While considering a bunch of appeals the Lucknow bench of the Income Tax Appellate Tribunal (ITAT) held that the addition of unexplained cash based on third-party statements without allowing cross-examination is not sustainable.
The assessee had claimed Long Term Capital Gain on the scrip Twenty-First Century (India) Ltd. as exempt u/s 10(38) of the Income Tax Act,1961. The Assessing Officer, based on the report from the Directorate of Investigation, held that the claim of the assessee on account of Long Term Capital Gain was arranged with the help of brokers and certain entry operators and was not a genuine one and held the same to be taxable u/s 69A of the Act.
It was stated by the assessee that they had filed all the documents, evident for the purchase and sale of shares. Further contended that statement recorded of some persons, alleged to be providing accommodation entry to some other person, cannot be used against the assessees for making additions and violative of the principles of natural justice.
The Tribunal found that evidence filed by assessees in support of their claims has neither been rejected nor has been adversely commented and the persons on whose statements the Department had relied, were not made available to assessees for cross-examination.
Shri A D Jain, vice president and Shri T S Kapoor, accountant member observed that additions based on statements of third parties which has not been made available to the assessees for cross-examination despite the assessees’ specific request for the same, are not justified and held assessee as eligible for exemption of Long Term Capital Gain u/s 10(38) of the Act. The appeal of the assessee was partly allowed.
The appellant was represented by Shri Ashish Jaiswal and the respondent was represented by Shri Pankaj Sachan.
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