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2017 (7) TMI 1164 - HC - Income TaxDenial of natural justice - not allowing the Assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order - Addition of on money received with respect to subject land of the assessee which was evidence by the document seized during search u/s 132 - non making available opportunity of cross-examining - Held that - Taking into consideration the observation made by the Tribunal regarding not allowing cross-examination of Mr. Thakkar from whose documents the amount is alleged to have been taken in the interest of the assessee. In that view of the matter the finding recorded by the Tribunal is just and proper and issues is answered in favour of the of the assessee against the department.
Issues Involved:
1. Deletion of additions made by the Assessing Officer based on seized documents. 2. Right to cross-examine the witness whose testimony was used to impose tax liability. Issue-Wise Detailed Analysis: 1. Deletion of Additions Based on Seized Documents: The primary issue in these appeals was whether the Tribunal was justified in deleting the additions made by the Assessing Officer (AO) based on documents seized during a search under Section 132 of the Income Tax Act. The AO had made additions of ?4,07,00,000/- and ?7,50,00,000/- in different appeals, which were confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The Tribunal, however, dismissed the department's appeal and allowed the assessee's appeal, deleting these additions. The court noted that the AO had presumed the properties belonged to the assessee without verifying the records of the Municipal Council/JDA or any other government agency. The Tribunal found that the AO made the additions based on presumptions, surmises, and conjectures without specific material evidence. It was emphasized that no addition could be made on the basis of presumption in block assessments, as highlighted in the case of Union of India vs. Ajit Jain And Another, 260 ITR 80. The Tribunal restored the matter back to the AO for re-examination with proper verification from government records. Additionally, the court observed that the AO failed to establish the ownership of the property or the transaction by the assessee through the Sub-Registrar’s office. The Tribunal concluded that the addition was made without any corroborative evidence and was based on mere presumption. Therefore, the Tribunal's decision to delete the additions was upheld. 2. Right to Cross-Examine the Witness: The second issue was whether the assessee should have been afforded the opportunity to cross-examine Ravindra Singh Thakkar, whose testimony was used to impose the tax liability. The court referred to several judgments emphasizing the importance of cross-examination as part of the principles of natural justice. In the case of Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II, the Supreme Court held that not allowing the assessee to cross-examine the witnesses whose statements were made the basis of the impugned order amounted to a violation of the principles of natural justice. Similarly, in the case of CIT vs. S.C. Sethi, it was held that peripheral reliance on documents without the opportunity for cross-examination could not be countenanced. The court also referred to the case of Principal Commissioner of Income Tax Ahmedabad vs. Kanubhai Maganlal Patel, where it was held that the AO was not justified in making additions solely relying on statements without allowing cross-examination. The Tribunal's decision to delete the addition was upheld because the statements of the farmers were not furnished to the assessee, and the request for cross-examination was rejected. In the present case, the Tribunal found that the AO had not allowed cross-examination of Mr. Thakkar, whose documents were used to allege the receipt of on-money. The court concluded that the Tribunal's finding was just and proper, and the addition could not be sustained without affording the opportunity for cross-examination. Conclusion: The court dismissed the appeals, upholding the Tribunal's decision to delete the additions made by the AO. The judgment emphasized the necessity of corroborative evidence and the right to cross-examine witnesses in ensuring fair assessment proceedings. The issues were resolved in favor of the assessee, and the appeals were dismissed.
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