ACIT Vs AMR India Limited (ITAT Hyderabad)
Abatement Helps Revenue, But Evidence Saves Assessee – ITAT Deletes Additions on Merits- Technical Win for Revenue, Ultimate Victory for Assessee – ITAT Restores All Deductions- Statements Without Cross-Examination Are Legally Worthless
This case beautifully illustrates how, even in search assessments, the Revenue cannot bypass evidence & natural justice. Assessee was subjected to a search, & proceedings u/s 153A were initiated for AYs 2017-18 & 2018-19. CIT(A) had deleted the additions by applying the Supreme Court’s landmark decision in Abhisar Buildwell, holding that in the absence of incriminating material for “unabated” years, no addition could be made. Revenue, however, challenged this & Tribunal first examined whether the assessments were actually abated or unabated by looking at return filing dates & 143(2) limitation. It held that in both years, the time to issue 143(2) had not expired on the date of search-therefore, both assessments were “abated.” As a result, the Tribunal rightly observed that CIT(A) was incorrect in applying Abhisar Buildwell & therefore allowed the Revenue’s appeals only on the technical aspect of abatement. However, the story did not end there.
For AY 2017-18, the core issue was the disallowance of depreciation on machinery allegedly purchased in AY 2013-14. AO relied solely on a statement of a third party recorded in some other search, claiming that the supplier had issued accommodation bills. No independent inquiry was conducted. No cross-examination was offered. Assessee, on the other hand, had produced purchase invoices, delivery documents, proof of payment through banking channels, & most importantly, depreciation had been consistently allowed in all earlier years. Tribunal emphasized that depreciation cannot be disallowed in later years when its genuineness had been accepted in the year of acquisition. Tribunal invoked the Supreme Court’s rulings in Andaman Timber Industries & Kishanchand Chellaram, reiterating that any statement used against an assessee must be confronted & an opportunity of cross-examination must be granted. Denial of such opportunity strikes at the very root of natural justice. Tribunal noted that there was no evidence whatsoever to show the machinery did not exist or that the transaction was sham. Mere suspicion or reliance on an untested statement is insufficient. Thus, while the Revenue succeeded technically on abatement, the depreciation disallowance failed on merits. Tribunal restored full depreciation & allowed the cross-objection of the assessee.
