I-T - Statements of share brokers recorded by Investigation wing can't be admitted as evidence against assessee if no opportunity of cross-examination is allowed: ITAT
By TIOL News Service
NEW DELHI, JAN 12, 2019: THE ISSUE IS - Whether statements of the share brokers recorded by investigation wing can be admitted as evidence against assessee if no opportunity of cross-examination is allowed to him. - NO IS THE VERDICT.
Facts of the case
The assessee filed return for relevant AY. During the scrutiny assessment, statement of assessee was recorded u/s 131 of the Act. The AO found that assessee had sold 2000 shares of M/s. Jackson Investment Limited on BSE and payment was received from the broker M/s. Anurity Multi Broking Pvt. Ltd. The assessee explained that shares were purchased in October, 2011 and were sold in October, 2014. The purchase price was Rs.20,000/- which was sold for Rs.6,14,000/- and the long term capital gains of Rs.5,83,762/- was claimed as exempt under section 10(38) of the I.T. Act. The assessee submitted copies of the bank account, Demat account, share purchase documents and share certificate were on record. The details of purchase and sale of this particular scrip, M/s. Jackson Investment Limited were examined. It was found that assessee had purchased 2000 shares of the scrip in October, 2011 in physical form which were sold in October, 2014 and there were abnormal rise in the price of the sale of the share. The financials of M/s. Jackson Investment Limited were noted in the assessment order to show that there were no business activity and it was either in loss or no profit earning. The AO noted that department had made search and surveys operations on some share broking entities and Investigation Wing of Kolkata found many brokers indulged in providing accommodation entries of long term capital gains. Statements of some of the brokers were recorded by the Investigation Wing, Kolkata. Based on such statements the AO held that assessee had received sale consideration of Rs.6,14,000/- on sale of shares of penny stock company M/s. Jackson Investment Limited which was considered as unexplained cash credit. Addition was accordingly made. On appeal, CIT(A) upheld the order of AO.
Tribunal held that,
++ the AO relied upon certain statements of the share brokers recorded by Investigation Wing, Kolkata to prove that they have provided accommodation entries for long term capital gains. The assessee in her statement requested that assessee may be allowed for cross-examinations of these statements. However, no cross-examination have been allowed to the assessee to cross-examine any of such share brokers. Therefore, such statements could not be admissible in evidence against the assessee. The decisions relied upon by the Counsel for the Assessee squarely apply to proposition. Reliance was placed upon the decision of the Supreme Court in the case of Kishan Chand Chelaram. Counsel for the Assessee also pointed-out from the assessment order that A.O. recorded balance-sheet and P & L A/c of M/s. Jackson Investment Ltd., and their figures of income and net worth for several years to show that the said Company was declaring the profit as well as having net worth. The decisions relied upon by the D.R. would not support the case of the Revenue. The issue is, therefore, covered by the Order of ITAT, Delhi SMC Bench in the case of Shri Amar Nath Goenka, New Delhi & Others vs. The ACIT, Circle-20(1), New Delhi. Accordingly, it was decided to set aside the Orders of the authorities below and delete the addition of Rs.6,14,000/- under section 68 of the I.T. Act and addition of Rs.18,420/- under section 69C of the I.T. Act towards commission. Accordingly, appeal of assessee is allowed.
(See 2019-TIOL-116-ITAT-DEL)
