THE LEARNED CIT(A) IS ERRED BOTH IN LAW AND ON FACTS IN CONF IRMING ASSESSING OFFICER'S VIEW THAT 'THE ASSESSEE HAS ACCEPTED THE CONSIDERATION FOR RELINQUISHING THE DEVELOPMENT RIGHTS' SOLELY RELYING ON THE STATEMENT OF SHRI ADITYA DADHE, PARTNER OF VIRAJ PROPERTIES, RECORDED ON 20.2.2006 WITHOUT GIVING ASSESSEE AN OPPORTUNITY TO EXAMINE HIM IN ASSESSEE'S PRESENCE AND / OR CROSS EXAMINE HIM THOUGH THE INCORRECT STATEMENT OF THE SAID DEPONENT WITNESS WAS BEING USED AS EVIDENCE AGAINST THE FACTS PRODUCED BY THE ASSESSEE; AND AS SUCH THE ASSESSMENT UNDER APPEAL BE TREAT ED AS BAD IN LAW AND A NULLITY. 3. THE LEARNED CIT(A) OUGHT TO HAVE HELD ON FACTS THAT THE RE - ASSESSMENT ORDER IS PASSED WITHOUT GIVING THE ASSESSEE AN OPPORTUNITY TO CROSS - EXAMINE THE WITNESS FOR THE STATEMENT RECORDED BY ASST. DIRECTOR OF INCOME - TAX (I NV .4 ), PUNE AND NOT BY ASSESSING OFFICER HIMSELF, USED AS EVIDENCE IN HOLDING THE SAID ADVANCE RECEIPT AS INCOME CAUSING VIOLATION OF NATURAL JUSTICE; AND AS SUCH THE ASSESSMENT UNDER APPEAL BE TREATED AS BAD IN LAW AND A NULLITY. 3. THE ISSUE ARISING IN THE PRESENT APPEAL FILED BY THE ASSESSEE IS AGAINST ASSESSABILITY OF ADVANCE RECEIVED BY THE ASSESSEE ON RELINQUISHMENT OF DEVELOPMENT RIGHTS. THE GRIEVANCE OF ASSESSEE IS THAT THE ADDITION HAS BEEN MADE IN THE HANDS OF ASSESSEE SOLELY RELYING ON THE STAT EMENT OF SHRI ADITYA DADHE, PARTNER OF VIRAJ PROPERTIES RECORDED ON 20.02.2006, WITHOUT GIVING THE ASSESSEE AN OPPORTUNITY TO EXAMINE HIM IN HIS PRESENCE OR CROSS - EXAMINE HIM IN RESPECT OF STATEMENT OF DEPONENT WITNESS BEING USED AS EVIDENCE AGAINST THE AS SESSEE. THE SAID STATEMENT WAS RECORDED BY ADIT (INV) - 4, PUNE AND NOT BY THE ASSESSING OFFICER AND THE ASSESSEE IS AGGRIEVED BY USING THE SAME AS EVIDENCE BEING IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSE SSEE FOR THE YEAR UNDER CONSIDERATION HAD FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 16,48,090/ - . THE ASSESSING OFFICER RECORDED REASONS FOR REOPENING THE ASSESSMENT SINCE THE ASSESSEE HAD FORMED JOINT VENTURE WITH M/S. DADHE CONSTRUCTION PVT . LTD. SUBSEQUENTLY, M/S. VIRAJ PROPERTIES PVT. LTD. APPROACHED THE ASSESSEE IN DECEMBER, 2001 STATING THAT THEY WERE TAKING OVER THE PROJECT ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 3 FROM M/S. DADHE CONSTRUCTION PVT. LTD. AND TENDERED 11 POST DATED CHEQUUES AMOUNTING TO RS.10 LAKHS EACH TOTALING RS.1.10 CRORES. THE ASSESSING OFFICER NOTED THAT AS PER JOINT VENTURE, THE ASSESSEE HAD RECEIVED RS.1.10 CRORES IN ASSESSMENT YEAR 2003 - 04 WHICH WAS NOT OFFERED TO TAX, WHERE THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, HENCE REASONS WERE RECORDED FOR REOPENING THE ASSESSMENT. THE ASSESSEE IN RESPONSE TO NOTICE ISSUED UNDER SECTION 148 OF THE ACT STATED THAT THE RETURN OF INCOME ORIGINALLY FILED DECLARING INCOME AT RS.16,48,090/ - MAY BE TREATED AS FILED IN COMPLIANCE TO NOTICE UNDER SECTIO N 148 OF THE ACT. THE ASSESSEE ASKED FOR THE REASONS FOR REOPENING THE ASSESSMENT AND THEREAFTER, FURNISHED OBJECTIONS AND STATED THAT THE REASSESSMENT PROCEEDINGS BE DROPPED. HOWEVER, THE ASSESSING OFFICER PASSED SPEAKING ORDER DATED 03.12.2010 REJECTIN G THE OBJECTIONS FILED BY THE ASSESSEE AND THEREAFTER, THE CASE OF ASSESSEE WAS TAKEN UP FOR SCRUTINY. THE ASSESSING OFFICER FROM THE SUBMISSION OF THE ASSESSEE POINTED OUT THAT FOLLOWING FACTS EMANATED : - 1. THE ASSESSEE ENTERED INTO MOU DATED 22.02.2000 ALONG WITH M/ S D ADHE CONSTRUCTION PVT. LTD. FOR DEVELOPING A PROPERTY AT SR.NO.59,60,61 KOTHRUD . THIS MOU BESTOWED CERTAIN RIGHTS ON ASSESSEE AS PER HIS CONTRIBUTION TO CAPITAL DECIDED THEREIN. THE LAND WAS PROCURED BY M / S D ADHE CONSTRUCTION PVT. LTD. ( D CPL) FROM THE ORIGINAL OWNERS. THE ASSESSEE WAS TO BRING IN CAPITAL OF ` ' 1 CRORE. AS A PART OF EXECUTION OF THE SAID MOU, ASSESSEE PAID ` ' 35.50 LAKHS TOWARDS WORK TO D CPL AND ` ' 4 LAKHS TO LAND LORD MR. PRAKASH KORDE DURING FEB., 2000 TO APRIL 2000. 2. MEANWHILE THE DEVELOPMENT RIGHT OF THE PROPERTY WERE TRANSFERRED TO M/S. VIRAJ PROPERTIES BY D CPL VIDE AGREEMENT DATED 03.06.2002. FOLLOWING IS THE YEARWISE CONSIDERATION RECEIVED BY THE ASSESSEE AGAINST RELINQUISHMENT OF HIS RIGHTS CREATED AS PER THE MOU . ASS. YEARS D CP LTD VIRAJ TOTAL . PROPERTIES 2002 - 03 49, 00 ,000 40,00,000 89,00,000 2003 - 04 NIL 70,00,000 70,00,000 TOTAL 49,00,000 1,10,00,000 1,59,00,000 THE ASSESSEE HAS NOT DISPUTED THE FACT THAT HE HAS RECEI VED THIS CONSIDERATION BUT HAS STATED THAT THE AMOUNT OF ` ' 1.59 CRORES IS NOT FULL AND FINAL SETTLEMENT FOR TRANSFER OF RIGHTS. 3. ASSESSEE HAS CLAIMED THAT HE COME TO KNOW THAT WITHOUT HIS KNOWLEDGE OR CONSENT, THE JOINT VENTURE VIZ. D CPL GAVE DEVELOPM ENT RIGHTS OF THE SAME SITE TO VIRAJ PROPERTIES. ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 4 4. ONE M / S BHUSHAN KULKA RN I ASSOCIATES P. LTD HAS RAISED A CLAIM AGAINST D CP LTD. & ORS IN RESPECT OF A PLOT ADJACENT TO THE PROJECT PROPERTY AND A CIVIL SUIT WAS FILED BY THE SAID M/S. BHUSHAN KULKA RNI & ASSOCIATES AGAINST THE SAID D CP LTD & ORS IN THIS BEHALF WHEREIN ASSESSEE WAS MADE A DEFENDANT IN THE SUIT. THE SAID SUIT WAS DECIDED VIDE AN ORDER DT. 28.3.2005 OF 3 RD JT. CIVIL JUDGE (SENIOR DIVISION), PUNE. D CP LTD THEN HAS AGAINST THE SAID ORDER PREFER RED AN APPEAL BEFORE HON. BOMBAY HIGH COURT WHICH IS PENDING TILL DATE. 5. FROM THE DOCUMENTS ON RECORD IT WILL BE CLEAR THAT DCP TD. HAS INDEPENDENTLY AND SOLELY ENTERED INTO ARRANGEMENT FOR ASSIGNMENT OF THEIR RIGHTS IN THE SAID PROPERTY WITH M / S VIRAJ PROPERTIES P. LTD AS PER MEMORANDUM OF UNDERSTANDING DATED 2.7.2001 AND SUBSEQUENT DEED OF ASSIGNMENT DATED 3.6.2002 REGISTERED WITH THE OFFICE OF SUB - R EGISTRAR, HAVELI - 2, PUNE; AND NEITHER ASSESSEE HAS ENTERED INTO ANY UNDERSTANDING NOR ASSESSEE HAS EXEC UTED ANY DOCUMENT IN RESPECT OF ASSIGNMENT, SETTLEMENT OR SURRENDER OF HIS RIGHTS, ENTITLEMENT AND / OR CLAIM WHATSOEVER AVAILABLE UNDER THE JV OR INTEREST IN THE PROJECT PROPERTY; AND 6. HON. BOMBAY HIGH COURT HAD PASSED HAS INJUNCTION IN CONNECTION WIT H TRANSFER OF THE PROPERTY UNDER LITIGATION BETWEEN DCP LTD AND BHUSHAN KULKA RNI & ASSOCIATES P. LTD, AND THAT THE DISTRICT COURT HAS GRANTED PERPETUAL INJUNCTION VIDE THEIR ORDER REFERRED TO IN (5) ABOVE IN RESPECT OF TWO PLOTS, A PART OF WHICH INCLUDES AN AREA FALLING IN THE PROJECT PROPERTY. THEREFORE, THE ASSIGNMENT OF ASSESSEE'S RIGHTS AND INTEREST IN THE AREA OF THE PROJECT PROPERTY CANNOT BE ASSIGNED AND IN FACT THE SAME IS NOT DIVESTED IN ANY MANNER WHATSOEVER. 5. THE CLAIM OF THE ASSESSEE BE FORE THE ASSESSING OFFICER WAS THAT IT STILL HAD 5. THE CLAIM OF THE ASSESSEE BE FORE THE ASSESSING OFFICER WAS THAT IT STILL HAD RIGHTS UNDER THE MOU ENTERED INTO WITH DCPL AND HAD NOT RECEIVED ANY CONSIDERATION FOR THE RELINQUISHMENT OF RIGHTS WHATSOEVER PENDING MUTUAL SETTLEMENT TO BE REACHED BETWEEN THE PARTIES CONCERNED. THE ASSE SSEE THUS, STATED THAT THE SAID RECEIPTS WERE NOT TO BE ADDED AS INCOME FROM DCPL IN ASSESSMENT YEAR 2003 - 04 . THE ASSESSING OFFICER HELD AS UNDER: - 7. THE ORIGINAL LAND BELONGED TO THE FAMILIES OF KORDE & MUTHA. THE DEVELOPMENT RIGHTS FOR THIS LAND WERE TRANSFERRED TO DCPL. DCP L ENTERED IN TO MOUS WITH VARIOUS PARTIES IN RESPECT OF DIFFERENT PIECES OF LAND AND HAS ALSO TRANSFERRED THE DEVELOPMENT RIGHTS TO SOME PARTIES. IN RESPECT OF ONE SUCH PIECE OF LAND, BHUSHAN KULKA RN I AND ASSOCIATES IS A PARTY TO W HOM DEVELOPMENT RIGHTS WERE TRANSFERRED BY DCPL. BHUSHAN KULKA RN I AND ASSOCIATES IS NOT CONCERNED WITH THE LAND IN WHICH ASSESSEE HAS CERTAIN RIGHTS ON ACCOUNT OF MOU WITH DCP L . 7.1 MEANWHILE DCPL ENTERED INTO MOU TO FORM A JOINT VENTURE WITH KHER AND AS SOCIATES TO DEVELOP THE SAID PLOT. AS IT IS EVIDENT FROM THE STATEMENT RECORDED BY THE ADIT OF MR. KHER AND THE SUBMISSIONS FILED, THE WORK OF DEVELOPMENT WERE STARTED AND THERE WAS NO FORMATION OF J V. AS PER THE MOU DCPL AND KHER & ASSOCIATES WERE TO FORM A J V, WHICH WAS NEVER MATERIALIZED. 7.2 SUBSEQUENTLY DCPL ENTERED INTO A DEVELOPMENT AGREEMENT DATED 03.06 . 2002 WITH VIRAJ PROPERTIES WHEREIN THE DEVELOPMENT RIGHTS WERE TRANSFE RRED TO VIRAJ PROPERTIES BY DCP L . AS PER THE AGREEMENT THE CLAIM OF ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 5 M / S KHER AND ASSOCIATES UNDER THE J V AGREEMENT WITH DCPL REGARDING 1,40,000 SQ.FT SALEABLE BUILT UP AREA WAS SETTLED FOR A CONSIDERATION OF ` 1.56 CRORES. THE ASSESSEE HAS ACCOUNTED FOR THESE PAYMENTS AS ADVANCES AGAINST THE PROPERTY IN ITS BALANCE SHEET. THE ASSE SSEE HAS NOT TAKEN IT AS ITS INCOME AS THE ASSESSEE BELIEVES THAT YET FINAL SETTLEMENT REGARDING THE CONSIDERATION HAS NOT BEEN REACHED. THE STATEMENT OF MR. ADITYA DADHE PARTNER OF VIRAJ PROPERTIES WAS RECORDED DATED 20.02.2006. IN HIS STATEMENT HE HAS S TATED THAT ` 1.66 CRORES WAS PAID TO MR. KHER AGAINST THE FULL AND FINAL SETTLEMENT AGAINST THE RELINQUISHMENT OF RIGHTS. THE ASSESSEE IN HIS SUBMISSION HAS CLAIMED THAT HE HAS NOT RECEIVED THE COMPLETE CONSIDERATION BUT IT IS A FACT THAT MR. KHER HAS ACCE PTED THE CONSIDERATION FOR SURRENDER OF RIGHT IN THE ABOVE REFERRED PROPERTY AND HAS NOT DISPUTED THE ISSUE OF SETTLEMENT EITHER IN THE COURT OR BEFO RE DADHE CONSTRU C TION PVT. LTD OR BEFORE VIRAJ PROPERTIES. THESE FACTS AND CIRCUMSTANCES SHOWS THAT THE TRA NSACTION HAS ALREADY REACHED FINALITY AS SOON AS MR. KHER HAD ACCEPTED THE CONSIDERATION. 8. THE ASSESSEE HAS TAKEN A PLEA THAT AS THE HON. BOMBAY HIGH COURT HAS PASSED AN INJU N CTION IN CONNECTION WITH TRANSFER OF PROPERTY UNDER LITIGATION BETWEEN DCPL AN D BHUSHAN KULKA RN I ASSOCIATES PVT. LTD., THE ASSIGNMENT OF HIS RIGHTS AND INTEREST IN THE AREA OF PROJECT PROPERTY CANNOT BE ASSIGNED. THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTED. THE DISPUTE IS BETWEEN BHUSHAN KULKA RN I ASSOCIATES PVT. LTD. AND DCPL FOR THE INTEREST AND RIGHTS OF BHUSHAN KULKA RN I ASSOCIATES PVT. LTD. IT IS A SUIT FILED BY BHUSHAN KULKA RN I ASSOCIATES PVT. LTD. AGAINST DCPL FOR THE CERTAIN PLOT WHEREIN ASSESSEE IS ONE OF THE DEFENDANT AS ARE OTHER 34 DEFENDANT. THUS THIS LITIGATION IN VARI OUS COURTS IS NOT AT ALL CONNECTED WITH THAT OF ASSESSEE'S SO CALLED LITIGATION . 6. THE ASSESSING OFFICER THUS, CONCLUDED THAT WHERE THE ASSESSEE HAD RECEIVED FULL CONSIDERATION AGAINST HIS RIGHTS IN THE LAND AND THE DEVELOPMENT RIGHTS BEING TRANSFERRED CONSTRUCTIVELY TO M/S. VIRAJ PROPERTIES, THEN THE ASSESSEE HAS NO RIGHTS IN THE SAID LAND. WHERE THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF DEVELOPER AND DEALER OF REAL ESTATES AND WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INCOME HAD ACCRUED TO THE ASSESSEE WHENEVER THE CONSTRUCTIVE POSSESSION OF RIGHTS IN LAND WERE TRANSFERRED TO VIRAJ PROPERTIES. THEREFORE, INCOME OF RS.1.59 CRORES WAS HELD TO ACCRUE IN ASSESSMENT YEAR 2003 - 04 AND THE SAME WAS ADDED AS INCOME OF THE ASSESSEE. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD RECEIVED RS.1.24 CRORES I.E. CONSIDERATION OF RS.1.59 CRORES RS.35 LAKHS AGAINST ADVANCE PAID TO DCPL, WHICH WAS ADDED AS INCOME OF THE ASSESSEE FOR INSTANT ASSESSMENT YEAR. 7. THE CIT(A) NOTED THAT BOTH IN THE ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS, THE ASSESSEE HAD ACCEPTED THAT THE SAID CONSIDERATION OF RS.1.59 ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 6 CRORES WAS RECEIVED BY CHEQUES AND HAS BEEN SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS WELL AS VPPL . THE CIT(A) ALSO POINTED OUT THAT SUM OF RS.1.24 CRORES WAS TO BE ADDED IN THE HANDS OF ASSESSEE. THE OBJECTION OF ASSESSEE THAT TERMS AND RIGHTS UNDER THE MOU WITH DCPL DATED 22.02.2000 WAS STILL IN FORCE AS NO WRITTEN DOCUMENT WAS EXECUTED FOR CANCELLAT ION OR TERMINATION OF THE MOU. HOWEVER, THE CIT(A) OBSERVED THAT THE MOU WITH DCPL WAS EXECUTED ON NON - JUDICIAL STAMP PAPER AND WAS NOT REGISTERED DOCUMENT. AS PER THE TERMS OF MOU, THE LAND WAS TO BE BROUGHT IN BY DCPL. ON THE OTHER HAND, THE ASSESSEE HAD TO DEPOSIT RS.1 CRORE AS CAPITAL IN THE NEWLY FORMED COMPANY. THIS AMOUNT WAS TO BE DEPOSITED IN A BANK ACCOUNT TO BE OPENED IN THE NAME OF NEW COMPANY AND ALL THE BOOKING AMOUNTS TO BE DEPOSITED THEREUNDER. THE CIT(A) OBSERVED THAT THE SAID MOU WAS NEVER EXECUTED BY WAY OF REGISTERED DEED NOR WAS A NEW COMPANY EVER FORMED WHICH SHOWS THAT THE FORMAL RIGHTS RELATED TO JOINT VENTURE WERE NEVER ASSIGNED TO THE ASSESSEE, THEN THEREAFTER, MOU DATED 02.07.2001 WAS SIGNED BETWEEN DCPL AND VPPL. THE CIT(A) IN THIS REGARD POINTS OUT THAT THE ASSESSEE WAS AWARE OF PROPOSED MOU BETWEEN T HE M AND HE IN REPLY TO QUESTION NO.11 OF STATEMENT RECORDED BY ADIT (INV) - 4, PUNE DATED 10.02.2006 STATED THAT HE WAS APPROACHED BY SHRI ADITYA DADHE, NEPHEW OF SHRI VIJAY DADHE , DIRECTOR OF DCPL IN DECEMBER, 2001, WHO STATED THAT VPPL WAS TO TAKE OVER THE PROJECT FROM DCPL. FURTHER, AS PER LETTER DATED 03.12.2001 WHICH WAS ADDRESSED TO THE ASSESSEE BY VPPL, IN DISCHARGE OF LIABILITY OF DCPL TO THE ASSESSEE, IT WAS CLEAR THAT TH E ASSESSEE WAS AWARE THAT HIS ROLE IN THE PROPERTY WAS EXTINGUISHED AND A NEW JOINT VENTURE WAS BEING PROPOSED, WHICH WAS ULTIMATELY FORMALIZED ON 03.06.2002 BETWEEN DCPL AND VPPL. ANOTHER RELATED ASPECT WAS THAT MOU WAS ENTERED INTO BY DCPL FOR DEVELOPME NT OF PROPERTY AT SURVEY NOS.59, 60, 61, KOTH R UD, PUNE WITH M/S. BHUSHAN KULKARNI PVT. ASSOCIATES, WHO IN TURN, HAD FILED SUIT IN THE COURT OF CIVIL JUDGE, PUNE AGAINST DCPL AND THE LAND OWNERS. REFERENCE WAS MADE TO THE LITIGATION IN PARA 4.7 OF THE APPE LLATE ORDER AND THE ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 7 ORDER OF THE HONBLE BOMBAY HIGH COURT, WHEREIN THE CIT(A) NOTED THAT THE ORDER OF CIVIL JUDGE, PUNE SPECIFICALLY MENTIONED THE CANCELLATION OF AGREEMENT BETWEEN THE ASSESSEE AND DCPL, WHICH HAS NOT BEEN CHALLENGED BY THE ASSESSEE AND H ENCE, THE ASSESSEE HAD IMPLIEDLY AND IMPLICITLY BY WAY OF HIS CONDUCT OF ACCEPTING THE CONSIDERATION FROM DCPL AND VPPL HAD GIVEN CONSENT TO THE CANCELLATION OF AGREEMENT. 8. THE NEXT OBJECTION OF ASSESSEE WAS THAT HE WAS DENIED AN OPPORTUNITY OF NATURA L JUSTICE, SINCE STATEMENT OF SHRI ADITYA D A DHE WAS RECORDED BEHIND HIS BACK AND HE WAS NOT GIVEN AN OPPORTUNITY OF CROSS - EXAMINATION OF THE SAME. THE CIT(A) NOTED THAT THE MATTER WAS REMANDED TO THE ASSESSING OFFICER FOR PROVIDING OPPORTUNITY TO CROSS - EX AMINE SHRI ADITYA DADHE AND ALSO TO RECEIVE A COPY OF HIS STATEMENT . THE CIT(A) NOTED THE RELATIONSHIP BETWEEN THE ASSESSEE AND SHRI VIJAY NARAYAN DADHE AND ALSO NOTED THE FACT THAT THE ASSESSEE HAD ADMITTED THAT HE WAS TRYING TO EFFECT THE COMPROMISE BET WEEN TWO SIDES. THEREFORE, THE CIT(A) HELD THAT THE ACT OF THE ASSESSING OFFICER IN NOT GIVING OPPORTUNITY TO THE ASSESSEE TO CROSS - EXAMINE WAS NOT SEEN TO BE FATAL MISTAKE. HE FURTHER OBSERVED THAT PREPONDERANCE O F PROBABILITIES SEEM TO SUGGEST THAT THE ENTIRE EPISODE AMOUNTED TO FORMAL ARRANGEMENT TO AVOID PAYING TAXES AND ALSO IT WAS NOT ESTABLISHED FROM THE RECORD THAT THERE WAS NO FULL AND FINAL SETTLEMENT NOR THAT THE RIGHTS OF ASSESSEE IN THE PROPERTIES STILL SURVIVE. ACCORDINGLY, THE CIT(A) UPH E L D THE ADDITION OF INCOME AT RS. 1,23,50,000/ - AS AGAINST RS.1,24,00,000/ - IN THE HANDS OF ASSESSEE ON THE FOLLOWING REASONS: - I) THE RIGHTS AND INTERESTS OF THE APPELLANT AS EMERGING OUT OF THE MOU DATED 22.2.2000 HAVE NOT BEEN FINALIZED BY WAY OF IRREVOC ABLE POWER OF ATTORNEY AND REGISTERED JV AGREEMENT AS DISCUSSED IN PARA 4.5 ABOVE. THE JV COMPANY HAS NEITHER BEEN FORMED NOR HAS ANY DEVELOPMENT ACTIVITIES TAKEN PLACE. CLAUSE 7 OF THE SAID MOU SPECIFICALLY MENTIONS THAT ALL LEGAL FORMALITIES ARE TO BE CO MPLETED. BUT NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE JV OR POA HAS ACTUALLY BEEN EXECUTED. IN FACT, THE APPELLANT IN HIS STATEMENT RECORDED U/S 131(1)(B) OF THE I.T. ACT RECORDED ON 10.2.2006 BEFORE THE ASSISTANT DIRECTOR INVESTIGATION PUNE ADMITTED THAT HE HAS NOT DISCHARGED HIS RIGHTS AS AVAILABLE TO HIM IN THE SAID JOINT VENTURE AS PER MOU (REPLY TO Q.NO.11). THE REPLY OF THE APPELLANT IS OBVIOUSLY ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 8 BASED ON THE FACT THAT NO SUCH JOINT VENTURE HAS EVER BEEN EXECUTED. IT IS ONLY PROPOSED. I N FACT, AT THE TIME OF RECORDING OF THE STATEMENTS OF THE APPELLANT AND SHRI ADITYA DADHE BY THE INVESTIGATION WING, PUNE, THE RESIDENTIAL CUM COMMERCIAL PROJECT ON THE PROPERTY IN QUESTION HAD ALREADY BEEN COMPLETED AND COMPLETION CERTIFICATE FROM THE PMC HAD ALSO BEEN RECEIVED. TO SAY THEREFORE, THAT THE SETTLEMENT BETWEEN THE APPELLANT AND DCPL IS NOT COMPLETE, IS IN SHEER CONTRADICTION TO THE FACTUAL POSITION VIS - A - VIS THE I M PU G NED PROPERTY. II ) THE CANCELLATION OF THE MOU IS NOT A VITAL FACTOR SINCE N O POWER OF ATTORNEY HAS BEEN IN EXECUTED IN FAVOUR OF THE PROPOSED JOINT VENTURE. WHAT THE MOU HAS DONE IS TO ONLY CREATE CERTAIN INTEREST ON THE APPELLANT AND FOR CANCELLATION OF THAT INTEREST HE HAS BEEN ADEQUATELY COMPENSATED. FROM THE DEED OF ASSIGNMEN T BETWEEN DCPL AND VPPL DATED 2.6.2002 THE INTEREST OF SEVERAL OTHER PARTIES WHICH HAD ENTERED INTO MOU WITH DCPL ALSO STAND CANCELLED. NO SPECIFIC CANCELLATION DEED IS SEEN TO HAVE BEEN EXECUTED WITH THOSE OTHER PARTIES VIZ. ONKAR PROPERTIES PVT. LTD., SU KHWANI ASSOCIATES, M/S. T.T. GHOLAP AND GHOLAP & GHOLAP PAINTIN G CO. ETC. III ) THE APPELLANT'S CONT E NTION THAT TRANSACTION IS NEITHER COMPLETED NOR CAN CELLED NOR CONSTRUCTIVE SETTLEMENT ARRIVED AT IN RESPECT OF THE PROPOSED JOINT VENTURE AND THEREFORE, T HE RECEIPTS ON ACCOUNT OF THE TRANSACTION IS NOT HIS BUSINESS INCOME IS NOT ACCEPTABLE SINCE HE HAS NEITHER TAKEN ANY STEPS TO CONTEST THE CANCELLATION OF HIS MOU WHICH HAS BEEN EFFECTED BOTH DUE TO THE SUBSEQUENT MOU DATED 2.7.2001 AND ASSIGNMENT OF DEVEL OPMENT RIGHTS DATED 3.6.2002 BETWEEN DCPL AND VPPL. HE HAS FURTHER NOT CONTESTED THE DECISION OF THE CIVIL JUDGE PUNE DATED 28.3.2005 WHERE IT IS RECORDED THAT THE AGREEMENT BETWEEN THE APPELLANT AND THE DCPL STANDS CANCELLED. 9. THE ALTERNATE CONTENTIO N OF THE ASSESSEE THAT THE RECEIPT OF COMPENSATION FOR DAMAGES ON EARLY TERMINATION OR CANCELATION OF AGREEMENT WAS CAPITAL RECEIPT AND NOT BUSINESS INCOME AND WAS TO BE TAXED IN THE YEAR OF ACCRUAL OF INCOME AND NOT UNDER THE YEAR OF APPEAL, WAS NOT ACCEP TED SINCE AS PER MOU DATED 22.02.2000, NO OWNERSHIP RIGHTS WERE CONFERRED UPON THE ASSESSEE. WHERE THE MOU WAS ONLY AN UNDERSTANDING BETWEEN THE PARTIES TO TAKE CERTAIN STEPS I.E. FORM A NEW COMPANY AND EXECUTE A PROPER DEVELOPMENT AGREEMENT, ETC. WAS A P ROFIT SHARING AGREEMENT, THEN THE INCOME RECEIVED BY THE ASSESSEE AS A RESULT OF MOU WAS BUSINESS INCOME, WHICH WAS CORRECTLY ASSESSED IN THE HANDS OF ASSESSEE BY THE ASSESSING OFFICER. 10. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 9 11. THE L EARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS WHETHER AMOUNTS RECEIVED BY THE ASSESSEE WAS AN ADVANCE AND WHETHER THE SAME IS TAXABLE OR NOT. HE FURTHER STATED THAT THE SECOND ASPECT OF THE ISSUE IS THAT IF TAXABLE, THEN IN WHICH YEAR THE SAME IS TAXABLE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS FILED FACTS SHEET IN THIS REGARD AND TAKEN US THROUGH DATE - WISE DEVELOPMENTS IN THE PROCEEDINGS OF THE CASE. HE POINTED OUT T HAT THE LAND BELONGS TO DADHE CONSTRUCTION PVT. LTD. AND AS PER THE UNDERSTANDING, THE ASSESSEE STARTED DEVELOPMENT OF THE SAID PROJECT. HOWEVER, M/S. BHUSAN KULKARNI ASSOCIATES PVT. LTD. W AS DEVELOPING ADJACENT LAND AND DISPUTE AROSE ON ENCROACHMENT. IN DECEMBER, 2001, SHRI ADITYA DADHE, NEPHEW OF SHRI VIJAY DADHE, DIRECTOR OF DCPL APPROACHED AND STATED THAT HE WAS TAKING OVER THE PROJECT, WHEREIN TOTAL CONSIDERATION WAS AGREED TO PAY TO ASSESSEE AT RS.1.59 CRORES AS AGAINST EXPENSES OF RS.35 LAKHS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STATES THAT SUM OF RS.49 LAKHS WAS PAID. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STRESSED THAT STATEMENT OF SHRI ADITYA DADHE WAS RECORDED AT THE BACK OF ASSESSEE AND WHEN HE ASKED FOR COP Y OF STATEMENT AND ALSO OPPORTUNITY TO CROSS - EXAMINE WITNESSES, THOUGH THE COPY OF STATEMENT WAS GIVEN DURING REMAND PROCEEDINGS, BUT THE ASSESSING OFFICER STATED THAT HE HIMSELF WOULD CROSS - EXAMINE. OUR ATTENTION WAS DRAWN TO THE COMMUNICATION BETWEEN TH E ASSESSEE AND THE ASSESSING OFFICER IN THIS REGARD AND ALSO THE LETTER TO THE CIT(A) GIV ING DIRECTIONS TO THE ASSESSING OFFICER. IN THE REMAND REPORT ALSO, THE ASSESSING OFFICER REITERATES THAT THERE IS NO NEED TO GIVE CROSS - EXAMINATION. HE FURTHER POIN TED OUT THAT THOUGH THE COURT CASES WERE BETWEEN M/S. BHUSAN DEVELOPERS AND DCPL BUT THE ASSESSEE WAS ALSO THE DEFENDANT IN THE SAID SUIT. HE STRESSED THAT THE DOCUMENT BETWEEN THE PARTIES HAD NOT BEEN CANCELLED TILL NOW. THE LEARNED AUTHORIZED REPRESENT ATIVE FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN M/S. ANDAMAN TIMBER INDUSTRIES VS. ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 10 COMMISSIONER OF CENTRAL EXCISE IN CIVIL APPEAL NO.4228 OF 2006 , JUDGMENT DATED 02.09.2015. HE STATES THAT ONCE THE STATEMENT HAS NOT BEEN GIVEN, NO ADDITION IS WARRANTED IN THE HANDS OF ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THEREAFTER, TOOK US THROUGH THE STATEMENT RECORDED OF THE ASSESSEE AND SHRI ADITYA DADHE AND POINTED OUT THAT SHRI ADITYA DADHE WAS VERY VITAL LINK AND WHERE HIS STATEMENT WAS RECORDED WHICH WAS GIVEN TO THE ASSESSEE BUT SINCE HE WAS NOT ALLOWED TO CROSS - EXAMINE , THE QUESTION IS WHETHER THE SAME CAN BE RELIED UPON. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PLACED RELIANCE ON T HE FOLLOWING DECISIONS: - I) KISHINCHAND CHELLARAM VS. CIT (1980) 125 ITR 713 (SC) II) R.B. SHREERAM DURGA PRASAD AND FATECHAND NURSING DAS VS. SETTLEMENT COMMISSION (IT AND WT) AND ANOTHER (1989) 176 ITR 169 (SC) III) DELIBERATION OF S AMPATH IYENGARS 11 TH EDITION AT PAGE 286. 12. HE ALSO STATES THAT THE ASSESSEES STATEMENT WAS RECORDED ON 10.02.2006 BY THE ADIT (INV) - 4, AND STATEMENT OF SHRI ADITYA DADHE WAS RECORDED ON BY THE ADIT (INV) - 4, AND STATEMENT OF SHRI ADITYA DADHE WAS RECORDED ON 20.02.2006 BY THE ADIT (INV) - 4, WHICH WAS FIRST BEHIND HIS BACK AND THE ASSESSING O FFICER HAS RELIED ON SUCH STATEMENT, WHICH WAS RECORDED BY OTHER OFFICER WITHOUT CONFRONTING TO THE ASSESSEE AND WITHOUT ALLOWING CROSS - EXAMINATION TO THE ASSESSEE AND HENCE, THE ASSESSMENT MADE IN THE CASE OF ASSESSEE IS UNWARRANTED. ANOTHER POINT RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT THE REASONS FOR REOPENING THE ASSESSMENT WERE RECORDED ON 31.03.2010 AS AGAINST THE STATEMENT RECORDED IN 2006. 13. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACING RELIA NCE ON THE ORDERS OF AUTHORITIES BELOW FAIRLY POINTED OUT THAT THE COPY OF STATEMENT WAS GIVEN TO THE ASSESSEE BUT ADMITTEDLY, NO CROSS - EXAMINATION WAS ALLOWED. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN ORDER TO ADJUDICATE THE IS SUE RAISED IN THE PRESENT APPEAL, WE WILL BRIEFLY TOUCH UPON THE ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 11 FACTS OF THE CASE AND THEN, TAKE NOTE OF THE ASSESSMENT PROCEEDINGS AND THE PLEA OF THE ASSESSEE BEFORE THE ASSESSING OFFICER AND ALSO THE MOD US OF APPELLATE PROCEEDINGS. THE ASSESSEE CLAIMS THAT IT HAD ENTERED INTO MOU WITH DCPL TO FORM JOINT VENTURE IN ORDER TO DEVELOP CERTAIN PIECE OF LAND WHICH WAS OWNED BY THE DCPL . THEREAFTER, THERE WAS SOME DEVELOPMENT BETWEEN DCPL AND OTHER CONCERN VIRAJ PROPERTIES, WHO TOOK OVER THE PROJECT AND MOU WAS SIGNED BETWEEN DCPL AND VIRAJ PROPERTIES, COPY OF WHICH IS PLACED AT PAGE 127 OF THE PAPER BOOK. ON 03.12.2001 , VIRAJ PROPERTIES INTIMATED THE ASSESSEE ABOUT THE DEVELOPMENT AND IT WAS AGREED THAT THE ASSESSEE WOULD BE PAID CONSIDERATION OF RS.1.59 CR ORES, OUT OF WHICH RS.1.10 CRORES WAS TO BE RECEIVE D FROM VIRAJ PROPERTIES AND RS.49 LAKHS WAS TO BE RECEIVED FROM DCPL. THE ASSESSEE HAD PAID RS.35,50,000/ - FOR EXECUTION OF PROJECT INCLUDING RS.4 LAKHS TO THE LANDLORD. THE ASSESSEE ADMITS THAT IT HAS R ECEIVED THE SAID CONSIDERATION BUT SINCE NO FULL AND FINAL SETTLEMENT FOR TRANSFER OF RIGHTS HAD TAKEN PLACE, THE ASSESSABILITY OF SAID AMOUNT DOES NOT AR I SE IN THE HANDS OF ASSESSEE. IN THIS REGARD, IT WAS POINTED OUT THAT CERTAIN DISPUTES HAD ARISEN BET WEEN THE PARTIES, WHEREIN THE PERSON DEVELOPING THE ADJACENT PLOT OF LAND I.E. KURKARNI ASSOCIATES HAD FILED CIVIL SUIT WHICH WAS PENDING BEFORE THE HONBLE BOMBAY HIGH COURT. THE ASSESSEE IS DEFENDANT IN THE SAID SUIT. HOWEVER, THE CASE OF REVENUE AGAIN ST THE ASSESSEE IS THAT THE AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE AND ONCE IT HAS ACCEPTED THE CONSIDERATION, THEN THE SAME IS TO BE ASSESSED AS BUSINESS INCOME IN THE HANDS OF ASSESSEE. SINCE THE ASSESSEE HAD NOT OFFERED THE SAID AMOUNT IN HIS RETURN OF INCOME, THE ASSESSING OFFICER RECORDED REASONS FOR REOPENING THE ASSESSMENT AND ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 26.03.2010, WHICH IS PLACED AT PAGE 1 OF THE PAPER BOOK. IN REPLY, THE ASSESSEE VIDE LETTER DATED 31.03.2010 REQUESTED THE ASS ESSING OFFICER TO TREAT THE ORIGINAL RETURN OF INCOME FILED IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT AND ALSO ASKED FOR REASONS FOR REOPENING THE ASSESSMENT, COPY OF SAID LETTER IS PLACED AT PAGE 2 OF THE PAPER ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 12 BOOK. THE ASSESSING OFFICER PROVID ED THE REASONS FOR REOPENING ON 20.05.2010, AGAINST WHICH THE ASSESSEE FILED OBJECTIONS, WHICH WERE REJECTED BY THE ASSESSING OFFICER VIDE ORDER DATED 03.12.2010. THE SAID COMMUNICATIONS ARE PLACED AT PAGES 3 TO 9 OF THE PAPER BOOK. ON 10.12.2010, THE AS SESSING OFFICER ISSUED LETTER TO THE ASSESSEE CALLING FOR DETAILS, COPY OF WHICH IS PLACED AT PAGES 10 AND 11 OF THE PAPER BOOK. IN REPLY TO IT, THE ASSESSEE FURNISHED THE DETAILS VIDE LETTER PLACED AT PAGES 12 TO 15 OF THE PAPER BOOK. THE ASSESSING OFFI CER PASSED THE ORDER UNDER SECTION 143(3) R.W.S. 147 OF THE ACT ON 31.12.2010. 15. THE ASSESSEE BEFORE THE CIT(A) VIDE LETTER DATED 05.01.2012 , COPY OF WHICH IS PLACED AT PAGES 16 TO 18 OF THE PAPER BOOK, POINTED OUT THAT THE ASSESSING OFFICER IN PARA 7 .2 OF THE ASSESSMENT ORDER HAD RELIED ON THE STATEMENT OF ONE SHRI ADITYA DADHE , WHICH WAS RECORDED ON 20.02.2006. HE ALLEGED THAT THE ASSESSING OFFICER HAD NOT INFORMED ABOUT RECORDING OF SUCH STATEMENT NOR THE COPY WAS FURNISHED. THE ASSESSEE VIDE LETT ER DATED 30.06.2010 HAD REQUESTED THE ASSESSING OFFICER THAT IN CASE ANY CONCERNED PARTIES HAVE TO BE EXAMINED, THEN THEY SHOULD BE EXAMINED IN THE PRESENCE OF ASSESSEE AND HE SHOULD BE GIVEN AN OPPORTUNITY TO CROSS - EXAMINE. THE SAID REQUEST WAS MADE VIDE PARA 2.6 OF THE SAID LETTER LETTER FILED OBJECTING TO THE REASONS RECORDED FOR REOPENING THE ASSESSMENT, COPY OF WHICH IS PLACED AT PAGES 4 TO 8 OF THE PAPER BOOK. BEFORE THE CIT(A), THE ASSESSEE REITERATED THAT THE ASSESSING OFFICER HAD FAILED TO ASCERT AIN THE CORRECTNESS OF STATEMENT OF SHRI ADITYA DADHE . WHILE MAKING ADDITION, MERELY BY RELYING ON THEM AND THE SAID STATEMENT COULD NOT BE RELIED UPON AND / OR USED AS EVIDENCE AGAINST THE ASSESSEE. THE COPY OF SAID STATEMENT IS PLACED AT PAGES 16 TO 18 OF THE PAPER BOOK. THE CIT(A) PASSED AN ORDER UNDER SECTION 250(4) OF THE ACT, DATED 31.01.2011, WHICH IS PLACED AT PAGES 19 TO 21 OF THE PAPER BOOK, UNDER WHICH THE CIT(A) REFERRED TO THE SUBMISSIONS MADE BY THE ASSESSEE VIS - - VIS FACTUAL ASPECTS AND TH E DISPUTES ARISING IN THE SAID DEAL AND THE ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 13 CLAIM OF ASSESSEE THAT THE ASSESSING OFFICER HAD ERRED IN HOLDING THAT THE ASSESSEE HAD RELINQUISHED THE RIGHTS IN THE PROJECT THROUGH SETTLEMENT WITH VIRAJ PROPERTIES. THE CIT(A) REFERRED TO FURTHER CONTENTIONS OF ASSESSEE THAT THE ASSESSING OFFICER HAS ERRED IN HOLDING THAT THE ASSESSEE HAD ACCEPTED CONSIDERATION FOR RELINQUISHING HIS DEVELOPMENT RIGHTS AND RELYING SOLELY ON THE STATEMENT OF SHRI ADITYA DADHE RECORDED ON 20.02.2006 WITHOUT BEING GIVEN AN OPPORT UNITY TO CROSS - EXAMINE OR EVEN FURNISHING COPY OF THE SAID STATEMENT. THE CIT(A) THUS, REMANDED THE MATTER FOR FURTHER ENQUIRY WITH DIRECTIONS TO THE ASSESSING OFFICER. THE ASSESSEE VIDE LETTER DATED 22.06.2012 REQUESTED THE ASSESSING OFFICER IN THE REMA ND PROCEEDINGS TO GIVE THE COPY OF STATEMENT OF SHRI ADITYA DADHE AND ALSO REQUESTED TO GIVE HIM OPPORTUNITY OF HEARING. THE ASSESSEE RECEIVED STATEMENT OF SHRI ADITYA DADHE, WHICH IS PLACED AT PAGES 96 TO 102 OF THE PAPER BOOK. THEREAFTER, THE ASSESSEE VIDE LETTER DATED 12.06.2012 / 12.09.2012 REQUESTED THE ASSESSING OFFICER TO KINDLY ARRANGE TO CROSS - EXAMINE THE WITNESS IN HIS PRESENCE AND ALLOW AN OPPORTUNITY TO CROSS - EXAMINE HIM, AS DIRECTED BY THE CIT(A). THE COPY OF SAID LETTER IS PLACED AT PAGE 24 OF THE PAPER BOOK. IN REPLY, VIDE LETTER DATED 14.09.2012 PLACED AT PAGE 25 OF THE PAPER BOOK, THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH HIS SAY WITH DOCUMENTARY EVIDENCE ON THE STATEMENT RECORDED OF SHRI ADITYA DADHE . HE FURTHER STATES IN THE SAID LETTER THAT THE SAME WILL BE EXAMINED BY THE UNDERSIGNED AND REPORT WILL BE SUBMITTED ACCORDINGLY TO T HE CIT(A) - I, PUNE . THE ASSESSEE WAS DIRECTED TO FURNISH THE SUBMISSIONS TO THE OFFICE ON OR BEFORE 24.09.2012. THE ASSESSEE MADE ANOTHER REQUEST T O THE ASSESSING OFFICER ON 04.10.2012, COPY OF WHICH IS PLACED AT PAGE 26 OF THE PAPER BOOK, AS PER WHICH, HE ASKED AN OPPORTUNITY TO CROSS - EXAMINE THE WITNESS SHRI ADITYA D A DHE BEFORE HIS PRESENCE ON THE MATTERS ARISING OUT OF SAID STATEMENTS RELIED UPON BY THE ASSESSING OFFICER. THE ASSESSEE REITERATED THAT THE CIT(A) APPRECIATED THE FACTS OF ASSESSEES RIGHT TO CROSS - EXAMINE THE WITNESS. THE ASSESSING OFFICER VIDE LETTER DATED 10.10.2012, COPY OF ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 14 WHICH IS PLACED AT PAGE 27 AGAIN INFORMED THE ASSESSEE T HAT HE WAS TO FURNISH HIS SAY WITH DOCUMENTARY EVIDENCE ON THE STATEMENT RECORDED OF SHRI ADITYA DADHE, COPY OF WHICH IS GIVEN TO HIM. HE SAYS THAT ANOTHER OPPORTUNITY IS BEING GIVEN TO THE ASSESSEE TO FURNISH HIS SAY WITH DOCUMENTARY EVIDENCE AND IF THE ASSESSEE FAILS TO DO SO, THE REMAND REPORT WOULD BE SUBMITTED TO THE CIT(A) ON THE BASIS OF INFORMATION AVAILABLE. THE ASSESSEE IN THE MEANWHILE APPROACHED THE CIT(A), PUNE VIDE LETTER DATED 17.10.2012, COPY OF WHICH IS PLACED AT PAGES 28 AND 29 OF THE PA PER BOOK AND REITERATED THE FACTS AND PROCEEDINGS BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT AND HIS REQUEST TO THE ASSESSING OFFICER TO BE GIVEN AN OPPORTUNITY TO CROSS - EXAMINE THE SAID DEPONENT SHRI ADITYA DADHE IN THE PRESEN CE OF ASSES SING OFFICER TO BRING OUT THE FACTUAL POSITION OF TRANSACTION. THE ASSESSEE FURTHER POINTED OUT THAT THE ASSESSING OFFICER HAD MIS - CONSTRUED THE DIRECTIONS ISSUED BY THE CIT(A) AND WAS INSIST ING UPON FURNISHING OF ASSESSEES SAY AND THAT THE ASSESSING OFF ICER WOULD HIMSELF CROSS - EXAMINE THE WITNESS. THE ASSESSEE REQUESTED THAT SUITABLE FURTHER DIRECTIONS BE ISSUED TO THE ASSESSING OFFICER IN THE MATTER FOR GIVING AN OPPORTUNITY T O CROSS - EXAMINE THE WITNESS IN RESPECT OF STATEMENT RECORDED ON 20.02.2006 . THE ASSESSEE ALSO MADE A REQUEST TO THE ASSESSING OFFICER VIDE LETTER DATED 17.10.2012 TO EXPLAIN THAT SINCE THERE WAS CONFUSION AS TO DIRECTIVES ISSUED BY THE CIT(A), PUNE UNDER SECTION 250(4) OF THE ACT AND HE HAD MADE FURTHER REFERENCE TO THE CIT(A) AS PER THE SUBMISSIONS, COPY OF WHICH IS ENCLOSED TO THE SAID LETTER. HE REQUESTED THE ASSESSING OFFICER TO WITHHOLD THE REPORT TO BE SUBMITTED TO THE CIT(A) UNTIL HIS FURTHER DIRECTIONS, COPY OF WHICH IS PLACED AT PAGE 30 OF THE PAPER BOOK. THE ASSESSING O FFICER HOWEVER, WITHOUT WAITING FOR ANY DIRECTIVES FROM THE CIT(A) SUBMITTED THE REMAND REPORT ON 22.10.2012, COPY OF WHICH IS PLACED AT PAGES 31 TO 33 OF THE PAPER BOOK . THEREAFTER, THE ASSESSEE FILED SUBMISSIONS BEFORE THE CIT(A) AND POINTED OUT THAT SI NCE THE ASSESSEE HAD BEEN DENIED EFFECTIVE OPPORTUNITY TO PROVE HIS CONTENTIONS DUE TO ABSENCE OF CROSS - EXAMINATION OF THE WITNESS AND FURTHER HAD BEEN ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 15 PREVENTED TO PRESENT HIS SAY ON THE MATTERS, THE REMAND REPORT FURNISHED BY THE ASSESSING OFFICER SHOULD BE DISCARDED AND SHOULD NOT BE TAKEN INTO CONSIDERATION. THE ASSESSEE STRESSED THAT DESPITE DIRECTIONS OF CIT(A), THE ASSESSING OFFICER HAD NOT ALLOWED OPPORTUNITY TO CROSS - EXAMINE THE WITNESS. THE CIT(A) VIDE PARA 4.9 ACKNOWLEDGED THAT THE MATTER WAS R EMANDED BACK TO THE ASSESSING OFFICER FOR PROVIDING AN OPPORTUNITY TO THE ASSESSEE TO CROSS - EXAMINE SHRI ADITYA DADHE AND ALSO TO RECEIVE COPY OF STATEMENT OF SHRI ADITYA DADHE. HE FURTHER GOES ON TO NOTE THAT THE ASSESSEE WAS RELATED VERY CLOSELY TO DADH E PERSONS INCLUDING SHRI VIJAY NARAYAN DADHE AND HOLDS THEREFORE, THE ACT OF ASSESSING OFFICER IN NOT GIVING OPPORTUNITY TO THE APPELLANT TO CROSS - EXAMINE SHRI ADITYA DADHE IS NOT SEEN TO BE A FATAL MISTAKE. HE FURTHER GOES ON TO HOLD THAT THE PREPONDERAN CE OF PROBABILITIES SEEM TO SUGGEST THAT THE ENTIRE EPISODE APPEARS TO BE FORMAL ARRANGEMENT TO AVOID PAYING TAXES AND HE ALSO ACKNOWLEDGED THAT IT IS CERTAINLY NOT ESTABLISHED FROM THE RECORDS THAT THERE IS NO FULL AND FINAL SETTLEMENT NOR THAT APPELLANT S RIGHTS/INTEREST IN THE PROPERTY STILL SURVIVES. ACCORDINGLY, HE UPHELD THE ADDITION IN THE HANDS OF ASSESSEE. 1 6 . THE FIRST PLEA RAISED BY THE ASSESSEE BEFORE US IS LACK OF OPPORTUNITY GIVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH HAS IMPAI RED HIS RIGHTS. THE ASSESSEE IS AGGRIEVED BY THE ORDER OF ASSESSING OFFICER IN PASSING THE ASSESSMENT ORDER RELYING ON THE STATEMENT OF SHRI ADITYA DADHE, WHICH WAS NEVER CONFRONTED TO THE ASSESSEE. THE SAID STATEMENT WAS RECORDED DURING THE COURSE OF IN VESTIGATION PROCEEDINGS BY THE ADIT(INV) - 4 AND NOT BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. FURTHER, THE SAID STATEMENT WAS RELIED ON WITHOUT CONFRONTING THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT SUCH A STA TEMENT EXISTS ON RECORD. ON RECEIPT OF ASSESSMENT ORDER, THE ASSESSEE BECAME AWARE OF THE RELIANCE OF ASSESSING OFFICER ON SAID STATEMENT AND BEFORE THE CIT(A) HE RAISED A PLEA THAT HE SHOULD BE GIVEN COPY OF ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 16 STATEMENT AND ALSO BE ALLOWED AN OPPORTUNITY N OT ONLY TO EXAMINE THE WITNESS BUT ALSO BE ALLOWED AN OPPORTUNITY TO CROSS - EXAMINE THE WITNESS BEFORE THE ASSESSING OFFICER. THE CIT(A) IN FAIRNESS WHILE PASSING ORDER UNDER SECTION 250(4) OF THE ACT CONSIDERED THE SUBMISSIONS OF ASSESSEE AND REMANDED THE ISSUE TO THE FILE OF ASSESSING OFFICER TO CARRY OUT FURTHER INVESTIGATIONS AND ALSO DIRECTED THE ASSESSING OFFICER TO GIVE THE COPY OF STATEMENT OF SHRI ADITYA DADHE TO THE ASSESSEE AND ALSO EXAMINE THE SAID PERSON IN ASSESSEES PRESENCE AND ALSO TO ALLOW THE ASSESSEE TO CROSS - EXAMINE HIM. THE ASSESSING OFFICER IN THE FIRST INSTANCE GAVE THE COPY OF STATEMENT RECORDED TO THE ASSESSEE. HOWEVER, DESPITE SEVERAL REQUESTS BY THE ASSESSEE TO EXAMINE THE SAID PERSON IN HIS PRESENCE AND ALSO ALLOW CROSS - EXAMINA TION OF THE SAID WITNESS, THE ASSESSING OFFICER TIME AND AGAIN REJECTED THE PLEA OF ASSESSEE AND ASKED HIM TO FILE HIS SAY ON THE AVERMENTS IN THE STATEMENT RECORDED BEHIND BACK OF THE ASSESSEE. VIDE LETTER DATED 14.09.2012, COPY OF WHICH IS PLACED AT PAG E 25 OF THE PAPER BOOK , THE ASSESSING OFFICER GOES ONE STEP AHEAD AND STATES THAT THE SAID PERSON WOULD BE CROSS - EXAMINED BY THE UNDERSIGNED AND REPORT WOULD BE SUBMITTED ACCORDINGLY TO THE CIT(A), PUNE I.E. THE ASSESSING OFFICER DOES NOT ALLOW EXAMINATION OF THE SAID SHRI ADITYA DADHE IN ASSESSEES PRESENCE AND FURTHER GOES ON TO SAY THAT THE CROSS - EXAMINATION W OULD BE DONE BY THE ASSESSING OFFICER AND REPORT WOULD BE SUBMITTED BEFORE THE CIT(A) . ANOTHER REQUEST MADE BY THE ASSESSEE THEREAFTER ON 04.10.20 12 WAS ALSO DISMISSED BY THE ASSESSING OFFICER ON SIMILAR LINES. THEREAFTER, THE ASSESSEE APPROACHED THE CIT(A) FOR SUITABLE DIRECTIONS ON 17.10.2012 AND ASKED THE ASSESSING OFFICER TO HOLD THE REMAND REPORT. HOWEVER, THE ASSESSING OFFICER SUBMITTED REMA ND REPORT IN TOTAL DEFIANCE AND WITHOUT COMPLYING WITH THE DIRECTIONS OF CIT(A). THE SAID REMAND REPORT WAS FURNISHED ON 22.10.2012. THEREAFTER, DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE AGAIN MADE A REQUEST TO THE CIT(A) THAT HIS DIRECTIO NS HAVE NOT BEEN COMPLIED WITH BY THE ASSESSING OFFICER AND NO EXAMINATION OF WITNESS HAS TAKEN PLACE IN HIS ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 17 PRESENCE NOR ANY CROSS - EXAMINATION HAS BEEN ALLOWED BUT THE CIT(A) GOES ONE STEP AHEAD TO SAY THAT THE PARTIES ARE RELATED PARTIES AND THERE IS NO NEED TO GIVE CROSS - EXAMINATION. HE FURTHER HOLDS THAT IT SEEMS TO BE TAX PLANNING BETWEEN THE PARTIES IN ORDER TO AVOID THE PAYMENT OF TAXES AND DISMISSED THE PLEA OF ASSESSEE IN ENTIRETY. 1 7 . THE ISSUE WHICH ARISES BEFORE US IS WHETHER WHERE THE ASSES SEE HAS NOT BEEN GIVEN THE COPY OF STATEMENT RELIED ON BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ADDITION HAS BEEN MADE IN THE HANDS OF ASSESSEE ON THE BASIS OF SUCH RECORDED STATEMENT, THEN WHETHER SUCH AN ACT OF THE ASSESSI NG OFFICER IS FATAL. FURTHER, IN CASE THE SO - CALLED STATEMENT RECORDED AT THE BACK OF ASSESSEE BY AN OFFICER, WHO WAS AN INVESTIGATION OFFICER AND NOT THE ADJUDICATION OFFICER, IS HANDED OVER TO THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS AND THE SAID WITNESS IS NOT EXAMINED IN THE PRESENCE OF ASSESSEE NOR HIS REQUEST OF ALLOWING EXAMINATION AND / OR CROSS - EXAMINATION OF THE WITNESS ALLOWED DURING THE COURSE OF APPELLATE PROCEEDINGS, CAN SUCH A STATEMENT BE THE BASIS FOR MAKING THE ADDITION IN THE HANDS OF ASSESSEE. 18. THE HONBLE SUPREME COURT IN M/S. ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF CENTRAL EXCISE (SUPRA) TOOK NOTE OF THE PLEA OF ASSESSEE BEFORE THE TRIBUNAL THAT IT WAS NOT ALLOWED CROSS - EXAMINATION OF DEALERS WHOSE STATEMENTS WERE RELIED ON BY THE ADJUDICATING AUTHORITY IN PASSING THE ORDERS, WHEREIN THE TRIBUNAL REJECTED THE PLEA IN THE FOLLOWING MANNER: - 6. THE PLEA OF NO CROSS EXAMINATION GRANTED TO THE VARIOUS DEALERS WOULD NOT HELP THE APPELLANT CASE SINCE THE EXAMINATI ON OF THE DEALERS WOULD NOT BRING OUT ANY MATERIAL WHICH WOULD NOT BE IN THE POSSESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX FACTORY PRICES REMAIN STATIC. SINCE WE ARE NOT UPHOLDING AND APPLYING THE EX FACTORY PRICES, AS WE FIND THEM CONTRAVENED AND NOT NORMAL PRICE AS ENVISAGED UNDER SECTION 4(1), WE FIND NO REASON TO DISTURB THE COMMISSIONERS ORDERS. ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 18 1 9 . THE ASSESSEE CHALLENGED THE SAID ORDER OF TRIBUNAL BEFORE THE HONBLE SUPREME COURT AND IT WAS HELD BY THE APEX COURT THAT NOT AL LOWING THE ASSESSEE TO CROSS - EXAMINE THE WITNESS BY THE ADJUDIC ATING AUTHORITY, WHERE THE STATEMENTS OF WITNESSES WERE MADE BAS IS FOR IMPUGNED ORDER, WAS A SERIOUS FLAW WHICH MAKES THE ORDER INVALID IN AS MUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF N ATURAL JUSTICE. THE RELEVANT FINDINGS OF THE HONBLE SUPREME COURT ARE AS UNDER: - ACCORDING TO US, 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 MAKES 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 BAS ED UPON THE STATEMENTS GIVEN BY THE AFORESAID 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 N OTE THAT IN THE IMPUGNED ORDER PASSED BY THE 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 ADJUDICATI NG AUTHORITY. AS FAR AS THE TRIBUNAL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED THAT CROSS - EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROUGHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSIO N OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX - FACTORY PRICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNAL TO HAVE GUESS WORK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED TO CROSS - EXAMINE THOSE DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED TO CROSS - EXAMINE THOSE DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED F ROM THEM. 20 . THE HONBLE SUPREME COURT ALSO OBSERVED THAT IT WAS NOT FOR THE TRIBUNAL TO GUESS WORK AS FOR WHAT PURPOSE THE APPELLANT WANTED TO CROSS - EXAMINE THOSE DEALERS. THE HONBLE SUPREME COURT WAS ALSO AGAINST THE MANNER IN WHICH THE ADJUDICATING AUTHORITY ACTED AND HELD THAT IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRE - SUPPOSE AS WHAT COULD BE THE SUBJECT MATTER OF CROSS - EXAMINATION AND MAKE THE REMARKS AS MENTIONED ABOVE. THE HONBLE SUPREME COURT HELD THAT IF THE TESTIMONY OF TWO WITNESSES IS DISCARDED, THEN THERE WAS NO MATERIAL WITH THE DEPARTMENT ON THE BASIS OF WHICH IT COULD JUSTIFY ITS ACTION , A S THE STATEMENTS OF AFORESAID TWO WITNESSES WERE ONLY THE BASIS OF ISSUING SHOW CAUSE NOTICE, HENCE THE IMPUGNED ORDER PASSED BY THE TRIBUNAL WAS SET ASIDE AND THE APPEAL OF THE ASSESSEE WAS ALLOWED. ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 19 21. THE HONBLE SUPREME COURT IN SAHARA INDIA (FIRM) VS. CIT AND ANOTHER (2008) 300 ITR 403 (SC) WHILE DECIDING ISSUE OF PRINCIPLES OF NATURAL JUSTICE AND RULE OF AUDI ALTERAM PARTEM HELD AS UNDE R: - 11. RULES OF 'NATURAL JUSTICE' ARE NOT EMBODIED RULES. THE PHRASE 'NATURAL JUSTICE' IS ALSO NOT CAPABLE OF A PRECISE DEFINITION. THE UNDERLYING PRINCIPLE OF NATURAL JUSTICE, EVOLVED UNDER THE COMMON LAW, IS TO CHECK ARBITRARY EXERCISE OF POWER BY THE STATE OR ITS FUNCTIONARIES. THEREFORE, THE PRINCIPLE IMPLIES A DUTY TO ACT FAIRLY, I.E., FAIR PLAY IN ACTION. AS OBSERVED BY THIS COURT IN A. K. KRAIPAK V. UNION OF INDIA (1969) 2 SCC 262 , THE AIM OF RULES OF NATURAL JUSTICE IS TO SECURE JUSTICE OR TO PUT IT NEGATIVELY TO PREVENT MISCARRIAGE OF JUSTICE. THESE RULES CAN OPERATE ONLY IN AREAS NOT COVERED BY ANY LAW VALIDLY MADE. THEY DO NOT SUPPLANT THE LAW BUT SUPPLEMENT IT. (ALSO SEE : ITO V. MADNANI ENGINEERING WORKS LTD. (1979) 2 SCC 455 . 12. IN SWADES HI COTTON MILLS CO. LTD. V. UNION OF INDIA (1981) 1 SCC 664 , R. S. SARKARIA J., SPEAKING FOR THE MAJORITY IN A THREE - JUDGE BENCH, LUCIDLY EXPLAINED THE MEANING AND SCOPE OF THE CONCEPT OF 'NATURAL JUSTICE'. REFERRING TO SEVERAL DECISIONS, HIS LORDSHIP OBSE RVED THUS (SCC P. 666 ; HEADNOTE) : 'RULES OF NATURAL JUSTICE ARE NOT EMBODIED RULES. BEING MEANS TO AN END AND NOT AN END IN THEMSELVES, IT IS NOT POSSIBLE TO MAKE AN EXHAUSTIVE CATALOGUE OF SUCH RULES. BUT THERE ARE TWO FUNDAMENTAL MAXIMS OF NATURAL JU STICE, VIZ., (I) AUDI ALTERAM PARTEM, AND (II) NEMO JUDEX IN RE SUA. THE AUDI ALTERAM PARTEM RULE HAS MANY FACETS, TWO OF THEM BEING (A) NOTICE OF THE CASE TO BE MET ; AND (B) OPPORTUNITY TO EXPLAIN. THIS RULE CANNOT BE SACRIFICED AT THE ALTAR OF ADMINISTR ATIVE CONVENIENCE OR CELERITY. THE GENERAL PRINCIPLE AS DISTINGUISHED FROM AN ABSOLUTE RULE OF UNIFORM APPLICATION PRINCIPLE AS DISTINGUISHED FROM AN ABSOLUTE RULE OF UNIFORM APPLICATION SEEMS TO BE THAT WHERE A STATUTE DOES NOT, IN TERMS, EXCLUDE THIS RULE OF PRIOR HEARING BUT CONTEMPLATES A POST DECISIONAL HEARING AMOUNTING TO A FULL REVIEW OF THE ORIGINAL ORDER ON MERITS, THEN SUCH A STATUTE WOULD BE CONSTRUED AS EXCLUDING THE AUDI ALTERAM PARTEM RULE AT THE PRE - DECISIONAL STAGE. CONVERSELY IF THE STATUTE CONFERRING THE POWER IS SILENT WITH REGARD TO THE GIVING OF A PRE - DECI SIONAL HEARING TO THE PERSON AFFECTED AND THE ADMINISTRATIVE DECISION TAKEN BY THE AUTHORITY INVOLVES CIVIL CONSEQUENCES OF A GRAVE NATURE, AND NO FULL REVIEW OR APPEAL ON MERITS AGAINST THAT DECISION IS PROVIDED, COURTS WILL BE EXTREMELY RELUCTANT TO 1.[1 969] 2 SCC 262 ; 1970] AIR 1970 SC 150. 2.[1979] 2 SCC 455 ; [1979] 118 ITR 1 (SC). 3.1981] 1 SCC 664 ; [1981] 51 COMP CAS 210 (SC) CONSTRUE SUCH A STATUTE AS EXCLUDING THE DUTY OF AFFORDING EVEN A MINIMAL HEARING, SHORN OF ALL ITS FORMAL TRAPPINGS AND DI LATORY FEATURES AT THE PRE - DECISIONAL STAGE, UNLESS, VIEWED PRAGMATICALLY, IT WOULD PARALYSE THE ADMINISTRATIVE PROCESS OR FRUSTRATE THE NEED FOR UTMOST PROMPTITUDE. IN SHORT, THIS RULE OF FAIR PLAY MUST NOT BE JETTISONED SAVE IN VERY EXCEPTIONAL CIRCUMSTA NCES WHERE COMPULSIVE NECESSITY SO DEMANDS. THE COURT MUST MAKE EVERY EFFORT TO SALVAGE THIS CARDINAL RULE TO THE MAXIMUM EXTENT POSSIBLE, WITH SITUATIONAL MODIFICATIONS. BUT, THE CORE OF IT MUST, HOWEVER, REMAIN, NAMELY, THAT THE PERSON AFFECTED MUST HAVE REASONABLE OPPORTUNITY OF BEING HEARD AND THE HEARING MUST BE A GENUINE HEARING AND NOT AN EMPTY PUBLIC RELATIONS EXERCISE.' 13. INITIALLY, IT WAS THE GENERAL VIEW THAT THE RULES OF NATURAL JUSTICE WOULD APPLY ONLY TO JUDICIAL OR QUASI - JUDICIAL PROCEED INGS AND NOT TO AN ADMINISTRATIVE ACTION. HOWEVER, IN STATE OF ORISSA V. DR. MISS BINAPANI DEI(1), THE DISTINCTION BETWEEN QUASI - JUDICIAL AND ADMINISTRATIVE DECISIONS WAS PERCEPTIVELY MITIGATED AND IT WAS HELD THAT EVEN AN ADMINISTRATIVE ORDER OR DECISION IN MATTERS INVOLVING CIVIL CONSEQUENCES, HAS TO BE MADE CONSISTENTLY WITH THE RULES OF NATURAL JUSTICE. SINCE THEN THE CONCEPT OF NATURAL JUSTICE HAS MADE GREAT STRIDES AND IS INVARIABLY READ ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 20 INTO ADMINISTRATIVE ACTIONS INVOLVING CIVIL CONSEQUENCES, UNLESS THE STATUTE, CONFERRING POWER, EXCLUDES ITS APPLICATION BY EXPRESS LANGUAGE. 14. RECENTLY, IN CANARA BANK V. V. K. AWASTHY(2), THE CONCEPT, SCOPE, HISTORY OF DEVELOPMENT AND SIGNIFICANCE OF THE PRINCIPLES OF NATURAL JUSTICE HAVE BEEN DISCUSSED IN EXTEN SO, WITH REFERENCE TO EARLIER CASES ON THE SUBJECT. INTER ALIA, OBSERVING THAT THE PRINCIPLES OF NATURAL JUSTICE ARE THOSE RULES WHICH HAVE BEEN LAID DOWN BY THE COURTS AS BEING THE MINIMUM PROTECTION OF THE RIGHTS OF THE INDIVIDUAL AGAINST THE ARBITRARY P ROCEDURE THAT MAY BE ADOPTED BY A JUDICIAL, QUASI - JUDICIAL AND ADMINISTRATIVE AUTHORITY WHILE MAKING AN ORDER AFFECTING THOSE RIGHTS, THE COURT SAID (HEADNOTE) : 'CONCEPT OF NATURAL JUSTICE HAS UNDERGONE A GREAT DEAL OF CHANGE IN RECENT YEARS. RULES OF N ATURAL JUSTICE ARE NOT RULES EMBODIED ALWAYS EXPRESSLY IN A STATUTE OR IN RULES FRAMED THEREUNDER. THEY MAY BE IMPLIED FROM THE NATURE OF THE DUTY TO BE PERFORMED UNDER A STATUTE. WHAT PARTICULAR RULE OF NATURAL JUSTICE SHOULD BE IMPLIED AND WHAT ITS CONTE XT SHOULD BE IN A GIVEN CASE MUST DEPEND TO A GREAT EXTENT ON THE FACT AND CIRCUMSTANCES OF THAT CASE, THE FRAMEWORK OF THE STATUTE UNDER WHICH THE ENQUIRY IS HELD. THE OLD DISTINCTION BETWEEN A JUDICIAL ACT AND 1.[1967] 2 SCR 625 ; [1967] AIR 1967 SC 1269 . 2.[2005] 6 SCC 321. AN ADMINISTRATIVE ACT HAS WITHERED AWAY. EVEN AN ADMINISTRATIVE ORDER WHICH INVOLVES CIVIL CONSEQUENCES MUST BE CONSISTENT WITH THE RULES OF NATURAL JUSTICE. THE EXPRESSION 'CIVIL CONSEQUENCES' ENCOMPASSES INFRACTION OF NOT MERELY PRO PERTY OR PERSONAL RIGHTS BUT OF CIVIL LIBERTIES, MATERIAL DEPRIVATIONS, AND NON - PECUNIARY DAMAGES. IN ITS WIDE UMBRELLA COMES EVERYTHING THAT AFFECTS A CITIZEN IN HIS CIVIL LIFE.' 15. THUS, IT IS TRITE THAT UNLESS A STATUTORY PROVISION EITHER SPECIFICAL LY OR BY NECESSARY IMPLICATION EXCLUDES THE APPLICATION OF THE PRINCIPLES OF NATURAL JUSTICE, BECAUSE IN THAT EVENT THE COURT WOULD NOT IGNORE THE LEGISLATIVE MANDATE, THE BECAUSE IN THAT EVENT THE COURT WOULD NOT IGNORE THE LEGISLATIVE MANDATE, THE REQUIREMENT OF GIVING REASONABLE OPPORTUNITY OF BEING HEARD BEFORE AN ORDER IS MADE, IS GENERALLY READ INTO THE PROVISIONS OF A STATUTE, PARTICULARLY WHEN THE ORDER HAS ADVERSE CIVIL CONSEQUENCES FOR THE PARTY AFFECTED. THE PRINCIPLE WILL HOLD GOOD IRRESPECTIVE OF WHETHER THE POWER CONFERRED ON A STATUTORY BODY OR TRIBUNAL IS ADMINISTRATI VE OR QUASI - JUDICIAL. 2 2 . IN THE FACTS OF THE PRESENT CASE BEFORE US, THERE IS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AS THE STATEMENT OF SHRI ADITYA DADHE WHICH WAS MADE THE BASIS FOR MAKING ADDITION WAS NOT GIVEN TO THE ASSESSEE BY THE ASSESSING OF FICER AND HIS REQUEST TO EXAMINE AND CROSS - EXAMINE THE SAID WITNESS WAS REJECTED BY THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS AND ALSO BY THE CIT(A) WHEN THIS FACT WAS BROUGHT TO HIS KNOWLEDGE. THE ASSESSMENT ORDER WAS PASSED IN THE PRESENT CASE REL YING ON THE SAID STATEMENT WHICH WAS RECORDED DURING INVESTIGATION BY ADIT(INV) AND NOT BY THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS. THE SAID STATEMENT WAS RECORDED AT THE BACK OF ASSESSEE AND COPY OF WHICH WAS NOT GIVEN TO ASSESSEE AND ASSESSM ENT ORDER WAS PASSED RELYING ON THE SAME. T HE ASSESSEE WAS HELD LIABLE FOR TAX ON THE BASIS OF SAID STATEMENT. B UT IN CASE THE ITA NO . 973 /PN/201 3 JAYDEEP M. KHER 21 TESTIMONY OF THE SAID WITNESS IS DIS CARDED AS BEFORE THE APEX COURT FOR VIOLATION OF RULE OF AUDI ALTERAM PARTEM, THEN THERE IS NO BASIS FOR MAKING ADDITION IN THE HANDS OF ASSESSEE , SINCE BOTH THE AUTHORITIES BELOW HAVE MADE ADDITION ON THE BASIS OF STATEMENT GIVEN BY SHRI ADITYA DADHE . ACCORDINGLY, FOR VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AND RULE OF AUDI ALTERAM PARTEM , THE ADDITION MADE BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) IS NOT SUSTAINABLE AND HENCE, THE SAME IS DELETED. THE PRELIMINARY ISSUE RAISED VIDE GROUND OF APPEAL NO.3 IN THIS REGARD IS ALLOWED AND THE ISSUE ON MERITS BECOMES ACADEMIC. 2 3 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 28 TH DAY OF DECEMBER , 201 6 . SD/ - SD/ - ( ANIL CHATURVEDI ) ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEM BER / JUDICIAL MEMBER / PUNE ; D ATED : 28 TH DECEMBER , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - I , PUNE ; 4. / THE CIT - I, PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE