SHRI ARVIND JOSHI, Bhopal V. THE ACIT 3(1), Bhopal

ITSSA 163/IND/2014

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 5523 (ITAT-INDORE)
• Duration Of Justice: 9 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 06-11-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-09-2023
• Assessment Year: 2004-2005
• Appeal Filed On: 01-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S P.M. CHOUDHARY
• Keywords: Search and seizure; Loose papers; Document seized; Principle of natural justice; Opportunity of cross examination; Tangible material; Retraction; Documents seized; Set aside
• Section: 132; 153A; 250; 143(2); 64; 48; 13; 22

Judgement Text

Page 1 of 42 आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER IT(SS)A No.144 to 150/Ind/2014 (Assessment Year:2004-05 to 2010-11) DCIT 3(1) Bhopal Vs. Late Arvind Joshi Through Legal heir Shri H.M. Joshi Sector E 5/3 Arera Colony Bhopal (Appellant / Revenue) (Respondent/ Assessee) PAN:AAUPJ 6533D IT(SS)A No.163 to 169/Ind/2014 (Assessment Year:2004-05 to 2010-11) Late Arvind Joshi Through Legal heir Shri H.M. Joshi Sector E 5/3 Arera Colony Bhopal Vs. DCIT 3(1) Bhopal (Appellant / Assessee) (Respondent/ Revenue) PAN:AAUPJ 6533D IT(SS)A No.151 to 157/Ind/2014 (Assessment Year:2004-05 to 2010-11) IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 2 of 42 Page 2 of 42 DCIT 3(1) Bhopal Vs. Smt. Tinoo Joshi D-19, 74-Banglows Bhopal (Appellant / Revenue) (Respondent/ Assessee) PAN:AAKPJ 7417 J Revenue by None Appellant by S/Shri P.M. Choudhary, Sr. Adv. With Madhav Khandelwal, Santosh Deshmukh, Parth Jhavar & P. Anand ARs Date of Hearing 13.09.2023 Date of Pronouncement 07.11.2023 O R D E R Per Bench: These are two set of seven cross appeals directed against the composite order of CIT(A) dated 27.02.2014 and one set of the seven appeals by the department directed against composite order of CIT(A) dated 28.02.2014 for A.Y.2004-05 to 2010-11 respectively. 2. There is no representative on behalf of the department to argue these appeals despite repeated adjournments have been taken by the department for last more than two years and for more than 25 times. These are old matters pending for more than 9 years and the Tribunal has time and again expressed its displeasure against repeated adjournments sought by the department. On 12 th September 2023 the Tribunal has again noted this fact and past history of adjournments as under: “Ld. CIT-DR is not present. However, an application from the ITO, office of the ld. CIT-DR has been filed for seeking adjournment of the hearing of entire cases on board today and Mr. K.K. Singh, ITO is present in person. It transpires from the record that hearing of this group of old appeals is being adjourned for last one year either at the request of Department or due to non-appearance of ld. DR. The hearings of these appeals have already been adjourned for more than IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 3 of 42 Page 3 of 42 25 times in the past. This Tribunal had time and again expressed its concern about the delay of the hearing and disposal of these old appeals due to non-representation on behalf of the Department. Specific orders have been passed by this Tribunal on various dates i.e. 09.11.2022 and thereafter, 12.4.2023, whereby the Department was directed to avoid further delay in disposal of these old appeals. Further, ld. Sr. Counsel representing the assessee has been appearing regularly to argue these matters but due to adjournments being sought by the DRs, the matters could not be heard on the earlier occasions. Accordingly, the Bench allowed the ld. Sr. Counsel of the assessee to initiate the arguments and liberty is given to ld. DR to join the hearing and argue the case of the Department from tomorrow i.e. 13.9.2023 onwards. The arguments on behalf of the assessee are heard on legal point and the hearing is kept as part- heard, to be continued tomorrow for further arguments and reply of the ld. CIT-DR. Hence, the hearing is adjourned as "Part-Heard" to 13.9.2023. [Total 21 appeals i.e. (SS) 144 to 157/Ind/2014 & 163 to 169/Ind/2014] 3. Despite the department was given liberty to join the proceedings and argue the case of the department again there was no representation on behalf of the department to argue these appeals. The hearing was finally concluded on 13 th September 2023. 4. First we take up the appeal of the assesse in ITANo.163 of 2014 for A.Y.2004-05 wherein the assesse has raised grounds which are common in all the assessment years. The assesse raised elaborate Grounds running into 36 pages and the same are in the nature of arguments therefore, the same are reduced in concised form as under: 1.(i)The Ld. CIT(A) erred in rejecting plea of the assessee that the assessment order was passed by the AO in violation of Principles of natural justice due to non-supply of material and evidence used against the assesse. Particularly the information gathered by the AO from the State Government Department, Police report, inquiry report, report of handwriting experts which were supplied only after the assessment order as made Annexure-2 to assessment order. (ii)The CIT(A) erred in not appreciating the fact that the order passed by the AO is not sustainable in law as the assessee was not given opportunity to cross examine the witnesses whose statement, report etc. used against the assessee by the AO while passing the assessment order. IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 4 of 42 Page 4 of 42 (iii)The ld. CIT(A) erred in not appreciating the fact that the AO has suppressed the available documents on record which are in favour of the assessee, therefore, failure to disclose, rather delivery suppressing material and evidence renders the assessment order illegal and void. (iv)The Ld. CIT(A) has erred in not accepting the retraction made by Mr. S.P. Kohli to the statement obtained by department during the course of search and post search inquiry and that to without giving opportunity to the assessee to cross examine. (v) The Ld. CIT(A) has erred in not considering the fact that the AO summons as many as about 1500 people obtained the statement on oath at the back of the assessee without bringing the said information/statement on record and provide the copies of the same to the assessee which is in violation of principles of natural justice. (vi) The Ld. CIT(A) has erred in confirming the addition made by the AO in absence of any material much less incriminating to show that the assessee received illegal rectification by misusing his official position. (vii) The Ld. CIT(A) has erred in no justification in confirming the addition made by the AO based on the assumption and presumption that the assessee received illegal rectification and investing the same in purchase of property and other assets. (viii) Ld. CIT(A) has erred and not justifying in confirming the addition made by the AO which is a double addition by making addition on account of illegal rectification and again on account of investments in properties and other assets. (ix) The Ld. CIT(A) has erred in not justified in confirming the addition which are not based on any evidence or material found during the course of search or other inquiry but the AO has estimated value of the property/assets arbitrary and contrary to the value recorded in the title deeds and other alleged documents. 2. That the Ld. Commissioner of Income Tax Appeal was not justified in confirming the addition made on account of opening cash balance and other entries reflected in the cash flow statement submitted by the Appellant Assessee during the course of the assessment proceedings vide para no 5.3 of the Appellate Order. It was proved before the Assessing Officer and then before the Ld.Commissioner of Income Tax - Appeal that the cash flow statement largely is a replica of the Bank Statement and all the entries therein are explained by way of narrations and other documentary evidences. The cash transactions made by the Appellant Assessee were satisfactorily explained with documentary evidence; therefore it was not open to the Ld.Commissioner of Income Tax Appeal to reject claim of the IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 5 of 42 Page 5 of 42 Appellant Assessee summarily with out any material to the contrary produced by the Assessing Officer. Addition of Rs. 3,50,700/- and Rs. 8,818/- for 2004-05; Rs. 2496 for 205-06; Rs. 1,84,769 for 2006- 07; Rs. 3.14,412/- for 2007-08: Rs. 62.262/- for 2008-09: Rs. 2,01,359/- for 2009-10 and Rs. 95.164/- for 2010-11 made need to be deleted; 3. That Ld. Commissioner of Income Tax Appeal as per para 5.7 of the Appeal Order was not justified in confirming the addition made by the Assessing Officer of Rs. 112.00.000/- for the period 2006-07 to 2010- 11 on account of sale / advance money received from Shri Subhash Sharma against sale of agricultural land of the Appellant Assessee; and that in the face of the fact when the Appellant Assessee has produced overwhelming evidence in support of the sale transaction; the Appellant Assessee took all the care to produce the said Shri Subhash Sharma before the Ld.Commissioner of Income Tax Appeal and the Assessing Officer as recorded in the Appellate Order. The Appellant Assessee cannot be held liable if the Assessing Officer foregoes the right to examine the witness and the documents admitted by the Ld.Commissioner of Income Tax- Appeal under Rule 46A of the Income Tax Rules. 4. That the Ld. Commissioner of Income Tax Appeal was not justified in holding that the Cash Flow Statement of Shri H M Joshi, the father of the Appellant Assessee represented his undisclosed income. The Assessing Officer has made an addition of Rs. 853.53.585/- and which is upheld by the Ld.Commissioner of Income Tax - Appeal. The Ld.Commissioner of Income Tax - Appeal is incorrect in stating that 'no documentary evidence has been submitted in support of his contentions' when in fact the Appellant Assessee (and his father in his assessment) provided overwhelming evidence in support of all the claims made by him repeatedly requested the Assessing Officer to examine the same as can be seen from the assessment record. Having done all that was necessary in the circumstances, the findings of the Assessing Officer as also of the Ld.Commissioner of Income Tax - Appeal are perverse. It is the Assessing Officer who has refrained from making a true and fair enquiry putting the blame on the Appellant Assessee. The Ld.Commissioner of Income Tax Appeal has with out dealing with the specific grounds raised by the Appellant Assessee conceded with what the Assessing Officer has stated; the addition of Rs. 853,53,585/- thus needs to be deleted; 5. That the Ld.Commissioner of Income Tax - Appeal was not justified in para 7.3 of the Appelate Order in confirming the addition of Rs. 1,00,000/- for 2004-05. Rs. 10.92.640/- for 2008-09 and Rs. 1,56.300/- for 2008-09 made on account of cash flow submitted by one M/s Ethos Exports Private Limited, assumed by the Assessing Officer as the benami concerns of the Appellant Assessee. It was IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 6 of 42 Page 6 of 42 pointed out to the Ld.Commissioner of Income Tax - Appeal that M/s Ethos Exports P Ltd is an independent assessee the Assessing Officer cannot of its own come to a conclusion, with out first recording that the criteria laid down by the Apex Court to hold a transaction as benami has been satisfied or not and whether there is a documented and positive nexus between the Appellant Assessee and the said concern. Not having done so the Assessing Officer was grossly incorrect and so also the Ld.Commissioner of Income Tax - Appeal who has with out dealing with the specific grounds raised by the Appellant Assessee conceded with what the Assessing Officer has stated; the said addition needs to be deleted. 6. That the Ld.Commissioner of Income Tax Appeal was not justified in confirming an addition of Rs. 300,81,850/- on account of cash found from the residential premises of the Appellant Assessee when it was proved with documentary evidence that the same represented the part sale consideration of house received by the Appellant Assessee's father Shri H M Joshi; the Ld.Commissioner of Income Tax - Appeal failed to appreciate that the Assessing Officer has through out the assessment proceedings and the Investigation Wing at the time of post search investigation have deliberately resorted to unfair practices. It was brought to the notice of the Ld.Commissioner of Income Tax - Appeal that the Assessing Officer himself has admitted in the Impugned Assessment Order that the enquiry is incomplete. The Assessing Officer repeatedly refrained form examination of the person who provided the sale consideration during the assessment and finally before the Ld.Commissioner of Income Tax Appeal as recorded in the Appellate Order. Therefore, the Ld.Commissioner of Income Tax - Appeal was not justified in confirming an addition made on incomplete enquiry and incorrect appreciation of facts. 7. That the Ld.Commissioner of Income Tax - Appeal was not justified in para 8.8 in confirming the addition of Rs.2,53,500/- made by the Assessing Officer on account of cash found from the personal briefcase of Shri Arvind Joshi on arrival from Delhi. 8. That the Ld.Commissioner of Income Tax - Appeal was not justified in para 8.9 in treating the cash found Rs.1,03,000/- from the purse of Mrs. Tinoo Joshi as the undisclosed income of the Appellant Assessee. 9. That the Ld.Commissioner of Income Tax - Appeal was not justified in para 10.2 in confirming the addition of Rs.1,50,000/- estimated to be the cost of liquor contained in the bottles found at the residential premises of the Appellant Assessee. These bottles were infact empty and no addition could be made in absence of any evidence to the contrary. These bottles were not seized at the time of search. The addition needs to be deleted. IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 7 of 42 Page 7 of 42 10. That the Ld.Commissioner of Income Tax - Appeal was not justified in para 12.5 in making an addition of Rs.1 Crore on account of five purchase agreements of Rs.20 lacs each seized from the residential premises of the Appellant Assessee. The addition made is bad in law in view of the fact that there is no property mentioned in the agreements nor the same is corroborated from the examination of the accounts of the seller. It has also not been established as to how the Appellant Assessee is connected with these agreements. The addition of Rs.1 crore is purely imaginary and needs to be deleted. 11. That the Ld.Commissioner of Income Tax - Appeal is not justified as para 13 to confirm the addition of Rs.4.57.76.000/- on account of investment in the business of Shri Shridev Sharma for the years starting from 2005-06 to 2008-09. The Assessing Officer has not been able to prove that the figures mentioned on some slips/notebooks were infact rupees or something else. The addition based on a dumb documents is unlawful. The Ld. Commissioner of Income Tax - Appeal is wrong in holding that the presumption u/s 132(4A) is available in the circumstances. The Ld. Commissioner of Income Tax Appeal has taken certain documents and informations as proved without making an effort to so prove them. The addition made on presumption may please be deleted. 12. That the Ld.Commissioner of Income Tax - Appeal was not justified in para 14.2 to uphold the addition of Rs. 17.000/- to the income of Appellant Assessee on account of Passport Expenses. It was proved before the Ld.Commissioner of Income Tax - Appeal as also the Assessing Officer that the Appellant Assessee had sufficient cash flow and personal withdrawals to warrant for an expense of Rs.17,000/-. 13. That the Ld. Commissioner of Income Tax Appeal was not justified in para 15 in confirming an addition of Rs.51,25,00,000/- on account of gratification received from contractors as per LPS 3 page 18. The Assessing Officer has gathered information which is totally incorrect and misleading. The reliance placed only on the presumption available u/s 292C of the Income Tax Act, 1961. The addition made on the basis of pure suspicion and estimation without any documentary basis or information that proves the contents of the seized papers and builds a positive nexus beyond doubt with the Appellant Assessee cannot be sustained. The Ld. Commissioner of Income Tax – Appeal has conceded to the findings of the Assessing Officer without considering the facts. The addition therefore needs to be deleted. 14. That the Ld. Commissioner of Income Tax Appeal was not justified in para 16.2 in confirming the addition of Rs.1.99.44.100/- to the income of the Appellant Assessee on account of loan given to Shri Pavan Agarwal. The addition made is not supported by documentary evidence that directly and conclusively establishes the IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 8 of 42 Page 8 of 42 correctness of the transaction nor the nexus with the Appellant Assessee has been proved. 15. That the Ld. Commissioner of Income Tax - Appeal was not justified para in 18.3 in confirming the addition of Rs. 94.480/- made on account of Bombay trip. mobile purchase allegedly on the ground that the Appellant Assessee could not prove the same with any documentary evidence: the same is devoid of merit in view of the submissions made by the Appellant Assessee; the same needs to be deleted: 16. That the Ld. Commissioner of Income Tax Appeal was not justified in confirming the addition of Rs.20.200/- in para 20.2 on account of payment to Nelanchal Society, being Society charges against flat owned an declared by the Appellant Assessee to the Govt. being beyond the period of enquiry: 17. That the Ld. Commissioner of Income Tax - Appeal was not justified in confirming the addition in para no.23 on account of payment to Progressive Travels of Rs.1,80,893/-; the Assessing Officer relied on the statement made by the owner of M/s Progressive Travels copy of which was not provided to the Appellant Assessee during the assessment. The Statement taken behind the back of the Appellant Assessee cannot be relied upon as admissible evidence. The same may be deleted. 18. That the Ld. Commissioner of Income Tax - Appeal was not justified in disallowing a sum of Rs.7,33,009/- on account of TA/DA in view of the factual position disclosed by the Appellant Assessee at the time of assessment and further during the proceeding in appeal. 19. That the Ld. Commissioner of Income Tax Appeal was not justified in confirming an addition of Rs.1,46,00,000/- on account of loose papers found from the premises of the Appellant Assessee which are basically dumb documents and no meaning can made out from them. The Assessing Officer has not established any nexus between the papers and the Appellant Assessee. The Assessing Officer has solely relied on the statement made by Shri S.P. Kohli before the investigation wing: this statement has no evidentiary value in view of the first ground of appeal raised here. 20. That the Ld. Commissioner of Income Tax - Appeal was not justified in para 33.2 to confirm in addition of Rs.61,00,000/- being alleged payment to Shri Pawan Agarwal. The addition being made purely on dumb documents without giving a cogent reason for the same cannot be sustained. 21. That the Ld. Commissioner of Income Tax - Appeal was not justified in para 34.2 in making an addition of Rs.85 lacs in the year 2009-10 and Rs.165 Lacs in the year 2010-11 on account of alleged IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 9 of 42 Page 9 of 42 investment in the business of Shri Pawan Agarwal. The addition been made solely on the basis of dumb document without proving the contents thereof and establishing a positive nexus between the alleged transaction and the Appellant Assessee is illegal. 22. That the Ld.Commissioner of Income Tax - Appeal was not justified in para 35.2 in making an addition of Rs.303 lacs in the year 2010-11 on account of alleged investment in the business of Shri Pawan Agarwal. The addition been made solely on the basis of dumb document without proving the contents thereof and establishing a positive nexus between the alleged transaction and the Appellant Assessee is illegal. 23. That the Ld.Commissioner of Income Tax - Appeal was not justified in confirming an addition of Rs.83.14 crores in para 36.2 against in addition of Rs.83.14 lacs in the Impugned Assessment Order. The mistake need rectification. The addition of Rs.83.14 lacs is made purely on the imagination of the Assessing Officer without reference to any evidence on record. 24. That the Ld.Commissioner of Income Tax - Appeal was not justified in confirming in addition of Rs.12.50 lacs. Rs.13.75 lacs in the year 2009-10 and Rs.178.15 lacs in the year 2010-11 on account of alleged gratification from contractors etc. The same is based on loose paper sheets being dumb documents or the statement of Shri S.P. Kohli which is inadmissible in law. 25. The the Ld.Commissioner of Income Tax - Appeal was not justified in confirming addition of Rs.94,20,000/- for the year 2008-09 and Rs.390.28 lacs in para 38 of the appeal order on account of alleged investment made through shri S.P. Kohli and his family. It was proved before the Ld.Commissioner of Income Tax - Appeal that the Appellant Assessee has no nexus. whatsoever, with shri S.P. Kohli, his business concern or his family members. Shri S.P. Kohli and his family are independent assessees for the past many years. 26. The Ld.Commissioner of Income Tax - Appeal was not justified in confirming addition of Rs.157.37,996/- on account of alleged investment in immovable properties in the name of the Appellant Assessee's sisters. The Assessing Officer has not brought any materials on record to prove that the investment in properties in the name of Appellant Assessee's sisters belong to the assessee. The Assessing Officer failed to satisfy the criteria set by the Apex Court in regard to benami properties. The Assessing Officer relied only upon the statement of Shri S.P. Kohli which has been proved by the Appellant Assessee as inadmissible evidence. 27. The Ld.Commissioner of Income Tax - Appeal was not justified in confirming in addition of Rs.25.000/- to the income of Appellant Assessee in para 42 of the appeal order without giving any reason IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 10 of 42 Page 10 of 42 there for. The Appellant Assessee has sold his flat in Bimakunj Colony for a sum of Rs.5.25 lacs which was duly disclosed to the Government at the time of purchase and at the time of sale. 28. The Ld.Commissioner of Income Tax - Appeal was not justified in confirming in addition of Rs.20.50 lacs in 2007-08. Rs.69.75 lacs in 2006-07, Rs.54.59 lacs in 2006-07. Rs.4.13 lacs in 09-10, Rs.4,61,400/- in 2009-10. Rs.7 lacs in 2008-09 and Rs.75 lacs in the year 2009-10. The said addition has been made on account of alleged sale of properties in the name of Appellant Assessee's sisters. The Appellant Assessee has proved before the Ld.Commissioner of Income Tax - Appeal that these properties do not belong to the Appellant Assessee: nor has the Assessing Officer placed any document on record to prove the nexus of the Appellant Assessee with the properties. 29. That the Ld.Commissioner of Income Tax - Appeal was not justified in considering the property belonging to M/S Ethos Exports Pvt. Ltd. as the property of the Appellant Assessee. The addition made by the Assessing Officer is based purely on estimate, suspicion without there being any connectivity between the Appellant Assessee and the said company. The addition made Rs.9.89 lacs in 2006-07. Rs. 12.03 lacs in 2006-07 and Rs.9 lacs in 2008-09 need to be deleted. 30. That the Ld.Commissioner of Income Tax - Appeal was not justified in upholding the addition of Rs.1821.31 lacs in alleged investment in land by the Appellant Assessee. The addition is made on pure imagination as to the purchase price. The Assessing Officer has placed reliance on statements taken behind the back of the assessee. The purchase price has been inflated 3 to 8 times. While doing so the Assessing Officer has not brought on record any document or evidence to show that the consideration for the alleged purchase has flown from the Appellant Assessee. 31. That the Ld.Commissioner of Income Tax - Appeal was not justified in confirming the addition of Rs.1.90 lacs in 2008-09 and Rs.26.84,900/- in the year 2009-10 on account of cash deposited in ICICI Bank A/c No.9336. The Appellant Assessee proved the source of these cash deposits and the Assessing Officer during the assessment proceedings and also at the time of appeal refrained from examining the documents and the witnesses produced by the Appellant Assessee. This fact has been recorded by the Ld.Commissioner of Income Tax Appeal prominently in the appeal order. The Assessing Officer, instead relied upon documents collected behind the back of the assessee. As at other places the Assessing Officer here also states that the Appellant Assessee was confronted with the documents while all through the proceedings the assessee has never been confronted with any document. IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 11 of 42 Page 11 of 42 32. That the Ld.Commissioner of Income Tax - Appeal was not justified in confirming the addition of Rs.3 lacs in the year 2009-10 on account of cash deposited in ICICI Bank A/c No.80301. The Appellant Assessee proved the source of these cash deposits and the Assessing Officer during the assessment proceedings and also at the time of appeal refrained from examining the documents and the witnesses produced by the Appellant Assessee. This fact has been recorded by the Ld.Commissioner of Income Tax - Appeal prominently in the appeal order. The Assessing Officer, instead relied upon documents collected behind the back of the assessee. As at other places the Assessing Officer here also states that the Appellant Assessee was confronted with the documents while all through the proceedings the assessee has never been confronted with any document. 33. That the Ld.Commissioner of Income Tax - Appeal was not justified in confirming the addition of Rs.2.65 lacs in the year 2008- 09 on account of cash deposited in Bank A/c No.15026. The Appellant Assessee proved the source of these cash deposits and the Assessing Officer during the assessment proceedings and also at the time of appeal refrained from examining the documents and the witnesses produced by the Appellant Assessee. This fact has been recorded by the Ld.Commissioner of Income Tax Appeal prominently in the appeal order. The Assessing Officer, instead relied upon documents collected behind the back of the assessee. As at other places the Assessing Officer here also states that the Appellant Assessee was confronted with the documents while all through the proceedings the assessee has never been confronted with any document. 34. That the Ld.Commissioner of Income Tax - Appeal was not justified in confirming the addition of Rs.25,000/- in the year 2003- 04 on account of cash deposited in Bank A/c in PPF A/C. The Appellant Assessee proved the source of these cash deposits and the Assessing Officer during the assessment proceedings and also at the time of appeal refrained from examining the documents and the witnesses produced by the Appellant Assessee. This fact has been recorded by the Ld.Commissioner of Income Tax - Appeal prominently in the appeal order. The Assessing Officer, instead relied upon documents collected behind the back of the assessee. As at other places the Assessing Officer here also states that the Appellant Assessee was confronted with the documents while all through the proceedings the assessee has never been confronted with any document. 35. That the Ld.Commissioner of Income Tax - Appeal was not justified in confirming in addition of Rs.10,000/- as per para 49 of the appeal order on account of alleged deposit of cash in the account of IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 12 of 42 Page 12 of 42 Mrs.Nirmala Joshi. The addition made by the Assessing Officer is illegal there being no evidence of any nature, whatsoever, to show that the deposit was made by the Appellant Assessee. 36. That the Ld.Commissioner of Income Tax - Appeal was not justified in confirming in para 52.2 addition on account of cash deposit in the bank account of m/s Ethos Exports Pvt.Ltd. Rs.17.48.290/- in 2004-05: Rs.12.50,000/- in 2006-07, Rs.15.93.940/- in 2008-09 and Rs.8.1 lacs in 2009-10. It was proved before the Ld.Commissioner of Income Tax - Appeal that Ethos Exports Pvt. Ltd. is independent entity and there is no connectivity or positive nexus between any transaction done by the said Company. The Assessing Officer has also not produced any documentary evidence which would go to prove the nexus of the Appellant Assessee with the said Company. 37. That the Ld.Commissioner of Income Tax - Appeal was not justified in considering the deposits made in the bank account of Shri S.P. Kohli and his family amounting to Rs.10.22.60.541/- as being the undisclosed income of the Appellant Assessee; when it was prove before the Ld.Commissioner of Income Tax - Appeal that the deposits in the bank accounts of Shri Kohli and his family represented business transaction comprising of sale proceeds of liquor business and hotel & resort business. The accounts of the business concerns were being audited u/s 44 AB of the Income Tax Act, 1961, the respective concerns were filing there return of income and the record of assessment in respect thereof was produced before the Assessing Officer and the Ld.Commissioner of Income Tax - Appeal. 38. That the Ld.Commissioner of Income Tax - Appeal was not justified in considering in para 53.2.2 cash deposited in ICICI Bank A/c No.5501029336 amounting to Rs.29.40 lacs in the year 2008-09, Rs.6.50 lacs in 2007-08 and Rs.52.59 lacs in the year 2009-10. The Appellant Assessee proved before the Ld.Commissioner of Income Tax - Appeal the source of this deposits. Even at the appeal stage the Assessing Officer refrained from examining the documents and the witness produced by the Appellant Assessee. The Appellant Assessee prepared a complete cash flow comprising of all the entries appearing in the various bank statements and investment made in shares through Khambata Securities and CFS. 39. That the Ld.Commissioner of Income Tax - Appeal was not justified in upholding the addition of Rs.12.43.669/- on account of investment in Khambata Securities in 2010-11 and Rs.11 lacs in 2007-08 in CFS Financial Services. The Appellant Assessee proved before the Ld.Commissioner of Income Tax - Appeal the source of these deposits. Even at the appeal stage the Assessing Officer refrained from examining the documents and the witness produced by the Appellant Assessee. The Appellant Assessee prepared a complete cash flow comprising of all the entries appearing in the IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 13 of 42 Page 13 of 42 various bank statements and investment made in shares through Khambata Securities and CFS which is placed on record. 40. That the Ld. Commissioner of Income Tax - Appeal was not justified in upholding the investment made by the parents of the Appellant Assessee as the benami investment of the Appellant Assessee Rs.5.71.234/- in 2007-08, Rs.22.20.952/- in 2008-09 and Rs.2.77.497 in 2009-10. It was proved before the Ld.Commissioner of Income Tax - Appeal that the said investment has been made by the parents themselves. It was proved by producing documentary evidence that the father of the Appellant Assessee had substantial income from pension (tax free u/s 10 of Income Tax Act, 1961 as he is a gallantry award winner) further abundant evidence was provided in respect of his agricultural income. The fact that the alleged investment had been made by the parents was mentioned in the statement made at the time of search also. The income and the investment was corroborated from bank account also. Contrary to this, the Assessing Officer has not produced any evidence to prove the addition. 41. That the Ld.Commissioner of Income Tax - Appeal was not justified in para 55 in considering the investment of Rs.3.54.54.604/- in the ICICI Prudential Life Insurance. The Appellant Assessee produced over whelming evidence to contradict the allegations made by the Assessing Officer. The Appellant Assessee also produced additional documentary evidence by filling an application under Rule 46A of the Income Tax Rules, 1962, which was permitted by the Ld.Commissioner of Income Tax - Appeal. The Assessing Officer again did not avail of the right to examine the documentary evidence and the witness sought to be produced during the course of appeal. 42. That the Ld.Commissioner of Income Tax - Appeal was not justified in upholding the addition of Rs.90 lacs in para 56.2 in the year 2010-11. It was proved before the Assessing Officer as also the Ld.Commissioner of Income Tax - Appeal that the said sum has been received against sale of agricultural land belonging to Smt. Nirmala Joshi, mother of Appellant Assessee. A statement to this effect was also made at the time of search. Ms. Vinod Verma also appeared before the investigation wing and made a statement which was not disclosed to the Appellant Assessee. The Assessing Officer however has not produced a single document which would go to establish the nexus of Appellant Assessee with the said transaction. 43. That the Ld.Commissioner of Income Tax - Appeal was not justified in upholding the addition made on account of alleged investment by the Appellant Assessee in the concerns of Mr.Pawan Agarwal, being Rs.64.64.400/- in 2004-05. Rs.5.33.571/- in 2005- 06. Rs.39.03.328/- in 2006-07 and Rs.36 lacs in 2007-08. The Appellant Assessee has not been found connected with any of the concerns of said Shri Pawan Agarwal at any time in any manner. IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 14 of 42 Page 14 of 42 44. That the Ld.Commissioner of Income Tax - Appeal was not justified in upholding the addition of Rs.5.50 crores alleged to have been made in the concern J.K. Resort. It was proved before the Ld.Commissioner of Income Tax - Appeal and also the Assessing Officer that the said resort belongs to Mr.S.P. Kohli, in support of which the building permission and the building completion certificate was produced; the said documents also proved that the said J.K. Resort was constructed in the year 1998. Shri S.P. Kohli is a regular assessee under the Income Tax Act, 1961 for past many years and has been showing income from J.K. Resort. 45. That the Appellate Order passed by the Ld.Commissioner of Income Tax Appeal and the Impugned Assessment Order itself suffer from a basic arithmetical fallacy resulting into double addition in all the issues raised in the Impugned Assessment Order. Assuming but not admitting, in case the finding of the Assessing Officer, confirmed by the Ld.Commissioner of Income Tax - Appeal, regarding unlawful gratification from contractors etc is assumed to be correct, then all the investment in the various properties get automatically explained. To elaborate, once the Assessing Officer has considered illegal gratification of a certain amount as the unexplained income of the assessee, then the investment of the same amount in properties cannot be treated as unexplained and added to the income of the assessee once again. Without prejudice to the right of the assessee and arguments that the Appellant Assessee may put forth. The double addition needs to be deleted. The Ld.Commissioner of Income Tax - Appeal has failed to grant relief that was due to the Appellant Assessee on this count. 46. That on the facts and in the circumstances of the case, the impugned appeal order passed by the Ld.Commissioner of Income Tax - Appeal is contrary to law, materially incorrect and unsustainable in law as well as on facts. 47. That on the facts and in the circumstances of the case, the Ld.Commissioner of Income Tax Appeal has grievously erred in not allowing, proper, reasonable and meaningful opportunity before passing the appeal order. The order has been made in violation of principles of natural justice. 48. The Appellant prays leave to add further or additional grounds in case the same have inadvertently been omitted here:” 5. At the time of hearing the Ld. Sr. Counsel for the assessee has given more emphasis on the grounds relating to violation of principles of natural justice for want of supply of information, documents and reports to the IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 15 of 42 Page 15 of 42 assessee which were gathered by the AO during the course of assessment proceedings and not giving the opportunity to the assessee to cross examine witness whose statement and reports have been relied upon by the AO while passing the assessment order. He has submitted that the assessee was IAS, Officer of M.P. Cadre and holding the post of Principal Secretary, Water Resources Department, Government of M.P. when search and seizure action u/s 132 of the Act was carried out on 04.02.2010. Search was conducted at official residential premises of the assessee situated at D-19,74, Bunglows, T.T. Nagar, Bhopal. At the time of search the assessee was out of station and was in Delhi and returned only after the proceedings of search had commenced. The search proceedings were continuing for two days i.e. from 04.02.2010 to 05.02.2010. Apart from the official residence of the assessee search was also conducted at the residence of the father of the assessee at E-5/3, Arera Colony, Bhopal. 5.1 Ld. Sr. counsel has submitted that the assessment u/s 153A in case of the assessee as well as other family members were completed and huge additions were made in the hands of the assessee vide order dated 30.12.2011. He has pointed out that the assessment order is running into more than 1500 pages and Annexures in 8 volumes marked as Annexure- A to H each comprising of about 250 to 300 pages. He has submitted that after the search and seizure action u/s 132 of the Act conducted on 4 & 5.02.2010, the Lokayukt MP also conducted search at the premises of the assessee and his wife on 10.12.2010. Pursuant to search conducted by the Lokayukt M.P., the DSP, Lokayukt has prepared a statement of disproportionate income and assets held by the assessee at Rs.41,87,35,821/-. The AO obtained the said statement prepared by DSP, Lokayukt which is also reproduced by the CIT(A) in para 2.1 & 2.2 of the impugned order. The AO has requisitioned information from the Lokayukt and has made the additions on the basis of the said information without confronting the assesse of the said information collected behind the back of the assessee. Therefore, the Ld. Sr. Counsel has submitted that the information and evidence collected by the AO at the back of the assesse IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 16 of 42 Page 16 of 42 without confronting the same to the assesse is in violation of principles of natural justice. He has further submitted that the father of the assesse Shri H.M. Joshi also filed his return of income in pursuance of notices u/s 153A wherein he has disclosed his undisclosed income in the nature of capital gains arising on the sale of agricultural land and also the agricultural income. 5.2 Ld. Sr. Counsel has submitted that the AO has used the statement of Shri H.M. Joshi father of the assesse recorded u/s 132(4) of the Act without giving opportunity to cross examine and further Shri H.M. Joshi filed detailed affidavit along with relevant documentary evidences to show that the cash found in the premises of the assessee as well as loose papers, diaries, documents etc. belong to him and not belonging to the assessee. Shri H.M. Joshi also admitted business associations with the parties whose names along with notings were found in the documents seized during the course of search. He has pointed out that Shri H.M. Joshi also filed a cash flow statement for the relevant period under consideration explaining various transactions reflected in loose papers and diaries but the AO has made addition of the amounts shown in the cash flow statement in the hands of the assessee. The AO has completely overlooked affidavit of Shri H.M. Joshi affirming and confirming that the documents, loose papers etc. found during the course of search belongs to him and therefore, the said affidavit remained uncontroverted. The AO has used adverse statements recorded behind the back of the assesse without supplying the copies of such adverse statement and without affording and opportunity of cross examination of the witnesses to the assesse. Ld. Sr. Counsel has contended that the AO has picked up only adverse statements for drawing adverse inferences against the assessee. Therefore, arbitrary method of pick and choose adopted by AO by ignoring favourable statements is against principle of natural justice and fair play. The AO has heavily relied upon the retracted statements of Shri S.P. Kohli recorded by the Investigation Wing of the department without supplying copy of the statements to the assessee despite specific request made in IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 17 of 42 Page 17 of 42 this respect. He has further contended that there is a violation of principle of natural justice on the part of the AO when he has obtained the report of the so called handwriting experts and relying upon the same to reach conclusion that the notings in the loose papers and diaries are in handwriting of the assessee without giving an opportunity to the assessee to cross examine as well as without considering the objections raised by the assessee to the report of the said handwriting experts which was supplied to the assessee only on 27.12.2011 and assessee filed objections vide letter dated 28.12.2011 but the AO has passed the impugned order without considering objections of the assesse as well as without giving opportunity to cross examine the handwriting experts. 5.3 He has also questioned the qualification and competence of the alleged handwriting experts whose opinion was obtained by the AO. Therefore, the ld. Sr. Counsel has submitted that the conclusion of the AO that the notings in the loose papers are in the handwriting of the assessee is without any valid evidence. Even otherwise when the objections of the assesse as well as opportunity to cross examine the witness was not considered by the AO then the said report obtained on the back of the assessee cannot be basis of the assessment order. Ld. AO has made huge addition on the basis of statements recorded behind the back of the assessee without confronting with such adverse statements to the assessee prior to their use in the assessment order nor was any opportunity of cross examination of such adverse witnesses afforded to assessee by the AO. The assessee came to know about such statement for the first time only when he received copies of the assessment orders along with statements as annexed to the assessment order. The AO made huge addition of more than 48 crores on the basis of the statement of Shri S.P. Kohli without affording any opportunity of cross examination of such person to the assessee. Further the addition is based on statement which has been later on retracted by the said person. 5.4 Ld. Sr. Counsel for the assesse has submitted that the examination and cross examination of Shri S.P. Kohli with reference to his subsequent IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 18 of 42 Page 18 of 42 retraction is more necessary and relevant. Therefore, without giving opportunities to the assesse to cross examine the witnesses whose statement was basis of the assessment and addition is in violation of principle of natural justice. He has referred to the impugned order of the Ld. CIT(A) para 62.1 and submitted that the Ld. CIT(A) has acknowledged the lacuna in the assessment proceedings not giving opportunity of cross examination of various person. However the Ld. CIT(A) has ignored the same while passing the impugned order. 5.5 Ld. Senior counsel has relied upon the judgment of Hon’ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise reported in (2015) 62 taxman 3 and submitted that the Hon’ble Supreme Court has held that not allowing the assessee to cross examine the witness whose statements were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as the violation of principles of natural justice because the assesse is adversely affected. He has also relied upon the decision of Hon’ble Supreme Court in case of State of Kerala vs. K.T. Shduli yusuff (1977) 39 STC 478 and submitted that the principles of natural justice requires that no man should be condemned unheard. In another judgment in case of R.B. Shreeram Durga Prasad & Fatehchand Nursinghdas vs. Settlement Commission reported 176 ITR 169 it was held that an order passed in violation of principles of natural justice is nullity. He has also relied upon the following judgments: a. C Vasantlal & Co vs. CIT 45 ITR 206 b.Kishanchand Chelaram vs. CIT 125 ITR 713 (SC) c. Udairaj Golia (HUF) vs. CIT 64 ITD 21 (ITAT, Mumbai) d. Dhakeshwari Cotton Mills Ltd. vs. CIT 26 ITR 775 (SC) e. Gargin Din Jwala Prasad vs. CIT 96 ITR 97 (HC All) f. R.W. Promotions Pvt. Ltd. vs. ACIT 61 taxman.com 54 (Bombay HC) IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 19 of 42 Page 19 of 42 5.6 Thus, the Ld. Sr. Counsel has submitted that the present case is a fit case where the order of the Ld. CIT(A) is to be set aside and the matter be restored back to the AO for fresh disposal after complying with the principle of natural justice by affording an opportunity of cross examination of adverse witnesses to the assesse. 5.7 Ld. Sr. Counsel further submitted that there were other lacuna in the proceedings which also vitiates the assessment order. He has pointed out that the statement of Shri H.M. Joshi has been relied upon by the AO whereas the said statement was recorded at odd hours of a person of more than 84 years old. He has referred to the statement recorded u/s 132(4) of the Act and submitted that the statement was continued on 4 th & 5 th of February 2010 as it is evident from the statement recording time and date as 3;00 AM on 5 th February 2010. The AO has heavily relied upon the statement of Shri H.M. Joshi but completely ignored the affidavit filed by the Shri H.M. Joshi who was about 84 years old at the time of search and therefore, recording of the statement at odd hours cannot be treated as voluntary statement and consequently cannot be a sole basis of addition. In support of his contention he has relied upon the judgment of Hon’ble Gujarat High Court in case of Kailash Ben Manharilal Choksy vs. CIT 328 ITR 411 and submitted that the Hon’ble High Court has observed that the statement recorded u/s 132(4) of the Act at mid-night, the person would not be in position to make any correct or conscious disclosure in the statement if such statements are recorded in such odd hours. Thus, the Ld. Counsel has submitted that the statement of Shri H.M. Joshi, 84 years old recorded at odd hours up to 3:00 AM cannot be considered to be voluntary statements and that too when it was subsequently retracted and necessary evidence was produced contrary to such admission. He has also referred to the CBDT instruction no.286/2/2003-IT(Inv) dated 10.03.2003 as well as instruction No.286/98/2013 –IT(Inv-II) dated 18.12.2014 to buttress his point that the practice of recording statements at odd hours during the course of proceedings u/s 132 has been condemned as violation of human rights. He has also referred to the IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 20 of 42 Page 20 of 42 judgment of Hon’ble Patna High Court in case of CCIT vs. State of Bihar 205 taxmann 232 and submitted that the Hon’ble High Court has upheld the order of Human Right Commission treating the act of continuation of interrogations by department officials for long period and keeping the person concerned awake till deep midnight as violation of human rights. 5.8 Ld. Sr. counsel has again stressed his point that there is no possible justification to continue interrogation and keep the person awake till 3:00 AM on the second night of search and interrogation. He has also referred to the judgment of Hon’ble Allahabad High Court in case of CIT vs. Radhakishan Goel 278 ITR 454 and submitted that the Hon’ble High Court has made a serious observations of the manner in which search being conducted with complete team of officers with police force disconnecting telephone and all other connections as well as in gross and egress are blocked. A person was so tortured, harassed and put to a mental agony that he loses his normal state of mind and at that stage it cannot be expected from a person to pre-empt the statement required to be given in law as part of his defense. Thus, the Ld. Counsel has submitted that it is gross violation of principle of natural justice. He has also relied upon the following judgments: i) Decision of Supreme Court in the case of Mehta Parikh & Co v/s CIT reported in (1956) 30 ITR 181. ii) Vasanji Ghela & Co v/s CST reported in (1977) 40 STC 544 (Bom) He has submitted that affidavits tendered by person could not rejected without cross examining the deponents thereof. 5.9 Ld. Counsel has then pointed out that the matter is also required a fresh verification and examination because of the facts that the AO has framed assessment solely on the basis of assumption that the assesse has received illegal money by misusing of his official position in the Government Department without any tangible material. He has further submitted that it is important to note that none of documents, loose IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 21 of 42 Page 21 of 42 papers, dairies etc. containing the name of the assessee but the documents, notes etc. indicate the transactions in the name of father, mother and sister of the assessee who have also admitted the said transactions. He has also raised the objection against statement of Shri H.M. Joshi recorded u/s 132(4) and used against the assessee and submitted that when the said statement was not recorded in the presence of the assessee and at the place of the assessee then the said statement of Shri H.M. Joshi cannot be used against the assessee. He has pointed out that there were misleading questions put to Mr. H.M. Joshi instead of direct and relevant questions and therefore, the said statements cannot be considered as incriminating material against the assessee. 6. We have considered the rival submission as well as relevant material on record. There was a search and seizure action u/s 132 of the Act carried out on 04.02.2010 at the official residential premises of the assesse situated at D-19,74, Bunglows, T.T. Nagar, Bhopal as well as at the residential premises of Shri H.M. Joshi father of the assessee and Smt. Nirmala Joshi, mother of the assesse situated at E-5/3, Arera Colony, Bhopal. The search also covers the business associates namely Pawan Agrawal and Seem Jaishwal. During the course of search and seizure action voluminous records and documents were found and seized in respect of various transactions of investment in properties, lands, jewellery, companies etc. The said record was found from the official residential premises of the assesse. The Bank lockers of the assessee and his family members were also opened during the search and seizure proceedings. The AO has given particulars of date and premises of search carried out u/s 132 in case of the assesse and his family members and other associates at page no.2 as under: S.No. Name of the person(s) searched as per warrant Premise Date of search Issued by 1 Shri Arvind Joshi, Smt. Tinno Joshi, D-19, 74 Banglows 4.2.2010 DIT(inv) MP & IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 22 of 42 Page 22 of 42 Ishan Joshi & Asmi Joshi Bhopal CG 2 Shri H.M. Joshi, Nirmala Joshi, Ishan & Asmi Joshi R-5/3 Arera Colony Bhopal 4.2.2010 DIT(inv) MP & CG 3 Shri H.M. Joshi, Tinno Joshi Locker No.51/41 State Bank of India PBB. Bhopal 8.2.2010 Add. DIT (Inv.) Bhopal 4 Shri H.M. Joshi, Nirmala Joshi Locker No.126, Sadguru Nagrik Sahkari Bank,E-5/13, Arera Colony Bhopal 9.2.2010 Add. DIT (Inv.) Bhopal 5 Shri H.M. Joshi, Nirmala Joshi Locker No.128, Sadguru Nagrik Sahkari Bank,E-5/13, Arera Colony Bhopal 9.2.2010 Add. DIT (Inv.) Bhopal 6 Shri H.M. Joshi, Nirmala Joshi, Tinno Joshi Locker No.204, Sadguru Nagrik Sahkari Bank,E-5/13, Arera Colony Bhopal 9.2.2010 Add. DIT (Inv.) Bhopal 7 Rajiv Joshi & Anuradha Joshi Locker No.224, Sadguru Nagrik Sahkari Bank,E-5/13, Arera Colony Bhopal 3.3.2010 Add. DIT (Inv.) Bhopal 8 S.P. Sharma Locker No.179, Sadguru Nagrik Sahkari Bank,E-5/13, Arera Colony Bhopal 19.2.2010 Add. DIT (Inv.) Bhopal 7. All the cases of assesse, family members and other related/associates persons were centralized vide order u/s 127 of the Act passed by the CIT. The AO consequently issued notices u/s 153A of the Act for A.Ys.2004-05 to 2009-10 and u/s 143(2) for A.Y.2010-11. A composite assessment order was passed on 30.12.2011 whereby the AO has made various additions and year wise details of the additions are given at page no.1318 to 1329 as under: IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 23 of 42 Page 23 of 42 IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 24 of 42 Page 24 of 42 IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 25 of 42 Page 25 of 42 IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 26 of 42 Page 26 of 42 IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 27 of 42 Page 27 of 42 IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 28 of 42 Page 28 of 42 IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 29 of 42 Page 29 of 42 IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 30 of 42 Page 30 of 42 IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 31 of 42 Page 31 of 42 IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 32 of 42 Page 32 of 42 IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 33 of 42 Page 33 of 42 8. The assesse filed appeal before the Ld. CIT(A) and raised various grounds to challenge the order passed by the AO interalia on the ground of violation of principle of natural justice. The CIT(A) has rejected the IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 34 of 42 Page 34 of 42 objection of the assesse challenging the assessment order on the ground of violation of principle of natural justice. However, the Ld. CIT(A) has granted part relief to the assesse in respect of some of the addition made by the AO which is purely based on assumption and not based on the seized material or other tangible material. Thus, both the assessee as well as department have filed these cross appeals. 9. Ld. Sr. counsel for the assessee has restricted his arguments only on the point of violation of principle of natural justice. Most of the additions were made by the AO on the basis of the seized material revealing the investments made in various properties and other assets. These investments were found to be Benami transactions made by the assesse in the name of his family members including father and sisters. Thus, the main objection of the assesse as emphasized by the Ld. Sr. Counsel during the course of hearing is that the AO has relied upon various documents without confronting the assesse and therefore, the assesse was not given an opportunity to revert those documents relied upon by Ld. AO. The first objection of the Ld. Sr. counsel is regarding the report/statement of DSP Lokayukt in respect of disproportionate income and asset hold by the assesse which was obtained by the AO without confronting the assesse of the said information collected behind the back of the assesse. Therefore, the said information/report of DSP Lokayukt MP used by the AO is in violation of principle of natural justice. There is no quarrel on the point that if any evidence or statement is made the basis of the assessment order without allowing the assesse to cross examine the witness or to rebut the evidence amounts to violation of principle of natural justice as held by the Hon’ble Supreme Court in case of Andaman Timber Industries vs. Commissioner of Central Excise (supra) in apra 6 & 7 as under: “6. 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 IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 35 of 42 Page 35 of 42 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 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. 7. 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 at 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 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.” 10. A similar view has been taken by the various High Courts on this point in the cases as relied upon by the assessee. For sake of brevity we are not multiplying the case law precedence on this point. However, it is pertinent to note that the report/statement of DSP Kokayukt MP cannot be subject matter of scrutiny in the proceedings under income Tax Act as the said report of investigation agency is subject to the scrutiny by the concerned court of law/authority and the veracity of the same cannot be questions in the assessment proceeding under the Income Tax Act. Therefore, the question of cross examination by the assesse of the investigating officer in the assessment proceedings does not arise as it IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 36 of 42 Page 36 of 42 would be a futile exercise when the said report as well as the witnesses are to be examined before the concerned court of law in the appropriate proceedings and assesse would be having its remedy under the relevant law and procedure. However, the assesse has a right to be confronted with the information before the same is used against the assesse. Though the CIT(A) has already dealt with all these issues however at this stage we are not going into merits of the issue as the Ld. Sr. counsel has restricted his arguments only on the point of violation of principle of natural justice. The department has not disputed the fact as pointed out by the assesse that the statements were first time provided to the assesse along with assessment order being annexures to the assessment order. Therefore, having regard to the facts and circumstances when the report/statements of DSP Lokayukt MP has been obtained by the AO and the same was supplied to the assessee only after the assessment order was passed. We are of the opinion that there is a violation of principle of natural justice as the assesse was deprived of the information/evidence which was considered by the AO while passing the assessment order. It is incumbent on the assessing officer to disclose and confront to the assessee all the material on the basis of which he is going to pass the order. Similarly if the AO proposes to conduct an inquiry then he must communicate the same to the assesse about the outcome of such inquiry and information/evidence gathered as a result of such inquiry. The assesse has all the rights to know the evidence and information which was to be used by the AO against him so that he would bring his own stands and material to meet such information/evidence brought against him by the AO. There is no dispute that the AO has the jurisdiction and authority to collect material to facilitate the assessment but the assessee must be informed about the material so collected and desired to be used against the assessee so that the assesse get an adequate opportunity to explain it and controvert the contents of the same. If the assesse is deprived the fair opportunity to contradict or challenge the correctness of the information/evidence proposed to be used by the AO against the assesse then it would amount to violation of principle of natural justice. IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 37 of 42 Page 37 of 42 11. The second contention and objection of the Ld. Sr. counsel is regarding the addition made by the AO on the basis of the statement of Shri S.P. Kohli without affording an opportunity of cross examination of the evidences. There is no dispute that the statement of Shri S.P. Kohli has been made the basis of some of the addition while framing the assessment order. Though the statements of Shri S.P. Kohli was recorded during the course of search and seizure action and post search inquiry and were very much in the knowledge of the assesse however, if the addition is made by the AO on the basis of such statements without giving opportunity of cross examination to the assesse then the same is in violation of principle of natural justice. 12. The next objection of the assesse is regarding the addition made by the AO on the basis of the statement of Shri H.M. Joshi father of the assesse recorded during the course of search u/s 132(4) of the Income Tax Act which was subsequently retracted by filing an affidavit of Shri H.M. Joshi. Ld. Sr. Counsel has submitted that the statement of Shri H.M. Joshi recorded u/s 132(4) cannot be treated as a voluntary statement as the said statement was recorded at odd hours of a person of about 84 years old. 13. Having considered the facts and surrounding circumstances of the case we do not agree with the contention of the Ld. Sr. counsel that the statement of Shri H.M. Joshi recorded u/s 132(4) cannot be treated as voluntary statement particularly when Shri H.M. Joshi is a retired Director General of Police, M.P. and having vast experience of investigation and handling intense situation. Therefore, he is not supposed to be perturbed or intimidated while answering the question at the time of statement recorded u/s 132(4) of the Act. Further there is nothing reflected either from the manner in which statement was recorded or the language of the question and answers recorded in the statements. To suggest any coercion from team.Therefore, in absence of any circumstances indicating any situation leading to disorientation or intimidation of Shri H.M. Joshi, the question of any coercion or undue IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 38 of 42 Page 38 of 42 pressure is completely ruled out. Further Shri H.M. Joshi is not a third person witness but he is one of the searched person and father of the assesse, managing all the alleged elicit income, investment and affairs of the certain concerns wherein the alleged investment was made by the assesse. Therefore, to the extent of the objection against the statement of Shri H.M. Joshi we do not find any merit or substance. However, it is a matter of consideration while deciding the merits of the addition whether the statement of Shri H.M. Joshi can be a basis of addition or not. 14. The next objection of the Ld. Sr. counsel for the assesse is regarding the report of hand writing expert obtained by the AO without giving the opportunities to assesse of cross examination. Further the Ld. Sr. counsel has submitted that the AO has not considered the objections raised by the assesse against report of the hand writing expert. He has also questioned the qualification and competence of the hand writing experts. On the perusal of the report of the hand writing expert we find that all the details of the handwriting expert such as qualification and experience are given in the letter head on which the report is submitted. Further the handwriting expert has signed the report in the capacity of a hand writing expert. Therefore, in absence of any contrary fact or material a mere objection of the assesse to the competence, qualification and expertise of the hand writing expert is without any substance or merit. However, since the AO has used the report of the handwriting expert to give a finding that the handwriting on the seized material is of the assesse then it is in the fair play to give an opportunity to the assessee to cross examine the handwriting expert or produce any contrary material. 15. The CIT(A) has considered this issue of violation of principle of natural justice in para 62 & 62.1 as under: “62. The appellant has also raised common grounds of appeal that A.O. is not justified in not providing him with the documents and third party statements relied on by him in framing the assessment order under appeal. Further proper, reasonable and meaningful opportunity has not been provided by the A.O. and assessment has been made in violation of principles of natural justice. And that all the findings and IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 39 of 42 Page 39 of 42 conclusion of the A.O. are contrary to the material on record. As per the appellant submissions have been made at various portions while discussing various additions made by the A.O. 62.1 Appellant's submissions have been considered carefully along with the assessment order. Assessment records have also been perused. Firstly, the appellant has filed returns u/s 153A as late as on 04.07.2011 when notices u/s 153A been found issued on 19.01.2011 & 23.01.2011. Thereafter also the appellant has adopted evasive, ambiguous and delaying attitude and tactics in supplying details and evidences in response to detailed questionnaire issued by the A.O. covering almost all the issues and seized documents in case of the appellant. This has been elaborately discussed by the A.O. in Pg. No. 17 to 115 of the assessment order. Appellant's contention regarding non supply of various documents and statements to him are also not found acceptable. As per the assessment records, the same have been duly supplied/sent to the appellant by the A.O. The only lacuna found is that the appellant has not been given opportunity to cross examine these various persons. But, as discussed in detail at various portions of this order, this defect is not found fatal to the assessment proceedings as in their statements these parties merely explained the transactions found recorded in documents found and seized from appellant's residence. Additions have been made by the A.O. after due consideration, marshalling and analysis of the all the facts and not merely by solely relying on these statements alone. In fact, the appellant has not given complete, original and who have been appellant's witnesses alone, as discussed on issue of cash found and cash flow statements.” 16. The CIT(A) has also accepted that there is a lacuna in the assessment order to the extent of not giving opportunity to cross examine various persons whose statements were made the basis of the assessment. However the objections of the assessee were rejected on the ground that the AO has framed the assessment not solely on the basis of the statement but by considering all the facts and documentary evidences found and seized during the course of search and seizure action. It is pertinent to note that the statements relied upon by the AO are to prove the contents of the documents and therefore, the denial of cross examination of the witnesses is clearly a violation of principle of natural justice. Without going into the merits of the various additions made by the AO at the outset, we note that there is a violation of principle of natural justice in respect of various statements as well as reports and documents IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 40 of 42 Page 40 of 42 made the basis of the assessment without confronting the assesse and without giving the assesse an opportunity to cross examine the witness whose statements were recorded during the proceedings under the Income Tax Act. Accordingly in the interest of justice we set aside the impugned composite order of the CIT(A) and remand the matter to the record of the AO to allow the assesse to cross examination of the witnesses whose statements were recorded in the proceedings under the income Tax Act including the assessment proceedings and also give the opportunity to the assessee to revert and meet the reports and other evidences collected by the AO and used against the assesse in the assessment proceedings but were supplied only after the assessment was completed. Since the AO has passed the composite order for all the assessment years 2004 to 2010-11 using the same evidence and statements. Therefore, the matters for assessment years 2004-05 to 2010-11 are set aside to the record of the AO for re-adjudication as per the directions above. In ITANo.151 to 157/Ind/2014 in Case of Smt. Tinoo Joshi 17. All these appeals are filed by the revenue against order of the CIT(A) whereby the protective assessment made by the AO was deleted in view of the substantive addition upheld in the hands of Late Shri Arvind Joshi husband of the assesse. The revenue has raised common grounds in these appeals and the grounds of appeal for A.Y.2004-5 as under: “On the facts and in the circumstances of the case and in law, the CIT (Appeal) has erred in:- “1. deleting the addition of Rs.3,54,294/- on account of education expenses of Ishan Joshi. 2. deleting the addition of Rs.3,54,294/- on account of education expenses of Asmi Joshi. 3. deleting the addition of Rs.4,95,691/- on account of household expenses. 4. deleting the addition of Rs.3,78,38,000/- on account of investments in various immovable properties. IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 41 of 42 Page 41 of 42 5. deleting additions made on protective basis despite the fact that substantive additions have not attained finality." 18. Ld. DR as well as the Ld. Sr. Counsel for the assessee has fairly submitted that if the matter in case of Shri Arvind Joshi is set aside to the record of the AO then the matter in the case of Smt. Tinoo Joshi is also required to be set aside to the record of the AO to be adjudicated afresh as per the outcome of the cases of Shri Arvind Joshi. 19. Having considered the submissions of both parties and careful perusal of the record we find that the AO made protective assessment in the hands of Smt. Tinno Joshi as the substantive addition was made in the hands of Shri Arvind Joshi. Since the matter in case of Shri Arvind Joshi where substantive addition was made is set aside to the record of the AO for fresh adjudication therefore, these matters in case of Smt. Tinno Joshi are also set aside to the record of the AO for fresh adjudication as per the outcome of the matters of Shri Arvind Joshi. Needless to say the assessee be given an appropriate opportunity of hearing before passing fresh order. 20. In the result, these cross appeals in IT(SS)ANo.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 and revenue IT(SS)ANo.151 to 157/Ind/2014 are allowed for statistical purposes. Order pronounced in the open court on 07.11.2023. Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member Indore, 07.11.2023 Patel/Sr. PS IT(SS)A No.144 to 150/Ind/2014 & IT(SS)ANo.163 to 169/Ind/2014 & IT(SS) AN.151 to 157/Ind/2014 Shri Arvind Joshi & Tinoo Joshi Page 42 of 42 Page 42 of 42 Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore