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Facts
The assessees filed appeals against assessment orders for A.Ys. 2018-19 to 2020-21, where additions were made under Section 153C based on a statement recorded from Shri Ashok Kumar Agrawal (husband of one assessee) during a search operation. The assessees' request for cross-examination of Shri Ashok Kumar Agrawal was denied by the Assessing Officer, who considered it an afterthought to delay proceedings.
Held
The Tribunal held that the denial of cross-examination of the third-party whose statement formed the sole basis of the additions violated the principles of natural justice. Citing Supreme Court precedents, the Tribunal found the request for cross-examination was timely and therefore, the assessment orders were unsustainable in law and were quashed.
Key Issues
Whether the denial of cross-examination of a third-party statement, which was the sole basis for an addition under Section 153C, constitutes a violation of natural justice and renders the assessment order invalid.
Sections Cited
153C, 132, 132(4)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
Before: SHRI RAVISH SOOD & SHRI MADHUSUDAN SAWDIA
Kiran Devi Agarwal, Dy. Commissioner of Income Tax, Vs. Central Circle-3(3), Hyderabad. Hyderabad. PAN:ADOPA7925R (Appellant) (Respondent) आ.अपी.सं /ITA Nos.304 to 306/Hyd/2025 (निर्धारण वर्ा/Assessment Years:2018-19 to 2020-21) Ankit Agarwal, Dy. Commissioner of Income Tax, Vs. Central Circle-3(3), Hyderabad. Hyderabad. PAN:BNLPA0543D (Appellant) (Respondent) निर्धाररती द्वधरध/Assessees by: Shri Sharad Chandra Toshniwal, C.A. रधजस् व द्वधरध/Revenue by: Shri Gurpreet Singh, SR-DR सुिवधई की तधरीख/Date of hearing: 09/07/2025 घोर्णध की तधरीख/Pronouncement: 14/07/2025 आदेश/ORDER PER BENCH : These appeals are filed by the captioned assessees, feeling aggrieved by the separate orders passed by the Learned Commissioner of Income Tax (Appeals)-11, Hyderabad (“Ld. CIT(A)”) for the A.Ys. 2018-19 to 2020-21 respectively. These six appeals of the assessees involve identical issues arising out of similar facts and are therefore heard together and disposed of by this consolidated order for the sake of convenience and consistency.
At the outset, it is observed that there is a delay of 14 days in some appeals and 15 days in others. The assessee has filed condonation petitions along with affidavits, explaining the reasons for such delay. After going through the condonation petitions and the material on record, and considering the submissions of the Learned Authorised Representative (“Ld. AR”) and the Learned Departmental Representative (“Ld. DR”), in the interest of substantial justice, we condone the delay in filing all the appeals and admit them for adjudication on merits.
For the sake of convenience, is taken as the lead case. The grounds of appeal raised by the assessee are as under :
4. The brief Facts of the case are that the assessee is an individual, proprietor of M/s. Ankit Marketing, engaged in assembly and sale of pedestal fans. The return of income was filed on 11.07.2018 declaring a total income of Rs.29,69,540/-. On 04.06.2019, a search operation was conducted by the GST Department at the premises of Shri Ashok Kumar Agrawal, the husband of the assessee. Based on information shared by the GST Department, a search and seizure operation under Section 132 of the Income Tax Act, 1961 (“the Act”) was conducted on the same day at his premises. Subsequently, a notice under Section 153C of the Act was issued to the assessee. After considering the assessee’s submissions, the Learned Assessing Officer (“Ld. AO”) passed an assessment order dated 15.03.2023 under Section 153C of the Act, making an addition of Rs.7,87,136/-.
5. Aggrieved with the order of Ld. AO, the assessee filed an appeal before the Ld. CIT(A), which was dismissed.
6. Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before this Tribunal. The Ld. AR submitted that, the entire addition in the hands of the assessee is based on the statement of Shri Ashok Kumar Agrawal, recorded during the course of search proceedings. The assessee had specifically sought cross-examination of Shri Ashok Kumar Agrawal during the assessment proceedings. Our attention was invited to page no. 7 of the assessment order, where the Ld. AO has acknowledged that the assessee requested cross- examination. However, the Ld. AO declined the same, stating it was an afterthought, allegedly made to delay proceedings. The Ld. AR refuted this claim by drawing attention to the fact that the assessee had made the cross-examination request on 14.02.2023, whereas the assessment order was passed only on 15.03.2023, i.e., one month later. Therefore, the request was not at the “fag end” but made well in time during the assessment process. The Ld. AR contended that denial of cross-examination violates the principles of natural justice, as the statement of Shri Ashok Kumar Agrawal formed the sole basis of the addition.
6.1 In support, he relied on the judgment of the Hon’ble Supreme Court in the case of Andaman Timber Industries Vs. CCE (2015) 62 Taxmann.com 3 (SC), wherein it was held that non-granting of cross- examination, when sought, renders the order invalid.
Per contra, the Learned Departmental Representative (“Ld. DR”) submitted that, the assessee sought cross-examination only towards the conclusion of the assessment, reflecting an attempt to delay the finalisation of the order. Accordingly, the Ld. DR submitted that the rejection of the cross-examination request was proper and the assessment order is not vitiated.
We have heard the rival submissions and also gone through the record in the light of the submissions made by either side. It is not in dispute that the entire addition in the case of the assessee is based on the statement of Shri Ashok Kumar Agrawal, recorded during the search. We have gone through the relevant portion of page no. 7 of the order of the Ld. AO, which is to the following effect :
8.1 On perusal of above, we found that the assessee sought cross- examination of Shri Ashok Kumar Agrawal and the Ld. AO declined the same, stating it was an afterthought, allegedly made to delay proceedings. Further, we find merit in the submission of the Ld. AR that the request for cross-examination was made on 14.02.2023, and the assessment order was passed on 15.03.2023 — almost a month later. Therefore, we reject the objection of the Ld. DR that the request was made at the “fag end” of the assessment proceedings. In our view, the assessee had made the request in a timely manner. In our view, once the statement of a third party is made the foundation of the assessment, it is incumbent upon the Assessing Officer to provide an opportunity of cross-examination, if sought. Denial of such opportunity is a serious breach of natural justice. We have also gone through the decision of the Hon’ble Supreme Court in the case of Andaman Timber Industries Vs. CCE (supra), wherein the hon’ble court has held as under:
“In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal.” 8.2 In light of the above legal position, we hold that the denial of cross-examination in the present case vitiates the assessment proceedings and renders the assessment order unsustainable in law. Accordingly, we quash the assessment order on the ground of violation of natural justice, i.e., denial of cross-examination. As we have allowed the appeal of the assessee on this legal ground, we do not propose to adjudicate the other grounds raised, and the same are left open.
In the result, all the appeal filed by the assessee is allowed.
The issues involved in these appeals are identical to the issues involved in the appeal in wherein we have allowed the appeal of the assessee. Therefore, our discussion and findings in are mutatis mutandis applicable to these appeals also. As the appeal of the assessee in ITA No.301/Hyd/2025 has been allowed, these appeals of the assessees are also allowed.
In the result, all the appeals filed by the assessee are allowed.
Order pronounced in the open Court on 14th July, 2025.