Tribunal overturns tax assessment due to unreliable statement, leading to deletion of added amount.

The Tribunal allowed the appeal, setting aside lower authorities' decisions and deleting the Rs. 27 lakhs addition. The statement of Dr. P. Mahalingam, the basis for the addition, was not subject to cross-examination. Without other evidence, the Tribunal deemed the statement unreliable. Consequently, the addition was removed, rendering the assessment reopening issue irrelevant.

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Issues:
Reopening of assessment under section 147/148 of the I.T. Act, 1961 and addition of Rs. 27 lakhs based on the statement of Dr. P. Mahalingam.

Analysis:
The appeal was against the Order of the Ld. CIT(A)-37, New Delhi, for the A.Y. 2007-2008. The case involved the reopening of the assessment and addition of Rs. 27 lakhs based on information received after a search conducted under section 132 of the I.T. Act, 1961. The A.O. reopened the assessment under section 147/148 as it was found that the assessee had paid cash for admission, which was denied by the assessee. The Ld. CIT(A) confirmed the reopening and directed the A.O. to arrange a meeting with Dr. P. Mahalingam for cross-examination, but Dr. P. Mahalingam did not appear. The right of cross-examination was considered by the Ld. CIT(A) not as an absolute right of the assessee. The A.O. made the addition of Rs. 27 lakhs which was challenged by the assessee.

The entire addition was based on the statement of Dr. P. Mahalingam, who admitted to receiving cash donations, while the assessee denied making any cash payments. The onus was on the Revenue Department to prove that the assessee had paid cash, but no cross-examination was allowed. The A.O. issued summons for cross-examination at the appellate stage, but Dr. P. Mahalingam did not appear. The Tribunal held that any adverse material not confronted to the assessee and not allowed for cross-examination cannot be considered in the proceedings. Citing relevant case laws, the Tribunal concluded that the statement of Dr. P. Mahalingam could not be relied upon. As there was no other material to support the addition, it was deleted. The Tribunal also noted that as the addition was deleted on merit, the issue of reopening the assessment became academic and was not discussed further. Consequently, the appeal of the assessee was allowed.

In summary, the Tribunal set aside the Orders of the authorities below and deleted the addition of Rs. 27 lakhs as the statement of Dr. P. Mahalingam was not allowed for cross-examination, and no other evidence supported the addition. The issue of reopening the assessment became moot after the deletion of the addition.

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