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Income Tax Appellate Tribunal, KOLKATA BENCH “B”, KOLKATA
Before: SH. J.SUDHAKAR REDDY & SH. S.S.VISWANETHRA RAVI
PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER
This appeal filed by the assessee directed against the order of Ld.CIT(A), Asansol passed u/s 250 of the Income Tax Act, 1961 (in short “Act”) for AY 2010- 11.
The assessee is an individual and is in the business of trading of agricultural instruments, tractor & spare parts. He filed his return of income of Rs.10,05,959/- The AO passed an order u/s 143(3) of the Act, determining the total income of the assessee at Rs.3,66,55,960/- inter alia making an addition u/s 68 of the Act. The assessee claimed that he has received advance for supply of gur from various parties totalling to Rs.3,41,05,000/-. During the course of assessment proceedings, the assessee furnished evidence as to who had advanced money for supply of gur, in the form of confirmatory letters, copy of bank statements etc.
The AO issued summons u/s 131 of the Act to all 35 parties who had given advances and recorded statements on oath from 22 persons who had appeared before him. Two other persons namely Abdul Halim and Tarak Gupta sent [Assessment Year: 2010-11] confirmation letters and cited persons reasons for not appearing before the AO. As far as the other persons are concerned, the summons issued u/s 131 of the Act were either returned back unserved or wherever they were served, the parties did not appear. The AO gave a show-cause notice to the assessee and thereafter, came into conclusion that the assessee had not discharged the burden of proof that lay of him to prove the creditworthiness of the creditors and genuineness of the transactions. Aggrieved the assessee carried the matter in appeal.
Ld.CIT(A) upheld the order of the AO on this issue of addition u/s 68 of the Act.
Aggrieved the assessee is before us on the following grounds:-
1. “That on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in upholding the addition of Rs.3,41,05,000/- made by the Ld. A.O. on account of advances made by parties, being in the nature of trade advances towards supply of gur.
2. That the Ld. CIT(A) ought to have considered the fact that the statement of the parties was taken behind the back of the assessee without giving any opportunity of cross examination in gross violation of the principle of natural justice.
3. That the Ld. CIT(A) ought to have considered the settled position of law that rigours of the provision of section 68 do not apply to trade advances.
4. That the appellant craves leave to add alter or delete all or any of the grounds of appeal.”
5. Ld. Counsel for the assessee filed an application for admission of additional evidences. The additional evidence as in the form of affidavits and the copies of the bills raised by the assessee to these parties in subsequent years. Ld. Counsel for the assessee submitted that only one single opportunity was given to the assessee by the AO to substantiate his case. Ld. Counsel for the assessee vehemently contended that no opportunity of cross-examination was provided to [Assessment Year: 2010-11] the assessee and the material based on which the AO has come into conclusion was also not given to the assessee. He referred to page 13 of Ld. CIT(A)’s order and submitted that, the finding that the assessee has never sought cross-examination is not correct. He has submitted that Ld.CIT(A) should have call to the Remand Report and given opportunity to the assessee to substantiate its case. He contended that under these circumstances, the additional evidence furnished by the assessee has to be admitted as this goes to the root of the matter and that the issue be remanded back to the AO for fresh adjudication as well as for granting an opportunity of cross-examination the witnesses of the Revenue. He relied on the following case-laws:-
(i) S.K.Bothra & Sons (HUF) vs ITO; (ii) M/s. Andaman Timber Industries vs CCE, Kol-II.
Ld. DR on the other hand, controverted the submissions of the assessee and argued that, the assessee never sought an opportunity for cross-examining the witnesses. He further submitted that Ld.CIT(A) had rightly appreciated the facts of the case and in para 13 concluded that submissions of the assessee are factually incorrect. Relied on the same and submitted that the order should upheld and the appeal dismissed.
After hearing rival contentions, considering the papers on record and the orders of the authorities below and case laws sought, we hold as follows. The AO in this case has not provided adequate opportunity to the assessee to cross- examine the witness, the statements of whom were recorded u/s 131 of the Act and were relied upon by the AO. The Hon’ble Supreme Court in the case of M/s Andaman Timber Industries (supra) 281 CTR 214 (SC) held as follows:-
“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 [Assessment Year: 2010-11] 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.”
Similarly jurisdiction of Hon’ble High Court in the case of S.K.Bothra & Sons (HUF)(supra) as held as under:-
“In our view, equity and justice demand that the full text of the information given by the Inspector to the AO which is the basis of the conclusion of the assessment should be made known to the assessee before the same is used against him so that the genuineness of the said information can be rebutted by the appellant-assessee or at least, the assessee can get an opportunity to explain the said information.
We thus find that in the facts of the present case the order of assessment was made without giving adequate opportunity to the appellant to explain the undisclosed information received by the AO from his Inspector. We, therefore, set aside the order of assessment and remand the matter to the AO for communicating the report of the Inspector to the appellant with further liberty to the AO to enquire.from the assessee any other information he desires. Similarly, the assessee will be entitled to explain the report submitted by the Inspector and after consideration of such explanation, the AO will come to a final decision whether the transactions were genuine or not.
[Assessment Year: 2010-11] As we propose to set aside the order of assessment on the ground of not affording adequate opportunity to the appellant to prove his case, we do not deal with the decisions cited by Mr. Agarwal as those deal with the principles which are required to be followed in arriving at the conclusion as to acceptance of the plea of loan taken by an assessee.”
Applying the propositions of law laid down in all these case laws, to the facts of this case, as an opportunity of cross-examination the witnesses has not to be provided to the assessee, we deem it fit to set aside the matter to the file of the AO for fresh adjudication in accordance with law for giving an opportunity to the assessee.
In the result, the appeal of the assessee is allowed for statistical purpsoes.
Order pronounced in the open court on 24.08.2018.