RUPALI SANJAY BEDMUTHA,MANMAD vs. INCOME-TAX OFFICER,

आदेश / ORDER

PER VIKAS AWASTHY, JM

These three appeals by the assessee for assessment years 2009-10, 2010-11 and 2011-12 are directed against the order of Commissioner of Income Tax (Appeal)-1, Nashik dated 16.09.2016 common for all the assessment years mentioned above.

2 ITA Nos. 2591 to 2593/PUN/2016 A.Ys. 2009-10 to 2011-2012

arising from same set of facts, these appeals are taken up together for

adjudication and are disposed of vide this common order.

is engaged in the business of trading in building material, steel, binding wire

etc. Assessments of the assessee for assessment years 2009-10, 2010-11

and 2011-12 were re-opened on the basis of information received by the

department from Sales Tax Department indicating assessee’s involvement in

transactions with Hawala operators. Separate notices u/s.148 of the Income

Tax Act, 1961 (hereinafter referred to as ‘the Act’) was issued to the assessee

on 24.02.2014 for impugned assessment years. The assessee did not reply/

file return of income for the impugned assessment years in response to the

notice issued u/s.148 of the Act. Several notices u/s.142(1) of the Act were

thereafter issued to the assessee, but the assessee chose to remain silent

and did not give response to any of the notices. The Assessing Officer was

constrained to pass assessment orders u/s.144 r.w.s 147 of the Act for all

the three assessment years. The Assessing Officer in re-assessment

proceedings made following additions on account of fictitious purchases from

Hawala operators.

Assessment year Additions made by Assessing Officer (Amount in Rs.) 2009-10 1,68,21,812/-

2010-11 72,65,214/-

2011-12 44,94,900/-

3 ITA Nos. 2591 to 2593/PUN/2016 A.Ys. 2009-10 to 2011-2012

years, the assessee filed appeal before Commissioner of Income Tax (Appeal)

challenging the validity of re-assessment proceedings as well as additions on

merits. The Commissioner of Income Tax (Appeal) after considering the

submissions of assessee rejected assessee’s plea challenging validity of re-

assessment proceedings. However, on merits, the Commissioner of Income

Tax (Appeal) restricted the additions/disallowances to 25% of alleged bogus

purchases. The Commissioner of Income Tax (Appeals) restricted the

additions in the impugned assessment years as under:

Assessment year Addition sustained by Commissioner of Income Tax (Appeal) (Amount in Rs.) 2009-10 42,05,453/-

2010-11 18,16,303/-

2011-12 11,23,723/-

assailing the findings of the Commissioner of Income Tax (Appeal) in

rejecting assessee’s challenge to validity of proceedings u/s.148 of the Act as

well as confirming disallowance to the extent of 25% of the alleged bogus

purchases.

additions have been made at the back of assessee without affording

opportunity to cross examine the parties. The ld. AR contended that the

assessee could not participate in assessment proceedings on account of

medical exigency. The detailed facts were narrated before the Commissioner

4 ITA Nos. 2591 to 2593/PUN/2016 A.Ys. 2009-10 to 2011-2012

of Income Tax (Appeal) by assessee for non appearance of the assessee before

Assessing Officer. The assessee had sought an opportunity from

Commissioner of Income Tax(Appeal) for cross examination of the witnesses

whose statements were used to re-open the assessments and to make

additions. The assessee never got chance to rebut the statements and the

affidavits which have been used against the assessee for making the

additions. The ld. AR submitted that the assessee has made specific request

before the Commissioner of Income Tax (Appeal) for granting an opportunity

to cross examine the witnesses. However, the same was rejected by the

Commissioner of Income Tax (Appeal). The Commissioner of Income Tax

(Appeal) after placing reliance on the decision in the case of Kolte Patil

Developer Vs. DCIT, in ITA Nos. 1478 to 1483/PN/2013 for assessment

years 2004-05 to 2009-10 decided on 20.02.2015 denied the opportunity to

assessee for cross examination. The ld. AR submitted that the Co-ordinate

Bench of the Tribunal in the case of Shanteelal Chenaramji Joshi Vs. ITO, in

ITA No.949/PUN/2017 for assessment year 2010-11 decided on 25.05.2018

under similar set of facts held that re-assessment proceedings is invalid

where opportunity of cross examination is not given to the assessee. The

Pune Bench of Tribunal in the bunch of cases lead case being Anita Sanjay

Agrawal Vs. ITO, in ITA Nos.2622 to 2624/PUN/2016 for assessment years

2009-10 to 2011-12 decided on 28.03.2018 following the judgment of

Hon'ble Supreme Court of India in the case of M/s. Andaman Timber

Industries Vs. Commissioner of Central Excise, in Civil Appeal No.4228 of

2006 and various other decisions held that where opportunity of cross

examination has not been afforded to the assessee, additions are not

sustainable.

5 ITA Nos. 2591 to 2593/PUN/2016 A.Ys. 2009-10 to 2011-2012

defended the order of Commissioner of Income Tax (Appeal) in rejecting

assessee’s contention challenging validity of re-assessment proceedings on

the ground of not allowing an opportunity of cross examination. The ld. DR

submitted that the case laws on which the assessee has placed reliance are

distinguishable. In all the cases cited by the ld. AR, the assessee participated

in assessment proceedings and had specifically asked for an opportunity to

cross examine the witnesses. In the present case, assessee never participated

in the assessment proceedings. The assessee did not ask for cross

examination of the witnesses and assessee never asked for the reasons for

re-opening assessment. The Hon'ble Supreme Court of India in the case of

M/s. Andaman Timber Industries Vs. Commissioner of Central

Excise(supra.) has held the assessment to be bad in law, where opportunity

of cross examination was not provide to the assessee despite specific request.

However, in the instant case, no request was made by the assessee during

assessment proceedings. The assessee for the first time appeared before

Commissioner of Income Tax (Appeal) in First Appellate proceedings and

asked for cross examination. The ld. DR prayed that since facts in the

present case are distinguishable, decisions/judgments on which reliance has

been placed by the ld. AR of the assessee have no application. The ld. DR

prayed for dismissing the appeals of assessee and upholding the order of

Commissioner of Income Tax (Appeal).

and have perused the orders of Authorities below. We have also considered

the decisions on which ld. AR has placed his reliance to support his

contentions. It is an undisputed fact that the assessee did not participate in

assessment proceedings for all the three impugned assessment years. The

6 ITA Nos. 2591 to 2593/PUN/2016 A.Ys. 2009-10 to 2011-2012

Assessing Officer made addition on account of bogus purchases in all the

three assessment years under appeal. The additions were made on the basis

of statement of hawala operators supplied by Sales Tax Department to the

Income Tax Department. The Assessing Officer made addition of the entire

amount of alleged bogus purchases made from hawala operators. During the

proceedings before the Commissioner of Income Tax (Appeal), the assessee

for the first time asked for the opportunity to cross examine the hawala

operators whose statements were used for re-opening the assessment.

assessment apart from assailing the addition on merits. The Commissioner

of Income Tax (Appeal) rejected the assessee’s objection against re-opening.

However, on merits of the addition the Commissioner of Income Tax (Appeal)

granted part relief to the assessee by restricting the addition to the extent of

25% of the alleged bogus purchases in all the three assessment years. The

argument of the assessee in allowing an opportunity to cross examine was

also rejected by the Commissioner of Income Tax (Appeal) in light of the

order of Tribunal in the case of Kolte Patil Developers Vs. DCIT (supra.).

his submissions challenging the order of Commissioner of Income Tax

(Appeal) in not granting opportunity of cross examination to the assessee.

The Hon'ble Supreme Court of India in the case M/s. Andaman Timber

Industries Vs. Commissioner of Central Excise (supra.) has held that not

providing opportunity to the assessee to cross examine the witnesses would

amount to violation of principles of natural justice. The relevant extract of

the observations by Hon'ble Apex Court read as under:

7 ITA Nos. 2591 to 2593/PUN/2016 A.Ys. 2009-10 to 2011-2012

“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.”

In the aforesaid case, the assessee had made specific request to allow

an opportunity to cross examine the witnesses. However, opportunity was

denied by Adjudicating Authority.

assessment proceedings, therefore, the question of asking and granting

opportunity to cross examine does not arise. During First Appellate

proceedings, the assessee made request to cross examine the witnesses

whose statements were used for re-opening the assessments. Principles of

natural justice demand that fair chance should be given to rebut the

evidence used to make addition. Thus, an opportunity to cross examine the

witnesses should be provided when the statements of witnesses are used

against the assessee for re-opening assessment resulting into addition of

income.

12 Taking into consideration entire facts of the case, we deem it

appropriate to restore these appeals to the file of Commissioner of Income

Tax (Appeal) for allowing an opportunity to the assessee to cross examine the

dealers whose statements were used by the Department for re-opening the

assessments in the case of assessee. Identical grounds have been raised by

the assessee in all the appeals. Accordingly, the ground No.1 raised in the

appeals are allowed for statistical purpose.

8 ITA Nos. 2591 to 2593/PUN/2016 A.Ys. 2009-10 to 2011-2012

Order pronounced on Friday, the 29th day of June, 2018.

Sd/- Sd/- (डी. क�णाकरा राव/D. KARUNAKARA RAO) (�वकास अव�थी /VIKAS AWASTHY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 29th June, 2018. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeal)-1, Nashik. 4. The Pr. CIT-1, Nashik. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.