Shri Pavan M.Sharma L/h of late Mahesh L.Sharma, Ahmedabad V. The ACIT.,Circle-6, Ahmedabad

ITSSA 240/AHD/2012

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5748 (ITAT-AHMEDABAD)
• Duration Of Justice: 12 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 21-07-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 23-04-2024
• Assessment Year: misc
• Appeal Filed On: 26-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: TWO PRISONS WHOSE STATEMENTS WERE RECORDED
• Keywords: Loose papers; Opportunity of being heard; Opportunity of cross examination; Block assessment; Set aside
• Section: 158BD; 22

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद यायपीठ अहमदाबाद यायपीठअहमदाबाद यायपीठ अहमदाबाद यायपीठ ‘D’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD ] ] BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER IT(SS)A No.240/Ahd/2012 Block Period 01-04-1985 to 31-3-1995 & 01-04-1995 to 21-9-21995 Shri Pavan M. Sharma Legal heir of Late Shri Mahesh L. Sharma C/78, Radhaswamy Row House Ghatlodiya Ahmedabad PAN : ATFPS 6366 M. Vs The ACIT, Cir.9 Ahmedabad. (Applicant) (Responent) Assessee by : Shri Parimalsinh B. Parmar, AR Revenue by : Dr.Darsi Suman Ratnam, CIT-DR सुनवाई क तारीख/D a t e o f H e a r i n g : 24/04/2024 घोषणा क तारीख /D a t e o f Pr o no u nc e me nt: 22/07/2024 आदेश आदेशआदेश आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER This appeal has been filed by the assessee against the order of the Asstt.Commissioner of Income-Tax, Cir.9, Ahmedabad dated 23.3.2006 under section 158BD r.w.s. 254 r.w.s. 144 of the Income Tax Act, 1961 (“the Act” for short) for the block period mentioned in the cause title. 2. The grounds raised in the appeal are as under: 1. The Id. AO has erred in law and on fact by not following the direction of the Hon’ble ITAT. IT(SS)A No.240/Ahd/2012 2 2. The Id. AO has erred in law and on facts of the case by invoking provisions of S.144 of the Act and making best judgment assessment. 3. The Id. AO has erred in law and on facts of case by invoking provisions of S. 158BD of the Act without recording satisfaction that undisclosed income belonged to the appellant. 4. The Id. AO has erred in law and on facts of the case by passing time- barred order u/s 158BD of the Act. 5. The Id. AO has erred in law and on facts of the case by making huge addition of Rs.68,00,000/- being undisclosed income in the hands of the appellant. 6. The learned Assessing Officer has erred in law and on facts in not properly appreciating and considering various submissions, evidences and supporting placed on record during the course of the assessment proceedings and not properly appreciating various facts and law in its proper perspective. 7. The ld.AO has erred in law and on facts in levying inter3st u/s.158BFA(1) of the Act. 3. The present appeal has come up before us in the second round, and it arose against the order passed by the AO in block assessment proceedings under section 158BD of the Act. 4. Before proceeding and for the purpose of adjudicating the present appeal, it is pertinent to bring out the complete history of the case, which we have noted has persisted for a period of almost 30 years since search was conducted and in consequence of which assessment was framed under section 158BD of the Act on the assessee. The order of the AO reveals that search was conducted on 21.01.1995 on Gokul Corporation Group, and in search conducted on one of the main partners of the group, Shri Suresh A. Patel, certain loose papers were seized, Page no.21 and 22, which contained the details of transaction of Bodakdev land which allegedly related to the IT(SS)A No.240/Ahd/2012 3 assessee who had purchased this land. Initially, in the first round, assessment order under section 158BD of the Act was framed determining undisclosed income of the assessee for the block period 1.4.1995 to 31.3.1995 and 1.4.1995 to 21.09.1995 to Rs.68 lakhs comprising of the following; i) Unexplained payment of Rs.27 lakhs in cash made to Shri Purshottam Goyal of M/s.Goyal & Co. Construction P.Ltd. for acquiring development right of Nirat Co-op. Hsg. Society. ii) Unexplained payment of Rs.30 lakhs in cash on 17.10.1994 and 24.10.1994 for purchase of land measuring 32,000 sq.yards to Shri Govind C. Patel as per the documents – page 21 & 22 seized in the case of Shri Suresh A. Patel. This land was earlier standing in the name of Dr.Rashmi Vora; iii) Unexplained payment of Rs.11 lakhs in cash on 26.10.1994 and 1.11.1994 to Shri Govind C. Patel for the land near Ocean Park as per the details mentioned at page no.21 & 22 seized from Suresh A Patel. 5. The above additions were made on the basis of statement of Shri Purshottam Goyal and Shri Suresh A. Patel and incriminating documents i.e. page no.21 & 22 of the loose paper filed. These facts are found recorded in page no.3 of the assessment order dated 23.3.2006 which is in challenge before us and was passed in the second round. 6. The assessment order in the first round was passed by the AO dated 28.11.1997, against which an appeal was filed before the ITAT, who vide their order in IT(SS)A No.231/Ahd/1997 dated 23.7.2004 set aside the assessment to the AO with directions to make a fresh assessment order after giving opportunity of hearing to the assessee, IT(SS)A No.240/Ahd/2012 4 and making the material available which was to be utilized against the assessee. Copy of the order of the ITAT was placed before us at PB Page No.13 to 19 and relevant finding of the ITAT in this regard are at para no.11 and 12 of its order as under: “11. We have heard the parties and considered their rival submissions. The loose papers found at the time of search do indicate the assessee’s involvement. These entries were identified as belonging to the assessee by two prisons whose statements were recorded and copies of which were given to the assessee on 29-8-97 much before complete the assessment. The assessee had however denied his involvement in these entries vide letter dated 27-11-97. He has also asked for cross examination on 25-11-97 immediately upon filing of return on 24-11-97 pursuant to AO’s notice u/s.158BD is served on 8- 9-97. He has also asked for the cross examination on 27-11-97. Every proceedings from issue of notices u/s.158BD serving copies of statements, filing of return, asking for cross examination and completion of assessment thereupon was within a period of two to three months. The filing of return and request of cross examination and making of assessment was within four days i.e.from 24-11-97 to 28- 11-97. This also shows that no particular opportunity was allowed to the assessee and therefore the assessment rqwu9ires to be set aside for making it afresh after giving an opportunity of being heard to the assessee and making available the material on record and cross examination of persons whose statements are recorded and are utilized against the assessee. 12. The assessee’s submission that no further opportunity be given to the AO in view of the decision in the case of Smt Neena Syal (supra) cannot be accepted in view of the fact that even the assessee had not raised object well in time for seeking cross examination and in view of the Supreme Court ....... In the case of Gudduthur Brothers (supra) wherein it is held that the ...... jurisdiction to continue proceedings from the stage at which .... . occurred, in that case also an opportunity was denied to the assessee.... Therefore the order of the ITO was vitiated by illegality which supervened, ...... the initial stage of the proceedings but during the course of it. In the case of Kapurchand shrimal 131- ITR-451 the Supreme Court though held that the Tribuanlw as justified in holding that the assessment in question was liable to the set aside as there was no compliance of section 25A(10) of the Act, their Lordships found it difficult to agree with the submission on behalf of the assessee that the duty of the Tribunal ends with making a declaration that the assessments are illegal and it had no duty to issue any further directions. It was observed that “it is well known that an appellate authority has the jurisdiction as well as the duty to correct IT(SS)A No.240/Ahd/2012 5 all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against those decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by statute and that the statute does not say that such a direction cannot be issued by the appellate authority in a case of this nature. The proper order to be passed in such a case would be to set aside the assessment and to direct the ITO to make a fresh assessment in accordance with the procedure prescribed by law. It would not be correct merely to upholding the assessment and direct the ITO to make appropriate modifications. We accordingly set aside the assessment with the direction to make it afresh after giving an opportunity of hearing to eh assessee and making the material available which is to be utilized against the assessee.” 7. As is evident from the perusal of the above, the ITAT noted that the adverse material was identified by two persons, whose statement was recorded, as relating/belonging to the assessee. The assessee was supplied with the material and he asked for cross examination but, the order notes, that the same was not given to the assessee and the AO completed the assessment proceedings passing order u/s 158BD of the Act within a period of 2-3 months. It was noted that the return was filed by the assessee and request for cross-examination made and thereafter assessment was made by the AO all within four days i.e. from 24.11.1997 to 28.11.1997. Noting these facts, the ITAT held that the matter needed reconsideration by the AO due to lack of opportunity given to the assessee in the first round. As a consequence to the order of the ITAT, the matter was taken up again by the AO, issuing notice to the assessee beginning from 7.3.2005 upto 13.1.2006, and despite repeated notices being served on the assessee, none came present before the AO. Accordingly, the AO reiterated the order passed in the first round, determining undisclosed income of the assessee for the block period of Rs.68 lakhs vide order dated 23.03.2006. IT(SS)A No.240/Ahd/2012 6 8. Subsequent to this, the assessee filed appeal against this order to the ITAT on 23.4.2012 i.e. after a delay of 2167 days. The ITAT heard both the parties on the aspect of condonation of delay, and on 21.3.2022 condoned the delay. The order-sheet entry of 21.3.2022 further reveals that the ITAT, noting the genuineness of the difficulties faced by the assessee in participating in the proceedings before the AO in the second round, thought it fit to give another opportunity to the assessee, but noting that it was a very old case, and restoring the matter to the AO would result in another round of litigation the ITAT directed the AO to submit a remand report in compliance with the direction of the ITAT in order passed in the first round. The contents of the order-sheet entry of 21.3.2022 are reproduced hereunder: “On merit, the learned AR submitted that the ITAT on the earlier occasion was pleased to set aside order to the file of the AO for fresh adjudication after providing opportunity of cross-examination to the assessee. However, assessee due to the unavoidable problems on account of enquiries by the Police, CID and the other authorities and imprisonment, severe heart attack which resulted his untimely death on 6th February 2008, failed to appear before the AO. Accordingly, the learned AR requested before us to set aside the issue to the file of the AO for providing one more opportunity to the legal heir of the assessee. On the contrary, the learned DR submitted that the assessee has already been provided enough opportunities but failed to avail the same. Furthermore, almost more than 27 years have elapsed from the block period in dispute and therefore no further opportunity should be given to the assessee. As such, the order of the AO should be upheld. We have heard the rival contentions of both the parties and perused the materials available on record. The ITAT on the earlier occasion in IT(SS)A No. 231/AHD/1997 vide order dated 23-7-2004 has set aside the issue to the file of the AO for fresh adjudication as per the provisions of law. The relevant extract of the direction reads as under: The filing of return and request of cross examination and making of assessment was within four days i.e from 24-11-97 to 28-11-97. This also shows that no particular opportunity was allowed to the assessee and therefore the assessment required to be set aside for making it afresh after giving an opportunity of being heard to the assessee and making available the material on record and cross examination of persons whose statements are recorded and are utilized against the assessee. IT(SS)A No.240/Ahd/2012 7 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXX The proper order to be passed in such a case would be to set aside the assessment and to direct the ITO to make a fresh assessment in accordance with the procedure prescribed by law. It would not be correct merely to uphold the assessment and direct the ITO to make appropriate modifications. We accordingly set aside the assessment with the direction to make it afresh after giving an opportunity of hearing to the assessee and making the material available which is to be utilized against the assessee. In pursuance to the direction of the ITAT, the assessee was given the opportunity for placing his points of contention but failed to avail the same. However, from the preceding discussion, we note that the assessee was facing certain difficulties which has also resulted his untimely demise. Thus we are of the view that the assessee failed to attend the set aside proceedings due to unavoidable circumstances. Accordingly, we are inclined to hold that the assessee, in the interest of justice and fair play, should also be afforded one more opportunity despite the lapse of considerable time. However, we are not inclined to set aside the issue to the file of the AO for fresh adjudication. It is for the reason that the matter before us is very old and it is again going to take another round of litigation if it is set aside the AO for fresh adjudication as per the law and in pursuance to the direction of the ITAT as discussed above. As such, in the interest of justice and fair play, we direct AO to submit the remand report in compliance of the direction of the ITAT as discussed above by 5th of May 2022. The learned DR is also directed to find out whether any penalty proceeding is pending before any forum for the period under consideration against the quantum appeal before us. In view of the above, the matter is adjourned to 5th of May 2022, treating the same as part heard. The copy of this order sheet entry may be supplied to both the parties.” 9. Thereafter, order-sheet entries reveal that on the stated date i.e. 5.5.2022 when the remand report was directed to be filed by the AO, no compliance was made, which went upto 3.11.2022, when again time was sought by the ld.DR to file the remand report. On 25.1.2023, the order sheet entries reveal that the ld.DR filed a report from the AO by stating that the assessee failed to avail opportunity of hearing before the AO despite notices being served to him. IT(SS)A No.240/Ahd/2012 8 10. At this juncture, the ld.counsel for the assessee was directed to respond to the same, and show cause as to why his appeal should not be dismissed for consistent non-appearance before the AO. The order- sheet entry dated 25.1.2023 reads as under: “In continuation of the earlier order sheet entry directing the assessee to appear before the AO to plead his case, and the AO thereafter to submit a report therein, the LD. DR filed a report from the AO stating that the assessee failed to avail the opportunity despite notice being served to him. Ld. Counsel, when asked to respond to the same & why his appeal should not be dismissed for consistent non-appearance before the AO, stated that he had not been provided copy of the report of the AO & needed time to respond to the same. Adjourned to 08/02/2023 for response of the Ld. Counsel. Kept as part heard. 11. Thereafter, on 8.2.2023, the ld.counsel for the assessee submitted that the assessee had not received notice from the AO, and therefore, did not respond to the same. It was pleaded that the assessee was willing to suo moto appear before the AO and provide cooperation in the matter. Taking note of the same, the assessee was given another opportunity to appear before the AO. The order sheet entry dated 8.2.2023 reads as under: “On the earlier date of hearing, learned Counsel for the assessee had been directed by the Bench to explain as to why the present appeal be not dismissed for the assessee not appearing before the Assessing Officer in remand proceedings as directed by the ITAT in its case. The learned Counsel for the assessee today has stated before us that only one opportunity of hearing was granted by the Assessing Officer fixing the hearing on 15.11.2022 vide notice dated 09.11.2022, that the said notice was not received by the assessee and hence did not respond to the same. It was pleaded that the assessee is willing to suo-moto appear before the Assessing Officer and provide all co-operation to the Assessing Officer in remand proceedings and one more opportunity be granted to the assessee in this regard. An affidavit of the assessee, duly notarized, stating the above on oath was also filed before us. Taking note of the fact that the Assessing Officer himself had delayed considerably in issuing notice to the assessee in pursuance to the IT(SS)A No.240/Ahd/2012 9 direction of the ITAT which was made on 21.03.2022 while the notice was issued by the Assessing Officer only on 09.11.2022 and only one notice of hearing was given to the assessee, in the interest of justice, we direct the Assessing Officer to provide a further opportunity of hearing to the assessee and thereafter file a remand report to the ITAT as per its direction vide order sheet entry dated 21.03.2022. In the meanwhile, the appeal is adjourned for hearing to 5th April, 2023.” 12. Finally, the remand report of the AO was filed vide letter dated 6.7.2023. The contents of the same are reproduced hereunder: IT(SS)A No.240/Ahd/2012 10 IT(SS)A No.240/Ahd/2012 11 13. It is evident from the above that after a lapse of almost 28 years since search was undertaken in 1995, the entire proceedings for determining the undisclosed income of the assessee for the block period have remained inconclusive. As noted from the assessment order/ order of the ITAT in the first round, the undisclosed income determined at Rs. 68 lacs was based on statements of two persons Shri Purshottam Goyal and Shri Govind Patel that the adverse material found during search belonged to the assesse. In the first round it was noted by the ITAT that the assessee was not given sufficient opportunity of hearing, was not allowed cross examination of the persons whose statements were considered for making addition therefore entire issue of determining undisclosed income of block period was restored back to the AO. IT(SS)A No.240/Ahd/2012 12 14. In the second round, due to substantial lapse of time the persons were found to be unavailable for cross examination, either having passed away or being non traceable, the remand report of the AO pointing out to the fact that the cross-examination sought by the assessee of Shri Purshottam Goyal and Govind Patel, was not possible for the reason that Shri Govind Patel has since passed away on 29.9.2009 and Shri Purshottam Goyal was not traceable, and did not respond to the summons issued to him. Therefore, even after the second round of assessment there is no progress in the status of assessment of undisclosed income. 15. In the first round the AO was noted to have passed order without giving opportunity of hearing to the assessee. In the second round the assessee failed to appear before the AO for the reason that he was passing through some personal difficulties; was jailed for certain offences being committed, considering which same reason his delay in filing appeal to the ITAT had also been condoned. And finally when another opportunity was afforded to the assessee during proceedings before the ITAT, substantial time of almost 25 years had elapsed and the said persons were found not available. Clearly, therefore, the position after the second round is the same as that in the first round of assessment. 16. The question now before us is, considering the status quo in assessment of undisclosed income of the assessee for the block period even after second round whether and how the issues can be adjudicated on merit? Answer to the same is very clear. Though the stand of the Revenue before us is that, the issue are to be adjudicated on the basis of material on record, we do not find any in merit in the IT(SS)A No.240/Ahd/2012 13 same. The ITAT in the first round itself had noted that since the adverse material and the statements had not been confronted to the assessee for cross-examination or otherwise, they could not be considered as evidence sufficient for determining the undisclosed income of the assessee, and for this reason the issues had been referred to the AO to provide opportunity of hearing to the assessee. Since, for the reason beyond the control of either of the parties, the adverse materials and statements have still remained to be confronted to the assessee, the assessee has still not been able to cross-examine the two persons on whose statement the undisclosed income had been determined, we are of the view that the undisclosed income determined in the case of the assessee of Rs.68 lakhs is not sustainable. The fact remains, that the AO having not afforded adequate opportunity to the assessee in the first round, resulted in the matter coming up in second round which also remained unconclusive on account of considerable lapse of time for reasons beyond anybody’s control. And even after second round the undisclosed income has been determined without affording the assessee opportunity of cross examination. It is trite law that any addition made in violation of principles of natural justice is not sustainable. In view of the above, the undisclosed income of the assessee, determined at Rs.68 lakhs is directed to be deleted. 17. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 22 nd July, 2024 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 22/07/2024