Court sets aside assessment order due to failure to allow cross-examination. Assessing Officer can restart from procedural defect point.

The court set aside the assessment order under sections 143/147 of the Income-Tax Act, 1961 due to the Assessing Officer's failure to allow the respondent-assessee to cross-examine individuals whose statements were used in determining additional income. The court granted liberty to the Assessing Officer to restart the proceedings from the point of the procedural defect, emphasizing the respondent-assessee's right to cross-examine relevant witnesses. The Assessing Officer was not allowed to gather new information beyond the initial assessment.

---

---

Issues:
1. Assessment order under section 143/147 of the Income-Tax Act, 1961 challenged by the respondent-assessee.
2. Dispute regarding the liberty to cross-examine individuals whose statements formed the basis of the assessment.
3. Appeal by respondent-assessee accepted by Commissioner of Income Tax (Appeals) but challenged by Revenue before Income-tax Appellate Tribunal.
4. Revenue's appeal against orders of Commissioner of Income-tax (Appeals) and Income-tax Appellate Tribunal.

Analysis:
1. The respondent-assessee filed an income-tax return for the assessment year 1996-97, leading to the Assessing Officer making additions to the declared income. The respondent-assessee contested the assessment order under section 143/147 of the Income-Tax Act, 1961, claiming the right to cross-examine individuals whose statements were used in the assessment.

2. The respondent-assessee raised grievances regarding the denial of the opportunity to cross-examine the individuals whose statements were pivotal in determining the additional income. The Commissioner of Income Tax (Appeals) accepted the respondent's appeal, emphasizing the importance of allowing cross-examination in such cases.

3. The Revenue, dissatisfied with the decision of the Commissioner of Income-tax (Appeals), appealed before the Income-tax Appellate Tribunal. The Tribunal, in line with the Commissioner's decision, upheld the importance of granting the respondent-assessee the opportunity to cross-examine the relevant individuals.

4. Despite acknowledging the procedural defect in not allowing cross-examination, the Revenue contended that the entire action should not be annulled, but the procedural defect should be rectified. The court agreed that the Assessing Officer's failure to allow cross-examination was unacceptable in law and set aside the proceedings conducted post the recording of statements.

5. The court granted liberty to the Assessing Officer to reinitiate the proceedings from the stage where the procedural defect occurred, emphasizing the necessity of allowing the respondent-assessee to cross-examine all relevant witnesses. However, the Assessing Officer was not permitted to collect any additional information beyond what was available during the initial assessment.

6. In conclusion, the court disposed of the appeal, granting liberty to the Assessing Officer to recommence the proceedings in accordance with the directions provided, ensuring the respondent-assessee's right to cross-examine the witnesses whose statements influenced the assessment.

---