Tribunal allows appeal, deletes addition under Section 68 of Income Tax Act.

The Tribunal allowed the appeal of the assessee, directing the deletion of the addition made under Section 68 of the Income Tax Act. The Tribunal found that the assessee had provided substantial documentary evidence to support the genuineness of the Long Term Capital Gain (LTCG) claimed, and criticized the denial of cross-examination and reliance on statements recorded under Section 133A. Additionally, the Tribunal noted the Assessing Officer's failure to conduct an independent inquiry, emphasizing the insufficiency of relying solely on the Investigation Wing's report and statements without further verification.

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Issues Involved:
1. Addition under Section 68 of the Income Tax Act, 1961.
2. Disallowance of exemption under Section 10(38) of the Income Tax Act, 1961.
3. Denial of cross-examination of witnesses.
4. Reliance on statements recorded under Section 133A of the Income Tax Act, 1961.
5. Application of the principle of human probabilities.
6. Relevance of documentary evidence provided by the assessee.
7. Independent enquiry by the Assessing Officer (AO).

Detailed Analysis:

1. Addition under Section 68 of the Income Tax Act, 1961:
The Assessing Officer (AO) made an addition of Rs. 2,00,10,326/- under Section 68, concluding that the Long Term Capital Gain (LTCG) claimed by the assessee was bogus. This conclusion was primarily based on a report from the Investigation Wing and statements from certain individuals, including Shri Harshvardhan Kayan. The AO dismissed the documentary evidence provided by the assessee, such as Contract Notes, Demat Account statements, and details of share transactions, and relied on the principle of preponderance of probability.

2. Disallowance of exemption under Section 10(38) of the Income Tax Act, 1961:
The AO disallowed the exemption claimed under Section 10(38) for LTCG, asserting that the gains were not genuine. The assessee had provided substantial documentary evidence, including bank statements showing transactions through account payee cheques and payment of Securities Transaction Tax (STT). However, these were not accepted by the AO or the Commissioner of Income Tax (Appeals) [CIT(A)].

3. Denial of cross-examination of witnesses:
The assessee requested the opportunity to cross-examine Shri Harshvardhan Kayan, whose statement was used against him. This request was denied by the AO, and the CIT(A) upheld this decision. The Tribunal noted that the denial of cross-examination was against the principles laid down by the Hon'ble Supreme Court in the case of Andaman Timber Industries, which states that reliance on statements recorded at the back of the assessee without allowing cross-examination is not permissible.

4. Reliance on statements recorded under Section 133A of the Income Tax Act, 1961:
The statement of Shri Harshvardhan Kayan was recorded under Section 133A, which does not carry evidentiary value as it is not recorded under oath. The Tribunal emphasized that such statements cannot be the sole basis for making additions, especially when the assessee has denied any dealings with the individual and provided substantial documentary evidence.

5. Application of the principle of human probabilities:
The AO and CIT(A) relied on the principle of human probabilities to conclude that the LTCG was bogus. The Tribunal highlighted that this principle cannot override documentary evidence. The Hon'ble Punjab and Haryana High Court in the case of Hitesh Gandhi and the Hon'ble Supreme Court in the case of Daulat Ram Rawatmull have held that documentary evidence cannot be brushed aside merely on suspicion.

6. Relevance of documentary evidence provided by the assessee:
The assessee provided extensive documentary evidence, including Contract Notes, Demat Account statements, bank statements, and a judgment from the Hon'ble Kolkata High Court regarding the amalgamation of companies. The Tribunal noted that the lower authorities did not find any defects in these documents and failed to provide counter-evidence to negate them. The Tribunal concluded that the assessee successfully discharged the onus cast upon him under Section 68.

7. Independent enquiry by the Assessing Officer (AO):
The Tribunal observed that the AO did not conduct any independent enquiry to verify the assessee's involvement in the allegedly bogus LTCG claim. The AO relied solely on the Investigation Wing's report and the statement of Shri Harshvardhan Kayan. The Tribunal emphasized that the AO should have conducted an independent enquiry to substantiate the claims made in the report.

Conclusion:
The Tribunal allowed the appeal of the assessee, directing the deletion of the addition made under Section 68. The Tribunal held that the assessee had provided sufficient documentary evidence to substantiate the genuineness of the LTCG and that the denial of cross-examination and reliance on statements recorded under Section 133A were not justified. The Tribunal also noted that the AO failed to conduct an independent enquiry and relied solely on the Investigation Wing's report and statements, which were not sufficient to make the addition.

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