Additions made violating principles of natural justice are void ab initio

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: