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Income Tax Appellate Tribunal, BENGULURU BENCH, BENGULURU (SMC
Before: SHRI CHANDRA POOJARI, AM
Per CHANDRA POOJARI, AM
This appeal filed by the assessee is directed against the order of the CIT(A) dated 20/09/2018. The relevant assessment year is 2008-09.
The assessee has raised the ground with regard to claim of the assessee at Rs.42,62,738/-. The source of shares of M/s. Zen shaving. According to the assessee, the Assessing Officer failed to provide an opportunity of cross examining Shri Mukesh Choksi by following the principles of natural justice. The assessee has also challenged the re-opening of the assessment and charging of interest u/s. 234B and 234 D of the I.T. Act. 3. The facts of the case are that the assessee filed her return of income for the A.Y. 2008-09 declaring income of Rs.3,21,338/-. The return was processed u/s. 143(1) of the Act. Subsequently, it was found that the assessee had obtained certain accommodation entries in the form of purchase and sale of shares which resulted in long term capital gains (LTCG) to the extent of Rs.42,62,738/-. A search and seizure operation u/s.132 of the Act was conducted on 25/11/2009 in the case of Mahasagar group. During course of search, the Director of Mahasagar group Shri Mukesh Choksi admitted in the sworn statement that the group was engaged in fraudulent billing activities and in giving accommodation entries in order to enable the clients to declare speculation profits/loss, LTCG, STCG etc. In the list of such beneficiaries found during the said search, the name of Smt. Hiteshi V. Mehta also figured in. Accordingly, the Assessing Officer initiated proceedings u/s. 147 of the Act. When asked for an explanation with regard to obtaining accommodation entries in the form of LTCG, the assessee denied to have taken any such entry from the group of Shri Mukesh Choksi. Not satisfied, the Assessing Officer made the addition of Rs. 42,62,738/- as bogus entries on the basis of the available records.
4. On appeal, the CIT(A) rejected the grounds raised by the assessee and confirmed the addition made by the Assessing Officer.
Against the assessee is in appeal before the Tribunal. The Ld. AR at the outset objected to the denial of opportunity of cross examination of Shri Mukesh Choksi before making the addition on account of earning capital gains on sale of shares of M/s. Zen Shaving.
The Ld. DR relied on the orders of the lower authorities. 6. After hearing both the parties, I am of the view that a similar issue came up for consideration before the Tribunal in the case of Rameshchand Kothari HUF vs. ACIT in dated 13/12/2019 wherein it was held as follows: 5. We are conscious of principle laid down by Hon’ble Supreme Court as well as various high courts that, without opportunity of cross- examination, such statements cannot be relied upon against any person. However, such right, as held in various decisions by Hon’ble Supreme Court, is not an absolute right and depends on circumstances of the case and the statute concerned, as held in State of J&K Vs. Bakshi Gulam Mohd. AIR 1967 (SC) 122, and Nath International Sales Vs. UOI reported in AIR 1992 Del 295. Similar is the view taken by Hon’ble Allahabad High Court in case of In case of Prem Castings Pvt.Ltd. Vs.CIT (Supra). At this juncture we referred to decision of T. Devasahaya Nadar V. CIT reported in (1964) 51 ITR 20 (Mad), wherein, it has been held that; "it is not an universal rule that any evidence upon which the department may rely should have been subjected to cross-examination, if the assessing officer refuses to produce an informant for cross-examination by the assessee there cannot be any violation of natural justice.”
Further in case of GTC Industries Ltd. V. Asstt. CIT reported in (1998) 60 TTJ (Bom-Trib) 308 , it has been held that, where statement and report of third parties are only secondary and subordinate material which were used to buttress the main matter connected with the quantum of addition, denial of opportunity to cross examine third parties did not amount to violation of natural justice. Each case has got to be decided on facts and circumstances of that case. Thus in our considered opinion, relevant factors to be considered are surrounding circumstances, objective facts, evidence adduced, presumption of facts based on common human experience in life and reasonable conclusions.
In present facts of the case it is further observed that Ld. AO has not examined/called for any evidences in respect of purchase/sale of alleged scripts. Assessee is therefore directed to provide all relevant documents to establish sound financial of alleged companies and that fluctuation in price was market driven. Ld.AO shall take all evidences into consideration and then decide the issue as per law. In the event de hors statement, there are overwhelming evidences and assessee is unable to establish genuineness of sale and purchase of alleged scripts, adverse view would be taken by holding the transaction to be sham.
Ld.AO is directed to provide all statements recorded by investigation wing to assessee, referred to in assessment order. In the event, statements recorded are not of secondary and subordinate category, cross examination has to be granted to assessee. Ld.AO is directed to re-examine the case of assessee in the light of aforestated direction in accordance with law. Needless to say that proper opportunity shall be granted to assessee to represent its case as per. Accordingly we allow ground raised by assessee on preliminary legal issue.
In the result assessee’s appeal stands allowed for statistical purposes.
6.1 In view of the above order of the Tribunal, I am inclined to remit this issue to the file of the Assessing Officer on similar direction. Since I have remitted this issue to the file of the Assessing Officer on legal issue, I refrain from going into the other grounds of appeal of the assessee at this stage. Thus, this ground of appeal of the assessee is allowed for statistical purposes.
7. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on this 8th September, 2020.