MOHAN JEJUMAL THADANI ,MUMBAI vs. INCOME TAX OFFICER 17(2)(3), MUMBAI

The Ld. CIT(A) has erred in ignoring the specific statement of Shri Kantilal Patel in his letter dt.04.05.2009, that the loose sheet figures were projected and not actual in all cases.

The Ld. CIT(A) erred in failing to follow the binding precedents rendered in similar factual matrix, rendering his order bad in law.

At the outset, it may be stated here that the assessee before the Bench has filed additional grounds of appeal which read as under: “10.1 The Ld. CIT(A) has erred in law in upholding the assessment order passed u/s 143(3) r.w.s 147 of the Act, although the said assessment order was completely void ab initio since the reasons recorded mentioned a search u/s 132 on another person, and the operation of section 147 of the Act was precluded."

2 The Ld. CIT(A) has erred in law in upholding the assessment order passed u/s 143(3) r.w.s 147 of the Act, although the said reassessment proceedings were without juri iction, as held by hon'ble Bombay High Court in the case of Sejal Jewellary & Anr. vs. Union of India & Ors. bearing WP no. 3057 of 2019 dt. 18.02.2025.” Α.Υ. 2009-10 Mohan Jejumal Thadani

1 It is submitted that the assessee preferred appeal before ITAT wherein it has challenged the addition on account of unexplained investment u/s 69 of the Act amounting to Rs 21,44,380/-.Subsequently, it was observed that one vital ground had been inadvertently omitted from being included in the "grounds of appeal" attached with Form 36. The said ground goes to the very root of the matter and challenges the juri iction of the AO in initiating reassessment proceedings and passing assessment order u/s 143(3) r.w.s 147 of the Act. It is pleaded Α.Υ. 2009-10 Mohan Jejumal Thadani the tribunal. We are also of the considered view that Tribunal is not precluded from considering a point arising out of an appeal merely because such a point had not been raised at earlier stage of proceeding. It has juri iction to entertain a fresh plea of the assessee. The additional ground is, therefore, admitted in terms of Rule 11 of the ITAT Rules.

Facts in brief as culled from the assessment order reveal that as per information, a search and seizure action u/s 132 of the Act was carried out in the case of one Sidhhi Group, Thane on 19.02.2009 by then DDIT (Inv.), Thane. During the course of post search proceedings, a statement u/s 131 of Shri Kantilal M. Patel, one of the Directors of M/s. Gayatri Homes Pvt. Ltd. was recorded on 02.04.2009. In his statement, he had explained the figures mentioned on the loose paper found and seized during the search proceedings, coded with 'xxx' standing for ‘ooo', i.e. figures were in thousands. The total of cash component admitted by Shri Patel was Rs.12.05 cr. which had been offered for taxation. The name of the assessee was appearing under the column owning shop number as 107 of the list. As per the sale agreement dated 01.07.2008, Shri Thadani and two others had jointly purchased the said shop for total consideration of Rs. 36,40,000/- as per agreement. Further, it had come to light from the loose paper no. 19 Α.Υ. 2009-10 Mohan Jejumal Thadani that the assessee and two others had paid Rs.47,60,000/- 'on money' in cash, over and above the purchase agreement value in respect of purchase of said shops. It was also ascertained by the AO from ITD system that the assessee had not filed return of income for A.Y. 2009-10.

1 Notices u/s.148/142(1) of the Act were issued and served upon the assessee who himself attended and submitted the copy of acknowledgement of return of income electronically filed on 13.12.2016 for A.Y. 2009-10 alongwith computation of total income disclosing total income of Rs. 8,36,072/-. During assessment proceedings, the AO issued notice u/s 142(1) of the Act intimating the assessee the above facts showing unexplained investment by the assessee alongwith two other persons in shops at Project Little World at Kharghar. The cash component as per the loose paper no. 19. was Rs.47,60,000/- over and above the sale value. He was requested to furnish certain details as narrated in the order.

2 In response, the assessee submitted his explanation with regard to his business activities and investment in shop in question, stating that he was engaged into the business of Printing at Jai Hind College basement in the name of Anil Art printers & Publication of Journals by the name of Daily Exhange Rates. His investment of Rs. 16,40,000/- was paid from Saraswat Bank, from past Savings and Α.Υ. 2009-10 Mohan Jejumal Thadani proceeds from sale of flat and loan amount received from Anil Thadani, etc. which were duly reflected and highlighted in the attached bank passbooks. He denied the knowledge of payment of cash to Gayatri Homes Ltd. It was also submitted that the allegation of cash payment of Rs. 47,60,000 was false and has been denied. Further, he purchased lease rights of the said shop no: 107 jointly in the names of himself with his son Anil Thadani and daughter-in-law Mrs. Nishi A. Thadani. His share of investment towards cost of purchase was Rs. 16,40,000/-, by Mr. Anil M. Thadani Rs. 10,00,000/- and by Mrs. Nishi A. Thadani, Rs. 10,00,000/- and they were sharing rent 36.25%, 36.25% and 27.5% respectively. It was also contended that the said DDIT had omitted to communicate a fact that Shri Kantibhai Patel, after his statement recorded on 02/04/2009 had further explained his statement vide his next statement recorded on 04/05/2009 by the Investigation wing, wherein he had clarified that the figures in loose sheets page 19 were projected and had further contended as “In some cases we could not arrange for brand committed, we could not change (charge) premium or rather the buyer of the shop, did not make extra payment in cash. No payment was made so far. However to avoid litigation with the department he offered Rs. 12.05 cr. as additional income in the hands of M/s Gaytri Homes. It was also pleaded that the explanation given by Α.Υ. 2009-10 Mohan Jejumal Thadani Shri Kantilal M. Patel in his statement dated 4/5/2009 needed further explanation/confirmation for which arrange for cross examination of Shri Patel should be given.

3 As per the assessment order the AO issued summons u/s 131 of the Act to Shri Kantilal M. Patel, whereby he was asked to attend his office alongwith with specific documents/details mentioned therein. The assessee was also communicated this fact and requested to attend this office at the scheduled date and time, alongwith certain details. However, the summons was received back from postal authorities with postal remark ‘Left’. Summons was issued to him on second address. But there was no compliance. The assessee made further submission claiming inter alia that no addition could be made on the basis of documents found with a third party and also in the absence of any evidence on record to support your allegations of cash payments. The AO however, rejected the contentions on the ground that the assessee had not filed his return of income u/s 139 of the Act though he had taxable income in the period relevant under consideration. Nothing was brought on record to show that he had filed his returns of income for AYs. 2007-08 and 2008-09. The assessee did not state anything about his source of income for A.Ys. 2007-08, 2008-09, 2010-11 and 2011-12, even after being asked to submit note in this regard. The act of the Α.Υ. 2009-10 Mohan Jejumal Thadani assessee clearly indicated that he had not filed his returns of income for any assessment year.The cash component as per the loose paper was Rs.47,60,000/-, over and above the sale value, the assessee had paid and the assessee had invested Rs. 16,40,000/- out of Rs. 36,40,000/- as appearing in the agreement dated 23.07.2008 in respect of said shop and the other co-owner's i.e. Shri Anil M. Thadani and Mrs. Nishi Anil Thadani share was of Rs. 10,00,000/- each. The statement of Shri Kantilal M. Patel as recorded on 02.04.2009 by ADIT (Inv.)-1, Thane wherein the above person had confirmed the receipt of cheque component and cash component in the statement. The seller of flat did not appear before the AO in order to record the statement and offer cross examination. The assessee stated that out of Rs. 36,40,000/- mentioned in the agreement, he had contributed Rs. 16,40,000/-, thus the share of the assessee in said shop was determined at 45.05%. Accordingly, the total cash component worked out amounting to Rs 21,44,380/- was determined as pertaining to the assessee's share out of the total cash component of Rs. 47,60,000/-. Therefore, the cash component of Rs. 21,44,380/-, being assessee's share was added to total income as Unexplained investment as per provision of section 69 of the Act. In the subsequent appeal, the ld.CIT(A) upheld the addition endorsing the findings and observations of the AO. Α.Υ. 2009-10 Mohan Jejumal Thadani

Before us, the ld.AR has reiterated the same contentions as made before the lower authorities challenging the addition stated to be based on statement of Sri Kantilal Patel, the seller of the property. It is stated that the statement was not supported by any corroborative evidence. He also objected to the denial of cross examination as the entire edifice of the addition is stated to be based on the statement only. In such a circumstance, it was incumbent on the authorities below to allow cross examination of Sri Patel. Denial of the same amounted to violation of the principles of natural justice. The ld.DR on the other hand, placed reliance on the assessment order on merits of the addition.

We have carefully considered all aspects of the case. There is no dispute that the AO has placed heavy reliance on the statement of Sri Kantilal Patel in making the impugned additions as also for reopening the assessment. We find that the AO did make some effort to allow the cross examination of the said person to the assessee, however, due to his non attendance, cross examination could not be taken to logical end. The records do not indicate that any fresh attempt was made by the AO in this regard. Rather, without making any such fresh effort he went ahead in drawing adverse conclusion and making the impugned additions. Therefore, it can be concluded that he did appreciate the importance of allowing cross examination of the facts and the circumstances of the Α.Υ. 2009-10 Mohan Jejumal Thadani case, but did not take it to a logical end and hurried to make the addition. Even the ld.CIT(A) having co-terminus powers under the Act did not consider it necessary to allow the same. Such action on part of the lower authorities in our view is inconsistent with the rules of justice and fairly.

1 According to us, not allowing the assessee to cross-examine the witnesses though the statement of the witness was made the basis of the impugned order is a serious flaw 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 assessment order is based upon the statement given by the aforesaid witness. Even when the assessee disputed the correctness of the statements and wanted to cross- examine, the authorities below did not grant this opportunity to the assessee though such an opportunity was repeatedly sought by the assessee.

2 In this regard,it may be stated here that in the case of GTC Industries Ltd. v ACIT 65 ITD 380, ITAT Mumbai Bench has relied upon the judgment of Calcutta High Court in the case of Kisanlal Agarwalla v. Collector of Land Customs AIR 1967 & Cal. 80 and Α.Υ. 2009-10 Mohan Jejumal Thadani quoted this judgment in para 90 which throws light on the right of cross examination-. “90. There is a good deal of misconception on this question of the right of cross-examination as part of natural justice. Natural justice is fast becoming the most unnatural and artificial justice and for that confusion the Courts are no less responsible than the litigants. Ordinarily the principle of natural justice is that no man shall be a judge in his own cause and that no man should be condemned unheard. This latter doctrine is known as audi alteram partem. It is on this principle that natural justice ensures that both sides should be heard fairly and reasonably. A part of this principle is that if any reliance is plated on evidence or record against a person then that evidence or record must be placed before him for his information, comment and criticism. That is all that is meant by the doctrine of audi alteram partem, that no party should be condemned unheard. No natural justice requires that there should be a kind of a formal cross-examination. Formal cross- examination is procedural justice. It is governed by rules of evidence. It is the creation of Courts and not a part of natural justice but of legal and statutory justice. Natural justice certainly includes that any statement of a person before it is accepted against somebody else, that somebody else should have an opportunity of meeting it whether it (sic), by way of interrogation or by way of comment does not matter. So long as the party charged has a fair and reasonable opportunity to see, comment and criticise the evidence, statement or record on which the charge is being made against him the demands and the test of natural justice are satisfied. Cross-examination in that sense is not the technical cross-examination in a Court of law in the witness-box.” ITAT has further held that, “As regards the dictum ‘audi alteram partem' the assessee's basic contention was that the statements of witnesses and materials which were relied upon by the Assessing Officer in the assessment order to reach the conclusions and findings which were adverse to the assessee should have been disclosed to the assessee and the witnesses should have been offered for cross-examination. The right to cross-examine the witness who made adverse report is not an invariable attribute of the requirement of the said dictum. The principles of natural justice do not require formal cross- examination. Formal cross-examination is a part of procedural justice. It is governed by the rules of evidence, and is the creation of Court. It is part of legal and statutory justice, and not a part of natural justice, therefore, of law that the revenue could not rely on any evidence which had not been subjected to cross-examination. However, if a witness has given directly incriminating statement and the addition in the Α.Υ. 2009-10 Mohan Jejumal Thadani assessment is based solely or mainly on such statement, in that eventuality it is incumbent on the Assessing Officer to allow cross- examination. Adverse evidence and material, relied upon in the order, to reach the finality, should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of collateral nature.”

3 In the case of ITO v. M. Pirai Choodi 334 ITR 262 where the High Court had set aside the order of assessment, it was held by the hon'ble Supreme Court that the High Court should not have set aside the entire ground that no opportunity to cross-examine was granted, as sought by the assessee and the High Court should have directed the Assessing Officer to grant an opportunity to the assessee to cross- examine the concerned witness.

4 Further, the CIT(A) who has co-terminus powers with the AO cannot delete the addition on the ground that opportunity of cross- examination was not given to the assessee, rather he should give this opportunity to the assessee even at appellate stage if it is crucial to decide the appeal and there is no other material evidence with the Assessing Officer other than the statement of the witness. Rules of evidence do not govern the income-tax proceedings strictly, as the proceedings under the Income Tax Act are not judicial proceedings in the sense in which the phrase “judicial proceedings” is ordinarily used. The Assessing Officer is not fettered or bound by technical rules of evidence contained in the Indian Evidence Act, and he is entitled to act Α.Υ. 2009-10 Mohan Jejumal Thadani on material which may or may not be accepted as evidence in a court of law. However, the principles of natural justice need to be applied by the authorities during assessment and appellate proceedings. Wherever Revenue collects evidences against the assessee and does not confront the same to the assessee, before using it against him, the addition cannot be sustained. The hon'ble Supreme Court in the case of Andaman Timber Industries v Commissioner of Central Excise, Civil Appeal No. 4228 of 2006 has considered that if there was no material with the Department on the basis of which it could justify its action, and if the statement of the two witnesses who were unknown to the appellant was the only basis of issuing the Show Cause Notice, right to cross-examination has to be given.

5 Considering the aforesaid judgments, we are of the view that the AO remained under a statutory obligation to facilitate a cross- examination. The assessee could have dispelled the material that the A.O acted upon to disprove the authenticity of the loan transaction only if it was provided an opportunity to cross-examine Sri Patel who had allegedly referred the name of the assessee having paid the purchase consideration of the property in cash as well. Accordingly, we set aside the appellate order and restore the entire issue involving merits with a Α.Υ. 2009-10 Mohan Jejumal Thadani direction to the AO to allow cross examination to the assessee of the above named person and decide the issue in accordance with the provisions of the Act. The AO would also supply the statement of Sri Kantibhai Patel to the assessee for necessary action at his end.

6 We may make it clear that remanding the matter should not be in any manner construed to deciding the issue on merits. The AO would be at liberty to decide the issue after affording adequate opportunity of hearing to the assessee in this regard.

In so far as the additional ground is concerned, we deem it fit to send the matter to the file of the AO for examining the same and after allowing opportunity if hearing to the assessee, to act as per law.

In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 29/01/2026. NARENDER KUMAR CHOUDHRY (न्यायिक सदस्य /JUDICIAL MEMBER) PRABHASH SHANKAR (लेखाकार सदस्य/ACCOUNTANT MEMBER) Α.Υ. 2009-10 Mohan Jejumal Thadani Place: मुंबई/Mumbai दिनांक / Date 29.01.2026 Lubhna Shaikh / Steno आदेश की प्रतिलिपि अग्रेषित/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रतिनिधि, आयकर अपीलीय अधिकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यापित प्रति //// आदेशानुसार / BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.