1. This appeal is preferred by the assessee against the order of the CIT(A) pertaining to the asst. yr. 1978-79 on various grounds.
2. The first grievance of the assessee is that the learned CIT(A) has erred in not treating the returns under the Amnesty Scheme.
3. With regard to this issue, after hearing the rival submissions of the parties, we have carefully perused the orders of the authorities below and find that the CIT(A) was justified in holding that the scheme will not be applicable to any return if as per admission of the assessee no tax is payable. Even otherwise, where it is found that the income declared in the said return is not true and full and complete disclosure, the assessee would not be entitled to the benefit of the said scheme. The CIT(A) discussed this issue in detail in his order and we do not find any cogent reason to disturb the findings of the CIT(A).
We, accordingly, subscribe the view of the CIT(A).
4. Ground No. 2 is general in nature. As such it does not require any specific adjudication.
5. Ground No. 3(a) relates to the addition of Rs. 15,695 as payment to DDA. The facts relating to the issue are that during the course of assessment it was observed by the AO from a letter dt. 4th January, 1990, that the assessee had made a payment of Rs. 15,695 on 16th January, 1978 to Delhi Development Authority for the allotment of a flat No. C-195, Malviya Nagar, New Delhi. The assessee was asked to explain the source of the said investment. The assessee merely replied that the said payment was made out of the cash in hand. As per the AO no cash flow statement was filed before him to justify the payment in cash to DDA, but the assessee strongly refuted the observations of the AO and submitted before us that he has filed the cash flow statement before the AO being not satisfied with the explanation of the assessee, the AO made an addition of Rs. 15,695 as an unexplained investment against which the assessee carried the matter before the CIT(A) but did not find favour from him.
6. The learned counsel for the assessee submitted before us that the assessee has obtained the loan of Rs. 1,05,000 in cash from Madanlal Tiwari, Kishanji Patidar and Jagannath Patidar. He also invited our attention to the balance sheet placed at p. 71 of the compilation of the assessee, but no cash flow statement is being placed before us. The learned Departmental Representative, on the other hand, has submitted that since the investment was made from 16th January, 1978 at the fake end of the financial year, it is for the assessee to prove that he was having sufficient cash in hand on the day for making the payment to the DDA.7. We have carefully perused the orders of the authorities below and the balance sheet placed at p. 71 of the compilation. From those documents, it is evident that the assessee has obtained the loan of Rs. 1,05,000 from its creditors and made the payment of Rs. 58,953 against flat No. C-195, Malviya Nagar, New Delhi, but it is not evident from this balance sheet that this amount includes the amount of Rs. 15,695 made to DDA on 16th January, 1978. Moreover, it is not clear from these payments whether the assessee was having sufficient cash in hand on 16th January, 1978, for making the payment to DDA for the allotment of flat No. C-195, Malviya Nagar, New Delhi. It is evident from the assessment order that the assessee has declared a cash credit of Rs. 1,05,000 in the name of Shri Madanlal Tiwari, Kishanji Patidar and Jagannath Patidar in its balance sheet ended on 31st March, 1978, but in the list of creditors the dates filed by the assessee, the dates on which cash credits obtained from Madanlal Kishanji Patidar and Jagannath were stated to be on 15th April, 1978, 9th April, 1978 and 10th April, 1978. This creates a doubt whether the assessee had sufficient cash in hand on the dates when the payments to DDA was made.
In these circumstances, we feel it proper to restore the matter to the file of the AO for a proper investigation in the payment of Rs. 15,695 made to DDA for the purchase of a flat at New Delhi. Accordingly, we set aside the order of the CIT(A) and restore the matter to the file of the AO with the direction to examine this issue in the light of cash flow statements filed by the assessee after affording him an opportunity of being heard.
8. Ground No. 1(b) relates to addition of Rs. 20,000 being N. D. Bond belonging to Kum. Meena, daughter of the assessee. During the course of assessment the AO observed that this investment was made in the name of Kum. Meena by the assessee. At the time of investment, Kum. Meena was a minor and she had no source of income. Being not satisfied with the explanation of the assessee, he added this amount in the hands of the assessee, against which the assessee went in appeal before the CIT(A) but did not find favour from him.
9. We have heard the rival submissions of the parties and perused the orders of the authorities below. The learned counsel for the assessee has invited our attention to the query raised by the AO which is placed at p. 19 of the paper-book of the Revenue in which a specific query was made regarding the various investments made by the assessee in his own name and in the name of his family members. In response to this query, the assessee specifically denied the alleged investments. The AO did not make any effort to find out from whose account the investment was made, as submitted by the learned counsel for the assessee. After careful perusal of the orders of the lower authorities and the documents placed on record, we find that the AO simply raised a query but did not make any sincere effort to ascertain from whose account the investment was made. Furthermore, the assessee was not allowed to defend his case properly and the addition was made in the hands of the assessee without affording any opportunity of being heard. It is obvious from the orders that at the time when the investment was made in NB bonds, Kum. Meena was minor and it was also for the assessee to assist the Revenue in arriving at the correct conclusion from whose account the investment was made. Since Kum Meena did not have sufficient funds for making the investment in the ND bonds, the investment must have been made by the parents of Kum. Meena or her near relations. This issue requires proper adjudication by the AO. However, in the instant case, we are concerned only with the assessee whether he has made the investment in the name of Kum. Meena and this controversy can only be resolved if this issue is re-examined by the AO after affording an opportunity of being heard to the assessee. Accordingly, we restore this matter to the file of the AO with the direction to re-examine this issue afresh after affording a reasonable opportunity of being heard to the assessee.
10. Ground No. 3(c) relates to the addition of Rs. 60,000 being FDR belonging to Kum. Meena and Kum. Manju. With regard to this issue the AO has observed that the investment of Rs. 60,000 was made in FDRs belonging to Kum. Manju & Meena at the time when both these daughters of the assessee were minor. The investment was added by the AO in the hands of the assessee as unexplained investment against which the appeal was filed but the fortune did not fluctuate.
11. We have heard the rival submissions of the parties and carefully perused the orders of the authorities below and the documents placed on record. Our attention was drawn to Annexure B prepared by the AO along with the queries sent to the assessee for specific reply in which on 3rd August, 1977 FDRs of Rs. 30,000 each were purchased in the name of Kum. Meena Saklecha and Manju Saklecha and the assessee was asked to explain the source of investment. The assessee denied the alleged investments but he did not explain from whose account the investment was made for the purchase of these FDRs in the name of two minor daughters. After careful perusal of the record, we are of the view that being the natural guardian of the minor, it is the moral duty of the assessee to disclose the correct facts to the AO as from whose account the investment was made for the purchase of FDRs if he had not invested from his own account. The assessee's main grievance is that he was not allowed to defend his case properly and the AO after noticing these investments, made an addition in the hands of the assessee. Under the given circumstances, we are of the view that this issue requires fresh adjudication and we, accordingly, restore the matter to the file of the AO with the direction to re-adjudicate this issue afresh after affording an opportunity of being heard to the assessee.
12. Ground No. 3(a) relates to the addition of Rs. 1,05,000 as unexplained credits. The facts relating to the issue are that during the course of assessment the AO has observed that in the statement of affairs as on 31st March, 1978, the assessee has indicated loans from the following three persons : But in the list of creditors with dates filed by the assessee it was stated that this loan was obtained from 9th April, 1978, to 15th April, 1978. To ascertain the correct position, the AO has examined the statement of the cash creditors recorded by the Revenue authorities in different cases and found that the assessee has wrongly included these liabilities in the state of affairs as on 31st March, 1978. If these items are excluded, there will be excess of assets over liabilities as on 31st March, 1978, by the amount of Rs. 1,05,000. As such, the source of investment in assets to that extent remains unexplained and the amount of Rs. 1,05,000 was considered as income of the assessee for that assessment year from undisclosed sources by the AO. Aggrieved, the assessee carried the matter before the CIT(A) but did not find favour from him.
13. The learned counsel for the assessee submitted before us that before making an addition under this head, the AO did not invite explanation from the assessee and he relied on the statement of the creditors recorded in different assessment proceedings. If the AO wanted to use the statement against the assessee, a copy of those statements should have been given to the assessee and he should be allowed to cross-examine the witnesses. Unless and until the evidence is tested by way of cross-examination, it cannot be relied on by the authorities concerned. He has invited our attention to p. 71 of the balance sheet filed by the assessee in which he has shown cash credit of Rs. 1,05,000 in the name of Madanlal Tiwari, Kishan Patidar and Jagannath Patidar. He further argued that before the CIT(A) the objection was raised by the assessee and the CIT(A) after considering the objections directed the AO to supply copy of the statements of the cash creditors. Consequently, the statements of the creditors were supplied to the assessee, but he was not duly afforded an opportunity to cross-examine the witnesses. He has invited our attention to the note sheet entry of the CIT(A)'s file which is placed at p. 45 of the compilation in which it is quite evident that the assessee raised objection that the creditors were not examined in the assessee's case and the assessee was not allowed to cross-examine the same. He has also invited our attention to the report of the Dy. CIT filed before the CIT(A) stating therein that the assessee was allowed to cross-examine the witnesses, but the assessee did not avail the opportunity whereas the learned counsel for the assessee has invited our attention to the notice issued to the assessee placed at pp. 25 and 26 in which the assessee was not specifically asked to cross-examine the witnesses in the instant case. Our attention was further invited to the letter of the assessee written to the AO in which the AO was specifically asked to furnish information in which case the assessee was asked to examine the witnesses. Even otherwise, on the date fixed the creditors which are required to be examined did not appear before the AO and the AO concluded its proceedings and made the report to the CIT(A). The learned counsel for the assessee further argued that despite the objections of the assessee regarding examination of the cash creditors, the CIT(A) did not pass the remand order and the assessee had no knowledge about any internal correspondence made between the CIT(A) and the Dy. CIT(A)/AO. The AO has relied on the statement of the creditors recorded in other assessment proceedings. The learned counsel for the assessee has invited our attention to the affidavit of Mr. Khabya, the learned counsel for the assessee, in which he categorically denied the observations of the CIT(A) that he did not express his desire to cross-examine the various creditors and wanted the appeals to be disposed of on the basis of the material already available on record.
The learned counsel for the assessee strongly relied on the judgment of the Supreme Court in the case of Parashuram Pottery Works Co. Ltd. vs.
ITO (1977) 106 ITR 1 (SC) and ITO vs. Pradeep Kumar Badjatiya & Co. 61 ITD 75.
14. The learned Departmental Representative strongly refuted the contentions of the assessee and submitted that the AO has made the addition after observing that the assessee has shown cash credit in its balance sheet, whereas the cash creditors admitted that the loan was advanced in the next previous year and the assessee could not furnish plausible explanation to this effect. Besides, relying on the findings of the CIT(A), he invited our attention to the order of the Tribunal in the assessee's case rendered for asst. yr. 1977-78 in which under similar circumstances the matter was restored to the file of the AO with the direction to afford an opportunity to the assessee to cross-examine the witnesses and to adjudicate the genuineness of the cash credits afresh. A copy of the order is placed on record.
15. We have heard the rival submissions of the parties and have carefully perused the orders of the authorities below. It is quite obvious from the orders that the balance sheet filed by the assessee that the assessee has shown the cash credits of Rs. 1,05,000 in the name of Shri Madanlal Tiwari, Kishan Patidar and Jayant Kumar Patidar.
In the assessment order the AO has relied on the list of the creditors filed by the assessee in which the date of the cash credits are given as 9th April, 1978, 10th April, 1978 and 15th April, 1978 falling within the next previous year, but the list of creditors is not placed before us either by the assessee or the Revenue. Though the assessee's main contention is that the while making an addition under this head, the AO has strongly relied on the statement of the cash creditors recorded in different assessment proceedings without affording any opportunity to cross-examine the witnesses to the assessee, but from the assessment order and the order of the CIT(A) there is no inkling that the Revenue authorities had relied on the statements of the cash creditors recorded in different assessment proceedings. The AO has examined the state of affairs ending on 31st March, 1978 vis-a-vis the list of creditors with dates filed by the assessee in which the dates of cash credits were shown as 9th April, 1978, 10th April, 1978 and 15th April, 1978. Since the alleged list of creditors with dates has not been filed before us, by any of the parties, we are unable to express our comments how far the Revenue authorities are correct in making the observations that if the cash credits are excluded from the balance sheet, there will be excess of assets over the liabilities as on 31st March, 1978 by the amount of Rs. 1,05,000 which could be considered as income of the assessee from undisclosed sources being the unexplained investment. It is quite obvious from record that the assessee was not affording any opportunity to cross-examine the cash creditors whose statements were recorded in other assessment proceedings. As per the principles of natural justice, an opportunity should be afforded to the assessee to cross-examine all those witnesses if at all they are relevant to the assessment proceedings in the case of the assessee. Though it is not obvious from the orders that the statements of the cash creditors were relied on by the AO, but the main grievance of the assessee is that he has not been afforded an opportunity to cross-examine the cash creditors who was used against the assessee despite specific objections raised before the CIT(A).
16. We have carefully perused the authorities quoted by the assessee and it is a settled position of law that no evidence can be used against anyone unless and until the affected person is allowed to cross-examine the witnesses. The rule of audi alteram partem should be followed in all circumstances. We have also perused the order of the Tribunal in the assessee's case for asst. yr. 1977-78. A copy of the same is placed on record.
17. Having regard to the observations of the Revenue authorities and the documents placed on record, we are of the view that the assessee should have been allowed to cross-examine the cash creditors, if at all their statements have been used against the assessee. Before making the addition on a particular point, the assessee should have been given opportunity to furnish the explanation with regard to his claim.
Keeping in view the order of the Tribunal in the case of the assessee and other judicial pronouncements, we set aside the order of the CIT(A) and restore it to the file of the AO with the direction to examine this issue afresh after affording an opportunity of being heard to the assessee. The assessee be allowed to cross-examine the cash creditors if their statements are relevant to the present dispute. This issue is accordingly decided.
18. Ground No. 3(c) relates to the addition of Rs. 11,140 being income belonging to Smt. Chetandevi. The facts relating to the issue are that the AO treated all other investments in her name except the share income from Saklecha Udyog and B. J. Plastics as the income of the assessee as a protective assessment was framed in the hands of Smt.
Chetandevi. Dissatisfied with the order of the AO, the assessee went in appeal before the CIT(A) but did not find favour from the CIT(A).
19. Before us the learned counsel for the assessee has submitted that the funds were available with Smt. Chetandevi and whatever investments were made, these were made from her own account. He also relied on the statement of affairs and the balance sheet filed in the case of Smt.
Chetandevi which is placed at pp. 75 and 76 and invited our attention that she had taken a loan of Rs. 1,73,000 in cash and the said fund was available for making various investments. He also invited our attention to the details of the addition of Rs. 11,140 which are placed at p. 10 of the second compilation of the assessee. He further argued that it is evident from the balance sheet that Smt. Chetandevi had financial transactions with the assessee and while making the additions in the hands of the assessee with regard to the investment made by Smt.
Chetandevi, no explanation was asked from the assessee for making the addition and by doing so, he has violated the principles of natural justice. The learned counsel for the assessee has also invited our attention to the following judgments :Jaydayal Poddar (Decd) & Anr. vs. Mst. Bibi Hazra & Ors. AIR 1974 SC 171 and and submitted that for treating the benami transactions the Revenue has to bring some material on record. The learned Departmental Representative on the other hand, relied on the findings of the CIT(A).
20. We have heard the rival submissions of the parties and carefully perused the orders of the authorities below and the documents placed on record. After careful perusal of the order of the AO and the CIT(A), we are of the view that their order is very cryptic and no detailed discussions are made before making the addition. However, they have also carefully perused the balance sheet in the case of Smt. Chetandevi and the details of investments given at p. 10 of the compilation of the assessee, but all the details mentioned at p. 10 do not find place in the balance sheet of Smt. Chetandevi. Since we do not find the detailed discussions in the orders of the authorities below and the assessee was not allowed to furnish the explanation with regard to the investment, we feel it proper to restore the matter to the file of the AO for examining this issue afresh in the light of the statement of investments and the explanation of the assessee. Accordingly, we set aside the order of the CIT(A) and restore the matter to the file of the AO with the direction to readjudicate this issue afresh after affording an opportunity of being heard to the assessee in the light of the details of investment and the balance sheet in the case of Smt.
Chetandevi.
21. Ground Nos. 3(f) and (g) relate to the addition of Rs. 58,590 and Rs. 22,075 being income belonging to Vijay Kumar and Raj Kumar, respectively.
22. For the same reasons as stated in the case of Smt. Chaturdevi, the AO treated the investment made in the name of Vijay Kumar and Raj Kumar Saklecha, son of the assessee, as income of the assessee and made the addition in his hands. In the case of Vijay Kumar the AO has not made detailed discussions but in the case of Raj Kumar he has made the discussion in detail. The addition made by the AO were confirmed by the CIT(A) and against the order of the CIT(A) the assessee is before us.
23. The learned counsel for the assessee has invited our attention to the statement of affairs/balance sheet placed at page Nos. 79 to 82. He further argued that before making the addition of the investment made in the name of Vijay Kumar and Raj Kumar, no explanation of the assessee was asked for. Even the cash credit of Rs. 20,000 in the account of Shri Raj Kumar was treated as unexplained and added in the hands of the assessee without examining the cash creditors and without affording an opportunity of being heard to the assessee. Similarly, in the case of Vijay Kumar and the cash credit of Rs. 50,000 was treated as unexplained cash credit without examining the cash creditors and even without affording an opportunity of being heard to the assessee and the unexplained cash credit was added to the income of the assessee. The learned Departmental Representative on the other hand, relied on the observations of the CIT(A).
24. After careful perusal of the orders of the authorities below and hearing the rival submissions of the parties, it is evident from the balance sheet that Shri Raj Kumar and Vijay Kumar had shown the cash credit in their balance sheet. From the orders of the authorities below, there is no inkling that the assessee was ever asked to explain the reason why this addition should not be made in his hands. It is incumbent upon the AO to afford an opportunity of being heard to the assessee before making any addition in the hands of the assessee. The grievance of the assessee is quite reasonable that he was not allowed to defend his case properly. In these circumstances, we are of the view that this issue requires fresh adjudication. Accordingly, we set aside the order of the CIT(A) and restore the matter to the file of the AO with the direction to adjudicate this issue afresh after affording the assessee an opportunity of being heard.
25. Ground No. 3(b) relates to the addition of Rs. 1,73,000 being loan given by V. K. Saklecha & Sons, HUF, to Smt. Chetandevi.
26. With regard to this issue, the learned counsel for the assessee invited our attention to the observations of the CIT(A) in his order that once the loan advanced to Smt. Chetandevi was treated as unexplained in the hands of the HUF, the source of the borrowings in the hands of Smt. Chetandevi becomes explained because for the same amount there cannot be two additions, but the CIT(A) has gone wrong in making further observations that if this amount is added in the hands of the assessee, it could not amount to double addition because there is no separate inclusion of the said loan as determined unexplained in the case of the HUF. The learned counsel for the assessee submitted that this addition was made in the hands of the assessee after considering that the cash credit is unexplained in the hands of Smt.
Chetandevi and it belongs to the assessee. Once the cash credit is explained in the hands of Smt. Chetandevi, the addition for this amount cannot be made in the hands of any other person. For a similar amount different additions cannot be made in the hands of different persons.
The learned Departmental Representative relied on the observations of the CIT(A).
27. We have heard the rival submissions of the parties and carefully perused the orders of the authorities below. We find force in the arguments of the assessee that once the loan advanced to Smt.
Chetandevi was treated as unexplained in the hands of the HUF, the source of the borrowings in the hands of Smt. Chetandevi becomes explained and as such no addition is called for in the hands of Smt.
Chetandevi. Furthermore, while the cash credit in the hands of Smt.
Chetandevi is explained, it cannot be treated as income of the assessee and no addition can be made in the hands of the assessee.
28. In view of our above discussions, we set aside the order of the CIT(A) and delete the addition of Rs. 1,73,000.
29. The next ground No. 3(i) relates to charging of interest under S.139(8) of the Act. With regard to this issue it was urged on behalf of the assessee that this issue is squarely covered by the judgment of the jurisdictional High Court in the case of Shakti Tiles Industries vs.
CIT (1996) 218 ITR 612 (MP), in favour of the assessee in which it is held that the interest under S. 139(8) can only be leviable in a regular assessment and the assessment framed after issuance of notice under S. 149 is not a regular assessment.
30. We have carefully perused the judgment of the Hon'ble High Court and find that the assessment was framed after issuance of notice under S. 148 of the Act and, as such, the assessment cannot be called a regular assessment. Since it is not a regular assessment, interest under S. 139(8) is not leviable. Accordingly, we set aside the order of the CIT(A) and delete the interest.