SANJAM SAYAL,NEW DELHI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 8, NEW DELHI

PER ANUBHAV SHARMA, JM:

These are appeals preferred by the assesseeagainst the common order

dated 07.07.2025 passed by the Ld. Commissioner of Income-tax (Appeals)-

24, New Delhi (hereinafter referred to as the First Appellate Authority or ‘the

ld. FAA’ for short) in DIN No: ITBA/APL/M/250/2025-

26/[1078252830(1)/1078252892(1)] arising out of the common assessment

order dated 30.03.2023 u/s 153C of the Income Tax Act, 1961 (hereinafter

referred to as ‘the Act’) passed by the DCIT, Central Circle-8, New Delhi for

AYs: 2016-17 & 2017-18.

of the Act at 4/3, WEA Saraswati Marg, Near Hotel Apra Deluxe, Karol

Bagh, Delhi 110005, the office premise of M/s Dengen Products India LLP

(DPI for Short) on 08.12.2018 were conducted, however, Mr.

PrateekChitkara was not present at the premises and the proceedings were

conducted in the presence of Mr. Shiv, employee of PrateekChitkara. During

the search action, allegedly 10 spiral diaries were found, seized and marked

P a g e | 3 ITA Nos. 5791 & 5792/Del/2025 SanjamSayal (AYs: 2016-17 & 2017-18) as Annexure A-1 to A-10. The ld. AO records that there were various cash

entries in the said diaries which appeared to be relating to the cash

committees and various other entries of cash received from and paid to

various persons.

132(4) of the Act wherein he had stated that in the instant case, Prateek

Chitkara used to organize such cash committees from his office premises.

Each committee consisted 15-16 members and monthly contribution from

each member ranged from thousands to lakhs. The monthly capital raised

ranged between 24 lakhs to 80 lakhs. The job of Mr. Shiv in this system was

to collect and distribute cash on the directions of Sh. Prateek Chitkara and

write down the same in the diaries and he has admitted the same in his

statement recorded on Oath.

LLP marked as annexure A-1 to A10 were allegedly analyzed by the ld. AO

and it was observed that all the amounts recorded, whether receipts or

payments, are in cash. Sh. Prateek Chitkara was also confronted to the seized

diaries during the recording of his statement on Oath on 18.07.2019. He

P a g e | 4 ITA Nos. 5791 & 5792/Del/2025 SanjamSayal (AYs: 2016-17 & 2017-18) admitted that the facts stated by Mr. Shiv are correct and he used to run such

five committees at that time with a corpus of Rs. 80 lakhs, 75 lakhs, 60 lakhs

and 24 lakhs. Allegedly, Prateek Chitkara, during the recording of statement

u/s 131(1A) on 20.02.2020, was asked to identify and give details of

members/participants of the committees whose names are reflecting in the

said diaries and he has identified the members/participants of the committees,

which allegedly included the assessee.

were calculated and the peak balance method was applied by the ld. AO. The

ld. AO explained the same by narrating as follows;

“The total monthly cash contribution made by the assessee during any particular F.Y. was added to arrive at total contribution during that F.Y. and that F.Y was taken as the base year for calculating the amount of cash introduced in the committee. The total payments made by the assessee say “X" are considered the peak balance and this amount "X" is the unaccounted income which is being rotated in the later years. In the next year, let us say "Y" is the peak balance and "Y-X" is the unaccounted income of that year, if it is positive. It is also to be noted that all the entries relating to assessee, whether it be related to committee or any other entry of any cash, are taken into account while calculating peak balance.

P a g e | 5 ITA Nos. 5791 & 5792/Del/2025 SanjamSayal (AYs: 2016-17 & 2017-18) 6. In the case of the assessee, the peak balance for the F.Y. 2015-16 and F.Y. 2016-17 is computed to Rs. 7,96,750/- and Rs. 1,12,61,936/- respectively and thus, the unaccounted income of assessee for the A.Y. 2017- 18 was held to be of Rs. 1,04,65,186/-.

had no participated in any such committee and also requested to provide the

copy of the incriminating material. The ld. AO records that

“Therefore, in the spirit of natural justice before any adverse findings are recorded, assessee was provided the copy of satisfaction note, Diaries marked as Annexure A-1 to A-10 seized from the premises of M/s Dengen Products India LLP and copies of statements of Mr. Shiv and Sh. PrateekChitkara on 23.02.2023 through the last known email id i.e., services@rnguptaassociate.com. However, assessee has furnished any explanation to the same till date and I am left with no option but to pass the assessment order on the basis of material facts available on record and on the following facts: i. Assessee has outrightly denied any link to the incriminating material in spite of the fact that there is incrimination material available on record in the form of handwritten diaries corroborated by the statements on Oath of Mr. shiv and Sh. PrateekChitkara already confronted to the assessee. ii. There is credible incriminating material available on record in the form of handwritten diaries as discussed in previous Paras which establishes that assessee does in fact participated in the said committees. iii. Assessee was allowed the opportunity of being heard by issue

P a g e | 6 ITA Nos. 5791 & 5792/Del/2025 SanjamSayal (AYs: 2016-17 & 2017-18) of summons under section 131(1A) of the Act by Investigation Wing to which he failed to comply and thus did not avail the opportunity allowed iv. Assessee has not placed on record any alternative explanation to the said facts.”

“5.1.10 Duties and obligations go hand in hand and the appellant cannot merely harp on technicalities even while failing to discharge the onus laid on him. Further, Right to Cross-examination as held in various decisions, is not absolute in nature.

(i) The Hon'ble Supreme Court has held in the case of State of J&K Vs. BakshiGulamMohd. AIR 1967 (SC) 122 and in the case of Nath International Sales Vs. UOI AIR 1992 Del 295 that the right of hearing

P a g e | 7 ITA Nos. 5791 & 5792/Del/2025 SanjamSayal (AYs: 2016-17 & 2017-18) does not include a right to cross examine. The right to cross examine must depend upon the circumstances of each case and also on the statute concerned. (ii) In the case of GTC Industries Ltd. V. Asstt. CIT (1998) 60 TTJ (Bom. Trib) 308, it was held that under the dictum of 'Audi AlteramPartem', the right to crossexamine the witness who made adverse report is not an invariable attribute of the requirement of the said dictum. The principles of natural justice do not require formal cross- examination. Formal cross-examination is a part of procedural justice. It is governed by the rules of evidence and is the creation of Court. It is part of legal and statutory justice, and not a part of natural justice, therefore, it cannot be laid down as a general proposition of law that the revenue could not rely on any evidence which had not been subjected to cross-examination. However, if a witness has given directly incriminating statement and the addition in the assessment is based solely or mainly on such statement, in that eventuality it is incumbent on the Assessing Officer to allow cross- examination. Adverse evidence and material relied upon in the order, to reach the finality, should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of collateral nature. (iii) In Kanungo& Company vs Collector of Customs And Ors. on 7 February, 1972, AIR 1972 SC 2136, a 3-judge bench of the Hon'ble Apex Court held that "We may first deal with the question of breach of natural justice. On the material on record, in our opinion, there has been no such breach. In the show-cause notice issued on August 21,

P a g e | 8 ITA Nos. 5791 & 5792/Del/2025 SanjamSayal (AYs: 2016-17 & 2017-18) 1961, all the material on which the Customs Authorities have relied was set out and it was then for the appellant to give a suitable explanation. The complaint of the appellant now is that all the persons from whom enquiries were alleged to have been made by the authorities should have been produced to enable it to cross-examine them. In our-opinion, the principles of natural justice do not require that in matters like this the persons who have given information should be examined in the presence of the appellant or should be allowed to be crossexamined by them on the statements made before the Customs Authorities. Accordingly, we hold that there is no force in the third contention of the appellant." It was further held in para 13 as "What the impugned order does is that it refers to the evidence on the record which militates against the version of the appellant and then states that the appellant had not been able to meet the inferences arising there from. In our opinion, the High Court was right in holding that the burden of proof had shifted on to the appellant after the Customs Authorities had informed the appellant of the results of the enquiries and investigations."

(iv) InSurjeet Singh Chhabravs Union of India &Ors on 25 October, 1996, the Hon'ble SC held that cross-examination was not an absolute right. This case was cited by Hon'ble Andhra Pradesh High Court in its order dated 31.10.2017 in M/s Manidhari Stainless Wire Private Limited Vs. Union of India, (Writ Petition No. 5917 of 2017), wherein it held "25. In Surjeet Singh Chhabra v. Union of India, the Supreme

P a g e | 9 ITA Nos. 5791 & 5792/Del/2025 SanjamSayal (AYs: 2016-17 & 2017-18) Court was concerned with a case arising under the Foreign Exchange Regulation Act and the Customs Act. Though the decision in Surjeet Singh Chhabra was a very brief order, the Supreme Court rejected the contention that the denial of cross-examination tantamounted to the violation of the principles of natural justice."

(v) In the case of Telestar Travels Pvt. Ltd vs Special Director of Enforcement dated 13.02.2013 in Civil Appeal Nos. 1306-1309 of 2013(arising out of S.L.P. (C) Nos.15546-15549 of 2008), "18. The question, however, is whether failure to permit the party to cross examine has resulted in any prejudice to call for reversal of the orders and a de novo enquiry into the matter. The answer to that question would depend upon the facts and circumstances of each case". It was further held in para 20 as "the refusal of the Adjudicating Authority to permit cross examination of the witnesses producing the documents cannot even on the principles of Evidence Act be found fault with. At any rate, the disclosure of the documents to the appellants and the opportunity given to them to rebut and explain the same was a substantial compliance with the principles of natural justice. That being so, there was and could be no prejudice to the appellants nor was any demonstrated by the appellants before us or before the Courts below".

5.1.11 The above cases and proposition of law laid down therein clearly establish that when statements are relied upon by the Department as

P a g e | 10 ITA Nos. 5791 & 5792/Del/2025 SanjamSayal (AYs: 2016-17 & 2017-18) secondary evidence in collaboration with other evidence, then the denial of right to cross-examination cannot be taken as plea to not make the addition. The department had in fact issued summons u/s 131 to the appellant. The AO has asked for compliance to notices issued u/s 142(1) of the IT Act, 1961. This being the case, the appellant is not justified in ignoring such summons and yet claim that adequate opportunity was not provided. The ground raised by the appellant regarding denial of cross-examination stands DISMISSED.”

record we are of the considered view that in the case in hand primarily a

statement of Mr. Shiv who was alleged employee of Prateek Chitkara became

foundation to draw all the inferences about assessee’s investment in the chit

fund, then, Prateek Chitkara statement was recorded u/s 131(1A) and what

comes up is that in question No. 5 he was questioned with regard to some

diaries Annexure A1 to Annexure A10 which were allegedly impounded

during search action at the premises 5-79, Ground Floor, G.K. 2, New Delhi,

110048. While the whole case is of finding 10 spiral diaries marked as

Annexure A-1 to Annexure A-10 from 4/3 WEA Saraswati Marg, near Hotel

Apra Deluxe Karol Bagh, Delhi 110005, which was office premise of M/s

Dengen Products India LLP.

P a g e | 11 ITA Nos. 5791 & 5792/Del/2025 SanjamSayal (AYs: 2016-17 & 2017-18) 12. When assessee has out-rightly denied any participation in any such

committee and the only evidences is the oral statement of persons who were

allegedly collecting the money and operating the committee and such

discrepancy is actually apparent from the assessment order itself with regard

to vital fact like the place from which alleged diaries were recovered then

assessee’s claim to be given an opportunity to cross examine the witnesses is

a crucial right and we find that ld. CIT(A) has relied various judicial

precedents to say that right to non cross examination of witnesses in the

present facts and circumstances has not caused prejudice to the assessee.

like diaries which are not kept in regular course of business and do not have

complete narration of facts and transaction and they are supplemented by oral

evidences to bring forth the details of transactions or modus operandi of

transactions, then the assessee certainly deserves an opportunity to cross

examine the vital witnesses and merely providing copies of statement or

alleged incriminating material is not sufficient.

P a g e | 12 ITA Nos. 5791 & 5792/Del/2025 SanjamSayal (AYs: 2016-17 & 2017-18) 14. When assessee specifically raises such a claim before ld. tax authorities

below then the same should be addressed on the basis of facts and

circumstances of the transactions and the nature of statements as recorded.

Ld. tax authorities cannot pre-suppose as to what could the subject matter of

the cross examination be and make a remark that cross examination would

not discredit the on oath statement for the mere reason that some evidentiary

value is attached to statement recorded u/s 132(4) of the Act.

of cross examination that assessee can make the probative value questionable

and rebut the evidentiary value. If the ld. tax authorities are of the view that

the evidentiary value is conclusive or corroborative to documentary

evidences then that all the more requires assessee an opportunity to cross

examine the witnesses who explain the content of documentary evidences.

establish the facts was on the assessing officer and the conclusion have been

drawn on the basis of evidences which are not admissible under law for want of

cross examination then the inferences and conclusion drawn cannot be sustained.

P a g e | 13 ITA Nos. 5791 & 5792/Del/2025 SanjamSayal (AYs: 2016-17 & 2017-18) Accordingly, we allow the corresponding grounds. Appeals are allowed,

impugned additions are deleted.

Order pronounced in the open court on 20.05.2026

Sd/- Sd/- (Amitabh Shukla) (Anubhav Sharma) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 20.05.2026 Rohit, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI