|The Tax Publishers2021 TaxPub(DT) 0116 (Luck-Trib)
INCOME TAX ACT, 1961
Where AO made addition under section 68 based on third party statement recorded by investigation wing, however, without affording opportunity of cross-examination to assessee, it amounted to violation of principles of natural justice and, therefore, addition was deleted.
Income from undisclosed sources - Addition under section 68 - AO made addition based on third party statement recorded by Investigation Wing - No opportunity of cross-examination afforded to assessee
Assessee was dealing in wholesale cloth trading business. AO based on third party statement recorded by Investigation Wing treated sales and purchases of assessee as bogus and made addition of unexplained cash credit to net profit under section 68 and charged income-tax under section 115BBE. Assessee challenged this. AO had not provided copy of such statement to assessee and thus, denied opportunity of cross-examination. Held: Right of cross-examination is an important right available to assessee and not providing opportunity to cross-examine would amount to violation of principles of natural justice. In the instant case, statements of third parties were not made available to assessee for cross-examination and on the other hand, assessee had recorded entries of sales and purchases in its books of account and had duly disclosed items of sales and purchases in profit and loss account and duly disclosed profit earned on trading in the profit and loss account and had offered the same as business income. Accordingly, assessee had prima facie discharged initial burden of substantiating purchases through cheques, VAT registration of sellers and their income-tax returns and, therefore, AO was not justified in making addition under section 68.
Followed:CIT v. Odeon Builders Pvt. Ltd. (2019) 418 ITR 315 (SC) ; (2019) 110 Taxmann.com 64 (SC) : 2019 TaxPub(DT) 6298 (SC), Andman Timber Industries v. CIT, vide Order, dated 2-9-2015 and Morning Glory vide Order, dated 15-3-2019 ITA. No. 72/Lkw/2018.
FAVOUR : In assessee's favour.
IN THE ITAT, LUCKNOW BENCH
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