Effective cross-examination in income tax proceedings must be allowed where witness statements are relied upon in assessment.

Income tax proceedings treated as quasi-judicial must permit effective cross-examination of witnesses whose statements are relied upon in assessment. Where remand directions had already allowed such cross-examination, the authority could not restrict it arbitrarily or refuse recall of witnesses for questions earlier disallowed. The applicable cross-examination requirements, including Section 145 of the Indian Evidence Act, had to be followed in substance, and the assessee was entitled to question the named witnesses effectively. The revenue authorities were directed to conduct the cross-examination and recall process without interference or restriction.

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Issues: Whether the assessee was entitled to effective cross-examination of witnesses whose statements were relied upon in the income tax appellate proceedings, including recall of witnesses already examined and discharged.

Analysis: The proceedings before the income tax authorities were treated as quasi-judicial in nature, and the appellate authority had already indicated that the authorities were bound to follow the provisions governing cross-examination, including Section 145 of the Indian Evidence Act, 1872. The earlier remand directions had permitted cross-examination of the witnesses whose statements had been used in the assessment order, and the court found no ambiguity in those directions. In that background, the assessee was entitled to have the cross-examination conducted effectively and without arbitrary restriction, and to seek recall of the specified witnesses for questions that had earlier been disallowed.

Conclusion: The assessee's request for recall of the named witnesses and for effective cross-examination in accordance with law was accepted, and the revenue authorities were directed to conduct the process without interference or restriction.

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