2024 (1) TMI 1393 - AT - Income Tax

Addition under section 69B based on third-party statements without cross-examination violates natural justice principles

Sardar Mahendra Singh Bhatia Versus CIT (A) Bilaspur (C.G.)

ITAT Raipur held that addition under section 69B based on third-party statements without allowing cross-examination violated principles of natural ... Addition u/s 69B - Addition made behind the back of the appellant on the basis of statements of third party but the opportunity to cross-examine such a person was not granted to the assessee - HELD THAT:- It is evident that the assessee was confronted by the AO with the statements of the third party, on which the assessee has rebutted that such statements are not factually correct and, therefore, the same cannot be used against the assessee, but Ld. AO has discarded such submissions of the assessee without providing the opportunity to cross-examine the third party in the absence of any prayer of the assessee. To substantiate his contention, the assessee has also submitted that the prime witness, should be called to take his statement to establish the correctness of the fact than has been cropped up from the statements of Third party/Smt. Chutki Bai and Jaswant Kumar Sonant. However, the request of the assessee to cross-examination Mr. Dile Suryavanshi was also considered as unnecessary and a delaying tactic by the assessee, and Ld. AO has culminated the assessment by making the addition u/s 69B. We have observed that during the assessment proceedings and thereafter before the appellate authority, the assessee was not allowed to substantiate its contentions by way of cross-examination of the parties who have given the statement against the assessee, though no such request was made before the Ld. AO but has raised specific ground before the Ld. CIT(A). The request to call and confront the prime witness Mr. Dile Suryavanshi was also not considered appropriate by the Ld. AO. Affidavits of such parties were assumed to be afterthought and self-serving documents without confronting the same with the concerned parties. Such proceedings wherein proper opportunity of being heard was not extended to the assessee to explain its case or to substantiate its contentions under the available remedies as per law are against the settled principle of law, in particular when the assessee is saddled with an addition on account of an unexplained investment u/s 69B. The issue in the present case regarding addition u/s 69B, wherein reasonable opportunity was not afforded to the assessee should be restored back to the files of Ld. AO to adjudicate the same afresh. Needless to say, a reasonable opportunity of being heard shall be provided to the assessee in set aside assessment proceedings. In result ground of the appeal is partly allowed for statistical purposes. Issues:Appeal against addition u/s 69B without proper opportunity for cross-examination and defense before Ld. CIT(A).Analysis:The appellant filed an appeal against the order passed by the Commissioner of Income Tax (Appeals) regarding the addition of Rs. 45,00,000 made by the Assessing Officer under section 69B without affording proper opportunity for defense. The appellant contended that the Ld. CIT(A) erred in confirming the addition without allowing the appellant to present arguments. The appellant also raised concerns about not being provided the opportunity to cross-examine the third party witnesses whose statements were relied upon for the addition.The Ld. CIT(A) dismissed the appeal filed by the assessee after considering the submissions and conditions of the appellant. The Ld. CIT(A) observed discrepancies in the power of attorney and statements recorded by the Assessing Officer. The Ld. CIT(A) highlighted the importance of certain questions and the involvement of legal heirs in the property transaction. The Ld. CIT(A) confirmed the findings of the AO, emphasizing that the appellant failed to provide substantial evidence to alter the factual position of the case.The appellant, aggrieved by the decision of the Ld. CIT(A), appealed before the ITAT. The appellant argued that proper opportunity was not granted during the appellate proceedings, and the addition under section 69B was made without allowing cross-examination of relevant third parties. The Ld. AR emphasized that the affidavits submitted were disregarded as afterthoughts without further inquiry or cross-examination of the concerned persons. The Ld. AR requested the quashing of the Ld. CIT(A)'s order and the vacation of the proposed addition.After considering the submissions and the available material, the ITAT observed that the assessee was not given a fair opportunity to defend against the addition under section 69B. The ITAT noted that the appellant's requests for cross-examination of witnesses were not considered appropriate by the AO. Consequently, the ITAT decided to restore the issue back to the AO for fresh adjudication, emphasizing the importance of providing a reasonable opportunity for the assessee to present its case.In conclusion, the ITAT partly allowed the appeal for statistical purposes, directing the issue of addition under section 69B to be reconsidered by the AO with proper opportunity for the assessee to be heard. Other grounds raised in the appeal were deemed infructuous and dismissed.