If opportunity of cross examination not availed, it can not be ground of challenge

If assessee not availed opportunity of cross examination, it can not be ground of challenge – Supreme Court dismisses Special Leave Petition

ABCAUS Case Law Citation:
ABCAUS 3854 (2024) (02) SC

Important Case Laws relied upon by parties:
Kishan Chand Chellaram Vs. CIT, (1980) 125 ITR 713 SC
Sumati Daya Vs. CIT, 214 ITR 801 SC

The appellant assessee was a partner in a Firm, another partner was the brother of the assessee. The assessee had two minor sons. While doing the scrutiny, the AO observed that the assessee had taken large amount of loan from both his minor sons through their mother i.e. wife of the assessee.

cross examination

The Assessee explained that the amount was given to the brother of the assessee on his retirement from the firm, out of which his brother gave money to each minor child of the assessee. The minor children have given the gifts to father through mother.

However, the A.O. found the said gifts was bogus and made the addition which was confirmed by the First Appellate Authority.

However, the Tribunal has accepted the gifts as genuine and deleted the addition. Being aggrieved, the Department approach the Hon’ble High Court.

Before the Hon’ble High Court, the Income Tax Department submitted that the brother of the assessee, in response to notice u/s 131, made a statement before the A.O.

In the statement, the brother of the assessee stated that he had not given any gift to any one. He stated that the accounts are maintained by the elder brother of the assessee. It was further stated that in case any gift amount has been shown by him it was not in his knowledge as he does not know English language and if any gift paper had been prepared in English then it was not in his knowledge as he does not know English language. It was further stated that he was having no capacity to given such a huge amount of gift and he also stated that no cheque had been given to him by the firm on his retirement. He alleged that the assessee got his signatures by misrepresenting the fact that cheques are to be deposited for income tax and he signed the cheque as directed by the assessee.

As per the Assessment Order, opportunity of corss-examination was given to the assessee to cross-examine his brother, but the assessee had not availed the said opportunity.

The assessee contended that the source of the funds was fully explained. It was submited that no opportunity was provided to the assessee to cross-examinehis brother. It was also a submission that the identity of the donor was established and the creditworthiness had also been proved. The genuineness of the transaction cannot be denied as the money was routed from the banking channel. He relied up the judgment of Hon’ble Supreme Court where it was held that the burden was on the department to show that money belonged to the assessee.

The Hon’ble High Court observed that there was a dispute between the two brothers and the later one had also filed a suit against the assessee claiming the outstanding debt due.

The Hon’ble High Court noted that the brother of the assessee was having own minor children, when it was so, then he is unlikely to give the gifts to the children of his brother. Further in his statement, he had categorically stated that no cheque was received from the firm and he has not given any gifts to anybody.

Regarding the cross-examination, the Hon’ble High Court stated that the assessee had not availed the opportunity as stated by the A.O. On the basis of the statement made by the donor, the burden had shifted upon the assessee as per the ratio laid down. The case law relied by the assessee’s counsel was not applicable, as the matter in hand was not related to telegraphic transfer of the money.

The Hon’ble High Court opined that it was evident that the gifts were not genuine as stated by the A.O. as well as by the First Appellate Authority. The Tribunal had deleted the addition merely only on the ground that no opportunity was provided for cross-examination. But fact remained that assessee never availed it.

The Hon’ble High Court opined that transaction was not genuine but colorable. Hence the Tribunal had wrongly deleted the addition which was not desirable in the circumstances of the case. The money was routed indirectly from the firm to the assessee’s account under the garb of the gifts.

Not satisfied with the judgment of the Hon’ble High Court, the assessee challenged it before the Hon’ble Supreme Court. However, the Division Bench of the Apex Court dinclined to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petition was dismissed

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