2008 (1) TMI 951 - HC - Income Tax

Addition of unexplained investments u/s 69B - P urchase of Agriculture land unexplained - Not allowed to retract from an earlier admission by mere statement - No opportunity provided for cross examination - seller admitted that he had sold the land in question at the rate of ₹ 4 lacs per acre, but the sale deed was got registered at the rate of ₹ 2.30 lacs per acre - subsequently retracted, assessed the value of the land purchased at the rate of ₹ 4 lacs per acre and framed the assessment while adding ₹ 38.65 lacs for the AY 2001-02 and ₹ 46,32,500 for the AY 2002-03 - Payment of the sale consideration from NRI account - Additions deleted by CIT(A) confirmed by the ITAT HELD THAT - It is undisputed/position that before the AO said Satinder Pal Singh did not appear and made any statement nor an opportunity was granted to the assessee to confront the sale deed and cross examine Satinder Pal Singh on the statement which he had made before the Assistant Director of Income Tax (Investment). In spite of all this evidence, the AO made the addition under Section 69B of the Act only on the basis of conjectures while observing that it is a well known practice that the sale deeds of immovable properties are being registered at the much lower rates than the rates prevailing in the markets. It is also undisputed fact that after selling of the land, Satinder Pal Singh was assessed under the Act and at that time the sale value of the said land was taken as indicated in the registered sale deed and that assessment had become final. In our opinion, the Tribunal has duly appreciated the evidence/material available on the record and various contentions raised by the parties, and then came to the aforesaid conclusion, which in our view, is a pure finding of fact which does not require any interference by this Court. Therefore, in our opinion, in these appeals no substantial question of law is arising from the impugned order for consideration of this Court. Hence, both the appeals are dismissed.

Summary

Issues:
- Interpretation of retraction of statement by seller
- Right to cross-examine the seller

Interpretation of retraction of statement by seller:
The case involved two appeals under Section 260A of the Income Tax Act, 1961 by the Department against the order passed by the Income Tax Appellate Tribunal. The dispute arose from the assessing officer's decision to add amounts to the assessee's income for the years 2001-02 and 2002-03 based on a statement by the seller, Satinder Pal Singh, which he later retracted. The Commissioner (Appeals) allowed the assessee's appeal, highlighting the lack of concrete evidence to substantiate the seller's initial statement. The Tribunal also dismissed the Department's appeals, emphasizing that there was no clinching evidence to support the Department's claim that the assessee had made investments beyond the registered sale deed amounts. The Tribunal considered the retraction of the seller's statement, the failure to allow cross-examination, and the lack of material evidence to justify the additions made by the assessing officer. The High Court upheld the Tribunal's decision, stating that the assessing officer's addition was without basis and purely speculative, as there was no evidence to support the claim of additional payments made by the assessee. The Court found that the Tribunal's factual findings were well-founded, and no substantial question of law arose from the impugned order.

Right to cross-examine the seller:
Another issue in the case was the right to cross-examine the seller. The Commissioner (Appeals) had noted that the assessing officer did not provide the assessee with an opportunity to cross-examine the seller, which was considered a violation of natural justice. The Tribunal also highlighted the failure to allow cross-examination as a crucial factor in rejecting the Department's appeals. The High Court concurred with the Tribunal's reasoning, emphasizing that the assessing officer's reliance on the seller's statement without allowing cross-examination was unjustified. The Court reiterated that the absence of concrete evidence and the failure to follow due process, such as providing an opportunity for cross-examination, weakened the Department's case. Ultimately, the High Court dismissed both appeals, affirming the Tribunal's decision based on the lack of substantial evidence and procedural irregularities in the assessment process.