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CIT vs. Sunita Dhadda (Supreme Court)

COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS: , ,
COUNSEL:
DATE: March 28, 2018 (Date of pronouncement)
DATE: June 6, 2018 (Date of publication)
AY: -
FILE: Click here to download the file in pdf format
CITATION:
S. 143(3)/ 292C: If the AO wants to rely upon documents found with third parties, the presumption u/s 292C against the assessee is not available. As per the principles of natural justice, the AO has to provide the evidence to the assessee & grant opportunity of cross-examination. Secondary evidences cannot be relied on as if neither the person who prepared the documents nor the witnesses are produced. The violation of natural justice renders the assessment void. The Dept cannot be given a second chance (All judgements considered)

HELD by the Supreme Court:

We do not find any ground to interfere with the impugned order. The special leave petition is, accordingly, dismissed.

Held by the Rajasthan High Court:

5. Counsel for the respondent has relied upon the following judgments :-

1. CIT VS. Dinesh Kumar Sharma, ITA No.14/2005 decided on 24.04.2017 holding as under:-

4. We have heard the learned counsel for the appellant.

4.1 However, the Tribunal while considering the case, held as under:-

7. By considering the totality of facts and circumstances of the case, it appears that the lower authorities presumed that the above mentioned properties belong to the assessee. But they have not verified in whose name these properties are recorded in the record of the Municipal Council/JDA or any other agency of the Government. It appears that the lower authorities made the addition by adopting short-cut method in the name of the assessee without verifying the record. No case is made out about the benami transactions by the lower authorities. In these circumstances, we deem it fit to set aside both the orders of the lower authorities and restore the matter back to the AO to examine the issue from the record of the Municipal council/JDA or any Government agency.

If the properties stand in the name of the assessee, only then the addition can be made in the hands of the assessee. However, the AO will be at liberty to examine the case for making the addition in the hands of the persons in whose name the property is recorded in the record of the Municipal Council/JDA etc., if need be. With this direction, the issue is set aside to the AO who will adjudicate in the light of above discussion and by considering the entire evidence as per law but by providing reasonable opportunity to the assessee.

10. After hearing rival submissions and considering the material available on record, we are of the view that the AO made the addition de hores without having any specific material on hand. The said property at Hanuman Nagar D is not identifiable as the Hanuman Nagar D is the name of the colony. The ld. A/R submitted that the assessee is not owning any property in Hanuman Nagar D nor he had sold any property during the assessment year under consideration.

11. From the AO’s order, it appears that he has not brought any evidence to establish the ownership of the assessee or to identity the property. It was expected from the AO to verify the ownership of the property or the transaction done by the assessee through the Sub- Registrar’s office. When assessee has categorically denied any involvement, then it was expected at least from the first appellant authority to ask for the remand report from the AO. We are satisfied that in the instant case the addition was made merely on the basis of presumption, surmises and conjectures. No addition can by made on the basis of presumption in the block assessment. Therefore, by taking into consideration the ration laid down in the case of Union of India vs. Ajit Jain And Another, 260 ITR 80, we set aside both the orders of the lower authorities and delete the addition of Rs. 1,86,500/-. The assessee will get the relief of this amount.

16. By considering the totality of facts and circumstances of the case, it appears that the statement of Shri Dinesh Kumar Sharma was recorded on 11.1.2001. In his statement, he merely submitted that he has taken the loan on interest from Shri Ashok Kumar Jain (question no. 11). The said loan was partly repaid. Balance of Rs. 45.000/- was continued. The said loan was taken for purchasing the property in the name of wife of the assessee. In these circumstances, we are of the view that when a person is taking the loan from Shri Ashok Kumar Jain, then he cann’t have the business relation with him in normal circumstances. The amount of Rs. 45,000/- was outstanding. If he has the brokerage business with Shri Ashok Kumar Jain, this amount might have been adjusted. In other words, the assessee might have not taken to amount on loan.

The assessee has expressly denied that he was having any brokerage business with Shri Ashok Kumar Jain. The assessee is a whole time director in M/s. Shakambri Stone Crushing Pvt. Ltd. The department has made no enquiry whether any brokerage payment was received either from assessee or from any other sources. Even the properties were not identified for which the brokerage was received.

If he was a broker, he might have signed as a witness on the transfer deed or diary or at least some document at the time of registration or agreement, but in the instant case no material was brought on record to prove that he was having brokerage business.

Moreover, no chance was given for to confront Shri Ashok Kumar Jain. Shri Ashok Kumar Jain never stated of having the brokerage business with the assessee. In these circumstances, we find no justification for making the addition of Rs. 1,13,000/-. Therefore, by setting aside both the orders of the lower authorities, we delete this addition. Thus, the assessee will get the relief of this amount.

19. After hearing rival submissions and considering the material available on record, we are of the view that the AO made the first two additions in summary manner as appears from his order. The CIT(A) has confirmed the order without any discussion. The above two additions are without any material. The AO made no attempt to bring any corroborative evidence or specific circumstances for the presumption. Hence the addition of Rs. 3,24,000/- for the year 1997-98 and addition of Rs. 35,000/- for the years 1998-99 are deleted as the same are de hors without any material.

23. After hearing rival submissions and considering the material available on record, it appears that in the previous ground the AO made the addition for taking the advances from Shri Ashok Kumar Jain on interest. But in this ground, the AO made the addition for giving the advances to Shri Ashok Kumar Jain. Both the facts are contradictory to each other.

It appears that the additions were made merely on the basis of presumption and surmises.

Neither any statement was recorded of Shri Ashok Kumar Jain nor any admission was obtained from the assessee regarding the said advances. No corroborative evidence was collected by the lower authorities to justify the additions. No specific circumstances like admission, signature, statement etc. were mentioned before making the presumption pertaining to the said additions. For the similar reasons mentioned above, we find no justification for upholding the orders of the lower authorities.

5. The judgment which has been cited by the counsel for the appellant in the case of P.R. Metrani Vs. Commissioner of Income Tax, Bangalore (2007) 1 SCC 789 is not applicable in the facts of the present case inasmuch as the duplicate books of account were not of assessee but of Ashok Kumar Jain in whose books of account the name of assessee was found.”

“2. CIT Jaipur vs. Vijendra Kumar Kankaria , ITA No. 175/2010 decided on 29.05.2017 observing as under:-

“7. He has also taken us to the judgment of Punjab and Haryana High Court in case of Navdeep Dhingra vs. Commissioner of Income Tax reported in [2015] 232 Taxman 0425 (P & H) wherein in para 3 & 4 held as under:-

“3. Aggrieved by this order, the assessee filed an appeal, which was dismissed by the CIT(A). The assessee thereafter filed an appeal before the ITAT which was also dismissed.

4. Counsel for the assessee submits that as admittedly the appellant retracted his admissions, the retracted admissions/statement could not form the basis of additions without any corroborative evidence. Counsel for the assessee draws attention to Office Note (Annexure-A6) dated 26.12.2008, wherein, the Deputy Commissioner of Income Tax has recorded that no other incriminating document except the slip pad has been recovered by the revenue. Counsel for the assessee submits that though an admission is the best evidence of a fact but where an admission is made under coercion and pressure and is retracted, the revenue cannot place reliance upon such an admission and must, therefore, look for other evidence to prove its case. The absence of any other evidence renders the impugned orders which are based upon retracted statements made by the assessee null and void.

8. However, counsel for the respondent contended that the view has been taken by the Supreme Court in recent judgment in case of M/s Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II reported in [2015] 281 CTR 241 (SC) wherein it has been held as under:- “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 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 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.

In view of the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal.”

9. He has also relied upon another decision in case of Gopal Saran vs. Satyanarayan reported in AIR 1989 Supreme Court 1141 wherein in para 5 it has been held as under:-

“5. On the basis of the aforesaid, it was contended that it was the definite case of the defendant in Examination-in-chief, that the board belonged to him and that the defendant was carrying on his own business and that there was no dispute as to the same by the plaintiff.

It may be mentioned that the plaintiff had not subjected himself to crossexamination in spite of the order of the Court after the remand, therefore, it would not be safe to rely on the examination-in-chief recorded which was not subjected to crossexamination before the remand was made.

If that is so, it will appear that there is no evidence of the plaintiff in respect of allegations in the plaint. This position appears established from the facts on record. When the plaintiff appeared for evidence in rebuttal he could have been cross-examined on these points. It was submitted that in rebuttal the plaintiff had stated only with regard to the default in payment of rent but the plaintiff had not chosen to support his plaint case. Before the defendant went to the witness box.

There was no question of cross-examining the plaintiff travelling beyond the evidence of the plaintiff given in examination-in-chief and thereby giving an opportunity to made out a case in cross-examination. It, therefore, appears from the pleadings and the evidence that the respondent did not make out any case of the appellant parting with possession by putting up the hoarding. In examination-in-chief also he did not make out such a case and on the contrary his case was that it was the defendant-appellant who had put up the hoarding. The plaintiff has made the evidence in examination-in-chief non est.

It was the case of the defendant that he was carrying on the business of advertisement by putting up the hoardings of different parties. The board was made by him, paintings and writings were also done by him and for putting the hoarding he charged from his customers. Therefore, it appears to us that there are no clear findings that anybody was given lease or anybody was given the right to put up the hoarding and there was parting of possession in favour of anyone else.

It was, however, argued that even if the appellant had put the advertisement board hoarding he was earning a huge amount by the same and this was a factor which would indicate that there was parting of possession by him. It was, however, submitted on behalf of the appellant that when the shop had been let out to the defendant-appellant for carrying on business it was the right of the defendant appellant to carry on the business. It was legally permissible to use the said shop room and also use the roof thereof and earn as much as could be done and as such it is not parting with possession.”

10. In view of the above, the view taken by the CIT(A) which was confirmed by the Tribunal is just and proper though the amount which has taken as income from commission is taken on a reasonable side.” He has also relied on the following decisions:-

“3. Common Cause (A Registered Society) and Ors. vs. Union of India (UOI) and Ors.

“22. In case of Sahara, in addition we have the adjudication by the Income Tax Settlement Commission. The order has been placed on record along with I.A. No. 4. The Settlement Commission has observed that the scrutiny of entries on loose papers, computer prints, hard disk, pen drives etc. have revealed that the transactions noted on documents were not genuine and have no evidentiary value and that details in these loose papers, computer print outs, hard disk and pen drive etc. do not comply with the requirement of the Indian Evidence Act and are not admissible evidence.

It further observed that the department has no evidence to prove that entries in these loose papers and electronic data were kept regularly during the course of business of the concerned business house and the fact that these entries were fabricated, non-genuine was proved. It held as well that the PCIT/DR have not been able to show and substantiate the nature and source of receipts as well as nature and reason of payments and have failed to prove evidentiary value of loose papers and electronic documents within the legal parameters. The Commission has also observed that Department has not been able to make out a clear case of taxing such income in the hands of the applicant firm on the basis of these documents.

23. It is apparent that the Commission has recorded a finding that transactions noted in the documents were not genuine and thus has not attached any evidentiary value to the pen drive, hard disk, computer loose papers, computer printouts.

“4. Bhandari Construction Company vs. Narayan Gopal Upadhye

“15. When the terms of the transaction are reduced to writing, it is impossible to lead evidence to contradict its terms in view of Section 91 of the Evidence Act. There is no case that any of the provisos to Section 92 of the Act are attracted in this case. Why the case that was sought to be spoken to by the respondent was not set up by him in the complaint was not explained. The case set up in evidence was completely at variance with the case in the complaint.

There was no evidence to show that the consideration was to be Rs. 9,00,000/-, especially, in the light of the recitals in the registered agreement. There was also no document to show the payment of Rs. 4,00,000/- by way of cash. Hence, this was no evidence to show that the balance amount due under the agreement after the admitted payment of Rs. 5,00,000/- was paid.

The affidavit produced before the State Forum and the evidence of the colleague of the respondent is clearly inadmissible and insufficient to prove any such payment. Thus, the case set up by the respondent in his evidence was not established. It is in that situation that the District Forum taking note of the payment of Rs. 5,00,000/- and the failure of the respondent to encash the cheque for Rs. 5,00,000/- that was returned by the company, ordered the complainant to pay the balance amount due under the transaction as evidenced by the written instrument and take delivery of the premises in question and in the alternative gave him the option to take back the sum of Rs. 5,00,000/- with interest.

Neither the State Commission, nor the National Commission has given any sustainable reason for differing from the conclusion of the District Forum.

A mere suspicion that builders in the country are prone to take a part of the sale amount in cash, is no ground to accept the story of payment of Rs. 4,00,000/- especially when such a payment had not even been set up in the complaint before the District Forum. Not only that, there was no independent evidence to support the payment of such a sum of Rs. 4,00,000/- except the ipse dixit of the respondent. The affidavit of the bank employee filed in the State Commission cannot certainly be accepted as evidence of such a payment. Payment of such a sum had clearly been denied by the company.

The respondent had, therefore, to prove such a payment. His case that the purchase price was Rs. 9,00,000/-, itself stands discredited by the recitals in the agreement dated 27.7.1997 in which the purchase price was recited as Rs. 7,75,000/-. Not only that the respondent did not have a receipt for evidencing the payment of Rs. 4,00,000/- and if the amount was paid on 5.7.1997 or 8.7.1997, as claimed by him, he would certainly have ensured that the payment was acknowledged in the agreement for sale executed on 27.7.1997.

The agreement for sale actually speaks of his obligation to pay the balance to make up Rs. 7,75,000/- after acknowledging receipt of Rs. 5,00,000/-. The respondent is not a layman. He is a practising advocate. According to him, he specialises in documentation. He cannot, therefore, plead ignorance about the existence of the recital in the agreement. He cannot plead ignorance of its implications.”

“5. Ayaaubkhan Noorkhan Pathan vs. The State of Maharashtra and Ors.

Cross-examination is one part of the principles of natural justice:

“23. A Constitution Bench of this Court in State of M.P. v. Chintaman Sadashiva Vaishampayan AIR 1961 SC 1623, held that the rules of natural justice, require that a party must be given the opportunity to adduce all relevant evidence upon which he relies, and further that, the evidence of the opposite party should be taken in his presence, and that he should be given the opportunity of cross-examining the witnesses examined by that party. Not providing the said opportunity to cross-examine witnesses, would violate the principles of natural justice.

(See also: Union of India v. T.R. Varma, AIR 1957 SC 882; Meenglas Tea Estate v. Workmen, AIR 1963 SC 1719; M/s. Kesoram Cotton Mills Ltd. v. Gangadhar and Ors. ,AIR 1964 SC 708; New India Assurance Co. Ltd. v. Nusli Neville Wadia and Anr. AIR 2008 SC 876; Rachpal Singh and Ors. v. Gurmit Singh and Ors.AIR 2009 SC 2448; Biecco Lawrie and Anr. v. State of West Bengal and Anr. AIR 2010 SC 142; and State of Uttar Pradesh v. Saroj Kumar Sinha AIR 2010 SC 3131).

24. In Lakshman Exports Ltd. v. Collector of Central Excise (2005) 10 SCC 634, this Court, while dealing with a case under the Central Excise Act, 1944, considered a similar issue i.e. permission with respect to the cross-examination of a witness. In the said case, the Assessee had specifically asked to be allowed to cross-examine the representatives of the firms concern, to establish that the goods in question had been accounted for in their books of accounts, and that excise duty had been paid. The Court held that such a request could not be turned down, as the denial of the right to cross-examine, would amount to a denial of the right to be heard i.e. audi alteram partem.

28. The meaning of providing a reasonable opportunity to show cause against an action proposed to be taken by the government, is that the government servant is afforded a reasonable opportunity to defend himself against the charges, on the basis of which an inquiry is held. The government servant should be given an opportunity to deny his guilt and establish his innocence. He can do so only when he is told what the charges against him are. He can therefore, do so by cross-examining the witnesses produced against him.

The object of supplying statements is that, the government servant will be able to refer to the previous statements of the witnesses proposed to be examined against him. Unless the said statements are provided to the government servant, he will not be able to conduct an effective and useful crossexamination.

29. In Rajiv Arora v. Union of India and Ors. AIR 2009 SC 1100, this Court held:

Effective cross-examination could have been done as regards the correctness or otherwise of the report, if the contents of them were proved. The principles analogous to the provisions of the Indian Evidence Act as also the principles of natural justice demand that the maker of the report should be examined, save and except in cases where the facts are admitted or the witnesses are not available for cross-examination or similar situation. The High Court in its impugned judgment proceeded to consider the issue on a technical plea, namely, no prejudice has been caused to the Appellant by such non-examination. If the basic principles of law have not been complied with or there has been a gross violation of the principles of natural justice, the High Court should have exercised its jurisdiction of judicial review.

30. The aforesaid discussion makes it evident that, not only should the opportunity of cross-examination be made available, but it should be one of effective cross examination, so as to meet the requirement of the principles of natural justice.

In the absence of such an opportunity, it cannot be held that the matter has been decided in accordance with law, as cross-examination is an integral part and parcel of the principles of natural justice.”

“6. Andaman Timber Industries vs. Commissioner of C. Ex., Kolkata-II

4. We have heard Mr. Kavin Gulati, learned senior counsel appearing for the Assessee, and Mr. K. Radhakrishnan, learned senior counsel who appeared for the Revenue.

5. According to us, not allowing the Assessee to crossexamine 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 crossexamine, 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 crossexamination 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 exfactory 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.

6. 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 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 17-3-2005 [2005 (187) E.L.T. A33 (S.C.)] 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.

7. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show cause notice.”

“7. Principal Commissioner of Income Tax Ahmedabad and Ors. vs. Kanubhai Maganlal Patel

“12. We have heard Shri Varun K Patel, learned counsel appearing on behalf of the Revenue at length. It emerges from the impugned orders and even the order passed by the Assessing Officer that the Assessing Officer made additions under Section 69B of the Act, relying upon the statements of two farmers [i.e., two sellers of the land] in which, according to the Department, they admitted of having received onmoney in cash. However, it is required to be noted and it is an admitted position that the statements of those two farmers upon which reliance was placed by the Department were not furnished/given to the assessee to controvert the same.

Not only that when a specific request was made before the Assessing Officer to permit them to cross examine the aforesaid two farmers, the same was rejected by the Assessing Officer. Under the circumstances, as rightly observed by the learned Tribunal, the Assessing Officer was not justified in making addition under Section 69B of the Act solely relying upon the statements of those two farmers.

13. We see no reason to interfere with the findings recorded by the learned Tribunal. We are in complete agreement with the view taken by the learned Tribunal while deleting the addition made by the Assessing Officer made under Section 69B of the Act. No substantial question of law arises.”

“8. CIT v. Devendra Kumar Singhal

“5. The ITAT thereafter relied upon finding of CIT (A) regarding the nature of diary, which was not found to be an exclusive record of the financial transactions. The ITAT observed:-

"It is also observed by the ld. CIT (A) that the diary did not show an element of exclusive/confidential business record. The ld. CIT (A) treated the diary as general household diary and not related to actual business transactions. We fully agree with this observation of the ld. CIT (A) that there is no sufficient material including LP-4, which could lead to the conclusion that the assessee has received any undisclosed money from employer towards his income i.e. salary.

On the other hand, the explanations and submissions of the assessee clearly established that the same were placed before the AO and were not appreciated by him due to lack of concluding enquiry and examination of other relevant persons in this behalf. Considering the entire facts and circumstances of the present case, we do not see any infirmity in the findings of the ld. CIT (A) on this issue. In our view, the ld. CIT (A) has passed a well-reasoned order after appreciating the facts of the present case as well as the settled legal position and therefore, we decline to interfere with his order."

“9. Commissioner of Income Tax-V vs. Indrajit Singh Suri

“The entire issue is based on factual matrix presented before the authorities. We are in complete agreement with the findings of the Tribunal that the Assessing Officer had largely proceeded on the basis of the statement of one Shri Gajjar in whose books of account, the said transaction of Ninad Co-op. Housing Society had emerged.

It further appears that no opportunity of cross examination of Shri Gajjar, though requested for, was granted by the Assessing Officer. Cumulatively, thus, when the Tribunal found that there was violation of principles of natural justice by not allowing cross examination despite such request coupled with absence of any evidence, no error much less any substantial error is committed by the Tribunal in deleting the said amount. This issue, therefore, requires no further consideration.”

“10. CIT vs. Supertech Diamond Tools Pvt. Ltd., 74 of 2012

“The reference to the statements made by some of the persons related with the said investing companies is of no effect because such statements could not have been utilized against the assessee Company when the assessee company had not been afforded an opportunity of confronting and cross-examining the persons concerned. There does not appear anything occurring in the statements of the persons relating with the assessee Company so as to provide a basis for the findings recorded by the AO.”

“11. Commissioner of Income Tax vs. Ashwani Gupta

“2. The Tribunal has confirmed the order passed by the Commissioner of Income Tax (Appeals) which held the entire addition made by the Assessing Officer to be invalid and had deleted the same. The Commissioner of Income Tax (Appeals) had clearly held that the Assessing Officer had passed the assessment order in violation of the principles of natural justice inasmuch as he had neither provided copies of the seized material to the assessee nor had he allowed the assessee to cross-examine one Mr. Manoj Aggarwal on the basis of whose statement the said addition was made.

The Commissioner of Income Tax (Appeals) also held that the entire addition deserved to be deleted, particularly so, because the transactions also stood duly reflected in his regular returns.

3. The Tribunal, after referring to the decision of this Court in the case of CIT v. SMC Share Brokers Ltd. MANU/DE/9286/2006 : [2007] 288 ITR 345, came to the conclusion that there was no infirmity in the order of the Commissioner of Income Tax (Appeals) and, therefore, declined to interfere with the same and dismissed the appeal of the Revenue.”

“12. ACIT vs. Govindbhai N. Patel

Addition under section 69B Undisclosed investment in purchase of agricultural lands–The addition made by the AO on account of undisclosed investment in purchase of agricultural lands. The AO had carried out investment and had collected statements of the sellers of the lands in question to establish that they had received cash payments from the assessee towards sale consideration. The assessee, however, strongly disputed the contents thereof and requested for crossexamination of the authors of such statements.

The AO refused to grant such cross-examination on the premise that the sale deeds were executed. CIT (A) deleted the addition. Tribunal found that the AO proceeded to make addition on the basis of enquiries conducted behind the back of the assessee without giving any opportunity of being heard or without giving any opportunity to cross examine the statements of the sellers. The CIT(A) was, therefore, justified in holding that the addition could not be sustained on that ground itself. Revenue filed appeal against the order of Tribunal.

Held: The AO had made additions on two basis firstly, that some of the lands in the village were sold at a higher price, and sellers had given statements to the AO of having received higher sale consideration. Both the grounds were knocked down by the CIT(A) and Tribunal on the premise that the other lands were not shown to be comparable and that the witnesses were not offered for cross-examination.

In fact, the assessee contended that the lands sought to be compared by the AO were converted into nonagricultural land, and therefore, naturally fetched much higher price. Therefore, CIT(A) and the Tribunal had correctly concluded that there was no evidence supporting the AO’s version that the assessee had invested large amount in purchase of agricultural lands.”

“13. CIT Kanpur vs. Shadiram & Others,

“Section 69 of the Income Tax Act, 1961- Unexplained Investments-Assessment Year 1981-82-During course of search carried out at business premises of a partnership firm (one of assessee), a loose parcha was recovered from wallet of one of partner of firm – On basis of entries in that parcha, ITO inferred that investment mentioned in parcha against various names belonged to persons whose name had been mentioned and interest on aforesaid capital investment had been given to them- He, accordingly, added certain amount towards unexplained investments and interest in case of three assessees i.e., partnership firm and two individuals –

On appeal, Commissioner (Appeals) confirmed order of Assessing Officer- On second appeal, Tribunal deleted additions holding that there being no corroborative evidence, no adverse inference could be drawn from entries of parcha against assessees- Whether finding recorded by Tribunal was pure finding of fact based on material on record and, therefore, no question of law arose therefrom-Held, yes.”

“14. Commissioner of Income Tax vs. Bhanwarlal Murwatiya and Ors.

“4. The entire case was sought to be hanged by the Revenue on the peg of statement of Shri Suresh Kumar Soni, said to have been recorded from time to time, who had given varying statements, at different times. Learned AO also relied upon certain statements, said to have, been recorded by the Asstt. Director of IT, of Amar Chand, Bhanwarlal and Radhey Shyam, but then, no reliance was placed on those statements by the learned Tribunal.

5. Assailing the impugned judgment, it is contended, with all vehemence, that it is more than clearly established on record, that a consideration of Rs. 61 lacs did pass, so much so that Suresh Kumar Soni has been assessed, his balance sheets have been considered, and it is writ large, that during the relevant time, his resources had disproportionately increased, which obviously was on account of the above consideration. Likewise, the aforesaid three witnesses viz; Amar Chand, Bhanwarlal and Radhey Shyam, have also clearly given out, that the land was sold for Rs. 61 lacs and, thus, there was no occasion for deleting the additions.

6. On the other hand, learned Counsel for the assessees submitted that none of the witnesses were examined by the AO, and even Suresh Kumar Soni had given varying statements at different occasions, apart from the fact that he was also not examined by the AO, nor did the assessee have any opportunity to cross examine on the version of Suresh Kumar Soni, so as to test his veracity or reliability, and the statements of the said witnesses, recorded by the other authority, could not be looked into, as they are not even relevant, in view of the provisions of Section 32 of the Evidence Act.

It was also contended that even an independent enquiry was got conducted, wherein the learned Dy. CIT had found, that the valuation of the land was not above the one, as shown in the sale deed, and thus, no interference is required to be made.

7. We have considered the submissions, and after going through the impugned orders, are of the view that all said and done, the question as to what was the price of the land at the relevant time, is a pure question of fact. Apart from the fact, that even if, it were to be assumed, that the price of the land was different than the one, recited in the sale deed, unless it is established on record by the Department, that as a matter of fact, the consideration, as alleged by the Department, did pass to the seller from the purchaser, it cannot be said, that the Department had any right to make any additions. It is a different story as to, to what extent and how, the statement of Suresh Kumar Soni, as given before different authorities, at different times, can be used against the assessee. More so, when none of the witnesses were examined before the AO, and the assessee did not have any opportunity to cross examine them.

8. In any case, the question as to whether the consideration of Rs. 61 lacs, or any other higher consideration than the one, mentioned in the sale deed, did pass from the assessee to the seller or not, does nonetheless remain a question of fact, and it is not shown by the Department, that any relevant material has been ignored, or misread by the learned CIT, or the learned Tribunal.”

“15. CIT vs. Dhrampal Premchand Ltd.

“However, AO paid no heed to such request and proceeded with assessment order- Whether since correctness or otherwise of report, on basis of which assessment order was passed against assessee, was itself under challenge, said repost could not be automatically accepted and Assessing Officer committed violation of principles of natural justice in not permitting cross-examination of analyst and relying upon his report to detriment of assessee-Held, yes.”

“16. CIT vs. S.M.Aggarwal

11. In the present case the Assessing Officer has placed reliance on the statement of Smt.Sarla Aggarwal, daughter of the assessed while arriving at the conclusion, that the entries belong to the transactions of the assessed.

This statement made by Smt.Sarla Gupta, cannot be said to be relevant or admissible evidence against the assessed, since the assessed was not given any opportunity to cross examine her and even from the statement, no conclusion can be drawn that the entries made on the relevant page belongs to the assessed and represents his undisclosed income.

It is also an admitted fact that the statement of the assessed was not recorded at any stage during the assessment proceedings. The only conclusion which can be drawn about the nature and contents of the document is that it is a dumb document and on the basis of the entry of nothings or figure etc. in this document, it cannot be concluded that this represents the undisclosed income of the assessed.

10. It is well settled that the only person competent to give evidence on the truthfulness of the contents of the document is the writer thereof. So, unless and until the contents of the document are proved against a person, the possession of the document or hand writing of that person, on such document by itself cannot prove the contents of the document. These are the findings of fact recorded by both the authorities, i.e., Commissioner of Income Tax (Appeals) and the Tribunal.

15. in the present case as already held above, the documents recovered during the course of search from the assessed are dumb documents and there are concurrent findings of Commissioner of Income Tax (Appeals) and the Tribunal to this effect. Since the conclusions are essentially factual, no substantial question of law arises for consideration.”

“17. Paramjit Singh vs. ITO, IT Appeal No. 401 of 2009

“We have thoughtfully considered the submissions made by the learned counsel and are of the view that they do not warrant acceptance. There is a well-known principle that no oral evidence is admissible once the document contains all the terms and conditions. Section 91 and 92 of the Indian Evidence Act, 1872 (for brevity ‘the 1872Act’) incorporate the aforesaid principle.

According to section 91 of the Act when terms of a contracts, grants or other dispositions of property has been reduced to the form of a documents then no evidence is permissible to be given in proof of any such terms of such grant or disposition of the property except the document itself or the secondary evidence thereof. According to section 92 of the 1872 Act once the document is tendered in evidence and proved as per the requirements of section 91 then no evidence of any oral agreement or statement would be admissible as between the parties to any such instrument for the purposes of contradicting, varying, adding to or subtracting from its terms.

According to illustration ‘b’ to section 92 if there is absolute agreement in writing between the parties where one has to pay the other a principal sum by specified date then the oral agreement that the money was not to be paid till the specified date cannot be proved. Therefore, it follows that no oral agreement contradicting/varying the terms of a document could be offered.

Once the aforesaid principal is clear then ostensible sale consideration disclosed in the sale deed dated 24-9-2002 (A.7) has to be accepted and it cannot be contradicted by adducing any oral evidence. Thereafter, the order of the Tribunal does not suffer from any legal infirmity in reaching to the conclusion that the amount shown in the registered sale deed was received by the vendors and deserves to be added to the gross income of the assessee-appellant.”

“18. CIT-13 Vs. M/s. Ashish International (ITA No. 4299 of 2009; dated, 22.02.2011)

“The Tribunal has recorded a finding of fact that the assessee had disputed the correctness of the above statement and admittedly the assessee was not given any opportunity to cross examine the concerned Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. who had made the above statement.

The appellate authority had sought remand report and even at that stage the genuineness of the statement has not been established by allowing cross examination of the person whose statement was relied upon by the revenue. In these circumstances, the decision of the Tribunal being based on the fact, no substantial question of law can be said to arise from the order of the Tribunal. The appeal is dismissed with no order as to costs.”

“19. Commissioner of Income Tax vs. Anil Khandelwal (21.04.2015 – DELHC)

“6. This Court further notices that the ITAT independently examined the evidence which the CIT (A) had scrutinized. It also took note of the paper book which had been furnished to the lower authorities and was satisfied that the amounts attributed to the assessee in fact had not been established and that in the given circumstances, the reference to Section 132(4A) and Section 292C was not justified. Having regard to the factual nature of the dispute – and having examined the findings of the lower authorities on this account which we do not consider unreasonable, this Court holds that no substantial question of law arises for consideration.

“20. Commissioner vs. Motabhai Iron and Steel Industries (03.09.2014 – GUJHC)

“10. From the findings recorded by the Tribunal, it is apparent that the sole basis of the demand was the statement of Shri Arjandas who did not appear pursuant to the summons issued to him. The assessee was, therefore, deprived of an opportunity to crossexamine the witness in respect of the statements made against him. In these circumstances, no reliance can be placed on the statement of such witness who has not subjected himself to cross-examination by the affected party.

Under the circumstances, the statement made by Shri Arjandas lost its efficacy and therefore, could not have been used against the assessee. Besides, the Tribunal has also found that M/s. Star Associates was regularly supplying goods to the assessee in the past and on no occasion, it was found that they had issued invoice without actually supplying the goods. It is in the light of the aforesaid facts that the Tribunal has deleted the disallowances of credit of Rs. 14,42,177/-. Under the circumstances, it cannot be said that there is any infirmity in the view taken by the Tribunal while deleting the disallowance of credit of Rs. 14,42,177/-.”

“21. CIT vs. S.C. Sethi, D.B.I.T Appeal No. 78 of 2005, 10.03.2006

“10. The facts stated above clearly indicate that no question of law arises in this appeal. The findings recorded by the Tribunal are findings of fact affirming the earlier finding of fact recorded by the Commissioner of Income-Tax (Appeals). Apparently when the loose papers by itself did not indicate receipt of the alleged undisclosed income by the assessee and peripheral reliance on the document was not earlier countenanced in absence of opportunity of cross examination of the person from whose possession the loose papers were recovered. The fact that the Assessing Officer has not made any efforts to serve the said Sh. A.K. Chhajer and secure his presence by invoking powers under the Income-tax Act for securing presence of any witness also goes to show that the Assessing Officer has not really made efforts to give effect to the directions of the Commissioner of Income-tax (Appeals) for making available opportunity of cross-examining Sh. A.K. Chhajer by the assessee.”

6. We have heard learned counsel for the parties.

7. Taking into consideration the observation made by the Tribunal regarding not allowing cross-examination of Mr. Thakkar from whose documents the amount is alleged to have been taken in the interest of the assessee.

8. In that view of the matter the finding recorded by the Tribunal is just and proper and issues is answered in favour of the of the assessee against the department.

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