9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (2) TMI 1421 - AT - Income TaxUnexplained income u/s. 68 - penny stock - denial of exemption of long term capital gains arising on transfer of shares claimed u/s. 10(38) - HELD THAT - Transactions claimed by the assessee whether real or sham, requires a revisit by the AO. Similar directions as given in the cases of Vimalchand Gulabchand, Praveen Chand, Gatraj Jain & Sons (HUF) and Mahendra Kumar Bhandari 2018 (4) TMI 701 - ITAT CHENNAI , read alongwith the directions given in the case of Heerachand Kanunga 2018 (6) TMI 1329 - ITAT CHENNAI are given herealso. Useful reference may be made to the law laid down in the case of CIT vs. Sunita Dhadda 2018 (3) TMI 1610 - SUPREME COURT OF INDIA while affirming a judgment of Hon ble Rajasthan High Court where the importance of providing an opportunity to cross examine the witness has been stressed. Their lordship held that this was an important constituent of natural justice. Only after all the steps required under law is complete, it can be ascertained whether claim of capital gains was bogus or not. We therefore set aside the orders of the lower authorities and remit the issue back to the file of the ld. Assessing Officer for consideration afresh in accordance with law. - Appeal of the assessee is allowed for statistical purposes.
Issues Involved:
1. Denial of exemption of long-term capital gains under Section 10(38) of the Income Tax Act, 1961. 2. Treatment of a sum as unexplained income under Section 68 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Denial of Exemption of Long-Term Capital Gains under Section 10(38) of the Income Tax Act, 1961: The appellant contested the denial of exemption for long-term capital gains amounting to ?14,04,752/- arising from the sale of shares of M/s. Kailash Auto Finance Ltd. The appellant argued that the shares were initially purchased from M/s. Panchshul Marketing Limited, which later merged with M/s. Kailash Auto Finance Ltd., and the shares were sold through a recognized stock exchange. The lower authorities disbelieved the sale, relying on reports from the Directorate of Income Tax (Investigation) and SEBI, which classified M/s. Kailash Auto Finance Ltd. as a penny stock company involved in price manipulation. The appellant contended that the statements and reports used against him were not disclosed to him, violating the principles of natural justice. The Tribunal noted that similar cases had been remanded for reconsideration, emphasizing the need for adherence to natural justice. The Tribunal found that the Assessing Officer (AO) had not provided the appellant with the opportunity to cross-examine witnesses or challenge the reports used against him. The Tribunal also noted that SEBI's final report had exonerated the accused of manipulating the share values. 2. Treatment of a Sum as Unexplained Income under Section 68 of the Income Tax Act, 1961: The appellant also contested the treatment of ?14,46,000/- as unexplained income under Section 68. The lower authorities had relied on statements and reports suggesting that the transactions were bogus. The Tribunal observed that the AO had not sufficiently investigated how the appellant identified the shares for off-market purchase or provided empirical data to support the claim that the financials of M/s. Kailash Auto Finance Ltd. did not justify the high share value. The Tribunal highlighted the importance of providing the appellant with the opportunity to explain and examine the evidence against him, as mandated by the principles of natural justice. In the absence of such an opportunity, the Tribunal found that the assessment could not be sustained. Conclusion: The Tribunal set aside the orders of the lower authorities and remitted the issues back to the AO for fresh consideration, emphasizing the need to adhere to the principles of natural justice and provide the appellant with the opportunity to cross-examine witnesses and challenge the evidence used against him. The Tribunal referenced similar cases and the importance of cross-examination as highlighted by the Hon'ble Apex Court in CIT vs. Sunita Dhadda. Order: The appeal of the assessee was allowed for statistical purposes, and the matter was remanded to the AO for reconsideration in accordance with the law. The order was pronounced on January 14, 2019, at Chennai.
|
