P MITTAL MANUFACTURING PVT. LTD.,NEW DELHI vs. ITO, WARD- 19(2), NEW DELHI

This appeal is filed by the assessee against the impugned order of the Ld. CIT(A)-7, New Delhi, dated 24.8.2018 for the A.Y. 2010-11.

certain persons to implicate an assessee, principles of cross examination have to be invariably followed as not providing opportunity to cross examine is violative of principles of natural justice. He further stated that where revenue strongly relies on statements of certain persons to implicate an assessee, principles of cross examination have to be invariably followed if truth and justice need to be found out. He stated that the answer has been given by the Bench positive in the case Amitabh Bansal vs. Income Tax Officer, Ward 46(4), New Delhi (2019) 102 taxmann.com 229 (Supra) and therefore, requested to follow the same ratio in the case of the assessee and addition in dispute may be deleted and appeal of the assessee may be allowed.

in the case of Amitabh Bansal vs. Income Tax Officer, Ward 46(4), New Delhi (2019) 102 taxmann.com 229of has been reproduced as under:-

“8.6 Now adverting to second issue framed above on impact of cross examination, I strongly rely on the following string of decisions of various courts to hold that when revenue strongly relies on statements of certain persons to implicate an assessee, principle of cross examination has to invariably followed if truth and justice needs to be found out. Following recent jurisprudence as relied by Ld AR is supportive to my view: IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR ITA No. 997 to 1002/JP/2018 & 1119/JP/2018 M/s. Kota Dall Mill Date of Pronouncement : 31/12/2018. 11.1. Even otherwise, the assessment order is solely based on the report of the Investigation Wing Kolkata which in turn is nothing but the narration of the statements recorded during the investigation and the AO was having in possession the statement of only Shri Anand Sharma. Therefore, all these proceedings conducted by the Investigation Wing Kolkata were at the back of the assessee and hence the statement which is the foundation of the report of the Investigation Wing Kolkata as well as the assessment order cannot be accepted in the absence of giving an opportunity of cross examination to the assessee. We find that the assessee has insisted for cross examination during the assessment proceedings and further during the appellate proceedings. The ld.CIT(A) even called for a remand report and directed the AO to allow cross examination to the assessee. However, the AO has expressed his inability to allow the assessee cross examination of the witnesses due to the reason that the witnesses belong to Kolkata and it is not possible for AO to make such arrangement. The ld. CIT(A) has finally

denied the cross examination to the assessee by giving his finding in para 5.11 at page 188 already reproduced in the earlier part of this order and, therefore, the only reason for denial of cross examination by the ld.CIT(A) is that the statements are so vocal and undeniable that cross examination of such accommodation entry provided by thousands of beneficiaries across India is neither practicable nor viable and therefore uncalled for. We find that the assessee has demanded the cross examination only in respect of the alleged transactions of loans and not for the entire business of the entry providers providing the bogus entries. Undisputedly, the statement of Shri Anand Sharma was recorded by the Investigation Wing Kolkata at the back of the assessee, even the proceedings by the Investigation were conducted at the back of the assessee, therefore, the said statement of Shri Anand Sharma cannot be the sole basis of assessment without giving an opportunity of cross examination to the assessee. The Hon’ble Supreme Court in the case of Andaman Timber Industries vs. CCE (supra) while dealing with the issue of violation of principles of natural justice for not providing the opportunity of cross examination of the witnesses whose statements were relied on by the AO has held in para 6 to 9 as under :- Once the assessee has disputed the correctness of the statement and wanted to cross examine the witness which was not given by the AO as well as ld. CIT(A), then the orders passed based on such statement are not sustainable in law. The Hon’ble Delhi High Court in case of CIT vs. Ashwani Gupta, 322 ITR 396 (Delhi) while dealing with the issue of not providing the opportunity to cross examine the witnesses has held in para 5 to 7 as under :- Thus the Hon’ble High Court has held that once there is a violation of principles of natural justice inasmuch as seized material is not provided to the assessee nor is cross examination of the person on whose statement the AO relied upon, granted, then, such deficiencies would amount to denial of opportunity and consequently would be fatal to the proceedings.

The Hon’ble Bombay 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 in para 11 to 17 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 ld. A/R has submitted that Coordinate Bench of this Tribunal in the case of DCIT vs. Shri Prateek Kothari vide order dated 16th December, 2012 in ITA No. 159/JP/2016 has considered this issue in para 2.8 to 2.11 as under :- “2.8 We have heard the rival contentions and perused the material available on record. The transaction under question relates to unsecured loans taken by the assessee amounting to Rs 1 Crores from M/s Mehul Gems Pvt Ltd during the impunged assessment year and not accepting the said loan transaction as a genuine transaction by the Assessing officer and the resultant addition made under section 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of tax filings, affidavits and confirmation of the Directors, bank statements of the lender, balance sheet of the lender company, and an independent confirmation has also been obtained by the Assessing officer to satisfy the cardinal test of identity, creditworthiness and genuineness of the loan transaction. However, the Assessing officer has not given any finding in respect of such explanation, documentary evidence as well as independent confirmation. Apparently, the reason for not accepting the same is that the Assessing officer was in receipt of certain information from the investigation wing of the tax department as per which the transaction under consideration is a bogus loan transaction. The said information received from the investigation wing thus overweighed the mind of

the Assessing officer. The Assessing officer stated that the primary onus is on the assessee to establish the genuineness of the transaction claimed by it and if the investigation done by the department leads to doubt regarding the genuineness of the transactions, it is incumbent on the assessee to produce the parties alongwith necessary documents to establish the genuineness of the transaction. In response, the assessee submitted that Shri Bhanwarlal Jain is not known to him and regarding various incriminating documentary evidences seized during the course of search and statements recorded of Shri Bhanwarlal Jain and other persons, he specifically requested the AO to provide copies of such incriminating documents and statement of all various persons recorded in this regard and provide an opportunity to the assessee to cross examine such persons. However, the AO didn’t provide to the assessee copies of such incriminating documents and statements of various persons recorded and allow the cross-examination of any of these persons. While doing so, the AO stated that “in his statements, Bhanwarlal Jain had described that they are indulged in providing accommodation entries of bogus unsecured loans and advances through various Benami concerns (70) operated and managed by them. This admission automatically makes all the transactions done by them as mere paper transactions and in these circumstances, further as per the information name and address of assessee and the Benami Concern through which accommodation entry of unsecured loans was provided is appearing in the list of beneficiaries to whom the said Group has provided. This admission is sufficient to reject the contentions of the asseesse.” Further, regarding cross examination, the AO stated that “the right of cross examination is not an absolute right and it depends upon the circumstances of each case and also on the statute concerned. In the present case, no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said

group categorically contains the name and address of the assessee. Further the group has categorically admitted to providing of accommodation entries of unsecured loans through various benami concerns.” The AO further relied upon the decision of Hon’ble Supreme Court in the case of C. Vasantlal & Co. Vs. CIT 45 ITR 206(SC) and Hon’ble Rajasthan High Court in case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) among others. In this regard, it was submitted by the assessee that if the entries and material are gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the cross examination and if this is not done, the principles of natural justice stand violated. 2.9 In light of above discussions, in our view, the crux of the issue at hand is that whether the principle of natural justice stand violated in the instant case. In other words, where the AO doesn’t want to accept the explanation of the assessee and the documentation furnished regarding the genuineness of the loan transaction and instead wants to rely upon the information independently received from the investigation wing of the department in respect of investigation carried out at a third party, can the said information be used against the assessee without sharing such information with the assessee and allowing an opportunity to the assessee to examine such information and explain its position especially when the assessee has requested the same to the Assessing officer. 2.10 In this regard, the Hon’ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775 (SC) (Copy at Case Law PB 812- 818) has held that “The rule of law on this subject has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Sinqh where it was stated that while proceeding under sub-section (3) of section 23, the Income-tax Officer, though not bound to rely on evidence produced by the assessee

as he considers to be false, yet if he proposes to make an estimate in disregard of that evidence, he should in fairness disclose to the assessee the material on which he is going to find that estimate; and that in case he proposes to use against the assessee the result of any private inquiries made by him, he must communicate to the assessee the substance of the information so proposed to be utilized to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and that he should further give him ample opportunity to meet it.” It was held in that case that “In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the assessee had not had a fair hearing.” The Hon’ble Supreme Court in case of C. Vasantlal & Co. Vs. CIT 45 ITR 206 (SC) has held that “the ITO is not bound by any technical rules of the law of evidence. It is open to him to collect material to facilitate assessment even by private enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The statements made by Praveen Jain and group were material on which the IT authorities could act provided the material was disclosed and the assessee had an opportunity to render their explanation in that regard.” The Hon’ble Supreme Court in case of Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) (Copy at Case Law PB 585-591) has held that “whether there was any material evidence to justify the findings of the Tribunal that the amount of Rs.1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee.

The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter, dated 18-2-1955 said to have been addressed by the manager of the bank to the ITO. Now it is difficult to see how this letter could at all be relied upon by the Tribunal as a material piece of evidence supportive of its finding. In the first place, this letter was not disclosed to the assessee by the ITO and even though the AAC reproduced an extract from it in his order, he did not care to produce it before the assessee or give a copy of it to the assessee. The same position obtained also before the Tribunal and the High Court and it was only when a supplemental statement of the case was called for by this Court by its order, dated 16-8-1979 that, according to the ITO, this letter was traced by him and even then it was not shown by him to the assessee but it was forwarded to the Tribunal and it was for the first time at the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case that this letter was shown to the assessee. It will, therefore, be seen that, even if we assume that this letter was in fact addressed by the manager of the bank to the ITO, no reliance could be placed upon it, since it was not shown to the assessee until at the stage of preparation of the supplemental statement of the case and no opportunity to cross examine the manager of the bank could in the circumstances be sought or availed of by the assessee. It is true that the proceedings under the income-tax law are not governed by the strict rules of evidence and, therefore, it might be said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the income-tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him.” 2.11 In light of above proposition in law and especially taking into consideration the decision of

the Hon’ble Supreme Court in case of C. Vasantlal & Co. (supra) relied upon by the Revenue and which actually supports the case of the assessee, in the instant case, the assessment was completed by the AO relying solely on the information received from the investigation wing, statement recorded u/s 132(4) of Shri Bhanwarlal Jain and others, and various incriminating documentary evidence found from the search and seizure carried out by Investigation Wing, Mumbai on the Shri Bhanwarlal Jain group on 03.10.2013. It remains undisputed that the assessee was never provided copies of such incriminating documents and statements of Shri Bhanwarlal Jain and various persons and an opportunity to cross examine such persons though he specifically asked for such documents and cross examination. On the other hand, the burden was sought to be shifted on the ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur 21 assessee by the A.O. It is clear case where the principle of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same. The order of the ld CIT(A) is accordingly confirmed and the ground of the Revenue is dismissed.” Thus when the assessee has specifically asked for cross examination of the witnesses whose statements were relied upon by the AO, then the denial of the opportunity to cross examine would certainly in violation of principles of natural justice and consequently renders the assessment order based on such statement as not sustainable in law. Hence in view of the facts and circumstances of the case where the assessee has repeatedly requested and demanded the cross examination of the witnesses whose statements were relied upon by the AO in the assessment order and further the report of the DDIT Investigation Kolkata is also based on the statement of such person then the denial of cross examination by the AO as well as ld. CIT (A) despite the fact that the assessee was ready to bear the cost of the cross examination of the witnesses is a gross

violation of principles of natural justice. Thus the additions made by the AO on the basis of such statement without any tangible material is not sustainable in law and liable to be deleted. Accordingly the addition made by the AO is also deleted on merits apart from the legal issue decided in favour of the assessee. APPELLATE TRIBUNAL, FOREIGN EXCHANGE MANAGEMENT ACT AT NEW DELHI Date of Decision:-13.04.2018 (1) FPA-FE-01/DLI/2018 Shri Ashwani Kumar Mehra … Appellant Versus Shri A.H. Khan Directorate of Enforcement, Delhi … Respondent CORAM JUSTICE MANMOHAN SINGH : CHAIRMAN SHRI G.C. MISHRA : MEMBER JUDGEMENT FPA-FE-01/DLI/2018, FPA-FE-03/DLI/2018, FPA-FE- 04/DLI/2018 & FPA-FE-05/DLI/2018 “54. “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, but it 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.” The 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. i) In Prem Singh Vs. Special Director, Enforcement Directorate, CRL A. 276 of 2008, Delhi High Court, decided on 24.04.2014, whereby it was held that the denial of right to cross examine the witnesses would cause prejudice to the accused as statements of witnesses are not substantive evidence in themselves. It was held in the said judgement that delay is not a ground for disallowing the opportunity to cross examine witnesses. The court laid down that: ―18. The impugned order of the AO fails to discuss this aspect although it has noticed the submission of learned counsel for the appellants that the said statements had been retracted as they had been given under threat and coercion. In order to determine whether the claim of the appellants that they were subjected to torture, threat and coercion was a credible one, the SD sought to have permitted the appellants to cross-examine the officers of the ED who recorded the statements. As regards Prem Singh, his statement is stated to have been recorded by A.K. Narang, Assistant Director. The statement of Rajendra Singh was recorded by Devender Malhotra. Neither of these officers was tendered for cross- examination. In the considered view of the Court, in the context of the specific allegation that the retracted confessional statements were obtained under torture and coercion, that aspect ought to have been examined by the SD. In the circumstances, the reasons given by the SD in the impugned AO for disallowing the request of the appellants for cross-examination of the ED officials only because it would tantamount to “further delay in finalising the proceeding” were not tenable or justified. The denial of cross examination of the ED officials by the appellants indeed has caused them severe prejudice since the ED was relying on the said statements as if they were by themselves substantive evidence.” (iii) The Hon’ble High Court of Delhi in Devashis Bhattacharya Vs. Union of India 159 (2009) DLT

780, while deciding a case under Foreign Exchange Regulation Act, 1973 had observed that: ―18. It is well settled that where an action under the statute entails civil consequences, then even if an opportunity of being heard may not be explicitly set out in the applicable legal provisions, the adherence to the principles of natural justice has to be read into such a statute. 19. There can be no dispute that the action permitted under section 61 of the FERA, 1973 certainly results in drastic penal consequences… (iv) The Hon’ble Supreme Court of India in Ramesh Ahluwalia Vs. State of Punjab & Ors. 2012 (10) SCALE 46 had observed that: ―18. This is in conformity with the principle that justice must not only be done. Actual and demonstrable fair play must be the hallmark of the proceedings and the decisions of the administrative and quasi judicial courts. In particular, when the decisions taken by these bodies are likely to cause adverse civil consequences to the persons against whom such decision are taken. IV-A The Hon’ble Supreme Court of India in Ashiwin S. Mehta and Anr. Vs. Union of India (UOI) and Ors. (2012) 1 SCC 83 had observed that: ―27. It is thus, trite that requirement of giving reasonable opportunity of being heard before an order is made by an administrative, quasi judicial or judicial authority, particularly when such an order entails adverse civil consequences, which would include infraction of property, personal rights and material deprivation for the party affected, cannot be sacrificed at the alter of administrative exigency or celerity. IV-B The Constitutional Bench of the Hon’ble Supreme Court of India in Khem Chand Vs. Union of India AIR 1958 SC 300 has defined the meaning of the term ―reasonable opportunity to include an opportunity to defined by cross-examining the

witnesses produced against the accused. The Hon’ble court held that: ―To summarize: the reasonable opportunity envisaged by the provision under consideration includes- (a) An opportunity to deny his guilt and establish his innocence, which he can only do if he is told what the charges leveled against him are and the allegations on which such charges are based; (b) An opportunity to defend himself by cross- examining the witnesses produced against him and by examining himself or any other witnesses in support of his defense; and finally (c) An opportunity to make his representation as to why the proposed punishment should not be inflicted on him. iv). The Hon‟ble Supreme Court of India in Ayubkhan Noorkhan Pathan Vs. The State of Maharashtra & Ors. Decided on 08.11.2012, Civil Appeal No. 7728 of 2012, after relying upon various authoritative judgments, has observed that cross-examination is an integral part and parcel of the Principles of Natural Justice. It held that Cross-examination is one part of the principles of natural justice. (v) A Constitution Bench of the Hon‟ble Supreme Court in State of M.P. v. Chintaman Sadashiva Vaishampayan, AIR 1961 SC 1623, has held that the Principle of Natural Justice require that a party be given the opportunity to adduce all relevant evidence upon which it relies, that evidence of the opposite party be taken in his presence, and that he be given the opportunity to crossexamine the witnesses examined by that party. Not providing the said opportunity to cross-examine is violative of the Principles of Natural Justice. (vi). In Lakshman Exports Ltd. v. Collector of Central Excise, (2005) 10 SCC 634, the Apex Court, while dealing with a case under the Central Excise Act, 1944, considered whether to grant permission for cross-examination of a witness. In that case, the

assessee had specifically asked to be allowed to crossexamine the representatives of the concerned firm, in order to establish that the goods in question had been accounted for in the firm‟s books of accounts and excise duty had been paid thereof. The Court held that such a request could not be turned down, as the denial of the right to cross-examine, would amount to a denial of the right to be heard i.e. audi alteram partem. (vii). In K.L. Tripathi v. State Bank of India & Ors., AIR 1984 SC 273, the Hon‟ble Supreme Court has held that in order to sustain a complaint of violation of the Principles of Natural Justice on the ground of denial of opportunity to crossexamine, it must be established that some prejudice has been caused to the party by the procedure followed. A party which does not want to controvert the veracity of the evidence on record or does not want to controvert the testimony gathered behind its back cannot expect to succeed in any subsequent grievance raised by him on the ground that no opportunity of cross-examination was provided to him especially when the same was not requested and especially when there was no dispute regarding the veracity of the statement. (viii). In Rajiv Arora v. Union of India & Ors., AIR 2009 SC 1100, the Apex Court held: ―Effective cross-examination could have been done as regards the correctness or otherwise of the report, if the contents of them were proved. The principles analogous to the provisions of the Indian Evidence Act as also the principles of natural justice demand that the maker of the report should be examined, save and except in cases where the facts are admitted or the witnesses are not available for cross-examination or similar situation. The High Court in its impugned judgment proceeded to consider the issue on a technical plea, namely, no prejudice has been caused to the appellant by such non-examination. If the basic principles of law have not been complied with or there has been a gross violation of the principles of natural justice, the High

Court should have exercised its jurisdiction of judicial review.” ix). The Hon‟ble Supreme Court of India in New India Assurance Company Ltd., v. Nusli Neville Wadia & Anr., AIR 2008 SC 876, while considering a case under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, held that though the statute may not provide for cross- examination, the same being a part of Principles of Natural Justice should be held to be an indefeasible right. It was held as follows:- ―If some facts are to be proved by the landlord, indisputably the occupant should get an opportunity to cross-examine. The witness who intends to prove the said fact has the right to cross-examine the witness. This may not be provided by under the statute, but it being a part of the principle of natural justice should be held to be indefeasible right” x). The Hon‟ble Supreme Court in Needle Industries (India) Ltd. & Ors. v. N.I.N.I.H. Ltd. & Ors., AIR 1981 SC 1298, considered a case under the Indian Companies Act, and observed that: ―It is generally unsatisfactory to record a finding involving grave consequences with respect to a person, on the basis of affidavits and documents alone, without asking that person to submit to cross- examination‖ (xi). Hon‟ble High Court in Mehar Singh Vs. The Appellate Board Foreign Exchange 1986 (10) DRJ 19, while dealing with a case under the Foreign Exchange Regulation Act, 1973, decided the appeal in favour of the Appellants on the short ground that the applications made to the Director of Enforcement and before the Appellate Board during the pendency of the appeal to summon four witnesses for cross- examination, were not dealt with by the authorities below. It was held:

―5. Non-summoning of the said witnesses for purposes of cross-examination has resulted in miscarriage of justice.‖ 55. In the nature of the seriousness of present case, the right to cross examination would have been given in view of gravity of the matter.” INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ―G‖: NEW DELHI ITA No. 1415 to 1417/Del/2018 (Assessment Year: 2013-14 to 2015-16) Shri Brij Bhushan Singal Date of pronouncement 07/12/2018 It is not in dispute that assessee has furnished all the details such as purchase bills, allotment details, demat accounts, bank statements, details of payments by cheques and sale on BSE electronic platform, proof of payment of Securities Transaction tax and receipt of payment through Cheque by an independent broker, sale bills etc which is not doubted by the revenue. The facts have already narrated by us in earlier paras, which are undisputed by both the parties. only following issues are to be decided in this appeal:- i. Whether AO can use the statements of third parties without granting crossexamination of those parties. ii. Whether without providing the copies of the statements as well as the cross examination of alleged exit providers, such evidences can be used against the assessee for making addition. iii. Whether the interim orders of the SEBI relied up on by the ld AO implicate the assessee for making addition u/s 68 of the act on alleged bogus longterm capital gains. iv. Whether Cash Trails of The buyers of the securities as stated by the ld AO makes the long-term capital gain of the assessee bogus. v. Whether the disclosure of some other persons as their undisclosed income of Long-term capital gain affects the case of the assessee also. vi. Whether de hors all the above facts addition in the hands of the assessee u/s 68 of long term capital gain can be made.

Thus, it is apparent that the assessee has not been granted an opportunity of the cross-examination of Sri R. K. Kedia and Shri Manish Arora. The learned authorised representative has relied upon the decision of the Hon‘ble Supreme Court where in relying on case of state of Madhya Pradesh vs. Chintaman sadashiv Waishampayan AIR 1961 SC 1623 wherein in para number 11, It has been held referring another decision in Union of India vs.TR Varma ―stating it broadly and without intending it to be exhaustive, it may be observed that the rules of natural justice require that the party should have the opportunity of producing all relevant evidence on which he relies, that the evidences of the appellant should be taken in his presence, and that he should be given the opportunity of cross-examining the witnesses examined by that party, and that no material should be relied on against him without he is being given an opportunity of explaining them.‖ It was further stated that it is hardly necessary to emphasize that the right to cross-examine the witnesses who give evidences against him is a very valuable right, and if it appears that effective exercise of this right has been prevented by the enquiry officer by not giving to officer relevant documents, to which he is entitled, that inevitably would be that the enquiry had not been held in accordance with the rules of natural justice. The Hon‘ble Supreme Court thereafter, referring to the another decision of the Hon‘ble Supreme Court held that the importance of giving an opportunity to the public officer to defend himself by crossexamining witness produced against him is necessary for following the rules of natural justice. Further, the decision of the Hon‘ble Supreme Court in case of Anadaman Timber industries vs. Commissioner of Central Excise (2015) 281 CTR 241 (SC) has 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 inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely

affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material, which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross- examine those dealers and what extraction the appellant wanted from them. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the crossexamination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting

the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause notice.‖ In the present case, also the assessee sought opportunity of cross-examination of the witnesses whose statements are used by the learned assessing officer against the assessee for making the addition. The assessee has contested the truthfulness of the statement of the witnesses recorded by the assessing officer. The truthfulness is also tested by the changing stands frequently. It is also not for the assessing officer to decide that no opportunity is necessary because he is not aware what could be the purpose for the cross-examination asked by the assessee. Therefore not granting of opportunity of the crossexamination of the brokers Sri RK Kedia, Manish Arora, Ankur Agarwal, directors of the companies who have purchased shares from the assessee through electronic platform of the Bombay stock exchange/ NSE and various other people as were mentioned in the assessment order is fatal to the assessment made by the assessing officer. We are also conscious of the decision of the Hon‘ble Supreme Court in case of M. Pirai Choodi vs. ITO 334 ITR 262, wherein the Hon‘ble Supreme Court while considering the decision of the Hon‘ble MP High Court in 302 ITR 40 has held that not granting an opportunity of crossexamination to the assessee is merely an regularity and therefore the High Court was not correct in cancelling the order of the adjudicating authority. Therefore, Hon‘ble Supreme Court thought it fit to set aside the matter to the adjudicating authority with a direction to grant opportunity of crossexamination to the assessee. Before us, an issue arises that whether the matter should be set aside to the file of the learned assessing officer to grant assessee an opportunity of

crossexamination of all the witnesses whose statements have been used by the learned assessing officer in the assessment order for the purpose of making the addition under section 68 of the act or to annul the assessment order itself. On careful perusal of the decision of the Hon‘ble Supreme Court, it is noted that such direction were given by the Hon‘ble Supreme Court in the case of writ petition filed by the assessee before the Hon‘ble High Court and therefore Supreme Court held that the assessee could have gone before the Commissioner Appeals to agitate this issue of cross-examination and therefore the opportunity was available to the assessee at that particular point of proceedings. In the present case, assessee has also raised the same issue before the learned CITA that cross- examination has not been provided to the assessee despite asking for the same. The learned CITA has also brushed aside the above argument of the assessee without giving any plausible reason. Therefore, when the assessee has not exhausted all the judicial process before reaching to the higher forum, but has bypassed them by invoking the different rights, then in such circumstances, the violation of the principles of natural justice, such as not granting of opportunity of the crossexamination, becomes any regularity and not an illegality. However, when the assessee has exhausted all the remedies available to him by exercising his right of the judicial process, then in such circumstances violation of the principle of natural justice, such as not granting an opportunity of cross-examination of the witness becomes an illegality. Therefore, in such circumstances, the order/addition made based on the statement of third parties and no opportunity has been granted to the assessee for their crossexamination despite repeated requests, addition deserves to be deleted. In view of our above findings, findings of the coordinate bench in assessee‘s own case for earlier years, and based on the various judicial precedent relied upon, we do not agree that document seized from third-party can be used for making addition in the hands of the

assessee without assessee being granted an opportunity of cross-examination of those parties. IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘E’ BENCH, NEW DELHI ITA No. 2576/Del/2010 Assessment year: 2003-04 Lords Distillery Limited, COMMON GRIEVANCE NO. 2 NO CROSS EXAMIANTION OF SHRI R.K. MIGLANI WAS ALLOWED BY THE REVENUE The ld. DR concluded by stating that ,in effect, Shri R.K. Miglani was an employee of the member of the UPDA and, therefore, there was no necessity for his cross examination. The contention of the ld. DR that since Shri R.K. Miglani was related to the member distilleries of UPDA, therefore it was not necessary to allow cross examination is not acceptable. The Hon'ble High Court of Delhi in the case of Shri S.N. Aggarwal 293 ITR 43 has held as under: “11. In the present case the Assessing Officer has placed reliance on the statement of Smt.Sarla Aggarwal, daughter of the assessed while arriving at the conclusion, that the entries belong to the transactions of the assessed. This statement made by Smt.Sarla Gupta, cannot be said to be relevant or admissible evidence against the assessed, since the assessed was not given any opportunity to crossexamine her and even from the statement, no conclusion can be drawn that the entries made on the relevant page belongs to the assessed and represents his undisclosed income. It is also an admitted fact that the statement of the assessed was not recorded at any stage during the assessment proceedings. The only conclusion which can be drawn about the nature and contents of the document is that it is a dumb document and on the basis of the entry of nothings or figure etc. in this document, it cannot be concluded that this represents the undisclosed income of the assessee.” 65. The Hon'ble Supreme Court in the case of Andaman Timber Vs. CIT in Civil Appeal No. 4228 OF 2006 has 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.” 66. The ld. DR has strongly emphasized on the evidentiary value of the statement recorded u/s 132(4) of the Act and has relied upon several judicial decisions to support his contentions. The ld. DR further relied upon the provisions of section 132(4A) of the Act and 292C of the Act. These sections read as under: 70. It can be seen from the above chart that the case in which the presumption was available, the Revenue accepted what was returned by Shri R.K. Miglani and on the strength of his statement that the documents seized from his premises belong to distilleries, the additions have been made as unexplained expenditure/contribution to UPDA. 71. It is well settled that only the person competent to give evidence on the truthfulness of the contents of the document is writer thereof. So, unless and until the contents of the documents are proved against a person, the possession of the document or hand writing of that person on such document by itself cannot prove the contents of the document. 72. Considering the facts of the dispute in totality, we are of the opinion that the assessment framed u/s 153C of the Act is in gross violation of the principles of natural justice and deserve to be tagged as nullity. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: ‘F’, NEW DELHI ITA No. 5662/Del/2018 AY: 2014-15 Veena Gupta Date of Pronouncement: 27/11/2018

12.1 It is pertinent to note that assessee, vide letter dated 21/12/16 had asked Ld. AO to provide material based upon which various allegations have been levied by Ld. AO. These factors from para 20 of assessment order, wherein assessee raised objections, one of which is opportunity to cross examine, in case of any evidence used against assessee. 12.3 To our surprise, Ld. AO without providing any material evidence, report on which he was relying and not granting an opportunity to cross examine the persons on whose statement he arrived at certain presuppositions, made addition in the hands of assessee. This is evident from para 22 of assessment order. 13. Before Ld. CIT (A) assessee once again raised plea of crossexamination granted to assessee and materials not based upon which the submissions have been made has not been provided for examination. Even then opportunity was not granted to assessee, though Ld. CIT (A) had coterminous powers as that of Ld. AO. 14. In our view this amounts to gross violation of principles of natural Justice. We draw our support from the decision of Hon’ble Supreme Court in the case of Andaman Timber Industries versus CCE reported in (2015) 62 Taxmann.com 3, wherein Hon’ble court observed as under: “According to us, not allowing the assessee to crossexamine 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 inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the

assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority.” 15. We, accordingly, respectfully following decision of Hon’ble Supreme Court in the case of Andaman Timber Industries versus CCE (supra) allow appeal ofassessee on legal ground raised in Ground 2(c), and quash and set-aside the assessment order so passed. 15.1 As we have allowed assessee’s appeal on Ground 2(c), other grounds raised by assessee becomes academic in nature which do not require any adjudication at this stage. Recent coordinate and division Pune bench ITAT decision in case of Brijendra Nath Agarwal (ITA 1666/Pun/2015) date of order: 29/11/2018 has held as under: “The issue which arises in the present appeal in such scenario, is whether re-assessment proceedings which have been completed against assessee, can stand in the eyes of law, where (a) documents asked for have not been supplied to the assessee and (b) cross-examination of witnesses have not been provided to the assessee. Before proceeding further, it may be pointed out that the Assessing Officer refers to the proceedings before DDIT(Inv) and alleges that all the documents have been handed over by DDIT(Inv) to the assessee and hence, they were not being provided. It is not clear as to what documents were provided by DDIT(Inv). Even if it was so, then it was incumbent upon the Assessing Officer to provide the documents, which were in his possession and which he was seeking to rely on in order to complete assessment against assessee. The assessee has time and again asked for the copies of documents and even was ready to pay copying charges but the Assessing Officer had blatantly refused to give the documents on the premise that they have already been received by assessee. But no

such evidences of such documents being handed over by DDIT(Inv) has been filed on record. Another aspect to be noted is that the Assessing Officer is relying on statements of two persons, the assessee had sought cross-examination of the said persons and of many evidences also, which have not been provided by Assessing Officer. Another aspect of the issue is that the Assessing Officer has purely relied on the statement of Shri Pravin Kumar Jain of having provided accommodation entries in order to first initiate re-assessment proceedings and then also to complete re-assessment proceedings but the copy of said statement made by Shri Pravin Kumar Jain has been refused by him. After the search proceedings, the assessee has even filed copy of affidavit of Shri Pravin Kumar Jain in this regard, but the same has not been commented on by the Assessing Officer nor referred to before making addition in the hands of assessee. The issue which has been raised before us is whether in such circumstances, re-assessment order passed by the Assessing Officer without providing copies of documents and without affording cross-examination is invalid and bad in law. 22. The issue which needs to be addressed is non providing of copies of documents and non affording of cross-examination of the witnesses is whether fatal to the assessment proceedings. The Assessing Officer alleges that the documents were provided by DDIT(Inv). However, it is not clear as to copies of what documents have been given by DDIT(Inv). In any case, the investigation was carried out not in the hands of assessee but in the hands of other person, so once the assessee asks that the documents be issued to it on which reliance is placed upon for reopening the assessment, then it was incumbent upon the Assessing Officer to provide the same to the assessee in order to enable the assessee to peruse the same and then point out whether by relying on the said documents, the re-assessment has been validly reopened. May be, the letter which is forwarded by DDIT(Inv) to the Assessing Officer is an internal document and the Assessing Officer has provided gist of the same to the assessee. However,

there are other documents the assessee has asked for i.e. copies of page No.6 to 15 of bundle No.1 seized from the office of CIIL, Bhosari, the details of Directors of the companies as mentioned in the said letter. In addition, the assessee had sought cross- examination of different persons whose statements / materials seized from them were being relied upon. However, we have already made reference to the said documents in paras 15, 17 and 18 hereinabove. The assessee has time and again asked for the copies of said documents but the same have not been supplied to the assessee. The assessee has also sought cross-examination of the persons whose statements were being relied upon to propose re- assessment in the hands of assessee, for which reasons were recorded for reopening the assessment but none of the cross-examinations have been allowed. The nonallowance of cross-examination has been held by the Hon'ble Supreme Court in M/s. Andaman Timber Industries Vs. Commissioner of Central Excise in Civil Appeal No.4228 of 2006, judgment dated 02.09.2015 to be most fatal. The facts of present case are similar, wherein no crossexamination has been allowed though the assessee has time and again asked for the same. Even if we accept the reasoning of Assessing Officer that seized documents have been supplied to the assessee but no cross-examination of witnesses has been provided to the assessee. In such scenario, invoking of jurisdiction under section 147/148 of the Act gets affected as the assessee has a right to file objections to reopening of assessment and such a right of assessee has been violated. The learned Authorized Representative for the assessee has pointed out that in the absence of getting the documents relied upon and in not allowing cross- examination of witnesses, the assessee was not in a position to file objections against reopening of assessment. The jurisdiction is conferred upon the Assessing Officer for making re-assessment in the case of assessee only on the basis of aforesaid seized documents and the communication from DDIT(Inv), who in turn, has relied on the statements of various persons who were searched. Hence, in

such circumstances, it was incumbent upon the Assessing Officer not only to allow cross-examination of witnesses but also furnish the copies of all the seized documents relied upon and even the letter forwarded by DDIT(Inv). It is this letter which has been relied upon by Assessing Officer to carry out investigation against assessee. Hence, the same partakes the character of an evidence to be used against assessee and the principles of natural justice demand that such evidence which is to be used against assessee, then copy of the same should be made available to the assessee. The contents of said letter have been made available by the Assessing Officer, hence we do not understand what stopped him for making available the letter, copy of which was forwarded by DDIT(Inv). The perusal of assessment order reflects that the Assessing Officer has elaborately referred to the contents of said letter and relied upon the investigation carried out by DDIT(Inv) in order to reopen the assessment in the case of assessee. In the totality of the above said facts and circumstances, where the assessee has been denied copy of statement recorded and copy of letter issued by DDIT(Inv), which has been extensively relied upon by the Assessing Officer to record reasons for reopening the assessment and failure of Assessing Officer in not providing cross- examination of witnesses in order to enable the assessee to meet the case of both reopening and also the assessment being carried out against the assessee on the basis of such statements, violates the basic fundamental principle of natural justice and in such scenario, the assessment which has been completed against the assessee cannot stand. Accordingly, we hold so. 24. The Hon'ble Supreme Court in GKN Driveshafts India Ltd. Vs. ITO (supra) has held that it is incumbent upon the Assessing Officer to provide an opportunity to the assessee to submit his objections to reopening of assessment and where the Assessing Officer has failed to provide such an opportunity, re- assessment order cannot stand. In the facts of

present case, since the assessee did not receive copies of documents relied upon and also no cross- examination of witnesses on whose statements the Assessing Officer relied upon to record reasons for reopening assessment, was provided to the assessee, hence the assessee was prevented from filing the objections to reopening of assessment. In such scenario, even if the assessee was well aware of reasons for reopening but the failure to provide opportunity to file objections to the reopening of assessment violates the governing principle of law and hence, reassessment order needs to be quashed and set aside. 25. The Hon’ble Bombay High Court in Agarwal Metals and Alloys Vs. ACIT (2012) 346 ITR 64 (Bom) has propounded such a view in turn relying on the judgment of the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. Vs. ITO (supra). The learned Authorized Representative for the assessee has raised various issues of change of opinion in the case of Shri B.N. Agarwal, wherein original assessment was completed under section 143(3) of the Act. However, since we have decided the issue on the other aspects of case and held the assessment order invalid and bad in law, we are not addressing the same. It may be pointed out herein itself that since the Assessing Officer did not provide copies of statements and did not allow crossexamination, then the plea of assessee that it could not object to the reasons recorded for reopening the assessment has merits to be allowed and for such act, wherein no proper opportunity was given to the assessee to file objections to reassessment, proceedings initiated under section 147/148 of the Act cannot stand. There is no merit in the observations of CIT(A) that the assessee had participated in assessment proceedings and hence, it cannot be said that he had any objections to reopening of assessment. The preliminary issue affecting the jurisdiction of Revenue authorities can be raised at any stage and accordingly, we admit the plea of assessee and hold that assessment order passed in the case without jurisdiction is both invalid and bad in law. The

grounds of appeal No.1 to 3 raised by assessee are thus, allowed.” We humbly request that instant proceedings may please be quashed on this count only that Ld AO has chosen not to supply any back material referred in reasons recorded namely investigation wing report letter etc and even cross examination is never offered with reference to statement of searched person if any , so entire proceedings are bad in law. Recently Delhi ITAT A bench decision in case of Ashtech Industries Private Limited (20/12/2018) has clearly held that “We further note that AO supplied the reasons recorded (without approval) to assessee (as placed in paper book before us) which were objected before the AO in detailed manner vide objection letter dated 27.04.2016 in which note worthy aspect is assessee specifically sought from AO copies of back material referred in reasons including investigation wing report/letter, seized documents etc referred therein, AO without confronting any back material as evident from objection disposal order dated 17.05.2016 rejected assessee’s objection challenging reopening action. In various letters placed in paper book and referred in written submission before us, it was specifically asked to AO during assessment proceedings to confront the back material as referred in reasons recorded namely in letters dated 07/06/2016, 20/10/2016 which request of assessee has not been adverted to by the AO is patent from objection disposal order dated 17/05/2016 and further notices dated 09/08/2016 u/s 142(1) and show cause notice dated 13/10/2016. In none of these notices as placed in paper book, we could find the back material being confronted to assessee as specifically requested by assessee. We note here that the Tribunal in various decisions specially one which is referred by Ld counsel for the assessee extensively in case of Moti Adhesives (ITA 3133/Del/2018) in order dated 25/06/2018 copy placed before us, has been consistently holding while taking support from Hon’ble Apex court leading

decision in Andaman Timber Industries case (Civil Appeal No. 4228 OF 2006) reported at 127 DTR 241 that violation of principle of natural justice (here withholding of back material referred in reasons which is specifically requested for repeatedly) is a serious flaw and results in nullity of the order so passed, which is squarely applicable to present case.” All the above decisions squarely answers the serious wrong impression in mind of revenue authorities on principle of cross examination may be compromised or eschewed and excluded from income tax assessment proceedings where entire assessment is otherwise plagiarized and heavily influenced by statements recorded by investigation wing which cant be taken on board unless tested on terra ferma of cross examination which for reasons best known to revenue is not adhered in any of such cases. As discussed supra there are five judge constitution bench rulings from Hon’ble Apex court (Hon’ble Supreme Court of India in Khem Chand Vs. Union of India AIR 1958 SC 300; the Hon‟ble Supreme Court in State of M.P. v. Chintaman Sadashiva Vaishampayan, AIR 1961 SC 1623 etc) holding not providing the said opportunity to crossexamine is violative of the Principles of Natural Justice and has also held that the meaning of the term ―reasonable opportunity‖ to include an opportunity to defined by crossexamining the witnesses produced against the accused.. Even celebrated decision of Hon’ble Apex court in Andaman Timber case (supra) which this tribunal is regularly following in various rulings consistently is also complete answer to contrary revenue argument which cant be accepted. In this connection, there is one recent division bench decision of this Hon’ble Tribunal where one Pradeep Jindal statement was made as basis to draw adverse inference and sans cross examination of that person it is held by this Tribunal in case of Reeta Singhal in ITA No.4819/DEL/2018 order dated 17/01/2019 held (DELHI BENCHES ‘CAMP AT MEERUT)that: “..6. On appeal, Ld. CIT(A) deleted the addition mainly on the ground that the sum of Rs.50 lac

received by the assessee was towards sale consideration of shares of M/s. Shri Ganga Paper Mills Pvt. Ltd. at face value on which the assessee had not earned any capital gain. The shares already existed in the balance sheet of the assessee in the Assessment Years 2006-07 and 2009-10. Further, the assessee was not allowed crossexamination of the maker of the statement that the assessee received accommodation entry of Rs.69 lac in the guise of sale consideration of shares, and therefore, the statement of the persons cannot be used against the assessee for making addition u/s.68 of the Act and relied upon the decision of Hon'ble Supreme Court in the case of M/s. Andaman Timber Industries (supra). No material has been brought on record by the Department to show that the above findings of the ld. CIT(A) are not correct. Even otherwise, no specific error in the order of the ld. CIT(A) could be pointed out by the learned Department Representative. Hence, we find no good reason to interfere with the order of the ld. CIT(A) which is hereby confirmed and the grounds of appeal of the Revenue is dismissed.” 9. Keeping in view of the facts and circumstances of the case and respectfully following and applying principles in aforesaid Hon’ble Supreme Court, Hon’ble High Court and this Tribunal rulings, second issue framed by me above on consequential impact of lack of cross examination and violation of principle of natural justice, I have no hesitation to accept the plea of Ld AR that lack of cross examination and violation of principle of natural justice results is total nullity of the entire addition, hence, the additions in dispute is hereby deleted.” 4.1 I have gone through the aforesaid findings of the Tribunal in the case of Amitabh Bansal vs. Income Tax Officer, Ward 46(4), New Delhi (2019) 102 taxmann.com 229 and I am of the view that the issue of cross examination in dispute is squarely covered in favour of the assessee by the findings of the Tribunal, as reproduced above. Therefore, respectfully

following the aforesaid finding of the Tribunal, the addition in dispute is deleted by accepting the appeal of the assessee.

// By order //

Asst. Registrar : ITAT Delhi Benches : Delhi