Commissioner of Income Tax and Another vs Land Development Corporation

Deepak Verma, J.—This appeal u/s 260A of the Income Tax Act, 1961 (hereinafter shall be referred to as "the Act"), is at the instance of the Revenue against the order passed by the Income Tax Appellate Tribunal, Bangalore Bench.

The short facts of the case are as under:

The respondent/assessee is carrying on the business of real estate and building apartments. The status of the assessee is association of persons. For the assessment year 1996-97, a return of income came to be filed on September 30, 1996, declaring a total income of Rs. 74,540. The said return filed by the assessee was processed u/s 143(1)(a) of the Act on August 12, 1997. On September 23, 1997, the premises of the assessee were surveyed u/s 133A of the Act. During the course of survey it was found that depreciation on certain machineries (reactors) was claimed by the assesses to the tune of Rs. 2.01 crores. This raised a doubt in the mind of the Revenue with regard to the correctness of the depreciation claimed. It was found that the assessee had entered into a lease agreement on September 11, 1995, with M/s. Morgan Industries Ltd. to lease mechanical reactors to be erected at the lessee''s factory premises at Cuddal of. The period of lease was said to be five years. The price of the equipment so leased out to the assessee was Rs. 201.25 lakhs and the lessee was to deposit Rs. 175 lakhs as security deposit. The said machinery was in fact to be supplied by M/s. Vishnelle Plastics to the assessee. Further enquiries were also made by the Revenue to Vishnelle Plastics. According to M/s. Vishnelle Plastics, machineries were purchased from M/s. Omsi Enterprises.

M/s. Omsi Enterprises was surveyed u/s 133A of the Act. During the course of enquiry it was found by the Revenue that no business of fabrication was being carried on. On December 24, 1997, a statement of Rajgopal was recorded, similarly statements of some other witnesses were also recorded from time to time.

During the course of hearing, pertinent question was asked to learned Counsel for the appellant whether any opportunity of cross-examination of these witnesses was extended to the assessee or not? For the said purpose the records were produced before us.

The Revenue had written a letter to the assessee with regard to the fact that the statement of certain witnesses has been recorded to which the reply was sent by the assessee. In reply a specific request was made by the assessee to grant an opportunity to cross-examine the witnesses whose statements were supplied to them on earlier date. The records show that the said witnesses were not actually tendered at any time for their cross-examination by the assessee. Thus, according to us, there was no proper opportunity afforded to the assessee to cross-examine the witnesses whose statements were recorded earlier, behind the back of the assessee.

In view of the aforesaid factual aspect we have no hesitation and alternative but to remand the matter to the Assessing Officer for affording an adequate and proper opportunity to the assessee for cross-examination of all those witnesses whose statements were recorded earlier and whose statements have already been supplied to the assessee. Since we are remanding the matter to the Assessing Officer, we are of the considered opinion that it is not necessary to answer the question of law as has been formulated by learned Counsel for the appellants.

In this view of the matter, the appeal is allowed and the impugned order is set aside. All other contentions of both the parties are kept open.