M/S PUKHRAJ HASMUKHLAL ,BANGALORE vs. INCOME TAX OFFICER WARD-5(2)(2), BANGALORE

The authorities below erred in treating the share purchase transactions as sham without proper examination under the facts and circumstances of the case. 6. Without prejudice, the addition made as unexplained cash credits under section 68 of the Income Tax Act (the Act) is wrong and requires to be made as Nil on the facts of the case. 7. The authorities below erred in not providing an opportunity to cross examine the third party whose statements were used against the appellant on the facts of the case. Thus, the order passed is opposed to principles of natural justice and requires to be deleted on the facts of the case. 8. The authorities below merely on suspicion and surmise treated the transactions made by the appellant as accommodative and bogus in nature and thus the addition made of Rs. 34,28,455/- needs to be deleted for the substantial cause of advancement of justice. 9. The action of the learned assessing officer in stating that the transactions entered into by the appellant are accommodative in nature is without any corroborative evidence which is unacceptable in the eyes of law. The action of the learned CIT(A) in confirming the additions based on such statement is not warranted and is liable to be deleted on the facts and circumstances of the case. 10. The action of the assessing officer in seeking reasons from the appellant for the unusual rise and fall of share prices is unjust, unfair and unacceptable for the reason that the appellant would not have any power to determine the movement of share prices and thus, the addition made is only on suspicion and surmises and needs to be deleted under the facts of the case. 11. The action of the assessing officer in making additions based on the investigation report of Kolkata Investigation Directorate, which was not put forth to the appellant for rebuttal is unacceptable on the facts of the case. Further, the action of the learned CIT(A) in confirming the additions based on such report is not warranted on the facts and circumstances of the case.

The assessing officer has not independently applied his mind to the facts of the case and has merely relied upon the general report made by the Kolkata Investigation Directorate which amounts to borrowed satisfaction, which is impermissible in the eyes of the law and therefore needs to be deleted in the interest of equity and justice.

The action of the assessing officer in treating all the transactions made with Sunrise Asian Limited as sham merely because the company was investigated by Kolkata Investigation Directorate is untenable and unsustainable in the eyes of law.

The appellant denies himself liable to be levied to interest under sections 234A. 234Band 234C of the Act and further the computation of interest was not provided to the appellant as regard to the rate, period and method of calculation of interest under the facts and circumstances of the case. The appellant expressly urges that the period of levy of interest is not in accordance with sections 234A, 234Band 234C of the Act.

Without prejudice, the interest levied under sections234A, 234B and 234C of the Act requires to be waived off under the facts and circumstances of the case.

The appellant craves leave to add, alter, delete or substitute any of the grounds urged above.

In view of the above and other grounds that may be urged at the time of the hearing of the appeal, the appellant prays that the appeal may be allowed in the interest of justice and equity.”

During the course of hearing, the ld. Counsel for the assessee has invited my attention that the impugned issues are squarely covered by the order of the Tribunal in the case of Shri Arvind Kumar Moolchand in in which the Tribunal has restored the issue to the file of the AO having observed that the additions were made on the basis of statement of Mr. Mukesh Choksi without confronting the said statement to the assessee. The Tribunal accordingly restored the matter to the AO with a direction to confront the statement of Mr. Mukesh Choksi to the assessee and thereafter allow him to cross-examine Mr. Mukesh Choksi and the issue may be adjudicated afresh, after affording opportunity of being heard to the assessee.

The ld. DR did not dispute these facts.

I have carefully examined the order of the lower authorities in the light of the order of the Tribunal on the impugned issue and I find that the impugned issue is squarely covered by the order of the Tribunal in the aforesaid case wherein the Tribunal restored the matter to the AO with certain directions. For the sake of reference, we extract the relevant portion of the order of the Tribunal :- “5. Having carefully examined the orders of lower authorities in the light of rival submissions, I find that during the course of search conducted upon the Mukesh Choksi group, statement of Mukesh Choksi was recorded and in his statement he has admitted that he was providing accommodation entries to those who were interested to earn capital gain. On a careful perusal of the assessment order, I find that there is no finding with regard to the supply of statement of Mukesh Choksi to the assessee. Moreover, nothing is available on record, wherefrom it could be inferred that assessee was ever allowed to cross-examine Mr. Mukesh Choksi. It is settled position of law that statement or the evidence which is being relied upon by the AO for making the addition in the hands of assessee, the same should be confronted to the assessee and the assessee should be allowed to cross- examine the witness in this regard. 6. From a careful perusal of the orders of lower authorities, it is quite evident that statement of Mr. Mukesh Choksi was relied on for making the addition, but assessee was never allowed to cross-examine him. In these circumstances, I am of the view that the AO was not justified in making addition in the hands of assessee, without allowing the assessee to cross-examine Mr. Mukesh Choksi, whose statement was relied upon for making the above additions. I accordingly set aside the order of CIT(Appeals) and restore the matter to the file of AO with a direction to first confront the statement of Mr. Mukesh Choksi to the assessee and allow him to cross-examine Mr. Mukesh Choksi to dig out the truth in this regard. Accordingly, the appeal of assessee is allowed for statistical purposes.”

In the result, appeal by the assessee is allowed for statistical purposes.