Commissioner of Income Tax vs Sanjeev Kumar Jain

J.S. Khehar, J.—The respondent-assessee filed his Income Tax return for the assessment year 1996-97 on April 30, 2003. The Assessing Officer on examining the same passed an order u/s 143/147 of the Income Tax Act, 1961, on March 31, 2004, wherein, while completing the assessment, he made three additions to the declared income of the respondent-assessee, namely, a sum of Rs. 2,12,750 allegedly earned by the assessee as a consequence of purchase/sale of shares, a sum of Rs. 1,03,317 alleged to be unexplained credits found in the bank account of the respondent-assessee, as also a sum of Rs. 30,000 allegedly paid by the respondent-assessee for the purchase of a plot.

It is not a matter of dispute that while arriving at the aforesaid conclusions the Assessing Officer recorded at the back of the respondent-assessee, statements of Shri H. Section Maheshwari, Shri Parveen Mittal, Shri Sanjay Hasija and Shri Rajinder Gulati. It is also not a matter of dispute that before the aforesaid statements could be taken into consideration, it was imperative for the Assessing Officer to confront the respondent-assessee with the aforesaid statements. It is also not a matter of dispute that the aforesaid statements were actually brought to the notice of the respondent-assessee.

The grievance raised by the respondent-assessee while repudiating the determination rendered by the Assessing Officer, u/s 143/147 of the Income Tax Act, 1961, has been that the respondent-assessee had made repeated oral requests to the Assessing Officer, seeking liberty to cross-examine the persons whose statements were recorded by the Assessing Officer at his back. In fact, it is the case of the respondent-assessee that a written request was also made by the respondent-assessee for the same purpose. Despite thereof, liberty was not granted to the assessee to cross-examine either of the four persons whose statements formed the basis of the determination of the Assessing Officer.

Dissatisfied with the determination rendered by the Assessing Officer, the respondent-assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The aforestated appeal preferred by the respondent-assessee was accepted by the Commissioner of Income (Appeals) by an order dated September 15, 2004. The aforesaid appellate authority arrived at the conclusion that it was imperative for the Assessing Officer to allow the respondent-assessee to cross-examine all the persons whose statements were recorded at his back, specially because they had formed the basis of arriving at the conclusion that additional income earned by the respondent-assessee had not been depicted in the return filed by him.

Being aggrieved with the order passed by the Commissioner of Income Tax (Appeals) dated September 15, 2004, the Revenue preferred an appeal before the Income Tax Appellate Tribunal. For the same reasons, as had been depicted in the order passed by the Commissioner of Income Tax (Appeals) dated September 15, 2004, the Income Tax Appellate Tribunal, also passed an order dated December 7, 2005. Consequent upon the dismissal of the appeal preferred by the Revenue at the hands of the Income Tax Appellate Tribunal, vide order dated December 7, 2005, the Revenue has approached this Court.

Through the instant appeal, the Revenue has impugned the order passed by the Commissioner of Income Tax (Appeals) dated September 15, 2004, as well as the order passed by the Income Tax Appellate Tribunal dated December 7, 2005.

During the course of hearing, learned Counsel for the Revenue very fairly acknowledged that the determination rendered by the Assessing Officer was based on the statements of Shri H.S. Maheshwari, Shri Parveen Mittal, Shri Sanjay Hasija and Shri Rajinder Gulati. Learned Counsel for the appellant also acknowledged that neither of those individuals was permitted to be cross-examined before the determination at the hands of the Assessing Officer on March 31, 2004, whereby the Assessing Officer had passed his assessment order under Sections 143/147 of the Income Tax Act, 1961. Thus viewed, we have no hesitation whatsoever to uphold the determination rendered by the Commissioner of Income Tax (Appeals) dated September 15, 2004, as well as the order passed by the Income Tax Appellate Tribunal dated December 7, 2005.

Despite our aforesaid conclusion, it is the vehement contention of the learned Counsel for the appellant, that even if some procedural defect had been found by the Commissioner of Income Tax (Appeals), as also by the Income Tax Appellate Tribunal, rather than negating the entire action taken by the Revenue, the appellate authorities should have annulled the procedural defect and remanded the matter for redetermination from the stage when the defect made the subsequent determination unacceptable in law.

We find merit in the aforesaid submission of the learned Counsel for the appellant. The Assessing Officer had failed to afford an opportunity to the respondent-assessee to cross-examine the persons whose statements were recorded by him, before passing the assessment order u/s 143/ 147 of the Income Tax Act, 1961, on March 31, 2004. The action of the Assessing Officer was unacceptable in law. Naturally, there was nothing wrong up to the stage of recording the statements of the four persons referred to above. The proceedings conducted by the Assessing Officer after recording the statements of the aforesaid individuals are liable to be set aside. The same alone are, therefore, set aside. It will be open to the Assessing Officer to reinitiate the proceedings from the aforesaid stage if he is still of the same opinion. In the aforesaid eventuality, any further action taken by the Assessing Officer would inevitably require him to allow the respondent-assessee to cross-examine all the four witnesses whose statements were the basis of the earlier consideration. Thereafter, it will be open to the Assessing Officer, to pass a fresh order in accordance with law. We would also like to clarify that the instant liberty granted to the Assessing Officer, to redetermine the issue would not enable him to collect any further information, besides the material already available with him (while passing the order dated March 31, 2004), for the purpose under reference.

In the totality of the circumstances, the instant appeal is disposed of with liberty to the Assessing Officer to reinitiate the proceedings, as ordered hereinabove.