COMNR.OF I.TAX vs. LATE BIJU PATNAIK

ITA No.106 of 2007 24.04.2017 Heard Mr. Acharya, learned Senior Standing Counsel (Income Tax) for appellant. According to him, the present appeal filed under Section 260A of the Income Tax Act, 1961, fo r short the Act challenging the order dated 30.3.2007 passed by the learned ITAT involving the following substantial questions of law: i. Whether in the facts and circumstances of the case the Learned ITAT has mi n-interpreted the decisions of the Honble Supreme Court and this Honble Court and Ld. ITAT in the case of the assessees for A.Y.1962-63 to 64-65.

ii. Whether on the facts and in the circumstances of the case the Learned ITAT has misinterpreted the decision dtd. 25.10.2006 of this Honble Court on the Misc. Case filed by the revenue. iii. Whether on the facts and in the circumstances of the case the Learned ITA T justified in upholding the order of CIT (A) when assessment in this case were pending to be framed for the assessment year 1962-63 to 1964-65 following the directions of this Honble Cour t and ITAT. According to Mr. Acharya, this appeal pertains to the assessment year 1959-60. In this case, the original assessment order of the assessee-Late Biju Patnaik was passed in 27.3.1980 on a total income of Rs.22,47,614/-. This order was set aside in appeal and the learned CIT ( A) directed that the assessee should be given opportunity to cross examine the witnesses, on t he basis of whose statements, it was held earlier that Kalinga Foundation Trust was a benami c oncern of Late Biju Patnaik. However, as the assessment for the assessment year 1959-90 was likely to be time barred, the Assessing Officer under Annexure-1 again held that the income of the Trust to be the income of assessee, namely , Late Biju Patnaik. Accordingly, the income of the assessee was assessed. Challenging the same, an appeal was filed before C.I.T. (Appeals)-I, Bhubaneswar style d as I.T. Appeal No.138/2002-03. The appellate authority accepted the appeal and vide Annexure -2 directed the Assessing Officer to delete addition of Rs.21,87,885/- from the income of appe llant. In coming to such a conclusion, the learned 1st Appellate Authority gave the following reasoning: x x x 5. After hearing the arguments of the Ld A/R and after perusing the facts from the ass essment order and also the remand report of the ACIT, Circle-1 (1), Bhubaneswar which was subm itted to the Honble ITAT, regarding the real facts of the witnesses and their statements, whic h were not available with the department and the witnesses were no more alive, I am of the opi nion that, the AO was not justified in making the mechanical addition, in the hands of the app ellant, of Rs.13,28,400/- in respect of loan transactions with Kalinga Foundation Trust and of Rs.8,59,485/- being loan transaction with Kalinga Industries Limited, without giving the appe llant, opportunity to cross examine the witnesses, based on whose statements, recorded u/s. 13 1 of the I.T. Act, as per the directions of the Honble Supreme Court. The AO has treated the K alinga Foundation Trust, which is a separate entity, registered u/s.12A of the I.T. Act with the I.D. Department , as well, as registered with the Charity Commissioner, as a Benami of the appellant, on some trivi al points. It was also not discussed in the body of the order, whether, the said additions were also made in the hands of the Kalinga Foundation Trust, a Cha ritable Trust, or otherwise. Considering all these aspects and also considering the fact that, the AO was not in a position to follow the directions of the apex court, of giving the opport unities of cross examining the witnesses, the AO has no legal power to treat the Kalinga Found ation Trust, as Benami of the appellant and to make an addition of Rs.21,87,885/- (both the ad ditions). Hence, I hereby direct the AO to delete the addition of Rs.21,87,885/- from the inco me of the appellant. Challenging such order, A.C.I.T., Circle 1 (1), Bhubaneswar filed I.T.A. No.138/CTK/20 06 before the learned ITAT and the same was dismissed on 30.3.2007 with the following reasonin

g: x x x 12. After hearing both the parties and perusing the record available at file, we are o f the considered opinion that the Ld CIT (A) has rightly deleted this addition because the Ass essing Officer while making this addition during reassessment proceeding has not followed the direction of the Honble Apex Court, Honble Orissa High Court & Honble I.T.A.T. of giving oppor tunity to the assessee to cross-examine the witnesses on the basis of whose statements the Kal inga Foundation Trust was treated as benamidar of the deceased assessee and the addition has b een made. The Departments petition before the Honble Orissa High Court praying for modifying i ts direction of giving opportunity to cross-examine the witnesses in view of the fact that the witnesses were not alive has also been considered and dismissed by the Honble Court vide its order dated 25.10.2006. Since the Department has not gone in appeal against this order of the Honble Orissa High Court, this order has reached finality and therefore, the Department was to follow these directions, but the same has not been done by the Assessing Officer while passin g the order under appeal. In the light of these facts and legal position of this case, we are not inclined to interfere with the orde r passed by the Ld CIT (A) and the same is hereby upheld. The appeal of the revenue is dismiss ed. Thus, the learned Tribunal has relied the order passed by this Court on 25.10.2006 in Misc. Case No.1 to 6 of 2004, to which one of us namely, I.Mohanty, J. is a party. There, in t he facts and circumstances of the case, this Court was not satisfied that the Kalinga Foundati on Trust was a benamidar concern of Late Biju Patnaik. This thing has also been taken note of by Delhi High Court in Commissioner Wealth Tax v. Biju Patnaik as reported in (2008) 298 ITR 9 1. Thus, both the 1st Appellate Authority and the learned Tribunal have accepted that the Assessing Officer has no legal power to accept Kalinga Foundation Trust as benami of the asse ssee in absence of opportunities to cross-examine the witnesses on the basis of whose statemen ts, the Kalinga Foundation Trust was treated as benamidar of the deceased asssessee and accord ingly the learned Tribunal confirmed the order of 1st Appellate Authority in deleting addition of Rs.13,28,400/- and Rs.8,59,485/- made by the Assessing Officer with regard to loan transac tion of the assessee. In such background, Mr. Acharya submitted that since the learned Tribunal has passed t he impugned order misinterpreting the decision of the Honble Supreme Court as reported in Comm issioner of Income Tax v. Biju Patnaik (1986) 160 ITR 674 and of this Court as reported in Com missioner of Income Tax v. Biju Patnaik (1991) 190 ITR 396 (Orissa) and Commissioner of Income Tax v. Biju Patnaik (Deceased) by LR Prem Patnaik as reported in (2007) 289 ITR 406, the same is liable to be quashed. He further submitted that no Court has ever directed cross-examination of witnesses and despite this, the learned ITAT has rejected the appeal under Annexure-3 on the ground that since the A.O. passed the order un der Annexure-1 in absence of such opportunity, the same was not legally permissible. He also s ubmitted that accordingly the above noted substantial questions of law have been framed by the appellant. We have perused the above noted decisions and orders under Annexures-1,2 and 3. From t hese it is clear that Kalinga Foundation Trust was treated to be benamidar of Late Biju Patnai k relying on statement of 14 numbers of witnesses. Pursuant to direction of Honble Supreme Cou rt, the matter came before this Court by way of references. Such references were disposed of o n 1.8.1990 by leaving the ITAT to pass consequential orders in view of the fact that the reaso nable opportunity has not been given to the assessee. It was made clear that all this can be e ffectively done by the Assessing Officer. Pursuant to such judgment, the learned ITAT restored the matter to the Assessing Officer with a direction to pass fresh order after allowing reaso nable opportunity to the assessee. However, since on account of the facts of death/physical in capacity/non-traceability of the concerned 14 witnesses, as their possibility of cross-examina tion was ruled out, the same was reported to the learned ITAT and accordingly the matter was dropped. Thus, there exists no legal evidence to s how that Kalinga Foundation Trust is a benamidar of Late Biju Patnaik. All these have been tak en note by this Court in Commissioner of Income Tax v. Biju Patnaik (Deceased) by LR Prem Patn aik reported in (2007) 289 ITR 406 as referred above. Delhi High Court has also taken note of

this decision in Commissioner of Wealth Tax v. Biju Patnaik reported in (2008) 298 ITR 91. Thu s, there has not been any misinterpretation of the judgments as submitted by Mr. Acharya. Furt her, in a case of present nature, giving reasonable opportunity clearly meant an opportunity t o cross-examine the above 14 witnesses. In such backdrop, we are of the considered opinion that this appeal does not involve a ny substantial questions of law as framed by the appellant, and, accordingly, the ITA is dismi ssed. .. I. Mahanty, J. ... Biswajit Mohanty, J. List this