M/S SUINDU & CO.,MUMBAI vs. ASST. CIT 17(3), MUMBAI

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-28, Mumbai (in short ‘the CIT(A)’) dated 08/02/2019 for the assessment year 2010-11.

The notice of the appeal was sent to the assessee on the address mentioned in Form No.36 through RPAD. The same was returned back by the Postal Authorities with the remarks ‘Left’. Again notice was sent to the assessee through RPAD on 13/10/2020 for today i.e. 04/11/2020. The notice has not been received back unserved nor acknowledgement of the service is received back. The assessee has not intimated fresh address for service of notice. It seems that assessee is not interested in pursuing its appeal. Under these circumstances the appeal is decided in the absence of the assessee after hearing ld. Departmental Representative and examining material available on record.

The brief facts of the case as emanating from records are: The assessee is engaged in the business of commission, forex broking , etc. During the period relevant to assessment year under appeal, the assessee had made donations to the tune of Rs.7,50,000/- to Navjeevan Charitable Trust and had claimed deduction of the same under section 35AC of the Income Tax Act, 1961 ( in short ‘the Act’). The return of the assessee was processed under section 143(1) of the Act. Thereafter, on the basis of information received from DCIT, Central Cir.2(1), Mumbai, assessment for assessment year 2010-11 was reopened on the ground that the assessee had obtained accommodation entry from the Navjeevan Charitable Trust and hence, the donation is non- genuine. The Assessing Officer vide assessment order dated 22/12/2017 passed under section 143(3) r.w.s. 147 of the Act disallowed assessee’s claim of deduction under section 35AC of the Act. Aggrieved by the assessment order, the assessee filed appeal before the CIT(A) raising a legal issue that the opportunity of ‘cross examination’ was not granted to the assessee. The CIT(A) rejected the objection of the assessee and dismissed the appeal. Now the assessee is before the Tribunal assailing the findings of CIT(A). The solitary ground raised by the assessee before the Tribunal reads as under:-

Ms Smita Verma, representing the Department vehemently defended the impguend order and prayed for dismissing the appeal of assessee. The ld. Departmental Representative submitted that a search action under section 132 of the Act was carried out at the premises of Navjeevan Charitable Trust. The statement of one of the trustees, Shri Subhash Rajaram Kadam was recorded on oath under section 131 of the Act on 10/11/2014. In his statement he confessed that the Trust is providing accommodation entries. He explained the modus operandi. Donations were received by the Trust through banking channels and cash was returned back to the donors after deducting commission of 3%. The assessee is one of the beneficiaries of bogus donations. Thus, it is beyond doubt that the deduction claimed by the assessee under section 35AC of the Act is the result of bogus donation.

The submissions made by ld. Departmental Representative heard. The material available on record examined. The assessee during assessment proceedings in order to substantiate genuineness of the donation made had produced the donation receipts and bank statements. We observe that when the alleged donation was made on 17/07/2009 by the assessee, the Trust was holding valid certificate of exemption. The registration was withdrawn on 20/12/2016. During the assessment proceedings the Assessing Officer placed heavy reliance on the statement of Shri Subhash Rajaram Kadam recorded under section 131 of the Act on 10/11/2014. He had purportedly admitted that the Trust was providing bogus accommodation entries. The sole grievance of the assessee before the Tribunal is that opportunity to cross examine the Trustee was not provided to the assessee. The Assessing Officer has withdrawn benefit of deduction under section 35AC on the basis of statement of Trustee.

It is a well settled law that a statement cannot be used against the assessee unless an opportunity is granted to the assessee to cross examine the person who has made such statement. [ Re. Kishanchand Chellaram vs. CIT, 125 ITR 713(SC)]. The Hon’ble Apex Court in the case of ICDS Ltd. Vs. CIT, 273 Taxman 12, held that where opportunity to cross-examine witness relied upon by the Assessing Officer is not extended to the assessee, the entire issue has to be adjudicated fresh by giving fair opportunity to both the sides. Similar view has been taken by Hon’ble Bombay High Court in the case of R.W. Promotions (P) Ltd. Vs. Asstt. CIT 376 ITR 342(Bom).

Nowhere it is emanating from perusal of assessment order that the statement recorded by the Department that was used to disallow assessee’s claim was provided to the assessee or the opportunity to cross- examine the person whose statement was used against the assessee was afforded to the assessee. The Assessing Officer ought to have provided material used against the assessee apart from providing an opportunity to cross examine deponent whose statement was used against the assessee. Besides the said statement there is no substantive material to disbelieve the claim of assessee. The request of the assessee to cross-examine the person whose statement was used by the Revenue for making the addition was also declined by the CIT(A). Taking into consideration entirety of facts, I deem it appropriate to restore the issue to the file of Assessing Officer for fresh adjudication after affording opportunity of cross examination to the assessee, in accordance with law.

In the result, appeal of the assessee is allowed for statistical purposes in the terms aforesaid.