Baleshwar Sharma Vs DCIT (Delhi High Court)
Once AO Grants a Fresh Opportunity for Cross-Examination, Earlier Non-Appearance Cannot Be Used to Deny It: Delhi HC Sets Aside Assessment with Costs
Background
An opportunity for cross-examination cannot be treated as exhausted on account of an earlier default when the AO has subsequently accepted the assessee’s request & fixed another date. However, an assessee seeking such an opportunity must also respect the time of the witnesses & participate in the proceedings with due diligence.
The petitioner challenged an assessment order dated 22.09.2026 passed u/s 143(3), alleging violation of natural justice & non-compliance with the High Court’s earlier directions.
The dispute originated from a slip recovered from one Pradeep Kumar Sehgal, recording ₹10,000. According to the AO, Sehgal had stated that the figure actually represented ₹1 crore & that three zeros had intentionally been omitted. Relying upon the slip & the statement, the AO added ₹1 crore in the petitioner’s hands through an assessment order dated 31.03.2026.
The petitioner disputed the addition & sought an opportunity to cross-examine Sehgal. When this was denied, he approached the High Court.
Earlier Directions & Subsequent Proceedings
By order dated 30.04.2026, the High Court set aside the original assessment because the addition essentially rested upon the seized slip & Sehgal’s statement, without an opportunity for cross-examination.
The Court directed the AO to fix a hearing between 18.05.2026 & 20.05.2026, give at least seven days’ advance notice & ensure Sehgal’s availability. A fresh assessment was to follow after giving due regard to the cross-examination.
The AO accordingly fixed the hearing for 19.05.2026 at 11:30 a.m. The petitioner, however, reached the AO’s office only at 12:20 p.m., explaining that he had been attending a hearing in the High Court. By then, Sehgal had left at 12:10 p.m.
The petitioner requested that the witness be called back. Following a representation to the Additional Commissioner, the AO subsequently fixed another opportunity on 26.05.2026. On that date, the petitioner & his counsel attended at the scheduled time, but the witness did not appear.
Meanwhile, the AO was transferred. His successor proceeded to complete the assessment on substantially the same lines as the original order, treating the earlier judicial directions as complied with & attributing the failure of cross-examination to the petitioner’s absence on 19.05.2026.
Rival Contentions
The petitioner argued that the fresh assessment violated both natural justice & the Court’s directions. He submitted that the slip incorrectly recorded his name, that he did not even know Sehgal & that there was no other incriminating material supporting the addition. Cross-examination was therefore essential.
The Revenue maintained that adequate notice had been given & the witness had attended and waited. Neither the petitioner nor his counsel had informed the AO that they would be late. It further submitted that the AO had called both Sehgal & Yogesh Jain to facilitate complete justice, and alleged that the petitioner was attempting to take advantage of his own default.
High Court’s Reasoning
The High Court expressly disapproved of the petitioner’s conduct. Having obtained an order directing cross-examination, he was expected to remain ready & available. With at least ten days’ advance notice, his explanation that he was attending another High Court matter was rejected. An assessee must prioritise his cases & pursue proceedings with the requisite seriousness.
Nevertheless, the decisive circumstance was the AO’s subsequent action.
The Court noted that the then AO had accepted the petitioner’s request & issued fresh notices requiring the petitioner & the witnesses, Sehgal & Yogesh Jain, to appear on 26.05.2026. The petitioner & his counsel attended, whereas the witnesses did not.
By granting this fresh opportunity, the AO had condoned the petitioner’s earlier fault or negligence. Having done so, the AO could not backtrack & rely upon the non-appearance on 19.05.2026 to deny cross-examination.
At the same time, the Court recognised that witnesses could not repeatedly be summoned merely to accommodate the petitioner. Their time also deserved respect.
Decision
The assessment order dated 22.09.2026 was set aside. The petitioner was directed to pay ₹25,000 to each witness, with cross-examination permitted only upon payment.
The AO was directed to fix a hearing, preferably between 16.11.2026 & 30.11.2026, with at least seven days’ advance notice & ensure the witnesses’ availability. If they failed to appear, another date was to be fixed. After non-appearance on three occasions, the AO could proceed in accordance with law without further waiting. Where cross-examination took place, the fresh assessment had to give due regard to it.
Author’s Comments
A fresh opportunity consciously granted cannot subsequently be nullified by reviving the very default already condoned. Equally, judicial relief does not excuse procedural indiscipline. The Court balanced both considerations through a further opportunity coupled with costs. Significantly, it did not delete the ₹1 crore addition on merits, nor direct automatic deletion if the witnesses remained absent.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. By way of the instant writ petition, the petitioner has challenged the Assessment Order dated 22.09.2026 passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’) on the ground of the same being contrary to principles of natural justice and in breach of the directions issued by this Court.
2. It may be noted that the petitioner had earlier preferred a writ petition W.P.(C) 5921/2026, inter alia challenging the Assessment Order dated 31.03.2026 passed under Section 143(3) of the Act of 1961, whereby the respondent No.1 had raised a demand against the petitioner essentially on the basis of slip recovered from one Pradeep Kumar Sehgal in which a sum of Rs.10,000/- was written. The Assessing Officer (hereinafter referred to as ‘AO’) alleged to have recorded the statement of said Pradeep Kumar Sehgal who reportedly deposed that the amount of Rs.10,000/- had been written in place of Rs.1,00,00,000/- and three zeros were intentionally not mentioned in the slip. The AO, thus, added such amount (Rs.1,00,00,000/-) in petitioner’s hands, inspite of the petitioner’s objection.
3. The petitioner sought an opportunity to cross-examine the said Pradeep Kumar Sehgal but the AO refused to grant such an opportunity, for which the petitioner approached this Court by way of the aforesaid writ petition. The said writ petition came to be allowed by this Court vide order dated 30.04.2026, whereby the assessment order under challenge was quashed and set aside and the AO was directed to grant an opportunity to cross-examine the said Pradeep Kumar Sehgal. The operating part of the above order dated 30.04.2026 reads thus:-
“8. We, therefore, set aside the assessment order dated 31.03.2026, which essentially hinges upon the seized document (Kachchi Parchi) and the statement of the said Mr. Pradeep Kumar Sehgal for want of opportunity of cross examination. Because, since the entire addition is edified on the statement and slip recovered from Pradeep Kumar Sehgal.
9. The AO shall fix any date of hearing between 18.05.2026 to 20.05.2026 and inform the petitioner at least 7 days in advance and provide an opportunity to cross-examine Pradeep Kumar Sehgal. It shall be incumbent upon the AO to ensure that said Pradeep Kumar is available for cross-examination at the time of hearing so fixed and after the cross examination being so done, the AO shall pass a fresh assessment order in accordance with law, giving due regard to the cross-examination.”
4. Mr. Jarwal, learned counsel for the petitioner informed that in furtherance of the directions so issued by this Court, the AO did issue a notice dated 08.05.2026, requiring the petitioner to appear on 19.05.2026 and also called said Pradeep Kumar Sehgal to remain present at 11:30a.m. for the purpose of cross-examination but on the very same date, the petitioner had a matter in the High Court, for which his presence (in the High Court) was necessary. After attending the hearing at High Court, when the petitioner reached the office of the AO, it was already 12:20 p.m. Then, the Assessing Officer informed that Pradeep Kumar Sehgal, the witness had left the office at 12:10 p.m.
5. The petitioner requested the AO to call said Pradeep Kumar Sehgal but his request was turned down. The petitioner immediately made a representation to the Additional Commissioner in this regard, perhaps at whose intervention, the AO acceded to petitioner’s request and called the said witness Pradeep Kumar Sehgal on 26.05.2026, on the said date the petitioner was present alongwith his Counsel at the scheduled time but said witness (Pradeep Kumar Sehgal) did not show up.
6. In the meantime, the incumbent in the chair of AO got transferred and the new officer who resumed charge refused to grant any indulgence and proceeded to pass impugned order by observing that the High Court’s order had been complied with and that it was the petitioner’s fault in not showing up at the time fixed by the AO on 19.05.2026.
7. While observing so, the AO proceeded to pass an assessment order, obviously on the same lines as the earlier assessment order dated 31.03.2026 and raised identical demand.
8. Learned counsel for the petitioner argued that the petitioner had reached the office of the AO at 12:20 p.m., just 10 minutes after the witness Pradeep Kumar Sehgal had left the office of the AO. He contended that the AO could have called the witness back so as to facilitate cross-examination but he refused to do so and submitted that by not providing an opportunity to cross examine, the AO has not followed the order of this Court in its true spirit and has thus breached the directions passed by this Court. He argued that the impugned order not only suffers from violation of principles of natural justice but the same is also contrary to the order of this Court and thus liable to be quashed and set aside.
9. He further argued that the entire basis of the demand as raised against the petitioner is, the slip which records an amount of Rs.10,000/- which too incorrectly records petitioner’s name. He submitted that in the facts of the present case, unless the petitioner is given an opportunity to cross-examine the said Pradeep Kumar Sehgal, whom the petitioner does not even know, such amount cannot be added in petitioner’s income, when there is no other incriminating material. He, therefore, submitted that the impugned demand raised against the petitioner is liable to be quashed on this ground as well.
10. Mr. Mann, learned counsel for the respondent, on the other hand, argued that the AO has complied with the directions contained in the order dated 30.04.2026 in both letter and spirit. He highlighted that admittedly he had given 10 days’ prior intimation to the petitioner and call the witness Pradeep Kumar Sehgal for cross-examination, who remained in the office from 11:30 p.m. to 12:10 p.m. waiting for the petitioner, but when the petitioner did not come he had no other option but to leave.
11. Learned counsel submitted that neither the petitioner nor his Counsel had the courtesy to even inform the AO that they would be late, so that the AO could have asked the witness to wait for some time.
12. Mr. Mann further submitted that in the interest of justice, the AO had called not only Pradeep Kumar Sehgal but also Yogesh Jain to ensure that complete justice was done and hence, it cannot be said that the AO had acted arbitrarily or vindictively in any manner.
13. Inviting the Court’s attention towards the assessment order, learned counsel submitted that it was the petitioner himself, who did not want to cross-examine the witnesses so as to take undue advantage of the situation and thus no indulgence be granted.
14. Heard learned counsel for the parties.
15. On appraisal of the facts on record, we are of the view that the petitioner has been indolent and negligent so far as taking up the proceedings with due diligence and requisite seriousness is concerned. When this Court had set aside the assessment order and directed the AO to grant an opportunity to cross-examine, it was imperative for the petitioner to be ready for cross-examination. The petitioner’s approach of not keeping himself or his counsel available for the purpose of cross-examination, when the AO had given him atleast 10 days notice in advance cannot be countenanced. His plea that he was busy attending the hearing in the High Court is a lame excuse. An assessee has to prioritise his cases.
16. Be that as it may. What persuades us to intervene is, the AO’s own action of acceding to petitioner’s request. Indisputably, at petitioner’s request the then AO had issued another notice to the petitioner and to the witnesses (Pradeep Kumar Sehgal and Yogesh Jain) to appear on 26.05.2026, on which date they (witnesses) did not appear but the petitioner and his counsel did come. Therefore, by his own action, the AO had condoned petitioner’s fault or negligence of not appearing on 19.05.2026. Such being the position, the AO in our opinion could not have backtracked and said that the petitioner had failed to avail opportunity to cross examine on 19.05.2026.
17. Despite holding above opinion, we feel that the witnesses cannot be called again and again to serve the cause of the petitioner. Their time also has its own value. Therefore, while allowing the present petition and setting aside the impugned assessment order dated 22.09.2026, we hereby direct that the petitioner shall have to pay costs of Rs.25,000/- to each of the witnesses, when they come for cross-examination.
18. The AO shall fix a suitable date of hearing preferably between 16.11.2026 to 30.11.2026 and inform the petitioner and witness(es) atleast 07 days in advance and provide an opportunity to cross-examine Pradeep Kumar Sehgal and Yogesh Jain. It shall be incumbent upon the AO to ensure that said Pradeep Kumar Sehgal and Yogesh Jain are available for cross-examination at the time of hearing, so fixed. In case the witness(es) do not appear on the date fixed, the AO shall fix another date. But if on 3 occasions, the witness(es) do not come, the AO shall pass order in accordance with law without waiting any further.
19. In case, the cross-examination is done, the AO shall pass fresh assessment order in accordance with law, giving due regard to the cross-examination.
20. The petitioner shall keep pay order/Banker’s cheque of Rs.25,000/- each drawn in the name of Pradeep Kumar Sehgal and Yogesh Jain ready with him to be handed over to the respective witness(es) as and when they appear for cross examination; their cross-examination shall be allowed only on payment of the aforesaid cost(s).
21. With the aforesaid observations, the petition stands allowed. Pending application(s) stands disposed of.
