query on undisclosed income

[ketanvyas1975]

A sales a plot of land to B. In the course of search in case of B, admission of on money payment is given by B on the basis of a chit found from him. B also adheres to the admission and pay tax thereon. Now the department wish to apply this admission to A as natural corollary. Cross examination is demanded but the same may not be granted. 

My question is can a third party statement and material obtained from the possession of a third party be directly applied to the case of an assesse?

Please give your reply/share views with proper judgments. I shall be thankful for the same.

[pawansingla]

Department has a good case.But,by not giving chance of cross examination will weaken their case too much. "Audi  Alterem Patam". No one can be punished without unheard.Their are lots of judgement in your favour in case cross examination is not given.

[ketanvyas1975]

can you please given citation of few judgments wherein such kind of addition was deleted on the ground of absence of cross examination? Thanks in advance.

[neerajbansal]

It is a natural justice principle. you will number of judgments on this. Moreover, addition on basis of just a 'chit' found can be quotioned anytime. 'Chit' found will not be any primary or even any secondary evidence. Department has to prove actual flow of money.

[pawansingla]

IT : Where assessee was not provided with opportunity to cross examine person providing information that lead into addition to income, fresh adjudication was required

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[2013] 39 taxmann.com 185 (Punjab & Haryana)

HIGH COURT OF PUNJAB AND HARYANA

Panchvati Motors (P.) Ltd.

v.

Assistant Commissioner of Income-tax, Circle -1, Bathinda*

RAJIVE BHALLA AND DR.BHARAT BHUSHAN PARSOON, JJ.
IT APPEAL NO. 211 OF 2012 (O&M)†
SEPTEMBER  2, 2013

Section 143, read with section 147, of the Income-tax Act, 1961 - Assessment - Addition of income [Opportunity of hearing] - Assessee Sales Tax authority held that there was sale of spare parts of cars to assessee by car manufacturer but same was not recorded in books - Said information was supplied to Assessing Officer - Assessing Officer initiated reassessment proceedings and made addition to assessee's income - On appeal, Tribunal found that Sales Tax Appellate Tribunal had set aside order of Sales Tax authority - Further, no authenticated document providing information was collected from car manufacturer, nor was same furnished to assessee or assessee was given opportunity of cross-examining officer who made statement relating to sale in question - Tribunal remitted matter to Assessing Officer for granting an opportunity to assessee to cross-examine officer who made statement relating to sale of cars and to comply with principles of natural justice - Whether order of Tribunal was just and proper - Held, yes [Para 5] [In favour of assessee]

CASE REVIEW

CIT v. Panchvati Motors (P.) Ltd. [IT Appeal No. 151 of 2011, dated 31-7-2013] (para 6) followed.

CASES REFERRED TO

CIT v. Panchvati Motors (P.) Ltd. [IT Appeal No. 151 of 2011, dated 31-7-2013] (para 6).

Sandeep Goyal for the Appellant.

ORDER

Rajive Bhalla, J. - By way of this order, we shall dispose of ITAs No.211, 212, 213, 214, 215, 216, 217 and 218 of 2012 as they involve adjudication of the same questions of fact and law. For the sake of convenience, facts are being taken from ITA No.211 of 2012.

2. The appellant challenges order dated 18.04.2012, passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar.

3. Counsel for the appellant primarily contends that remand of assessment proceedings to the Assessing Authority is not warranted. The additions deleted by the Commissioner of Income Tax (Appeals) Bathinda, should have been affirmed by the Tribunal. The mere violation of principles of natural justice, as discerned by the Income Tax Appellate Tribunal, Amritsar, are not sufficient to remit the matter to the Assessing Officer as no such plea was raised before the Commissioner of Income Tax (Appeals). The following substantial questions of law arise for adjudication: —

"(i)        Whether in the facts and circumstances of the case the Hon'ble ITAT was right in law to hold that the service of notice u/s 148 was invalid and, therefore, it was not correct in quashing the assessment orders on the said grounds?
(ii)        Whether assessment order can be termed invalid merely by the reason of any mistake or omission in service of notice when Section 292B of I.T. Act, 1961 states that if the proceeding is in substance and effect in conformity with or according to the intent and purpose of I.T. Act, 1961, the assessment proceedings cannot be termed invalid merely by reason of any mistake, defect or omission in the notice?"
4. We have heard counsel for the appellant, perused the substantial questions of law as well as the impugned order and find no reason to entertain the appeals much less hold that any substantial question of law arises for adjudication.

5. A perusal of finding recorded by the Income Tax Appellate Tribunal reveals that additions with respect to sale of spare parts was held to be illegal as it was based upon an order passed by the Sales Tax Authority which was set aside by the Sales Tax Appellate Tribunal. The addition for sale of cars etc., was held to be violative of principles of natural justice as information collected from the manufacturer of cars was not furnished to the assessee and the assessee was not allowed to cross-examine the officer who made the statement relating to sale of cars. The Income Tax Appellate Tribunal, has, therefore, rightly remitted the matter to the Assessing Officer for granting an opportunity to the assessee to cross-examine the officer who made statement relating to sale of cars and to comply with principles of natural justice. A relevant extract from order dated 18.04.2012, passed by the Income Tax Appellate Tribunal, reads as follows: —

"18. The findings of the VAT Tribunal order dated 22-8-2006 have been perused by us and the stand of the learned D.R. that at PB 64 being the finding of the VAT Tribunal the entire supply of the spare parts by the Maruti Udyog Limited was never brought/imported in the State of Punjab had been reflected in the books of account. Though in the absence of material on record, the order of the DETC(A) was quashed by the VAT Tribunal on 22-8-2006. The argument of the learned A.R. that when the basis on which the dispute arose had vanished and, therefore, no addition can be made, has been taken into account, the other arguments made by both the parties have also been taken into consideration but the fact remains that the assessee was not allowed to cross-examine the person, who had supplied the information. Since the assessment was being time barred and the A.O. proceeded to complete the assessment on 17-3-2004, the argument of the learned A.R. and the findings of the learned CIT(A) that the assessee was in regular contact with the supplier, Maruti Udyog Limited, the onus lies on the assessee to contradict the information provided by the department, cannot be accepted. It will be against the principle of natural justice to decide any issue firstly without providing the authenticated document to the assessee and without confronting the said authenticated documents and consequently without giving opportunity of cross-examination to the assessee when specifically asked for. The A.O. cannot be permitted to complete the assessment and give the perverse finding without following the principle of natural justice. Therefore, in view of the circumstances and the facts of the case, the matter is set aside to the file of the A.O. who will provide the authenticated information to the assessee and the opportunity of cross examination and complete the assessments accordingly afresh by providing opportunity of being heard to the assessee. Thus all the ground Nos.2 to 4 in the appeals of the assessee and all the grounds of the Revenue in all the years are allowed for statistical purposes."

6. We find no reason to hold that the Income Tax Appellate Tribunal has committed an error that would give rise to a substantial question of law. It would also be appropriate to point that that with respect to the same assessee, an assessment order relating to a similar dispute but a different year, was set aside by this Court in ITA No.151 of 2011 "CIT v. Panchvati Motors (P) Ltd., decided on 31.07.2013, by modifying the order passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, and restoring the matter to the Assessing Authority to decide the matter afresh after complying with principles of natural justice.

7. In view of what has been stated hereinabove, the appeals are dismissed.

[pawansingla]

Excise & Customs : Right of cross-examination of witnesses whose statements have been relied upon in show-cause notice is a valuable right in any quasi judicial proceedings, as said proceedings may have adverse consequences to assessee and said right can be taken away only in exceptional circumstances stipulated in section 138B

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[2014] 42 taxmann.com 62 (Delhi)

HIGH COURT OF DELHI

Basudev Garg

v.

Commissioner of Customs*

BADAR DURREZ AHMED AND R.V. EASWAR, JJ.
CUS. A.A. NOS. 7, 10, 12 & 13 OF 2010
C.M. NOS. 21740, 21751 & 21754 OF 2010†
APRIL  12, 2013

I. Section 138B of the Customs Act, 1962 read with section 9D of the Central Excise Act, 1944 and section 83 of the Finance Act, 1994 - Relevancy of statements under certain circumstances - When any statement is used against assessee, an opportunity of cross-examining persons who made those statements ought to be given to assessee - Right of cross-examination is a valuable right in any quasi judicial proceeding, as said proceedings may have adverse consequences to assessee; however, said right can be taken away in exceptional circumstances stipulated in Excise section 9D or Customs section 138B viz. person who had given a statement : (a) is dead or (b) cannot be found, or (c) is incapable of giving evidence, or (d) is kept out of way by adverse party, or (e) his presence cannot be obtained without an amount of delay and expense which, under circumstances of case, Court considers unreasonable - Unless such circumstances exist, assessee has a right to cross-examine persons whose statements are being relied upon even in quasi judicial proceedings - Section 138B (identical to excise section 9D), considers such statements as relevant only if, under given circumstances, such a person cannot be produced for cross-examination - Where Department holds that it is not possible to procure attendance of witnesses without undue delay or expense, said view is subject to judicial review and justification of such a finding can be taken up in appeal [Paras 9 to 14] [In favour of assessee]

II. Sections 28 and 122A of the Customs Act, 1962, section 73 of the Finance Act, 1994 and sections 11A and 33A of the Central Excise Act, 1944 - Recovery - Of duty or tax not levied/paid or short-levied/paid or erroneously refunded - Adjudication of demand - Department alleged that assessee imported certain ball bearings of Chinese origin but showed them as originating from Sri Lanka with a view to evade anti-dumping duty - Various show-cause notice were issued to assessee based on 21 statements/ testimony of various individuals recorded under section 108 of Customs Act - Assessee requested for cross-examination of said witnesses, officers and authorities - Department denied said request on ground that assessee had no such right - Further, in confirming demand, department also relied upon a report dated 20-7-2005, while show-cause was issued on 30-4-2004 and hearings were completed on 14-10-2004 - HELD : Assessee was entitled to cross-examine witnesses in view of express provisions of section 138B of Customs Act, 1962 (identical to provisions of section 9D of Central Excise Act, 1944) - Since said aspect had not been examined and enquiry report had not be supplied to assessee, hence, matter was remanded back to Tribunal for fresh consideration [Paras 9 to 17] [In favour of assessee]

CASE REVIEW

Swadeshi Polytex Ltd. v. Collector of Central Excise 2000 (122) ELT 641 (SC) (para 10) and Lakshman Exports Ltd. v. Collector of Central Excise 2002 (143) ELT 21 (SC) (para 10) relied on.

J&K Cigarettes Ltd. v. Collector of Central Excise 2009 (242) ELT 189 (Delhi) (paras 10 to 14) followed.

Preeti Daga v. Commissioner of Customs 2010 (253) ELT 465 (Tri.-Delhi) (para 16) setaside.

CASES REFERRED TO

Preeti Daga v. Commissioner of Customs [2010 (253) ELT 465 (Tri.-Delhi) (para 1), Swadeshi Polytex Ltd.v. Collector of Central Excise 2000 (122) ELT 641 (SC) (para 9), Lakshman Exports Ltd. v. Collector of Central Excise 2002 (143) ELT 21 (SC) (para 9) and J&K Cigarettes Ltd. v. Collector of Central Excise2009 (242) ELT 189 (Delhi) (para 9).

C. Hari Shankar and S. Sunil for the Appellant. Kamal Nijhawan and Sumit Gaur for the Respondent.

[prashantmaharishi]

 I think in this case the  matter will be set aside at the most but cannot be decided in favour of the assessee. generally in such cases CO is granted after ITAT sets aside the case