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2019 Supreme(SC) 2375
SUPREME COURT OF INDIA
ROHINTON FALI NARIMAN, INDU MALHOTRA, JJ.
Commissioner of Income Tax, New Delhi – Petitioner
Versus
M/s Odeon Builders Pvt. Ltd. – Respondent
Review Petition (C) Diary No. 22394 of 2019, Civil Appeal Nos. 9604-9605 of 2018
Decided On : 21-08-2019
Disallowance of expenses based solely on third party information without further scrutiny and denial of opportunity for cross-examination is not justified.
Headnote:
Tax Effect - Disallowance of Expenses - The court found that a disallowance of expenses based solely on third party information, without further scrutiny and denial of opportunity for cross-examination, was not justified. The judgments of the lower courts were upheld based on concurrent factual findings.
Fact of the Case:
The court found that the disallowance of expenses was based solely on third party information without further scrutiny and denial of opportunity for cross-examination.
Finding of the Court:
The court upheld the judgments of the lower courts based on concurrent factual findings and dismissed the review petitions.
Issues: The issue was the disallowance of expenses based on third party information without further scrutiny and denial of opportunity for cross-examination.
Ratio Decidendi: The disallowance of expenses based solely on third party information without further scrutiny and denial of opportunity for cross-examination was not justified.
Final Decision: The review petitions were dismissed.
ORDER :
1. Delay condoned.
2. We have perused the review petition and find that the tax effect in this case is above Rs. 1 crore, that is, Rs. 6,59,27,298/-. Ordinarily, therefore, we would have recalled our order dated 17th September, 2018, since the order was passed only on the basis that the tax effect in this case is less than Rs. 1 crore.
3. However, on going through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs. 19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating:
“Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques and VAT Registration of the sellers and their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs. 19,39,60,866/- is directed to be deleted.”
4. The ITAT by its judgment dated 16th May, 2014 relied on the selfsame reasoning and dismissed the appeal of the revenue. Likewise, the High Court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT.
5. In these circumstances, the Review Petitions are dismissed.
