Shiv Charan Vs ITO (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT) in Delhi recently pronounced a decision in the case of Shiv Charan Vs ITO that could serve as a significant reference for procedural fairness in income tax adjudication. The case brings to light the importance of Section 68 of the Income Tax Act and emphasizes the necessity for the Assessing Officer (AO) to give the assessee an opportunity for cross-examination, particularly when third-party statements are involved. This article delves into the details of the case, highlighting key issues and implications.
Background
The appellant, Shiv Charan, contested an income tax addition of Rs. 68,30,000 made by the AO. He pointed out various lapses in the procedure followed, which included not issuing a show-cause notice and not allowing him the opportunity for cross-examination of a third person whose statement was used against him.
Violation of Procedure
One of the main grounds on which Shiv Charan based his appeal was that the procedure under sections 149-151 of the Income Tax Act was not followed. There was no proper inquiry before issuing the notice under Section 148, and he was not given copies of the reasons recorded by the AO, which is a violation of procedural fairness.
Issue of Natural Justice
Shiv Charan argued that the AO’s action is against natural justice. The ITAT order, in this case, emphasized that failure to allow cross-examination on the statement of a third party, who has been relied upon by the lower authorities, is “fatal” to the orders.
Assessment of Source of Income
Shiv Charan clearly demonstrated the source of the cash deposit in his bank account. He had sold agricultural land, and the funds received from the sale were what had been deposited into his bank account. Despite this, the lower authorities did not consider his explanation.
ITAT’s Decision
The ITAT ordered a fresh adjudication, allowing Shiv Charan to place all relevant documentary evidence and submissions during the proceedings. The issue was restored to the file of the Assessing Officer for fresh adjudication after allowing due opportunity of hearing to Shiv Charan.
Conclusion
The Shiv Charan Vs ITO case serves as a crucial benchmark in upholding procedural fairness and natural justice in income tax adjudications. Not only did it stress the importance of following proper procedures as laid down by the Income Tax Act, but it also highlighted the imperativeness of allowing an assessee to cross-examine third-party statements that are used against him. This case reaffirms that procedural missteps can have far-reaching consequences and underscores the need for fair play in tax law proceedings.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal has been filed against the order of Ld. CIT(A), Karnal dated 02.08.2017 for AY 2011-12.
2. The grounds of assessee are as follows:-
1 That on the facts and circumstances of the case, the Id AO has erred in law not following the procedure u/s 149- 151 of IT Act, 1961 before making the assessment in the case of appellant..
i) No enquiry was made by the Id O before issuing the notice u/s 148. The notice u/s 148 was issued mere on the basis of information from DDI(Inv), Panipat.
ii) That the copies of reasons recorded by the Id A O and approval given by the competent authority not provided to the appellant.
iii) That no show cause notice was issued by the Id AO to the appellant before making the assessment.
2 That on the facts and circumstances of the case, the order of the Id AO is against the natural justice, while making the addition of Rs 6830000/- in the income of appellant, whereas the appellant has proved the source of cash deposited into his bank.
3 That on the facts and circumstances of the case, both the lower authorities have erred in law not providing opportunity of cross examination of the third person of which
statement was used against the appellant in making/confirming the adverse order.
4 That on the facts and circumstances of the case, the ld AO has erred in law in applying sec 68 in the case of appellant.
5 That on the facts and circumstances of the case, both the lower authorities have erred in making/confirming the addition of Rs 6830000/-in the income of appellant. Lt Sh Nakli Ram (Father of appellant) sold his parental Ag land to one Sh Asgar Ali resident of same village and the sales consideration of Ag land was deposited into bank o f appellant on same day or next day of sales of Ag land. Date wise detail of the Ag land sold, amount received and deposited into the bank of appellant is as under:-
(On 03-05-2010 Ag land ( measuring 39K-14M-7S @ Rs 23.20 lakh per acre) sold as per agreement dt 03-05-2010 for a total sum of Rs 11600000/- by Lt Sh Nakli Ram f/o appellant to Sh Asgar Ali, which was registered on dt 28-03-2011 for a sum of Rs 30.00 lakh on the request of purchaser as it is a prevalent practice in land transactions.
