KRISHNA TRADING COMPANY,MUMBAI vs. ITO 23(1)(3), MUMBAI
What did the Tribunal hold?
The Tribunal held that denying cross-examination violates principles of natural justice and vitiates the assessment. The matter was restored to the AO for fresh adjudication with an opportunity for cross-examination.
What were the facts?
The assessee, a trading firm, declared a loss. The AO treated commission receipts as income from other sources, rejecting the assessee's explanation and request for cross-examination of parties whose statements were used against it.
What were the issues?
Whether the assessment is vitiated due to denial of cross-examination of parties whose statements were used against the assessee, violating principles of natural justice.
Which sections of the Income-tax Act were involved?
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- GTC Industries Ltd. v. ACIT119 citing65 ITD 380 · 1998 · ITAT
Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER Rajendra A.M.- अनुसार Challenging the order dt.7.2.12 of CIT(A)-36,the assessee has filed the present appeal raising three grounds of appeal.Assessee-firm,engaged in the business of trading in wire rods of iron and steel,filed its retrun of income on 31.10.2007,declaring loss of Rs.6506/-.The AO completed the asst tom 14.12.2009 u/s. 143(3) of the Act,determining the income of the assessee the Rs.11.20 lakhs. 2.During the assessment proceedings,the AO found that assessee had shown some commission receipts.He directed the assessee to file explanation in that regard.The assessee stated that some of the partners had interest in Shreeji wires Industries(SWI),that it was a family concern,that M/s. Naveen Traderes (NT), M/s. Pinky Wire Traders (PWT) and M/s. Vishal Traders (VT) wanted to purchase goods on credit from SWI,that a tripartite arrangement was made between the assessee those parties and SWI, that as per the agreement the assessee guaranteed payment and SWI guaranteed supply of material, that SWI was free to charge higher price and assessee was to receive commission from SWI.The AO summoned the three parties and recorded the statement of the partners.After considering the available material,he asked the assessee as to why the commission should not be treated as income from other sources.The assessee requested for cross examnation of the parties.However,the AO rejected the request and the explanation and treated the commission income as income from other sources. 3.Aggrieved by the order of the AO the assessee preferred an appeal before the FAA.Before him, the assessee argued that in absence of cross examination the assessment was vitiated. Referring to the judgment of GTC Industries Ltd.(65ITD380),the FAA held that assessment was not vitiated if the cross examination was not allowed.Other grounds were also decided against the assessee. 4.Before us,the authorised Representative(AR)contended that there was violation of principles of natural justice,that specific request was made to afford a reasonable opportunity of cross examining the parties.Departmental Representative(DR)supported the order of the FAA. 5.We have heard the rival submissions and perused the material available with us we find that the assessee had requested the AO to allow him to cross examine the parties,that the first
3770/M/12-Krishna Trdg.
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