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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the disallowance of long-term capital loss arising from share transactions was justified on the basis of an untested third-party statement and whether denial of cross-examination vitiated the addition.
Analysis: The addition was founded primarily on a statement recorded from an alleged entry operator, while the assessee had produced ledger accounts, purchase and sale bills, and bank statements to support the transactions. The statement was not put to the assessee for cross-examination or rebuttal. The Assessing Officer also did not invoke available enquiry powers to verify the broker-side evidence. In these circumstances, the untested statement could not be treated as reliable evidence against the assessee, and the denial of cross-examination amounted to violation of natural justice. The supporting documents and payment of STT further strengthened the genuineness of the transactions.
Conclusion: The disallowance of loss was unsustainable and was set aside in favour of the assessee.
Ratio Decidendi: An adverse statement used against an assessee must be subjected to cross-examination or rebuttal, and an addition cannot rest solely on an untested statement when the assessee has produced contemporaneous documentary evidence supporting the transaction.
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