2010 (6) TMI 654 - AT - Income Tax

Unaccounted cash - Addition u/s 69A - CIT(A) deleted the addition - whether CIT(A) was justified in deleting the addition made by AO on the basis of the statements which were never confronted to the assessee for rebuttal nor any opportunity granted to the assessee to cross-examine the deponents in spite of repeated requests by the assessee to the Assessing Officer to allow such opportunity? - HELD THAT - Undeniably, the statements of Shri Brij Mohan Gupta, his son Rajeev Gupta and the accountant, Ram Avtar Singhal are the basis of the addition made by the Assessing Officer under section 69A of the IT Act. Undeniably again, these statements were never provided to the assessee for rebuttal. Also, he was not afforded any opportunity to cross-examine the deponents of these statements. This is despite the fact that the assessee had made repeated requests to the Assessing Officer for providing the statements to him and for affording him an opportunity to cross-examine these deponents. Pertinently, even at the first appellate stage, the matter was remitted by the learned CIT(A) to the Assessing Officer, however, once again, no such opportunity was provided to the assessee. CIT(A) observed that AO had failed to establish any case against the assessee, nor was any corroborative evidence gathered by the AO in relation to the assessee. The AO, as observed by the CIT(A), merely summarized the salient features of the assessment proceedings relating to Brij Mohan Gupta and thereafter, summarily rejected the reply of the assessee as not acceptable. Though the AO referred to the statement of Brij Mohan Gupta and others admitting their involvement in cash loan transactions, these statements were not provided to the assessee. The allegation of the assessee having entered into loan transaction with Brij Mohan Gupta was not proved, since nothing was brought on record by the AO regarding any further investigations to confirm any such loan transaction. CIT(A) deleted addition u/s 69A made by AO. Addition was not valid, or for the proposition that in a case of no opportunity provided to the assessee, the matter cannot be set aside to the AO to fill up the lacuna, have been quoted by the Department. No error whatsoever with the order of the learned CIT(A), the same is hereby confirmed. In the result, the appeal filed by the Department is dismissed.

Summary

Issues:
Department's appeal against deletion of addition of Rs. 49 lakhs under section 69A of the Income-tax Act for the assessment year 2001-02.

Analysis:
The Appellate Tribunal ITAT Delhi heard the Department's appeal against the deletion of an addition of Rs. 49 lakhs made by the Assessing Officer under section 69A of the Income-tax Act for the assessment year 2001-02. The assessee, a partner in a trading firm, had his assessment reopened based on information regarding money lending activities of another individual. The Assessing Officer made the addition based on transactions observed between the assessee and the individual, despite the assessee denying any involvement. The CIT(A) deleted the addition, leading to the Department's appeal. The Departmental Representative argued that the addition was valid under section 69A since the assessee failed to explain the transactions. The assessee's counsel contended that the addition was rightly deleted as the statements forming the basis were not provided for rebuttal or cross-examination. The issue revolved around whether the CIT(A) was justified in deleting the addition without affording the assessee an opportunity to rebut or cross-examine the deponents of the statements.

The Tribunal noted that the statements forming the basis of the addition were never provided to the assessee for rebuttal, and no opportunity for cross-examination was granted despite repeated requests. The CIT(A) observed that the Assessing Officer failed to establish a case against the assessee or provide corroborative evidence. The Assessing Officer summarily rejected the assessee's reply without proving the alleged loan transactions. Citing relevant case law, the Tribunal emphasized the importance of providing the opportunity for cross-examination and the violation of natural justice in the absence of such opportunity.

The assessee vehemently opposed sending the matter back to the Assessing Officer for further opportunities, arguing that the Department's deficiency could not be rectified at this stage. The Tribunal referenced case law to support the position that deficiencies in the Department's case should not be rectified at a later stage. The Tribunal confirmed the CIT(A)'s order, stating that no errors were found, and dismissed the Department's appeal. The decision highlighted the significance of providing opportunities for rebuttal and cross-examination, emphasizing the principles of natural justice in tax assessments.