Case Law Details
Case Name : Shri G.Mahesh Babu Vs DCIT, Hyderabad (ITAT Hyderabad)
Appeal Number : IT Appeal No. 256/2015
Date of Judgement/Order : 27/11/2015
Related Assessment Year : 2006-07
Brief of the case:
The ITAT Hyderabad in the case of Shri G. Mahesh Babu vs. DCIT held that if any material gathered by AO proposed to be utilized in the course of assessment proceedings then it is the duty of AO to inform the assessee about the same and provide an opportunity to be heard. If AO fails to do so then the same would result in violation of principles of natural justice and would invalidate the action taken by AO.
Facts of the case:
- The assessee and his wife have entered an agreement with M/s. Emaar Hills Township (P) Ltd.(EHTPL) to purchase a plot of land at Manikonda Village Range Reddy District, admeasuring 1328 sq. ft.
- AO observed that CBI in its investigation into irregularities found that though the rate of selling theb Villas was fixed at Rs.5,000 per sq. yard, actually Villas were sold to the buyers at rates varying from Rs.4,000 per sq. yard to Rs.45,000 per sq. yard.
- AO on the basis of information received from other plot owners in the same area and relying on statement of a person Shri Tummala Ranga Rao before Metropolitan Magistrate-II, Hyderabad recorded u/s 164 of Criminal Procedure Code , concluded that actual sale value paid by the assessee to EHTPL was not Rs.5,000 per sq. yard as mentioned in sale deed, but Rs.15,000 per sq. yard, made an addition of Rs.1,99,20,000 as unexplained investment under section 69B of the Act.
- Aggrieved assessee filed an appeal before CIT(A), who upheld the addition by holding that even some other buyers also in the course of investigation have accepted of having paid ‘on money’ and even filed revised returns of income. He observed that mere fact that the assessee was not granted opportunity of cross examination, does not vitiate the assessment, as the Assessing Officer has made the assessee aware of the statement recorded from Shri T.Ranga Rao.
- Aggrieved by the order of CIT (A), assessee is in appeal before the ITAT Hyderabad.
Contention of the Assessee:
- The learned counsel for the assessee contended that entire payment was made through bank account of the assessee and his wife and the payments are duly reflected in the financial statements and books of account and apart from the recorded payment, no ‘on money’ was paid.
- Assessee challenged the evidences used by AO in framing assessment on the ground that AO relied on the statement of one person Shri T.Ranga Rao because its statement was recorded in a criminal case to which assessee was not a party and also such person’s statement was neither made available to him nor produced before the assessee for rebuttal or for cross examination. As such the statement had no value because it was only an uncorroborated evidence.
Contention of the Revenue:
- The learned counsel for the department contended that the AO gathered information not only from the CBI investigation but also from the independent enquiries made from the plot owners from the same area by issuing notices u/s 133(6) of the I.T Act, 1961.
- But the counsel accepted that if the tribunal feel that the principles of natural justice have been overlooked then the case may be remitted back to the file of AO to reconsider the case after giving assessee due opportunity to rebut the evidences gathered.
Held by ITAT Hyderabad:
- The AO had made an addition in respect of excess money paid to EHTPL not recorded in the books as an unexplained investment. Such addition was made relying upon the material gathered as a result of investigation made during the assessment proceedings of EHTPL, particularly on the basis of statement recorded from Shri T.Ranga Rao and also on the basis of information gathered in exercise of power under S.133(6) from some other buyers, who agreed to have paid on-money towards purchase of plots/villas from EHTPL.
- But AO neither in the assessment order nor even subsequently no material has been brought on record to show what exactly is the information/evidence, which indicated that assessee has paid the on money of Rs.1,99,20,000. Further, the investigation findings of CBI as well as the statement of Mr. T.Ranga Rao heavily relied upon by the assessee were not supplied to the assessee.
- It is well settled position of law that any adverse material gathered by the AO proposed to be utilized against the assessee must be brought to the knowledge of the assessee so as to render him an opportunity to rebut the same.
- In the present case assessee in his letter dated 13.3.2014 has specifically asked for cross examination of Shri T.Ranga Rao but no such opportunity was provided and even the copy of his statement not supplied to the assessee.
- However, the AO had also relied the information obtained u/s 133(6) to frame the assessment , therefore, the tribunal decided to remit the case back to the file of AO to examine the issue relating to on-money afresh after providing assessee the material gathered by him and an opportunity to be heard.