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Facts
The assessee filed its return of income. A search operation was conducted, and incriminating documents were found. Notices u/s 153C and 143(2) were issued, and the AO assessed income higher than declared. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that the initiation of proceedings u/s 153C based on a third-party statement, where the assessee was denied cross-examination, is bad in law. The matter requires fresh examination by the AO.
Key Issues
Whether proceedings initiated u/s 153C based on a third-party statement, without providing an opportunity for cross-examination to the assessee, are valid.
Sections Cited
153C, 131, 68, 115BBE, 37, 69C, 139, 132, 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘F’: NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI SUDHIR PAREEK
PAN Realtors Pvt. Ltd., ACIT, S-406, LGF, Greater Vs. Central Circle-13, Kailash-11, New Delhi. New Delhi-110048. PAN No: AAFCP2034D APPELLANT RESPONDENT Assessee by : Sh. Rahul Khare, Adv. Revenue by : Ms. Monika Singh, CIT(DR) Date of Hearing : 03.07.2025 Date of Pronouncement : 06.08.2025 ORDER PER SUDHIR PAREEK, JM:
The aforecaptioned appeals have been preferred by the same Assessee/Appellant against the common order of the Ld. Commissioner of Income -tax (Appeals)-26, New Delhi, ([in short (Ld.
.- 4767 & 4768/Del/2024 PAN Realtors Pvt. Ltd. CIT(A)] dated 23.08.2024 for the Assessment Years 2014-15 and 2015-16. Since identical issues are involved in both the appeals, they are disposed of by this consolidated order for the sake of convenience and brevity.
1.1 The Assessee/appellant has raised the following grounds of appeal for adjudication:
ITA No.- 4767/Del/2024 “ 1.That the proceedings initiated u/s 153 C is not only void but bad in law because the basis of initiation is the statement of third part Mr. Vikas Kumar Agarwal whom department is unable to call for cross examination inspite of the summons issued to him u/s 131.
2. That the proceedings u/s because it is based on the third party evidence as per 153C is bad in law dump document and ground no 1 above 3.The learned CIT-A erred in fact and in law in confirming the addition of Rs 3,00,00,000 u/s 68 read with section 115BBE which is not only bad in law but also against the facts and circumstances of the case 4. The learned CIT-A erred in fact and in law in confirming the disallowance of Rs 1,06,542 towards interest paid u/s 37 which is not only bad in law but also against the facts and circumstances of the case. 5.The learned CIT-A erred in fact and in law in confirming the disallowance of Rs 9,00,000 towards commission paid u/s 69C read with section 115BBE which is not only bad in law but also against the facts and circumstances of the case.”
ITA No.- 4768/Del/2024 .- 4767 & 4768/Del/2024 PAN Realtors Pvt. Ltd. 1.That the proceedings initiated u/s 153 C is not only void but bad in law because the basis of initiation is the statement of third part Mr Vikas Kumar Agarwal, whom department is unable to call for cross examination inspite of the summons issued to him u/s 131.
2. That the proceedings u/s 153C is bad in law because it is based on the dump document and third-party evidence as per ground no 2 above.
3. The learned CIT-A erred in fact and in law in confirming an disallowance of Rs 1,93,548 towards interest paid u/s 37 which is not only bad in law but also against the facts and circumstances of the case.”
Facts of the case may be narrated as that the assessee filed its return of income u/s 139 of the Income Tax Act, 1961 (‘the Act’) on 27.11.2014 showing declaring income of Rs. 2,67,56,510/-. A search operation u/s 132 of the Act, was carried out on 22.10.2016, on subsequent dates at business and residential premises of Sh. Ashish Begwani and others. Also, during the course of search and seizure operation, various incriminating documents were said to be found pertaining to the assessee, accordingly notices u/s 153C and 143(2) were also issued to the assessee and at the completion of the proceedings, the Learned AO assessed income Rs 5,77,62,962/-. Assessee assails the order before the Learned CIT(A) by way of appeal, which was dismissed. Aggrieved with, assessee before us.
Heard rival submissions and carefully perused the material available on record. 3 .- 4767 & 4768/Del/2024 PAN Realtors Pvt. Ltd.
Reiterating the grounds of appeal, the Learned AR submitted that the basis of initiation was the statement of third party Mr Vikas Kumar Agarwal, whom department was unable to call for cross examination despite the summons issued to him u/s 131 of the Act. It is also submitted that in the assessment proceedings, the assessee requested to given right to cross examination persons, based on whose statement the proceedings is initiated before completion the assessment, but no any opportunity was provided to asseessee. Further submitted that it is established principle of law that if an authority is relying on the testimony of a witness, the assessee is required to be afforded an opportunity to cross examine him failing which the testimony cannot be utilized against the assessee.
4. It is also submitted that the statement of Mr. Vikas Kumar Agarwal formed the basis for initiating proceedings u/s 153C, which is violation of the principles laid down by the Hon’ble Supreme Court in the case of Andaman Timber Industries vs. CCE (2015) 281 CTR 241 (SC) and addition in question made on the basis of “dumb document’.
.- 4767 & 4768/Del/2024 PAN Realtors Pvt. Ltd.
In view of the above fact situation and in the interest of substantial justice, we are of the considered opinion that the matter requires fresh examination by the Learned AO. Therefore, to ensure the interest of justice and fair play, we deem it appropriate to set aside the impugned orders of the Ld. CIT(A) and restore the matters to the file of the Learned AO with the direction to decide afresh in accordance with law, after providing adequate opportunity to the assessee. The assessee/Appellant is also directed to cooperate in the proceedings and furnish all necessary evidence in support of its claims.
Consequently, both appeals of the assessee are allowed as indicated above for statistical purposes.