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Facts
The assessee, an individual, was involved in providing accommodation entries for bogus Long Term Capital Gains (LTCG) through penny stocks. A search action revealed incriminating material, leading to the Assessing Officer (AO) issuing a notice under Section 153A. The AO added commission income at 4.75% on the total value of transactions.
Held
The Tribunal held that the assessee was denied proper opportunity for cross-examination of parties whose statements were relied upon by the lower authorities. This violation of natural justice principles rendered the assessment order questionable. The Tribunal remanded the case back to the AO to provide the opportunity for cross-examination.
Key Issues
Whether the assessee was denied a fair opportunity to cross-examine material witnesses, thus violating principles of natural justice, and if so, whether the assessment order should be quashed or remanded.
Sections Cited
143(1), 132, 153A, 143(2), 142(1), 143, 250
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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: AND SMT. RENU JAUHRI, AM
IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE MS. KAVITHA RAJAGOPAL, JM AND SMT. RENU JAUHRI, AM to 3201/Mum/2023 (Assessment Year: 2009-10 to 2015-16) Krishan Khadaria Dy. CIT (CC) 4(3) B-11, Oberoi Sky Garden, 3RS Cross Room No. 1921, 19th Floor, Air India Lane (Back Road), Lokhandwala Building, Nariman Point, Mumbai – Vs. Complex, Andheri (West), Mumbai – 400021. 400053. PAN/GIR No. AAHPK3724G (Assessee) : (Respondent) and 3571/Mum/2023 (Assessment Year: 2011-12 and 2012-13) & ITA No. 3570 and 3569/Mum/2023 (Assessment Year: 2014-15 and 2015-16) DCIT-CC-4(3) Krishan Raghunath Prasad Room No. 1921, 19th Floor, Air India Khadaria Building, Nariman Point, Mumbai – B-11, Oberoi Sky Garden, 3RS 400021. Vs. Cross Lane (Back Road), Lokhandwala Complex, Andheri (West), Mumbai – 400053. PAN/GIR No. AAHPK3724G (Assessee) : (Respondent) Assessee by : Shri. Ashok Bansal, CA a/w. Shri. Ajay Daga, CA Respondent by : Shri. Biswanath Das – CIT DR Date of Hearing : 27.01.2025 Date of Pronouncement : 28.03.2025 O R D E R Per Bench: to 3201/Mum/2023 (A.Y. 2009-10 to 2015-16)
& 3571/Mum/2023 (A.Y. 2011-12 & 2012-13) & 3569/Mum/2023 (A.Y. 2014-15 & 2015-16) Krishan Khadaria These captioned appeals are cross appeals filed by the assessee and the revenue, challenging the order of the learned Commissioner of Income Tax (Appeals) 52, Mumbai (‘ld. CIT(A)’ for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2009-2010 to 2015-16 2. As the facts are identical in all these appeals, we hereby pass a consolidated order by taking ITA No. 3195/Mum/2023 as a lead case. ITA No. 3195/Mum/2023; A.Y. 2009-10 3. The assessee has raised the following grounds of appeal:
1. The ld. CIT(A) erred in holding that assessment was validity made. 1.i. In doing so, the 1d. CIT(A) did not appreciate that the material found in the course of search action on the appellant did not support the allegation that he was indulged in providing accommodation entries of bogus LTCG by manipulating scrips of companies under his control and earning commission therefrom and, therefore, the said material did not trigger assessment u/s 153A of the Act. 1.ii. Further in doing so, the ld. CIT(A) did not appreciate that even if jurisdiction u/s 153A of the Act was rightly assumed, the completed assessment in absence of any incriminating material found in the course of search could not have been disturbed.
2. The 1d. CIT(A) erred in holding that opportunity of cross-examination of Shri R. K. Kedia & persons connected with him was provided to the appellant. 2.i. In doing so, the 1d. CIT(A) did not appreciate that to comply with the principles of natural justice, providing such opportunity at Delhi Office of the Deptt. and that too before an Officer other than the AO was only a pretence of formality and no real opportunity of cross-examination was afforded to the appellant.
3. The ld. CIT(A) further erred in holding that even if opportunity of cross-examination of the said persons was not given and/or their statements were not provided to the appellant for his rebuttal, the assessment was still in accordance with law. 3.i. In doing so, the 1d. CIT(A) did not appreciate that no corroborative material was brought on record by the AO in support of statements of the said persons which were heavily relied upon by him in drawing adverse inference and the AO by not providing the said statements & not affording the opportunity of cross- examination, which was very much imperative in the facts & circumstances of the case, has violated the principles of natural justice which has rendered the assessment as null & void. to 3201/Mum/2023 (A.Y. 2009-10 to 2015-16)
& 3571/Mum/2023 (A.Y. 2011-12 & 2012-13) & 3569/Mum/2023 (A.Y. 2014-15 & 2015-16) Krishan Khadaria 4. The ld. CIT(A) CIT(A) erred in confirming the actions of the AO in holding appellant to be a part of racketeers involved in providing accommodation entries of LTCG and in bringing to tax alleged commission earned from the said activities though restricting the said commission income to 1% of the total trade value as against 4.75% considered by the AO. 4.i. In doing so, the 1d. CIT(A) did not appreciate that the AO in holding the appellant to be part of the racketeers has merely relied on the statements of Shri Raj Kumar Kedia and of his main employee Shri Manish Arora and that too by drawing incorrect inference in as much as what was stated in the statements as referred to in the assessment order is that Shri Raj Kumar Kedia is the person who managed & controlled share prices of some companies for reaping bogus LTCG including the companies under the control & management of the appellant and nowhere it is stated that the appellant was involved in rigging the prices of shares and, therefore, there was no warrant to infer that the appellant is part of the said racket. 4.ii. In any event, the Id. CIT{A) did not appreciate that no incriminating material was found in the search action on the appellant nor any corroborative material was brought on record warranting the said allegation. 4.iii. Further in any event, the ld. CIT(A) did not appreciate that the commission, if any, could have been earned on the value of long-term capital gain & that too which is routed through the appellant and could not have been earned on the trade value. 4.iv. Nevertheless, the 1d. CIT(A) erred in applying the rate of commission at 1% as against the rate of 0.15% accepted by the Hon. ITAT, Mumbai in the case of Shri Mukesh Chokshi Vs. DC(CC) 46 in ITA No. 833-839/M/2013 dt. 04.05.2016 arising out of similar allegation of providing accommodation entries of capital gain. Your appellant, therefore, submits that the assessment order made in pursuance of notice u/s 153A of the Act be quashed and in the alternative suitable relief be allowed.”
The revenue has raised the following grounds of appeal which are common for all the assessment years except with variance in figures. For the sake of convenience, we are reproducing the grounds raised in “On the facts and in the circumstances of the case, Ld CIT(A) erred in deleting addition to the extent of Rs.3,46,03,793/- made towards commission income, by restricting rate of percentage at 1% of transaction amount as against commission income computed by the A.O. @ 4.75% of transaction amount, without properly appreciating the facts of the case."
5. Brief facts of the case are that the assessee is an individual and also a partner in various firms and also director in various companies and had filed his return of income for the year under consideration, dated 30.03.2010 declaring total income at Rs.4,87,610/- out of income from salary, house property, capital gain on sale of shares and the same was processed to 3201/Mum/2023 (A.Y. 2009-10 to 2015-16)
& 3571/Mum/2023 (A.Y. 2011-12 & 2012-13) & 3569/Mum/2023 (A.Y. 2014-15 & 2015-16) Krishan Khadaria u/s. 143(1) of the Act. Pursuant to a search and seizure action carried out in the case of Raj Kumar Kedia Group, dated 13.06.2014, by DDIT (Investigation), Unit 3(3), Delhi u/s. 132 of the Act, information received was that the said group is engaged in providing accommodation entries to various beneficiaries across the country by way of bogus long term capital gain (‘LTCG' for short) by trading in shares alleged to be penny stocks in companies which are controlled and managed by the Syndicate of the said group. The assessee’s residential premises was also covered under the search carried out on 13.06.2014 along with the premises of the assessee’s acquaintance viz. Shri Rajesh Omprakash Agrawal, Shri Natwarlal Daga and Shri Rajkumar B. Mal. The learned Assessing Officer (‘ld. AO' for short) observed that based on various incriminating materials found and seized during the search, it was evident that the said group was engaged in providing accommodation entries on a large scale and further the said material also had information relating to the assessee. The ld. AO issued notice u/s. 153A of the Act to the assessee, dated 29.07.2015, and in response to the same, the assessee filed a copy of the original return of income, declaring total income at Rs.4,87,615/-. The ld. AO also issued notice u/s. 143(2) and 142(1) duly issued and served upon the assessee. The ld. AO then passed the assessment order dated 29.12.2016, u/s. 143 r.w.s. 153A of the Act, where the total income of the assessee was determined at Rs.6,94,347/- after making an addition/disallowance on the unaccounted commission income earned from bogus transaction in various penny stocks @ 4.75% for the year under consideration, on the total value of transaction at Rs.682,04,93,591/- ITA No. 3195 to 3201/Mum/2023 (A.Y. 2009-10 to 2015-16)
& 3571/Mum/2023 (A.Y. 2011-12 & 2012-13) & 3569/Mum/2023 (A.Y. 2014-15 & 2015-16) Krishan Khadaria spread across for the period from 2009-2010 to 2015-16, where the total addition for all these years aggregated to Rs.33,39,73,446/-.
Aggrieved the assessee was in appeal before the first appellate authority, who vide order dated 12.07.2023, restricted the estimation of commission income @ 1% as against the addition made by the ld. AO @ 4.75%.
The assessee as well as the revenue are in cross appeals before us, challenging the order of the ld. CIT(A).
We have heard the rival submissions and perused the materials available on record. It is observed that during the search carried out in the case of Shri R. K. Kedia, detailed ledger accounts were seized which contained the following details: 1.1 The ledger accounts runs into 870 number of pages having a total of 224 ledgers of 30 groups. 1.2 The ledger accounts have been maintained on Tally Software and the transactions are recorded along with detailed narration and voucher number. 1.3 The ledger accounts cover the period from 01.04.2008 to 31.03.2015. 1.4 The transactions recorded under the head "Thakur" depicting cash payments run into hundreds of crores amongst various entry operators. 1.5 Several RTGS transactions have been set off against the Cash/ Thakur transactions which indicate that the ledger accounts pertain to accommodation entries provided by Shri R. K. Kedia in collaboration with various entry operators in different parts of the country. 1.6 The ledger accounts have been prepared with the intention to keep a record of how much money has been received/ paid to / from various fellow entry operators based in different cities so as to determine the actual balances for the purpose of settling the accounts with different operators. 1.7 The transactions shown by way of bank / RTGS are duly verified and the same match with the transactions appearing in the bank accounts and the books of accounts of various concerns. So, the seized documents are very well corroborated with the multiple bank account statements and the financials / books of accounts of various concerns and, therefore, there is no scope for questioning the veracity of evidence and the truth of transactions reflected therein. 1.8 Shri R.K. Kedia, in his statement on oath recorded during the course of search, has admitted and elaborated the aforesaid ledger accounts seized from his premises and the true nature of transactions appearing therein. It has been categorically admitted to 3201/Mum/2023 (A.Y. 2009-10 to 2015-16)
& 3571/Mum/2023 (A.Y. 2011-12 & 2012-13) & 3569/Mum/2023 (A.Y. 2014-15 & 2015-16) Krishan Khadaria by him and his employees involved in recording these transactions that these account reflect the true nature of accommodation entry racket run by him in collaboration with various entry operators based at different cities all over the country (A copy of statement of Shri Manish Arora and Shri R.K. Kedia is enclosed herewith for ready reference). 1.9 It is pertinent to note that the aforesaid seized documents and the statement on oath of Shri R.K. Kedia have been independently corroborated with the evidence gathered from the analysis of various penny stock scrips. The financial statements of such scrips along with the trade data on the browses of the companies have independently established that such scrips were being used solely for the purpose of generating illicit long term capital gains in the hands of beneficiaries to help them build capital and evade tax. Such racket was being operated by a group of entry operators to earn commission from the beneficiaries against the accommodation entries provided by them to the beneficiaries. 1.10 In view of the above, the various evidences gathered from multiple sources and corroborated by one another establish beyond doubt that Shri R.K.Kedia and other entry operators were involved in providing accommodation entries to various beneficiaries across the country. 1.11 Shri R.K.Kedia while elaborating the modus-operandi and the transactions recorded in the above ledger accounts has also identified the various individuals based at Mumbai, Kolkata and other cities who have carried out these transactions. These transactions are independently corroborated with the bank statements appearing in the statements / books of accounts of such other individuals. Therefore, the involvements of such other individuals in the racket of providing accommodation is also established beyond doubt.”
The ld. AO also observed that in the seized ledger accounts there were 3 ledger accounts pertaining to the assessee along with the assessee’s group concerns which have been tabulated herein as under: 2.2. Account in the name of Khadaria_Cheque A/c. Name of the Account Khadaria_Cheque A/C: (Group Venkatesh Sales) Period of entries 01.04.2008 TO 13.06.2013 Total debit side Rs.28,00,000/- Total credit side Rs.28,00,000/- Closing balance Zero Thakur entries total Rs. NIL 2.3. Account in name of Khadaria: Name of the Account Khadaria (Group Venkatesh Sales) Period of entries 01.04.2008 - 31.01.2014 to 3201/Mum/2023 (A.Y. 2009-10 to 2015-16)
& 3571/Mum/2023 (A.Y. 2011-12 & 2012-13) & 3569/Mum/2023 (A.Y. 2014-15 & 2015-16) Krishan Khadaria Total debit side Rs. 36,99,83,746/- Total credit side Rs. 38,59,68,239/- Closing balance Rs. 1,59,84,493/- Thakur entries total Rs.8,76,50,000/- 2.4. Account in name of Khadaria_Gwarja: Name of the Account Khadaria_Gwarja (Group Venkatesh Sales) Period of entries 17.04.2013 - 17.09.2013 Total debit side Rs.31,16,02,472/- Total credit side Rs.31,16,02,472/- Closing balance Zero Thakur entries total Rs. 16,34,68,316 2.5 Account in name of Khadaria_New Loan A/C: Name of the Account Khadaria_New Loan A/C (Group Venkatesh Sales) Period of entries 01.04.2008 - 31.04.2014 Total debit side Rs. 3,44,70,155/- Total credit side Rs. 2,31,20,155/- Closing balance Rs. 1,13,50,000/- Thakur entries total Rs.NIL 2.6 Account in name of Khadaria_NML: Name of the Account Khadaria NML (Group Venkatesh Sales) Period of entries 01.04.2008 - 30.06.2013 Total debit side Rs.26,84,533/- Total credit side Rs.26,84,533/- Closing balance Zero Thakur entries total Rs.NIL 10. During the assessment proceedings, the ld. AO had sought for the details pertaining to the assessee’s involvement in the said transactions based on the above information and also the statement on oath of Shri R. K. Kedia which was corroborated with the bank statement appearing in the statement/books of accounts of the various individuals. It is also observed that four scripts of the companies viz.: (a) Nouveau Global Ventures Limited (b) Matra Kaushal Enterprises Ltd. (c) Pearl Agriculture Ltd [now known as Mukta Agriculture Ltd.] (d) Pearl Electronics Ltd. [now known as Mystic Electronics ITA No. 3195 to 3201/Mum/2023 (A.Y. 2009-10 to 2015-16)
& 3571/Mum/2023 (A.Y. 2011-12 & 2012-13) & 3569/Mum/2023 (A.Y. 2014-15 & 2015-16) Krishan Khadaria Ltd.] were found to be penny stocks and merely paper companies for the purpose of availing bogus LTCG which the ld. AO submits that the same was admitted by Shri R K Kedia and his associates. The ld. AO discussed the financials of these companies and stated that Shri R K Kedia in his statement has admitted that these companies were controlled and managed by the assessee who was a close friend of Shri R K Kedia and was into the business of providing accommodation entries. It is also observed that Shri Manish Arora who was the main employee of Shri R K Kedia maintains the record of unaccounted transactions and has also admitted to the fact that these transactions were bogus. Also the statement of Shri Natwarlal Daga is also in support of the fact that he was also an entry operator based in Mumbai and was helping Shri R K Kedia. In arranging investors for preferential issues in the assessee’s companies mentioned above on the instruction of the assessee. The ld. AO held that the assessee could not justify the huge rise in the price of the shares of these companies except for the fact that these are controlled arrangement for manipulation of prices for the purpose of providing bogus LTCG to various beneficiaries/preferential allottees. The statement of Shri Rakesh Sehewal, who was an employee of the assessee was also recorded in which he has admitted to the fact that the assessee is an accommodation entry provider and that he was handling the cash transaction of the assessee. The said person has also explained the modus operandi of these bogus transactions in the statement recorded by the ld. AO. The ld. AO observed that there was no substantial business transaction that has taken place by these companies and that they were operating merely for the purpose of providing accommodation entries for providing profitable exit entry to various ITA No. 3195 to 3201/Mum/2023 (A.Y. 2009-10 to 2015-16)
& 3571/Mum/2023 (A.Y. 2011-12 & 2012-13) & 3569/Mum/2023 (A.Y. 2014-15 & 2015-16) Krishan Khadaria beneficiaries of bogus LTCG. The statement of Shri R K Kedia revealed that he is a commission agent for providing accommodation entries such as bogus LTCG, share capital/premium, etc., for various beneficiaries through various entry operators for bringing unaccounted money of these beneficiaries in their books for evading tax involving a syndicate of such operators who are based in Delhi, Kolkata and Mumbai where the Investigation Directorate initiated action which involved a large volume of transactions exceeding Rs.5,000 crores. The ld. AO stated that some of the beneficiaries have admitted that they have obtained these entries by paying commission of 5% to 6% of the entry amount in cash as per the investigation report by the investigation wing. The total value of such bogus transactions of the four companies pertaining to the assessee are tabulated herein under: Sr. Scrip Name of the Full Name of Penny Stock Total Value of No. Code Scrip Manipulative Trade (Rs.) 1. 531465 NOUVEAU NOUVEAU GLOBAL VENTURES 203,87,23,071 LTD. 2. 526671 MKEL MATRA KAUSHAL ENTERPRISE 331,40,59,825 LTD. 3. 535204 PEARL AGRI PEARL AGRICULTURE LTD 59,41,69,145 4. 535205 PEARLELEC PEARL ELECTRONICS LTD 87,35,57,789 TOTAL MANIPULATIVE TRADE 682,05,09,830
The assessee denied the allegation raised by the ld. AO and stated that Shri R K Kedia had merely given a general statement that even the assessee’s companies were engaged in bogus transactions. The assessee without prejudice stated that the total commission cannot exceed 1% in the case of intermediaries’ hands where the statement of Shri R K to 3201/Mum/2023 (A.Y. 2009-10 to 2015-16)
& 3571/Mum/2023 (A.Y. 2011-12 & 2012-13) & 3569/Mum/2023 (A.Y. 2014-15 & 2015-16) Krishan Khadaria Kedia has also admitted to 4.5% or 4.25% commission to promoters or other intermediaries. Further, the assessee contended that the ld. AO has not specified the quantum and description of the transaction and also the period of the said transaction has not been specified in the said notice. The assessee further contented that the details of beneficiaries who have paid the commission to the assessee was also not confronted to the assessee by the ld. AO. The ld. AO has also relied on the statement of Smt. Juhi Verma, where she has admitted to the documents related to the assessee with regard to the shares of Nouveau Global Ventures Limited during search. As the assessee could not controvert the above said facts, the ld. AO made an addition on the commission @4.75% on the bogus transactions from A.Y. 2009-10 to 2015-16 which are tabulated herein under: A.Y. F.Y. Name of the Quantity Value of Trade Commission Scrip Traded @4.75% 2009-10 2008-09 NOUVEAU 1,72,526 43,73,307 2,07,732 2010-11 2009-10 NOUVEAU 32,83,658 21,84,61,404 1,03,76,917 2011-12 2010-11 NOUVEAU 63,12,472 92,27,67,788 4,38,31,470 2012-13 2011-12 NOUVEAU 5,47,68,229 62,01,88,207 2,94,58,940 MKEL 34,400 8,13,297 38,632 NOUVEAU 47,80,355 6,54,45,716 31,08,672 2013-14 2012-13 PEARLAGRL 12,971 1,34,777 6,402 PEARLELEC 1,038 5,807 276 TOTAL 48,28,764 6,63,99,597 31,53,981 MKEL 47,33,339 2,58,74,04,816 12,29,01,729 NOUVEAU 36,70,349 12,81,07,599 60,85,111 2014-15 2013-14 PEARLAGRL 15,98,183 43,59,40,586 2,07,07,178 PEARLELEC 14,57,629 43,57,12,204 2,06,96,330 TOTAL 1,14,59,500 3,58,71,65,205 17,03,90,347 ITA No. 3195 to 3201/Mum/2023 (A.Y. 2009-10 to 2015-16)
& 3571/Mum/2023 (A.Y. 2011-12 & 2012-13) & 3569/Mum/2023 (A.Y. 2014-15 & 2015-16) Krishan Khadaria MKEL 1,26,37,646 72,58,41,713 3,44,77,481 NOUVEAU 22,84,435 7,93,79,049 37,70,505 2015-16 2014-15 PEARLAGRL 3,74,132 15,80,93,782 75,09,455 PEARLELEC 8,09,529 43,78,23,537 2,07,96,618 TOTAL 1,61,05,742 1,40,11,38,081 6,65,54,059 GRAND TOTAL 9,69,30,391 6,82,04,93,590 32,39,73,446
The ld. CIT(A) in the appeal filed by the assessee restricted the commission income to 1% as per the following finding. The relevant extract of the finding of ld. CIT(A) is reproduced herein under: “6.22.1. I have examined the above claim of the appellant. The AO has brought out that Shri NatwarLal Daga, who is also an entry operator based in Mumbai and is helping Shri Raj Kumar Kedia, admitted that he had arranged investors for preferential issue in the assessee company on the instructions of Shri Krishan Raghunath Prasad Khadaria. Besides Sh. R K Kedia has also confirmed the involvement of the appellant. Although Matra Kaushal Enterprises Ltd. was used for the purpose of bogus LTCG, the appellant was not a director in the said entity. Unlike in the case of M/s Nouveau Global Ventures Limited, M/s Pearl Agriculture Limited (presently known as M/s Mukta Agriculture Limited) &M/s Pearl Electronics Limited (Presently known as M/s Mystic Electronics Limited) where the appellant has both active shareholding and is also a director along with family members and exercises control over them, it appears that the case of Matra Kaushal Enterprises Ltd.is different. Thus, the appellant’s request to grant parity with Sh. Suresh Jajodia does have some force, as far as this entity is concerned. At the same time, the evidences / deposition do show that the appellant has a role in arranging bogus LTCG in Matra Kaushal Enterprises Ltd. even though he may not be a promoter / director.
6.22.2. Unlike in the case of Sh. Suresh Jajodia, the evidences clearly indicate that three companies (M/s Nouveau Global Ventures Limited, M/s Mukta Agriculture Limited &M/s Mystic Electronics Limited) which are discussed are owned / managed by the appellant himself. Thus, he enjoys greater control over the affairs and the logical conclusion would be that he would be entitled to larger returns. 6.23. During the course of appellate proceedings, my ld. Predecessor was of the view that the commission income needs re-working based on the LTCG and estimation of other commission income (share capital, unsecured loans, etc.). In this regard, remand report was called for from the AO vide letter dt. to 3201/Mum/2023 (A.Y. 2009-10 to 2015-16)
& 3571/Mum/2023 (A.Y. 2011-12 & 2012-13) & 3569/Mum/2023 (A.Y. 2014-15 & 2015-16) Krishan Khadaria 28.05.2019& 07.06.2019. However, it is seen that despite several reminders including 02.01.2020 &15.01.2023 no remand report has been received till date. Since the commission estimation is based on judgment (having reference to the underlying material available), I am of the view that the appellate proceedings could be continued and concluded based on the available data.The estimation of commission income at 1% based on the transactions, would be reasonable and adequate in my view and cover up for any other addition which may be required 6.24. In the replies of Sh. R. K. Kedia referred above, he has stated about commission of 5 to 6 % received but he has also stated above the commission of operator being in the nature of 4 to 4.25% for LTCG. As regards STCG, he has stated that he pays 2% to the operator. It is well known that the operator in turn would also be incurring various expenses. Thus, in my view, it would be prudent to restrict the addition of commission income to 1% of such transactions instead of 4.75%. The argument of the appellant that it should be 0.15% is not acceptable as the appellant itself has raised in its ground of appeal to restrict the addition to 1% commission income. The reasons have been discussed in various parts of this order.
2011-12 NOUVEAU 63,12,472 92,27,67,788 4,38,31,470 92,27,677 2012-13 NOUVEAU 5,47,68,229 62,01,88,207 2,94,58,940 62,01,882 MKEL 34,400 8,13,297 38,632 8,132 NOUVEAU 47,80.355 6,54,45,716 31,08,672 6,54,457 PEARLAGRI 12,971 1,34,777 6,402 1,347 2013-14 PEARLELEC 1,038 5,807 276 58 Total 48,28,764 6,63,99,597 31,53,981 6,63,995 MKEL 47,33,339 2,58,74,04,816 12,29,01,729 2,58,74,048 NOUVEAU 36,70,349 12,81,07,599 60,85,111 12,81,075 PEARLAGRI 15,98,183 46,59,40,586 2,07,07,178 46,59,405 2014-15 to 3201/Mum/2023 (A.Y. 2009-10 to 2015-16)
& 3571/Mum/2023 (A.Y. 2011-12 & 2012-13) & 3569/Mum/2023 (A.Y. 2014-15 & 2015-16) Krishan Khadaria PEARLELEC 14,57,629 43,57,12,204 2,06,96,330 43,57,122 Total 1,14,59,500 3,58,71,65,205 17,03,90,347 3,58,71,652 MKEL 1,26,37,646 72,58,41,713 3,44,77,481 72,58,417 NOUVEAU 22,84,435 7,93,79,049 37,70,505 7,93,790 PEARLAGRI 3,74,132 15,80,93,782 75,09,455 15,80,937 2015-16 PEARLELEC 8,09,529 43,78,23,537 2,07,96,618 43,78,235 Total 1,61,05,742 1,40,11,38,081 6,65,54,059 1,40,11,380 9,69,30,891 6,82,04,93,590 32,39,73,446 6,82,04,933 6.25. In line with the discussions above, the addition for AY 2009-10 is sustained at Rs. 43,733/- instead of Rs. 2,07,732/- made by the AO.”
The learned Authorised Representative ('ld. AR' for short) for the assessee restricted his arguments to ground no. 2 and 3 of the appeal, where the impugned order was challenged on the violation of principles of natural justice, where the assessee was not given proper opportunity to cross examine Shri. R. K. Kedia and other persons whose statements were relied upon by the lower authorities. The ld. AR further contended that only one opportunity was provided to the assessee at the Delhi office of the Department before the Officer other than the jurisdictional AO was extended with a very short period of notice which is evident from the assessment order, where the ld. AO has mentioned that as the matter was time barring, it will not be possible to provide any further adjournment or opportunity to cross examine. The ld. AR further stated that the to 3201/Mum/2023 (A.Y. 2009-10 to 2015-16)
& 3571/Mum/2023 (A.Y. 2011-12 & 2012-13) & 3569/Mum/2023 (A.Y. 2014-15 & 2015-16) Krishan Khadaria as ld. AO as well as assessee are based in Mumbai, cross examination should be accorded to the assessee at Mumbai and not at the Delhi office. The ld. AR further stated that it is very crucial for the assessee to examine Shri. R. K. Kedia for the reason that the letter dated 15.12.2016, the assessee has clearly stated that Shri. R. K. Kedia when enquired by the assessee who confessed that the assessee’s company names were given generally along with other company names and that he had confirmed that no transactions have taken place involving the companies which are managed and controlled by the assessee. The ld. AR prayed that the assessment order be quashed on the ground of violation of principles of natural justice.
The learned Departmental Representative (ld. DR for short) on the other hand controverted the said fact and stated that the assessee was provided an opportunity to cross examine at the Delhi office but the same was not availed by the assessee. Further, the ld. DR contended that in the present circumstances of the case, there are incriminating materials to show that the assessee was involved in bogus transactions which the assessee has failed to rebut by way of cogent evidences and submitted that the ld. AO has merely not relied on the statements of the parties but has also corroborated the same with incriminating materials found during search of various parties including the assessee. The ld. DR relied on the order of the ld. CIT(A), who has given a categorical finding on the issue of violation of principles of natural justice and also relied on the assessment order and prayed that the ld. AO's order be upheld.
In the above factual matrix of the case, we observed that addition by way of commission income has been made in the hands of the assessee by the ld. AO @4.75% and the same to 3201/Mum/2023 (A.Y. 2009-10 to 2015-16)
& 3571/Mum/2023 (A.Y. 2011-12 & 2012-13) & 3569/Mum/2023 (A.Y. 2014-15 & 2015-16) Krishan Khadaria was restricted by the ld. CIT(A) to 1%. Before getting into the merits of the case, we deem it fit to decide the grounds raised by the assessee as to the violation of principles of natural justice, where the assessee has been denied the opportunity of cross examining the parties whose statement has been relied upon by the lower authorities. It is also evident from the assessment order that the ld. AO has provided the assessee the opportunity to cross examine Shri. R. K. Kedia on 20.12.2016 at the Delhi office and the assessment order was dated 29.12.2016, which clearly states that sufficient opportunity was not provided to the assessee for cross examining the parties whose statement has been extensively relied upon by the ld. AO. It is a settled proposition of law that the assessee should be given effective opportunity to rebut the allegations raised by the department by furnishing all the statements recorded by the ld. AO, so that, the assessee is well informed of such allegations in order to prepare himself for contradicting those facts that are against him. This is the fundamental right of the assessee which cannot be dispensed off by the authority in whatsoever manner may be. The ld. CIT(A) having co-terminus power with that of the ld. AO has also not considered the same and has held that when the statement relied upon by the ld. AO are corroborated with the other evidences then the denial of right of cross examination cannot be taken as a plea by the assessee, in our view is unjustifiable.
16. From the above observation, we are of the considered view that all these matters are to be remanded back to the file of ld. AO for the purpose of providing the assessee opportunity to cross examine the parties whose statements have been relied upon by the by the ld. AO and also furnishing the copies of the statements recorded by the ld. AO to 3201/Mum/2023 (A.Y. 2009-10 to 2015-16)
& 3571/Mum/2023 (A.Y. 2011-12 & 2012-13) & 3569/Mum/2023 (A.Y. 2014-15 & 2015-16) Krishan Khadaria by giving sufficient time and notice to the assessee. We hereby partly allow ground no. 2 and 3 raised by the assessee. As we have remitted these issues back to the file of ld. AO for denovo assessment, we have not expressed our views on any of these issues on the merits of the case which are to be decided afresh by the ld. AO.
In the result, the appeal filed by the assessee is allowed for statistical purpose. to 3201/Mum/2023; (A.Y.: 2010-11 to 2015-16) 18. The findings recorded in ITA No. 3195/Mum/2023 for A.Y. 2009-10 shall apply mutatis mutandis to these appeals also. ITA No. 3572 and 3571/Mum/2023; (A.Y.: 2011-12 and 2012-13) ITA No. 3570 and 3569/Mum/2023; (A.Y.: 2014-15 and 2015-16) 19. As we are remanding the assessee’s appeals back to the file of ld. AO, we also deem it fit to remand the revenue’s appeal to the file of ld. AO for denovo assessment.
In the result, the appeals filed by the revenue are allowed for statistical purpose. Order pronounced in the open court on 28.03.2025 Sd/- Sd/- (RENU JAUHRI) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 28.03.2025 Karishma J. Pawar (Stenographer) Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File to 3201/Mum/2023 (A.Y. 2009-10 to 2015-16)