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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], Faridabad dated 29.11.2017 pertaining to assessment year 2014-15. In this appeal assessee has raised as many 10 grounds of appeal. But at the time of hearing, Ld. counsel for the assessee has only argued the ground no. 6 which is reproduced as under:-
“6. On the facts and circumstances of the case, the ld. CIT(A) has erred both on facts and in law in confirming the addition which was made on the basis of material collected at the back of the assessee without giving his an opportunity to rebut the same in violation of the principle of natural justice.” 2. Brief facts of the case are that assessee filed his e-return of income on 29.11.2014 declaring total income of Rs. 23,54,870/- and the same was processed u/s. 143(1) of the Income Tax Act, 1961 (in short “Act”). The case of the assessee was selected for scrutiny through CASS, accordingly notice u/s. 143(2) of the Act dated 28.8.2015 was issued and served upon the assessee. the assessee is a contractor and run his business under proprietorship concern names M/s United Engineers. the case was earlier selected for ‘limited scrutiny’ through CASS and further converted into complete scrutiny after recording of reason. The case was transferred to ITO, Ward 62(1), New Delhi. Accordingly, notice u/s. 142(1) of the Act was issued in this case on 23.11.2016. In compliance thereof, the A.R. for the assessee attended the case from time to time and furnished written submissions, which were examined by the AO. AO observed that assessee is an individual and during the relevant year, assessee has earned income under the head salary, income from business and profession, capital gains and other sources. The AO completed the assessment u/s. 143(3) of the Act at an income of 44,68,790/-. Against the assessment order, the Assessee appealed before the Ld. CIT(A) who vide his impugned order dated 15.2.2018 has partly allowed 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. 13 & 14 vide para no. 1(i) & (vi) of the Ld. CIT(A)’s order mentioning the assessee’s submission wherein it was specifically mentioned that “(i)... The scrip M/s Kappac Pharma Ltd. was alleged to be used by the unknown entry operators to provide accommodation entries, however, no such person(s) were produced for cross examination despite specific requests made during the assessment proceedings.....”; (ii) the inference drawn by the AO is only on the basis of material collected at the back of the appellant for which no opportunity to cross examine the same was provided to the assessee and therefore, the said action of the AO is in gross violation of principle of natural justice....” She 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 and relied upon the following cases laws:-
i) Sanjay Bimalchand Jain L/H Shantidevi Bimalchand Jain vs. CIT (2017) (Bombay High Court (Nagpur Bench). ii) Chandan Gupta vs. CIT (2015) 54 taxmann.com 10 (P&H) (2015) 229 Taxman 173. iii) Balbir Chand Maini vs. CIT (2011) 12 taxmann.com 276 (P&H). iv) Usha Chandresh Shah vs., ITO (ITAT Mumbai) (2014) 2014-TIOL-1459-ITAT Mum. v) Ratnakar M. Pujari vs. ITO (ITAT, Mumbai) (2016) 2016-TIOL-1746-ITAT-Mum) vi) Abhimanyu Soin vs. ACIT, Circle VII, Ludhiana – ITAT Chandigarh Income Tax 2018-LL-0418-97 18.4.2018.
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 that the case laws relied upon by the Ld. DR are on the merits of the case, however, the ground argued before the Tribunal is relating to confirmation of addition which was made on the basis of material collected at the back of the assessee without giving his an opportunity to rebut the same in violation of the principle of natural justice, hence, the same are not applicable here. I find considerable cogency in the contention raised by the assessee’s counsel that addition was made on the basis of material collected at the back of the assessee without giving him an opportunity to rebut/cross examine the same, which was also raised before the Ld. CIT(A), who wrongly held that when the appellant has failed to appear before AO for the personal deposition u/s. 131 of the I.T. Act and now the assessee is claiming opportunity of cross examination and wrongly upheld the AO’s order, 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 addition in dispute is deleted and the appeal of the assessee is allowed.
In the result, the appeal filed by the assessee is allowed.