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2020 (12) TMI 130 - HC - Income TaxDemand of tax - non testing the evidence through cross examination - HELD THAT - If the evidence relied upon by the revenue for confirming a demand against the assessee is not tested, through permitting a cross examination by the assessee, then the untested evidence cannot be relied upon against the assessee while confirming a demand against him. Inasmuch as the impugned orders of the assessing authority rely on material that was not tested, we quash Ext.P4 assessment order and direct the 2nd respondent to pass fresh orders in lieu thereof, after taking note of the observations in this judgment. The 2nd respondent assessing authority shall pass fresh orders as directed after hearing the petitioner, within a period of three months from the date of receipt of a copy of this judgment.
Issues:
Challenge to tax demand under the Income Tax Act based on untested evidence and lack of cross-examination rights. Analysis: The petitioner challenged an order confirming a tax demand under the Income Tax Act. The assessment initially focused on alleged lending activities of the petitioner for the year 2007-2008. The first appellate authority ruled in favor of the petitioner. However, the revenue appealed to the tribunal, which remanded the matter to verify bank accounts of a certain individual, Mohan Raj, and allowed cross-examination of Mohan Raj by the petitioner. The assessing authority, in the subsequent order, did not permit cross-examination of Mohan Raj due to his unavailability despite summons. The assessing authority still relied on Mohan Raj's evidence without testing it through cross-examination. The court held that untested evidence cannot be the basis for confirming a tax demand against the assessee. Consequently, the court quashed the assessment order and directed the assessing authority to issue fresh orders considering the judgment's observations. The assessing authority was instructed to hear the petitioner and issue fresh orders within three months from receiving a copy of the judgment. The petitioner was required to provide a copy of the writ petition and judgment to the assessing authority for further action.
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