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Income Tax Appellate Tribunal, “SMC - A” BENCH : BANGALORE
Before: SHRI SUNIL KUMAR YADAV
Date of hearing : 27.12.2016 Date of Pronouncement : 28.12.2016 O R D E R
This appeal is preferred by the assessee against the order of CIT(Appeals) inter alia on the following grounds:-
“1. THE Learned Assessing Officer has erred in passing the order in the manner it is passed by HIM. The impugned order being bad in Law, Void ab intio and required to be quashed. 2. IN any case and the without prejudice the order having been passed in total disregard of and in violation of the principles of Natural Justice, makes the order bad in Law and liable to be quashed.
3. THE appellant is regularly dealing in shares and this transaction has also to be accepted as such.
4. THE Assessing Officer has erred in making various observations and coming to various conclusions, without any proof or evidence. AND such observations and conclusions need to be ignored, 5. The copy of sworn statement of Sri Mukesh Chokshi was NOT made available to the appellant, to know the reason for re-opening of MY case. 6. The entire basis for the impugned order is the sworn statement of Sri Mukesh Chokshi. And the same was NOT made available to the appellant to know the reason for re-opening of the case, And with-out giving a reasonable opportunity to the assessee to have a say in the mater. 7. Further A Copy of Order of The High Court of Karnataka at Bengaluru Dated 25th February, 2015, was also enclosed, wherein The Hon'ble JUSTICE Mr. B.S.Patil has allowed the Writ Petition No.39379/2014 (T-IT), under same circumstances. 8. And THE Learned Assessing Officer has not considered the Order of The High Court of Karnataka at Bengaluru, which is in the favour of the Assessee. 9. IN view of the above and other grounds to be adduced at the time of hearing it is requested that the impugned order be quashed and the returned income from Long-Term capital gains be accepted. The assessment of the amount U/s.68 be deleted and the interest also be deleted. 9. With this background the assessee has preferred this appeal.”
During the course of hearing, the ld. counsel for the assessee has invited our attention that the assessee has maintained the entire record with respect to the purchase and sale transactions in shares, but the AO has treated these transactions to be sham and made the addition u/s. 68 of the Act. It was further contended that the AO has disallowed the claim of long term capital gain of the assessee having relied upon the statement of Mr. Mukesh Chokshi, which was never confronted tot the assessee.
Therefore, the addition made by the AO deserves to be deleted.
The ld. DR, on the other hand, has contended that search was conducted upon Mr. Mukesh Chokshi and his group concerns at Mumbai.
During the course of his statement, he has admitted that he was engaged in giving accommodation entries through his alleged stock broking companies for declaring profits from purchase and sale of shares to persons who wanted to book entries for the purpose of fictitious profits/ losses in their books, which is nothing but accommodation entries through middlemen who operate between the clients and the alleged stock broking companies floated by Mr. Mukesh Chokshi. On the basis of this statement of Mr. Mukesh Chokshi, the AO has disallowed the claim of long term capital gain accrued on sale of shares in the hands of assessee.
The addition made by the AO was confirmed by the CIT(Appeals).
On perusal of the record, I find that the statement of Mr. Mukesh Chokshi was the sole basis for treating the transactions as sham, but the statement was never confronted to the assessee. Therefore, I am of the view that the revenue cannot make an addition without confronting the evidence to the assessee, which is solely relied upon for making such addition. I, therefore, set aside the order of CIT(Appeals) and restore the matter to the AO with a direction to first confront the statement of Mr. Mukesh Chokshi to the assessee, on which he intends to rely upon and after obtaining the comments of the assessee, he can proceed with the assessment proceedings. If the assessee seeks to cross-examine Mr. Mukesh Chokshi, the AO should allow cross-examination before relying upon his statement. Accordingly, the appeal is disposed of.
In the result, the appeal by the assessee is allowed for statistical purposes.
Pronounced in the open court on this 28th day of December, 2016.