Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Online)(ITAT) 6467

INCOME TAX APPELLATE TRIBUNAL (CHENNAI BENCH)
Shri Manu Kumar Giri, J, Shri S.R. Raghunatha, ACJ
Shri. Naina Mohamed Seyad Abdul Kareem – Appellant
Versus
Shri. R. Clement Ramesh Kumar, C.I.T. – Respondent
ITA Nos.: 3267, 3268 & 3272/Chny/2024 | ITA Nos.: 3269, 3270 & 3271/Chny/2024 | ITA Nos.: 106 to 108/Chny/2025 | ITA Nos.: 112 to 114/Chny/2025

Advocates:
For the Appellant: Shri. B. Ramakrishnan, F.C.A.
For the Respondent: Shri. R. Clement Ramesh Kumar, C.I.T.

The Tribunal emphasized that reliance on unverified witness statements without allowing cross-examination constitutes a breach of natural justice, rendering the assessments invalid.

Headnote:(A) Income Tax Act, 1961 - Sections 69 and 245D - Assessment years 2012-13 to 2014-15 - Addition of unaccounted investments confirmed by CIT(A) based on ITSC order while ignoring appellants’ independent merits and violating principles of natural justice - Tribunal finds reliance on third-party statements inappropriate without cross-examination - Resultantly, additions set aside due to insufficient evidence and procedural impropriety. (Paras 28, 29)

(B) Natural Justice - Denial of cross-examination of third-party witnesses directly affects the validity of the assessment - This principle reiterated with respect to SC precedents. (Paras 25, 26)

Facts of the case:
The appeals arise from additions made for unaccounted investments at the behest of third-party statements during assessments following a search on the Seyadu Group conducted on 28.06.2017. The CIT(A) affirmed the AO’s additions, largely adopting findings from a prior ITSC order without independent evaluation of evidence. The appellants challenged the basis of the assessments noting procedural deficiencies and lack of corroborative evidence linking them to the investments questioned.

Findings of Court:
The Tribunal determined that the AO relied heavily on unverified witness statements and rejected the appellants' claims without adequate investigation, thus calling into question the integrity of the associated assessments. The court emphasized the importance of fair hearing principles, which were not followed in this instance.

Issues: The court addressed whether the CIT(A) erred in enhancing the AO’s additions without adequate evidence and proper consideration of the appellant’s submissions on merits.

Ratio Decidendi: The reliance on uncorroborated statements without allowing cross-examination of involved parties constituted a breach of natural justice principles, leading to flawed assessments that could not stand in light of established judicial standards.

Result: Appeals allowed.

Table of Content
1. assessment was based solely on unverified statements without acknowledging the lack of independent evidence. (Para 3 , 4 , 5)
2. appellants challenged the grounds of assessment and procedural fairness not being upheld. (Para 10 , 11 , 14)
3. the significance of cross-examination for maintaining procedural justice and reliability of evidence. (Para 24 , 28)

आदेश/ORDER

PER BENCH:

These fifteen appeals filed by the assessee are directed against separate orders of even date 25.10.2024 passed by the ld. Commissioner of Income Tax, (Appeals) -19, Chennai. Since, facts are identical and issues are common, for the sake of convenience, the appeals filed by the separate assessee are being heard together and disposed of by this consolidated order.

2. The assessee has raised the following similar concise grounds of appeal for the assessment years 2012-13 to 2014-15. For the sake of brevity the grounds raised for the A.Y. 2012-13 ITA No.3267/Chny/2024 in the case of Sri. Naina Mohamed Seyadu Abdul Kareem are given below:

1. The order of the Learned Commissioner of Income Tax (Appeals) is contrary to the law, facts and circumstances of the case.

2. For that the Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.11,79,456/- as 'unaccounted investments' u/s.69 of the Act towards deposits made in M/s.Seyad Cotton Mills Limited ("SCML" in Short) during the relevant previous year.

3. For that the Learned Commissioner of Income Tax (Appeals) had erred in making an enhancement of Rs.93,669/- to the above mentioned addition made by relying upon the Order passed by the Hon'ble Income Tax Settlement Commission dated 06.09.2023 u/s.245D(4) of the Act in the case of three Directors of SCML (ie) Shri.F.Sadiq, Shri.T.E.S.Naina Mohammed and Shri.F.Seyad Rabbani.

4. Without prejudice to the above, the Learned Commissioner of Income Tax (Appeals) erred in rejecting the alternate plea of the appellant that only the fresh investment made out of the undisclosed income earned during the respective AYs 2012-13 to AY 2014-15 ought to be taxed in the hands of the appellant amounting to Rs.18,56,000/- in AY 2013-14 & Rs.18,40,625/- in AY 2014-15.

For these grounds and such other grounds that may be adduced before or during the hearing of the appeal, it is prayed that the Hon'ble Tribunal may be pleased to delete the addition made and/or provide such other relief as this Hon'ble Tribunal may deem fit.

3. The common brief facts are as under:

A search was conducted in the case of Seyadu group of concerns at Tirunalveli on 28.06.2017, wherein offices and residences of various entities and individuals related to the group were covered in the search operations. Residence of the assessee at A-19, (6/1), 23^rd Cross Street, Maharaja Nagar, Tirunalveli, was also covered. Later the case was centralised to Central Circle - 1, Madurai. Notice u/s.153A of the Act was issued to the assessee for various A.Ys. 2012-13 to 2017-18 on 20.11.2018 on the basis of material evidence gathered. Pursuant to these notices the return of income were filed electronically on 17.12.2018 for all these assessment years. The notices u/s.143(2) of the Act were issued on 11.01.2019.

4. The assessee filed the details and other documents called for were filed from time to time during the assessment proceedings. The assessee also filed objections during assessment proceedings. However, the AO after perusal of the submissions and objections filed by the assessee concluded the assessment by making the following additions and passed orders u/s.143(3) r.w.s.153A of the Act dated 24.12.2019.

Addition made u/s 69 of the Act towards deposits in M/s.Seyad Cotton Mills Limited:

During the course of post search operations in the premises of M/s. Seyad Cotton Mills Ltd (‘SCML’), from a Fixed deposit ledger maintained in the accounting application, it was noticed that there was high value deposits made over the period FY 2011-12 to 2013-14. The total amount of fixed deposit rece

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