Fictitious derivative losses: procedural defects alone did not justify deletion; matter restored for fresh adjudication with cross-examination.

Alleged fictitious derivative losses were said to arise from pre-arranged and reversal trades based on Investigation Wing information. The first appellate authority deleted the addition because the assessment order lacked complete particulars of the relied-upon statements and cross-examination had not been afforded. The Tribunal held that these procedural irregularities did not, by themselves, justify deletion at the appellate stage, since the appellate authority has coterminous powers and the matter could be re-examined by the Assessing Officer. The issue was restored for fresh adjudication after supplying the complete statements and granting cross-examination.

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Issues: Whether the deletion of the addition made on account of alleged fictitious derivative losses was sustainable, and whether the matter required remand for furnishing the relied upon statements and granting cross-examination.

Analysis: The assessment was reopened on the basis of Investigation Wing information alleging pre-arranged and reversal derivative trades resulting in fictitious losses. The first appellate authority deleted the addition mainly because the assessment order did not contain complete particulars of the statements relied upon and no opportunity of cross-examination had been granted. The Tribunal held that these irregularities by themselves did not justify deletion of the addition at the appellate stage. It observed that the appellate authority has coterminous powers and that the matter could be re-examined by the Assessing Officer after supplying the complete statements and affording cross-examination to the assessee.

Conclusion: The deletion of the addition was set aside and the issue was restored to the Assessing Officer for fresh adjudication after supplying the statements and granting cross-examination.

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