The Income Tax Appellate Tribunal (ITAT), Chennai bench has held that the Assessing Officer should allow the opportunity of cross-examination to the assessee to check whether the share transaction is real or not.
The Assessing Officer denied the exemption of long term capital gains of Rs. 14,04,752/-, arising on transfer of shares claimed by the assessee u/s.10(38) of the Income Tax Act, 1961. The Officer treated the same as unexplained cash credit under Section 68 of the Income Tax Act.
It is not disputed that long term capital gains claimed by the assessee as exempt u/s.10(38) of the Act arose on account of sale of equity shares of M/s. Kailash Auto Finance Ltd. The assessee had initially acquired the shares of one of M/s. Panchshul Marketing Limited, which was later merged with M/s. Kailash Auto Finance Ltd.
The Tribunal held that the transactions claimed by the assessee whether real or sham, requires a revisit by the Assessing Officer.
“Similar directions as given in the cases of Vimalchand Gulabchand, Praveen Chand, Gatraj Jain & Sons (HUF) and Mahendra Kumar Bhandari (supra), read along with the directions given in the case of Heerachand Kanunga (supra) are given here also. A useful reference may be made to the law laid down by Hon’ble Apex Court in the case of CIT vs. Sunita Dhadda, SLP (Civil) No.9432/2018, dated 28.03.2018, while affirming a judgment of Hon’ble Rajasthan High Court in the case of CIT vs.Smt. Sunita Dhadda, 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 the 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,” the Tribunal said.
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