2015 (12) TMI 451 - AT - Income Tax

Undisclosed cash element in sale of plot - non providing opportunity to cross examine the witness - Held that - Hon ble Bombay High Court in the case of M/s.R.W. Promotions Pvt. Ltd 2015 (7) TMI 782 - BOMBAY HIGH COURT while deciding an identical issue where opportunity to cross examine the witness whose statement was relied upon by the revenue was not allowed had held that denial of such cross examination is breach of principles of natural justice. Accordingly, the order of the Tribunal was set aside to the file of the AO with a direction to decide the issue afresh after giving due opportunity to the assessee to cross examine the witness. Since in the instant case also opportunity to cross examine the witness was not granted despite specific request made by the assessee, therefore, respectfully following the decision of the jurisdictional High Court cited (Supra) we restore the issue to the file of the AO with a direction to give an we restore the issue to the file of the AO with a direction to give an opportunity to the assessee to cross examine Shri Rakesh Agarwal. The AO shall decide the issue afresh and in accordance with law after giving due opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Addition of undisclosed cash element in the sale of plot.
2. Denial of opportunity to cross-examine Mr. Rakesh Agarwal.

Issue 1: Addition of undisclosed cash element in the sale of plot:
The case involves an appeal filed by the assessee against the order of the CIT(A)-I, Nashik regarding the Assessment Year 2008-09. The AO noted a search action under section 132 of the I.T. Act at the premises of a group in Pune, where a document related to the assessee's transaction was seized. The document indicated a total consideration higher than what the assessee declared as short-term capital gain. The AO confronted the assessee with this document and the statement of another individual, Shri Rakesh Agarwal, who admitted a cash payment. The assessee denied knowledge of the cash payment and requested not to consider the deposition. However, the AO held that the seized paper and deposition were related to the transaction, adding the cash amount to the total income of the assessee. The CIT(A) upheld this decision, leading to the appeal.

Issue 2: Denial of opportunity to cross-examine Mr. Rakesh Agarwal:
The assessee argued that the addition was made without allowing cross-examination of Mr. Rakesh Agarwal, the consultant involved in the transaction. Citing a decision of the Bombay High Court, the assessee contended that the right to cross-examine is a fundamental principle of natural justice and its denial constitutes a breach. The High Court's decision emphasized the importance of this right and set aside a previous order for fresh disposal after granting the opportunity to cross-examine. In this case, since the assessee's request for cross-examination was declined, the ITAT Pune restored the issue to the AO, directing a fresh decision after providing the opportunity to cross-examine Mr. Rakesh Agarwal. The ITAT Pune allowed the appeal for statistical purposes, emphasizing the importance of adhering to principles of natural justice.

This judgment highlights the significance of granting the opportunity to cross-examine witnesses in tax proceedings, ensuring fairness and adherence to principles of natural justice. The decision underscores the importance of procedural fairness in tax assessments, emphasizing the right of the assessee to challenge evidence and confront witnesses.