The Income Tax Appellate Tribunal (ITAT), Delhi Bench ruled that the addition against the wife cannot be made solely relying upon statements of the husband recorded under section 131 of Income Tax Act, 1961.
The assessee, Sunita Gadde filed return of income declaring income of Rs.38,82,621/-. In this case information was received that during the course of survey conducted on the above assessee as well as other Group Promoter of Lingaya Group Society, various incriminating documents were found, examined and impounded.
As per investigation reports received, Assessee had paid a consideration of Rs.3.15 crores towards purchase cost of farm house. The seller Smt. Jaya Sharma stated the fact on oath during the course of her deposition under section 131 of the Income Tax Act, 1961, that both have paid Rs.3.15 crores towards purchase cost and out of the total amount of Rs.3.15 crores, Rs.2.10 crores were paid in cash and balance amount of Rs.1.05 crores were paid through cheque. Smt. Jaya Sharma furnished a letter addressed to DDIT (Inv.) that she would pay taxes on that.
Accordingly, reasons were recorded for reopening of the assessment and notice under section 148 was issued. The assessee filed letter before AO intimating that original return filed may be treated as return having filed in response to notice under section 148. The assessee filed objections to the reopening of the assessment before AO which have been rejected.
The assessee has stated that she had purchased the property for Rs.1.05 crores and has not paid any other amount for purchase of this agricultural land. The A.O. did not accept the contention of the assessee in view of the statement recorded of Jaya Sharma under section 131 that assessee and her husband have paid cash to her. The A.O. also noted that husband of the assessee Picheswar Gadde who is also co-owner of 50% share in the property in his statement recorded during the course of survey admitted that he has sold the property to M/s. Mapple Destination Dreambuilt P. Ltd., for an amount of Rs.6.61 crores, out of which, part amount was paid through cash and part was paid through cheque and admitted to pay taxes thereon.
The assessee challenged the addition before the CIT(A) as well as the reopening of the assessment. The assessee also contended before the CIT(A) that no right of cross-examination had been given to the statement of Jaya Sharma which is recorded at the back of the assessee and used against the assessee, therefore, it cannot be read in evidence against the assessee.
The CIT(A) rejected the contention of assessee as well as rejected the contention of assessee that no right of cross-examination has been given to the statement of Jaya Sharma because it is not an absolute right of assessee. The appeal of assessee was accordingly dismissed.
The Coram of O.P.Kant and Bhavnesh Saini clarified that it is well settled Law that any material collected at the back of the assessee or any statement recorded at the back of the assessee cannot be read in evidence against the assessee unless the same is confronted to the assessee and that assessee should be allowed to cross-examine to such statements.
The ITAT observed that the AO has failed to produce Jaya Sharma before assessee for cross-examination on behalf of the assessee particularly when Smt. Jaya Sharma has retracted from her statement.
Therefore, the Tribunal held that it was the duty of the AO to produce Jaya Sharma at the reassessment proceedings to allow cross-examination to her statement on behalf of the assessee, so such statement and material collected at the back of the assessee, cannot be read in evidence against the assessee.
“The statement of the husband of the assessee and Shri Rakesh Sejwal are not relevant to the matter in issue and as such, they cannot be the basis for making any addition against the assessee in the assessment year under appeal. Considering the totality of the facts and circumstances of the case it is clear that there was no basis for the A.O. to make any addition against the assessee of Rs.1.05 crores,” the ITAT added.