RACHNA GUPTA,NEW DELHI vs. ACIT, CENTRAL CIRCLE-29, NEW DELHI

order in violation of principles of natural justice and relied upon the material collected at the back of the assessee without offering an opportunity to cross examine.”

1.1 Since common legal ground has been raised by the assessees in both the appeals, hence, the appeals were heard together and are being disposed of by this common order for the sake of convenience, by dealing with facts and circumstances of (AY 2014-15) – Shobhit Gupta vs. ACIT, CC-20, New Delhi and the result thereof will apply mutatis mutandis to other appeal of Smt. Rachna Gupta vs. ACIT, CC-20, New Delhi - (AY 2014-15).

Detailed questionnaire alognwith notice u/s. 142(1) of the Act were issued on 14.6.2016 and 4.11.2016. In response thereto, the AR of the assessee attended the proceedings from time to time and filed necessary details / information/documents, etc. as required. During the year under consideration, assessee derives income chargeable to tax under the head income from salary, income from house property, income from capital gain and income from other sources. During the course of scrutiny proceedings in assessee’s case for the assessment year 2014-15, AO noted that the assessee has earned capital gain amounting to Rs.12,47,743/- from sale of 20,000 nos. of shares of M/s CCL International Ltd., the details thereof is at page no. 1 of the assessment order. On perusal of the calculation submitted by the assessee, AO noticed that the assessee has earned windfall gain of more than 3 times within a short span of time of six months that too with the investment in relatively unknown company. AO further noted that the average annual return from the investment in share market during the year 2011-12, 2012-13 and 2013-14 remained at -9.11%, 6.86% and 10.75% respectively. Surprisingly, as per available information in the public domain, when annual average return from share market ranged between - 9.11% and 10.75%, share of a relatively unknown company like M/s CCL International Ltd. has given return of more than 300% within a half year during the period when the share market gave around 10.75% in FY 2013-14. AO further observed that the assessee purchased 20,000 nos. of shares of M/s CCL International Ltd. on dated 17.4.2013. The initial payment of Rs. 20,000/- was made in cash on 17.4.2013 and the rest amount of Rs. 5,90,000/- was paid through cheque cleared on 25.11.2013. The shares were purchased from one closely held company M/s Comfort Dealcom (P) Ltd. addressed Kolkata through off market in physical form means through transfer of share certificate. The shares were dematerialized on 25.11.2013 and assessee sold all shares within 15 days of dematerialization. AO further in order to enquire more, the daily trade date of the company available in the public domain on the website www.bseindia.com was analyzed and the daily trade data of the company for the period December, 2012 to December, 2015 as obtained from the website of Bombay Stock Exchange is given at page no. 2 to 23 of the assessment order. After analysizing the data and considering the various decisions and the replies of the assessee, the AO observed that the claim of capital gain claimed by the assessee is not genuine and a colouring device through which the assessee has introduced through which the assessee has introduced its unaccounted money in the books and the amount of Rs. 18,57,743/- (capital gain of Rs. 12,47,743/- plus Rs. 6,10,000/- invested) was added back to the income of the assessee under section 68 of the Act by assessing the income at Rs. 35,50,730/- u/s. 143(3) of the Act vide order dated 27.12.2016. Against the above addition, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 15.05.2018 has dismissed the appeal of the assessee.

Aggrieved with the impugned order dated 15.5.2018, assessee is in appeal before the Tribunal.

But despite that the Ld. CIT(A) has not adjudicated the ground no. 5(d).

In view of above, he submitted that the addition in dispute was made and no statement is confronted to the assessee much less offered for cross examination which also lacks of independent corroboration from any incriminating material, which is not sustainable in the eyes of law.

Therefore, he submitted that the issue argued vide ground no. 3 is squarely covered by the decision of the ITAT, SMC, Delhi Bench wherein the Tribunal vide its order dated 06.11.2018 passed in (AY 2014-15) in the case of Smt. Jyoti Gupta vs. ITO has allowed the appeal of the assessee on exactly similar facts and circumstances. Hence, he requested to follow the aforesaid case and allow the appeal of the assessee.

During the hearing, Ld. counsel for the assessee has submitted that Ld. CIT(A) mechanically addressed the concern of the assessee that Ld. AO had passed the assessment order in violation of principles of natural justice and relied upon the material collected at the back of the assessee without offering an opportunity to cross examine. I find that at page no. 50 vide para no. 21 & 21.3 of the assessment order the AO has observed that “……..In order to sustain a complaint of violation of principles of natural justice on the ground of absence of opportunity of cross examination, it has to be established that prejudice has been caused to the appellant by the procedure followed.…” . …”there has been in the facts and circumstances of the case, no infraction of any principle of natural justice by the absence of a formal opportunity of oral cross examination. Neither cross examination of a formal opportunity or oral.

Neither cross examination nor the opportunity to lead evidence is an integral of all quasi-judicial adjudications”, which is not tenable in the eyes of law. I further find that assessee has raised ground no. 5(d) before the Ld. CIT(A) viz. “No statement (back material referred in paragraph no. 20.6 onwards till 20.9) is confronted to the assessee much less offered for cross examination, which also lacks independent corroboration from any incriminating material”, which was also not adjudicated by the Ld. CIT(A). I further note that assessee vide his representation dated 14.5.2018 made before the Ld. CIT(A) at page no. 77 of the PB has raised a ground that “That the statement cannot be used by the AO without giving an opportunity to cross examination as per Apex Court in Andaman Case.” and vide page no. 83 of the PB has raised that “That there is gross and flagrant violation of principle of natural justice to confront the back material and to offer and provide cross examination of revenue witness.” But the Ld. CIT(A) has not considered the aforesaid grounds raised in the representation as well as ground raised before him in the grounds of appeal vide ground 5(d), which is not sustainable in the eyes of law. Therefore, in view of above, the legal issue argued vide ground no. 3 before the Tribunal is squarely covered by the decision of the ITAT, SMC, Delhi Bench wherein the Tribunal vide its order dated 06.11.2018 passed in (AY 2014-15) in the case of Smt. Jyoti Gupta vs. ITO wherein, the Tribunal has allowed the appeal of the assessee on exactly similar facts and circumstances. I am of the considered view that assessee has considerable cogency that addition was made on the statement (back material referred in paragraph no. 20.6 onwards till 20.9) is confronted to the assessee much less offered for cross examination, which also lacks independent corroboration from any incriminating material, which ground was also raised before the Ld. CIT(A), who did not adjudicate the same, which is against the settled law.

I note that exactly on the similar facts and circumstances the ITAT, SMC, Delhi Bench vide its order dated 06.11.2018 passed in (AY 2014-15) in the case of Smt. Jyoti Gupta vs. ITO wherein, the SMC Bench has considered the statement of Vikrant Kayan and has held that since the impugned addition was made on the statement of Sh. Vikrant Kayan without providing any opportunity to the assessee to cross examine the same, which is in violation of principle of natural justice and against the law laid down by the Hon’ble Supreme Court of India in the case of Andaman Timber vs. CIT decided in Civil Appeal No. 4228 of 2006. For the sake of convenience, I am reproducing the relevant portion of the ITAT, SMC, Delhi Bench vide its order dated 06.11.2018 passed in ITA No. 3510/Del/2018 (AY 2014-15) in the case of Smt. Jyoti Gupta vs. ITO as under:-

“13. Merely on the strength of statement of third party i.e. Shri Vikrant Kayan cannot justify the impugned additions. Moreso, when specific request was made by the assessee for allowing cross examination was denied by the Assessing Officer. The first appellate authority also did not consider it fit to allow cross-examination.

This is in gross violation of the principles of natural justice and against the ratio laid down by the Hon'ble Supreme Court in the case of Andaman Timber Vs. CIT Civil Appeal

No. 4228 OF 2006 wherein it has been 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 cross-examination 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. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal.”

The decision is pronounced on 18/04/2019.