DHARMANDAN INFRASTRUCTURE PVT. LTD.,,AHMEDABAD vs. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(2),, AHMEDABAD

PER MAHAVIR PRASAD, JUDICIAL MEMBER

2 . A.Y. 2012-13 1. Disallowance on account of fictitious loss under the head of business and profession - Rs. 2.53.61.230/-. I. The Ld. CIT (A) has erred in law and on facts in confirming the disallowance of Rs. 2,53,61,230/- as made by the Ld. A.O on account of alleged fictitious loss under the head of business and profession without properly appreciating the entire facts of the case.

2. The Ld. CIT(A) and the Ld. A.O erred in law and on facts in failing to properly consider the submissions filed by appellant company before them.

3. The Ld. CIT (A) as well the Ld. A.O failed to grant the opportunity of cross examination of Mr. Deepak Chimanlal Shah whose statement recorded behind the back of the appellant has been relied upon in respect of the disallowance in the case of appellant. They ought to have granted the opportunity of cross examination of Mr. Dipakkumar Chinubhai Shah in view of the decision of the Hon'ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata [2015] 62 taxmann.com 3 (SC) as well as various other judicial pronouncements relied upon by the appellant.

3 . A.Y. 2012-13 4.1 As per the AIR information, it is seen that the assessee has sold a property of Rs. 6,98,54,400/-, accordingly, a notice u/s. 133(6) of the Act was issued to the Sub- Registrar-3, Ratanpur, Rajkot. On examination of copy of sale deed so-received from Sub-Registrar-3, Ratanpur, Rajkot, it is found that the assessee has is a confirming party in respect of transaction entered into between purchaser GSPC Gas Company Ltd. and the seller Shri Vagherbhai Jivabhai. It is also noticed that the assessee had entered into a banakhat with Shri Vagherbhai Jivabhai on 04/10/2011 for purchase of land for a consideration of Rs. 2,55,87,000/-. Subsequently, the said property was sold by Shri Vagherbhai Jivabhai to GSPC Gas Company Ltd. in conformity with the assessee vide Registration Deed No. RKT-3/55/2012 dated 03/01/2012 for a sale consideration of Rs. 6,98,58,950/-. Hence, verification of this fact clearly reveals that the assessee has earned Rs. 4,42,71,950/- as short term capital gain on such transaction. The assessee vide Point No. 2 of letter dated 05/02/2015 was, therefore, requested to explain the details of income offered for taxation in the return of income filed for A.Y. 2012- 13 or else explain as to why the same should not be taxed accordingly. The assessee furnished its reply vide letter dated 12/02/2015, for the sake of reference the same is reproduced as under:

"We are confirming party in the said transactions. This transaction is our business transactions and the said purchase and sales details are mentioned in sales and purchase account and duty audited by chartered accountant as business transactions. Initially we have made an agreement to sale to purchase the said property by Rs. 2,55,87,000 and made payment of Rs. 517015,000 to seller. Before making a full payment and executing final sales deed, we have sold the said property for Rs. 6,98,58,950. We are confirming party in the said sales deed. We have received Rs. 4,93,71,950. So we have debited Rs. 51,00,000 as purchase account and credited Rs. 4,93,71,950 as sales in the books of account. So the profit of the id transaction Rs.4,42,71,750 (4,93,71,750-51,00,000) is as income from business profession. The details of purchase has been given in Annexure-E of our submission dated 24-1-2014 and details of sales and deed has been given in Annexure-A of our submission dated 27-01-2015. The copy of registered deed showing this transaction is given in Annexure-F of our submission dated 24-12-2014 4 . A.Y. 2012-13 5. In order to verifying the contents of the assessee, ld. A.O. summoned one Shri Deepak Chimanlal Shah and in accordance with his statement who was proprietor of M/s. Nutan Enterprise from whom assessee purportedly made the purchase of goods such as cloths etc. and statement of Shri Deepak Chimanlal Shah was recorded in the absence of the assessee wherein Shri Deepak Chimanlal Shah.

7. On the other hand contention of the assessee was that statement of Shri Deepak Chimanlal Shah was recorded in its absence and no opportunity of cross examination was given to the assessee. And in appeal, ld. CIT(A) confirmed the action of ld. Assessing Officer.

5 . A.Y. 2012-13 10. In another case of Hon’ble Supreme Court in the matter of Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata [2015] 62 Taxmann.com 3 (SC) wherein it has been held:

"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 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 guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.

6 . A.Y. 2012-13 11. In the case of Heirs and LRs of Late Laxmanbhai S. Patgel vs. CIT 327 ITR 290 (2008) (Guj.) wherein it is held: “Income—Cash credit— Opportunity of being heard—During search of one R, key of bank locker along with two packets containing six promissory notes were recovered- Out of those six promissory notes; one was in the sum of Rs. 8,78,358 executed by one K in the capacity of partner of firm DCI—In his statement recorded during search, R stated that the key: of locker and the two envelopes were handed over to him by the assessee—K also admitted in his statement recorded on the same day at 2.00 AM midnight that he had executed the pronote and signed it on behalf of DCI after obtaining a sum of Rs. 8,78,358—Later, K filed an affidavit that his statement was recorded at late hours in the night under coercion and pressure—Subsequently, K along with two other partners of DCI, made a voluntary disclosure of a sum of Rs. 11 lacs including the amount of Rs. 8,78,358 and same was assessed in the hands of the three partners-Relying on the statement of R and the retracted statement of K, AO made addition of Rs. 8,78,358 under.s.68 in the hands of assessee also and the same was confirmed by CIT(A) and Tribunal—-Not justified—Apparently, there was a violation 0f principles of natural justice as the statement of one of the important witnesses, namely, R on which heavy reliance was placed by the AO is neither referred to in the assessment order nor copy thereof was given to the assessee nor the assessee was given an opportunity of cross-examining the said R—Authorities could riot be absolved from doing so on the ground that the facts stated by R were admitted by the assessee—K had not only retracted his earlier statement but also made a voluntary disclosure, along with two other partners of DCI, in the sum of Rs. 11 lacs which included the amount of pronote of Rs. 8,78,358—Legal effect of the statement recorded behind the back of the assessee and without furnishing the copy thereof to the assessee or without giving an opportunity of cross-examination, is that if the addition is made, the same is required to be 7 . A.Y. 2012-13 deleted on the ground of violation of the principles of natural justice—Orders of all the three authorities set aside and addition deleted"

Order pronounced in Open Court on 18 - 11- 2019