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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI A.K. GARODIA & SMT. BEENA PILLAI
O R D E R PER SMT. BEENA PILLAI, JUDICIAL MEMBER
Present appeal has been filed by assessee against order dated 31/01/19 passed by Ld. CIT (A)-2, Bangalore for assessment year 2015-16.
Brief facts of the case are as under:
Page 2 of Assessee is a HUF and filed his return of income for year under consideration declaring total income of Rs.12,84,670/-. Ld.AO observed that assessee has claimed exemption under section 10(38) amounting to Rs.1,16,85,790/- towards sale of equity shares. The case was selected for scrutiny to verify the suspicions long term capital gains on shares in pursuance to the inputs from investigation wing. 2.1. Ld.AO observed that, during the year assessee sold 25,000 shares of M/s Sunrise Asian Ltd., at Rs.492/- per share. Assessee upon being quarried by Ld.AO submitted that originally assessee bought 25,000 shares of M/s Conart Traders Ltd., for a price of Rs.20/- each on to November 2011 through M/s Santoshima Trade Links Ltd. It has been submitted that, this company subsequently merged into M/s.Sunrise Asian Ltd., and shares of transferee company being M/s.Sunrise Asian Ltd., were allotted to assessee. Assessee submitted that these shares were in physical form and assessee got the same dematerialised and was sold during the year under consideration. Assessee submitted before Ld.AO that transaction of sale was done through recognised stock exchange openly, and he was unaware of the scrip being a penny stock company. 2.2. It has been submitted that assessing officer concluded the assessment by holding that the transaction in the share price of M/s Sunrise Asian Ltd is not owing to commercial principles and market factors and that assessee resorted to a preconceived scheme to procure long term capital gains by way of price difference in Page 3 of share transactions. Ld.AO also held that assessee did not discharge his onus of proving the rise in share price to be natural and based on market forces, and, in view of order of SEBI finding that company Sunrise Asian Ltd., was involved in providing bogus long term capital gains, claim of exemption of long term capital gains earned by assessee was denied.
On appeal before Ld.CIT (A), observations and findings by Ld.AO were upheld.
Aggrieved by order of Ld. CIT (A) assessee is in appeal before us. 4.1. At the outset assessee, raised claim to cross examine persons whose statements were used against assessee to which Ld.AO has referred to in assessment order. In support, Ld.AR placed reliance upon decision of Hon’ble Karnataka High Court in case of Chandra Devi Kothari vs ITO in Writ Petition No. 39370/2014 dated 02/02/2015, wherein matter was restored back to file of AO for fresh decision after providing copy of statement and other related details relied upon by Ld.AO. It has been submitted by Ld.AR that on identical facts and in respect of same script this Tribunal in case of individual set aside this issue too Ld.AO vide order dated 28/08/19 in for assessment year 2014-15. Ld.Sr.DR on the contrary filed written submission stating that assessee’s claim of genuineness is merely confined to the act that the shares were sold through recognised stock exchange and payment/receipt of consideration was through banking channels. He submitted that these transactions are tailor made and when the circumstantial evidence point on an opposite direction the claim is Page 4 of proven to be illegitimate. Ld.Sr.DR placed reliance upon order dated 17/09/19 passed by Hon’ble Delhi High Court in case of Suman Poddar vs ITO in ITA No. 841/2019. We have perused decision of Hon’ble Delhi High Court, wherein assessee raised plea regarding failure to accord opportunity of cross examination, for which Hon’ble Court relied on judgment in case of Prem Castings Pvt.Ltd. Vs.CIT passed by Hon’ble Allahabad High Court reported in 88 Taxmann.com 189, against which, SLP filed before Hon’ble Supreme Court has been dismissed. We have perused submissions advanced by both sides in light of records placed before us.
We are conscious of principle laid down by Hon’ble Supreme Court as well as various high courts that, without opportunity of cross- examination, such statements cannot be relied upon against any person. However, such right, as held in various decisions by Hon’ble Supreme Court, is not an absolute right and depends on circumstances of the case and the statute concerned, as held in State of J&K Vs. Bakshi Gulam Mohd. AIR 1967 (SC) 122, and Nath International Sales Vs. UOI reported in AIR 1992 Del 295. Similar is the view taken by Hon’ble Allahabad High Court in case of In case of Prem Castings Pvt.Ltd. Vs.CIT (Supra). At this juncture we referred to decision of T. Devasahaya Nadar V. CIT reported in (1964) 51 ITR 20 (Mad), wherein, it has been held that; "it is not an universal rule that any evidence upon which the department may rely should have been subjected to cross- examination, if the assessing officer refuses to produce an informant