1981 (5) TMI 67 - AT - Income Tax

Tribunal upholds reassessment validity under Income Tax Act but finds violation of natural justice in cross-examination.

The Tribunal upheld the validity of the reassessment proceedings under sections 147(a) and 148 of the Income Tax Act, emphasizing the duty of the assessee ... - Issues:1. Validity of proceedings under section 147(a) read with section 148 of the Income Tax Act, 1961.2. Justification of relying on the statement of the creditor without proper opportunity for cross-examination.Detailed Analysis:1. Validity of proceedings under section 147(a) read with section 148:The appeal in this case raised the issue of the validity of the reassessment proceedings under section 147(a) read with section 148 of the Income Tax Act, 1961 for the assessment year 1971-72. The Income Tax Officer (ITO) initiated the proceedings after discovering that a cash credit of Rs. 20,000 was not genuine and had escaped assessment. The assessee contended that the initiation of proceedings was not valid as the necessary facts had been disclosed during the original assessment. The Appellate Assistant Commissioner (AAC) upheld the validity of the reassessment proceedings, citing the uncontroverted statement of the creditor. The Tribunal considered the contention of the Revenue that the disclosure made by the assessee was untrue, leading to the initiation of reassessment proceedings. The Tribunal relied on the Supreme Court decision in the case of ITO vs. Lakhmani Mewal Das, emphasizing the duty of the assessee to make a true and full disclosure of material facts. The Tribunal upheld the validity of the ITO's action in initiating the reassessment proceedings under section 147(a) read with section 148.2. Justification of relying on the statement of the creditor without proper opportunity for cross-examination:Another issue raised in the appeal was the reliance on the statement of the creditor without affording the assessee a proper opportunity for cross-examination. The assessee argued that the ITO did not provide sufficient opportunity for cross-examination of the creditor, leading to a violation of natural justice. The Tribunal agreed with the assessee, noting that the ITO had not adjourned the case with a reasonable gap to enable the counsel to cross-examine the creditor. As a result, the Tribunal set aside the AAC's order on this point and directed the ITO to afford a reasonable opportunity to the assessee's counsel for cross-examining the creditor. The appeal was treated as allowed for statistical purposes.In conclusion, the Tribunal upheld the validity of the reassessment proceedings under section 147(a) read with section 148, emphasizing the duty of the assessee to make a true and full disclosure of material facts. Additionally, the Tribunal found that the ITO had not provided a proper opportunity for cross-examination, leading to a direction for a re-examination of the creditor with adequate opportunity for the assessee's counsel.