2023 (6) TMI 94 - HC - Income Tax

Court directs Income Tax Commissioner to expedite appeals disposal, allow effective cross-examination & comply with Evidence Act

Madhu Korah Versus Income Tax Department through Director General, Income Tax, Patna Bihar and Others

The Court directed the Commissioner of Income Tax (Appeal), Patna to expedite the disposal of appeals for various Assessment Years and ensure effective ... Denial of cross-examination process of witness - Importance of cross examination of the witnesses whose statements have been utilized by the Assessing Officer in the assessment order - ACIT restricted cross examination process by denying the questions asked by the Petitioner during cross examination - petitioner submits that the petitioner has not been provided complete copies of statements made by the witnesses who are being cross-examined, copy of entire order sheets, remand reports, etc. despite repeated requests - HELD THAT:- After going through the documents available on record it is profitable to refer the order passed by this Court in [2023 (2) TMI 1146 - JHARKHAND HIGH COURT] wherein this Court has made it very clear that there is no doubt that the control of the proceedings lies with the Presiding Officer, the Assessing Officer herein, on how to conduct the cross-examination. Adequate guidelines have also been issued by the Appellate Authority as reflected in communication dated 24.01.2023 more particularly the letter No. F. No. 1434 dated 30.12.2022 wherein the CIT (Appeal) has specifically directed that as the Evidence Act is the law of the land, the income tax authorities are bound to abide by its provisions. As gone through the directions in the remand order wherein he has allowed the appellant, cross examination of the witnesses whose statements have been utilized by the Assessing Officer in the assessment order. There is no ambiguity in the said directions. We hereby direct the petitioner to file petition for recall of the witnesses who have been cross-examined and discharged, to put them the question which have been initially discarded by the Assessing Officer. ISSUES PRESENTED AND CONSIDERED 1. Whether the appellate authority (CIT(A)) or Assessing Officer may restrict or control cross-examination in departmental appellate remand proceedings, and the extent to which the provisions of the Indian Evidence Act, 1872 apply to such cross-examination. 2. Whether the petitioner is entitled to complete and contemporaneous disclosure (copies of statements of witnesses, order sheets, remand reports and related material) necessary to effectively conduct cross-examination in appeals against assessment orders. 3. Whether the petitioner may recall discharged witnesses to put questions earlier disallowed by the Assessing Officer and whether such recall is to be permitted as a matter of right or subject to supervisory control. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Control of cross-examination by Assessing Officer and applicability of the Indian Evidence Act, 1872 Legal framework: Proceedings before income-tax authorities are quasi-judicial in nature; the Indian Evidence Act, 1872 contains provisions on examination-in-chief, cross-examination and re-examination (including principles governing relevancy and scope of cross-examination). The Income-tax Act does not expressly define 'cross-examination' for departmental remand proceedings. Precedent treatment: The Court refers to directions in earlier remand orders and communications of the appellate authority recognising that income-tax authorities are bound to follow the Evidence Act in the conduct of cross-examination. The judgment follows those prior administrative directions rather than distinguishing or overruling any higher judicial precedent. Interpretation and reasoning: The Court reasons that because the proceedings are quasi-judicial, the Assessing Officer as presiding officer has control over conduct of cross-examination but must do so consistent with the provisions of the Indian Evidence Act. The appellate authority's guidance (letter dated 30.12.2022 and prior remand directions) is treated as binding administrative instruction that the Assessing Officer should follow the predecessor CIT(A)'s allowance of cross-examination and the Evidence Act's prescriptions so that the order withstands appellate scrutiny. Ratio vs. Obiter: Ratio - The Assessing Officer may control procedural conduct but must allow cross-examination in accordance with the Indian Evidence Act; administrative directions permitting cross-examination previously granted by the appellate authority ought to be followed. Obiter - Observations on the exact boundaries of 'control' by the presiding officer beyond adherence to the Evidence Act and prior directions. Conclusion: The Assessing Officer retains control over conduct of proceedings but is directed to conduct and permit cross-examination in accordance with the Indian Evidence Act, 1872 and to follow the appellate authority's prior remand directions so as not to unduly restrict the right of cross-examination. Issue 2 - Entitlement to disclosure of statements, order-sheets, remand reports and other materials for effective cross-examination Legal framework: Principles of natural justice and fair hearing in quasi-judicial tax proceedings require disclosure of material upon which adverse findings are based to enable effective cross-examination and rebuttal; the Evidence Act governs use of witness statements in cross-examination. Precedent treatment: The Court relies on administrative directions given by the CIT(A) (including letter No. F. No. 1434 dated 30.12.2022) emphasising adherence to the Evidence Act; no contrary judicial precedent is cited or overruled. Interpretation and reasoning: The Court accepts the petitioner's contention that absence of complete copies of witness statements, order-sheets and remand reports prejudices effective cross-examination. It reasons that, before proceeding with cross-examination, the Revenue should provide such material so that the petitioner may exercise his right of cross-examination in a meaningful manner, consistent with procedural fairness and the Evidence Act. Ratio vs. Obiter: Ratio - The Revenue is directed to provide copies of witness statements, order-sheets, remand reports and related material necessary for cross-examination. Obiter - The Court's characterisation of the specific prejudice arising from denial of particular categories of documents is illustrative rather than exhaustive. Conclusion: The petitioner is entitled to copies of the entire order-sheets, statements of witnesses (including those cross-examined earlier), remand reports and related material necessary to effectively conduct cross-examination; the Revenue must furnish these documents prior to or in the course of continued cross-examination. Issue 3 - Scope of questions and number/nature of witnesses permitted; restriction to a specified number of witnesses Legal framework: Cross-examination scope is governed by the Evidence Act (questions must be relevant to matters in issue, credibility, or contradiction of statements relied upon); administrative authorities may impose reasonable procedural limits but must not arbitrarily deny relevant questioning or refuse examination of witnesses whose statements were used in assessment. Precedent treatment: The Court follows the appellate authority's remand directions allowing cross-examination of witnesses whose statements were utilised by the Assessing Officer; it does not adopt any restrictive jurisprudence that permits arbitrary numerical caps inconsistent with the Evidence Act. Interpretation and reasoning: The Court finds arbitrary restrictions (e.g., cap at 21 witnesses) unacceptable where the Revenue relies on statements of additional witnesses for assessing additions; the petitioner must be permitted to cross-examine all witnesses whose statements have been relied upon, and to examine persons named by those witnesses, subject to relevance under the Evidence Act. At the same time the Assessing Officer retains authority to manage proceedings but must not interfere or restrict legitimate cross-examination. Ratio vs. Obiter: Ratio - The Revenue cannot arbitrarily restrict the petitioner to a limited set of witnesses when additional witnesses' statements have been relied upon; the petitioner may cross-examine witnesses named by primary witnesses. Obiter - Practical considerations (e.g., expedition and avoidance of delay) noted by respondents are acknowledged but not held to justify arbitrary denial of relevant cross-examination. Conclusion: The petitioner shall be permitted to cross-examine all witnesses whose statements were relied upon in assessment and persons named by them, and arbitrary numerical limits or denial of relevant questions by the Assessing Officer are impermissible unless justified under the Evidence Act and reasonable procedural control. Issue 4 - Right to recall discharged witnesses to put previously disallowed questions Legal framework: Recalling witnesses for further questioning is governed by procedural fairness, control of the presiding officer and the Evidence Act; recall may be allowed where questions are relevant and were previously wrongly disallowed or where further inquiry is necessary for adjudication. Precedent treatment: The Court relies on prior remand directions and administrative practice rather than citing binding judicial precedent; it enforces remedial measures to secure fair opportunity for cross-examination. Interpretation and reasoning: The Court directed the petitioner to file petitions for recall of specific discharged witnesses whose cross-examinations were earlier truncated or questions disallowed, permitting those witnesses to be re-examined on the questions initially discarded by the Assessing Officer. The direction flows from the principle that denial of relevant questioning amounts to prejudice and may be remedied by recall. Ratio vs. Obiter: Ratio - Where relevant questions were earlier disallowed and prejudice results, recall of discharged witnesses to put such questions is permissible and should be facilitated by the Assessing Officer in line with the Evidence Act. Obiter - The Court's specific naming of witnesses for recall is contextual to the facts and not a general mandate to disturb every prior discontinuance. Conclusion: The petitioner is entitled to seek recall of discharged witnesses to put questions previously disallowed; the Assessing Officer is directed to permit such recall and to conduct recall/cross-examination in accordance with the Evidence Act and the appellate authority's remand directions. Cross-references and operative direction Cross-reference: Issues 1-4 are interrelated: the Assessing Officer's control (Issue 1) must be exercised consistently with the Evidence Act enabling disclosure (Issue 2), permitting relevant questioning and examination of all relied-upon witnesses (Issue 3), and allowing recall where prejudice arises from earlier disallowance (Issue 4). Operative conclusion: The Court directs compliance with the appellate authority's earlier remand directions and the provisions of the Indian Evidence Act, 1872; the Revenue must provide required documents, permit effective cross-examination (including persons named by witnesses), and allow recall of identified discharged witnesses to remedy prejudicial disallowance of questions.