2021 (9) TMI 989 - AT - Income Tax

Reopening of assessment u/s 147 - specific information received by the ld.AO on the basis of search conducted in some other cases - addition made for the alleged on-money - HELD THAT - The seized documents revealed the details of assessee having transacted with the searched parties and the same formed the basis for issuance of notice u/s 148 - Under these given facts, we are of the view that Ld. CIT(A) has rightly dismissed the assessee s legal ground challenging the validity of assessment proceedings u/s 147 of the Act holding that the notice u/s 148 of the Act has been rightly issued. CIT(A) has rightly dismissed the assessee s legal ground challenging the validity of assessment proceedings. Addition made without providing the opportunity of cross examination of the search parties to the assessee before making impugned addition - The registered documents for the purchase of plot of land shows that the consideration is not less than the guidelines rate and both buyer and seller have agreed to this consideration. Assessee has seeked opportunity for cross examination of the searched person, during the proceedings before the Ld. CIT(A) and the same was ignored. We, observe that such action of the Ld. Assessing Officer of making addition in the hands of assessee based on 3rd party statement/evidence cannot withstand unless proper opportunity of cross examination is provided to the assessee. See ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II 2015 (10) TMI 442 - SUPREME COURT . Assessee has not been provided any opportunity of cross examination of the parties who have stated to have received on money from sale of land. We, thus, set aside the finding of Ld. CIT(A) and delete the addition. - Decided partly in favour of assessee.

Summary

Issues Involved:
Validity of reassessment proceedings under Section 147 of the Income Tax Act, 1961; Jurisdiction under Section 148 of the Act; Provision of third-party external information for reopening the case; Opportunity for cross-examination of persons involved in the case; Addition on account of unexplained investment under Section 69 of the Act; Determination of total income by the Assessing Officer.

Analysis:

1. Validity of Reassessment Proceedings (Grounds 1-3):
The appeal challenged the validity of reassessment proceedings under Section 147 of the Income Tax Act, 1961. The Assessing Officer (AO) issued a notice under Section 148 based on information obtained from a search conducted in other cases. The seized documents indicated transactions between the assessee and searched parties, forming the basis for the notice. The Commissioner of Income Tax (Appeals) rightly upheld the validity of the reassessment proceedings, dismissing the grounds raised by the assessee. The Tribunal concurred with this decision, noting that the notice under Section 148 was appropriately issued based on the incriminating documents found during the search.

2. Cross-Examination Opportunity (Ground 4):
The appeal contested the addition made without providing the opportunity for cross-examination of the search parties. The Assessing Officer relied on seized material from Garha Group & Apollo Group to make the addition. The Tribunal emphasized the importance of allowing cross-examination, citing the Supreme Court's judgment in M/s Andaman Timber Industries case. As the assessee was not given the chance to cross-examine the parties involved, the Tribunal deemed the addition invalid. Following precedents, the Tribunal deleted the addition of ?36,46,175, allowing the ground raised by the assessee.

3. Unexplained Investment Addition (Ground 5):
The addition on account of alleged unexplained investment under Section 69 of the Act was challenged in the appeal. The Tribunal found that the addition was made based on insufficient evidence and without following principles of natural justice. Consequently, the Tribunal ruled in favor of the assessee, directing the deletion of the addition.

4. Determination of Total Income (Ground 6):
The appeal questioned the Assessing Officer's determination of total income, arguing that it was excessive and against the law. The Tribunal reviewed the assessment and concluded that the income determination was not justified. Consequently, the Tribunal set aside the excessive income determination, aligning with the assessee's contention.

In conclusion, the Tribunal partially allowed the assessee's appeal, dismissing some grounds while ruling in favor of the assessee on others. The decision highlighted the importance of procedural fairness, including the right to cross-examination and the need for substantial evidence to support additions in income assessments.