BHAGABAN PRASAD SAHU,MAYURBHANJ vs. ITO, WARD-1, BARIPADA

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ITA 199/CTK/2016Status: DisposedITAT Cuttack08 March 2017AY 2008-0910 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition cannot be sustained as the assessee was not allowed to cross-examine the creditors who denied the transactions, violating principles of natural justice. The initial burden of proof was discharged by the assessee.

What were the facts?

The Assessing Officer made an addition of Rs. 11,60,000/- as unexplained cash credit as the assessee failed to provide details of the creditors. The assessee later provided creditor details, but the creditors denied any transaction with the assessee. The CIT(A) confirmed the addition.

What were the issues?

Whether the addition of unexplained cash credit is valid when the assessee is denied the opportunity to cross-examine creditors who deny the transaction. Whether the assessee discharged the initial burden of proof for cash credits.

Which sections of the Income-tax Act were involved?

Section 133(6),Section 250(4)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, CUTTACK

Before: SHRI N.S SAINI

For Appellant: Shri B.Panda, AR
For Respondent: Shri D.K.Pradhan, DR
Pronounced: 08/03

This is an appeal filed by the assessee against the order of CIT(A)-

Cuttack, dated 23.2.2016, for the assessment year 2008-09.

2.

The first issue involved in this appeal is that the CIT(A) erred in

confirming the action of the Assessing Officer in making addition of

Rs.11,60,000/- as unexplained cash credit.

3.

The brief facts of the case are that the Assessing Officer found that

the cash credit totalling to Rs.11,60,000/- were entered into in the Balance

Sheet of the assessee under the head "ERM" the friends & relatives" and

2 ITA No. 199/CT K/ 2016 Asse ssment Year :20 08- 09

the amount was shown to be repaid on different dates. The Assessing

Officer required the assessee to furnish the name, complete postal address

and PAN of the creditors along with confirmations from them in respect of

each cash credit. The assessee was also requested to furnish sufficient

evidence to substantiate the genuineness of the cash credits by furnishing

evidence to prove the genuineness of the transaction, identity and

creditworthiness of the cash creditors. The Assessing Officer observed that

although sufficient opportunities were given to the assessee, assessee

could not furnish the required details and confirmation and, therefore, he

made addition of Rs.11,60,000/- as unexplained cash credit.

4.

On appeal before the CIT(A), the assessee filed confirmation of four

persons alongwith their addresses, PAN card, regarding the advance and

receipt of such loan during the financial year 2007-08. Since the Assessing

Officer had categorically mentioned that such details were not furnished

before him and because the confirmations have been filed for the first time

in the appeal proceedings, the CIT(A) requested the Assessing Officer to

verify the same and prepare a remand report u/s.250(4) of the Act. The

CIT(A) observed from the remand report that the Assessing Officer had

asked the assessee to produce the books of account for verification and to

produce the loan creditors along with details of their identity,

creditworthiness and genuineness of the transaction for further

examination. The assessee expressed his inability to produce the loan

3 ITA No. 199/CT K/ 2016 Asse ssment Year :20 08- 09

creditors before the Assessing Officer for examination and cross-

examination. Therefore, the Assessing Officer concluded that the assessee

has failed to prove identity of the creditors and their creditworthiness

regarding advancement of the cash loans. The remand report was

forwarded to the assessee for comments. In response to the same, the

assessee submitted that “the Assessing Officer at least could have

contracted the lTO,Ward-2(3),Cuttack to find out the genuineness of the

persons, their business activities, creditworthiness and other details which

have been fully disclosed in the IT records and the amount since have been

returned back to the concerned creditors the details of which have already

been stated, hence no doubt or suspicion could have been raised in the

matter." The assessee also submitted that the Assessing Officer could have

collected details from such loan creditors directly as the address, PAN

details and assessment particulars of the loan creditors were produced

before the Assessing Officer. Accordingly, the Assessing Officer was once

again directed to collect details from the loan creditors directly for verifying

their identity, creditworthiness and genuineness of the transactions. The

Assessing Officer in turn had made a questionnaire and issued the same to

the 4 persons requiring information U/S.133[6) of the Act. In response, all

the four persons whose name, address and PANs were submitted by the

assessee replied that "In response to your notice dated.31.07.2014 the

assessee begs to submit that he had no transactions, whatsoever, with

Bhagwan Prasad Sahu of Hatbhadra, Mayurbhanj during the FY 2007-08 or

4 ITA No. 199/CT K/ 2016 Asse ssment Year :20 08- 09

any time afterwards so far. Moreover, the assessee does not know the

aforesaid person in any way neither had/has any connection with him. The

assessee is regularly assessed to income-tax in your Ward and has filed l.T.

Returns for all the years in past". The Assessing Officer sent the

questionnaire to the cash creditors and their replies in the remand report

u/s.250(4) of the Act to the CIT(A). The said remand report was forwarded

to the assessee but the assessee once again requested for cross-

examination of the cash creditors with him.

5.

The CIT(A) thereafter held that the assessee himself has not been

able to produce the cash creditors for cross-verification though the burden

to prove lies with him. Under the circumstances and that the statement of

the four persons denying any transaction with the assessee to which the

assessee could not produce any response, he was not inclined to accept

that the assessee has accepted the cash credit and repaid the same. Rather

the finding of the Assessing Officer that the assessee had understated his

receipts and introduced the same as cash credit to the books as and when

necessary and had shown those as repaid appears to be more genuine. He,

therefore, confirmed the action of the Assessing Officer.

6.

Before me, ld Authorised Representative of the assessee pointed out

from page 29 of paper book that the assessee had filed petition before the

CIT(A) on 10.3.2016 seeking cross examination of the four cash creditors

5 ITA No. 199/CT K/ 2016 Asse ssment Year :20 08- 09

namely; Smt. Bhanu Kamani, Gnvant P Kamani, Y. Bhaskar Rao and Y.

Pushpavati, who had stated before the Assessing officer that they have not

given any loan to the assessee. He again pointed out from page 32 of

Paper Book that on 3.3.2016 by way of a petition to the CIT(A), the

assessee had sought for cross examination of the four cash creditors who

denied of having given loan to the assessee. He further pointed out from

page 40 of Paper book that on 17.6.2015, the Income Tax Officer Ward-1,

Baripada was directed by the CIT(A) to allow cross examination of the four

loan creditors who have denied having advancing the loan to the assessee.

He submitted that in spite of specific request of the assessee, cross

examination of the four loan creditors who have denied having given loan

to the assessee was not allowed to the assessee either by the Assessing

Officer or by the CIT(A). Hence, he submitted that in absence of cross

examination of creditors allowed to the assessee, who have denied having

advanced loan to the assessee, n o adverse inference can be drawn against

the assessee based on those statements. He relied on the decision of

Hon’ble Supreme Court in the case of Anadman Timber Industries vs CCE,

(2015) 281 CTR 241, wherein, it was held that “not allowing Assessee to

cross-examine witnesses by Adjudicating Authority though statements of

those witnesses were made as basis of impugned order, amounted in

serious flaw which make impugned order nullity as it amounted to violation

of principles of natural justice because of which the assessee was adversely

affected.”

6 ITA No. 199/CT K/ 2016 Asse ssment Year :20 08- 09

7.

He also relied on the decision of Hon’ble Gujarat High Court in the

case of Pr. Commissioner of Income Tads vs. Chartered Speed Pvt Ltd., in

Tax Appeal No.126 of 2015 with Tax Appeal No.127 of 2015 order dated

3.3.2015, wherein, it has been held as no cross examination of the maker

of the statement was allowed to the assessee, their statement could not be

used as an evidence against the assessee. Hence, it was the submission of

ld Authorised Representative of the assessee that the addition should be

deleted.

8.

Ld Departmental Representative relied on the orders of lower

authorities.

9.

I have heard the rival submissions and perused the orders of lower

authorities and materials available on record. The undisputed facts of the

case are that during the year under appeal, the assssee received loan from

four persons which were shown under the head “"ERM" the friends &

relatives” of Rs.11,60,000/- Since the assessee failed to file details of the

loan creditors, such as name, addressees, and PAN, the Assessing Officer

treated the amount of Rs.11,60,000/- as unexplained cash credit and added

to the income of the assessee.

10.

On appeal before the CIT(A), the assessee furnished names,

7 ITA No. 199/CT K/ 2016 Asse ssment Year :20 08- 09

addresses, PAN of the loan creditors from whom loans of Rs.11,60,000/-

were received by the assessee during the impugned assessment year. The

CIT(A)called for a remand report from the Assessing Officer. The Assessing

Officer issued notice u/s.133(6) to the four loan creditors namely, Smt.

Bhanu Kamani, Gnvant P Kamani, Y. Bhaskar Rao and Y. Pushpavati, who

in response to same, denied having advanced the loans to the assessee.

Accordingly, the remand report was sent to the CIT(A) but on confrontation

of this remand report to the assessee, the assessee requested for cross

examination of the loan creditors and the CIT(A) vide its letter No.

CIT(A)/CTK/2015-16 dated 17.6.2015 directed the Assessing Officer to

allow cross examination of the loan creditors.

11.

The Assessing Officer did not allow cross examination of the loan

creditors to the assessee and the CIT(A) without receiving report from the

Assessing Officer on the cross examination of the loan creditors passed

order on 23.2.2016 confirming the addition of Rs.11,60,000/- as

unexplained cash credit in the hands of the assessee basing on the

statement of the four loan creditors.

12.

Ld Authorised Representaitve has relied on the decision of Hon’ble

Supreme Court in the case of Anadman Timber Industries (supra),,

wherein, it was held that “not allowing Assessee to cross-examine

witnesses by Adjudicating Authority though statements of those witnesses

were made as basis of impugned order, amounted in serious flaw which

8 ITA No. 199/CT K/ 2016 Asse ssment Year :20 08- 09

make impugned order nullity as it amounted to violation of principles of

natural justice because of which the assessee was adversely affected.” .

13.

Similarly, Hon’ble Gujarat High Court in the case of Chartered Speed

Pvt Ltd(supra) has held that where the assessee requested for cross

examination of the maker of the statement and the Assessing Officer did

not take any step to allow effective opportunity to the assessee to cross

examine the makers of the statement, statement of those persons cannot

be cannot be read against the assessee.

14.

In the present appeal before me, I find that inspite of specific

direction given by the CIT(A) vide his letter dated 17.6.2015 to the

Assessing Officer to allow cross examination to the assessee of the four

loan creditors who denied of advancing loan to the assessee, the same have

not been allowed to the assessee by the Assessing Officer. The CIT(A)

passed the appeal order on 23.2.2016 confirming the addition based on

those statements of the loan creditors in spite of his directing the Assessing

Officer to allow cross examination of the loan creditors to the assessee vide

his letter dated 17.6.2015. In the above facts and circumstances of the

case, in my considered view, addition cannot be sustained in law in view of

the decision of Hon’ble Supreme Court in the case of Andaman Timber

Industries (supra) and the decision of Hon’ble Gujarat High Court in the

case of Chartered Speed Pvt Ltd (supra) keeping in view the fact that all

9 ITA No. 199/CT K/ 2016 Asse ssment Year :20 08- 09

the details of the loan creditors such as , name and addresses, PAN were

provided by the assessee and, therefore, the initial burden of proving

identity, genuineness of transaction and creditworthiness of the credits was

duly discharged by the assessee. If the statement of loan creditors are

removed then there is no evidence brought on record by the revenue to

show that the loan of Rs.11,60,000/- received from four loan creditoros is

not genuine or bogus. I, therefore, set aside the orders of lower authorities

and delete the addition of Rs.11,60,000/- on account of unexplained cash

credit and allow this ground of appeal of the assessee.

15.

The second issue is that the CIT(A) erred in confirming the action of

the Assessing Officer adding Rs.2,96,865/- as interest on fixed deposit not

disclosed by the assessee.

16.

At the time of hearing, no arguments were made by ld Authorised

Representative of the assessee on this ground of appeal of the assessee.

Therefore, this ground of the assessee is dismissed for want of prosecution.

17.

In the result, the appeal filed by the assessee is partly allowed.

Order pronounced in the open court on 08/03/2017 in the presence

of parties. Sd/-

(N.S Saini) ACCOUNTANT MEMBER Cuttack; Dated 08/03/2017 B.K.Parida, SPS

10 ITA No. 199/CT K/ 2016 Asse ssment Year :20 08- 09

Copy of the Order forwarded to : 1. The Appellant : Shri Bhagaban Prasad Sahu, At/PO: Haty Badra, Dist: Mayurbhanj. 2. The Respondent. ITO, Waqrd-1, Baripada 3. The CIT(A) Cuttack 4. Pr.CIT, Cuttack 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// BY ORDER,

SR.PRIVATE SECRETARY ITAT, Cuttack

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