Unreported Decisions – September 2020

By Ajay R. Singh, Advocate

1. S. 10(38)/68: Bogus Capital Gains from Penny Stocks – third party statement – cross examination not provided:

The Tribunal observed that the primary material to make additions in the hands of assessee was the statement of one Shri Vipul Bhat and the outcome of earch proceedings on his associated entities including M/s. SAL. However, there is nothing on record to establish vital link between the assessee group and Shri Vipul Bhat or any of his group entities. The assessee, all along, denied having known Shri Vipul Bhat or any of his group entities. However, nothing has been brought on record to controvert the same and establish the link between Shri Vipul Bhat and the assessee. The opportunity to cross-examine Shri Vipul Bhat was never provided to the assessee which is contrary to the decision of Hon’ble Supreme Court in M/s. Andaman Timber Industries V/s. CCE (CA No. 4228 of 2006) wherein it was held that not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statement of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as it amounts to violation of principal of natural justice because of which the assessee was adversely affected

The AO has not discharged the onus of controverting the documentary evidences furnished by the assessee and by bringing on record any cogent material to sustain the addition. The allegation of price rigging / manipulation has been levied without establishing the vital link between the assessee and other entities. The whole basis of making additions is third party statement and no opportunity of cross-examination has been provided to the assessee to confront the said party. As against this, the assessee’s position that that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue .

Dipesh Ramesh Vardhan vs. DCIT (alongwith other appeals) [I.T.A. No. 7648/Mum/2019 dated : 11/8/2020, AY : 2014-15 “D” BENCH, MUMBAI]  

Dipesh Ramesh Vardhan