2023 (9) TMI 1303 - AT - Income Tax

Tribunal overturns Assessing Officer's decision, citing denial of natural justice.

Mr. Narender Singh Versus Income Tax Officer Ward-2, Rewari

The Tribunal allowed the appeals for both Assessment Years 2010-11 and 2011-12, deleting the addition of Rs. 50,00,000/- made by the Assessing Officer. ... Reopening of assessment - donation/capitation fee paid for admission of daughter in cash at the time of admission - Reliance on the statement of Chairman [Medical College] - The statement of Chairman [Medical College] clarified that capitation fees was received and the registers seized and annexurised contained entries of both accounted and unaccounted receipts and also name of assessee’s daughter figures in the list of such names and as per the code given the figure of fees paid and donation given and their total is clearly stated and it is the same pattern in all the cases - assessee argued he as denied with the opportunity of Cross-examination HELD THAT:- Similar issue has came up for considerations before the Tribunal in the case of Sulekh Chand Singhal[2020 (8) TMI 65 - ITAT DELHI] wherein the same college and the very same Doctor’s statement was in dispute and the Assessee therein was denied with the opportunity of Cross-examination. In view of the fact that even in the present case, the assessee has been deprived of with the opportunity of cross-examining Chairman[ Medical College] which was ultimately resulted in making the addition of similar nature, in our opinion, the addition made by the Revenue is in violation of the natural justice which requires to be interfere. By relying the order of the Co- ordinate Bench of ITAT, Delhi, we allow the grounds of appeal of the Assessee and delete the addition made by the AO which was confirmed by the Ld. CIT(A). Issues Involved:1. Validity of proceedings initiated under sections 147/148 of the Income Tax Act, 1961.2. Confirmation of assessment orders based on information from the Investigation Wing.3. Alleged payment of donation/capitation fee by the assessee.4. Violation of principles of natural justice due to lack of cross-examination opportunity.5. Applicability of section 153C for assessment based on search documents.6. Mechanical approval under section 151 of the Income Tax Act, 1961.Summary:Issue 1: Validity of Proceedings under Sections 147/148The assessee argued that the initiation of proceedings under sections 147/148 was invalid as the reasons recorded did not reflect the Assessing Officer's satisfaction regarding income escapement but were based on borrowed satisfaction from the Investigation Wing. The Tribunal noted that the assessee did not press this ground, so it was dismissed.Issue 2: Confirmation of Assessment OrdersThe assessee contended that the assessment orders were confirmed based on information from the Investigation Wing without any material evidence. The Tribunal observed that the Assessing Officer relied on the records maintained by Santosh Medical College, which showed receipt of both accounted and unaccounted fees, including a donation/capitation fee of Rs. 50,00,000/-. The Tribunal found the addition to be based on prima facie belief and upheld the reopening of the case.Issue 3: Alleged Payment of Donation/Capitation FeeThe assessee denied paying the donation/capitation fee of Rs. 50,00,000/-. The Tribunal noted that the Assessing Officer relied on the statement of Dr. P. Mahalingam and the seized registers showing unaccounted receipts. However, the Tribunal found that the assessee was not given the opportunity to cross-examine Dr. P. Mahalingam, which violated the principles of natural justice.Issue 4: Violation of Principles of Natural JusticeThe Tribunal emphasized that the assessee was denied the opportunity to cross-examine Dr. P. Mahalingam, whose statement was crucial for the addition. Citing precedents, the Tribunal held that any adverse material collected at the back of the assessee must be confronted, and the right to cross-examination must be allowed. The Tribunal concluded that the addition was in violation of natural justice and deleted it.Issue 5: Applicability of Section 153CThe assessee argued that the assessment should have been made under section 153C based on documents found during the search. The Tribunal did not specifically address this issue as it was not pressed by the assessee.Issue 6: Mechanical Approval under Section 151The assessee claimed that the approval by the Additional Commissioner under section 151 was mechanical. The Tribunal did not specifically address this issue as it was not pressed by the assessee.Conclusion:The Tribunal allowed the appeals for both Assessment Years 2010-11 and 2011-12, deleting the addition of Rs. 50,00,000/- made by the Assessing Officer. The Tribunal emphasized the violation of natural justice due to the denial of the right to cross-examine Dr. P. Mahalingam and relied on a similar case (Sulekh Chand Singhal vs. ACIT) to support its decision. The appeals were pronounced in open court on 11th May 2023.