2023 (4) TMI 466 - AT - Income Tax

Addition u/s. 68 - accommodation entry taken from investor company - Addition based on Investigation Wing Report - not allowing opportunity of cross-examination to assessee - HELD THAT - Assessee filed copies of bank statement of the assessee along with bank statement of Investor Company confirmation issued it ITR acknowledgement and assessment order wherein no addition has been made by the AO in the hands of investor company. DR has also not controverted that the assessee filed objection letter wherein the assessee requested to provide documents and statements relied on by the Investigation Wing and the AO. Further from the copies of the letter noted that the assessee again requested to provide copies of the documents and statements and to provide opportunity of cross-examination but unable to see any action by the AO on the said consecutive three requests of the assessee. Respectfully note that their Lordships in the case of Pradeep Kumar Gupta 2006 (11) TMI 184 - DELHI HIGH COURT held that the assessment proceedings on the basis of deposition of third party without allowing opportunity of cross-examination of the said party to the assessee despite specific demand was not valid. Thus addition made by the AO and upheld by the ld.CIT(A) is not valid and sustainable - Decided in favour of assessee.

Summary

Issues Involved:
The appeal filed by the assessee against the order of the CIT(A)-1, New Delhi, dated 11.01.2018, for Assessment Year 2009-10.

Grounds No. 3 and 4:
The ld. AR argued that the addition of Rs. 10 lakhs under section 68 for alleged accommodation entry was unjustified as the transaction was genuine. The AR provided various documents to support the genuineness of the transaction, including bank statements, financial statements, and confirmation of share allotment.

The AR emphasized that no defects were found in the submitted documents, and no direct inquiry was made by the AO. The AR contended that without any adverse material or evidence, the addition made by the AO lacked a sustainable basis. Additionally, the AR highlighted that the identity and creditworthiness of the investor were established through proper documentation and payment methods.

The AR raised concerns about the lack of cross-examination of relevant persons and the failure to provide copies of adverse material used against the assessee. Citing relevant case laws, the AR argued that the principles of natural justice were not followed during the assessment proceedings, and the AO's actions were not justified.

Arguments and Decision:
The Sr. DR supported the AO's decision based on information from the Investigation Wing regarding alleged accommodation entries. However, upon careful consideration, it was noted that the assessee had provided all necessary documents to prove the genuineness of the transaction, and repeated requests for cross-examination and relevant documents were ignored by the AO.

Referring to precedents, it was highlighted that the failure to provide opportunities for cross-examination and withholding relevant statements undermined the validity of the addition under section 68. The judgment favored the assessee, directing the AO to delete the addition as it lacked a valid and sustainable basis.

Therefore, the appeal was partly allowed, emphasizing the importance of following due process and providing necessary opportunities for defense during assessment proceedings.

Order pronounced in the open court on 14.03.2023.