2021 (4) TMI 158 - AT - Income Tax

LTCG Addition - denial of natural justice - only argument during the course of hearing is that neither the Assessing Officer nor the CIT(A) have provided the assessee an opportunity to cross-examine Shri Krishna Reddy who acted as an intermediary in the receipt of money by the assessee before reiterating the impugned addition - Reference to tribunal s earlier remand directions dt.31-01-2017 restoring this sole issue back to the Assessing Officer - HELD THAT - We find no merit in either of the foregoing arguments. We make it clear that this tribunal s first round remand directions had directed the Assessing Officer to offer cross-examination of the said third party only if required and not otherwise as a rule. Case records and more particularly, the Assessing Officer s second round assessment order dt.29-12-2017 sufficiently indicates that he had afforded a number of opportunities to the assessee; as elucidated in para 3.2, but this taxpayer never ever turned up along with the corresponding explanation. We wish to reiterate here that the tribunal s earlier co-ordinate bench 2017 (7) TMI 32 - ITAT HYDERABAD had already expressed its agreement with the department qua the impugned addition in principle. The assessee s stand before us seeks to shift his onus on the department side does not deserve to be concurred with therefore. We thus hold in these peculiar facts and circumstances that both the lower authorities have rightly reiterated the impugned long term capital gains addition in assessee s hands on account of his failure to comply with the tribunal s earlier directions and on the basis of the overwhelming supportive evidence. The assessee fails in his sole substantive grievance therefore.

Summary

Issues Involved:
1. Long Term Capital Gains (LTCG) addition of ?1,16,19,800.
2. Opportunity to cross-examine a witness (Sri K. Krishna Reddy).
3. Compliance with ITAT's remand directions.

Detailed Analysis:

1. Long Term Capital Gains (LTCG) Addition:
The primary issue in this appeal was the correctness of the long-term capital gains (LTCG) addition of ?1,16,19,800. The assessee originally filed a return for AY 2007-08 admitting a total income of ?1,98,361, which was processed under section 143(1) of the Income Tax Act, 1961. The assessment was later reopened based on information from a survey conducted on M/s. Surakshita Homes, revealing that the assessee received ?1,40,00,000 from M/s. Surakshita Homes and M/s. Sidharth Estates. The Assessing Officer (AO) considered this amount as the full value of consideration and, after allowing the indexed cost of acquisition, assessed ?1,16,19,800 as LTCG. The CIT(A) upheld this addition.

2. Opportunity to Cross-Examine Witness:
The assessee contended that the AO failed to provide an opportunity to cross-examine Sri K. Krishna Reddy, who was an intermediary in the transaction. The ITAT had earlier remanded the case to the AO with directions to offer the assessee a chance to cross-examine the witness if required. The AO issued several notices and summons to both the assessee and Sri K. Krishna Reddy, but there was no compliance. The AO completed the assessment without the cross-examination, retaining the earlier LTCG addition.

3. Compliance with ITAT's Remand Directions:
The ITAT's remand directions emphasized providing the assessee an opportunity to explain his stand and cross-examine relevant parties, if necessary. The AO made multiple attempts to comply with these directions by issuing notices and summons. Despite these efforts, the assessee did not produce Sri K. Krishna Reddy or provide a new address, nor did he respond adequately to the AO's requests. The tribunal noted that the AO had adhered to the remand directions, and the assessee failed to avail the opportunities provided.

Judgment Analysis:
The tribunal reviewed the case records and found that the AO had given sufficient opportunities to the assessee, who failed to comply. The tribunal reiterated that its earlier remand directions required cross-examination "if required" and not as a rule. The tribunal also noted that it had already agreed with the department on the addition in principle. The assessee's failure to comply with the tribunal's directions and the overwhelming evidence against him led to the dismissal of the appeal. The tribunal upheld the LTCG addition of ?1,16,19,800, concluding that the assessee's arguments did not merit acceptance.

Conclusion:
The assessee's appeal was dismissed, and the LTCG addition of ?1,16,19,800 was upheld due to the assessee's non-compliance with the tribunal's earlier directions and the substantial evidence supporting the department's case. The tribunal emphasized that the opportunity for cross-examination was conditional and the assessee's failure to produce the witness or provide necessary explanations justified the retention of the addition.