Addition made without providing opportunity for cross examination is invalid – ITAT

Addition made without providing to assessse an opportunity for cross examination is invalid – ITAT

In a recent judgment, ITAT Delhi has held that addition made on the strength of statement of alleged accommodation entry provider without providing assessee an opportunity for cross examination was invalid being in violation of statutory provisions and principles of natural justice.

ABCAUS Case Law Citation:
4618 (2025) (06) abcaus.in ITAT

In the instant case, the Revenue had challenged the order passed by the CIT(A) National Faceless Appeal Centre (NFAC) in restricting the addition made by the Assessing Officer (AO) to only profit element embedded in bogus purchase/sale is chargeable to tax. The assessee had also filed Cross Objections contending that CIT(A) ought to have deleted the total additions made in impugned assessment order.

The assessee filed its return of income for the A.Y. 2019-20.  As per the information received in the case of assessee in accordance with the Risk Management Strategy formulated by CBDT, on insight portal maintained by the Income Tax Department, under the head High risk CRIU/VRU cases, the assesse, the firm of the assessee had carried out certain transactions during the financial year and the  case was selected for reassessment under Section 147 r.w.s. 148 of the Income Tax Act, 1961, (“the Act”). 

In compliance with notice u/s 148, the assessee filed its return of income. The Assessment had been completed making addition to income by disallowing the alleged bogus purchases made by the assessee by entry operators as unexplained / non-existent purchase and also treated the sales made by the assessee as unexplained credits under section 68 of the Act. 

Before ITAT, the assessee submitted that no any approval u/s 151 of the Act supplied to assessee alongwith notice u/s 148 of the Act and 148A(d) as mandate in CBDT guidelines dated 01-08-2022 and non supplying the same is fatal.

It was also submitted that the assessee by way of reply sought for adverse material and cross examination but none of them was provided and same is fatal as held by the coordinate bench in assessee’s own case.

It was also submitted that the lack of cross examination being provided to assessee despite request was fatal.

The Tribunal observed that assessment order revealed that the assessee made a request for opportunity of cross examination of the alleged entry operator on whose statement, case was reopened for the assessment under section 147 of the Act.

It was submitted that the CIT(A) had observed that the AO had made every efforts to provide cross examination. However, there is a vast difference between making efforts and making ensure.  It was also submitted that the notice in question SCN u/s 148A(b) issued to assessee was quite vague lacking application of mind.

In substance the submission were that AO solely relied upon the statement of alleged entry operator recorded during search and held that he himself admitted that he was engaged in providing accommodation entries of non-genuine purchases and non-genuine sales to various parties.

The Tribunal observed that in the assessee’s own case for AY 2018-19, the Tribunal had deleted similar additions observing that not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flow which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected.

Following the order of the coordinate bench the Tribunal held that the addition made without providing an opportunity for cross examination is invalid in the eyes of law and there is material substance in the plea of assessee that the AO supposed to provide all the relied-upon materials and relevant information alongwith notice u/s 148A(b).

Accordingly, the impugned assessment order passed under Section 147/144B and the first appellate order were held to be invalid and bad in law, having been passed in violation of statutory provisions and principles of natural justice. Consequently, the additions made therein were directed to be deleted.

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