Tribunal orders cross-examination opportunity, appeal allowed for statistical purposes

The Tribunal set aside the order of the CIT(A) and directed the AO to provide the appellant with an opportunity to cross-examine Mr. Mukesh Choksi, whose statement was relied upon without confrontation. The appeal was allowed for statistical purposes.

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Issues Involved:
1. Determination of total income by the Assessing Officer (AO).
2. Addition of income under the head "income from other sources".
3. Reopening of assessment based on the statement of Mr. Mukesh Choksi.
4. Opportunity to cross-examine Mr. Mukesh Choksi.
5. Treatment of share transactions as bogus.
6. Levy of interest under sections 234A and 234B.

Detailed Analysis:

1. Determination of Total Income by the Assessing Officer (AO):
The AO determined the total income of the appellant at Rs. 25,03,900 as against Rs. 1,97,900 computed by the appellant. The appellant challenged this determination, arguing that the AO erred in law and on facts.

2. Addition of Income Under the Head "Income from Other Sources":
The AO made an addition of Rs. 23,05,996 under the head "income from other sources," treating the transaction as unexplained sources on account of the purchase and sale of shares. The appellant contended that the shares were purchased from the profit earned from the sale of other shares, and the transactions were supported by contract notes and demat statements.

3. Reopening of Assessment Based on the Statement of Mr. Mukesh Choksi:
The assessment was reopened under section 147 on the grounds that the capital gain on the sale of shares was arising out of unexplained purchase and sale of shares. This reopening was based on the sworn statement of Mr. Mukesh Choksi, who admitted to making accommodation entries to enable clients to declare speculation profit/loss. The appellant argued that there was no trail of cash or book entry indicating such fraudulent activities.

4. Opportunity to Cross-Examine Mr. Mukesh Choksi:
The appellant was not given an opportunity to cross-examine Mr. Mukesh Choksi, whose statement was relied upon for making the addition. The appellant cited various judgments, including the Karnataka High Court's ruling in Jayshree Devi Kothari vs. ITO, which emphasized the necessity of providing an opportunity to cross-examine the witness.

5. Treatment of Share Transactions as Bogus:
The AO treated the share transactions as bogus based on the statement of Mr. Mukesh Choksi. The appellant provided evidence such as bank statements, contract notes, and demat statements to prove the genuineness of the transactions. The appellant also cited several judgments supporting the contention that transactions supported by documentary evidence cannot be treated as bogus merely based on suspicion.

6. Levy of Interest Under Sections 234A and 234B:
The AO levied interest of Rs. 61,976 under section 234A and Rs. 7,35,965 under section 234B. The appellant argued that these interests were erroneously computed.

Conclusion:
The Tribunal found that the AO relied on the statement of Mr. Mukesh Choksi without providing the appellant an opportunity to cross-examine him. It is a settled position of law that any evidence relied upon by the AO must be confronted to the assessee, and the assessee should be allowed to cross-examine the witness. The Tribunal set aside the order of the CIT(A) and restored the matter to the AO with a direction to first confront the statement of Mr. Mukesh Choksi to the assessee and allow cross-examination to ascertain the truth. The appeal of the assessee was allowed for statistical purposes.

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