Assessment Order Quashed for Failure to Allow Cross-Examination: ITAT

Assessment Order Quashed for Failure to Allow Cross-Examination: ITAT

Introduction

The Income Tax Appellate Tribunal (ITAT) has set aside an assessment order due to the Assessing Officer’s failure to provide a proper opportunity for cross-examination of witnesses.

Factual Background

The assessee had filed a return of income for the relevant assessment year, which was selected for scrutiny assessment. During the assessment proceedings, the Assessing Officer made certain additions to the assessee’s income based on statements from certain individuals.

Procedural Background

The assessee requested cross-examination of these witnesses, but the Assessing Officer did not allow it. The assessee challenged the assessment order before the ITAT, arguing that the lack of opportunity for cross-examination was a violation of natural justice.

Contentions of the Parties

• Assessee’s Contentions: The assessee argued that the assessment order was invalid due to the lack of opportunity for cross-examination of witnesses.
• Revenue’s Contentions: The revenue argued that the assessment order was valid and that the assessee had been given sufficient opportunity to present their case.

Tribunal’s Analysis

The ITAT observed that the Assessing Officer had failed to provide a proper opportunity for cross-examination of witnesses, which is a fundamental principle of natural justice. The Tribunal noted that the assessee had specifically requested cross-examination, but the Assessing Officer had not allowed it.

Reasoning & Analysis

Unlike the earlier split-verdict Supreme Court case involving Justices B.V. Nagarathna and Satish Chandra Sharma, this decision was delivered solely by the ITAT.

The Tribunal emphasized that cross-examination is essential to test the veracity of statements and to ensure fairness in the assessment process. It held that the assessment order was not sustainable in law due to the violation of natural justice.

Implications

This decision underscores that principles of natural justice must be strictly followed in assessment proceedings. Denial of cross-examination can render the entire assessment legally unsustainable.

Outcome

The ITAT set aside the assessment order and directed the Assessing Officer to reconsider the matter after providing a proper opportunity for cross-examination. This ensures that the assessee is given a fair and transparent hearing.

Representation

In this case, the Income Tax Department was represented by Additional Solicitor General N Venkatraman, Senior Advocate Swarupama Chaturvedi, and Mr. Raj Bahadur Yadav, Mr. H.R. Rao, Mr. Udai Khanna, Mr. V. Chandrashekhara Bharathi, Mr. Ashok Panigrahi, Mr. Sachin Sharma, Ms. A. Deepa, and Ms. Madhulika Upadhyay (Advocates).

The respondents were represented by Senior Advocate J.D. Mistry with Advocates Rubal Bansal Maini, Prakhar Pandey, Satvik Sareen, and Faisal Sherwani from Luthra & Luthra. In addition, Mr. Nitesh Joshi, Mr. Kunal Cheema, Mr. Raghav Deshpande, and Mr. Shubham Chandankhede also represented the respondents.