Law:

Section:

Section 147 of the Income-tax Act, 1961 - Income escaping assessment - Genral Reassessment based on deposition of third party without allowing opportunity to assessee to cross examine third party is not valid Once sections 147 and 148 are resorted to, the Assessing Officer must first discharge the burden of showing that income has escaped assessment. It is only thereafter that the assessee has to provide all the answers. There is no reason why the initial burden of proof should not rest on the Assessing Officer even where the assessment has gone through under section 143(1). Assessments of the assessee were reopened. The case of the revenue was that the Assessing Officer had received information from the Dy. Director of IT (Inv.), Faridabad that while carrying out post-search enquiries relating to a third party, the sole proprietor of firm had deposed that he was providing bogus/false transactions purporting to sell/purchase of foodgrain items and that the cash deposits with him were from parties who had approached him for 'accommodation entries' in the form of agricultural receipts. The enquiries with the banks on whom cheques were drawn and credited in the account of the firm, showed that the assessee was also the beneficiary of such illegal transactions. Based on the sworn statement of sole proprietor of the firm proceedings against the assessee under section 147/148 were initiated. The assessee demanded an opportunity to cross-examine the sole proprietor but that was declined on the ground that the statement of that person had been recorded by the Dy. Director of IT (inv.), Faridabad. While the assessee did not deny that it had sold produce to the firm and had submitted copies of the bills issued by the latter, it maintained that those sales were genuine. Held that it was mandatory for the revenue to produce the proprietor for cross-examination by the assessee on its specific demand in that regard. Therefore, the reopening of assessment based on deposition of the third party was not justified. Mrs. P.L. Bansal for the Appellant. Dr. Rakesh Gupta and Jitenjter Saini for the Respondent. JUDGMENT The Revenue has filed these appeals against the order of the…

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