Case Law (SC) – Before the disallowing the claim of professional expenses of the assessee by the revenue relying upon the retracted statement of service provider (alleged entry operator), revenue is duty bound to provide an opportunity to the assessee to cross-examination of service provider.

“We find that in the later statements, Shri S.K. Gupta had categorically stated that he had rendered services to the assessee. He also mentioned that the name of the assessee was not referred to as one of the beneficiaries of the accommodation bills in his earlier statement. He had categorically stated that he had rendered service to the assessee and that the assessee had not obtained any bogus accommodation bills from him. Assessing officer had dis-believed the affidavit as well as the subsequent statement of Shri S.K. Gupta without any justifiable and cogent reason. That apart when the revenue had relied upon the retracted statement of Shri S.K. Gupta, it ought to have provided an opportunity to the assessee to cross-examine Shri S.K. Gupta which was however denied. Thus, revenue was not justified in disallowing the claim of professional expenses of the assessee on account of payment to Shri S.K. Gupta and his group of companies.

52. Therefore, we agree with the view taken by the High Court. As noted by the High Court, the entire issue is based on appreciation of the materials on record. Tribunal had scrutinized the materials on record and thereafter had recorded a finding of fact that there were sufficient evidence to justify payment made by the assessee to Shri SK Gupta, a consultant of the assessee, and that the assessing officer had wholly relied upon the statement of Shri Gupta recorded during the search operation which was retracted by him within a reasonable period. In these circumstances, we are of the view that there is no admissible material to deny the claim of expenditure made by the assessee. Accordingly, this issue is answered in favour of the assessee and against the revenue.”

CIT v. Jindal Steel & Power Limited [2023 INSC 1053] dated 06.12.2023

CIT Vs. M/s Reliance Industries Ltd. Civil Appeal No. 7425/2019

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