K.A.RAUF vs. THE ASST.COMMISSIONER OF INCOME TAX,
What did the High Court hold?
The High Court held that if evidence relied upon by the revenue for confirming a demand against an assessee has not been tested through cross-examination by the assessee, then such untested evidence cannot be relied upon. The Court found that the impugned assessment order relied on material that was not tested. Consequently, the Court quashed the assessment order (Ext.P4) and directed the 2nd respondent (Assistant Commissioner of Income Tax) to pass fresh orders. These fresh orders are to be passed after taking into account the observations in the judgment, hearing the petitioner, and within a period of three months from the receipt of a copy of the judgment. The Court did not expressly leave any issue undecided, as it directly addressed the procedural fairness in the assessment.
What were the facts?
The petitioner, K.A. Rauf, is challenging an order passed by the Assistant Commissioner of Income Tax (2nd respondent) confirming a tax demand for Assessment Year 2009-2010. The initial assessment was based on alleged lending activities. The petitioner's appeal to the first appellate authority was decided in his favour. The revenue appealed to the Income Tax Appellate Tribunal (ITAT), which remanded the matter to the assessing authority. The ITAT directed verification of the bank accounts of one Mohan Raj and allowed the petitioner to cross-examine him. In the remand proceedings, the assessing authority could not permit cross-examination of Mohan Raj due to his non-availability, despite issuing summons. Nevertheless, the assessing authority relied on Mohan Raj's evidence without it being tested through cross-examination by the petitioner.
What were the issues?
1. Whether the assessing authority could rely on untested evidence of Mohan Raj against the assessee when cross-examination was not permitted due to the witness's non-availability, despite the ITAT's direction for such cross-examination? (Question of law and fact, concerning principles of natural justice and evidentiary value). Assessee's Contention: The petitioner argued that the assessing authority erred by relying on evidence that was not tested through cross-examination, especially when the ITAT had specifically directed that the petitioner be allowed to cross-examine Mohan Raj. The inability to cross-examine, due to the witness's unavailability, meant the evidence was unreliable and could not form the basis for confirming a tax demand against the petitioner. Revenue's Contention: The judgment does not record any specific contentions made by the revenue in response to the petitioner's arguments regarding the untested evidence. The revenue's position appears to be implicit in the impugned order confirming the demand.
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
JUDGMENT The petitioner has approached this Court aggrieved by Ext.P4 order passed by the 2nd respondent confirming a demand of tax under the Income Tax Act. In the writ petition, it is the case of the petitioner that the assessment was initially done for the assessment year 2009-2010 by making reference to certain alleged lending activities of the petitioner. In an appeal that was carried by the petitioner, the first appellate authority decided the issue in favour of the petitioner. It is stated that the revenue, however, carried the matter in further appeal before the appellate tribunal and the appellate tribunal remanded the matter to the assessing authority after finding that the bank accounts of one Mohan Raj ought to have been verified and, further, that the petitioner was entitled to cross examine the said Mohan Raj. In the consequent order that was passed pursuant to the remand from the tribunal, the assessing authority found that the cross examination of Mohan Raj could not be permitted because of the non-availability of Mohan Raj for cross examination, despite summons issued to him. The assessing authority, however, proceeded to rely on the evidence tendered by Mohan Raj without testing the said evidence through cross examination at the instance of the petitioner. In my view, if the evidence relied upon by the revenue for confirming a demand against the assessee is not tested, through permitting a cross examination by the assessee, then the untested evidence cannot be relied upon against the assessee while confirming a demand against him. Inasmuch as the impugned orders of the assessing authority rely on material that was not tested, I quash Ext.P4 assessment order and direct the 2nd respondent to pass fresh orders in lieu thereof, after taking note of the observations in this judgment. The 2nd respondent assessing authority shall pass fresh orders as directed after hearing the petitioner,
WP(C).No.25820 OF 2020(B) 3 within a period of three months from the date of receipt of a copy of this judgment. The petitioner shall produce a copy of the writ petition together with a copy of this judgment before the 2nd respondent for further action. A.K.JAYASANKARAN NAMBIAR JUDGE WP(C).No.25820 OF 2020(B) 4
Appendix — schedule of exhibits
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