2021 (8) TMI 216 - AT - Income Tax

Unexplained investment on purchase of lands - HELD THAT - On reading of the assessment order, it would suggest that the Assessing Officer made addition based on the statement given by the sellers before the Investigation Wing of the Department. No doubt, the AO had given opportunity to the appellant to rebut the said evidence which was not availed of by the appellant for whatsoever reasons. But, during the course of proceedings before CIT(A), the appellant had contested the addition on the ground that no reasonable opportunity was granted and no addition can be made merely based on the statement of third parties. CIT(A) confirmed the addition relying upon the evidence gathered by the AO i.e., in the form of statement given by the sellers before the Investigation Department. In our considered opinion, the approach of the ld. CIT(A) does not stand the judicial scrutiny as it is settled position of law that no addition can be made merely based on the statement of third parties and the CIT(A) without giving an opportunity to cross-examine the sellers, whose statements formed the basis of making addition, ought not have confirmed the addition - in order to meet the ends of justice, we remand the matter back to the file of Assessing Officer to re do the assessment afresh in accordance with the law.

Issues Involved:
Appeals against separate orders of Commissioner of Income Tax for assessment year 2012-13; Addition of unexplained investment on purchase of lands; Opportunity to rebut evidence; Confirmation of addition based on third party statements; Cross-examination of sellers; Remand for fresh assessment.

Analysis:

1. Addition of Unexplained Investment:
The appeals were filed against orders of the Commissioner of Income Tax regarding the addition of ?77,08,750 to the total income of the appellant for the assessment year 2012-13. The Assessing Officer made this addition based on statements given by sellers before the Investigation Wing of the Department, indicating cash received over and above the stated consideration in the sale deed. The appellant contested the addition, stating no return of income was filed and denied paying any money beyond the stated consideration. The Commissioner confirmed the addition based on evidence gathered during assessment proceedings, leading to the appeal.

2. Opportunity to Rebut Evidence:
During the proceedings, the appellant argued that no reasonable opportunity was granted and no addition could be made solely based on third-party statements. The Commissioner's decision to confirm the addition was based on the sellers' statements without providing an opportunity for cross-examination. The appellate tribunal highlighted that additions cannot be solely based on third-party statements and emphasized the importance of providing a chance to cross-examine witnesses whose statements are used as a basis for additions.

3. Remand for Fresh Assessment:
The tribunal found the Commissioner's approach lacking judicial scrutiny, emphasizing that justice demands a fair opportunity for cross-examination. Consequently, the matter was remanded back to the Assessing Officer for a fresh assessment in accordance with the law. The tribunal partially allowed the appeal for statistical purposes, directing a reevaluation of the evidence and procedures followed in making the addition.

4. Decision on Multiple Appeals:
The tribunal's decision on one appeal was applied mutatis mutandis to another appeal under identical facts, leading to a partial allowance of the second appeal for statistical purposes. Both appeals were partially allowed for statistical purposes, emphasizing the need for fair procedures and adherence to legal principles in making additions to income. The final decision was pronounced on July 29, 2021.

This detailed analysis covers the issues involved in the legal judgment, highlighting the key arguments, decisions, and the rationale behind the tribunal's remand for a fresh assessment.

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