TaxTMI 
TaxTMI 
2026 (1) TMI 1471
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....appeals were heard together, they are being taken up together for adjudication vide this composite order for the sake of brevity. We take up Revenue's appeal in ITA No. 4046/MUM/2025 and CO No.213/MUM/2025 together first. Decision in the appeal would apply mutatis mutandis to appeal for AY 2016-17 as well. 2. The grounds of appeals are as under:- ITA No. 4046/MUM/2025 (A.Y. 2015-16) 1. On the facts and circumstances of case, the Ld. CIT(A) erred in holding that reopening of the assessment is based on change of opinion, ignoring the fact that the case was reopened on the basis of fresh information regarding cash loans given to M/s Radius Estates Developers Pvt. Ltd. was received by Hon'ble Income Tax Settlement Commission. 2. On the facts and circumstances of case, the Ld. CIT(A) erred in holding that reopening of the assessment is based on change of opinion, ignoring the fact that Affidavit, filed by Shri Sanjay Chhabria before the Hon'ble Income Tax Settlement Commission, admitting of receiving cash loans from the assessee was a fresh material which was considered for reopening of the case for assessment. 3. On the facts and circumstances o....
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....nstant appeals of the Revenue are delayed by six days. In this regard, an application for condonation of the delay has been submitted alongwith an affidavit mainly attributing the delay due to procedural formalities. Since the delay is negligible and the reasons stated are considered to be sufficient cause, we condone the delay and proceed to adjudicate the appeals on merit. 3.1 Likewise, the CO filed by the assessee is also delayed. The assessee has pleaded that grounds of appeal of the Department were received on 20.06.2025 and 30 days ended on 19.07.2025, and hence there is a delay of 17 days in filing cross-objection. The assessee forwarded the grounds of appeal to his Chartered Accountant on 10/7/2025 who was under the bonafide impression that time to file cross-objection was 60 days. Hence, there was delay in filing cross objection. It has also filed the affidavit of the CA to support to support his contention and to condone the delay which is stated to be unintentional, for bonafide reasons and due to the circumstances beyond its the control. Reliance is placed on Collector, Land Acquisition vs. Mst. Katiji & Ors. (1987) 167 ITR 471 (SC).Considering the detailed reasons, ....
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....by the Hon'ble ITSC. It is seen that the following ledger account has been identified by the applicant entities as representing Cash loan transaction undertaken by the Radius Group with the assessee i.e. Shri Sunil Dalal (PAN-AAEPD3658F). Name of the party/ledger account appearing in 'Tally File-Balu' Name and Address of the Party (as submitted by the applicant to the ITSC) Sunil Dalal-11% Sunil Dalal, 183, 1 st Floor, KalyanBhavan, JSS Road, Girgaon, Mumbai-4 AAEPD3658F Sunil Dalal-13% Sunil Dalal, 183, 1 st Floor, KalyanBhavan, JSS Road, Girgaon, Mumbai-4 AAEPD3658F Sunil Dalal-14% Sunil Dalal, 183, 1 st Floor, KalyanBhavan, JSS Road, Girgaon, Mumbai-4 AAEPD3658F Sunil Dalal-18% Sunil Dalal, 183, 1 st Floor, KalyanBhavan, JSS Road, Girgaon, Mumbai-4 AAEPD3658F Sunil Dalal New-18% Sunil Dalal, 183, 1 st Floor, KalyanBhavan, JSS Road, Girgaon, Mumbai-4 AAEPD3658F 4.1 The AO further stated that the applicant entities during the course of judicial proceedings before the ITSC had identified the above ledger account as representing cash loan transaction executed by the Radius Group with the assessee, by submitting comple....
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....ment Order. Before passing such Assessment Order, personal hearing shall be given to Petitioner, notice whereof shall be communicated at-least five working days in advance. If the Assessing Officer is going to rely on any judgment in his Assessment Order, a list thereof shall be provided to Petitioner along with the notice for personal hearing so that petitioner will be able to deal with/distinguish the judgments during personal hearing; (v) The order to be passed shall be a reasoned order, dealing with all the submissions of Petitioner." 4.3 The directions given as above were adhered and accordingly, legible copies of following details/documents which are relied upon by Assessing officer while recording reasons for reopening were given to the assessee vide letter dated 31.07.2023 and 01.08.2023. Further, the assessee was asked to file reply along with submissions within 2 weeks from the date of this letter as per directions of Hon'ble Bombay High Court. "I. Printout of the following ledger accounts recorded in the seized Tally File - 'Balu' and referred in the 'Reasons recorded for reopening' a. Sunil Dalal-11% b. Sunil Dalal-....
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....here were reasons to believe that tax had escaped assessment. Hon'ble Bombay High court vide order dated 26.06.2023 directed to share legible documents relied upon by Assessing officer while recording reasons; statements of Sanjay Chhabria do not come into this category. Pursuant to the directions of Hon'ble Bombay High Court legible copies of various documents were furnished to the assessee. 4.5 Before the AO, it was submitted that mere furnishing affidavit before the ITSC, did not and could not be considered as fresh tangible material so as to reopen the case. With respect to this, it is was observed that the AO that Sanjay Chhabria for the first time since the conduct of search submitted the complete details viz., Names, PAN and address of parties from whom cash loans as recorded in seized data-Balu which were taken by Radius Group submitted through Affidavits dated 07.07.2018 and 23.08.2018 in proceedings before ITSC. During course of assessment proceedings u/s 153C of the Act, though the documentary evidences like ledgers, tally file named Balu were in possession with then AO and the then AO also recorded statements under oath of CFO Ujwal Desai and assessee, source of thes....
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....d, and he does not have power to review. It was also stated that reopening of the assessment also could not be made without any new tangible material coming into existence. In the present case, there was no new tangible material on the basis of which the AO had reopened the assessment and hence, the reopening was bad in law and liable to be quashed. No new materials were also brought on records. Reliance was also placed on various judicial decisions in this regard. 5.1 The ld.CIT(A) observed that it was undisputed fact that the AO reopened the case u/s. 148 of the Act and as per the reasons recorded, the reopening of the assessment was based upon the subsequent events taken place in respect of Radius Group assessment before the ITSC wherein the key personnel of Radius Group, Shri Sanjay Chhabria filed affidavit giving details of person from whom cash loans were received and as recorded in the tally file named Balu. Another affidavit was filed by Shri Sanjay Chhabria before ITSC wherein assurance was given that the repayment of the cash loans would be made from accounted funds of Radius Group. Based upon the above facts of the case, the AO had received information that Radius Gro....
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....essment proceedings u/s. 153C of the Act. For the first time during the proceedings before ITSC, Radius Group through key personnel Shri Sanjay Chhabria contended that it has received cash loans from third parties including assessee and in support of the same, Shri Sanjay Chhabria filed his affidavit. Hence, it could be concluded as per the facts on record that except for affidavit of Shri Sanjay Chhabria filed before ITSC, there was no new tangible material or evidence brought on record in reassessment proceedings corroborating cash loans given by the assessee to Radius Group. In such situation, reliance needs be placed only on the tangible material / evidence found during the search action, also for the reason that Radius group has changed its stand for the first time during ITSC proceedings in respect of the contents of tally file named Balu found from laptop of Shri Ujjval Desai, CFO of Radius Group. He placed reliance on certain case laws in holding that the jurisdictional conditions for invoking section 147 - 148 are not satisfied as there was no failure to disclose material facts fully and truly point. The Supreme Court in CIT v. Kelvinator of India Ltd. 320 ITR 561 (SC) has....
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....e Hon'ble Delhi High Court in the case of AGR Investments Ltd. vs. Addl. CIT (Del) 333 ITR 146 held that that where Assessing Officer had specific information from DDIT (Investigation) as regard transactions entered into by assessee company with a number of concerns which had made accommodation entries and they were not genuine transactions, it could be said that there was material on basis of which notice under section 148 of the Act could be issued. It is further pertinent to mention here that in the case of CIT vs. Nova Promoters & Finlease (P) Ltd (ITA No. 342 of 2011) dated 15.02.2012, the Hon'ble Delhi High Court, held that as long as there is a 'live link' between the material which was placed before the AO at the time when reasons for reopening were recorded, proceedings u/s 147 would be valid. The Court also held- "We are aware of the legal position that at the stage of issuing the notice u/s 148 the merits of the matter is not relevant and the Assessing Officer at that stage is required to form only a prima facie belief or opinion that income chargeable to tax has escaped assessment." 7.1 There is a live link between the information which was available with....
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.... obtain, what the taxpayer was always bound to pay if the increase is justified at all. The decision to initiate the proceedings is not to be preceded by any judicial or quasi judicial enquiry. His reasoning may be the result of official information or his own investigation or may come from any source that he considers reliable. His reason is not to be judged by a Court by the standard of what the ideal man would think. He is the actual man trusted by the legislature and charged with the duty of forming of a belief for the mere purposes of determining whether he should proceed to collect what is strictly due by law, and no other authority can substitute, its standard of sufficient reason in the circumstances, or his opinion or belief for his. Unless the ground or material on which his belief is based, is found to be so irrational as not to be worthy of being called a reason by any honest man, his conclusion that it constitutes a sufficient reason, cannot be overridden. What is, therefore, to be ascertained is, whether the alleged reason really existed, and if it did, whether it was so irrational as to be outside the limits of his administrative discretion with which the AO is inves....
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.... to be quashed being illegal and bad in law. 9. The ld.CIT(A),narrated the contents of the assessment order according to which during course of search action, the tally file named 'Balu' which recorded unaccounted cash transactions of Radius Group was found in the laptop of Shri Ujwal Desai(CFO of Radius Group). Further, during proceedings before ITSC, Sri Chhabria filed affidavit giving details of the names, PAN, address, amount of cash loan, amount of interest paid etc. pertaining to the cash loans recorded in the seized 'Tally File Balu'. Name and PAN of the assessee was clearly appearing in the Sr.No. 58 to Sr. No. 62 of the Annexure filed to Affidavit filed by Sanjay Chhabria. Thus, contention of the assessee that there was no corroborative material or evidence with regard to digital record seized during search action was present was not acceptable. The AO also relied on the case of a person Sri Monish Ghansham Makhija in whose case, similar addition was made on the basis of the affidavit of Sri Chabaria and settled the dispute by availing Direct Vivad se Vishwas Scheme. Thus, affidavit filed by Sanjay Chhabria was corroborative material or evidence which explains entries i....
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....ace. Therefore, it was clearly held that the assessee had provided cash loan amounting to Rs. 16.81 cr. to the Radius Group during the year under consideration which has not been disclosed by the assessee in its books of accounts and in the return of income for which assessee had not provided satisfactory explanation and thus remain as unexplained investment. Hence, a sum of Rs. 16.81 cr. given to Radius Group was held to be unexplained investment u/s. 69 of the Act and is added to the total income of the assessee. Further, interest received amounting to Rs. 2.99 cr. on cash loan given to Radius Group which had not been disclosed by the assessee in his books of accounts and in the return of income for which assessee had not provided satisfactory explanation was also held to be unexplained money u/s 69A of the Act and was added to the total income of assessee. 10. Before the ld.CIT(A) the assessee inter alia claimed that that there was no other corroborative evidence or material apart from the affidavit proving that the assessee had actually given any cash loan to Radius Group and no such material or evidence was found in course of search action at his residence or office premise....
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....violation of the principles of natural justice. The ld.DR on the other hand placed reliance on the assessment order on merits of the addition. In respect of cross examination, he placed reliance on the decision of the authorities below. 12. We have carefully considered all aspects of the case. There is no dispute that the AO has placed heavy reliance on the affidavit of Sri Chabaria in making the impugned additions as also for reopening the assessment proceedings. We find that the AO did make some effort to allow the cross examination of the said person to the assessee, however, due to his non attendance, cross examination could not be taken to logical end. The records do not indicate that any fresh attempt was made by the AO in this regard. Rather, without making any such fresh effort he went ahead in drawing adverse conclusion and making the impugned additions. Therefore, it can be concluded that he did appreciate the importance of allowing cross examination of the facts and the circumstances of the case, but did not take it to a logical end and hurried to make the addition contradicting his own action. Even the ld.CIT(A) having co-terminus powers under the Act did not conside....
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....lse, that somebody else should have an opportunity of meeting it whether it (sic), by way of interrogation or by way of comment does not matter. So long as the party charged has a fair and reasonable opportunity to see, comment and criticise the evidence, statement or record on which the charge is being made against him the demands and the test of natural justice are satisfied. Cross-examination in that sense is not the technical cross-examination in a Court of law in the witness-box." ITAT has further held that, "As regards the dictum 'audi alteram partem' the assessee's basic contention was that the statements of witnesses and materials which were relied upon by the Assessing Officer in the assessment order to reach the conclusions and findings which were adverse to the assessee should have been disclosed to the assessee and the witnesses should have been offered for cross-examination. The right to cross-examine the witness who made adverse report is not an invariable attribute of the requirement of the said dictum. The principles of natural justice do not require formal cross- examination. Formal cross-examination is a part of procedural justice. It is governed by the r....
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....o. 4228 of 2006 has considered that if there was no material with the Department on the basis of which it could justify its action, and if the statement of the two witnesses who were unknown to the appellant was the only basis of issuing the Show Cause Notice, right to cross-examination has to be given. 12.5 Considering the aforesaid judgments, we are of the view that the AO remained under a statutory obligation to facilitate a cross-examination. The assessee could have dispelled the material that the A.O acted upon to disprove the authenticity of the loan transaction only if it was provided an opportunity to cross-examine Sri Sanjay Chabaria who had allegedly referred the name of the assessee as a lender of the impugned cash loan. Accordingly, we set aside the appellate order and restore the entire issue involving merits with a direction to the AO to allow cross examination to the assessee of the above named person and decide the issue in accordance with the provisions of the Act.The AO would also supply the statement/affidavit of Sri Sanjay Chabaria to the assessee for necessary action at its end. 12.6 We may make it clear that remanding the matter should not be in any mann....