Tax assessment order quashed for lack of cross-examination, fresh orders to be issued within three months

The court quashed the assessment order confirming a tax demand under the Income Tax Act due to reliance on untested evidence without allowing cross-examination. The court directed the assessing authority to issue fresh orders within three months, considering the judgment's observations and permitting the petitioner's participation in the process.

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Issues:
Challenge to tax demand under the Income Tax Act based on untested evidence and lack of cross-examination rights.

Analysis:
The petitioner challenged an order confirming a tax demand under the Income Tax Act. The assessment initially focused on alleged lending activities of the petitioner for the year 2007-2008. The first appellate authority ruled in favor of the petitioner. However, the revenue appealed to the tribunal, which remanded the matter to verify bank accounts of a certain individual, Mohan Raj, and allowed cross-examination of Mohan Raj by the petitioner. The assessing authority, in the subsequent order, did not permit cross-examination of Mohan Raj due to his unavailability despite summons. The assessing authority still relied on Mohan Raj's evidence without testing it through cross-examination. The court held that untested evidence cannot be the basis for confirming a tax demand against the assessee. Consequently, the court quashed the assessment order and directed the assessing authority to issue fresh orders considering the judgment's observations. The assessing authority was instructed to hear the petitioner and issue fresh orders within three months from receiving a copy of the judgment. The petitioner was required to provide a copy of the writ petition and judgment to the assessing authority for further action.

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