TaxTMI 
TaxTMI 
2019 (7) TMI 2022
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.... attention towards page no. 29 and stated that where revenue relies on statements of certain persons to implicate an assessee, principles of cross examination have to be invariably followed as not providing opportunity to cross examine is violative of principles of natural justice. He further stated that where revenue strongly relies on statements of certain persons to implicate an assessee, principles of cross examination have to be invariably followed if truth and justice need to be found out. He stated that the answer has been given by the Bench positive in the case Amitabh Bansal vs. Income Tax Officer, Ward 46(4), New Delhi (2019) 102 taxmann.com 229 (Supra) and therefore, requested to follow the same ratio in the case of the assessee and addition in dispute may be deleted and appeal of the assessee may be allowed. 3. On the contrary, Ld. DR relied upon the orders passed by the Revenue Authorities. He stated that the addition in dispute has been made on the basis of the information received from the Investigation Wing, after recording the valid reasons with the approval of the Competent Authority. Therefore, no irregularity has been committed by the AO as well as Ld. CIT(A)....
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....llate proceedings. The ld.CIT(A) even called for a remand report and directed the AO to allow cross examination to the assessee. However, the AO has expressed his inability to allow the assessee cross examination of the witnesses due to the reason that the witnesses belong to Kolkata and it is not possible for AO to make such arrangement. The ld. CIT(A) has finally denied the cross examination to the assessee by giving his finding in para 5.11 at page 188 already reproduced in the earlier part of this order and, therefore, the only reason for denial of cross examination by the ld.CIT(A) is that the statements are so vocal and undeniable that cross examination of such accommodation entry provided by thousands of beneficiaries across India is neither practicable nor viable and therefore uncalled for. We find that the assessee has demanded the cross examination only in respect of the alleged transactions of loans and not for the entire business of the entry providers providing the bogus entries. Undisputedly, the statement of Shri Anand Sharma was recorded by the Investigation Wing Kolkata at the back of the assessee, even the proceedings by the Investigation were conducted at the bac....
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....tion 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of tax filings, affidavits and confirmation of the Directors, bank statements of the lender, balance sheet of the lender company, and an independent confirmation has also been obtained by the Assessing officer to satisfy the cardinal test of identity, creditworthiness and genuineness of the loan transaction. However, the Assessing officer has not given any finding in respect of such explanation, documentary evidence as well as independent confirmation. Apparently, the reason for not accepting the same is that the Assessing officer was in receipt of certain information from the investigation wing of the tax department as per which the transaction under consideration is a bogus loan transaction. The said information received from the investigation wing thus overweighed the mind of the Assessing officer. The Assessing officer stated that the primary onus is on the assessee to establish the genuineness of the transaction claimed by it and if the investigat....
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....rial are gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the cross examination and if this is not done, the principles of natural justice stand violated. 2.9 In light of above discussions, in our view, the crux of the issue at hand is that whether the principle of natural justice stand violated in the instant case. In other words, where the AO doesn't want to accept the explanation of the assessee and the documentation furnished regarding the genuineness of the loan transaction and instead wants to rely upon the information independently received from the investigation wing of the department in respect of investigation carried out at a third party, can the said information be used against the assessee without sharing such information with the assessee and allowing an opportunity to the assessee to examine such information and explain its position especially when the assessee has requested the same to the Assessing officer. 2.10 In this regard, the Hon'ble Supreme Court in the case of Dhakeswari Co....
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.... have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee. The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter, dated 18-2-1955 said to have been addressed by the manager of the bank to the ITO. Now it is difficult to see how this letter could at all be relied upon by the Tribunal as a material piece of evidence supportive of its finding. In the first place, this letter was not disclosed to the assessee by the ITO and even though the AAC reproduced an extract from it in his order, he did not care to produce it before the assessee or give a copy of it to the assessee. The same position obtained also before the Tribunal and the High Court and it was only when a supplemental statement of the case was called for by this Court by its order, dated 16-8-1979 that, according to the ITO, this letter was traced by him and even then it was not shown by him to the assessee but it was forwarded to the Tribunal and it was for the first time at the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case that this letter was shown to the assessee. It will, the....
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....es whose statements were relied upon by the AO, then the denial of the opportunity to cross examine would certainly in violation of principles of natural justice and consequently renders the assessment order based on such statement as not sustainable in law. Hence in view of the facts and circumstances of the case where the assessee has repeatedly requested and demanded the cross examination of the witnesses whose statements were relied upon by the AO in the assessment order and further the report of the DDIT Investigation Kolkata is also based on the statement of such person then the denial of cross examination by the AO as well as ld. CIT (A) despite the fact that the assessee was ready to bear the cost of the cross examination of the witnesses is a gross violation of principles of natural justice. Thus the additions made by the AO on the basis of such statement without any tangible material is not sustainable in law and liable to be deleted. Accordingly the addition made by the AO is also deleted on merits apart from the legal issue decided in favour of the assessee. APPELLATE TRIBUNAL, FOREIGN EXCHANGE MANAGEMENT ACT AT NEW DELHI Date of Decision:-13.04.2018 ....
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....red for crossexamination. In the considered view of the Court, in the context of the specific allegation that the retracted confessional statements were obtained under torture and coercion, that aspect ought to have been examined by the SD. In the circumstances, the reasons given by the SD in the impugned AO for disallowing the request of the appellants for cross-examination of the ED officials only because it would tantamount to "further delay in finalising the proceeding" were not tenable or justified. The denial of cross examination of the ED officials by the appellants indeed has caused them severe prejudice since the ED was relying on the said statements as if they were by themselves substantive evidence." (iii) The Hon'ble High Court of Delhi in Devashis Bhattacharya Vs. Union of India 159 (2009) DLT 780, while deciding a case under Foreign Exchange Regulation Act, 1973 had observed that: ―18. It is well settled that where an action under the statute entails civil consequences, then even if an opportunity of being heard may not be explicitly set out in the applicable legal provisions, the adherence to the principles of natural justice has to be read in....
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....ying upon various authoritative judgments, has observed that cross-examination is an integral part and parcel of the Principles of Natural Justice. It held that Cross-examination is one part of the principles of natural justice. (v) A Constitution Bench of the Hon‟ble Supreme Court in State of M.P. v. Chintaman Sadashiva Vaishampayan, AIR 1961 SC 1623, has held that the Principle of Natural Justice require that a party be given the opportunity to adduce all relevant evidence upon which it relies, that evidence of the opposite party be taken in his presence, and that he be given the opportunity to crossexamine the witnesses examined by that party. Not providing the said opportunity to cross-examine is violative of the Principles of Natural Justice. (vi). In Lakshman Exports Ltd. v. Collector of Central Excise, (2005) 10 SCC 634, the Apex Court, while dealing with a case under the Central Excise Act, 1944, considered whether to grant permission for cross-examination of a witness. In that case, the assessee had specifically asked to be allowed to crossexamine the representatives of the concerned firm, in order to establish that the goods in question had been ac....
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.... held as follows:- ―If some facts are to be proved by the landlord, indisputably the occupant should get an opportunity to cross-examine. The witness who intends to prove the said fact has the right to cross-examine the witness. This may not be provided by under the statute, but it being a part of the principle of natural justice should be held to be indefeasible right" x). The Hon‟ble Supreme Court in Needle Industries (India) Ltd. & Ors. v. N.I.N.I.H. Ltd. & Ors., AIR 1981 SC 1298, considered a case under the Indian Companies Act, and observed that: ―It is generally unsatisfactory to record a finding involving grave consequences with respect to a person, on the basis of affidavits and documents alone, without asking that person to submit to cross-examination‖ (xi). Hon‟ble High Court in Mehar Singh Vs. The Appellate Board Foreign Exchange 1986 (10) DRJ 19, while dealing with a case under the Foreign Exchange Regulation Act, 1973, decided the appeal in favour of the Appellants on the short ground that the applications made to the Director of Enforcement and before the Appellate Board during the pendency of the appea....
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....SC 1623 wherein in para number 11, It has been held referring another decision in Union of India vs.TR Varma ―stating it broadly and without intending it to be exhaustive, it may be observed that the rules of natural justice require that the party should have the opportunity of producing all relevant evidence on which he relies, that the evidences of the appellant should be taken in his presence, and that he should be given the opportunity of cross-examining the witnesses examined by that party, and that no material should be relied on against him without he is being given an opportunity of explaining them.‖ It was further stated that it is hardly necessary to emphasize that the right to cross-examine the witnesses who give evidences against him is a very valuable right, and if it appears that effective exercise of this right has been prevented by the enquiry officer by not giving to officer relevant documents, to which he is entitled, that inevitably would be that the enquiry had not been held in accordance with the rules of natural justice. The Hon'ble Supreme Court thereafter, referring to the another decision of the Hon'ble Supreme Court held that the importance of ....
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....g 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 17.03.2005 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 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.‖ In the present case, also the assessee sought opportunity of cross-examination of the witnesses whose statements are used by the learned assessing officer against the assessee for making the addition. The assessee has contested the truthfulness of the statement of the witnesses recorded by the assessing officer. The truthfulness is also tested by the changing stands frequently. It is also not for the assessing officer to decide that no opport....
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....nt rights, then in such circumstances, the violation of the principles of natural justice, such as not granting of opportunity of the cross-examination, becomes any regularity and not an illegality. However, when the assessee has exhausted all the remedies available to him by exercising his right of the judicial process, then in such circumstances violation of the principle of natural justice, such as not granting an opportunity of cross-examination of the witness becomes an illegality. Therefore, in such circumstances, the order/addition made based on the statement of third parties and no opportunity has been granted to the assessee for their cross-examination despite repeated requests, addition deserves to be deleted. In view of our above findings, findings of the coordinate bench in assessee's own case for earlier years, and based on the various judicial precedent relied upon, we do not agree that document seized from third-party can be used for making addition in the hands of the assessee without assessee being granted an opportunity of cross-examination of those parties. IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI 'E' BENCH, NEW DELHI ITA No. 2576/Del/2010 As....
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....hese sections read as under: 70. It can be seen from the above chart that the case in which the presumption was available, the Revenue accepted what was returned by Shri R.K. Miglani and on the strength of his statement that the documents seized from his premises belong to distilleries, the additions have been made as unexplained expenditure/contribution to UPDA. 71. It is well settled that only the person competent to give evidence on the truthfulness of the contents of the document is writer thereof. So, unless and until the contents of the documents 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. 72. Considering the facts of the dispute in totality, we are of the opinion that the assessment framed u/s 153C of the Act is in gross violation of the principles of natural justice and deserve to be tagged as nullity. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: 'F', NEW DELHI ITA No. 5662/Del/2018 AY: 2014-15 Veena Gupta Date of Pronouncement: 27/11/2018 12.1 It is pertinent to note that assessee....
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....(c), and quash and set-aside the assessment order so passed. 15.1 As we have allowed assessee's appeal on Ground 2(c), other grounds raised by assessee becomes academic in nature which do not require any adjudication at this stage. Recent coordinate and division Pune bench ITAT decision in case of Brijendra Nath Agarwal (ITA 1666/Pun/2015) date of order: 29/11/2018 has held as under: "The issue which arises in the present appeal in such scenario, is whether re-assessment proceedings which have been completed against assessee, can stand in the eyes of law, where (a) documents asked for have not been supplied to the assessee and (b) cross-examination of witnesses have not been provided to the assessee. Before proceeding further, it may be pointed out that the Assessing Officer refers to the proceedings before DDIT(Inv) and alleges that all the documents have been handed over by DDIT(Inv) to the assessee and hence, they were not being provided. It is not clear as to what documents were provided by DDIT(Inv). Even if it was so, then it was incumbent upon the Assessing Officer to provide the documents, which were in his possession and which he was seeking to rely on in....
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.... Assessing Officer has provided gist of the same to the assessee. However, there are other documents the assessee has asked for i.e. copies of page No.6 to 15 of bundle No.1 seized from the office of CIIL, Bhosari, the details of Directors of the companies as mentioned in the said letter. In addition, the assessee had sought crossexamination of different persons whose statements / materials seized from them were being relied upon. However, we have already made reference to the said documents in paras 15, 17 and 18 hereinabove. The assessee has time and again asked for the copies of said documents but the same have not been supplied to the assessee. The assessee has also sought cross-examination of the persons whose statements were being relied upon to propose reassessment in the hands of assessee, for which reasons were recorded for reopening the assessment but none of the cross-examinations have been allowed. The nonallowance of cross-examination has been held by the Hon'ble Supreme Court in M/s. Andaman Timber Industries Vs. Commissioner of Central Excise in Civil Appeal No.4228 of 2006, judgment dated 02.09.2015 to be most fatal. The facts of present case are similar, wherei....
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....tion of witnesses in order to enable the assessee to meet the case of both reopening and also the assessment being carried out against the assessee on the basis of such statements, violates the basic fundamental principle of natural justice and in such scenario, the assessment which has been completed against the assessee cannot stand. Accordingly, we hold so. 24. The Hon'ble Supreme Court in GKN Driveshafts India Ltd. Vs. ITO (supra) has held that it is incumbent upon the Assessing Officer to provide an opportunity to the assessee to submit his objections to reopening of assessment and where the Assessing Officer has failed to provide such an opportunity, reassessment order cannot stand. In the facts of present case, since the assessee did not receive copies of documents relied upon and also no cross-examination of witnesses on whose statements the Assessing Officer relied upon to record reasons for reopening assessment, was provided to the assessee, hence the assessee was prevented from filing the objections to reopening of assessment. In such scenario, even if the assessee was well aware of reasons for reopening but the failure to provide opportunity to file objecti....
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....letter dated 27.04.2016 in which note worthy aspect is assessee specifically sought from AO copies of back material referred in reasons including investigation wing report/letter, seized documents etc referred therein, AO without confronting any back material as evident from objection disposal order dated 17.05.2016 rejected assessee's objection challenging reopening action. In various letters placed in paper book and referred in written submission before us, it was specifically asked to AO during assessment proceedings to confront the back material as referred in reasons recorded namely in letters dated 07/06/2016, 20/10/2016 which request of assessee has not been adverted to by the AO is patent from objection disposal order dated 17/05/2016 and further notices dated 09/08/2016 u/s 142(1) and show cause notice dated 13/10/2016. In none of these notices as placed in paper book, we could find the back material being confronted to assessee as specifically requested by assessee. We note here that the Tribunal in various decisions specially one which is referred by Ld counsel for the assessee extensively in case of Moti Adhesives (ITA 3133/Del/2018) in order dated 25/06/2018 copy place....