Anish Rajkumar Parasrampuria Vs ITO (ITAT Mumbai)
Mumbai ITAT: Assessment Based on Third-Party Statements Quashed for Denial of Cross-Examination
The Mumbai ITAT quashed the reassessment and deleted the addition of ₹25 lakh under section 69, holding that an assessment founded substantially on third-party statements cannot be sustained when the assessee is denied the complete material relied upon and an opportunity to cross-examine those witnesses. The addition was made on the allegation that the assessee had advanced a cash loan to M/s Evergreen Enterprises, based on statements recorded during a search on that concern and certain seized documents.
The Tribunal found that the assessee was furnished only extracts of the statements, while the complete statements and seized material forming the basis of the addition were never supplied despite specific requests. Further, the persons whose statements were relied upon were never produced for cross-examination. The Tribunal also noted that none of the statements specifically referred to the assessee, and no independent corroborative evidence directly linked the assessee with the alleged cash transaction.
Relying on the Supreme Court’s decision in Andaman Timber Industries v. CCE, the Tribunal held that denial of cross-examination and failure to furnish the material relied upon constitute a serious violation of the principles of natural justice, rendering the assessment unsustainable. Since the addition rested primarily on untested third-party statements without independent corroboration, the reassessment order was quashed and the assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Present appeal filed by the assessee arises out of the order dated 08/12/2025 passed by Ld.CIT(A) -51, Mumbai [hereinafter referred to as “Ld.CIT(A)”] for A.Y. 2012-13, on the following revised grounds of appeal:-
“I. Reopening of Assessment is bad in law :
1. The learned CIT(A) erred in upholding the reopening of assessment based on information received from DDIT(Inv) without independently verifying the said information nor providing copy of the material/statement relied upon by the AO while recording the reasons for reopening, thereby violating the direction/guideline passed by the Supreme Court and Bombay High
2. The reopening u/s. 148 is bad law as same is based on seized material pursuant to search action u/s. 132 of the Act undertaken on third person and statement of third party.
II. Principal of Natural Justice Violated:
3. The CIT(A) failed to consider the fact that the statement recorded of Mr. Nilesh Bharani and his employees were never provided to the assessee for rebuttal nor the seized material nor opportunity to cross examination the alleged parties.
II. Addition of Rs. 25,000,00/- u/s 69 of the Act:
4. The CIT(A) NFAC has erred in upholding addition of Rs. 25,000,00/-treating the same as unexplained investment u/s 69 of the Act based on the alleged statement recorded and alleged seized material of third party, without appreciating that assessee had not entered into any such alleged cash transaction and therefore the addition is required to be deleted.
5. The ld CIT(A) failed to appreciate that the statement relied by the Assessing Officer of Shri Nilesh Bharani was later retracted by the Shri Nilesh Bharani therefore no credentials can be laid on the same without providing the cross examination.
6. The Appellant craves leave to add, amend, omit any of the aforesaid grounds of appeal as the occasion may arise or demand.”
2. Brief facts of the case are as under:-
