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Income Tax Appellate Tribunal, DELHI ‘SMC’ BENCH, NEW DELHI
Before: SHRI H.S. SIDHU
This appeal by the assessee is preferred against the order of the Ld.
Commissioner of Income Tax [Appeals]-22, New Delhi dated 31.5.2018 pertaining to assessment year 2014-15. In this appeal assessee has raised as many 13 grounds of appeal. But at the time of hearing, Ld. counsel for the assessee has only argued the ground no. 10 which is reproduced as under:-
“10. On the facts and circumstances of the case, the AO has erred, both on facts and in law in relying on the report of the Investigation Wing made at the back of the assessee without giving an opportunity of cross examination.” 2. Brief facts of the case are that assessee filed his return of income on 27.9.2014 declaring a total income of Rs. 6,30,390/-. The case of the assessee was selected for scrutiny through CASS in order to examine “suspicion long term capital gain on shares (inputs from investigation wing)” under the scope complete scrutiny. Notice u/s. 143(2) of the Income Tax Act, 1961 (in short “Act”) was issued on 12.4.2016 and in response to the same notices issued u/s. 143(2) and 142(1) of the Act, the A.R. for the assessee appeared from time to time and furnished the information called for. During the year under consideration, the assessee has declared income from house property, long term capital gain and income from other sources. The assessee has declared income from long term capital gains at Rs. 23,32,869/- which has been claimed exempt u/s. 10(38) of the I.T. Act, 1961. AO held that the transactions were sham and has entered into colourable device for avoidance of tax and the receipt of Rs. 2382923/- by way of cheques is nothing but unexplained cash credits u/s. 68 of the Income Tax Act, 1961 to be taxed @ 30% u/s. 115BBE of the Income Tax Act, 1961 at the hands of the assessee and Rs. 71487/- @ 3% of Rs. 2382923/- (being the total sale value of shares) was also added u/s. 69C of the Act as unexplained expenditure of the assessee. Accordingly, the AO completed the assessment u/s. 143(3) of the Act at an income of 3084800/- vide order dated 29.12.2016. Against the assessment order, the Assessee appealed before the Ld. CIT(A) who vide his impugned order dated 31.5.2018 has dismissed the appeal of the assessee. Aggrieved with the order of the Ld. CIT(A), assessee appealed before the Tribunal.
During the hearing, Ld. counsel for the assessee draw my attention towards the page no. 5, para no. 2.18 of the impugned order of the Ld. CIT(A) wherein it was mentioned “that the material on the basis of which report has been prepared by the investigation wing did not provided to the appellant. For the sake of principle of natural justice, an opportunity of cross examination must be provided to the appellant as all the materials were gathered at the back of the appellant.” He further draw my attention towards page no. 28, para no. 6.11 of the impugned order wherein it has been mentioned that “It has also been contested by the appellant that the assessee was not provided with any adverse report and no opportunity was provided to cross examine the persons/witness whose statements have been used against the appellant. I find that such right as held in various decisions, is not an absolute right and depends not only the circumstances of the case but also on the statute concerned.”
He stated that the issue in dispute is squarely 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 similar facts and circumstances. Hence, requested to follow the aforesaid case and allow the appeal of the assessee.
Ld. DR relied upon the orders of the authorities below.
I have heard both the parties and perused the records, especially the assessment as well as impugned order and the submissions filed by the Assessee before the Ld. CIT(A). I find considerable cogency in the contention raised by the assessee’s counsel that the material on the basis of which report has been prepared by the investigation wing did not provided to the assessee and no opportunity was provided to cross examine the persons/witnesses whose statements have been used against the assessee, which issue was also raised before the Ld. CIT(A), who wrongly held that such right as held in various decisions, is not an absolute right and depends not only the circumstances of the case but also on the statute concerned, which is not proper. I further 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 and Ld. CIT(A) has not considered the same ground, 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.”
Considering the facts of the case in totality, I do not find any merit in the impugned additions. The findings of the CIT(A) are accordingly set aside. The Assessing Officer is directed to allow the claim of exemption u/s 10(38) of the Act.”
Keeping in view of the facts and circumstances of the present case and respectfully following the order of the Tribunal, SMC Bench, Delhi in the case of Smt. Jyoti Gupta vs. ITO (Supra) and in view of the law settled by the Hon’ble Supreme Court of India in the case of Andaman Timber vs. CIT (Supra), on identical facts and circumstances, the additions in dispute are deleted and the appeal of the assessee is allowed.
In the result, the appeal filed by the assessee is allowed.