No Additions Relying Upon Statements of Transporters Without Providing Opportunity to Cross-examine: HC

Case Details: Sree Trading Corporation v. ITO - [2023] 151 taxmann.com 486 (Telangana)

Judiciary and Counsel Details

• • Ujjal Bhuyan, C.J & N. Tukaramji, J.
  • Ms. I. Maamu Vani, Ld. Counsel for the Appellant.
  • J.V. Prasad, Ld. Standing Counsel for the Respondent.

Facts of the Case

The assessee was carrying on the business of commission agent for a company which included transportation of its products all over the country. It had shown a certain amount as outstanding to be paid to four transporters whose vehicles were utilized by it during the assessment year. In support of such credits, it furnished confirmation letters from the transporters and produced some vouchers and TDS certificates.

Assessing Officer (AO) took the view that the amount shown as outstanding to transporters was not genuine and added the same to the assessee’s income.

On appeal, CIT(A) confirmed AO’s order which the Tribunal further upheld. The matter then reached Telangana High Court.

High Court Held

The High Court held that the AO had relied upon statements made by the transporters adverse to the assessee, which were not furnished to the assessee. It is the settled proposition of law that before income tax authorities can use a document submitted by a person to an income tax officer, they have a legal obligation to present it to the taxpayer. This allows the taxpayer to challenge the information in the document by requesting an opportunity to question the person who made the statements in the document.

Furthermore, it is also a settled proposition of law that if the adjudicating authority denies the taxpayer the opportunity to cross-examine witnesses, even though the statements of those witnesses formed the basis of the disputed order, it constitutes a significant flaw. This flaw renders the order null and void, violating the fundamental principles of natural justice.

Therefore, the assessee should have been allowed to rebut the same by cross-examining the deponent to extract the truth. Failure to provide such an opportunity amounted to a violation of the principles of natural justice, which vitiated the order of the AO.

List of Cases Reviewed

• • IT Appeal No. 1098 (Hyd.) of 2004, dated 5-10-2005 set aside.
  • Kishinchand Chellaram v. CIT [1980] 4 Taxman 29/125 ITR 713 (SC)
  • Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3/52 GST 355 (SC) (para 23) followed.

List of Cases Referred to

• • Kishinchand Chellaram v. CIT [1980] 4 Taxman 29/125 ITR 713 (SC) (para 9)
  • Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3/52 GST 355 (SC) (para 9).