2024 (7) TMI 1368 - AT - Income Tax

Assessee wins appeal as addition deleted due to denial of cross-examination opportunity violating natural justice

M/s. Srishti Associates Central Square Versus The ACIT Central Circle- Kota Kota

ITAT Jaipur allowed the assessee's appeal regarding unaccounted money on flat sales. The tribunal held that assessment order validity was not affected by ... Validity of assessment order without quoting DIN - HELD THAT:- As the assessment order does not contain the DIN but as evident from the remand report, which submitted by AO to CIT (A), DIN was duly generated and intimated to the assessee vide letter dated 28.12.2019 and duly been delivered to the registered email of the assessee. Hon’ble Supreme Court of India in the case of CIT V/s Brandix Maurititus Holdings Ltd. [2024 (1) TMI 276 - SC ORDER] has granted stay on this issue, therefore the argument of the assessee regarding the validity of assessment order, without mentioning of DIN in the body of assessment, though the same was duly generated and separately intimated to the assessee, is not found to be acceptable and hence the same is rejected. Approval of draft assessment order u/s 153D - We find that the fact of giving approval is duly mentioned in the body of assessment order itself, therefore there is nothing on record to presume that the approval was given in mechanical manner. Regarding non generating and mentioning the DIN on the approval granted by ACIT we have given the elaborated finding on the issue of DIN in para above and the same is mutatis mutandis applied here also. The other arguments raised by the assessee is regarding satisfaction note being not proper, assessment based on surmises conjecture and cross examination etc. and also the principal of natural justice, are interlink & interconnected to the addition made by AO, which is challenged in ground No. 2 of appeal, therefore the same are being dealt with while adjudicating the ground No. 2 of the appeal and for the sake of brevity the same are not being adjudicating here. Unaccounted money by the assessee on sales of flats at Royal Imperia Apartment - material placed on record, it is apparent that during the course of search at Shri Upendra Kumar Soni a document was found & seized - HELD THAT:- Addition so made the AO relied on the document found from the possession of Shri Upendra Kumar Soni and also on some extracted statement, though in such statement he nowhere admitted to pass on/receiving any cash amount by the appellant. We found that there is a noting of cash over the seized from the possession of Shri Upendra Kumar Soni and to this effect the AO neither examined to Shri Upendra Kumar Soni nor provided his cross examination to the assessee. CIT (A), directed to Ld. A.O. to provide the cross examination of Shri Upendra Kumar Soni to the assessee, which is basic principle of natural justice and it is not a mere formality. AO has not made any effective efforts to enforce the attendance of Shri Upendra Kumar Soni by issuing of summons u/s 131 of the Act. It was incumbent on the AO to enforce the attendance of shri Upendra Kumar Soni and to record his statement on the disputed issues. Therefore, without confrontation of fact of receiving of on money by the appellant from Shri Upendra Kumar Soni and without allowing the cross examination, the addition made by AO in absence of corroborative evidence is not sustainable in the eyes of law. The Hon’ble Supreme Court in the case of Andaman Timber Industries vs. CCE [2015 (10) TMI 442 - SUPREME COURT] while dealing with the issue of violation of principles of natural justice for not providing the opportunity of cross examination of the witnesses whose statements were relied on by the AO has held if the testimony of the 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. When person has not stated anything about the assessee in his statement recorded u/s 132(4) of the Act during search operation which has a evidentiary value in the eyes of law then any further statement recorded u/s 131 of the Act that too after Hon’ble ITSC order, it shall not be sufficient to make addition in the assessee’s case. We hold that the Id. CIT(A) has erred in confirming the addition. Thus we set aside the order passed by CIT(A)-2, and direct the AO to delete the entire addition. Assessee appeal allowed. Issues Involved:1. Validity of the assessment order under section 153C of the IT Act.2. Addition of Rs. 3,96,05,000/- to the total income of the assessee on the ground of receiving unaccounted money from the sale of flats.Issue-Wise Detailed Analysis:1. Validity of the Assessment Order:Arguments by Assessee:- The assessment order dated 27.12.2019 was issued without a Document Identification Number (DIN), violating CBDT Circular No. 19/2019.- The AO obtained a common approval from the Additional Commissioner of Income Tax under section 153D for various assessment years, which should have been taken separately.- The satisfaction note recorded by the AO for initiating proceedings under section 153C was improper and based on generalization.- The assessee was not provided a proper opportunity for cross-examination of Shri Upendra Kumar Soni, violating principles of natural justice.Arguments by Revenue:- The DIN was generated and communicated to the assessee via email on 28.12.2019.- The approval by the Additional Commissioner was given after due application of mind and was mentioned in the assessment order.- The satisfaction note was properly recorded, and the addition was based on documents found during the search at Shri Upendra Kumar Soni's premises.Tribunal's Findings:- The assessment order does not contain the DIN, but it was duly generated and communicated to the assessee, making the assessment valid.- The approval under section 153D was properly obtained and mentioned in the assessment order.- The satisfaction note was found to be reasonable, and the nexus of the documents with the appellant was established.- The issue of cross-examination and other arguments related to addition were addressed under the second ground of appeal.2. Addition of Rs. 3,96,05,000/-:Arguments by Assessee:- Relied on the decision of ITAT Jaipur Bench in M/s Moti Developers, arguing that similar facts and issues were involved.- Contended that the document found from Shri Upendra Kumar Soni's possession did not establish any nexus with the appellant.- Pointed out discrepancies in the excel sheets used by the AO for making the addition.- Argued that the statement of Shri Upendra Kumar Soni did not mention any cash passed to the appellant.- Asserted that the addition was made without corroborative evidence and was based on surmises and conjectures.- Highlighted that the GST department had rejected the demand of short payment of GST on the alleged cash receipts.Arguments by Revenue:- The addition was based on documents found and seized during the search at Shri Upendra Kumar Soni's premises, which clearly established that on-money in cash was taken against sales of flats.Tribunal's Findings:- The document found from Shri Upendra Kumar Soni's possession did not mention the name of the assessee, the date or year of receipt, or unit-wise bifurcation of amounts.- The excel sheets used by the AO contained serious discrepancies and inconsistencies, making them unreliable.- The AO did not provide complete statements of Shri Upendra Kumar Soni to the assessee, and no effective efforts were made to enforce his attendance for cross-examination.- The satisfaction note prepared by the AO was not reasonable and lacked corroborative material.- The Tribunal cited the decision of ITAT Jaipur Bench in M/s Moti Developers and other relevant case laws, concluding that the addition was not sustainable.Conclusion:The Tribunal set aside the order passed by CIT(A) and directed the AO to delete the entire addition of Rs. 3,96,05,000/-. The appeal of the assessee was partly allowed.