SH. GAURI SHANKAR SHARMA,AJMER vs. INCOME TAX OFFICER, AJMER

In this appeal, the assessee is aggrieved for reopening of the assessment as well as merit of the addition of Rs. 4,66,660/- made by the A.O. as unexplained investment in plot.

2 ITA 35/JP/2018 Gauri Shanker Sharma Vs ITO 3. At the outset, the ld AR of the assessee placed on record the order of the Coordinate Bench wherein under the similar facts, the addition so made by the A.O. was deleted by the Tribunal.

I have heard the rival contentions and carefully gone through the orders of the authorities below and found that the assessee, being a State Govt. employee, has purchased one Plot situated at 187, Revenue Residency at village Peepla Bharatsingh, (Jaisinghpura Muhana Road), Bhankrota, Tehsil Sanganer, Jaipur. Total size of Plot was Rs. 233.33 Sq. Yards. The consideration of the Plot was negotiated @ Rs. 1150/- per Sq. Yards and total amount was Rs. 268330/- The plot was purchased through Rajasthan Tehsildar Sewa Parishad and advance money of Rs. 30000/- was paid in the F.Y. 2006- 07. All the terms and conditions were settled between the assessee and Rajasthan Tehsildar Sewa Parishad. Balance amount of consideration was paid during the F.Y. 2008-09.

The A.O. reopened the assessment as per information received from Investigation Wing, Jaipur by the A.O., one Sh. Madan Mohan Gupta has accepted on money receipt on sale of Revenue Residency Scheme which is Rs. 2000/- per square yard. On the basis of the information as mentioned above, the A.O. added a sum of Rs. 3 ITA 35/JP/2018 Gauri Shanker Sharma Vs ITO 466660/- to the income of the assessee as unexplained money/ investment.

I have considered the rival contentions and carefully gone through the orders of the authorities below and found that under similar facts, the addition made on account of on money was deleted after following the observation made in the case of Dhirendra Singh Vs. ITO in order dated 25/03/2019 wherein the bench concluded having exactly similar facts and circumstances as under: “6. Now I come to the merit of the addition, I found that the Assessing Officer observed at pages 2 to 15 of the order that in search at business premises of Shri Madan Mohan Gupta dated 23.05.2013, incriminating documents were found and seized which revealed that the assessee made payment of Rs.2,68,330/- and Rs.2,670/- towards boundary expenses by receipt no. 53 dated 07.07.2008 through cheque and Rs.4,66,660/- as ‘on-money’. He referred to the relevant extract of the statement of Shri Madan Mohan Gupta u/s 132(4) reproduced at pages 10-13 of the order to conclude that assessee made ‘on-money’ payment at the rate of Rs.2,000 per sq. yard and thus, made addition of Rs.4,66,660/- u/s 69 of the Act. By the impugned order, the ld. CIT(A) has confirmed the action of the Assessing Officer. On the issue of opportunity of cross examination, it was held that Shri Madan Mohan Gupta is not third party as he was the owner of the plots. All the documents on the basis of which assessment was made were provided to the assessee. Accordingly, it 4 ITA 35/JP/2018 Gauri Shanker Sharma Vs ITO was held that the contention raised by the assessee as to the denial of cross examination by the Assessing Officer does not carry much weight and thus, confirmed the addition.

Assessee also asked before the AO to provide opportunity for the cross examination of the person on whose statement addition was made. However, no such opportunity was provided neither by the AO nor by the CIT(A). Thus, without affording cross examination, the AO has made addition on the basis of statement of Shri Madan Mohan Gupta u/s 69 being unexplained investment and added the same in assessee’s income. However, there was no corroborative material available with the AO for making addition. As per our considered view, not providing opportunity of cross examination amount to violation of principle of natural justice, a serious flaw which makes the order null and void.

For this purpose, reliance can be placed on the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries 281 CTR 241 wherein it was held that not allowing assessee to cross-examine witnesses by adjudicating authority though statements of those witnesses were made as basis of impugned order, amounted in serious flaw which made impugned order nullity as it amounted to violation of principles of natural justice. The precise observation of the Hon'ble Supreme Court was as under :- "Not allowing the appellant 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 appellant 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 8 ITA 35/JP/2018 Gauri Shanker Sharma Vs ITO when the appellant disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the appellant. 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 appellant. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. 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."

Reliance can also be placed on the on the decision of Bombay High Court in the case of Ashish international in 1TA No.4299/Murn/2009 dated 22/02/2011, wherein Court held as under:- "The question raised in this appeal is, -whether the Tribunal justified in deleting the addition on account of bogus purchases allegedly made by the appellant from M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. According to the revenue, the Director of M/s. Thakkar Agro Industrial Chem Supplies P.Ltd. in his statement had stated that there were no sales/ purchases but the transactions were only accommodation bills not involving any transactions. The Tribunal has recorded a finding of fact that the appellant had disputed the correctness of the above statement and admittedly the appellant was not given any opportunity to cross examine the concerned Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. who had made the above statement. The appellate authority had sought remand report 9 ITA 35/JP/2018 Gauri Shanker Sharma Vs ITO at that stage the genuineness of the statement has not been established by allowing cross examination of the person whose statement was relied upon by the revenue. In these circumstances, the decision of the Tribunal being based on the fact, no substantial question of law can be said to arise from the order of the Tribunal. The appeal is dismissed with no order as to costs ".

Reliance is also placed on the decision of Bombay High Court in the case of H.R. Mehta in its order dated 07/07/2016. The Hon’ble High Court held as under:- “The assessee is bound to be provided with the material used against him apart from being permitted to cross examine the deponents. The denial of such opportunity goes to root of the matter and strikes at the very foundation of the assessment order and renders it vulnerable.”

Applying proposition of law laid down by Hon’ble Supreme Court and High Court as discussed above, I do not find any merit for the addition made by AO merely on the basis of statement, when there is no corroborative material with AO suggesting the alleged addition, without allowing assessee an opportunity to cross examine the person on whose statement addition was made. Accordingly, AO is directed to delete the addition so made.

Before parting with the matter, I observe that Ld. AR had placed on record order of ITAT Jaipur Bench in the case of Navrtattan Kothari vs. ACIT in in which proceedings initiated u/s.148 was quashed. However, the facts of this case are entirely distinguishable from the facts of instant case, in so far as in the case of Navrattan Kothari (supra) reopening of assessment after four years of assessment framed u/s.143(3) / 153 was quashed, whereas in the instant case, no assessment was framed u/s.143(3) and only return was processed u/s.143(1). Accordingly, it is not going to help the assessee in any manner.

In the result, appeal filed by assessee is allowed in terms indicated hereinabove and stay application is dismissed as infructuous.”

In view of the above facts and circumstances, I do not find any merit in the addition so made by the Assessing Officer and confirmed by the ld. CIT(A), hence, the Assessing Officer is directed to delete the same. “

As the facts and circumstances in the instant case is pari materia, respectfully following the order of the Tribunal as stated above, I do not find any merit in reopening as well as the addition so made by the A.O. hence, I direct the A.O. to delete the same.

In this result, this appeal of the assessee is allowed.