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2018 (12) TMI 742 - AT - Income TaxAddition u/s. 68 - disallowance of interest expenditure relating to loans added u/s. 68 - Non supply of copies of statements nor afforded opportunity of cross examination - Held that:- AO did not make further enquiries on the evidences furnished by the assessee. AO has simply rejected them without assigning any reasons. In fact, the assessee has produced the lenders before the AO, who have also confirmed the loan transactions. Instead the AO has placed reliance on the report given by search officials, brushing aside the confirmation given by the lenders and also brushing aside the various documents furnished by the assessee to prove the cash credits. Even though the AO has stated that the assessee has failed to prove the three basic tenets of a legal loan transaction, yet he has not substantiated the same with any credible reasons. Hence, it is a case of mere rejection of various evidences furnished by the assessee. We notice that the AO had asked the assessee to produce books of accounts from one of the lenders, which were not produced. Supreme Court has held in the case of Kishanchand Chellaram vs. CIT [1980 (9) TMI 3 - SUPREME COURT] that the materials, which were not supplied to the assessee, could not be used against the assessee. The Hon’ble Supreme Court in the case of Andaman Timber Industries [2015 (10) TMI 442 - SUPREME COURT] has held that, if the statements of the witnesses were the basis for passing the orders, then not allowing assessee to cross examine witnesses by Adjudicating Authority amounted in serious flaw which make impugned order nullity as it amounted to violation of principles of natural justice. Hence, for these reasons also, the impugned additions cannot be sustained. - Decided in favour of assessee.
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