TaxTMI 
TaxTMI 
2017 (2) TMI 904
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....lopment rights' solely relying on the statement of Shri Aditya Dadhe, partner of Viraj Properties, recorded on 20.2.2006 without giving assessee an opportunity to examine him in assessee's presence and / or cross examine him though the incorrect statement of the said Deponent Witness was being used as evidence against the facts produced by the assessee; and as such the assessment under appeal be treated as bad in law and a nullity. 3. The learned CIT(A) ought to have held on facts that the re-assessment order is passed without giving the assessee an opportunity to cross- examine the witness for the statement recorded by Asst. Director of Income-Tax (Inv.4), Pune and not by assessing officer himself, used as evidence in holding the said advance receipt as income causing violation of natural justice; and as such the assessment under appeal be treated as bad in law and a nullity. 3. The issue arising in the present appeal filed by the assessee is against assessability of advance received by the assessee on relinquishment of development rights. The grievance of assessee is that the addition has been made in the hands of assessee solely relying on the statement of Shri Aditya....
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....U, assessee paid Rs. 35.50 Lakhs towards work to DCPL and Rs. 4 Lakhs to Land Lord Mr. Prakash Korde during Feb., 2000 to April 2000. 2. Meanwhile the development right of the property were transferred to M/s. Viraj Properties by DCPL vide agreement dated 03.06.2002. Following is the yearwise consideration received by the assessee against relinquishment of his rights created as per the MOU. Ass. Years DCP Ltd Viraj Properties Total 2002-03 49,00,000 40,00,000 89,00,000 2003-04 Nil 70,00,000 70,00,000 Total 49,00,000 1,10,00,000 1,59,00,000 The assessee has not disputed the fact that he has received this consideration but has stated that the amount of Rs. 1.59 crores is not full and final settlement for transfer of rights. 3. Assessee has claimed that he come to know that without his knowledge or consent, the Joint Venture viz. DCPL gave development rights of the same site to Viraj Properties. 4. One M/s Bhushan Kulkarni Associates P. Ltd has raised a claim against DCP Ltd. & ors in respect of a plot adjacent to the Project Property and a civil suit was filed by the said M/s. Bhushan Kulkarni & Associates against the said DCP Ltd & ors in ....
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....rights on account of MOU with DCPL. 7.1 Meanwhile DCPL entered into MOU to form a joint venture with Kher and Associates to develop the said plot. As it is evident from the statement recorded by the ADIT of Mr. Kher and the submissions filed, the work of development were started and there was no formation of JV. As per the MOU DCPL and Kher & Associates were to form a JV, which was never materialized. 7.2 Subsequently DCPL entered into a development agreement dated 03.06.2002 with Viraj Properties wherein the development rights were transferred to Viraj properties by DCPL. As per the agreement the claim of M/s Kher and Associates under the JV agreement with DCPL regarding 1,40,000 sq.ft saleable built up area was settled for a consideration of ` 1.56 crores. The assessee has accounted for these payments as advances against the property in its balance sheet. The assessee has not taken it as its income as the assessee believes that yet final settlement regarding the consideration has not been reached. The statement of Mr. Aditya Dadhe partner of Viraj Properties was recorded dated 20.02.2006. In his statement he has stated that ` 1.66 crores was paid to Mr. Kher against the full ....
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.... was received by cheques and has been shown in the books of account of the assessee as well as VPPL. The CIT(A) also pointed out that sum of Rs. 1.24 crores was to be added in the hands of assessee. The objection of assessee that terms and rights under the MOU with DCPL dated 22.02.2000 was still in force as no written document was executed for cancellation or termination of the MOU. However, the CIT(A) observed that the MOU with DCPL was executed on Non- Judicial Stamp Paper and was not registered document. As per the terms of MOU, the land was to be brought in by DCPL. On the other hand, the assessee had to deposit Rs. 1 crore as capital in the newly formed company. This amount was to be deposited in a bank account to be opened in the name of new company and all the booking amounts to be deposited thereunder. The CIT(A) observed that the said MOU was never executed by way of registered deed nor was a new company ever formed which shows that the formal rights related to Joint Venture were never assigned to the assessee, then thereafter, MOU dated 02.07.2001 was signed between DCPL and VPPL. The CIT(A) in this regard points out that the assessee was aware of proposed MOU between th....
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....essee in the properties still survive. Accordingly, the CIT(A) uph eld the addition of income at Rs. 1,23,50,000/- as against Rs. 1,24,00,000/- in the hands of assessee on the following reasons:- "I) The rights and interests of the appellant as emerging out of the MOU dated 22.2.2000 have not been finalized by way of irrevocable Power of Attorney and registered JV agreement as discussed in para 4.5 above. The JV company has neither been formed nor has any development activities taken place. Clause 7 of the said MOU specifically mentions that all legal formalities are to be completed. But no evidence has been brought on record to show that the JV or POA has actually been executed. In fact, the appellant in his statement recorded u/s 131(1)(b) of the I.T. Act recorded on 10.2.2006 before the Assistant Director Investigation Pune admitted that he has not discharged his rights as available to him in the said joint venture as per MOU (reply to Q.No.11). The reply of the appellant is obviously based on the fact that no such joint venture has ever been executed. It is only proposed. In fact, at the time of recording of the statements of the appellant and Shri Aditya Dadhe by the Investi....
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....ssessee is in appeal against the order of CIT(A). 11. The learned Authorized Representative for the assessee pointed out that the issue which arises in the present appeal is whether amounts received by the assessee was an advance and whether the same is taxable or not. He further stated that the second aspect of the issue is that if taxable, then in which year the same is taxable. The learned Authorized Representative for the assessee has filed facts sheet in this regard and taken us through date-wise developments in the proceedings of the case. He pointed out that the land belongs to Dadhe Construction Pvt. Ltd. and as per the understanding, the assessee started development of the said project. However, M/s. Bhusan Kulkarni Associates Pvt. Ltd. was developing adjacent land and dispute arose on encroachment. In December, 2001, Shri Aditya Dadhe, nephew of Shri Vijay Dadhe, Director of DCPL approached and stated that he was taking over the project, wherein total consideration was agreed to pay to assessee at Rs. 1.59 crores as against expenses of Rs. 35 lakhs. The learned Authorized Representative for the assessee states that sum of Rs. 49 lakhs was paid. The learned Authorized Rep....
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....is unwarranted. Another point raised by the learned Authorized Representative for the assessee was that the reasons for reopening the assessment were recorded on 31.03.2010 as against the statement recorded in 2006. 13. The learned Departmental Representative for the Revenue placing reliance on the orders of authorities below fairly pointed out that the copy of statement was given to the assessee but admittedly, no cross-examination was allowed. 14. We have heard the rival contentions and perused the record. In order to adjudicate the issue raised in the present appeal, we will briefly touch upon the facts of the case and then, take note of the assessment proceedings and the plea of the assessee before the Assessing Officer and also the modus of appellate proceedings. The assessee claims that it had entered into MOU with DCPL to form Joint Venture in order to develop certain piece of land which was owned by the DCPL. Thereafter, there was some development between DCPL and other concern Viraj Properties, who took over the project and MOU was signed between DCPL and Viraj Properties, copy of which is placed at page 127 of the Paper Book. On 03.12.2001, Viraj Properties intimated th....
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....ara 7.2 of the assessment order had relied on the statement of one Shri Aditya Dadhe, which was recorded on 20.02.2006. He alleged that the Assessing Officer had not informed about recording of such statement nor the copy was furnished. The assessee vide letter dated 30.06.2010 had requested the Assessing Officer that in case any concerned parties have to be examined, then they should be examined in the presence of assessee and he should be given an opportunity to cross-examine. The said request was made vide para 2.6 of the said letter letter filed objecting to the reasons recorded for reopening the assessment, copy of which is placed at pages 4 to 8 of the Paper Book. Before the CIT(A), the assessee reiterated that the Assessing Officer had failed to ascertain the correctness of statement of Shri Aditya Dadhe. While making addition, merely by relying on them and the said statement could not be relied upon and / or used as evidence against the assessee. The copy of said statement is placed at pages 16 to 18 of the Paper Book. The CIT(A) passed an order under section 250(4) of the Act, dated 31.01.2011, which is placed at pages 19 to 21 of the Paper Book, under which the CIT(A) ref....
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.... his say with documentary evidence on the statement recorded of Shri Aditya Dadhe, copy of which is given to him. He says that another opportunity is being given to the assessee to furnish his say with documentary evidence and if the assessee fails to do so, the remand report would be submitted to the CIT(A) on the basis of information available. The assessee in the meanwhile approached the CIT(A), Pune vide letter dated 17.10.2012, copy of which is placed at pages 28 and 29 of the Paper Book and reiterated the facts and proceedings before the Assessing Officer during the course of assessment and his request to the Assessing Officer to be given an opportunity to cross-examine the said deponent Shri Aditya Dadhe in the presence of Assessing Officer to bring out the factual position of transaction. The assessee further pointed out that the Assessing Officer had mis-construed the directions issued by the CIT(A) and was insisting upon furnishing of assessee's say and that the Assessing Officer would himself cross-examine the witness. The assessee requested that suitable further directions be issued to the Assessing Officer in the matter for giving an opportunity to cross-examine the wi....
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....he order of Assessing Officer in passing the assessment order relying on the statement of Shri Aditya Dadhe, which was never confronted to the assessee. The said statement was recorded during the course of investigation proceedings by the ADIT(Inv)-4 and not by the Assessing Officer during the course of assessment proceedings. Further, the said statement was relied on without confronting the assessee during the course of assessment proceedings that such a statement exists on record. On receipt of assessment order, the assessee became aware of the reliance of Assessing Officer on said statement and before the CIT(A) he raised a plea that he should be given copy of statement and also be allowed an opportunity not only to examine the witness but also be allowed an opportunity to cross-examine the witness before the Assessing Officer. The CIT(A) in fairness while passing order under section 250(4) of the Act considered the submissions of assessee and remanded the issue to the file of Assessing Officer to carry out further investigations and also directed the Assessing Officer to give the copy of statement of Shri Aditya Dadhe to the assessee and also examine the said person in assessee....
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....e back of assessee by an officer, who was an Investigation Officer and not the adjudication officer, is handed over to the assessee during the course of appellate proceedings and the said witness is not examined in the presence of assessee nor his request of allowing examination and / or cross-examination of the witness allowed during the course of appellate proceedings, can such a statement be the basis for making the addition in the hands of assessee. 18. The Hon'ble Supreme Court in M/s. Andaman Timber Industries Vs. Commissioner of Central Excise (supra) took note of the plea of assessee before the Tribunal that it was not allowed cross-examination of dealers whose statements were relied on by the adjudicating authority in passing the orders, wherein the Tribunal rejected the plea in the following manner:- "6. The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex factory prices remain static. Since we are not upholding and applying the ex factory prices, as we fin....
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....ld be the subject matter of cross-examination and make the remarks as mentioned above. The Hon'ble Supreme Court held that if the testimony of two witnesses is discarded, then there was no material with the Department on the basis of which it could justify its action, as the statements of aforesaid two witnesses were only the basis of issuing show cause notice, hence the impugned order passed by the Tribunal was set aside and the appeal of the assessee was allowed. 21. The Hon'ble Supreme Court in Sahara India (Firm) Vs. CIT and Another (2008) 300 ITR 403 (SC) while deciding issue of principles of natural justice and Rule of audi alteram partem held as under:- "11. Rules of "natural justice" are not embodied rules. The phrase "natural justice" is also not capable of a precise definition. The underlying principle of natural justice, evolved under the common law, is to check arbitrary exercise of power by the State or its functionaries. Therefore, the principle implies a duty to act fairly, i.e., fair play in action. As observed by this court in A. K. Kraipak v. Union of India (1969) 2 SCC 262, the aim of rules of natural justice is to secure justice or to put it negatively to pre....
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....mum extent possible, with situational modifications. But, the core of it must, however, remain, namely, that the person affected must have reasonable opportunity of being heard and the hearing must be a genuine hearing and not an empty public relations exercise." 13. Initially, it was the general view that the rules of natural justice would apply only to judicial or quasi-judicial proceedings and not to an administrative action. However, in State of Orissa v. Dr. Miss Binapani Dei(1), the distinction between quasi-judicial and administrative decisions was perceptively mitigated and it was held that even an administrative order or decision in matters involving civil consequences, has to be made consistently with the rules of natural justice. Since then the concept of natural justice has made great strides and is invariably read into administrative actions involving civil consequences, unless the statute, conferring power, excludes its application by express language. 14. Recently, in Canara Bank v. V. K. Awasthy(2), the concept, scope, history of development and significance of the principles of natural justice have been discussed in extenso, with reference to earlier cases on t....