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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI AMARJIT SINGH, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLE
O R D E R PER S. RIFAUR RAHMAN (AM)
These appeals are filed by the assessee against different orders of Learned Commissioner of Income-tax (Appeals)-47, Mumbai [hereinafter in short “Ld.CIT(A)”] hereinafter for short "Ld. CIT(A)] dated 05.02.2021 for the A.Ys.2012-13 to 2018-19.
2 ITA.NOs. 1188 to 1194/MUM/2021 Kiritkumar Dharsibhai Suba 2. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal in ITA.No. 1188/MUM/2021 for Assessment Year 2012-13 as a lead appeal.
The facts in brief are that the assessee had filed his return of income for the assessment year 2012-13 on 27.07.2012 declaring total income at Rs. 5,06,072/-. The return of income was processed u/s 143(1) of the Income Tax Act, 1961 (in short ‘Act’). There was no regular assessment u/s 143(3). A search action took place on 09.01.2018 in the case of Podar group. During the year under consideration, the assessee was working with Podar group as a Consultant Chartered Accountant looking after statutory compliances and as financial advisory. Subsequent to the search action on the Podar group, the Assessing Officer (hereinafter in short “AO") issued a notice u/s 153C of the Act on 21.09.2019 and in compliance thereof the assessee filed his return of income on 07.10.2019 declaring total income at Rs. 5,14,440/-. Thereafter the AO issued statutory notices u/s 143(2) and 142(1) of the Act. The submissions called for by the AO were duly submitted. The Assessing Officer was not satisfied with the submissions and thereafter, passed the assessment order u/s 153C r.w.s. 143(3) dated 23.12.2019 wherein, the AO has made an addition of Rs.
3 ITA.NOs. 1188 to 1194/MUM/2021 Kiritkumar Dharsibhai Suba 2,00,250/- in respect of alleged commission income in the hands of the assessee.
Aggrieved with the above order, the assessee preferred an appeal before the CIT(A) on the following grounds: - “
1. On the facts and the circumstances of the appellant’s case and in law the Ld. AO erred in issuing notice u/s. 153C despite the fact that no satisfaction was recorded by the AO of the searched party and the AO of the appellant and therefore, the notice, u/s. 153C and consequent order pass by the AO u/s. 143(3) r.w.s. 153C is bad-in-law, illegal or otherwise void for want of jurisdiction.” “2. On the facts and the circumstances of the appellant’s case and in law the Lad. AO erred in not providing opportunity to cross examine Shri Jayesh Zanani.” “3. On the facts and the circumstances of the appellant’s case and in law the Ld. AO erred in relying upon the statement of appellant, Shri Navin Nishar and Shri N.K. Sodhani despite the fact that it has been retracted by them.” , “4. On the facts and the circumstances of the appellant's case and in law the Ld. AO erred in making the addition of Rs. 2,00,250/- on -. account of alleged unexplained commission earned.”
5. The appellant craves leave to alter, amend, modify or substitute any ground or grounds and to add any new ground(s)/ as may be necessary.”
5. With regard to the ground raised against the jurisdiction by issue of notice u/s 153(C) of the Act and the submissions made thereof before the CIT(A), the assessee relied on the following case laws in support of the challenge against jurisdiction:
4 ITA.NOs. 1188 to 1194/MUM/2021 Kiritkumar Dharsibhai Suba i. CIT vs. Shri Shyam Sunder Infrastructure and others dated 04.02.2015 ii. CIT vs Calucltta Knitwears (2014) 43 taxmann.com 446 (Hon’ble SC) iii. Pepsico India Holding P Limited vs. ACIT 50 taxmann.com 299 (Hon’ble Delhi HC) iv. H. R. Mehta vs. ACIT 387 ITR 561 (Hon’ble Bombay HC) v. Ayaaubkhan Noorkhan Pathan vs. State of Maharashtra & Others 4SCC 465 (Hon’ble SC) vi. CIT vs. Khader Khan Sons (2013) 352 ITR 480 (Hon’ble SC) vii. CIT vs. Ashok Kumar Jain (2014) 369 ITR 145 (Hon’ble HC) viii. CIT vs. M.P Scrap Dealers (2015) 372 ITR 507 (Hon’ble Gujarat HC) ix. Jain Trading Co vs. ITO (2007) 17 SOT 574 (Hon’ble ITAT, Mumbai)
6. However, the Ld. CIT(A) has dismissed the grounds challenging the action of AO in entering jurisdiction u/s 153(C) of the Act. According to CIT(A), the AO had recorded satisfaction and that in any case the assessee had participated in the assessment proceedings without raising any objections at the time of assessment proceedings and thus the ground has little or no merit now. Further it was held that there is no need for giving any cross examination to the assessee since even as per assessee’s own statement recorded during the course of survey u/s 133A, the fact of donations being returned back was admitted and besides, the assessee had never sought any such cross examination. The Ld. CIT(A) was of the view that the statements of others persons are only supporting in nature and the contention that the AO simply relied on the statements of Shri
5 ITA.NOs. 1188 to 1194/MUM/2021 Kiritkumar Dharsibhai Suba Jayesh Zanani and Shri N K Sodhani is not totally correct. Thus, the challenge to jurisdiction was dismissed.
As regards the merits of the case, relating to addition, Ld. CIT(A) relied on the findings of the AO and observed that the assessee in his own statement recorded during the survey action on 11.01.2018 and 12.01.2018 accepted that he was getting commission at the rate of 0.15% of the amount of total donation in nature of bogus accommodation entries provided to the Podar group. Thus, it cannot be said that there was no incriminating material found against the assessee. Hence, the Ld. CIT(A) confirmed the addition of Rs. 2,00,250/- on merits.
Aggrieved the assessee is in appeal before us raising following grounds of appeal: - “1. On the facts and the circumstances of the appellant’s case and in law, the Ld. CIT(A) erred in holding that that the notice issued u/s 153C is a valid notice despite the fact that no satisfaction as mandated by law was recorded by the AO of the searched party and the AO of the appellant, thereby rendering the notice u/s 153C and the consequent assessment order vitiated by lack of jurisdiction and thus are void, illegal and bad in law.
2. On the facts and the circumstances of the appellant’s case and in law, the Ld. CIT(A) erred in confirming the addition made by the AO in respect of commission, solely relying upon statements recorded in the course of search, without any bringing on record any corroborative material and despite the fact that no incriminating material was found either during the course of search action u/s. 132 on Podar Group or during the course of survey action u/s 133A at the premises of M/s. Suba & Co.
6 ITA.NOs. 1188 to 1194/MUM/2021 Kiritkumar Dharsibhai Suba 3. On the facts and the circumstances of the appellant’s case and i in law; the Ld. CIT(A) erred in holding that opportunity for cross-examination of Jayesh Zanani i is not required, despite the fact that AO has relied upon the statement of Shri Jayesh Zanani while making the addition in respect of commission.
4. On the facts ‘and the circumstances of the appellant’s case and in law the Ld. CIT(A) has erred in sustaining the addition holding that the AO has relied upon the statement given by the appellant himself to make the addition despite the fact that apart from the statement of appellant. the AO has also relied upon the statements of Shri Navin Nishar and Shri N.K. Sodhani which are legally untenable considering that all the three persons viz., the appellant, Shri Navin Nishar and Shri N.K. Sodhanihave retracted their statements.”
On the facts and the circumstances of the appellant's case and in law, the Ld. CIT(A) erred in sustaining the addition of Rs. 2,00,250/- on account of all ‘alleged unexplained commission earned.
The appellant craves leave to alter, amend, modify or substitute any ground or grounds and to add any new ground / (s) as may be necessary.” The appellant pray before this Hon'ble Tribunal to quash the notice issued u/s 153C of the Act as void for want of jurisdiction, delete the additions made and confirmed by the Ld.CIT (A) and thus render justice to the appellant.”
During the course of hearing before us, the Authorized Representative of the assessee brought to our notice that the assessee was covered vide survey u/s 133A and his statement was recorded u/s 131 on 12.01.2018 which was later retracted on 03.04.2018. The Ld. AR contended that addition cannot be made merely on the basis of statement alone and that such statement is corroborated by cogent material / incriminating material no addition is sustainable under law. It was 7 ITA.NOs. 1188 to 1194/MUM/2021 Kiritkumar Dharsibhai Suba submitted before us that such statement now being relied upon by lower authorities was extracted under intense mental pressure when assessee was made to admit that he had earned commission for facilitating alleged bogus donations. Such addition made by the AO without any material in corroboration thereof has been sustained by CIT(A) unjustly. The Ld. AR has brought to our notice, the very basis of such addition being the alleged donation has been deleted by the Hon’ble ITAT in the case of Hemadri Machine Tools Private Limited (ITA No 714/M/20) [placed at page number 141 of paper book]. As such the addition in the nature of commission made in the hands of the assessee has no legs to stand on and hence has to be deleted.
Additionally, it was further submitted that no incriminating material or corroborative evidence was found. Hence the statement recorded u/s.131, even assuming it may bind an assessee, cannot be independently used for making addition unless corroborated by evidences. Further, the Ld. CIT(A) has deleted similar addition made on same set of facts in the cases of Shri Navin Nishar and Shri N K Sodhani which is quite evident from para 8.2, 8.3 and para 7.1, 7.2 of their respective CIT(A) orders [placed at page number 81 and page number 73 of their respective CIT(A) orders].
8 ITA.NOs. 1188 to 1194/MUM/2021 Kiritkumar Dharsibhai Suba 11. On the other hand, the Ld. DR relied on the findings of Ld. CIT(A) and stated that the assessee in his own statement recorded during the survey action has accepted that he was getting commission income at the rate of 0.15% of the amount of total donation in nature of bogus accommodation entries, hence it is apparent that the assessee has earned commission income.
Considered the rival submissions and the material placed on record. We notice that no copy of satisfaction note was provided by the Assessing Officer in the course of assessment proceedings. It is fact on record that apart from the statements recorded u/s 131 from the assessee and from Shri Navin Nishar, Shri N K Sodhani and Shri Jayesh Zanani and relied upon by the Assessing Officer, there was no incriminating material found in support of the addition towards receipt of the purported alleged commission receipt. We also notice that though the Ld. CIT(A) has also relied on the statements of Shri Navin Nishar, Shri N K Sodhani and Shri Jayesh Zanani, the assessee was never provided with an opportunity to cross examine Shri Jayesh Zanani. It is also a fact that the statements of these parties were later retracted. We also notice that no new material was ever brought on record by the Assessing Officer to corroborate the allegation of commission receipt even despite the fact that the statements
9 ITA.NOs. 1188 to 1194/MUM/2021 Kiritkumar Dharsibhai Suba u/s 131 of the Acts relied upon by the Assessing Officer stood retracted. From perusal of the records and order of the lower authorities it is abundantly clear that there is no corroborative evidence or incriminating material to support the allegation on the assessee having received commission income.
Besides, we find it significant that the Revenue does not have a case nor was it satisfactorily brought to our notice by the Revenue that during the course of search some money, bullion, jewellery or books of accounts or other documents found from the persons searched belonged to the assessee or have a bearing on the determination of total income of the assessee. In our view there is thus lack of jurisdiction on the Assessing Officer of the assessee to enter jurisdiction u/s 153C of the Act. We are not convinced that there was any incriminating material found in the search that has a bearing on determination of total income of the assessee. It is not the case of Revenue that the valuable articles, or books of accounts or documents found in the course of search reflect or disclose any unaccounted income in the hands of the assessee herein. In fact, we find that Revenue has no case that any information contained therein relates to receipt of commission income in the hands of the assessee herein. In any case, the Assessing Officer has made addition only on the 10 ITA.NOs. 1188 to 1194/MUM/2021 Kiritkumar Dharsibhai Suba basis of the statement of the assessee recorded u/s 131 during survey in the premises of M/s Suba & Co. In the similar situation, the Hon’ble Madras High Court in case of CIT vs. P. Balasubramanian (354 ITR 116 - order placed on record) held that the statement recorded during survey operation u/s 133A may be relevant material, but in the absence of further materials to substantiate the same, such statement recorded u/s 133A can hardly be the basis for assessment. In our considered view the statement recorded u/s 131 during the course of proceedings u/s 133A does not have any evidentiary value and becomes void-ab-initio. Without prejudice, it is observed that these statements were eventually retracted thus revoking them completely. Besides, as mentioned earlier, the statements relied on by the AO in the nature of admissions are bereft of corroborative material to justify or implicate the additions on the assessee.
In our further view of the matter, we have observed that the assessee was not provided an opportunity of cross examination of Shri Jayesh Zanani, whose statements were relied upon by the AO for passing the order. Without prejudice, there is no mention in the statement of Shri Jayesh Zanani that the assessee has been paid commission at the rate of 0.15 percent by the companies stated to be entry providers. When no opportunity for cross examination is given, it is not proper to rely on such 11 ITA.NOs. 1188 to 1194/MUM/2021 Kiritkumar Dharsibhai Suba statements and fatal to the order passed. In this regard, reliance is placed on the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries vs. CCE (in Civil Appeal No. 4228 OF 2006) wherein, it has been held as under:- "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 in as much as it amounted to violation of principles of natural justice because of which the assessee was adversely affected."
The Hon'ble High Court in the case of H.R. Mehta vs. ACIT, 387 ITR 561 (Bombay) has also considered the issue of not providing opportunity of cross examination and has held as under: “Thus, the denial of opportunity to cross examine was considered by the Hon'ble High Court which goes to the root of the matter and strikes at the very foundation of the assessment and, therefore, renders the assessment order passed by the AO not sustainable.”
The Hon’ble Supreme Court of India in the case of Ayaaubkhan Noorkhan Pathan v. State of Maharashtra & others reported in [(2013) 4 SCC 465], has inter alia held that the opportunity of cross examination be made available, and such opportunity should be one of effective cross examination, so as to meet the requirement of the principles of natural justice. “In the absence of such an opportunity, it cannot be held that the matter has been decided in accordance with law, as cross examination is an integral part and parcel of the principles of natural justice." Further,
12 ITA.NOs. 1188 to 1194/MUM/2021 Kiritkumar Dharsibhai Suba Constitution Bench of the Hon’ble Supreme Court of India in State of M.P. v. Sadashiuva Vishampayan reported in AIR 1961 SC 1623, has also confirmed the principle that, the rules of natural justice require that a party should be given the opportunity of cross-examining a witness.
There has been gross violation of the principles of natural justice and bearing in mind the above judicial precedents, we have no hesitation in holding that there was gross violation of principles of natural justice and fair play as the additions has been made without providing an opportunity to the assessee to cross examine those persons whose statements has been relied upon by the AO. And as regards merits of the case, we find that the issue is covered in favour of the assessee by the decision of the Coordinate bench in assessee’s group case of M/s Hemadri Machine Tools Private Limited wherein the alleged bogus donation on which the commission is alleged to have been earned was deleted.
Thus in view of above findings and also considering the merits of the case in that there is no incriminating material/corroborative evidence to affirm the receipt of commission income, all the grounds stand allowed. The addition made by AO accordingly stands deleted.
13 ITA.NOs. 1188 to 1194/MUM/2021 Kiritkumar Dharsibhai Suba 19. Coming to the appeals relating to other assessment years, since facts in these cases are mutatis mutandis, therefore the decision taken in A.Y. 2012-13 is applicable to these Assessment Years also. Accordingly, these appeals are also allowed.
In result, the assessee’s appeals for AY 2012-13, AY 2013-14, AY 2014-15, AY 2015-16, AY 2016-17, AY 2017-18 and AY 2018-19 are allowed.
Order pronounced in the open court on 28.04.2022