Mere providing evidence relied upon is no substitute of right of cross-examination

Mere providing evidence relied upon by AO no substitute of fundamental right of opportunity for cross-examination – ITAT

ABCAUS Case Law Citation:
ABCAUS 3705 (2023) (04) ITAT

Important Case Laws relied upon by parties:
Andaman Timber Industries vs. Commissioner of Central Excise, [2015] 314 ELT 641 (SC)
I.C.D.S.  Ltd. vs CIT [2020] 273 Taxman 12 (SC)  

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the action of the AO of not granting the cross examination of documents relied on by him while assessing the income of the Appellant and passing the assessment order u/s 147 of the Income Tax Act, 1961 (the Act)

The assessee was an individual and is working as an employee in the Merchant Navy. For the relevant assessment year, the assessee filed his return of income (ITR) declaring Nil income. The return filed by the assessee was processed under section 143(1) of the Act.

Subsequently, on the basis of information received from the Directorate of Investigation that the assessee has paid cash to a builder towards the purchase of residential flat, proceedings under section 147 of the Act were initiated and notice under section 148 of the Act was issued.

The AO also issued summons u/s 131 to the assessee and the builder calling for the details and explanation in support of the on-money paid/received. However, both the assessee and the builder failed to reply to the summons.

The AO completed the assessment on the basis of material available on record by treating the amount of cash paid to the Builder as income of the assessee made addition under section 69B of the Act as unexplained investment.

The Tribunal observed that the AO relied upon the statement of  the builder which was recorded on oath before  DDIT (Investigation) during a search and seizure proceedings under section 132(4) of the Act in the case of a Group of companies.

The Tribunal opined that when the person, whose statement was relied upon to make the addition in the hands of the assessee, does not appear in response to the summons, the submission of the Revenue that the assessee chose not to avail the opportunity to cross-examine the builder provided by the AO was a mere empty formality.

The ITAT observed that Hon’ble Supreme Court had held 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 flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected.

The ITAT further observed that the Hon’ble Apex Court has laid down that where the issue involved was about not extending an   opportunity to the appellant to cross-examine witnesses relied upon by Assessing Officer, the entire matter would be considered by First Appellate Authority afresh by giving fair opportunity to both sides to espouse their claim.

Accordingly, the Tribunal set aside the impugned order and restored the matter to the file of AO for de novo adjudication. 

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