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Income Tax Appellate Tribunal, DELHI BENCH: SMC: NEW DELHI
Before: SHRI CHANDRA MOHAN GARG
Date of Hearing : 29.12.2022 Date of Pronouncement : 07.03.2023 ORDER
This appeals filed by the assessee are directed against the separate orders dated 21.02.2018 of the Ld. CIT(A)-12, New Delhi, relating to Assessment Year 2007-08.
The Ld. AR submitted that the assessee does not want to press grounds No.1 and 2. Therefore, the same are dismissed as ‘not
ITAs No.4134 & 4135/Del/2018 Page 2 of 11 pressed.’ Ground No.6 of the assessee is general in nature. The remaining effective grounds, i.e., grounds No.3 to 5 left for adjudication read as follows:-
“3. That on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in upholding the addition of Rs. 22,55,000/- and creating a demand of Rs. 14,48,041/-.
4. That the addition having been made on surmises and conjectures, without confronting the assessee with the complete statements recorded, of the persons searched and without granting an opportunity of cross examination, being against the principles of natural justice, the said assessment is bad in law, and ought to have been quashed / set aside by the Learned Commissioner of Income Tax (Appeals) 5. That there being inherent contradictions in the documents relied upon by the Assessing Officer, the Learned Commissioner of Income Tax (Appeals) ought to have deleted the addition.”
The learned counsel of the assessee pressing into service judgment of ITAT “SMC” Bench dated 04.10.2022 in the case of Shri Manjit Singh Gahlot vs. ITO in ITA 219/Del/2020 for A.Y. 2013-14 submitted that the issue is squarely covered in favour of the assessee by said order of co-ordinate bench. Therefore the addition made by the AO may kindly be deleted.
ITAs No.4134 & 4135/Del/2018 Page 3 of 11 4. The Ld. AR also place reliance on the order of the co-ordinate bench of Tribunal in the case of Shri Naresh Pamnani vs ITO, Ward-61(15), New Delhi, Shri Rajender Singh vs ITO, Ward- 42(1), New Delhi & Shri Ratn Pal Kein vs ITO, Ward-2(2), Ghaziabad.
Replying to the above the Ld. Senior DR supported the orders of the authorities below.
On careful consideration of above submissions first of all I note that the Ld. Senior DR has not controverted a very relevant fact that the fact and circumstances in the case of Shri Naresh Pamnani vs. ITO (supra) are identical to the present case of assessee. In the case of Shri Naresh Pamnani vs. ITO (supra) the Tribunal decided the issue in favour of the assessee with following observations and findings:-
5. Learned Counsel for the Assessee submitted that assessee raised specific ground on merit to challenge the addition on merit, but, the Ld. CIT(A) without any reason noted in the impugned order that assessee has not raised any ground in this regard. He has submitted that Ld. CIT(A) has reproduced all the grounds in the appellate order, in which, in Ground No.6, assessee has challenged the addition of Rs.19,75,000/-. He has submitted that A.O. or the Investigation Wing have not supplied copy of the statement of Dr P Mahalingam to him for rebutting his statement and no cross- ITAs No.4134 & 4135/Del/2018 Page 4 of 11 examination to his statement have been allowed at any stage, therefore, this statement cannot be read in evidence against the assessee. He has referred to the statement of assessee recorded at assessment stage, copy of which is filed on record, in which he has denied to have paid any amount to Dr P Mahalingam or the above college as capitation fees. He, therefore, submitted that since no material has been confronted to assessee, therefore, no addition could be made against the assessee.
6. On the other hand, Ld. D.R. relied upon orders of the authorities below.
7. After considering the rival submissions, I am of the view that addition on merit is wholly unjustified. It is well settled Law that unless the incriminating documents or statement used against the assessee are confronted to assessee and assessee have been allowed to cross-examine such statements, no such material or statement, could be read in evidence against the assessee. I rely upon the decision of the Hon’ble Supreme Court in the case of Kishan Chand Chellaram 125 ITR 713 (SC). In the present case, the A.O. has relied upon the statement of Dr P Mahalingam, recorded during the course of search, under section 132(4) of the Income Tax Act against the assessee, in which he has admitted to have received capitation fees from the assessee of Rs.19,75,000/- in cash. The assessing officer recorded statement of assessee at assessment stage, in which, the statement of Dr P Mahalingam recorded under section 132(4) of the Income Tax Act, have been referred to, but, it is nowhere mentioned in which statement, if such copy of the statement was provided to assessee for explanation of assessee. The assessee denied to have made any cash payment to Dr P Mahalingam. The assessing officer in the assessment order also did not mention any fact if statement Dr P Mahalingam have been provided to the assessee for his comments or was confronted to assessee at any stage. The assessing officer did not record in the assessment order if statement of Dr. P Mahalingam recorded at the back of the assessee by the Investigation Wing, was allowed for cross examination on behalf of the assessee at any stage, therefore,
ITAs No.4134 & 4135/Del/2018 Page 5 of 11 statement of third party, cannot be used against the assessee unless assessee has been allowed a right to cross-examine such statement. The A.O. in the assessment order also did not mention, if any, material found during the course of search, was confronted to the assessee. Thus, assessee was justified in denying in making any cash payment to Dr. P Mahalingam at any stage. There is no material available on record to justify the addition against the assessee on merits. In the absence of any material on record against the assessee and in the absence of cross examination to the statement of Dr P Mahalingam on behalf of the assessee, such material cannot be used against the assessee so as to make the impugned addition. I, accordingly, set aside the Orders of the authorities below and delete the addition of Rs.19,75,000/-.
Considering the totality of the facts and circumstances of the case noted above in the light of material on record as well as Order of the Tribunal in the case of Shri Manjit Singh Gahlot, Delhi (supra) and Shri Naresh Pamnani vs. ITO (supra), I am of the view that no addition could be made against the assessee of the impugned amount. In view of the above, I set aside the Orders of the authorities below and delete the entire addition in the hands of the assessee. Since the addition on merit have been deleted, therefore, the issue of reopening of the assessment is left with academic discussion only and I do not propose to decide the same. In view of the above, appeal of the assessee is allowed.
In the result appeal of the assessee is partly allowed.
ITAs No.4134 & 4135/Del/2018 Page 6 of
The grounds raised by the assessee read as under:-
“1. That on the facts and circumstances of the case and in the law, the Learned Commissioner of Income-tax (Appeals) erred in upholding the levy of penalty of Rs. 10,000/- u/s 271(l)(b) of the Income-tax Act, 1961.
2. That the assessee having established with conclusive evidence that the notice dated 28.03.2014 u/s 148 of the Act, having been returned un-served on account of incomplete address, and also that no notice u/s 142(1) of the Act, having been served upon the assessee before 16.01.2015 (served in person through notice server / inspector), the levy of penalty u/s 271(l)(b) of the Act for non compliance ought to have been deleted.
3. That the notice dated 16.01.2015 u/s 142(1) of the Act for compliance on 23.01.2015, having been complied with, the levy of penalty on 18.02.2015 is bad in law and ought to have been deleted.
That there being inherent contradictions in the penalty order dated 18.02.2015, the action of the Learned Commissioner of Income-tax Appeals in ignoring them, are with a pre-determined intention to uphold penalty and the order by Learned Commissoner of Income-tax Appeals is bad in law.
5. That the Learned Commissioner of Income-tax Appeals ought to have held that the notice issued on a person of unsound mind, is bad in law and void ab-inito.
6. That the Appellant craves leave to add, alter, modify, vary, delete any ground of appeal before or at the time of hearing.”
ITAs No.4134 & 4135/Del/2018 Page 7 of 11 10. The ld. AR submitted that the authorities below have imposed penalty u/s 271(1)(b) of the Income-tax Act, 1961 (for short, ‘the Act’) despite the fact that there is no conclusive evidence regarding service of notice u/s 148 dated 28.03.2014 on the assessee as the same was returned unserved on account of incomplete address. The ld. Counsel also submitted that no notice u/s 143(1) of the Act having been served upon the assessee before 16.01.2015 regarding imposition of penalty u/s 271(1)(b) of the Act, the penalty imposed by the AO and confirmed by the ld.CIT(A) may kindly be deleted.
Replying to the above, the ld. Sr. DR strongly supported the orders of the authorities below and submitted that the assessee did not comply with several notices. Therefore, the penalty was rightly imposed by the assessee for non-compliance of six notices issued u/s 142(1) of the Act by the AO.
On careful consideration of the above rival submissions, first of all, from the first appellate order, I notice that the ld.CIT(A) has confirmed the penalty with the following observations and findings:-
“7.4 I have considered the facts of the case and the submission of the Appellant. The Assessing Officer has ITAs No.4134 & 4135/Del/2018 Page 8 of 11 clearly mentioned the dates of the notices u/s 142(1) and the dates of compliance. There appears to be some clerical error on the part of the Assessing Officer to mention the dates of compliance. However, such error is ignored in the interest of justice. Obviously, the notices were sent by the Assessing Officer on the given address. Had the notices been returned unserved, the Assessing Officer would have mentioned the same. The Assessee did not comply with even the notice u/s 271(1 )(b) of the Act the Ld. AR for the Appellant has given unsubstantiated oral statement that the Counsel of the Assessee appeared before the Assessing Officer but his presence was not recorded. This is self contradictory in as much as the service of the notices has been denied on one hand and the appearance of the Ld. Counsel before the Assessing Officer. The sum of the facts are that Appellant has failed to explain his non compliance in response to the notices issued u/s 142(1) of the Act. The mention of Section 271(1 )(c) of the Act on the Notice of Demand instead of 271(1 )(b) is again clerical error only. The same stands rectified by this order. On these facts and in the circumstances, I hold that Appellant has committed default in terms of Section 271(1 )(b) of the Act. Therefore, the penalty is confirmed and grounds taken by the Appellant are dismissed.”
On perusal of the findings recorded by the ld. First appellate authority, as reproduced hereinabove, I am of the view that the assessee firstly did not comply with the notices issued by the assessee u/s 142(1) of the Act and, secondly, he placed explanation which was self-contradictory as, on the one hand, the assessee is harping that notices were not served on the assessee and per contra, it has been alleged that the counsel of the assessee
ITAs No.4134 & 4135/Del/2018 Page 9 of 11 appeared before the AO. Therefore, the ld.CIT(A) rightly held that the assessee has failed to explain his non-compliance in response to the notices issued to him u/s 142(1) of the Act. Therefore, the penalty was rightly imposed by the AO and the ld.CIT(A) was also correct in upholding the same. Accordingly, the grounds of the assessee are dismissed and the penalty u/s 271(1)(b) of the Act is hereby confirmed.
In the result, the appeal filed by the assessee is dismissed.
To sum up ITAT No.4134/Del/2018 by the assessee is partly and allowed and by the assessee is dismissed.
Order pronounced in the open court on 07.03.2023.