2024 (11) TMI 1378 - HC - Income Tax

Addition representing agricultural income - material evidence filed for the sale of the casuarina trees - ITAT sustaining the entire amount of agricultural income as unexplained income - addition based on the sworn statement - HELD THAT -. The facts of the case of the appellant in this Appeal being almost identical to the facts of the case the appellant's husband 2024 (9) TMI 1455 - MADRAS HIGH COURT evidence which department has gathered is long after the felling of trees and sale by the appellant by placing reliance on the statement of the Village Headman. The statement of the Village Headman can at best only corroborate the stand which department based on evidence, if there were other compelling evidence. It was incumbent on the part of the Income Tax Department to have summoned the said Mr.Thangasamy of Alangudi Taluk, Pudukottai District and verified and confirmed whether the said person had indeed given the statement which was produced by the Appellant and if so whether the statement given by the said person was true or not. Although the department is governed by preponderance of probability and not by strict rules of evidence, yet it was incumbent to have secured the presence of the said person. They should have cross examined him before disbelieving the statement. Therefore, an issuance of summon to Mr.Thangasamy who had given statement by the Income Tax department is not sufficient. Income Tax department should have secured the presence of Mr.Thangasamy to answer to the summons and should have confronted him and contradicted the content of the statement of Mr.Thangasamy produced by the appellant by way of cross examination. Therefore, without cross examination, the statement of Mr.Thangasamy can neither be disbelieved nor disregarded. The statement of Mr.Thangasamy cannot be therefore discredited. If Mr.Thangasamy had refused to co-operate, the Income Tax Department was not without remedy under the provisions of the Income Tax Act, 1961 to secure his presence. Since this exercise was not done, the demand confirmed u/s 144(A) are liable to be interfered as unsustainable. Addition u/s 69A of the Income Tax Act, 1961 as unexplained credit/unexplained money of the appellant are incorrect and are liable to the set aside. Decided in favour of assessee.

Summary

Issues:
1. Addition of agricultural income for investments made
2. Treatment of agricultural income as unexplained income
3. Addition based on sworn statement and subsequent retraction

Analysis:
1. The appeal raised concerns regarding the addition of Rs. 37,85,000 as agricultural income for investments, challenging the Tribunal's decision based on the sale of casuarina trees. The appellant argued that relevant evidence was overlooked, leading to an incorrect conclusion. The Court emphasized the importance of cross-examination and natural justice principles in such cases, highlighting the need for thorough verification before discrediting evidence. The Court found the department's reliance on the statement of a person without cross-examination to be inadequate, ultimately leading to the appeal being allowed.

2. Another issue addressed in the appeal was the treatment of the entire agricultural income as unexplained, despite a portion of it being received in a previous assessment year. The Court analyzed a similar case involving the appellant's husband and emphasized the necessity of proper verification and examination of evidence before drawing conclusions. The Court held that the department's failure to summon and cross-examine relevant individuals undermined the validity of the assessment, leading to the appeal being allowed in favor of the appellant.

3. The third issue pertained to the addition of Rs. 67,645 based on a sworn statement, which was later retracted. The Court's decision highlighted the significance of due process and the need for comprehensive examination of evidence before making additions to income. The Court's emphasis on the importance of cross-examination and verification underscored the procedural lapses in the department's approach, ultimately resulting in the appeal being allowed and the additions set aside.

In summary, the judgment focused on procedural irregularities, lack of thorough examination of evidence, and the importance of adhering to natural justice principles in income tax assessments. The Court's detailed analysis highlighted the necessity of proper verification, cross-examination, and adherence to legal procedures to ensure fair and accurate assessments.