2020 (4) TMI 211 - AT - Income Tax

Unexplained cash payment made by the assessee relating to the admission of his son into P.G. medical course under management quota - Addition based on statement recorded u/sec 132(4) - no opportunity to cross-examine the cashier - HELD THAT - When the seized material was found in the premises of the college, it has to be presumed that it belonging to the college. When the addition is proposed in the hands of the assessee and when assessee has specifically denied, the Assessing Officer should have given opportunity to cross-examine the cashier and thereafter he has to pass the assessment order. In this case, without giving opportunity to the assessee to cross-examine the person who has given statement u/sec. 132(4) on behalf of the college, simply addition was made on the basis of seized material, in my view, is not correct. Addition made by the Assessing Officer and confirmed by the ld. CIT(A) cannot survive. Accordingly, addition is deleted. Assessing Officer based on the seized material and statement given by the cashier of the college addition was made. Therefore, the addition is based on the statement of the third party though assessee has not specifically asked for cross examination, it is the duty of the Assessing Officer to give opportunity to the assessee and allow him cross-examination. In this case, the assessee specifically denied that he has not paid any amount other than the amount paid by him as per the Government prescribed fee. Keeping in view of the principles laid down in ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II 2015 (10) TMI 442 - SUPREME COURT , the addition made by the Assessing Officer has to be deleted. Addition of gift from his close relatives - case of the assessee is that his son has received gifts from his relatives for admission in P.G. college and the amount was paid through demand draft - HELD THAT - CIT(A) simply rejected the explanation of the assessee without giving any reason that the transaction is not genuine and the assessee s son has no other source. The assessee has given a detailed explanation and filed bank statements and particularly payment is made through demand draft. The assessee particularly submitted before the ld. CIT(A) that his relatives have contributed for payment of fee and the same is deposited in the bank account and paid through demand draft, in my opinion, addition cannot be made on the basis of suspicious without there being any basis. If at all, the Assessing Officer is having any doubt about the donations received by the assessee, he ought to have summoned the donor and called the explanation and thereafter decide the issue. Without making any effort, simply making the addition on the basis of suspension is not correct. Thus, find that the addition made by the Assessing Officer cannot survive and the same is deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Unexplained cash credits in the hands of the assessee.
2. Addition of cash payment made for admission under management quota.
3. Validity of addition based on seized material and statement of a third party.
4. Right to cross-examine witnesses and principles of natural justice.
5. Addition of payment made through demand draft without explained source.

Analysis:

1. Unexplained Cash Credits:
The case involved a search and seizure operation where evidence of capitation fees collected above regular government-fixed fees for medical college seats was found. The assessee denied making any payments from his source and claimed family members made the payments. However, the assessee failed to provide the source of income for the payments, leading to an addition of unexplained cash credits in the hands of the assessee.

2. Addition for Admission Payment:
The Assessing Officer and CIT(A) confirmed an addition of ?30.00 lakhs based on seized material and the statement of the college cashier. The CIT(A) considered the seized material and cashier's statement as conclusive proof of the payment made by the assessee for admission under the management quota. However, the appellate tribunal found the addition solely based on seized material without giving the assessee an opportunity to cross-examine the cashier to be incorrect, leading to the deletion of the addition.

3. Validity of Addition Based on Seized Material:
The tribunal emphasized the importance of providing the assessee with the opportunity to cross-examine witnesses whose statements are relied upon, citing the principles of natural justice. Relying on the Supreme Court's decision in Andaman Timber Industries case, the tribunal held that the addition based on seized material without allowing cross-examination was not valid, leading to the cancellation of the CIT(A)'s order.

4. Payment Made Through Demand Draft:
Regarding the addition of ?5,79,600 made for payment through demand draft without an explained source, the tribunal found that the CIT(A) rejected the explanation without proper reasoning. The assessee provided detailed explanations, bank statements, and clarified that the payment was made from gifts received by his son. The tribunal concluded that the addition based on suspicion without proper investigation or basis was incorrect, leading to the deletion of the addition.

In conclusion, the tribunal allowed the appeal of the assessee, reversing the CIT(A)'s order and deleting the additions made, emphasizing the importance of following principles of natural justice and conducting thorough investigations before making additions based on seized material or suspicious transactions.