(O&M) COMMISSIONER OF INCOME TAX V. ASHWANI KUMAR

ITA/143/2008

AI Insights

The case involves an appeal by the Commissioner of Income Tax, Patiala against Shri Ashwani Kumar concerning the assessment year 1998-99. The core issue was the alleged failure to provide the assessee an opportunity to cross-examine a witness, which was deemed a violation of natural justice. The Income Tax Appellate Tribunal had previously allowed the assessee's appeal on these grounds, leading to the revenue's appeal to the High Court. The High Court, after considering the arguments and the relevant legal provisions, decided to remand the case back to the Assessing Officer for a proper examination, emphasizing the need for procedural fairness in tax assessments.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 730205 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 20-08-2014
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax, Patiala vs. M/s Radhey Sham Sita Ram
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: S K MUKHI
• Assessee Lawyers: SAVITA SAXENA
• Keywords: Bogus entries; Cross Examination; Cross-examination; Long Term Capital Gains; Natural Justice; Undisclosed income
• Section: 147; 260A; 54E

Judgement Text

"ITA No.143 of 2008(O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.143 of 2008(O&M) Date of decision: 20.8.2014 The Commissioner of Income Tax, Patiala (Punjab) ……Appellant Vs. Shri Ashwani Kumar c/o M/s Ashwani Steel Sales, Mandi Gobindgarh (Punjab). …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE FATEH DEEP SINGH Present: Ms. Savita Saxena, Advocate for the appellant. Mr. S.K.Mukhi, Advocate for the respondent. Ajay Kumar Mittal,J. 1. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 31.7.2007, Annexure A.2, passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B, Chandigarh in ITA No.377/CHANDI/2005 for the assessment year 1998-99. It was admitted on 12.5.2009 to consider following substantial questions of law:- “i) Whether on the facts and circumstances of the case, the ITAT was right in law in deciding the appeal in favour of the assessee on technical ground by stating that the assessee was not provided opportunity to cross examine the witness in view of the fact that the right to cross examine was not necessarily a part of reasonable opportunity particularly when the facts of the case otherwise available on record were against the assessee? ii) Whether on the facts and in the circumstances of the case, GURBAX SINGH 2014.10.07 12:20 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.143 of 2008(O&M) 2 the Tribunal was justified in not restoring the matter back and instead deciding the same on technical grounds?” 2. A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The assessee filed his return of income on 27.10.1998 declaring income of ` 73,330/- which included long term capital gains of ` 11,33,493/- on account of sale of shares of M/s Porshe Capital Market Limited against which exemption under Section 54E of the Act was claimed. Later on information was received from the Deputy Director of Income Tax (Inv.) Gurgaon (DDIT) to the effect that the long term capital gain shown by the assessee allegedly on account of sale proceeds of M/s Porshe Capital Market Limited was nothing but his undisclosed income having been introduced in the garb of receipt of drafts from the bank account of Shri S.S.Mehta, so called broker who had been earning income out of petty jobs as an Assistant with different Chartered Accountants/brokers at different periods. It was found that the bogus entries had been received by a number of persons including the assessee and that such entries were given by Shri Mehta, the alleged broker by taking cash equivalent to the draft amount. Further, the drafts were issued to the beneficiaries including the assessee by depositing the cash in bank account. It was mentioned in the report that total consideration of ` 13,66,342/- was received by the assessee from the said broker Shri Mehta. It was also confirmed by the company that till 17.2.2003, the said shares still stood in the name of the assessee Shri Ashwani Kumar and that the same had not been transferred. Accordingly, after recording reasons, the Assessing officer initiated the proceedings under Section 147 of the Act. During the course of assessment proceedings, the assessee made a request to the Assessing officer for cross examination of Shri S.S.Mehta but his GURBAX SINGH 2014.10.07 12:20 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.143 of 2008(O&M) 3 request was not accepted. However, despite specific show cause notice issued to the assessee intimating that alleged transaction of sale of shares were bogus and as such why the amount of capital gain declared should not be taken as income from undisclosed sources, the assessee had not furnished any explanation till 25.2.2004 i.e. the date on which assessment was framed. Vide order dated 25.2.2004, Annexure A, it was held by the Assessing officer that there was no genuine sale transaction of shares and hence income of ` 13,69,080/- claimed to have been earned by way of long term capital gain was assesseed as income from undisclosed sources. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 29.3.2005, Annexure A.1, the appeal was dismissed. Still not satisfied, the assessee filed appeal before the Tribunal. Vide order dated 31.7.2007, Annexure A.2, the appeal was allowed by the Tribunal by following its own decision dated 4.1.2006 in ITA No.376/CHD/2005 in the case of assessee's brother Shri Ravi Kumar holding that since opportunity to cross examine Shri Mehta through whom the sale of shares was effected and whose statement was recorded by DDIT (Inv.) Gurgaon which formed the basis of the addition made on account of booking of long term capital gain by the assessee was not provided and the statement was of a third person, principles of natural justice were violated. Hence the instant appeal by the revenue. 3. Learned counsel for the appellant revenue submitted that the order passed by the Tribunal was unsustainable as the Tribunal ought to have remanded the matter and allowed the assessee to cross examine the witness on the basis of which the proceedings were held to be non est. 4. On the other hand, learned counsel for the assessee placed GURBAX SINGH 2014.10.07 12:20 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.143 of 2008(O&M) 4 reliance on judgment of this Court in Commissioner of Income Tax, Patiala vs. M/s Radhey Sham Sita Ram, (2003) 22 IT Rep 667 (P&H) to urge that it was a finding of fact and in such a situation when the assessee on merits had explained the general transaction, there was no occasion for the matter to be remanded to the Assessing Officer. 5. After hearing learned counsel for the parties and perusing the record, we find that the Tribunal had allowed the appeal of the assessee and held that absence of opportunity to cross examine Shri S.S.Mehta would have rendered the proceedings bad. In our opinion, it was appropriate for the Tribunal in such a situation to have remanded the matter to the Assessing officer by directing him to afford an opportunity to cross examine the said witness on whose statement reliance was placed and order of addition was passed against the assessee. The judgment relied upon by the learned counsel for the assessee was not relating to the issue of remanding the matter where the opportunity had not been provided to the assessee to cross examine the witness but was based on its own facts. Thus, no advantage can be derived by the learned counsel for the assessee from the said pronouncement. 6. In view of the above, the substantial questions of law are answered accordingly and the matter is remanded to the Assessing officer who shall now proceed in accordance with law. The appeal stands disposed of. (Ajay Kumar Mittal) Judge August 20, 2014 (Fateh Deep Singh) Judge 'gs' GURBAX SINGH 2014.10.07 12:20 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.143 of 2008(O&M) 5 ‘gs' GURBAX SINGH 2014.10.07 12:20 I attest to the accuracy and integrity of this document High Court Chandigarh "