2020 (8) TMI 65 - AT - Income Tax

Unaccounted money - search proceedings - Onus to prove - donation/capitation fees over and above the regular course fees paid in cash by parents of the students for taking admission in various medical courses - HELD THAT - Since the Revenue Department alleged that assessee has paid cash of ₹ 27 lakhs as donation/capitation fees, therefore, onus is upon A.O. to prove through cogent and reliable evidence that assessee has in fact paid cash by way of donation of capitation fees to the Medical College and Dr. P. Mahalingam. In the present case, the entire case is set-up on the basis of statement of Dr. P. Mahalingam recorded during the course of search under section 132(4) in which, he has admitted to have received donation/capitation fees in cash. However, the assessment order is silent if any right of cross-examination have been allowed on behalf of the assessee at the assessment stage. CIT(A) at the appellate stage asked the A.O. for production of Dr. P. Mahalingam and allow an opportunity to the assessee for cross-examination. The A.O. issued summons to Dr. P. Mahalingam at the appellate stage for providing an opportunity to the assessee to cross-examine his statement, but, Dr. P. Mahalingam did not appear at the appellate stage, therefore, the fact remained that assessee has been denied right to make cross-examination to the statement of Dr. P. Mahalingam. Any adverse material collected at the back of the assessee when not confronted and that if any statement is recorded by the A.O./Revenue Department at the back of the assessee and such statement is not allowed for cross-examination on behalf of the assessee, such material cannot be considered against the assessee in the Income Tax proceedings and such material/statement cannot be read in evidence against the assessee. See ANDAMAN TIMBER INDUSTRIES 2015 (10) TMI 442 - SUPREME COURT and KISHINCHAND CHELLARAM 1980 (9) TMI 3 - SUPREME COURT Onus upon the Revenue Department to prove that assessee paid cash to Dr. P. Mahalingam or the Medical College is not discharged in the present case. - Decided against revenue.

Summary

Issues:
Reopening of assessment under section 147/148 of the I.T. Act, 1961 and addition of ?27 lakhs based on the statement of Dr. P. Mahalingam.

Analysis:
The appeal was against the Order of the Ld. CIT(A)-37, New Delhi, for the A.Y. 2007-2008. The case involved the reopening of the assessment and addition of ?27 lakhs based on information received after a search conducted under section 132 of the I.T. Act, 1961. The A.O. reopened the assessment under section 147/148 as it was found that the assessee had paid cash for admission, which was denied by the assessee. The Ld. CIT(A) confirmed the reopening and directed the A.O. to arrange a meeting with Dr. P. Mahalingam for cross-examination, but Dr. P. Mahalingam did not appear. The right of cross-examination was considered by the Ld. CIT(A) not as an absolute right of the assessee. The A.O. made the addition of ?27 lakhs which was challenged by the assessee.

The entire addition was based on the statement of Dr. P. Mahalingam, who admitted to receiving cash donations, while the assessee denied making any cash payments. The onus was on the Revenue Department to prove that the assessee had paid cash, but no cross-examination was allowed. The A.O. issued summons for cross-examination at the appellate stage, but Dr. P. Mahalingam did not appear. The Tribunal held that any adverse material not confronted to the assessee and not allowed for cross-examination cannot be considered in the proceedings. Citing relevant case laws, the Tribunal concluded that the statement of Dr. P. Mahalingam could not be relied upon. As there was no other material to support the addition, it was deleted. The Tribunal also noted that as the addition was deleted on merit, the issue of reopening the assessment became academic and was not discussed further. Consequently, the appeal of the assessee was allowed.

In summary, the Tribunal set aside the Orders of the authorities below and deleted the addition of ?27 lakhs as the statement of Dr. P. Mahalingam was not allowed for cross-examination, and no other evidence supported the addition. The issue of reopening the assessment became moot after the deletion of the addition.