SHRI ABDUR RASHID,ALIGARH vs. DEPUTY COMMISSIONER OF INCOME-TAX,CIRCLE, LUCKNOW

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “A”, LUCKNOW BEFORE SHRI. A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA No.145 & 146/LKW/2018 Assessment Year: 2009-10 Abdur Rashid v. DCIT C/o Deepak Singh, Advocate International Taxation 2, Court of Wards Compound Circle Aligarh Lucknow TAN/PAN:AQUPR8710L (Appellant) (Respondent) Appellant by: Shri Deepak Singh, Advocate Respondent by: Shri C. K. Singh, D.R. Date of hearing: 07 03 2019 Date of pronouncement: 08 03 2019 O R D E R PER A. D. JAIN, V.P.: These are assessee’s appeals against the orders of the ld. CIT(A)-2, Noida dated 27/12/2017 for the assessment year 2009-10, passed in the quantum proceedings, and the other passed in penalty proceedings, under section 271(1)(c) of the Act. 2. In the quantum appeal, the following grounds have been raised:- (1) Because the ld. CIT(A) was not erred in confirming the addition of Rs.20,00,000 for alleged donation to an educational Institution. (2} Because the Ld. CIT(A) has erred in not giving proper opportunity of being heard. (3) Because the order appealed against is contrary to the facts, law and principles of natural Justice. 3. In the penalty appeal, the following are the grounds taken:-

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(1) Because the Ld. CIT(A) has erred in confirming the levy of penalty of Rs.6,32,496 u/s 271(1)(c) of Income Tax Act,1961. (2) Because the Ld. CIT(A) has erred in not giving proper opportunity of being heard. (3) Because the order appealed against is contrary to the facts, law and principles of natural justice. 4. The brief facts of the quantum appeal in ITA No.145/LKW/2018 are that a search and seizure proceedings under section 132 of the Act was carried out on 27/6/2013 in the business premises of Santosh group of Institutions and Dr. P. Mahalingam, Ghaziabad, Chairman of the Trust running the Santosh Medical College. Several documents/books of account were seized from the premises H-1 to 6, Santosh Nagar, Pratap Vihar, Ghaziabad, which contain the details of donation/capitation fee over and above the regular course fees, paid in cash by the parents of students taking admission in various medical courses during F.Ys. 2007-08 to 2012-13. According to the assessment order, the documents seized from the premises showed that the assessee had made a cash donation of Rs.20,00,000/- to Santosh Medical College. The assessee denied to have made any such cash payment to Santosh Medical College. The Assessing Officer did not accept the contention of the assessee and made an addition of Rs.20,00,000/- under section 69C of the Act to the total income of the assessee. The ld. CIT(A) has dismissed the assessee’s appeal by virtue of the impugned order. 5. The ld. A.R. of the assessee has contended that the ld. CIT(A) has erred in dismissing the appeal despite the fact that no opportunity has been provided to the assessee to cross-examine Dr. P. Mahalingam, whose statement, recorded at the back of the assessee, has been used to make the addition in question. It has been contended that only two pages, i.e., page Nos.52 and 53, of the ledger of the Register seized

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during the search conducted at the business premises of the Santosh group of Institutions, were confronted to the assessee; that these two pages do not reflect any payment of the amount of Rs.20,00,000/- as donation to Santosh Medical College by the assessee. It has also been contended that the alleged incriminating material was found from the possession of the party searched, i.e., a third party, and not from the possession of the assessee; that this being so, the presumption contained in section 132(4A) of the Act, is not applicable in the absence of any corroborative evidence whatsoever. 6. On the other hand, relying on the impugned order, the ld. D.R. has contended that as noted by the ld. CIT(A), Dr. P. Mahalingam repeatedly did not attend the proceedings when he was called for cross- examination by the assessee, which was the reason why no cross- examination was possible; that, however, the statement of Dr. P. Mahalingam had been duly confronted to the assessee. 7. Heard. It remains undisputed that the statement of Dr. P. Mahalingam, Chairman of the Trust running Santosh Medical College, to which Institution, the assessee is alleged to have made cash donation of Rs.20,00,000/-, was recorded at the back of the assessee. It finds mention in the impugned order, that in response to summons issued to him under section 131 of the Act, Dr. P. Mahalingam did not attend the proceedings before the Assessing Officer on 2/8/2017 or thereafter upto 20/11/2017. The assessee was, therefore, denied his right of cross- examining Dr. P. Mahalingam. The ld. CIT(A), however, has dismissed the appeal of the assessee, relying on “Motilal Padampat Udyog Ltd. vs. CIT”, 160 Taxman 233 (Alld.). The facts in that case, as rightly contended, are not at parity with those attending the present one. There, the assessee had requested that if the statement of the third party had not been recorded, it may be recorded and the assessee be

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given opportunity of cross-examination. The statement of the third party had already been recorded and so, there was no occasion to record a fresh statement and to allow cross-examination thereon. On the contrary, in the present case, the statement of Dr. P. Mahalingam had been recorded at the back of the assessee and the assessee was denied cross-examination of the deponent, which fact also stands taken note of by the ld. CIT(A). 8. Now, it is trite law that merely confronting the statement recorded at the back of the assessee, to the assessee, in the absence of providing a cross-examination of the maker of the statement, is in complete violation of the natural justice principle of audi alterem partem. Undisputedly, even the ld. CIT(A) himself had remanded the matter to the Assessing Officer for providing due opportunity of cross- examination of Dr. P. Mahalingam to the assessee. Non-appearance of Dr. P. Mahalingam for the purpose of cross-examination cannot be made the basis of throwing out the assessee and confirming the addition based on the mere statement of Dr. P. Mahalingam, without affording due opportunity to the assessee to cross-examine Dr. P. Mahalingam, particularly in the face of the fact that such statement was recorded at the back of the assessee and the assessee had no occasion to rebut the same by cross-examining Dr. P. Mahalingam. The Assessing Officer has ample powers to ensure the presence of Dr. P. Mahalingam for the purpose of cross-examination by the assessee. 9. As per section 131 of the Income Tax Act, 1961, the AO shall, for the purposes of the Act, have the same powers as are vested in a Court under the Code of Civil Procedure, 1908, when trying a suit, in respect of, inter-alia, enforcing the attendance of any person and examining him on oath. Section 131(1)(b) (relevant portion) of the Act reads as follows:

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131(1): The AO ............. shall, for the purposes of this Act, have the same powers as are vested in a Court under the Code of Civil Procedure, 1908…………when trying a suit in respect of the following matters, namely:- (a) ......... (b) "Enforcing the attendance of any person……………. and examining him on oath." 10. Section 120(1) of the Act states that Income-tax authorities shall exercise all or any of the powers assigned to them by or under the Act, in accordance with such directions as C.B.D.T. may issue for the exercise of the said powers. 11. Section 124(1) of the Income-tax Act provides, amongst other things, that where by virtue of any direction or order issued u/s 120(1), the AO has been vested with jurisdiction over any area, within the limits of such area, he shall have the jurisdiction in respect of any person carrying on a business or profession, if the place of such business or profession is situate within the area, and in respect of any other person residing within the area. Section 124(1) reads as follows: “Section 124(1) : Where by virtue of any direction or order issued under subsection (1) or sub-section (2) of section 120, the Assessing Officer has been vested With jurisdiction over any area, within the limits of such area, he shall have jurisdiction— (a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and (b) in respect of any other person residing within the area.” 12. From the above provision, it is evident that the AO of an area has jurisdiction over the persons either carrying on business or profession within such area, or residing therein. Such AO, as the

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designation itself suggests, assesses the income of the residents of his area. Therefore, he is the Adjudicating Authority of his area. For such adjudication, the AO would require the attendance of persons, for examining them as witnesses. It is for enforcing such attendance of witnesses, that the AO has been vested with the same powers as are vested in a Court under the Code of Civil Procedure, when trying a suit. 13. Now, as per section 30(b) of the C.P.C., the Court may issue summonses to persons whose attendance is required, either to give evidence, or to produce documents, or other material objects producible as evidence. For ready reference, section 30 of the Code of Civil Procedure, is reproduced hereunder: "30. Power to order discovery and the like.- Subject to such conditions and limitations as may be prescribed, the Court may, at any time, either of its own motion or on the application of any party, - (a) make such orders as may be necessary or reasonable in all matters relating to the delivery and answering of interrogatories, the admission of documents and facts, and the discovery, inspection, production, impounding and return of documents or other material objects producible as evidence; (b) issue summonses to persons whose attendance is required either to give evidence or to produce documents or such other objects as aforesaid; (c) order any fact to be proved by affidavit.” 14. The AO, thus, has the power to enforce the attendance of witnesses in matters pending before him, in a manner similar to the powers vested in a Court under the Code of Civil Procedure, when trying a suit. This position includes matters involving cross-examination. 15. In view of the above, considering the prejudice caused to the assessee by way of non-grant of opportunity to cross-examine Dr. P. Mahalingam, this matter is remitted to the file of the Assessing Officer,

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to be decided afresh in accordance with law, on affording due and adequate opportunity to the assessee, to cross-examine Dr. P. Mahalingam. The Assessing Officer shall ensure attendance of Dr. P. Mahalingam for this purpose. The assessee shall co-operate in the fresh proceedings before the Assessing Officer. The Assessing Officer shall also take into consideration and decide the other issues raised by the assessee as noted in the earlier part of this order. All pleas available under the law shall remain so available to the assessee. Ordered accordingly. 16. Since the quantum appeal has been remitted to the file of the Assessing Officer, as above, the penalty appeal in ITA No.146/LKW/2018 is also remitted to the file of the Assessing Officer, to be decided afresh in accordance with law, based on the result to be arrived at by the Assessing Officer in the quantum matter. 17. In the result, both the appeals are treated as allowed, for statistical purposes. Order pronounced in the open Court on 08/03/2019.

Sd/- Sd/- [T. S. KAPOOR] [A. D. JAIN] ACCOUNTANT MEMBER VICE PRESIDENT DATED:8th March, 2019 JJ:0703 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order Assistant Registrar