No Opportunity of Cross-Examination under Income Tax Litigations
In law, cross-examination is the interrogation of a witness called by one’s opponent. Section 138 of the Indian Evidence Act 1872 provides that a witness will be first examined in chief, and then if the adverse party deems fit, cross-examined and if the party calling him so desires, be re-examined.
The issue of cross examination of witnesses in Income Tax proceedings has seen substantial litigation before various appellate forum. Many a times, income tax assessments, otherwise sound on facts and merits, suffer adverse consequences due to opportunity of cross examination not being provided to the assessee. Right of cross examination shall be given to the assessee to uphold the principle of natural justice. It is necessary, therefore, to understand the importance and scope of the principles of cross examination in income tax proceedings.
The purpose of this article is to provide a focus on various decisions and judgments of Tribunals and higher Courts on the issue of cross-examination and its applicability to the provisions of Income Tax Act 1961 through the website itatorders.in
Following are few Judgments on this issue which might be relied upon.
“Aforesaid Hon’ble Supreme Court, Hon’ble High Court and this Tribunal rulings, second issue framed by me above on consequential impact of lack of cross examination and violation of principle of natural justice, I have no hesitation to accept the plea of Ld. AR that lack of cross examination and violation of principle of natural justice results is total nullity of the entire addition, hence, the additions in dispute is hereby deleted.”
2. Andaman Timber Industries vs. CICE, [281 CTR 0241(SC)] dated 02.09.2015
“Held that not allowing Assessee to cross-examine witnesses by Adjudicating Authority though statements of those witnesses were made as basis of impugned order, amounted in serious flaw which make impugned order nullity as it amounted to violation of principles of natural justice.”
“Thus, we find that the assessee was not allowed any real opportunity to cross-examine the persons who made the statement at the back of the assessee. In our considered view, in the circumstances, the statement of those persons cannot be read against the assessee. Our above view finds support from then decision of the Hon’ble Jurisdictional High Court in the case of:
1. Heirs and Legal Representatives of Late Laxmanbhai S. Patel Vs. Commissioner of Income Tax (supra)
2. CIT Vs. Indrajit Singh Suri (supra)
3. DCIT Vs. Mahendra Ambalal Patel (supra)
4. CIT Vs. KanitbhaiRevidas Patel (supra)
In view of the above settled position of law, we find force in the argument of the assessee that the statements of the persons mentioned above are not admissible evidence against the assessee. In absence of these statements, we find that no other material has been brought on record by the Revenue to show that why still the amount in question should be treated as income of the assessee when the assessee furnished all the documents which were available with it to discharge the onus which was upon it u/s 68 of the Act.
In the above circumstances, in our considered view, the addition was made solely based on the inadmissible and unreliable material and therefore addition so made cannot be sustained. We, therefore, delete the addition of Rs 2,00,00,000/- made in the case of M/s Charted Motors Pvt. Ltd. As well as addition of Rs 70,00,000/- made in the case of M/s. Chartered Speed Private Limited.”
Download Full Judgement here : https://www.itatorders.in/appeal/itssa-25-ahd-2013-16-chartered-speed-pvt-ltd-ahmedabad-the-acit-cent-circle-2-2-ahmedabad
4. DCIT vs. Mahendra Ambalal Patel [462 of 1999 /40 DTR 243 ] dated 13.04.2010
“Though the AO has placed reliance upon the statements of Shri Manoj Vadodaria and Shri G.C. Patel for the purpose of taxing the amount in the hands of the assessee, despite specific request being made by the assessee for cross-examining both the said persons, the AO has not permitted the assessee to cross-examine them. In the circumstances, no reliance could be placed upon the statements of the said persons as the respondent assessee had no opportunity to cross-examine them. The statements made by the aforesaid persons would have no evidentiary value and as such, would not be admissible in evidence”
5. H.R. Mehta v. ACIT [289 ITR 0561 (Bom)] dated 30.06.2016
“Held that the least that the Revenue should have done was to grant an opportunity to the assessee to meet the case against him by providing the material sought to be used against assessee in arriving before passing the order of reassessment. Assessee was bound to be provided with the material used against him apart from being permitting him to cross examine the deponents. Despite the request dated 15th February, 1996 seeking an opportunity to cross examine the deponent and furnish the assessee with copies of statements and disclose material, these were denied to him.”
6. Kishancand Chellaram v/s CIT [125 ITR 713] [SC] dated 19.04.1962
“Honorable Supreme Court has held that evidence which is not shown to the assessee cannot be admitted. The opportunity to controvert should be given to the assessee.”
7. CIT v. Ashwani Gupta [322 ITR 0396 (DEL)] dated 16.02.2010
“Held that once there is a violation of the principles of natural justice in as much as seized material is not provided to an assessee nor cross-examination of the person on granted, then, such deficiencies would amount to a denial of opportunity and therefore, Tribunal was right in confirming the CIT(A)’s order in deleting additions made by the AO as he had neither provided copies of the seized material to the assessee nor had he allowed the assessee to cross-examine concerned party.”
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