SANJAY DANCHAND GHODAWAT,JAYSINGHPUR vs. THE ASSISTANT COMMISSIONER OF INCOME TAX , CIRCLE ICHALKARANJI CIRCLE, ICHALKARANJI

Assessee by Shri Prashanth G.S. – AR Revenue by Shri Ajay Kumar Keshari – DR Date of hearing 14/08/2024 Date of pronouncement 20/08/2024 आदेश/ ORDER

PER DR. DIPAK P. RIPOTE, AM:

1. a) The orders of the authorities below in so far as these are against the Appellant is opposed to law, weight of evidence, natural justice, probabilities, facts and circumstances of the Appellant’s case. b) The appellant denies himself liable to be assessed on a total income of Rs.8,92,90,000/- as against the returned income of Rs.23,26,50,868/- under the facts and circumstances of the case.

, 541/PUN/2024 (A) & 598(R)/PUN/2024 Sanjay Danchand Ghodawat(03 Appeals) b) The authorities below failed to appreciate that all the transactions with M/s. Varad Infrastructure Pvt Ltd were through proper banking channels & there were no cash transactions undertaken and consequently addition of Rs.8,88,00,000/- is unwarranted under the facts & circumstances of the case. c) The authorities below grossly erred in making an addition of Rs.8,88,00,000/- merely on the basis of the statement of Mr. Vivek Dhamanse without providing an opportunity to cross examine him under the facts & circumstances of the case. 3. a) The learned CIT(A) erred in confirming an addition of Rs.12,57,00,000/- as interest/benefits received in cash on loans provided to M/s. VIPL under the facts & circumstances of the case. b) The authorities below are justified in merely relying on certain notings in the dairy seized from Mr. Vivek Dhamanse for making an addition of Rs.12,57,00,000/- as interest under the facts & circumstances of the case. c) The authorities below failed to appreciate that dairy seized from Mr. Vivek Dhamanse’s premises are not books of accounts and the entries therein are not sufficient to charge the appellant with liability on the facts of the case. 4. a) The appellant denies itself liable to be levied to interest under section 234B of the Act, as the computation of interest of 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. b) Without prejudice, the interest under section 234B is not leviable and ought to have been waived on the facts 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.” 1.1 The assessee in raised the following grounds of appeal :

1. a) The orders of the authorities below in so far as these are , 541/PUN/2024 (A) & 598(R)/PUN/2024 Sanjay Danchand Ghodawat(03 Appeals) against the Appellant is opposed to law, weight of evidence, natural justice, probabilities, facts and circumstances of the Appellant’s case. b) The appellant denies himself liable to be assessed on a total income of Rs.9,72,65,000/- as against the returned income of Rs.4,90,000/- under the facts and circumstances of the case.

2. Addition under section 69 of the Act of Rs.9,67,75,000/- a) The learned CIT(A) erred in confirming an addition of Rs.9,67,75,000/- as unexplained investment under section 69 of the Act under the facts & circumstances of the case. b) The authorities below failed to appreciate that all the transactions with M/s. Varad Infrastructure Pvt Ltd were through proper banking channels & there were no cash transactions undertaken and consequently addition of Rs.9,67,75,000/- is unwarranted under the facts & circumstances of the case. c) The authorities below grossly erred in making an addition of Rs.9,67,75,000/- merely on the basis of the statement of Mr. Vivek Dhamanse without providing an opportunity to cross examine him under the facts & circumstances of the case. 3. a) The authorities below are not justified in merely relying on certain notings in the dairy seized from Mr. Vivek Dhamanse for making an addition under the facts & circumstances of the case. b) The authorities below failed to appreciate that dairy seized from Mr. Vivek Dhamanse’s premises are not books of accounts and the entries therein are not sufficient to charge the appellant with liability on the facts of the case. 4. a) The appellant denies itself liable to be levied to interest under section 234B of the Act, as the computation of interest of 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. b) Without prejudice, the interest under section 234B is not leviable and ought to have been waived on the facts of the case. The appellant craves leave to add, alter, delete or substitute any of the grounds urged above.

, 541/PUN/2024 (A) & 598(R)/PUN/2024 Sanjay Danchand Ghodawat(03 Appeals) 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.” The Revenue in raised the following 1.2 grounds of appeal : “

1. Whether on facts and circumstances of the case and in law. the ld.CIT(A) was justified in giving relief to the assessee of Rs.2,68,85,000/- out of total addition made by the AO of Rs.9,67,75,000/- u/s 69 of the Act.

2. Whether on facts and circumstances of the case and in law, the ld.CIT(A) was justified in directing the AO to grant relief to the assessee after due verification on issue of AMT credit of Rs.1,01,47,395/-.

3. Whether on facts and circumstances of the case and in law, the ld.ClT(A) was justified in directing the AO to grant relief after due verification on issue of telescopic benefit of Rs.12,57,00,000/-.

4. Whether on facts and circumstances of the case and law the ld.CIT(A) erred in observing that where there are two separate additions, one on account of suppression of profit/cash receipts and another on account of cash investment/cash expenditure, in that case one should be telescoped into the other, resulting only in one addition, when as the unaccounted cash income is received in A.Y.2016-17, whereas the investment is made in A.Y. 17-18. And there is no evidence that the same cash has been invested again in the next financial year. As the same has not been entered in the cash book.

5. Whether on facts and circumstances of the case and law the ld.CIT(A) erred by not appreciating the fact that the assessee has not entered the said transaction in his cash book in FY 2015-16 relevant to AY 2016-17. Hence, telescoping should not have been allowed.” Submission of ld.AR :

2. Admittedly assessee has given certain loans to Varad Infra Projects Private Limited. Copy of the Ledger Account is at page no.263 to 265 of the paper book and copy of bank statement is at , 541/PUN/2024 (A) & 598(R)/PUN/2024 Sanjay Danchand Ghodawat(03 Appeals) page no.266 to 280. It is alleged by Assessing Officer(AO) that there was a search u/sec.132 of the Income-tax Act, on 20.03.2017 in the case of Varad Infrastructure Pvt. Ltd. AO alleged that he has received copies of the documents seized/impounded in the case of Varad Infrastructure Private Limited. Assessing Officer also stated that statement of Shri Vivek Dhamanse, Managing Director of Varad Infrastructure Pvt. Ltd., was recorded u/sec.131 and 132(4) of the Act. The AO has referred the statement of Mr.Vivek Dhamanse in the assessment order in which Mr.Vivek Dhamanse has claimed that cash payments were made to assessee i.e.Mr.Sanjay Danchand Ghodawat. Ld.AR invited attention to page no.92, 93 of the paper book which was copy of statement of Mr.Vivek Dhamanse. Ld.AR read out the answer given to Q.No.16. It has been stated by Mr.Vivek Dhamanse that Mr.Sanjay D. Ghodawat gave Rs.5 crores to Varad Infrastructure Private Limited[VIPL] and they have returned Rs.10,21,00,000/- which includes interest of Rs.5,21,00,000/-. Out of the total payment of Rs.10,21,00,000/-, Rs.5.99 crores have been returned by RTGS and Rs.4.22 crores returned by cash. Ld.AR submitted that from answer to question no.16, one can understand that , 541/PUN/2024 (A) & 598(R)/PUN/2024 Sanjay Danchand Ghodawat(03 Appeals) Mr.Vivek Dhamanse alleged that for Rs.5 crores, he has returned Rs.10.21 crores, applying the law of human probability; in no business such kind of interest is charged. This itself explains that statement of Mr.Vivek Dhamanse is not reliable. Ld.AR read out certain other parts of the statement to demonstrate the same. Ld.AR submitted that assessee had requested for cross- examination of Mr.Vivek Dhamanse, but both AO as well as ld.CIT(A) has denied the opportunity. Ld.AR submitted that it is against the principle of natural justice. Ld.AR relied on following decisions :  Kishinchand Chellaram Vs. CIT 125 ITR 713 by Hon’ble Supreme Court.  Andaman Timber Industries Vs. CCE 62 taxmann.com 3/127 DTR 241 by Hon’ble Supreme Court.  Vetrivel Minerals Vs. ACIT 129 taxmann.com 126 by Hon’ble High Court of Madras.

3. Ld.AR humbly submitted that the case may kindly be remanded back to the Assessing Officer with a direction to provide opportunity of Cross-examination of Mr.Vivek Dhamanse. Ld.AR submitted that there are blatant irregularities in the statement, Cross-examination of Mr.Vivek Dhamanse is essential. Ld.AR invited attention to the page no.281 to 284 of the Paper Book which are confirmations issued by Varad Infrastructure Private , 541/PUN/2024 (A) & 598(R)/PUN/2024 Sanjay Danchand Ghodawat(03 Appeals) Limited of the account of Mr.Sanjay Danchand Ghodawat which is duly signed by Mr.Vivek Dhamanse. Ld.AR specifically invited attention to page no.284 which is confirmation of accounts of Varad Infra Projects Private Limited in the books of Mr.Sanjay Danchand Ghodawat for F.Y.2016-17, duly signed by Mr.Vivek Dhamanse on 01.04.2017. Ld.AR submitted that the search was conducted on 20.03.2017 and statement of Mr.Vivek Dhamanse was recorded on 20.03.2017 in which Mr.Vivek Dhamanse alleged cash payments made to Shri Sanjay Danchand Ghodawat. However, same Mr.Vivek Dhamanse on 01.04.2017 i.e. after the impugned statement has confirmed the ledger account of Varad Infra Projects Private Limited in the books of Mr.Sanjay D.Ghodawat and as per the said ledger account, there are no cash payments. Thus, on one hand, it is the case of the Revenue that Mr.Vivek Dhamanse in his statement alleged cash payments, but in the confirmation of accounts duly signed Mr.Vivek Dhamanse there are no such cash payments. In this background, we had sought Cross-examination of Mr.Vivek Dhamanse, but it was denied by the AO and ld.CIT(A). Ld.AR also submitted that after the search in the case of VIPL, a survey u/sec.133A of the Act was , 541/PUN/2024 (A) & 598(R)/PUN/2024 Sanjay Danchand Ghodawat(03 Appeals) conducted in the case of assessee on 20.03.2017. Statement of assessee was recorded during the survey. Assessee has specifically denied all the alleged cash transactions. No evidence regarding the alleged cash transactions was found during the survey in the case of assessee. Ld.AR also submitted that assessee filed a criminal complaint against Mr.Vivek Dhamanse u/sec.138 of Negotiable Instrument Act as certain cheques issued by VIPL were dishonored. Ld.AR submitted that page no.191 to 203 is the affidavit of the assessee filed before the Hon’ble Civil Judge in PCR No.1675/2018, Hubli. As per the said affidavit, assessee has given loan of Rs.77 crores to VIPL, but VIPL has returned only Rs.25 crores and a sum of Rs.52 crores was still outstanding.

Submission of ld.DR : 4. The ld.Departmental Representative(ld.DR) for the Revenue vehemently relied on the order of AO and ld.CIT(A). Ld.DR submitted that the addition is based on incriminating documents found during the search which has been referred in the assessment order. Ld.DR submitted that thus, the addition is based on incriminating document and statement of Mr.Vivek Dhamanse.

, 541/PUN/2024 (A) & 598(R)/PUN/2024 Sanjay Danchand Ghodawat(03 Appeals) Therefore, Cross-examination of Mr.Vivek Dhamanse was not required.

Findings &Analysis: 5. We have heard both the parties and perused the records. A.Y.2016-17 & A.Y.2017-18 were heard together as the Ground No.2(c) was same for both the Assessment Years. We will first adjudicate the Ground No.2(c) of the assessee. Assessee has specifically said that opportunity of Cross-examination of Mr.Vivek Dhamanse was denied by the AO as well as ld.CIT(A). In this case, the AO in the assessment order has made addition of Rs.8,88,00,000/- u/sec.69 of the Act for A.Y.2016-17. The AO has mentioned in the assessment order that as per the statement of Mr.Vivek Dhamanse and copy of the Tally Printouts maintained by the VIPL which were found during the Survey/search, the assessee has given loan of Rs.70 crores by banking channels during the A.Y.2016-17 and Rs.8.80 crores by Cash during A.Y.2016-17. The assessee has admitted only the loan of Rs.70 crores for A.Y.2016-17 which is through banking channel and denied the cash payment of Rs.8.80 crores for A.Y.2016-17. The Assessee had requested the Assessing Officer for opportunity of Cross- , 541/PUN/2024 (A) & 598(R)/PUN/2024 Sanjay Danchand Ghodawat(03 Appeals) examination of Mr.Vivek Dhamanse, Dinesh Dhamanse. The AO issued summons u/sec.131 of the Act to Mr.Vivek Dhamanse, but he failed to comply the summons. Therefore, the AO could not give opportunity of Cross-examination to the assessee.

5.1 In this case, certain blatant discrepancies have been pointed out by the ld.Authroised Representative in the statement. Ld.AR specifically submitted that after the search, Mr.Vivek Dhamanse had given them the confirmation of accounts for F.Y.2016-17 on 01.04.2017, which does not mention anything about cash transactions. We have perused page no.284 of the paper book which is confirmation of accounts of Varad Infra Projects Private Limited in the books of Mr.Sanjay D. Ghodawat for F.Y.2016-17 dated 01.04.2017. The said ledger account is duly signed by Mr.Vivek Dhamanse for Varad Infraprojects Private Limited. Thus, on one hand, on 20.03.2017, Mr.Vivek Dhamanse in his statement alleged that Mr.Sanjay D. Ghodawat gave them Cash Loan and on the other hand signed confirmation of account of Assessee. Copy of this confirmation was filed by the assessee before the Assessing Officer as well as ld.CIT(A). None of them had given any observation on this confirmation of accounts. Thus, , 541/PUN/2024 (A) & 598(R)/PUN/2024 Sanjay Danchand Ghodawat(03 Appeals) there are contradictions in the ‘dulysigned confirmations of Account and the statement u/s 131 and 132(4) of the Act’. In these facts justice demands that Cross examination should have been allowed to the assessee. The AO has recorded fact that Mr.Vivek Dhamanse has failed to comply the summons issued u/s 131 of the Act. This act of Mr.Vivek Dhamanse in avoiding the cross examination creates a fog of suspicion. The Income Department had conducted Survey u/s133A on 18/03/2017 which was subsequently converted in Search u/s 132 in the case of Varad Infraprojects Pvt.Ltd., in which Mr.Vivek Dhamanse was Director, it means the Income Tax department is well aware about the residential, business premises of Mr.Vivek Dhamanse, the Income tax department is well aware about all his Bank Accounts, where he must have submitted KYC. The residential Address of Mr.Vivek Dhamanse as appearing in the statement u/s 131 is 1802, Ashirwad Heights, Plot Number 7, Sector 18, Kharghar, Navi Mumbai. In these circumstances, the AO writing that Mr.Vivek Dhamanse has failed to comply the summons is difficult to accept. The Assistant Commissioner Income Tax (AO) had issued Summons u/sec.131 of the Act to Mr.Vivek Dhamanse on , 541/PUN/2024 (A) & 598(R)/PUN/2024 Sanjay Danchand Ghodawat(03 Appeals) 18/12/2018, whereas the assessment order was passed on 29/12/2018. It has been mentioned in the Assessment Order that the Summons was retuned unserved (as per assessment order the summons was send by Speed Post and email). The time granted to comply summons was only 5 days. This demonstrates that the AO has merely completed the formality of issuing summons to Mr.Vivek Dhamanse.

5.2 It is observed that a survey u/sec.133A was conducted in the case of the assessee on 20/03/2017 by Asst.Director of Income Tax(Investigation), Unit III(1), Kolhapur and Mr.Sanjay Ghodawat’s statement was recorded on 20/03/2017. The relevant question/answer is reproduced here under : “Q.No.15 : Please state whether any advance paid or received from Shri Vivek R. Dhamanse in cash. Ans : No. I have not given any advance in cash to Shri Vivek R. Dhamanse and I have not received any advance/ payment in cash from him. Q.No.16 : During the statement recorded u/s.131 of the I.T.Act, 1961 in case of Vivek R. Dhamanse on 18.03.2017, he stated in answer to Qu.No.14 that he has received an amount of Rs.15 crores as a loan from you during the period of 16.04.2015 to 11.06.2015. against which RTGS payment of Rs.17,83,50,000/- and cash payment of Rs.8,35,00,000/- have been made towards repayment to you by Shri Vivek R.Dhamanse. In addition to this he also stated that total payment of Rs.35,51,50,000/- were made to you and another middle persons against the loan of Rs.15 crores given by you. Please comment on the same.

, 541/PUN/2024 (A) & 598(R)/PUN/2024 Sanjay Danchand Ghodawat(03 Appeals) Ans :- In this regard I have state that in reply to Qu. No.14 I have correctly stated the amount of advance given by me to Shri Vivek Dhamanse and amount received from him including interest. I have given advances of Rs.77,43,75,000/- to him and an amount of Rs.23.18 crores have been received back from him. Apart from the same I have received interest of Rs.39,37,500/-, Rs.99,00,000/- and Rs.2,83,50,000/- on 01.07.2014, 29.06.2015 and 26.04.2016 respectively from Shri Vivek R. Dhamanse. I have not received cash of Rs.8,35,00,000/- towards repayment from Shri Vivek R. Dhamanse.” 5.3 The Asst.Director Income-tax(Investigation) had not asked any question to Mr.Sanjay Ghodavat during the statement recorded on 20/03/2017 regarding the Answer given by Mr. Vivek Dhamanse on 18/03/2017 to question number 33 which is reproduced by the Assessing Officer in the Assessment Order. During the Assessment Proceedings the Assessing Officer Asst.Commissioner of Income Tax, Ichalkaranji Circle, had issued a “Show cause notice” dated 5/11/2018 to the assessee Mr.Sanjay D Ghodawat ,in which the AO has raised only one issue of purchase of some plot of land and applicability of section 56(2). Then the same Assessing Officer Asst.Commissioner of Income Tax, Ichalkaranji Circle vide notice dated 15/12/2018 asked the Assessee to explain the documents impounded/seized in the case of Varad Infra Projects P Ltd. Thus, till 15/12/2018 the AO had not asked any question to the assessee regarding the impugned seized/impounded documents, which were seized/impounded on , 541/PUN/2024 (A) & 598(R)/PUN/2024 Sanjay Danchand Ghodawat(03 Appeals) 20/03/2017 in the case of Varad Infra Projects P. Ltd. The assessee asked for cross examination. However, the Assessing Officer Asst.Commissioner of Income Tax, Ichalkaranji Circle passed the Assessment Order on 29/12/2018 without providing opportunity of cross examination to the assessee.

5.4 The opportunity of Cross examination is fundamental to the principle of natural justice,especially when the assessee had denied the entire cash transitions and has alleged that the other person has cheated on him. In this case we have observed that there are specific discrepancies in the statement and the confirmation of account duly signed by Vivek Dhamanse. In this case the Income Tax Department had failed to provide opportunity of cross examination.

5.5 TheHon’ble Jurisdictional High Court in the case of R W Promotions Pvt. Ltd. Vs. ACIT [2015] 376 ITR 342 (Bombay) has held as under : Quote, “13. Thus the appellant was not given an opportunity to cross examine the witnesses whose statement is relied upon by the revenue and the evidence led by the appellant has not been considered. Therefore, clearly a breachof principles of natural justice. In view of the above, we set aside the order of the Tribunal and restore the issue to the Assessing Officer for fresh disposal after following the principles of natural justice and in accordance with law. It is made , 541/PUN/2024 (A) & 598(R)/PUN/2024 Sanjay Danchand Ghodawat(03 Appeals) clear that the challenge to the issue of reopening of assessment is not pressed before us therefore that issue stands concluded.”Unquote. 5.6 The Hon’ble Supreme Court in the case of Andaman Timber Industries Vs. CCE 62 taxmann.com 3/127 DTR 241 observed as under : “6. 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 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 that 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 guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.” 5.7 The Hon’ble High Court of Madras Vetrivel Minerals Vs. ACIT 129 taxmann.com 126 has set-aside the assessment to the AO with a specific direction that opportunity of Cross-examination shall be provided to the assessee.

, 541/PUN/2024 (A) & 598(R)/PUN/2024 Sanjay Danchand Ghodawat(03 Appeals) 5.8 The Hon’ble Supreme Court in the case of I.C.D.S. Ltd. vs. CIT [2020] 117 taxmann.com 723(SC) vide order dated 12.02.2020 held as under : Quote”3. In view of rival submissions and the documents on which reliance has been placed by the respective parties, we would deem it appropriate to relegate the parties before the First Appellate Authority. Be it noted that one of the issues involved is about not extending opportunity to the appellant to cross-examine the witnesses relied upon by the Assessing Officer. If the Department wants to rely on their evidence, it may be necessary to provide opportunity of cross- examination of these witnesses to the appellant, which can be done by the First Appellate Authority itself, namely, Commissioner of Income- tax (Appeals)-I, Bangalore. We say so because both parties intend to rely on some additional documents and circumstances. The First Appellate Authority may reconsider the matter afresh on its own merits in accordance with law including by examining the additional material/circumstances to be produced by the parties. In other words, the entire matter will have to be considered by the First Appellate Authority afresh by giving fair opportunity to both sides to espouse their claim in the remanded appeal(s)”Unqoute. 5.9 Thus, it is well laid down principle of law that whenever Revenue intends to use statement of witnesses against assessee, then Opportunity of Cross-examination should be given to the assessee. In this case, we have specifically referred to the discrepancies pointed out by ld.AR in the statements. In these facts and circumstances of the case, respectfully following the Hon’ble Supreme Court,the Hon’ble Jurisdictional High Court, (supra), Hon’ble High Court of Madras(supra), we set-aside the additions made in the assessment order by the Assessing Officer to , 541/PUN/2024 (A) & 598(R)/PUN/2024 Sanjay Danchand Ghodawat(03 Appeals) Assessing Officer for de-novo adjudication after providing opportunity of Cross-examination of witness Mr.Vivek Dhamanse to the assessee. Accordingly, Ground No.2(c) raised by the assessee is allowed for statistical purpose.

5.10 Since we have set-aside Assessment Order to the AO for de- novo adjudication, we do not intend to adjudicate the other grounds of the assessee on merit. Accordingly, Ground Nos.1, 2(a) 2(b), 3 and 4 are dismissed as unadjudicated.

A.Y.2017-18 : 7. Since we have already discussed the issue at length and the facts of are similar to the facts of this appeal in shall apply mutatis mutandis to this appeal also, accordingly, grounds of appeal raised by the assessee in ITA No.541/PUN/2024 arepartly allowed. for A.Y.2017-18 (Revenue) :

9. We have set-aside the assessment order, for A.Y.2017-18 in assessee’s appeal in for denovo adjudication. Since we have decided the quantum appeal of the assessee in the cross appeal filed by the Revenue in ITA No.598/PUN/2024 becomes infructuous. Accordingly, grounds of appeal raised by the Revenue are kept open.