2021 (9) TMI 537 - AT - Income Tax

Best judgement assessment u/s. 144 r.w.s.147 - additions towards unaccounted professional charges received from Apollo Hospitals in cash - denial of natural justice - assessee argued for non providing opportunity of cross-examination to the assessee - additions towards unaccounted professional charges on statement recorded from an employee during the course of search - assessee has denied having received professional charges in cash from Apollo Hospitals other than what was received in cheque/RTGS - HELD THAT - AO made additions towards unaccounted professional charges received in cash for simple reason that except statement of an employee recorded during the course of search, the AO has never brought on record any other evidence to support his finding that the assessee has received professional charges in cash from Apollo Hospitals. Additions towards unaccounted professional charges received in cash for simple reason that except statement of an employee recorded during the course of search, the Assessing Officer has never brought on record any other evidence to support his finding that the assessee has received professional charges in cash from Apollo Hospitals. Hon'ble Supreme Court in the case of M/s.Andaman Timber Industries 2015 (10) TMI 442 - SUPREME COURT as categorically held that not allowing assessee to cross examine witnesses by the adjudicating authority, though statements of those witnesses were made on the basis of impugned order is a serious flaw, which makes the order nullity, inasmuch as it amounted to violation of principles of natural justice, because of which the assessee was adversely affected. Assessing Officer has erred in making additions towards unaccounted professional charges received in cash from Apollo Hospitals on the basis of statement of a third party, without providing opportunity of cross-examination to the assessee. - Decided in favour of assessee.

Summary

Issues:
1. Unaccounted professional charges received from Apollo Hospitals.
2. Violation of principles of natural justice in relying on oral evidence without cross-examination.

Analysis:
Issue 1: The appellant, a General Surgeon, filed appeals against orders passed by the CIT(A) for assessment years 2012-13 & 2013-14 regarding unaccounted professional charges received from Apollo Hospitals. The appellant argued that all fees were collected by Apollo Hospitals, and no fees were directly collected by the appellant. The Assessing Officer made additions towards unaccounted professional charges, alleging income escapement. The CIT(A) sustained the additions, stating that the appellant did not furnish supporting evidence. However, the ITAT Chennai found that the Assessing Officer solely relied on an employee's statement without providing an opportunity for cross-examination to the appellant. Citing legal precedents, the ITAT concluded that the additions were made without proper evidence and violated principles of natural justice. Consequently, the ITAT directed the Assessing Officer to delete the additions for both assessment years.

Issue 2: The appellant contended that relying on oral evidence without cross-examination violated natural justice principles. The ITAT agreed, emphasizing that not allowing cross-examination of witnesses is a serious flaw, rendering the order null and void. The ITAT noted that the CIT(A) had deleted similar additions for a previous assessment year based on the same legal position. Therefore, the ITAT held that the CIT(A) erred in not applying the same legal principle for the subsequent assessment years. By following legal precedents, including decisions of the Supreme Court and High Court, the ITAT concluded that the Assessing Officer's reliance on oral evidence without providing an opportunity for cross-examination was unjust. As a result, the ITAT allowed the appeals for both assessment years, directing the deletion of the additions made towards unaccounted professional charges received from Apollo Hospitals.

In conclusion, the ITAT Chennai set aside the CIT(A)'s orders and directed the Assessing Officer to delete the additions made towards unaccounted professional charges received in cash from Apollo Hospitals for both assessment years, emphasizing the importance of upholding principles of natural justice in tax assessments.