2019 (9) TMI 501 - HC - Income Tax

Denial of an opportunity to cross examination of witness - relief upon the statement of the person, claiming that Cash was received from the assessee, additions were made - non-supply of statements so recorded - unaccounted investment - HELD THAT - Specific grievance was made about the willingness to cross-examine - The objection taken on behalf of the Respondent needs to be negated. In order to support their contention about the right to cross-examine witness, the leaned Counsel for the Appellant relied upon the Judgment delivered by in case of Andaman Timber Industries V/s Commissioner of C. Ex., KolkataII, Decided 2015 (10) TMI 442 - SUPREME COURT . There was a proceedings relating to the payment of central excise. The Assessee made grievance about denial of an opportunity to cross-examine the buyers. Denial of such an opportunity is a serious flaw rendering the order as a nullity. Hence the Hon'ble Supreme Court set-aside the impugned orders. Provisions of Income Tax Act - The investigating team has recorded statement of said Gopal Kondawar on three occasions. They are on 10/4/2013, 31/5/2013 and 7/6/2013. The Appellant Assessee has made grievance about not admitting cash payment by Mr. Gopal Kondawar in first two statements. The Appellant Assessee has insisted on supply of the statement dated 7th June 2013. These statements have been made the foundation by the Income Tax authorities in passing the orders thereby including ₹ 1,50,00,000/in the income of the Assessee. These materials cannot be used against the Assessee without giving them an opportunity to challenge the contents of those statements. That is why an opportunity of cross-examining Mr. Gopal Kondawar needs to be given. Remand - ACIT is the first authority who has conducted that enquiry. Hence, he only can be directed to secure the presence of Mr. Gopal Kondawar for cross-examination by the Assessee. We do not find anywhere any observations by the learned Commissioner of Income Tax and by the learned Appellate Tribunal regarding the grievance made about denial of an opportunity of cross-examination. Failure to give an opinion about this grievance also amounts to refusal of an opportunity to cross-examine the said Gopal Kondwar which is improper. Hence, all the orders needs to be set-aside.

Summary

Issues:
1. Denial of opportunity to cross-examine a witness in income tax assessment proceedings.
2. Compliance with provisions of the Income Tax Act regarding cross-examination rights.

Analysis:
1. The case involved an appeal by the Assessee against the inclusion of unaccounted investment in their total income by the Assistant Commissioner of Income Tax. The Appellate authorities upheld the decision, leading to the challenge before the High Court. The primary issue was whether the Appellant was given the opportunity to cross-examine a key witness, Mr. Gopal Kondawar, Director of a company involved in the transaction. The Appellant contended that denial of this opportunity prejudiced their case.

2. The High Court scrutinized the record and observed that the Appellant had indeed expressed willingness to cross-examine Mr. Kondawar in earlier proceedings. However, the Respondent disputed the existence of a crucial letter supporting this claim. Despite the Appellant's grievance about denial of cross-examination being mentioned in the appeal documents, the Court noted the absence of any observation by the Commissioner of Income Tax or the Appellate Tribunal on this issue.

3. Citing the importance of the right to cross-examine witnesses, the Court referred to a Supreme Court judgment emphasizing the significance of this procedural safeguard. The Income Tax Act provisions were also examined, highlighting the authority's power to enforce attendance and examine individuals on oath. The Court underscored the need for a fair opportunity to challenge evidence used against the Assessee, especially statements made by Mr. Kondawar forming the basis of the tax authorities' decision.

4. Ultimately, the Court found merit in the Appellant's claim regarding the denial of the cross-examination opportunity. It held that failure to address this grievance amounted to a refusal of a fundamental procedural right. Consequently, the High Court partially allowed the appeal, setting aside the previous orders and remanding the matter to the Assistant Commissioner of Income Tax. The directive included securing Mr. Kondawar's presence for cross-examination and allowing the Appellant to submit additional documents and explanations for a fresh assessment.

5. The Court's detailed analysis focused on upholding the principles of natural justice and procedural fairness in income tax assessment proceedings. By emphasizing the right to cross-examine witnesses and ensuring compliance with statutory provisions, the judgment underscored the importance of a robust and equitable tax assessment process.