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2021 (8) TMI 333 - AT - Income TaxBogus LTCG - Long-term capital gain exempt under Section 10(38) denied - HELD THAT - Nothing has been brought on record by Revenue to show that the persons investigated, including entry operators or stock brokers, have named the appellant was in collusion with them. No finding specifically against the appellant has been made in the Investigation team report as appearing on record and this cannot be any ground for holding the appellant guilty or linked to the wrong facts of the persons investigated. Perusal of records further suggests that in the instant case, the appellant is not connected with M/s Turbo Tech Engineering Ltd. or their promoters, directors or any other person who exercised any control over M/s Turbo Tech Engineering Ltd. or any so-called entry operator. As a matter of fact, no element is available showing that the appellant has indulged in any such questionable activity or has been part of the modus operandi as alleged by the Ld. A.O. It appears on record that assessee has not given the opportunity to cross-examine the person based on whose statement the addition have been made in the hands of the assessee. That it is a settled position of law that finding as recorded in one case cannot be relied in other cases until and unless the material as gathered and to be used against the assessee is not provided to the assessee and an opportunity of cross examination is not allowed to the assessee. Hence, material as collected by the Investigation Wing of Kolkata was general in nature and cannot be used in the specific case of the appellant, moreso when the name of the appellant was never included in their statements. Even if name of the appellant appeared in their statements, it could not have been used against the appellant until and unless the appellant was allowed an opportunity to cross examine the person whose statement was recorded during the course of survey/searches. Hence, the material as received by the assessing officer behind the back of the appellant cannot be used against the appellant. As relying on SMT. KRISHNA DEVI, HARDEV SAHAI GUPTA (GARG) , SMT. BINDU GARG 2021 (1) TMI 1008 - DELHI HIGH COURT we do not hesitate to allow the claim made by the appellant towards LTCG - Decided in favour of assessee.
Issues Involved:
1. Genuineness of long-term capital gain (LTCG) claimed under Section 10(38) of the Income Tax Act. 2. Legitimacy of off-market share transactions. 3. Reliance on investigation reports and denial of cross-examination. 4. Validity of evidence and documentation provided by the assessee. Issue-wise Detailed Analysis: 1. Genuineness of LTCG Claimed Under Section 10(38): The assessee declared a net income of ?4,12,396 and claimed an LTCG exemption of ?23,03,300 on the purchase and sale of shares of Turbotech Engineering Ltd. The shares were purchased off-market and later sold through a recognized stock broker. The Assessing Officer (AO) rejected this claim, suspecting the transactions were bogus and accommodative, designed to claim false exemptions. The AO's decision was based on the significant price increase of the shares and an investigation report alleging similar bogus transactions. The appellate tribunal, however, found no specific evidence linking the assessee to any fraudulent activity or collusion with entry operators or brokers. 2. Legitimacy of Off-Market Share Transactions: The AO doubted the genuineness of the off-market purchase of shares from Shah Space Manager Pvt. Ltd., as the entity was not a registered stock exchange broker. Despite this, the tribunal noted that there was no legal restriction against off-market purchases and that the assessee had provided all necessary documentation, including purchase bills, demat account statements, and bank account details showing the receipt of sale proceeds. 3. Reliance on Investigation Reports and Denial of Cross-Examination: The AO relied heavily on an investigation report from the Kolkata Investigation Wing, which was not directly related to the assessee. The tribunal emphasized that findings from other cases cannot be used against an assessee without providing an opportunity for cross-examination. Citing the Supreme Court's decision in Andaman Timber Industries vs. CCE, the tribunal highlighted that denying the assessee the chance to cross-examine witnesses whose statements were used against them is a violation of natural justice, rendering the assessment order null and void. 4. Validity of Evidence and Documentation Provided by the Assessee: The tribunal found that the assessee had duly discharged their onus by submitting all relevant documents, including purchase and sale bills, demat account statements, and bank transaction records. The Revenue failed to produce any contrary evidence or show any specific defects in these documents. The tribunal also referenced the SEBI order lifting the suspension on trading of Turbotech Engineering Ltd. shares, indicating no irregularities or involvement in price rigging by the company's directors. Conclusion: The tribunal concluded that the AO's reliance on the investigation report was misplaced and that the assessee's transactions were genuine. The denial of cross-examination was a critical flaw. The tribunal allowed the assessee's appeal, recognizing the LTCG exemption claimed under Section 10(38) and dismissing the Revenue's arguments. The tribunal's decision was consistent with prior judgments in similar cases, including Radheyshyam Khandelwal vs. ACIT, where similar claims were upheld. Consequently, all the appeals filed by the assessee were allowed.
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