MADHAN HUF,TRICHY vs. DCIT, CENTRAL CIRCLE-1, TRICHY

This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals), Chennai - 19, for the assessment year 2015-16, vide order dated 26.07.2023.

The assessee raised many grounds for the following issues, which are exhaustive & argumentative and hence not reproduced:

The brief facts are that, Shri J.Madan mohan is the managing director of the M/s.Vijay Dairy & Farm Products Pvt. Ltd. The assessee ‘Madhan HUF’ is an entity of Shri J.Madan mohan. The assessee had not filed its return of income for the A.Y. 2015-16 U/s.139 of the Act. A survey u/s.133A was conducted on 19/02/2019 in the case of M/s.Vijay Dairy & Farm Products Pvt. Ltd, Trichy. During the course of survey, a sale agreement dated 10/10/2014 between Madhan Mohan HUF and M/s.Trinetra real estate consultants pvt. Ltd., Kolkata – 700069, was found and impounded as per Annexure RKR/VD/133A/Documents/Imp. “2.1 Shri J. Madan Mohan is the Managing Director of M/s. Vijay Diary & Farm Products Private Ltd. The Appellant Shri madhan HUF is another entity pertains to Shri. J. Madan Mohan. A Survey u/s. 133A of the Act was conducted in the case of M/s. Vijay Diary & Farm Products Pvt Ltd., Trichy on 19.02.2019. During the course of survey, a sale agreement dated 10.10.2014 between Madan Mohan

The Ld.CIT(A) has confirmed the addition after perusing the details submitted by the assessee along with the grounds of appeal by passing an order dated 26/07/2023 by holding as under: “6.3 Grounds raised upon Merits 6.3.1 In this Ground the main contention of the Appellant Is that Shri Brij Nandan Singh who has executed the agreement was not examined by the Department and also the Department has not established that Shrì Anand Kumar Sharma (from whom statement was corded by the DCIT at Kolkata to whom a commission was issued u/s 131 of the Act), is a Key Management Personnel of M/s. Trinetra Real Estate Consultants Private Limited. Further, it has been claimed that the. A.O. has not explained why the Agreement for Sale executed by MIs. Trinetra. Real Estate Consultants Private Limited was not put-forth for necessary explanation from the Key Person. 63.2 It is the issue which has been discussed in detail in Para No. 6.2.2 while deciding the ground raised by the Appellant upon not allowing cross-examination of Shri Brij Nandan Singh and Shri Anand Kumar Sharma. The Appellant in a statement recorded w/s 131 of the Act has admitted about the receipt of R$.4.5 Crore as advance from M/s. Trinetra Real Estate Consultants Private Limited and the A.R. in the submission before the A.O. has admitted about the receipt of such advance and also claimed this amount as a source for investment. 6.3.3 Further, the original Sale Agreement dated 10.10.2014 entered by the Appellant and Shri Brij Nandan Singh, Representative of M/s. Trinetra Real Estate Consultants Private Limited for the sale of land belonging to the Appellant was found and impounded during the course of survey conducted was 133A of the Act. In this agreement, the Appellant as well as the purchaser of land Shri Brij Nandan Singh, Representative of M/s.

The Ld.AR for the assessee raised various grounds including the validity of re-opening, violation of Principles of Natural Justice and on merits. The preliminary issue raised by the Assessee is on the Principles of Violation of Natural Justice

The Ld.Counsel for Assessee, on this preliminary issue assailed the impugned action of the ld.CIT(A) and stated that the Ld.CIT(A) has erred in not granting cross examination of the directors of M/s.Trinetra Real Estates Consultants P. Ltd whose statement was relied upon by the Department for making the impugned additions. The Ld Counsel for the Assessee also relied upon various decisions in support of his arguments by filing a paper book containing 1 – 95 pages.

Per Contra, the Ld. DR, supported the decision of the Ld. CIT(A) for rejecting the plea of the Assessee to grant cross examination.

Having heard both the sides and considered relevant material on record on this preliminary issue and gone through the orders of the lower authorities. We find that the Assessing officer had made addition of Rs.4,63,75,948/- based on the statement recorded from Shri. Anand Kumar Sharma, key

The Assessing officer has made the impugned addition by relying on the statement of Shri. Anand Kumar Sharma, who happens to be the key managerial person of the company at the time of recording the statement. In fact, the said person has also stated in the said statement that Shri. Brajnandan Singh is an erstwhile director of the said company upto the financial year in which the impugned transaction had taken place.

In view of the above facts and circumstances, we are of the opinion that when a statement which is detrimental to the interest of the Assessee is being relied by the Income Tax Department for making additions, it is mandatory to grant cross examination of the said person to effectively rebut and demonstrate the actual facts emanating from a transaction. The Ld.AR for the Assessee also relied upon the judgment of the :-9-: ITA. No:975/Chny/2023 Supreme Court in the case of Andaman Timber Industries v commissioner of Central Excise, (Civil appeal No.4228 of 2006) wherein the Apex Court had 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 in as much 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 al 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 7.93.2005 was passed remitting the case back to the Tribunal with the directions to :-10-: ITA. No:975/Chny/2023 decide the appeal on merits giving its reasons for accepting or rejecting the submissions."

Respectfully following the ratio laid down by the Supreme Court, we are inclined to direct the Assessing officer to conduct the proceedings of cross-examination by summoning Shri.Anand Kumar Sharma, whose statement is relied upon by the Income Tax Department by permitting cross-examination from the side of the Appellant / Assessee and further grant an opportunity to cross examine Shri.Brajnandan Singh, who was also involved in the impugned transaction by summoning the said person to his office for the said purpose. Needless to say, the Assessing officer after granting the cross examination shall pass a speaking order considering the pleas of the Assessee and also grant adequate opportunity to state its case.

Since, we are remanding the issue to the file of the Assessing officer on this preliminary issue, all other issues including the issue of validity of re-opening are left open to be agitated at the appropriate time, if necessary.