2023 (11) TMI 762 - HC - Income Tax

Addition on the basis of statements recorded behind the back of the assessee - Suppressed sales - violation of principles of natural justice - as argued No opportunity provided of cross-examination to the assessee regarding the persons on whose statements the assessing authority had relied on - ITAT allowing relief to the assessee - HELD THAT - Division Bench of the Delhi High Court in the case of Rajesh Kumar 2008 (4) TMI 233 - DELHI HIGH COURT also has taken a similar view under the provisions of 1961 Act wherein the statements of one Maheshwari had been recorded wherein he had denied that he had nothing to do with the bank account from which the cheques were issued to the assessee. Resultantly, the order of the Tribunal had been upheld on the ground that the said person had not been cross-examined and no opportunity was granted by the Assessing Officer and there was violation of principles of natural justice. Facts herein are similar as noticed above. A perusal of the order of Commissioner of Income Tax would go on to show the Commissioner had noticed that the Assessing Officer without bringing any record or evidence had made the addition on the basis of the statement of the third party which could not be considered as conclusive evidence. It is in such circumstances, we are of the considered opinion that the Tribunal has rightly interfered in the orders passed by the authorities below. Therefore, no question of law arises.

Summary

Issues involved:
The judgment involves the assessment of five appeals under Section 260A of the Income Tax Act, 1961, regarding the Assessment Years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018.

Issue 1: Addition of Rs. 14,70,900/- based on suppressed sales
The Tribunal allowed the appeals due to the Assessing Officer not providing an opportunity for cross-examination to the assessee regarding relied-upon statements, violating principles of natural justice. The judgment of the Apex Court and other High Courts was cited in support of the decision.

Issue 2: Opportunity of cross-examination denied
The Tribunal observed that the Assessing Officer did not provide proper opportunity for cross-examination to the assessee, which was a violation of principles highlighted in the judgment of the Hon'ble Calcutta High Court. The Tribunal found that the impugned additions were made without giving the assessee a chance to rebut through cross-examination.

Issue 3: Impugned order based on third-party evidence
For the subsequent years, additions were made based on an e-mail communication received from electronic records, without independent inquiry or corroborative evidence. The Tribunal noted contradictions in the evidence presented and found that the Assessing Officer relied solely on third-party evidence without proper investigation.

Judgment Summary:
The High Court dismissed the appeals, stating that no substantial question of law was established. The background of the case revealed information received from the Directorate General of GST Intelligence regarding alleged suppression of turnover. The Tribunal found that the Assessing Officer did not provide adequate opportunity for cross-examination, leading to a violation of natural justice principles.

The Tribunal considered the statements of various individuals and found that the impugned additions were made without proper opportunity for the assessee to rebut the evidence. The Tribunal highlighted discrepancies in the evidence presented and concluded that the appeals should be allowed based on the lack of proper cross-examination.

The judgment referenced the Apex Court's decision in a similar case under the Central Excise Act, emphasizing the importance of allowing cross-examination to maintain fairness and uphold natural justice principles. The Division Bench of the Delhi High Court also upheld a similar view, emphasizing the necessity of providing the assessee with an opportunity for cross-examination.

In conclusion, the High Court affirmed the Tribunal's decision to allow the appeals, as the impugned orders were found to lack substantial evidence and violated principles of natural justice. The judgment highlighted the importance of fair procedures and adequate opportunities for rebuttal in such cases.