2020 (2) TMI 1344 - AT - Income Tax

Tribunal grants Assessee's appeal, emphasizing cross-examination and onus of proof. Deletions under sections 143(3) and 68.

The Tribunal allowed the appeal filed by the Assessee, emphasizing the importance of providing opportunities for cross-examination and ensuring that the ... Long Term Capital Gains - claim of exemption under section 10(38) - bogus share transactions - onus of proof - opportunity to cross examine person whose statement led to investigation - reliance on demat records and banking evidenceLong Term Capital Gains - claim of exemption under section 10(38) - bogus share transactions - onus of proof - opportunity to cross examine person whose statement led to investigation - reliance on demat records and banking evidence - Whether the addition of Rs. 9,70,468 made as unexplained Long Term Capital Gain on account of alleged bogus share transactions is sustainable. - HELD THAT: - The assessee produced contemporaneous documents including purchase and sale bills, contract notes, demat statements and bank payment evidence showing purchase and sale of shares and that some shares remained in the demat account after the sales. The Assessing Officer proceeded on information from the Investigation Wing alleging bogus penny stock transactions but did not supply to the assessee the statement(s) forming the basis of the information nor afforded opportunity to cross examine the person whose statement prompted the investigation. In these circumstances the Tribunal found that the assessee had discharged the onus of proof by furnishing documentary and demat evidence and that the AO's addition could not be sustained. The Tribunal also noted precedent of a Coordinate Bench that an assessee should be granted opportunity to cross examine the person on whose statement the notice is based; absence of such opportunity weighed against the department. Applying these conclusions, the Tribunal allowed the appeal and directed that the returned income be accepted.Addition of Rs. 9,70,468 as Long Term Capital Gain deleted; appeal allowed and returned income to be accepted.Final Conclusion: The Tribunal set aside the addition of Rs. 9,70,468 treated as bogus LTCG for A.Y. 2014-15, finding that the assessee discharged its onus by producing demat, bank and transaction records and that the AO failed to supply the investigative statement or allow cross examination; appeal allowed. Issues:1. Challenge to order passed under section 143(3) of the Act2. Deletion of addition made under section 68 of the Act3. Rejection of claim of exempt income of Long Term Capital Gain u/s Sec 10(38) of the Act4. Appeal for the determination of the amount of interest under section 234B of the ActAnalysis:1. The appeal challenged the order passed under section 143(3) of the Act, arguing for its quashing and deletion of the addition made therein. The contention was that the learned AO should accept the returned income. The Tribunal considered the facts presented, where the assessee was engaged in trading shares and earning income from various sources. The investigating wing raised concerns about long term capital gain transactions, leading to the assessing officer issuing a notice alleging bogus transactions. Despite the assessee's submissions of relevant documents, the AO made an addition. However, the Tribunal, after reviewing the evidence, held that the assessee had provided sufficient details, including bank statements and demat account information, to support the legitimacy of the transactions. Consequently, the Tribunal allowed the appeal, emphasizing that the onus was discharged by the assessee.2. The next issue involved the deletion of the addition made under section 68 of the Act. The CIT(A) had upheld the addition, stating that the companies involved were bogus. However, the Tribunal, upon examining the records and submissions, found that the assessee had purchased shares through legitimate channels and provided necessary documentation. The Tribunal concluded that the long term capital gains were genuine, and the addition was unwarranted. Therefore, the appeal was allowed in favor of the assessee.3. The third issue pertained to the rejection of the claim of exempt income of Long Term Capital Gain under section 10(38) of the Act. The Tribunal noted that the assessee had fulfilled the requirements by presenting relevant details and transactions through recognized brokers. The Tribunal held that the claim of long term capital gain was valid and directed the AO to allow the said claim while computing the total income.4. Lastly, the appeal sought a determination of the interest amount under section 234B of the Act. The Tribunal observed that the AO had not provided an opportunity for cross-examination or supplied relevant statements to the assessee. Citing precedent, the Tribunal emphasized the importance of granting such opportunities. As a result, the Tribunal held that the assessee had discharged the onus, and no addition could be sustained. Consequently, the appeal was allowed in favor of the assessee.In conclusion, the Tribunal allowed the appeal filed by the Assessee, emphasizing the importance of providing opportunities for cross-examination and ensuring that the onus of proof is met in such cases.