INCOME TAX APPEAL NO. 30 OF 2018

23rd July 2019

Petitioner Counsel: Mr. S. S. Dewani
Respondent Counsel: Mr. S. N. Bhattad Mr. A. J. Bhoot
Act Name: Income Tax Act, 1961

Section :
Section 131 Income Tax Act, 1961 Section 131(b) Income Tax Act, 1961 Section 136 Income Tax Act, 1961

Cases Cited :
Para 10: Andaman Timber Industries Vs. Commissioner of C. Ex., Kolkata-II, Decided on 2nd September 2015 in Civil Appeal No. 4228 of 2006

JUDGEMENT

S. M. MODAK, J.

1. Income Tax Appellate Tribunal, Nagpur vide order dated 29th June 2017 dismissed the Appeal of the Appellant – Assessee and thereby in turn confirmed the order dated 27th March 2015 passed by the Assistant Commissioner of Income Tax, Central Circle – 2(1), Nagpur.

2. Vide said order, the Assistant Commissioner included Rs.1,50,00,000/- being unaccounted investment in the total income of the Assessee. He further directed to initiate penalty proceedings. There is an appeal preferred against the said order before the learned Commissioner of Income Tax (Appeals) - 3, Nagpur. The Appellant – Assessee could not convince him and the Appeal came to be dismissed on 30th November 2016. Even the Appellant could not succeed before the Income Tax Commissioner as mentioned above. All these decisions are challenged before us.

3. The Appellant - Assessee has agreed to purchase land from one M/s Jagdamba Realtors Private Limited. There was one Memorandum of Understanding executed on 13th March 2007. Total consideration was Rs.6,00,34,846/-. Out of that, Appellant - Assessee paid Rs. 4,50,34,864/-. The Appellant - Assessee also submitted his return for relevant assessment years. There was a raid conducted at several offices of M/s Jagdamba Realtors Private Limited on 7/3/2013 and 30/4/2013. Various incriminating documents were seized. One of them is the copy of Memorandum of Understanding dated 13th March 2007 as referred above.

4. The Income Tax authorities noticed a reference of payment in cash of Rs.1,50,00,000/- by the Appellant - Assessee to the said M/s Jagdamba Realtors Private Limited. This gave a cause of action for the Income Tax authorities to issue notice on 4th August 2014 to the Appellant - Assessess. The Appellant - Asessee was asked to file a return for the assessment year 2008-09, thereby disclosing true and correct income. The Appellant - Asessee gave explanation. But, it was not accepted by the Assessment Officer so also by the Appellate authorities as mentioned above.

5. The Appellant - Assessee challenged the said assessment before the Appellate authorities on merits. According to him, there is a over-writing in the Memorandum of Understanding by including a reference of payment of Rs.1,50,00,000/-. In this Appeal we are not supposed to make any comment about the merits of the matter. The issue before us is very limited. Whether the Appellant was given an opportunity to cross-examine the partner Mr. Gopal Kondawar, Director of M/s Jagdamba Realtors Private Limited and whether it has caused prejudice to the Appellant due to denial of opportunity to cross-examine.

6. On 10th July 2019 after hearing both the sides, we have framed two questions of law. We have also heard Mr. S. S. Dewani, the learned Counsel for Appellant and Mr. Bhattad, the learned Counsel for Respondent.

GRIEVANCES

7. There are two grievances. One is non-supply of documents including the statement of Gopal Kondawar to the Appellant - Assesses and second is denial of an opportunity to cross-examine him. The first grievance is not agitated before us seriously. When we have perused the documents, We are also satisfied that the first appellate authority i.e. Commissioner of Income Tax has supplied the documents to the Appellant - Assessee. We find reference in the observations made by the learned Commissioner of Income Tax on page No. 52 of the Paper book and Paragraph No. 14 to that effect. He observes :

“copies of statements of Mr. Gopal Kondawar were given to the Assessee during the appellate proceedings”.
So, the issue only remains whether there was denial of an opportunity to cross examine said Gopal Kondawar.

RIGHT OF CROSS-EXAMINATION

8. There is a dispute amongst the parties on this issue. Assessee claims that he had shown willingness to cross-examine the said Gopal Kondawar in earlier proceedings, whereas the Respondent contends that this grievance was not made earlier. When we have perused the record, we find that such grievance was made in the earlier proceedings. We have scrutinized the record of all the three proceedings made available to us. There is willingness shown to cross-examine Mr. Gopal Kondawar by way of a letter dated 4th March 2015. This letter is disputed. We also do not find any convincing evidence about giving of this letter. We do not accept it. We have perused the Memo of Appeal filed before the Commissioner of Income Tax and (First Appeal) in Paragraph No.5 of the statement of facts attached to the said Memo of Appeal, we find reference about the grievance made about denial of opportunity to cross-examine.

9. With the assistance of both the sides, when we have read the order passed by the leaned Commissioner of Income Tax, we do not find any where observation made about opportunity to cross-examine Mr. Gopal Kondawar. We have also perused the Memo of Appeal filed before the learned Appellate Tribunal (Second Appeal). The grievance about denial of cross-exponentiation was made in Paragraph No. 7 of the grounds of facts.

CONCLUSION

10. The above facts clearly shows that specific grievance was made about the willingness to cross-examine Mr. Gopal Kondawar. The objection taken on behalf of the Respondent needs to be negated. In order to support their contention about the right to cross-examine witness, the leaned Counsel for the Appellant relied upon the Judgment delivered by the Hon'ble Supreme Court in case of Andaman Timber Industries V/s Commissioner of C. Ex., Kolkata-II, Decided on 2nd September 2015 in Civil Appeal No. 4228 of 2006. There was a proceedings relating to the payment of central excise. The Assessee made grievance about denial of an opportunity to cross-examine the buyers. Denial of such an opportunity is a serious flaw rendering the order as a nullity. Hence the Hon'ble Supreme Court set-aside the impugned orders.

PROVISIONS OF INCOME TAX ACT

11. With the assistance of both the sides we have perused the provisions of Income Tax Act. Section 131 empowers the prescribed authorities to do certain things. Clause (b) of Section 131 empowers the authorities to enforce the attendance of a person. It is for the purpose of examining him on oath. Whereas the provisions of Section 136 equates the proceedings before the Income Tax authorities to judicial proceedings. Net result is that, Income Tax authorities can certainly record the evidence.

12. The investigating team has recorded statement of said Gopal Kondawar on three occasions. They are on 10/4/2013, 31/5/2013 and 7/6/2013. The Appellant - Assessee has made grievance about not admitting cash payment by Mr. Gopal Kondawar in first two statements. The Appellant - Assessee has insisted on supply of the statement dated 7th June 2013. These statements have been made the foundation by the Income Tax authorities in passing the orders thereby including Rs. 1,50,00,000/- in the income of the Asessee. These materials cannot be used against the Assessee without giving them an opportunity to challenge the contents of those statements. That is why an opportunity of cross-examining Mr. Gopal Kondawar needs to be given.

REMAND

13. Assistant Commissioner of Income Tax is the first authority who has conducted that enquiry. Hence, he only can be directed to secure the presence of Mr. Gopal Kondawar for cross-examination by the Assessee. We do not find anywhere any observations by the learned Commissioner of Income Tax and by the learned Appellate Tribunal regarding the grievance made about denial of an opportunity of cross-examination. Failure to give an opinion about this grievance also amounts to refusal of an opportunity to cross-examine the said Gopal Kondwar which is improper. Hence, all the orders needs to be set-aside. For the above discussion we answer both the issues in the affirmative and proceed to pass the following order.

ORDER
(A) The Appeal is partly allowed.
(B) The orders dated 29th June 2017, 30th November 2016 and 27th March 2015 are hereby set-aside.
(C) The matter is remanded back to the Assistant Commissioner of Income Tax, Central Circle 2(1), Nagpur. The Petitioner to appear before him on 29th July 2019.
(D) The Assistant Commissioner of Income Tax is directed to secure the presence of Mr. Gopal Kondawar being the Director of M/s Jagdamba Realtors Private Limited for his cross-examination on behalf of the Appellant Assessee.
(E) The Appellant - Assessee is at liberty to file new documents, if any, connected to the issues involved and to file additional explanation.
(F) The Assistant Commissioner of Income Tax is directed to pass appropriate order as per merits of the case.
(G) Parties to bear their own costs.