By K. B. Bhujle, Advocate
New Page 2
II. Reported :
48 Assessment : Validity : S. 131 and S. 143
of Income-tax Act, 1961 : Statement of third party relied on by AO : Third party
retracted statement subsequently : Assessee not allowed to cross-examine third
party : Principles of natural justice violated: Assessment order not valid.
[Prakash Chand Nahta v. CIT, 301 ITR 134 (MP)]
The assessee was carrying on the business of trading in
silver ornaments, utensils, etc. Certain silver ornaments found in the course of
search were explained by the assessee as being purchased by the assessee from
one R. R who had initially denied the transaction in his statement, but he
subsequently retracted the statement and accepted the transaction. The assessee
had filed the correspondence made by him and R regarding the payment of the
amount. The Assessing Officer accepted all the entries recorded in the amanat
book except the entries pertaining to R. The affidavit of R and the bank
transaction made by him were ignored. On the basis of the original statement
made by R, the Assessing Officer made an addition of Rs.3,49,225. The assessee
made a prayer u/s.131 of the Act to summon R for cross-examination. The prayer
was not acceded to and the assessment order was passed. The Tribunal upheld the
assessment order observing that the statement of R was fairly communicated to
the assessee and that apart, it was not the case of the assessee that he did not
know what R had stated.
The Madhya Pradesh High Court allowed the appeal filed by the
assessee and held as under :
“The Assessing Officer had not summoned R in spite of the
request made u/s.131 of the Act, the evidence of R could not have been used
against the assessee and in the absence of affording a reasonable opportunity
of being heard by summoning the said witness, the assessment order was
vitiated.”
