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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
This appeal by the assessee is directed against the order of Commissioner Income Tax (Appeals) -54, Mumbai [in short ‘the CIT(A)’] dated 03/10/2019 for the assessment year 2017-18. 2. The assessee in appeal has assailed addition of Rs.5,50,00,000/- as undisclosed investment under section 69 of the Income Tax Act, 1961( in short ‘the Act’) on account of alleged on-money paid for purchase of residential flat.
The assessee has also raised legal ground in not affording opportunity of cross – examination of persons on whose statements addition has been made.
Shri Yogesh Thar appearing on behalf of the assessee submitted that a search action was carried out at the premises of Indiabulls Group on 13/07/2016 and simultaneously survey under section 133A of the Act was conducted on 13/07/2016 at the premises of the assessee. During the course of search under section 132 of the Act in the case of Indiabulls Group a laptop was found and seized from the chamber of Shri Ashok Sharma, CFO of Indiabulls Group. From the said Laptop one excel sheet was extracted. The same is at page 24 of the Paper Book, wherein the names Kubier/ Pranav Shah were mentioned against some figures stated to be the amounts in thousands with dates. The Assessing Officer linked the said document with the assessee and interpreted that the amounts mentioned against the names and the dates signify the amount paid as on-money for purchase of flat. The ld.Authorized Representative of the assessee submitted that notice under section 153C of the Act dated 29/09/2018 was served on the assessee followed by notice under section 142(1) of the Act dated 16/11/2018. In response to the aforesaid notices the assessee vide letter dated 19/11/2018 (at page 39 of paper book) requested the Assessing Officer to provide certified copies of seized material collected during survey and the statements recorded in the course of survey proceedings, copy of documents found and seized from the premises of Indiabulls Group on the basis of which notice under section 153C was served on the assessee, copy of statements of the officials/directors/persons connected with Indiabulls which has a bearing on assessment of the assessee. Thereafter, the assessee vide another communication dated 10/12/2018 (at page 40 of the paper book) again asked the Assessing Officer for providing copies of the statements recorded in the course of search and other relevant documents, statements, etc. The Assessing Officer in response to aforesaid requests only provided one excel sheet (page 24 of Paper Book) to the assessee. No other statement recorded during search action was provided to the assessee and no effective opportunity was given to the assessee to cross examine the persons on the basis of whose statements addition under section 69 of the Act was made by the Assessing Officer. The ld.Authorized Representative of the assessee pointed that the Assessing Officer provided only one opportunity to cross examine Kubier Khera the representative of Indiabulls Group. The Assessing Officer vide intimation letter dated 19/12/2018 was allowed to cross examine Kubier Khera on 21/12/2018. The assessee expressed his inability to cross examine Kubier Khera at such a short notice as the assessee was unwell on that date and further the assessee was not able to consult his counsel in that brief time of 48 hours. No further opportunity was granted by the Assessing Officer for cross examination. The Assessing Officer made addition of Rs.5,50,00,000/- in the hands of assessee under section 69 of the Act on account of on-money paid to Indiabulls Infraestate Ltd.
Aggrieved by the assessment order dated 28/12/2018, the assessee filed appeal before the CIT(A), inter-alia, assailing validity of assessment order in the absence of proper opportunity to cross examine Kubier Khera and Ashok Sharma on whose statements the addition was made in the hands of the assessee under section 69 of the Act. The CIT(A) rejected assessee’s request for cross examination and confirmed the addition made under section 69 of the Act. The ld.Authorized Representative of the assessee submitted that non- grant of opportunity to cross examine the persons on the basis of whose statements additions have been made in the hands of the assessee is fatal to the assessment proceedings, the assessee seeks an opportunity to cross examine the persons whose statements are vital and instrumental resulting in addition under section 69 of the Act. The ld.Authorized Representative of the assessee prayed that the statement of Kubier Khera , Ashok Sharma, CFO Indiabulls Group and other officials of Indiabulls Group, if any relevant to the assessment of the assessee be provided to the assessee before granting an opportunity of cross-examination to the assessee. Non-grant of opportunity to cross-examine before making addition is clear violation of principles of natural justice.
On the other hand, Shri J. Saravanan representing the Department vehemently defended the order of CIT(A). The ld.Departmental Representative submitted that the assessee was given opportunity to cross examine, however, the assessee failed to avail that opportunity. No useful purpose would be served to provide opportunity again to the assessee. The relevant document excel sheet found and seized during the course of search at the premises of Indiabulls Group is self explanatory and clearly indicate that the assessee has paid on-money for purchase of flat to India Bulls through Kubier Khera. A copy of said excel sheet has already been provided to the assessee. The ld.Departmental Representative prayed for dismissing the appeal and upholding the assessment order.
We have heard the submissions made by rival sides, examined the orders of authorities below and the documents filed by the assessee in the form of Paper Book. The assessee in appeal has assailed addition on merits as well as, for non-grant of opportunity to cross examine by the authorities below. The ld.Authorized Representative of the assessee has primarily assailed the assessment proceedings and the order of CIT(A) on the ground that fair opportunity to cross examine the persons on whose statements the addition under section 69 of the Act was made/upheld were not provided to the assessee. A perusal of the communication dated 19/11/2018 (page 39 of the Paper Book ) shows that the assessee had requested the Assessing Officer to provide certified copies of seized material collected from the surveyed premises and the statements recorded in the course of proceedings u/s 132 of the Act. Except for one excel computer sheet (page 24 of Paper Book ) no other document was provided to the assessee. The assessee had sought opportunity from the Assessing Officer to cross examine Kubier Khera representative of Indiabulls Infraestate Ltd. and Ashok Sharma CFO, Indiabulls Group. The Assessing Officer vide letter dated 19/12/2018 gave opportunity to the assessee to cross examine Kubier Khera on 21/12/2018. However, it is relevant to mention here that the assessee was not provided with statement made by Kubier Khera till that time. The assessee expressed his inability to cross examine Kubier Khera at such a short notice of 48 hours. Thereafter, no further opportunity was granted to the assessee by the Assessing Officer to cross examine either Kubier Khera or Ashok Sharma. The so called opportunity granted by the Assessing Officer was merely a formality and cannot be said to a fair opportunity in legal jurisprudence.
In the first appellate proceedings the assessee again requested for grant of opportunity to cross examine Kubier Khera and Ashok Sharma. The CIT(A) denied the opportunity by observing as under:-
“5.8 ……………The letter to the assessee informing him about the cross examination on 21.12.2018 was served on the assessee on 19/12/2018. The learned Counsel argued that 48 hours is too short a period to prepare for cross examination. This argument does not have any logic as the cross examination required by the assessee does not need any great preparation, Besides, the assessee has been asking for it for quite some time and he would have been in a prepared state of mind any day. But the assessee merely made an excuse of back ache and did not appear for cross examination. The assessee did not utilize the opportunity of cross examination and on the contrary he is blaming the AO for granting perfunctory opportunity of cross examination which was merely a ruse to mislead the assessee and the appellate authority etc. which is completely absurd and illogical. According to him, the cross examination of Shri Ashok Sharma should have been provided first which does not make any sense .Moreover, even if cross examination of Ashok Sharma was provided, there is all probability that the assessee would have made a similar excuse and would have avoided it. When an opportunity was provided, the assessee chose not to utilize it and blaming the AO for not providing cross examination or blaming him that the opportunity was merely a ruse to mislead the assessee and the appellate authorities, is not right.”
A perusal of the above extract from the order of CIT(A) clearly indicates that the First Appellate Authority undermines the significance of principles of natural justice. The Hon'ble Apex Court has time and again held that denial of cross examination of persons, whose statements were relied upon, amount to violation of principles of natural justice. In the case of Andaman Timber Industries Vs. CCE in CA No. 4228 of 2006 decided on 2nd September, 2015, the Hon'ble Supreme Court of India has held that not allowing the assessee to cross examine the witness whose statement were relied upon for making the addition is a serious flaw which makes the order nullity in as much as it amounts to violation of principles of natural justice. Thus, any addition made on the basis of statement recorded at the back of assessee without allowing opportunity to cross-examine is against the principles of natural justice and, hence, is unsustainable.
In the facts and circumstances of the case we deem it appropriate to restore this case back to the file of Assessing Officer with following directions: (i) The Assessing Officer shall provide copy of the statements and all relevant documents necessary and in connection with the addition u/s 69 of the Act in the hands of the assessee, (ii) The Assessing Officer shall provide effective opportunity to cross examine the persons on whose statement the Assessing Officer would be placing reliance to make the addition u/s 69 of the Act. (iii) The Assessing Officer shall thereafter complete the assessment after affording reasonable opportunity of hearing to the assessee, in accordance with law.
In the result, impugned order is quashed and appeal of the assessee is allowed for statistical purpose in the terms aforesaid.
Order pronounced in the open court on Monday the 24th day of January, 2022.