Income Tax Addition u/s 68 of Income Tax Act without giving Opportunity to Assessee for Cross Examination of Third Person: ITAT orders Fresh Adjudication [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that the inaction and omission on the part of Assessing Officer (AO) as well as Commissioner of Income Tax (Appeals) [CIT(A)] not providing cross examination on the statement of a witness who has been relied by the assessee is fatal to the orders of the authorities, thus restored the matter to the file of AO for a fresh adjudication.

The assessee in present case is Shiv Charan, Nakli Ram (Father of assessee) sold his parental Agricultural land to  Asgar Ali resident of same village and the sales consideration of Agricultural land was deposited into bank of appellant on same day or next day of sales of Agricultural land.

During the assessment proceeding the AO has made addition under Section 68 of the Income Tax Act,1961 alleging that the assessee has failed to explain source of cash deposits made to his bank account  of Rs. 38 lakh, Rs.30,000/- and Rs. 30 lakh on received on three respective dates and made total addition of Rs. 68,30,000/-.

Aggrieved by the order the assessee filed an appeal before the CIT (A) which upheld the decision of AO and dismissed the appeal of assessee.

Further aggrieved the assessee filed an appeal before the Tribunal.

The Authorised Representative of the assessee (AR) B Sharma, submitted that when the assessee has sold his agricultural land which does not subject to provisions of long term or short term capital gain then the amount shown in the registered sale deed and amount of on money not included in the sale deed cannot be considered as unexplained money when the assessee successfully demonstrate the link between transaction of sale of agricultural land and cash deposit to his or his family members bank account.

He further added that the impugned amount of Rs. 68,30,000/- being part of consideration received by the assessee against sale of agricultural land which is not a capital asset, may kindly be treated as explained and AO may kindly be directed to delete the addition.

The Departmental Representative (DR) S.L Anuragi supported the assessment order and submitted that since the AO rightly held that the assessee is failed to explain source of impugned deposits to his bank account therefore the AO was right in making addition in the hands of assessee under Section 68 of the Income Tax Act.

The Tribunal observed that father of assessee Nakli Ram agreement executed sale of agricultural land at the rate of Rs. 23,20,000/- per acre total agreed amount Rs. 1,16,00,000/- and received of Rs. 40 lakh advance in cash. Further from the copy of registered sale deed it reveals that the father of assessee executed registered sale deed in favour of Asgar Ali mentioning total sale consideration of Rs. 30 lakh received in cash at the residence of seller Nakli Ram father of assessee.

From the copy of letter address to CIT (A)  further reveals that the assessee again requested to provide cross examination on the said witness but the same was not provided. This inaction and omission on the part of AO as well as CIT(A) not providing cross examination on the statement of a witness who has been relied by the by them is fatal to the orders of the authorities below.

Further copy of sale deed registered reveals that the father of assessee Nakli Ram executed registered sale deed under the said agreement in favour of SAsgar Ali showing consideration of Rs. 30 lakh cash and the alleged amount of Rs. 30 lakh was deposited  which is matching with the quantum of consideration shown in the registered sale deed which is matching with the explanation of assessee.

The Bench comprising of Chandra Mohan Garg, Judicial Member and Pradip Kumar Kedia, Accountant Member held that the contention of assessee that the on money received by the seller in cash under transaction of sale of agricultural land, which is not subject to any capital gain or loss, deposited to the bank account cannot be treated as unexplained credit to invoke provisions of Section 68 of the Income Tax Act.

Thus the sole issue on merits was restored to the file of Assessing Officer for afresh adjudication after allowing due opportunity of hearing to the assessee and without being influenced with the earlier assessment and first appellate order.

Hence the appeal of the assessee is allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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