2019 (1) TMI 1014 - AT - Income Tax

Unexplained cash credit u/s 68 - addition relying on the report of the Investigation Wing made at the back of the assessee without giving an opportunity of cross examination - denial of natural justice - Held that - We find considerable cogency in the contention raised by the assessee s counsel that the material on the basis of which report has been prepared by the investigation wing did not provided to the assessee and no opportunity was provided to cross examine the persons/witnesses whose statements have been used against the assessee, which issue was also raised before the Ld. CIT(A), who wrongly held that such right as held in various decisions, is not an absolute right and depends not only the circumstances of the case but also on the statute concerned, which is not proper. Similar facts and circumstances passed in case of Smt. Jyoti Gupta vs. ITO 2018 (11) TMI 1353 - ITAT NEW DELHI wherein, held that since the impugned addition was made on the statement of Sh. Vikrant Kayan without providing any opportunity to the assessee to cross examine the same and Ld. CIT(A) has not considered the same ground, which is in violation of principle of natural justice and against the law laid down by the Hon ble Supreme Court of India in the case of Andaman Timber vs. CIT 2015 (10) TMI 442 - SUPREME COURT - Decided in favour of assessee.

Summary

Issues involved:
Challenge to reliance on investigation wing report without cross-examination opportunity.

Detailed Analysis:
1. Facts of the Case: The assessee filed the income tax return for the assessment year 2014-15, declaring a total income. The case was selected for scrutiny due to suspicion of long-term capital gains on shares. The Assessing Officer (AO) held that the transactions were sham and constituted unexplained cash credits and unexplained expenditure, resulting in an increased income assessment.

2. Grounds of Appeal: The assessee appealed to the Ld. CIT(A) against the assessment order, specifically challenging the reliance on the investigation wing report without providing an opportunity for cross-examination. The Ld. CIT(A) dismissed the appeal, leading to the appeal before the Tribunal.

3. Legal Argument: During the hearing, the assessee's counsel argued that the denial of cross-examination opportunity based on the investigation wing's report violated the principle of natural justice. Reference was made to a similar case decided by the ITAT, SMC, Delhi Bench, where the appeal was allowed due to the denial of cross-examination rights.

4. Tribunal's Decision: After considering the submissions and the legal precedents, the Tribunal found merit in the contention raised by the assessee regarding the lack of opportunity for cross-examination. Citing the decision of the ITAT, SMC, Delhi Bench in a similar case, the Tribunal concluded that the denial of cross-examination rights was a violation of natural justice. The Tribunal emphasized the importance of providing such opportunities to affected parties for a fair assessment process.

5. Judicial Precedent: The Tribunal referred to the judgment of the Hon'ble Supreme Court in the case of Andaman Timber vs. CIT, highlighting the significance of allowing cross-examination to ensure fairness and adherence to natural justice principles. Relying on the legal principles established in previous cases, the Tribunal decided to delete the disputed additions and allowed the appeal of the assessee.

6. Final Decision: In light of the legal arguments, precedents, and the principle of natural justice, the Tribunal allowed the appeal of the assessee, setting aside the additions made by the AO and the Ld. CIT(A). The Tribunal directed the AO to grant the claim of exemption under section 10(38) of the Income Tax Act, 1961.

This detailed analysis highlights the key legal issues, arguments presented, judicial precedents referenced, and the final decision rendered by the Tribunal in favor of the assessee based on the denial of cross-examination rights and violation of natural justice principles.