2023 (6) TMI 1017 - AT - Income Tax

Payment of on-money in cash - not extending an opportunity to the appellant to cros xamine witnesses relied upon - AO on the basis of information received from the Directorate of Investigation that the assessee has been identified as one of the persons who had paid on-money in cash to M/s Runwal Homes Private Limited for the purchase of property, initiated proceedings u/s 147 - HELD THAT - As evident from the record, when summons were issued by the AO to the assessee as well as the builder, Mr. Subodh Runwal, calling for the details and explanation in support of the on-money paid/received, none of them replied to the summons and therefore, the assessment was completed on the basis of material available on record. Thus, when the person, whose statement was relied upon to make the addition in the hands of the assessee, does not appear in response to the summons, the submission of the Revenue that the assessee chose not to avail the opportunity to cross-examine the builder provided by the AO appears to be a mere empty formality. As difference in the price of the property, which was considered as on-money paid in cash is based on sale value as per the email, however, there is no evidence available on record as to between whom this email correspondence took place. Merely providing the evidence relied upon by the AO cannot substitute the fundamental requirement of providing the opportunity for cross-examination. Hon ble Supreme Court in I.C.D.S. Ltd. 2020 (2) TMI 1424 - SUPREME COURT held that where the issue involved was about not extending an opportunity to the appellant to cross-examine witnesses relied upon by AO, the entire matter would be considered by First Appellate Authority afresh by giving fair opportunity to both sides to espouse their claim. We set aside the impugned order and restore the matter to the file of AO for de novo adjudication after providing the assessee with all the documents, which were relied upon in support of the impugned addition. Further, the AO is directed to grant the opportunity to cross-examine the party on whose statement reliance was placed. Grounds raised by the assessee are allowed for statistical purposes.

Summary

Issues:
The appeal challenges the order passed under section 250 of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals)-57, Mumbai, for the assessment year 2015-16.

Issue 1: Opportunity of Cross Examination
The appellant contended that the Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer of not granting the cross-examination of documents relied on while assessing the income. The appellant sought to have the orders passed without providing the opportunity for cross-examination declared null and void.

Issue 2: Unexplained Investment u/s 69B
The appellant disputed the addition of Rs. 22,70,750 under section 69B of the Act, alleging that the Assessing Officer erred in making the addition based on cash payments for the acquisition of a flat. The appellant argued that the action of the lower authorities should be deleted.

Issue 3: General
The appellant sought leave to add, alter, or amend the grounds of appeal.

The brief facts of the case are as follows: The appellant, an individual working in the Merchant Navy, filed a return of income declaring a total income of Rs. Nil. Subsequently, proceedings were initiated under section 147 of the Act based on information that the appellant had made cash payments towards the purchase of a residential flat. The Assessing Officer treated the cash payment as income of the appellant and added it under section 69B of the Act. The Commissioner of Income Tax (Appeals) dismissed the appeal, leading to the current appeal.

During the hearing, the Authorized Representative argued that the appellant was not granted the opportunity to cross-examine the builder, whose statement was relied upon by the Assessing Officer. The Departmental Representative contended that the appellant chose not to avail the opportunity for cross-examination.

The Tribunal noted that the appellant's grievance was related to the addition of Rs. 22,70,750 as on-money paid in cash. The Tribunal observed that the appellant was not provided with the opportunity to cross-examine the builder, which was a serious flaw violating the principles of natural justice. Citing legal precedents, the Tribunal set aside the impugned order and directed the Assessing Officer to re-examine the matter, providing the appellant with all relied-upon documents and the opportunity to cross-examine the relevant party.

Consequently, the appeal by the appellant was allowed for statistical purposes, and the matter was remanded to the Assessing Officer for fresh adjudication, with directions to provide a fair opportunity for both sides to present their claims.