2016 (9) TMI 1143 - AT - Income Tax

Bogus long term capital gain entries - whether the statement of Shri Mukesh Choksi is sufficient to the addition? - Held that - Except the statement of Shri Mukesh Choksi there is no material available to the Assessing Officer for the said addition. No opportunity of cross examination of Shri Mukesh Choksi was given to the assessee. It is not in dispute that the sales were effected from Demat Account No.10111342 with Dena Bank. Sale consideration of ₹ 1,83,768/- were deposited in the appellant s saving bank account No. HS 7310 of Central Bank of India. There is no cogent and convincing material with the Assessing Officer for the above said bogus transaction to the tune of ₹ 1,83,768/-. As discussed above the statement of Shri Mukesh Choksi is not sufficient to arrive at this conclusion that the transaction with M/s. Gold Star Finvest Pvt. Ltd. is bogus specifically in the circumstances when no opportunity was given to the assessee to cross examine the Shri. Mukesh Choksi. The number of decisions have come in favour of the assessee which were based upon the statement of Shri Mukesh Choksi - Decided in favour of assessee.

Summary

Issues involved:
1. Validity of assessment order passed without legal initiation of proceedings u/s.147 and notice u/s.148.
2. Validity of assessment order passed without notice u/s.143(2).
3. Validity of initiation of proceedings u/s.147 by a non-jurisdictional officer.
4. Validity of proceedings conducted by non-jurisdictional officer despite jurisdictional objection.
5. Application of Section 292B of the Income Tax Act.
6. Failure to provide reasons recorded and approval sought to the appellant.
7. Lack of compliance by jurisdictional ITO in recording reasons, obtaining approval, and issuing valid notices.
8. Failure to provide copies of reasons recorded, reports, and information.
9. Lack of cross-examination of a witness relied upon for assessment.
10. Request for quashing the assessment order due to legal flaws.

Analysis:
Issues 1 to 2 and 7 to 10:
The appeal challenged an addition of ?1,83,768 based on alleged bogus long-term capital gain entries. The statement of Shri Mukesh Choksi was the primary basis for this addition. However, the Assessing Officer lacked substantial evidence beyond this statement and did not provide an opportunity for cross-examination. The appellant demonstrated the legitimate acquisition and sale of shares through proper channels, supported by relevant documents. The Tribunal found the addition unjustified, lacking legal and factual basis, and ordered its deletion in favor of the appellant.

Issues 3 to 6:
Since the previous issues were decided in favor of the assessee, these issues became academic and did not require a separate decision. Therefore, no further analysis or decision was made on these issues.

In conclusion, the Tribunal allowed the appeal filed by the assessee, ruling in their favor due to the lack of substantial evidence supporting the addition and the failure to provide a fair opportunity for cross-examination. The assessment order was deemed invalid and the addition of ?1,83,768 was ordered to be deleted. The judgment highlighted the importance of due process and the necessity for concrete evidence to support tax assessments.