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2019 (5) TMI 1909 - AT - Income TaxReopening of assessment u/s 147 - addition of bogus purchases - reopening only on the basis of statement given by the third party - denial of cross-examine of the third party - assessee has submitted that the AO has erred on facts and in law forming a negative inference solely on the basis of extracts of statement by third parties without confronting the same to the assessee and in total disregard to the provisions of law - AO has not provided the statement of the third party on which the basis the addition was made and also not provided the opportunity of cross examination of the same - HELD THAT - As the issue in dispute along with the documentary evidence filed by the assessee in two paper books and the decision of the Hon'ble Supreme Court of India in the case of Andaman Timber Industries 2015 (10) TMI 442 - SUPREME COURT it is clear that the Assessing Officer has not given any opportunity of cross-examine to the third party as well as not supplying the statement of the same to the assessee which is contrary to the principle of natural justice and the addition on this basis is not sustainable in the eye of law. Respectfully following the decision given by the Hon'ble Supreme Court of India reproduced above, we are of the view that the Assessing Officer has not given any opportunity to the assessee for cross-examine to the third party of which basis the addition in dispute has been made. Respectfully following the order passed by the Hon'ble Supreme Court of India the addition in dispute is deleted by accepting the appeal filed by the assessee.
Issues:
Reopening of assessment u/s.147 of the Act, Partial confirmation of addition made by AO, Opportunity of cross-examination not provided to assessee, Violation of principle of natural justice, Failure to supply material collected by AO to assessee, Application of decision of Hon'ble Supreme Court in Andaman Timber Industries case. Analysis: 1. Reopening of Assessment: The Assessee challenged the reopening of assessment u/s.147, arguing that the AO erred in forming a negative inference solely based on third-party statements without providing the opportunity of cross-examination. The First Appellate Authority partly confirmed the addition made by the AO. The Tribunal noted that the AO reopened the assessment solely based on third-party statements without providing any other material. The Assessee requested to cross-examine the third party, which was denied, violating the principle of natural justice. The Tribunal, following the decision of the Hon'ble Supreme Court in Andaman Timber Industries case, held that the addition based on lack of opportunity for cross-examination is not sustainable in law. 2. Partial Confirmation of Addition: The AO had made an addition based on alleged bogus purchases. The CIT (A) partly confirmed this addition. The Assessee contended that the AO did not follow due process and failed to provide relevant material for assessment. The Tribunal found that the AO's action was solely based on third-party statements without providing any opportunity for cross-examination to the Assessee. The Tribunal, in line with the decision in Andaman Timber Industries case, deleted the addition as it was not sustainable due to the lack of opportunity for cross-examination. 3. Opportunity of Cross-Examination: The Assessee argued that the AO did not provide the opportunity to cross-examine the third party, violating the principle of natural justice. The Tribunal held that denial of cross-examination when the statements of witnesses formed the basis of the order is a serious flaw, making the order null and void. The Tribunal emphasized that the Assessee's right to cross-examine witnesses is crucial for a fair assessment process and found in favor of the Assessee based on the principles of natural justice. 4. Application of Legal Precedent: The Tribunal extensively relied on the decision of the Hon'ble Supreme Court in the Andaman Timber Industries case, which emphasized the importance of allowing cross-examination of witnesses and the adverse impact of denying this right. The Tribunal applied the principles laid down in this case to the present matter and concluded that the addition made by the AO without providing the opportunity for cross-examination is unsustainable in law. 5. Final Decision: The Tribunal allowed all seven appeals filed by the Assessee for various assessment years, deleting the additions made by the AO. The Tribunal found that the AO's failure to provide the opportunity for cross-examination and not following the principles of natural justice rendered the additions unsustainable. The decision was based on upholding the Assessee's right to a fair assessment process as established by legal precedents, particularly the Andaman Timber Industries case.
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