RAJAT DIWAKER INDIVIDUAL,BHOPAL vs. I.T.O. 2(2), BHOPAL
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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Per Vijay Pal Rao, JM :
This appeal by the Assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) Delhi dated 28.08.2023 for A.Y. 2007-08. The assessee has raised following grounds of appeal:
“The Appellant wishes to raise the following grounds in the present appeal: 1. That the Assessing Officer was not justified in making the addition of Rs. 84.20 lacs as the undisclosed investment by the Appellant Assessee for purchase of Flat No 2602 (AVALON) only on
ITANo.369/Ind/2023 Rajat Diwakar Individual the basis of statements made by the Hiranandani Group Builder before the DIT(Inv.)-II, Mumbai. 2. That the Impugned Assessment Order deserves to be quashed on the grounds that the Assessing Officer did not comply with the directions dated 19.03.2015 of the Jt. Commissioner of Income Tax, Range 2, Bhopal u/s 144A of the Income Tax Act, 1961. 3. That the Impugned assessment order is bad in law as no relied upon documents nor the opportunity to cross examine the persons upon whose statement the Assessing Officer has relied were ever provided to the Appellant Assessee while making the said addition. 4. The Appellant prays leave to add further or additional grounds in case the same have inadvertently been omitted here;"
The solitary issue arises in this appeal of the assessee is whether the CIT(A) is justified in confirming the addition made by the AO on account of undisclosed investment for purchase of flat in Mumbai. The assesse has filed his return of income u/s 139 of the Act on 21st May 2008 declaring total income of Rs.6,59,570/-. Scrutiny assessment u/s 143(3) was completed on 18.12.2009 whereby the AO accepted the return income. Thereafter the assessment was reopened by the AO by issuing notice u/s 148 on 29.03.2014 on the basis of the information received from DDIT(inv) Mumbai regarding the ‘on money’ payment by the assessee for purchase of flat in Mumbai from Hiranandani Group as detected the search and seizure operation in the case of the Hiranandani group. Ld. AR of the assessee has submitted that the AO has made an addition of Rs.88,24,000/- on the basis of the information received from DDIT based on the statement of Directors of the builder and developer of Hiranandani group.
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ITANo.369/Ind/2023 Rajat Diwakar Individual 2.1 Ld. AR has submitted that the assessee requested the AO to provide all the documents which were seized from the developer and allegedly showing the payment of on money by the assessee. The AO did not provide the copy of the alleged material on the basis of which the addition has been made in the hand of the assessee. He has further contended that the assessee has fundamental rights to have access to the material being used against him so that the assesse could respond to the said information/material. He has further submitted that the statement of third person recorded by the DDIT cannot be a basis of addition without giving opportunity to the assessee to cross examine the witnesses. Therefore, there is violation of principle of natural justice when the AO has not provided the documents/material on the basis of which the addition is made. The assessee should have knowledge of the material which is being used against him by the AO so that the assessee may able to meet it. He has relied upon the judgment of Hon’ble Supreme Court in case of Ram Chander vs. Union of India & Ors. 1986 SCC(4) 12(SC) and in case of Dhakeswari Cotton Mills Ltd. vs. CIT 27 ITR 126 and submitted that statement recorded on the back of the assessee cannot be used against the assessee without providing the assessee an opportunity to cross examine the witnesses. He has also relied upon the judgment of Hon’ble Supreme Court in case of Andaman Timber Industries vs. CCE 62 taxmann.com 3(SC) and submitted that the Hon’ble Supreme Court has laid down the rule that not allowing the assessee to cross examine the witnesses by the adjudicating authority though the statement of those witnesses
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ITANo.369/Ind/2023 Rajat Diwakar Individual were made the basis of the impugned order is a serious flaw which makes the order a nullity in as much as it amounting to violation of principles of natural justice.
2.2 Ld. AR has further submitted that without prejudice to the contentions on the violation of principle of natural justice the assessee has also produced complete proof of payment made for purchase of the flat with supporting evidence of source of income. The payments have been verified by the AO both during the original assessment and also at the time of re-assessment and have not found any fault. He has pointed out that the flat was purchased by the assessee at a price which is 21% higher than the circle rate and therefore, there was no motivating factor for any on money payment. The CIT(A) is under a mistaken belief that the statement in question are those of the assessee himself whereas the assessee is not aware of the statements made by the Directors of Hiranandani Group or any documents recovered from them. Thus, ld. AR has submitted that unless documents are provided to the assessee he cannot charged for failure to prove that admission made by the developer is the statement is wrong. Thus, Ld. AR has submitted that the addition made by the AO and sustained by the CIT(A) is highly arbitrary and not justified.
On the other hand, ld. DR has relied upon the orders of the authorities below and submitted that the alleged letter dated 21.11.2014 does bear signature of the assessee or the Ld. AR
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ITANo.369/Ind/2023 Rajat Diwakar Individual therefore, it is not clear whether the assessee has actually filed the said letter before the AO for demanding copies of the material/information received by the AO from the DDIT. Ld. DR has submitted that the assessment order does not refer any such letter of the assessee.
We have considered rival submission as well as relevant material on record. It is undisputed fact that originally assessment was completed u/s 143(3) whereby the AO has accepted the return income. In the reassessment proceedings the AO has made the addition of on money payment towards purchase of flat by the assessee on the basis of the statement of the Directors of Hiranandanit Group recorded during the search and seizure action u/s 132(1) wherein they surrendered the income on account of on money receipt. The AO has given details of the information received by him from DDIT in para 3 as under: S.No. Date of payment Amount of on Concern of Hiranandani of on money as money paid (in Group to whom on per evidence Rs.) money is paid 1 11.01.2007 860000 Classique Associates 2 20.01.2007 1800000 Classique Associates 3 22.01.2007 750000 Classique Associates 4 29.01.2007 3574000 Classique Associates 5 01.02.2007 1840000 Classique Associates Total 8824000
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ITANo.369/Ind/2023 Rajat Diwakar Individual Thus the AO has given date wise details of the alleged payment of on money by the assessee to the group concern of the M/s Hiranandani Group. The assessee has demanded the copy of the statement of the builder disclosing on money received from the assessee against sale of flat as well as any other documents in the possession of the AO. It is also not in dispute that the AO has not provided any material or statement to the assessee which is made the basis of the addition. Once the AO has made the addition on the basis of the information received from DDIT Mumbai comprising of the statements of the Directors of the Hiranandani Group admitting on money received from the assessee then the said material ought to have been supplied to the assessee and further the assessee ought have been provided the opportunity to cross examine witnesses. It is settled proposition of law that if any evidence or statement is made on the basis of the assessment without giving opportunities to assessee to cross examine witnesses or to rebut the evidence it is violation of principle of natural justice as held by the Hon’ble Supreme Court in case of Andaman Timber Industries vs. CCE (supra) in para 6 & 7 are 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 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
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ITANo.369/Ind/2023 Rajat Diwakar Individual 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 at 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
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ITANo.369/Ind/2023 Rajat Diwakar Individual 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 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.”
Thus the assessee has right to be confronted with the information before the same is used against the assesse. In the facts and circumstances of the case when the AO has made addition solely on the basis of the information received from DDIT Mumbai and the same was not shared with the assessee then in our considered opinion there is a violation of principle of natural justice because the assessee was deprived of said evidence/material which was made the basis of the assessment order. It is the duty of the AO to disclose and confront the assessee all the material on the basis of which he is going to pass the order. The principle of natural justice requires that the assessee would be made known the evidence and information which was to be used by the AO against him so that he would bring his own stand and material to meet such information/evidence brought against him. Therefore, in the facts and circumstances of the case when the AO has made addition on the basis of the information and statement recorded by the DDIT during the search and seizure action against the builder and developer without providing assessee copy of the said documents/material and also without giving opportunity to the assessee to cross examine the witnesses render the assessment order voidable. Accordingly in the interest of justice we set aside the Page 8 of 9
ITANo.369/Ind/2023 Rajat Diwakar Individual impugned order and remanded the matter to the record of the AO for fresh adjudication after providing the relevant material/information which was used against the assessee before the same is used against the assesse. Needless to say the assessee be given an appropriate opportunity of hearing before passing fresh order
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 12 .02.2024.
Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member
Indore,_ 12.02.2024 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
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