2021 (5) TMI 448 - AT - Income Tax

Addition on account of sale of property - addition relying upon statement of Smt. Jaya Sharma-Seller recorded under section 131 in which she has admitted to have received cash from the assessee and her husband on account of sale of property - assessee argued on AO's failure to provide person for cross-examination on whose basis addition is made - HELD THAT - It is well settled Law that any material collected at the back of the assessee or any statement recorded at the back of the assessee cannot be read in evidence against the assessee, unless the same is confronted to the assessee and that assessee should be allowed to cross-examine to such statements. In this case, the A.O. has failed to produce Smt. Jaya Sharma before assessee for cross-examination on behalf of the assessee particularly when Smt. Jaya Sharma has retracted from her statement. It was the duty of the A.O. to produce Smt. Jaya Sharma at the reassessment proceedings to allow cross-examination to her statement on behalf of the assessee. Therefore, such statement and material collected at the back of the assessee, cannot be read in evidence against the assessee. We rely upon the Judgments of Hon ble Supreme Court in the cases of Kishan Chand Chellaram 1980 (9) TMI 3 - SUPREME COURT and Andaman Timber Industries 2015 (10) TMI 442 - SUPREME COURT - CIT(A) without any justification has rejected the contention of assessee that is not an absolute right of assessee to cross-examine the statement of Smt. Jaya Sharma. These facts clearly disentitle the Revenue to use the statement of Smt. Jaya Sharma recorded under section 131 of the I.T. Act in evidence against the assessee. Therefore, we set aside the Orders of the authorities below and direct that such statement cannot be read in evidence against the assessee. A.O. also referred to statement of husband of the assessee recorded during the course of survey in which he has admitted to have sold the property to M/s. Mapple Destination Dreambuilt P. Ltd., and received the cash amount. The present case is with respect to purchase of property of Dera Mandi, Chattarpur, New Delhi from the Seller-Smt. Jaya Sharma. Therefore, the statement of husband of assessee is not relevant to the matter in issue. A.O. has referred to statement of Shri Rakesh Sejwal, Manager of Lingaya s Society who was assigned various works with reference to transactions of different properties who have confirmed collecting cash on sale of property on behalf of the assessee and her husband. This statement is also not relevant to the matter in issue because transaction is a different one. Therefore, the statement of husband of assessee and Shri Rakesh Sejwal are not relevant to the matter in issue and as such they cannot be the basis for making any addition against the assessee in assessment year under appeal. There were no basis for the A.O. to make any addition against the assessee - we delete the addition. This ground of appeal is allowed.

Summary

Issues:
Reopening of assessment under section 147 of the I.T. Act, 1961 and addition of ?1,05,00,000 on account of purchase of property.

Reopening of Assessment:
The appeal challenged the reopening of the assessment under section 147 of the I.T. Act, 1961. The assessee contended that the husband's appeal for the same assessment year had been decided by the ITAT, Delhi F-Bench, quashing the reopening. However, the Tribunal found that the husband's case did not directly apply to the assessee's situation as no Order under section 143(3) was passed for the assessee. The Tribunal dismissed the contention that the reopening was unjustified due to lack of supporting evidence or Order under section 143(3) for the assessee.

Addition on Merit:
The addition of ?1.05 crores was based on the statement of Seller-Smt. Jaya Sharma recorded under section 131 of the I.T. Act, where she admitted to receiving cash from the assessee and her husband for the property purchase. However, Smt. Jaya Sharma later retracted her statement through her Counsel, denying its authenticity. The assessee repeatedly requested cross-examination of the statement and access to all collected material, which the AO did not provide. The Tribunal emphasized that material collected without confrontation or cross-examination cannot be used as evidence. Citing legal precedents, the Tribunal ruled that the statement of Smt. Jaya Sharma could not be used against the assessee, leading to the deletion of the addition.

Conclusion:
The Tribunal found that the AO's reliance on Smt. Jaya Sharma's statement without allowing cross-examination was unjustified. Statements of other individuals were deemed irrelevant to the case, leading to the deletion of the ?1.05 crores addition. The Tribunal allowed the appeal partly, emphasizing the importance of providing the assessee with an opportunity for cross-examination and access to collected material before making additions based on such evidence.