Commissioner Of Income Tax-1,Ludhiana v. Sanjeev Kumar Jain

IN THE HIGH COURTOF PUNJAB AND HARYANA, CHANDIGARH. ITA No.638 of 2007 Date of decision: 16.1.2009 Commissioner of Income Tax-1,Ludhiana ....Appellantvs. Sanjeev Kumar Jain . ..Respondent CORAM:HON'BLE MR.JUSTICE J.S.KHEHAR.HON'BLE MR.JUSTICE NAWAB SINGH. --- Present:Mr.Rajesh Sethi, Advocate, for the appellant. Mr.Sandeep Goel, Advocate, for the respondent-assessee.-- J.S.KHEHAR,J. (Oral) The respondent-assessee filed his income tax return for theassessment year 1996-97 on 30.4.2003. The Assessing Officer onexamining the same passed an order under sections 143/147 of the IncomeTax Act, 1961 on 31.3.2004, wherein while completing the assessment, hemade three additions to the declared income of the respondent-assessee,namely, a sum of Rs.2,12,750/- allegedly earned by the assessee as aconsequence of purchase/sale of shares, a sum of Rs.1,03,317/- alleged to beunexplained credits found in the bank account of the respondent-assessee,as also a sum of Rs.30,000/- allegedly paid by the respondent-assessee forthe purchase of a plot. It is not a matter of dispute that while arriving at the aforesaidconclusions the Assessing Officer recorded at the back of the respondent-assessee, statements of Shri H.S.Maheshwari, Shri Parveen Mittal, ShriSanjay Hasija and Shri Rajinder Gulati. It is also not a matter of dispute,that before the aforesaid statements could be taken into consideration, it was imperative for the Assessing Officer to confront the respondent-assesseewith the aforesaid statements. It is also not a matter of dispute that theaforesaid statements were actually brought to the notice of the respondent-assessee The grievance raised by the respondent-assessee whilerepudiating the determination rendered by the Assessing Officer, undersections 143/147 of the Income Tax Act, 1961, has been that therespondent-assessee had made repeated oral requests to the AssessingOfficer, seeking liberty to cross-examine the persons whose statements wererecorded by the Assessing Officer at his back. In fact, it is the case of therespondent-assessee, that a written request was also made by therespondent-assessee for the same purpose. Despite thereof, liberty was notgranted to the assessee to cross-examine either of the four persons whosestatements formed the basis of the determination of the Assessing Officer. Dissatisfied with the determination rendered by the AssessingOfficer, the respondent-assessee preferred an appeal before theCommissioner of Income Tax (Appeals). The aforestated appeal preferredby the respondent-assessee, was accepted by the Commissioner of Income(Appeals) by an order dated 15.9.2004. The aforesaid Appellate Authorityarrived at the conclusion, that it was imperative for the Assessing Officerto allow the respondent-assessee to cross-examine all the persons whosestatements were recorded at his back, specially because they had formed thebasis of arriving at the conclusion that additional income earned by therespondent-assessee, had not been depicted in the return filed by him. Being aggrieved with the order passed by the Commissioner ofIncome Tax(Appeals) dated 15.9.2004, the Revenue preferred an appeal before the Income Tax Appellate Tribunal. For the same reasons, as hadbeen depicted in the order passed by the Commissioner of Income Tax(Appeals) dated 15.9.2004, the Income Tax Appellate Tribunal, also passedan order dated 7.12.2005. Consequent upon the dismissal of the appealpreferred by the Revenue at the hands of the Income Tax AppellateTribunal, vide order dated 7.12.2005, the Revenue has approached thisCourt. Through the instant appeal, the Revenue has impugned theorder passed by the Commissioner of Income Tax (Appeals) dated15.9.2004, as well as, order passed by the Income Tax Appellate Tribunaldated 7.12.2005. Being aggrieved with the order passed by the Commissioner ofIncome Tax(Appeals) dated 15.9.2004, the Revenue preferred an appeal before the Income Tax Appellate Tribunal. For the same reasons, as hadbeen depicted in the order passed by the Commissioner of Income Tax(Appeals) dated 15.9.2004, the Income Tax Appellate Tribunal, also passedan order dated 7.12.2005. Consequent upon the dismissal of the appealpreferred by the Revenue at the hands of the Income Tax AppellateTribunal, vide order dated 7.12.2005, the Revenue has approached thisCourt. Through the instant appeal, the Revenue has impugned theorder passed by the Commissioner of Income Tax (Appeals) dated15.9.2004, as well as, order passed by the Income Tax Appellate Tribunaldated 7.12.2005. During the course of hearing, learned counsel for the Revenuevery fairly acknowledged, that the determination rendered by the AssessingOfficer was based on the statements of Shri H.S.Maheshwari. Shri ParveenMittal, Shri Sanjay Hasija and Shri Rajinger Gulati. Learned counsel for theappellant also acknowledged, that neither of those individuals was permittedto be cross-examined before the determination at the hands of the AssessingOfficer on 31.3.2004, whereby, the Assessing Officer had passed hisassessment order under sections 143/147 of the Income Tax Act, 1961. Thusviewed, we have no hesitation whatsoever to uphold the determinationrendered by the Commissioner of Income Tax (Appeals) dated 15.9.2004, aswell as the order passed by the Income Tax Appellate Tribunal dated7.12.2005. Despite our aforesaid conclusion, it is the vehement contentionof the learned counsel for the appellant, that even if some procedural defecthad been found by the Commissioner of Income Tax (Appeals), as also by the Income Tax Appellate Tribunal, rather than negating the entire actiontaken by the Revenue, the Appellate Authorities should have annulled theprocedural defect, and remanded the matter for re-determination from thestage when the defect made the subsequent determination unacceptable inlaw. We find merit in the aforesaid submission of the learnedcounsel for the appellant. The Assessing Officer had failed to afford anopportunity to the respondent-assessee to cross-examine the persons whosestatements were recorded by him, before passing the assessment orderunder sections 143/147 of the Income Tax Act, 1961, on 31.3.2004. Theaction of the Assessing Officer was unacceptable in law. Naturally, therewas nothing wrong upto the stage of recording the statements of the 4persons referred to above. The proceedings conducted by the AssessingOfficer after recording the statements of the aforesaid individuals, areliable to be set aside. The same alone are therefore, set aside. It will be opento the Assessing Officer to re-initiate the proceedings from the aforesaidstage if he is still of the same opinion. In the aforesaid eventuality, anyfurther action taken by the Assessing Officer would inevitably require himto allow the respondent-assessee to cross-examine all the four witnesseswhose statements were the basis of the earlier consideration. Thereafter, itwill be open to the Assessing Officer, to pass a fresh order in accordancewith law. We would also like to clarify, that the instant liberty granted to theAssessing Officer, to re-determine the issue would not enable him to collectany further information, besides the material already available with him(while passing the order dated 31.3.2004), for the purpose under reference. In the totality of the circumstances, the instant appeal is disposed of, with liberty to the Assessing Officer to re-initiate theproceedings, as ordered hereinabove. ( J.S.Khehar) Judge January 16, 2009rk (Nawab Singh ) Judge