INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Receipt of share capital/premium - AO made addition relying on third party statement--No opportunity of cross-examination afforded to assessee

AO based on third party statement recorded by investigation wing, treated share capital/premium received by assessee as unexplained credit and made addition under section 68. Assessee challenged this on the ground of no opportunity of cross-examination afforded to assessee. Held: AO was duty bound to provide opportunity of cross-examination of witness, if he relied on statement of such witness to decide against assessee, particularly when it was demanded by assessee. Illegality crept in, the moment request for cross-examination was denied. On the other hand assessee had discharged its onus by furnishing necessary details such as copy of PAN and CIN, MOA/AOA, confirmation of parties, Bank exracts, etc., to support concerned transactions. Accordingly, AO was not justified in making addition under section 68.

Supported by:CIT v. Chanakya Developers (2014) 43 taxmann.com 91 (Guj) : 2014 TaxPub(DT) 2934 (Guj-HC), CIT v. Orissa Corp. (P.) Ltd. (1986) 159 ITR 78 (SC) : (1986) 25 Taxman 80 (SC) : 1986 TaxPub(DT) 1425 (SC), Deputy CIT v. Rohini Builders (2002) 256 ITR 360 : (2003) 127 Taxman 523 (Guj.) : 2002 TaxPub(DT) 305 (Guj-HC) and Andaman Timber Industries v. CCE (2015) 62 Taxmann.com 3 : 52 GST 355 (SC) : 2015 TaxPub(DT) 5186 (SC). Distinguished:Navodaya Castle Pvt. Ltd. v. CIT (2015) 56 Taxmann.com 18 (SC) : 2015 TaxPub(DT) 1868 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10

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