2022 (10) TMI 399 - AT - Income Tax

Undisclosed payment to the Institution - assessee has paid a sum towards capitation fee/donation for admission of his daughter - addition on the basis of statement recorded of Chairman/Director of Santosh Medical College Group recorded during the course of search and seizure operation - as argued no opportunity have been provided to him to cross-examine the person on the basis of whose statement the allegations have been made against the assessee - HELD THAT - It is not brought on record if his statement was ever supplied to assessee or subjected to cross-examination on behalf of assessee. There is no other material available on record to justify the addition made against the assessee. The assessee since beginning of the re-assessment proceedings have denied to have paid any amount to the Medical College. The assessee in his explanation has affirmed that he has not paid any amount for admission of his daughter to MBBS Course. Thus, no material is available on record to prove that assessee made any payment on behalf of his daughter for admission to the MBBS Course. Since the Revenue alleged that the amount in question is paid by assessee for admission of his daughter to the Medical Course, therefore, the burden is very heavy upon Revenue to prove by positive evidence that assessee has in fact made the payment to the Medical College for admission for his daughter. However, no evidence is available on record to prove such contention and initial denial of the assessee itself supports the explanation of assessee that no amount is paid by assessee for admission of his daughter in Medical Course. As decided in Shri Naresh Pamnani, Delhi 2019 (3) TMI 1787 - ITAT DELHI assessing officer did not record in the assessment order if statement recorded at the back of the assessee by the Investigation Wing, was allowed for cross examination on behalf of the assessee at any stage, therefore, statement of third party, cannot be used against the assessee unless assessee has been allowed a right to cross-examine such statement. A.O. in the assessment order also did not mention, if any, material found during the course of search, was confronted to the assessee. Thus, assessee was justified in denying in making any cash payment at any stage. There is no material available on record to justify the addition against the assessee on merits. In the absence of any material on record against the assessee and in the absence of cross examination to the statement of Dr P Mahalingam on behalf of the assessee, such material cannot be used against the assessee so as to make the impugned addition Addition on merit is wholly unjustified. It is well settled Law that unless the incriminating documents or statement used against the assessee are confronted to assessee and assessee have been allowed to cross-examine such statements, no such material or statement, could be read in evidence against the assessee. Thus no addition could be made against the assessee of the impugned amount - Assessee appeal allowed.

Issues Involved:
1. Initiation of reassessment proceedings under section 147 of the I.T. Act, 1961.
2. Addition of Rs.19,50,000/- as income escaping assessment.
3. Denial of opportunity to cross-examine the person whose statement was used against the assessee.
4. Justification of the addition based on available evidence.

Issue-wise Detailed Analysis:

1. Initiation of Reassessment Proceedings under Section 147 of the I.T. Act, 1961:
The assessee challenged the initiation of reassessment proceedings under section 148 of the I.T. Act. The A.O. initiated these proceedings based on information received from the DDIT (Inv.), New Delhi, regarding a search conducted on 27.06.2013 at Santosh Medical College Group of Institutions. The A.O. recorded that the assessee's income to the extent of Rs.31,18,000/- had escaped assessment during the F.Y. 2012-13 relevant to A.Y. 2013-14. The initiation was done with the prior approval of the JCIT, Range-43, New Delhi. The assessee argued that the reassessment proceedings were illegal and bad in law, as no case of reopening of the assessment was made out.

2. Addition of Rs.19,50,000/- as Income Escaping Assessment:
The A.O. noted that the assessee had allegedly paid Rs.19,50,000/- towards capitation fee/donation for his daughter's admission to the MBBS course. Despite the assessee's denial, the A.O. was not satisfied and added the amount back to the assessee's income, determining the total income at Rs.23,20,580/- against the returned income of Rs.3,70,580/-. The Ld. CIT(A) confirmed this addition, dismissing the assessee's appeal.

3. Denial of Opportunity to Cross-Examine:
The assessee contended that the statement of Shri P. Mahalingam, Chairman/Director of Santosh Medical College, was never provided for cross-examination. The Ld. CIT(A) did not accept this contention, stating that the principles of natural justice were followed. However, the Tribunal observed that the statement recorded during the search and seizure operation was not supplied to the assessee or subjected to cross-examination. This lack of opportunity to cross-examine was a significant procedural lapse.

4. Justification of the Addition Based on Available Evidence:
The Tribunal found that the entire case against the assessee was based on the statement of Shri P. Mahalingam. There was no other material evidence to justify the addition. The assessee consistently denied making any payment for his daughter's admission. The Tribunal emphasized that the burden of proof was on the Revenue to provide positive evidence of the payment, which was not met. The Tribunal referenced a similar case (Shri Naresh Pamnani vs. ITO) where the addition was deleted due to lack of evidence and procedural fairness.

Conclusion:
The Tribunal concluded that no addition could be made against the assessee without concrete evidence and proper procedural adherence, including the right to cross-examine. The orders of the lower authorities were set aside, and the addition was deleted. The issue of reopening the assessment was deemed academic and not decided upon. The appeal of the assessee was allowed.

Order Pronouncement:
The appeal of the assessee was allowed, and the order was pronounced in the open Court on 04.10.2022.

← Previous Next →