Assessment order quashed for lack of procedural fairness; SEBI report supports assessee's position.

The Tribunal quashed the assessment order due to lack of procedural fairness, specifically the denial of cross-examination opportunity and reliance on unverified statements. The SEBI report exonerated the assessee's family from price manipulation charges, supporting the genuineness of transactions. Consequently, the additions under Section 68 and denial of exemption under Section 10(38) were not upheld, and the assessee's appeal was allowed.

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Issues Involved:
1. Addition under Section 68 of the Income Tax Act.
2. Denial of exemption under Section 10(38) of the Income Tax Act.
3. SEBI report and its implications.
4. Opportunity for cross-examination and procedural fairness.
5. Alleged price manipulation and accommodation entries.
6. Onus of proof and evidentiary requirements.

Detailed Analysis:

1. Addition under Section 68 of the Income Tax Act:
The Assessing Officer (AO) added Rs. 12,28,62,584/- to the assessee's income under Section 68, citing unexplained cash credits. The AO argued that the Long Term Capital Gains (LTCG) declared by the assessee were not genuine and were part of a scheme to convert unaccounted money into white money through accommodation entries.

2. Denial of exemption under Section 10(38) of the Income Tax Act:
The AO denied the exemption under Section 10(38), which pertains to LTCG from the sale of equity shares. The AO's decision was based on the investigation findings that the transactions were not genuine and were part of a scheme involving price manipulation.

3. SEBI report and its implications:
The SEBI report, which investigated price manipulation in the shares of Maa Jagdambe Trade Links Ltd (MJTL), did not find any direct involvement of the assessee or his family members in the manipulation. The SEBI investigation exonerated the assessee's brother and his wife from any charges of price manipulation. This report was crucial as it contradicted the AO's findings and supported the assessee's claim of genuine transactions.

4. Opportunity for cross-examination and procedural fairness:
The assessee argued that the AO did not provide an opportunity for cross-examination of the individuals whose statements were used against him. The AO issued a summons for the assessee to appear on 27.12.2017, but this did not mention any opportunity for cross-examination. The Tribunal found that the AO's failure to provide this opportunity violated principles of natural justice, making the assessment order null and void as per the precedent set by the Supreme Court in Andaman Timber Industries v. CCE [(2015) 127 DTR 241 (SC)].

5. Alleged price manipulation and accommodation entries:
The AO relied heavily on the findings of the Investigation Wing, Kolkata, which suggested that the assessee's transactions were part of a broader scheme of price manipulation and accommodation entries. However, no direct evidence linked the assessee to these activities. The Tribunal noted that the AO's findings were based on general observations and not on specific evidence against the assessee.

6. Onus of proof and evidentiary requirements:
The Tribunal emphasized that the onus was on the AO to provide concrete evidence to support the allegations of bogus transactions. The AO failed to provide such evidence, and the statements used were not subjected to cross-examination. The Tribunal cited several case laws, including Kishinchand Chellaram v. CIT [(1980) 125 ITR 713 (SC)] and Andaman Timber Industries v. CCE [(2015) 127 DTR 241 (SC)], to highlight the importance of providing the assessee an opportunity to contest the evidence used against him.

Conclusion:
The Tribunal quashed the assessment order, stating that the AO failed to provide necessary procedural fairness by not allowing cross-examination and relying on unverified statements. The SEBI report further supported the assessee's claim of genuine transactions. Consequently, the addition under Section 68 and the denial of exemption under Section 10(38) were not upheld. The appeal filed by the assessee was allowed.

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