MADHAN HUF, TRICHY V. DCIT, CENTRAL CIRCLE-1, TRICHY

ITA 975/CHNY/2023

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 1898 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-06-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 14-09-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N. SANJAY GANDHI; PERMITTING
• Assessee Lawyers: N. ARJUN RAJ
• Keywords: Principle of natural justice
• Section: 147; 132; 131; 69A; 133A

Judgement Text

आयकर अपीलीय अिधकरण,‘बी’ ᭠यायपीठ,चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI ᮰ी महावीर ᳲसह, उपा᭟यᭃ एवं ᮰ी एस. आर. रघुनाथा, लेखा सद᭭य के समᭃ BEFORE SHRI MAHAVIR SINGH, HON’BLE VICE PRESIDENT AND SHRI S. R. RAGHUNATHA, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./ITA No.: 975/Chny/2023 िनधाᭅरणवषᭅ / Assessment Year: 2015-16 Madhan HUF, 284 Lawsons Road, Cantonment, Trichy – 600 001. [PAN: AAQHM-0598-F] v. DCIT/ACIT, Central Circle 1, Trichy. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮकᳱओरसे/Appellant by : Shri. N. Arjun Raj, Advocate ᮧ᭜यथᱮकᳱओरसे/Respondent by : Shri. N. Sanjay Gandhi, JCIT सुनवाई कᳱ तारीख/Date of Hearing : 11.06.2024 घोषणा कᳱ तारीख/Date of Pronouncement : 04.09.2024 आदेश /O R D E R PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals), Chennai - 19, for the assessment year 2015-16, vide order dated 26.07.2023. 2. The assessee raised many grounds for the following issues, which are exhaustive & argumentative and hence not reproduced: :-2-: ITA. No:975/Chny/2023 “a) The Ld. CIT(A) erred in confirming the validity of the Jurisdiction in terms of Section 147 of the Act, without any tangible / fresh materials to vitiate the assumption of jurisdiction. b) The Ld. CIT(A) erred in sustaining the addition of Rs.4,63,75,948/-made U/s.69A of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), by the Assessing Officer. c) The Ld. CIT(A) failed to appreciate that having not granted an opportunity to the appellant to cross examine the person claimed to connected to the said Company from whom the statement was recorded by DCIT, Benami Prohibition Unit, Kolkata, the consequential addition made based on the said unsubstantiated statement would get vitiated on the ground of gross violation of principles of natural justice.” 3. The brief facts are that, Shri J.Madan mohan is the managing director of the M/s.Vijay Dairy & Farm Products Pvt. Ltd. The assessee ‘Madhan HUF’ is an entity of Shri J.Madan mohan. The assessee had not filed its return of income for the A.Y. 2015-16 U/s.139 of the Act. A survey u/s.133A was conducted on 19/02/2019 in the case of M/s.Vijay Dairy & Farm Products Pvt. Ltd, Trichy. During the course of survey, a sale agreement dated 10/10/2014 between Madhan Mohan HUF and M/s.Trinetra real estate consultants pvt. Ltd., Kolkata – 700069, was found and impounded as per Annexure RKR/VD/133A/Documents/Imp. “2.1 Shri J. Madan Mohan is the Managing Director of M/s. Vijay Diary & Farm Products Private Ltd. The Appellant Shri madhan HUF is another entity pertains to Shri. J. Madan Mohan. A Survey u/s. 133A of the Act was conducted in the case of M/s. Vijay Diary & Farm Products Pvt Ltd., Trichy on 19.02.2019. During the course of survey, a sale agreement dated 10.10.2014 between Madan Mohan :-3-: ITA. No:975/Chny/2023 HUF and M/s. Trinetra Real Estate Consultants Private Ltd., Kolkata – 700 069, was found and impounded as per Annexure RKR/VD/133A/Documents/Imp. 2.2 In the Sale Agreement it was found that M/s, Trinetta Real Estate Consultants Private Ltd., Kolkata, has advanced cash amounting Rs4,50,00,000/- to the Appellant HUF for the purchase of land at Trichy. In addition to this, confirmation of payment of cash amounting Rs.4,50,00,000/- to the Appellant on 10.10.2014 by M/s. Trinetra Real Estate Consultants Private Limited signed by Brij Nandan Singh in the capacity as Director of M/s. Trinetra Real Estate was also impounded. 2.3 In the Sworn Statement recorded u/s 131 of the Act Shri J. Madan Mohan has admitted about the receipt of cash of Rs.4,5 Crore as an advarnce, out of total sum of Rs.8.01 Crore agreed by both the parties as per the Sale Agreement. Further, he admitted that the amount was received by him in the capacity as Kärta HUP and the property which is in his individual name to be transferred to Madan Mohan HUF at the time of registration. 2.4 The A.O. has issued a commission u/s 131. to the DCIT, Benami Prohibition Unit, Kolkata, to enquire about the genuineness of the transaction. The DCIT, BPU, Kolkata, has recorded the statement from one Shri Anand Kumar Sharma, Key Management Personnel, of Ms. Trinetra Real Estate and he was not able to confirm the transaction. 2.5 In this background another statement was recorded from Shri J. Madan Mohan u/s 131 of the Act wherein he confirms the contents of impounded document, wherein details were found about the cash advance amounting Rs.3.6 Crores to Smt. Bhakialakshni and cash advance of Rs.1.1 Crore to T Mahesh for the purchase of land and flat respectively on 27.12.2014. Further, the A.R. during the course of Assessment Proceedings has admitted that the advance amount received from M/s. Trinctra Real Bstate Consultants Private Limited has been utilized to advance for purchase of Land and Flat. 2.6 In this background, the A.O. has reopened the assessment, and completed the assessment by making an addition of Rs.4,63,75,948/- being the unexplained money utilized by the Appellant in making advance of Rs.4,60,00,000/- (Rs.3,50,00,000/- to Bagialakshmi andRs.1,10,00,000/- to T Mahesh) and a sum of Rs:3,75,948/- (being the opening balance) (Totaling Rs.4,63,75,948/-). :-4-: ITA. No:975/Chny/2023 Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld.CIT(A) – 19, Chennai. 4. The Ld.CIT(A) has confirmed the addition after perusing the details submitted by the assessee along with the grounds of appeal by passing an order dated 26/07/2023 by holding as under: “6.3 Grounds raised upon Merits 6.3.1 In this Ground the main contention of the Appellant Is that Shri Brij Nandan Singh who has executed the agreement was not examined by the Department and also the Department has not established that Shrì Anand Kumar Sharma (from whom statement was corded by the DCIT at Kolkata to whom a commission was issued u/s 131 of the Act), is a Key Management Personnel of M/s. Trinetra Real Estate Consultants Private Limited. Further, it has been claimed that the. A.O. has not explained why the Agreement for Sale executed by MIs. Trinetra. Real Estate Consultants Private Limited was not put-forth for necessary explanation from the Key Person. 63.2 It is the issue which has been discussed in detail in Para No. 6.2.2 while deciding the ground raised by the Appellant upon not allowing cross-examination of Shri Brij Nandan Singh and Shri Anand Kumar Sharma. The Appellant in a statement recorded w/s 131 of the Act has admitted about the receipt of R$.4.5 Crore as advance from M/s. Trinetra Real Estate Consultants Private Limited and the A.R. in the submission before the A.O. has admitted about the receipt of such advance and also claimed this amount as a source for investment. 6.3.3 Further, the original Sale Agreement dated 10.10.2014 entered by the Appellant and Shri Brij Nandan Singh, Representative of M/s. Trinetra Real Estate Consultants Private Limited for the sale of land belonging to the Appellant was found and impounded during the course of survey conducted was 133A of the Act. In this agreement, the Appellant as well as the purchaser of land Shri Brij Nandan Singh, Representative of M/s. :-5-: ITA. No:975/Chny/2023 Trinetra Real Estate Consultants Private Limited has signed the agreement. The copy of the agreement was made available before the undersigned by the Appellant in the submission submitted. 6.3.4 As per the provisions of section 292 C of the Act where any document was found in possession are in control of any person in the course of search u/s 132 of the Act or survey u/s 133A of the Act, it may be presumed that the contents of such books of account and other documents are true, and that the signature and every other part of such other document may reasonably be assumed to have been signed by or to be in the handwriting of, any particular person, or in that person's handwriting. 6.3.5 While going through the Agreement which was found and impounded, it can be seen that the Appellant has signed the document along with Shri Brij Nandan Singh. The Appellant during the course of Appellate Proceedings also not disputed about the Agreement of sale and also not disputed about his signature in the Agreement, When his signature in the agreement was not disputed and disputing about the other party of the transaction by claiming that he was not allowed to cross-examine will not be appropriate. 6.3.6 The presumption laid-down u/s 292C of the Act is a rebuttable presumption (Hon'ble Kerala High court in the case of ITO-vs- T. Abdul Majeed reported in 169 ITR 440). In the present case, the Appellant has. not rebutted the signature and the contents contained in the Sale Agreement. In addition, the Appellant has admitted about the receipt of 4.5 Crore in the statement recorded u/s 131 of the Act and also the A.R. in the submission made has admitted about the fact, about the receipt of advance of Rs.4.5 Crore from M/s. Trinetra Real Estate Consultants Private Limited, and claimed this amount as a source for making payment to purchase the land and flat. 6.3.7 The survey team was also able to found and impound document as per annexure in RKR/VD/133A/Extracts/IMP which had the details of cash advance amount to Rs.3.6 Crores to Smt. Bhagialakshmi for the purchase of land of 43,600 Sq. ft. on 27.12.2014 and cash advanced of Rs.1.1 Crore to Mahesh for purchase of Flat. The Appellant has also filed specific performance suit before the District Court, Trichy to enforce the above two sales. 6.3.8 As per the presumptions laid down u's 292C of the Act, as per the statement recorded u/s 131 of the Act, as per the details :-6-: ITA. No:975/Chny/2023 obtained during the course of survey, and submission made by the A.R. during the course of Assessment Proceedings it is crystal clear and also established beyond doubt that the Appellant has received a sum of Rs.4.5 Crore as advance from M/s.Trinetra Real Estate Consultants Private Limited, and the same along with some other fund the Appellant has advanced a sum of Rs.4,63,75,948/- to purchase land and flat. 6.3.9 It may be appreciated that the A.O. has taxed only the amount which has been advanced to purchase the land and flat and not the advance amount received from M/s. Trinetra Real Estate Consultants Private Limited. The A.0. taxed the only the application money and the amount received from M/s. Trinetra. Real Estate Consultants Private Limited was treated as a source for application. The A.O. has not taxed both the amount. In this background, making a plea about the. examination of the person who has advanced the amount and requiring confirmation upon this issue from the responsible person of M/s. Trinetra Real Estate Consultants Private Limited is irrelevant to the facts and circumstances of the case. The advance amount received were not recorded in the books of the Appellant. But, the Appellant admitted to the advance given for the purchase of land and flat. The Appellant admitted the Source is from M/s. Trinetra Real Estate Consultants Private Limited, however, the same was denied by the M/s. Trinetra Real Estate Consultants Private Limited. Hence, the Assessing Officer treated the advance given to Smt. Bakialakshmi and to Shri T. Mahesh including the opening cash balance as unexplained money u/s 69A of the Act. In view of this, the grounds raised by the Appellant upon Merits are treated as dismissed as not sustainable.” Aggrieved by the order of the ld.CIT(A), the assessee is before us. 5. The Ld.AR for the assessee raised various grounds including the validity of re-opening, violation of Principles of Natural Justice and on merits. The preliminary issue raised by the Assessee is on the Principles of Violation of Natural Justice :-7-: ITA. No:975/Chny/2023 in view of the rejection of the opportunity to cross examine the person whose statements were relied upon by the Department and the said Ground is captured in Ground No. (c), 6. The Ld.Counsel for Assessee, on this preliminary issue assailed the impugned action of the ld.CIT(A) and stated that the Ld.CIT(A) has erred in not granting cross examination of the directors of M/s.Trinetra Real Estates Consultants P. Ltd whose statement was relied upon by the Department for making the impugned additions. The Ld Counsel for the Assessee also relied upon various decisions in support of his arguments by filing a paper book containing 1 – 95 pages. 7. Per Contra, the Ld. DR, supported the decision of the Ld. CIT(A) for rejecting the plea of the Assessee to grant cross examination. 8. Having heard both the sides and considered relevant material on record on this preliminary issue and gone through the orders of the lower authorities. We find that the Assessing officer had made addition of Rs.4,63,75,948/- based on the statement recorded from Shri. Anand Kumar Sharma, key :-8-: ITA. No:975/Chny/2023 managerial person, M/s.Trinetra Real Estates Consultants P. Ltd, from whom the Assessee had received an advance in relation to a property transaction. It is an undisputed fact that the assessee had entered into impugned transaction with Shri. Brajnandan Singh, who was one of the erstwhile directors of the said company. 9. The Assessing officer has made the impugned addition by relying on the statement of Shri. Anand Kumar Sharma, who happens to be the key managerial person of the company at the time of recording the statement. In fact, the said person has also stated in the said statement that Shri. Brajnandan Singh is an erstwhile director of the said company upto the financial year in which the impugned transaction had taken place. 10. In view of the above facts and circumstances, we are of the opinion that when a statement which is detrimental to the interest of the Assessee is being relied by the Income Tax Department for making additions, it is mandatory to grant cross examination of the said person to effectively rebut and demonstrate the actual facts emanating from a transaction. The Ld.AR for the Assessee also relied upon the judgment of the :-9-: ITA. No:975/Chny/2023 Supreme Court in the case of Andaman Timber Industries v commissioner of Central Excise, (Civil appeal No.4228 of 2006) wherein the Apex Court had held 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 in as much as it amounted to violation of principles of natural justice because of which the assessee w as adversely affected. It is to be borne in mind that the order of the commissioner was based 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 to note 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 Adjudicating 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 possession 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 from them. As mentioned above, the appellant 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 al the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, 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. We may also point out that on an earlier occasion when the matter came before this court in Civil Appeal No. 2216 of 2000, order dated 7.93.2005 was passed remitting the case back to the Tribunal with the directions to :-10-: ITA. No:975/Chny/2023 decide the appeal on merits giving its reasons for accepting or rejecting the submissions." 11. Respectfully following the ratio laid down by the Supreme Court, we are inclined to direct the Assessing officer to conduct the proceedings of cross-examination by summoning Shri.Anand Kumar Sharma, whose statement is relied upon by the Income Tax Department by permitting cross-examination from the side of the Appellant / Assessee and further grant an opportunity to cross examine Shri.Brajnandan Singh, who was also involved in the impugned transaction by summoning the said person to his office for the said purpose. Needless to say, the Assessing officer after granting the cross examination shall pass a speaking order considering the pleas of the Assessee and also grant adequate opportunity to state its case. 12. Since, we are remanding the issue to the file of the Assessing officer on this preliminary issue, all other issues including the issue of validity of re-opening are left open to be agitated at the appropriate time, if necessary. :-11-: ITA. No:975/Chny/2023 13. In the result the appeal of the assessee is allowed for statistical purpose. Order pronounced in the open court on 04 th September, 2024 at Chennai. Sd/- (महावीर िसंह ) (MAHAVIR SINGH) उपाȯƗ /Vice President Sd/- (एस.आर.रघुनाथा) (S. R. RAGHUNATHA) लेखासद˟/Accountant Member चे᳖ई/Chennai, ᳰदनांक/Dated, the 04 th September, 2024 JPV आदेशकीŮितिलिपअŤेिषत/Copy to: 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3.आयकर आयुƅ/CIT – Madurai 4. िवभागीय Ůितिनिध/DR 5. गाडŊ फाईल/GF