Ita/143/2008 Of (O&M) Commissioner Of Income Tax v. Ashwani Kumar

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.143 of 2008(0&M)Date of decision: 20.8.2014 The Commissioner of Income Tax, Patiala (Punjab) Vs, ..-.-- Appe Shri Ashwani Kumar c/o M/s Ashwani Steel Sales, Mandi Gobindgarh(Punjab). .....Responde CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTALHON’BLE MR. JUSTICE FATEH DEEP SINGH Present: Ms. Savita Saxena, Advocate for the appellant, Mr. S.K.Mukhi, Advocate for the respondent. Ajay Kumar Mittal, J. inThis appeal has been preferred by the revenue under Section260A of the Income Tax Act, 1961 (in short, “the Act’) against the orderdated 31.7.2007, Annexure A.2, passed by the Income Tax AppellateTribunal, Chandigarh Bench 'B, Chandigarh in ITA No.377/CHANDI/2005for the assessment year 1998-99. It was admitted on 12.5.2009 to considerfollowing substantial questions of law:- 1) Whether on the facts and circumstances of the case, theITAT was right in law in deciding the appeal in favour of theassessee on technical ground by stating that the assessee wasnot provided opportunity to cross examine the witness inview of the fact that the right to cross examine was notnecessarily a part of reasonable opportunity particularlywhen the facts of the case otherwise available on record wereagainst the assessee? 11) Whether on the facts and in the circumstances of the case, the Tribunal was justified in not restoring the matter backand instead deciding the same on technical grounds?” ?DA few facts relevant for the decision of the controversyinvolved as narrated in the appeal may be noticed. The assessee filed hisreturn of income on 27.10.1998 declaring income of -73,330/- whichincluded long term capital gains ofv11,33,493/- on account of sale ofShares of M/s Porshe Capital Market Limited against which exemptionunder Section 54K of the Act was claimed. Later on intormation wasreceived from the Deputy Director of Income Tax (Inv.) Gurgaon (DDIT) tothe effect that the long term capital gain shown by the assessee allegedly onaccount of sale proceeds of M/s Porshe Capital Market Limited wasnothing but his undisclosed income having been introduced in the garb ofreceipt of drafts from the bank account of Shri S.S.Mehta, so called brokerwho had been earning income out of petty jobs as an Assistant withdifferent Chartered Accountants/brokers at different periods. It was foundthat the bogus entries had been received by a number of persons includingthe assessee and that such entries were given by Shri Mehta, the allegedbroker by taking cash equivalent to the draft amount. Further, the draftswere issued to the beneficiaries including the assessee by depositing thecash in bank account. It was mentioned in the report that total considerationof|<a13,66,342/- was received by the assessee from the said broker ShriMehta. It was also confirmed by the company that till 17.2.2003, the saidshares still stood in the name of the assessee Shri Ashwani Kumar and thatthe same had not been transferred. Accordingly, after recording reasons, theAssessing officer initiated the proceedings under Section 147 of the Act,During the course of assessment proceedings, the assessee made a request to ITA No.143 of 2008(0&M) ITA No.143 of 2008(0&M) request was not accepted. However, despite specific show cause noticeissued to the assessee intimating that alleged transaction of sale of shareswere bogus and as such why the amount of capital gain declared should notbe taken as income from undisclosed sources, the assessee had not furnishedany explanation till 25.2.2004 1.e. the date on which assessment was framed,Vide order dated 25.2.2004, Annexure A, it was held by the Assessingofficer that there was no genuine sale transaction of shares and henceincome of.<a13,69,080/- claimed to have been earned by way of long termcapital gain was assesseed as income from undisclosed sources. Aggrievedby the order, the assessee filed appeal before the Commissioner of IncomeTax (Appeals) [CIT(A)]. Vide order dated 29.3.2005, Annexure A.1, theappeal was dismissed. Still not satisfied, the assessee filed appeal before theTribunal. Vide order dated 31.7.2007, Annexure A.2, the appeal wasallowed by the Tribunal by following its own decision dated 4.1.2006 inITA No.376/CHD/2005 in the case of assessee's brother Shri Ravi Kumarholding that since opportunity to cross examine Shri Mehta through whomthe sale of shares was effected and whose statement was recorded by DDIT(Inv.) Gurgaon which formed the basis of the addition made on account ofbooking of long term capital gain by the assessee was not provided and theStatement was of a third person, principles of natural justice were violated,Hence the instant appeal by the revenue. 3Learned counsel for the appellant revenue submitted that theorder passed by the Tribunal was unsustainable as the Tribunal ought tohave remanded the matter and allowed the assessee to cross examine thewitness on the basis of which the proceedings were held to be|non eSf. 4On the other hand, learned counsel for the assessee placed ITA No.143 of 2008(0&M) A reliance on judgment of this Court in Commissioner of Income Tax,Patiala vs. M/s Radhey Sham Sita Ram,(2003) 22 IT Rep 667 (P&H) tourge that it was a finding of fact and in such a situation when the assesseeon merits had explained the general transaction, there was no occasion forthe matter to be remanded to the Assessing Officer.5 After hearing learned counsel for the parties and perusing therecord, we find that the Tribunal had allowed the appeal of the assessee andheld that absence of opportunity to cross examine Shri S.S.Mehta wouldhave rendered the proceedings bad. In our opinion, it was appropriate forthe Tribunal in such a Situation to have remanded the matter to theAssessing officer by directing him to afford an opportunity to cross examinethe said witness on whose statement reliance was placed and order ofaddition was passed against the assessee. The judgment relied upon by thelearned counsel for the assessee was not relating to the issue of remandingthe matter where the opportunity had not been provided to the assessee tocross examine the witness but was based on its own facts. Thus, noadvantage can be derived by the learned counsel for the assessee trom theSaid pronouncement. 6 In view of the above, the substantial questions of law areanswered accordingly and the matter is remanded to the Assessing officerwho shall now proceed in accordance with law. The appeal stands disposedot. (Ajay Kumar Mittal)Judge August 20, 2014 =9&= (Fateh Deep Singh)Judge ����������������������� G,�0