Preeti Milan Sankhala Vs ITO (ITAT Pune)
Addition Based on Third-Party Statement Set Aside; Matter Restored for Cross-Examination and Legal Adjudication: ITAT Pune
Summary: The Pune Bench (SMC) of the Income Tax Appellate Tribunal (ITAT) allowed the assessee’s appeal for AY 2017-18 for statistical purposes and set aside the NFAC order confirming an addition of ₹15 lakh towards alleged unexplained investment in purchase of a flat.
The addition was made under section 69C, based solely on third-party information and statement recorded under section 131 during survey proceedings in the case of the builder, alleging receipt of on-money. The assessee contended that:
- No copy of the third-party statement or seized material was provided,
- No opportunity of cross-examination was granted,
- Several jurisdictional and legal grounds (including validity of notice under section 148, approval under section 151, faceless jurisdiction, DIN violation, and breach of section 144B procedure) were not adjudicated by the CIT(A).
The Tribunal noted that the CIT(A) failed to adjudicate the legal grounds, and relying on the Delhi High Court decision in Divine Infracon Pvt. Ltd. v. PCIT, held that the ITAT cannot decide legal grounds which did not arise from the first appellate order.
Accordingly, the ITAT restored all legal issues to the file of the CIT(A) for proper adjudication. It further directed that if the legal grounds fail, the CIT(A) must:
- Provide the assessee with copies of third-party statements and material relied upon, and
- Grant a specific opportunity for cross-examination before deciding the addition on merits.
The Tribunal held that reliance on third-party statements without cross-examination violates principles of natural justice. The impugned order was thus set aside, and the appeal was allowed for statistical purposes.
