2019 (7) TMI 2022 - AT - Income Tax

Violation of principle of natural justice - lack of cross examination provided - addition made on the basis of the information received from the Investigation Wing - HELD THAT - Issue decided in favour of assessee as relying on case of Amitabh Bansal 2019 (2) TMI 1132 - ITAT DELHI in which exactly similar issue has been dealt by the Tribunal and decided that when revenue strongly relies on statements of certain persons to implicate an assessee, principle of cross examination has to invariably followed if truth and justice needs to be found out, which has not been done in the case of the assessee. Thus the issue of cross examination in dispute is squarely covered in favour of the assessee by the findings of the Tribunal, as reproduced above. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Violation of principles of natural justice due to denial of cross-examination.
2. Reliance on statements and information from the Investigation Wing without providing cross-examination.
3. Validity of the addition made by the AO based on such statements.

Issue-Wise Detailed Analysis:

1. Violation of Principles of Natural Justice Due to Denial of Cross-Examination:
The core issue revolves around the principle that when the revenue relies on statements of certain persons to implicate an assessee, the principles of cross-examination must be invariably followed. The Tribunal emphasized that not providing an opportunity for cross-examination is a violation of the principles of natural justice. This principle was upheld in multiple judgments, including the case of Amitabh Bansal vs. Income Tax Officer, where it was held that truth and justice necessitate cross-examination if the revenue relies heavily on such statements.

2. Reliance on Statements and Information from the Investigation Wing Without Providing Cross-Examination:
The Tribunal noted that the addition in dispute was based on information received from the Investigation Wing. The assessee's counsel argued that similar issues were adjudicated in favor of the assessee in the case of Amitabh Bansal, where it was held that the revenue must provide an opportunity for cross-examination if they rely on statements from third parties. The Tribunal cited various judgments, including those from the Supreme Court and High Courts, which consistently held that the denial of cross-examination when requested by the assessee renders the assessment unsustainable.

3. Validity of the Addition Made by the AO Based on Such Statements:
The Tribunal scrutinized the orders passed by the revenue authorities and the judgments cited by the assessee's counsel. It was highlighted that the assessment order was based on statements recorded during the investigation, which were not subjected to cross-examination. The Tribunal reiterated that the foundation of the assessment cannot solely rely on such statements without granting the assessee the right to cross-examine the witnesses. This stance was supported by several judicial precedents, including the case of Andaman Timber Industries vs. CCE, where the Supreme Court held that not allowing cross-examination is a serious flaw that makes the order nullity.

Conclusion:
The Tribunal concluded that the revenue authorities' failure to provide an opportunity for cross-examination violated the principles of natural justice. Consequently, the addition made by the AO based on the statements from the Investigation Wing, without allowing cross-examination, was deemed unsustainable. The appeal of the assessee was allowed, and the addition in dispute was deleted.

Order:
The appeal of the assessee is allowed, and the addition in dispute is deleted. The order was pronounced on 23-07-2019.