Income Tax Appellate Tribunal - Ahmedabad
Vijaybhai H. Shah vs Deputy Cit, Circle 9, Ahmedabad on 28 February, 2005
Equivalent citations: [2006]6SOT75(AHD)
ORDER
Rajpae Yadav, Judicial Member The assessee is in appeal before us against the assessment order passed under section 158BD read with section 143(3) of the Income Tax Act, 1961 by the learned Assessing Officer on 27-2-2004.
2. The assessee is aggrieved with an addition of Rs. 77 lakhs made by the assessing officer.
3. In the second ground of appeal, he has raised the grievance that assessing officer did not follow the Rules of principle of natural justice, and did not grant opportunity of cross-examination before relying upon the statement of the persons and made the addition.
4. Shri M.G. Patel, learned Counsel for the assessee, first advanced argument on his preliminary objection pertaining to non-grant of proper opportunity of hearing. Therefore, first, we take up the second ground of appeal.
5. The brief facts of the case are that a search and seizure operation was carried out at the premises of M/s. Gokul Corporation and Shri Suresh A. Patel on 22-09-1995. During the course of search, a file containing loose papers was found and seized vide recovery memo A-I From the residence of Shri Suresh A. Patel. At page No. 105 of this file, an entry at 5. No. 4 depicts that Rs. 77 lakhs was paid to the assessee by Shri Manoj Vadodaria. Statement of S/Shri Manoj Vadodaria, Govind C. Patel recorded under section 132(4) of the Income Tax Act. They have disclosed in their statements that Rs. 77 lakhs was paid to the assdssee. On the basis of this incriminating material, a show-cause notice alongwith copy of the statement as well as the seized material was issued to the assessee. The assessee filed a detailed reply and objected the proposed addition on the ground that no transaction was ever carried out with S/Shri Manoj Vadodaria, Govind Patel and Suresh Patel by the assessee. It was further contended that entries made in the books of account of a 3rd person could not fasten the assessee with the liabilities. The assessee specifically requested the assessing officer that he be allowed to cross-examine. Shri Govind Patel and other persons whose statements are being relied upon against him. The learned Assessing Officer spun down this contention of the assessee by observing as under:-
"10(vi) it is also submitted that it is alleged that Shri Manoj Vadodaria made payment of Rs. 77 lakhs to him on behalf of Shri Govind C. Patel. He has also stated that he may be allowed examination of Shri Govind C. Patel alongwith his books of account to verify whether he had any transactions whatsoever with him or to check up the above facts.
Comments: The above contention of the assessee is not acceptable. The loose papers and documents are very authentic evidences as they were found during the course of search and some important notings showing transaction outside the books of account were made on it. These are very important evidences to be considered under sub-section (4A) of section 132 of the Income Tax Act. Also Shri Suresh A. Patel and Shri Manoj Vadodaria have admitted in their statement that Rs. 77 lakhs have been paid to the assessee for purchase of land on behalf of Shri Govindbhai C. Patel.
11. Question of allowing examination of Shri Govind C. Patel alongwith his books of account for verification does not arise at all as the transactions are made out of the books of account. Further, Shri Suresh A. Patel and Shri Manoj Vadodaria have admitted the cash payment of Rs. 77 lakhs in their statements. Thus, on the basis of these two statements and the loose papers, cash payment of Rs. 77 lakhs is proved. The copies of the two statements and the loose papers have already been supplied to the assessee. Hence the examination of Shri Govind C. Patel would not serve any purpose, as statement of Shri Suresh A. Patel and Shri Manoj Vadodaria was recorded and they have admitted the above transaction for which the assessee has not made any clarification and no rebuttal of these statements has been made by the assessee which mean that the assessee has no point of dispute in regard to these statements."
6. The learned counsel for the assessee, impugned this finding of the learned assessing officer on the ground that without affording an opportunity of cross-examination, these statements cannot be used against assessee. For buttressing his argument, he relied upon the decision of ITAT in the case of Prarthana Construction (P) Ltd. v. Dy. CIT(2001) 70 TU 122.
7. On the other hand, the learned departmental Representative relied upon the order of the assessing officer.
8. We have duly considered the rival contentions. It is true that disclosure made under section 132(4) is a good piece of evidence and bound the maker of the disclosure. Similarly, according to the sections 34 and 35 of the Evidence Act, if any entry found from the books of account of a person maintained in the ordinary course of business, then such entries would be admissible in Evidence Act and a relevant piece of evidence. Though entries maintained regularly on day-to-day basis in pursuance of a continuous and a uniform practice would be admissible, but being entry of a 3rd concern, straightway they cannot charge the assessee with the liabilities. These materials, the entries as well as the statement of the person recorded under section 132(4) of the Act, 1961 can only be used against the assessee after providing due opportunity of hearing to assessee of rebut them. The statement of a person recorded from the back of the assessee can be used against him, if opportunity to cross-examination was granted. The order of the learned assessing officer is lacking in this regard, therefore, it deserves to be set aside. However, we are of the opinion that if an order is to be struck down as invalid, being passed in violation of principle of natural justice, then proceedings are not required to be terminated rather the order assailed by virtue of its inherent defect is to be vacated and proceedings are required to be left open. Therefore, we set aside this order and restore this issue to the file of assessing officer for fresh adjudication with a direction that he shall give opportunity to cross-examine the three persons; namely, S/ShriSuresh Patel, Manoj Vadodaria and Vijay Shah. The assessing officer shall further supply all the relevant documents required to be used against the assessee and invite the assessees explanation on those materials. The assessee will be at liberty to produce any evidence in support of his explanation. Since we are setting aside the assessment order on preliminary issue, i.e., being passed in violation of natural justice. Therefore, our order shall not impair and injure the case of the assessing officer or prejudice the defence or explanation of the assessee on merit. With the above observation, this appeal of the assessee is treated as allowed for statistical purposes.