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2016 (7) TMI 1212 - HC - Income TaxAdditions on the basis of statement recorded u/s 131 - Tribunal deleted the additions - AO has rejected the retracted statement of the assessee with a reasoning that the same has been furnished after two months and the statement was recorded in the presence of assessee s Advocate and also the fact that the detailed breakup submitted by the assessee with respect to earning of income cannot be put into the mouth of the assessee and thereby additions were made. Held that - the assessee was not allowed to crossexamine the person on the basis of whose statement the proceedings was initiated. When the assessee has asked for their crossexamination the crossexamination of Shri Subhash Pandey was not given to the assessee although the statement of the assessee was recored in consequence of the statement of Shri Subhash Pandey recorded on 1.1.96 u/s. 131. The statements of Shri Suresh A Patel and Shri Kashyap Thakore nowhere state the name of the assessee. Thus the Revenue has not brought any evidence. The onus in our opinion is on the Revenue to prove that the assessee has earned the income. It gets shifted on the assessee once the assessee claims the exemption of income. Additions were rightly deleted - Decided against the revenue.
Issues Involved:
1. Legality of the retraction of the statement under Section 131 of the Income Tax Act. 2. Right to cross-examine the witness whose statement initiated the proceedings. 3. Validity of additions made by the AO based on the retracted statement. Issue-wise Detailed Analysis: 1. Legality of the Retraction of the Statement: The primary issue was whether the retraction of the statement by the assessee, which was initially recorded under Section 131 of the Income Tax Act, was legally valid. The AO made additions based on the statement where the assessee admitted to earning ?1,79,00,000/- in cash from various projects. However, the assessee retracted the statement after two months, claiming it was obtained under threat. The AO rejected this retraction, reasoning that it was delayed and the statement was recorded in the presence of the assessee's advocate. The CIT (A) and the Tribunal, however, deleted the additions, leading to the Department's appeal. 2. Right to Cross-examine the Witness: The assessee was not allowed to cross-examine the witness (Shir Subhash Pandey) whose statement was pivotal in initiating the proceedings. The Tribunal noted that the retraction was valid and emphasized the importance of cross-examination. The Tribunal stated, "the admission made by the assessee is not a conclusive proof and such admission can be used as an evidence unless it is not retracted." The Tribunal highlighted that the Revenue could not provide any evidence except the statement of the assessee and the statements of Shir Subhash Pandey and Shri Kashyap Thakore, which were recorded at the back of the assessee. 3. Validity of Additions Made by the AO: The Tribunal and CIT (A) found that the additions made by the AO were not supported by substantial evidence. The Tribunal concluded that "the onus is on the Revenue to prove that the assessee has earned the income." The Tribunal upheld the deletion of additions by the CIT (A), stating that the Revenue failed to bring any concrete evidence apart from the retracted statement. Judgment: The High Court dismissed the Department's appeals, affirming the Tribunal's decision. The Court held that the assessee's retraction was valid and noted the failure to allow cross-examination of the witness, which constituted a significant procedural flaw. The Court cited the Supreme Court's decision in Andaman Timber Industries, emphasizing that not allowing cross-examination violated principles of natural justice. The Court also referred to its earlier decision in Chandrakumar Jethmal Kochar, reinforcing the validity of retraction and the necessity for credible evidence to support additions based on statements. The Court concluded, "the view taken by the Tribunal is just and proper," and dismissed the appeals, answering the issue in favor of the assessee and against the Department.
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