Addition based on statement recorded deleted as witness not appeared for cross examination

Addition based on statement recorded deleted as witness did not appear for cross examination on Departments notice

ABCAUS Case Law Citation:
ABCAUS 3345 (2020) (07) ITAT

Important case law relied upon by the parties:
Kishanchand Chellaram 125 ITR 713 (SC)
Andaman Timber Industries 281 CTR 214 (SC

The Assessee had challenged the Order of the CIT(A) in dismissing the appeal of the assessee holding that the right of cross-examination is not absolute right of the assessee.

The return of income of the assessee was processed under section 141(1) of the Income Tax Act, 1961 (the Act). Later a search was conducted under section 132 in a Group of Educational Institutions.

During the search, certain documents/books of account were seized which reveal receipt of donation/capitation fees in cash by parents of the students for taking admission in various medical courses.

During the course of recording statement under section 132(4) the Chairman of the Trust categorically admitted of accepting donation/capitation fees in cash and offered these unaccounted money for taxation.

The Assessing Officer (AO) on the basis of such information found that assessee had paid considerable amount of cash for admission of his son to MBBS course.

The AO on the basis of this information reopened the assessment u/s 147/148 of the Act.  The statement of assessee was recorded under section 131 of the Act but, he failed to explain correctly that he had not given the donation.

The assessee, however, denied giving any cash for admission of his son. The AO was not satisfied with the explanation of  assessee and made the addition.

The assessee challenged the reopening of the assessment under section 147/148 and addition made before the CIT(A).

The assessee explained that no adverse material was confronted to him and that the Chairman of the Trust was never produced for cross-examination on his behalf.

The CIT(A) confirmed the reopening of the assessment and directed the AO to allow an opportunity to the assessee for cross-examination of the Trust Chairman.

The AO in response thereto issued summons, but, the said Chairman did not appear before AO for cross-examination on behalf of the assessee. The CIT(A) even on merit confirmed the addition and finally dismissed the appeal of assessee.

The Tribunal opined that since the Revenue Department alleged that assessee had paid cash as donation/capitation fees, therefore, onus was upon AO to prove through cogent and reliable evidence that assessee had in fact paid cash by way of donation of capitation fees to the Medical College/Chairman.

The Tribunal observed that at the appellate stage the AO issued summons to the Trust Chairman for providing an opportunity to the assessee to cross-examine his statement, but, he did not appear at the appellate stage, therefore, the fact remained that assessee had been denied right to make cross-examination  to  the  statement  relied upon by the assessee.

The Tribunal stated that it is well settled Law that any adverse material collected at the back of the assessee when not confronted and that if any statement is recorded by the Department at the back of the assessee and such statement is not allowed for  cross-examination on behalf of the assessee, such material cannot be considered against the assessee in the Income Tax proceedings and such material/statement cannot be read in evidence against the assessee.

The Tribunal held that the onus upon the Revenue Department to prove that assessee paid cash to the Trust/Chairman was not discharged. 

Accordingly, the ITAT set aside the Orders of the authorities below and deleted the addition.

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