The New Delhi bench of Income Tax Appellate Tribunal in Rajat Exports Import (India) Pvt. Ltd versus ITO held that if no opportunity for cross-examination is granted then the statement of third parties cannot be treated as solid evidence.
In the instant case Assessee produced certain documents like bank statement, share application form from investors, confirmation of share subscribers and ROC master data to the lower authorities with regard to addition under Section 68 of Income Tax Act.
The assessee also added that all the transactions are through banking channels and they are having sufficient means to make further investments.
However, the AO was not satisfied with the said evidences and found that no evidences for allotment of shares like Form No. 2 was provided during assessment proceedings. Assessee denied the explanation given by AO and added before this tribunal that Copy of Form No. 2 i.e. ROC return filed before the ROC declaring the allotment of shares is filed in PB.
Assessee already filed the certificate in the PB which is already submitted before CIT (A) and to the AO. The counsel for Assessee stated that these all are according to the suspicion of the AO to make addition against Assessee and he didn’t make any move to prove that the said document is untrustworthy.
The AO also noted in the assessment order that DIT during the investigation had taken the statements of three persons regarding the allegation but AO did not provide any opportunity to cross examine these persons on behalf of assessee to find out the truth.
Finally the bench including Judicial Member Bhavnesh Saini and Accountant Member L.P Sahu stated that initial burden of Assessee to prove identity and creditworthiness of the investors have been discharged and AO did not granted an opportunity for Assessee to cross examine those persons.
Accordingly, the bench held that statement of outsiders or third parties is not a ground for evidence to make additions.
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