· A search and seizure action was conducted in the case of Mahasagar Securities Pvt. Ltd. It emerged that the said company along with its group companies were engaged in fraudulent billing activities and the business of providing accommodation entries for speculation profit / loss, short term / log tem capital gain / loss, share application money, commodities profit / loss in commodity trading.
· AO was of the view that assessee was one of the beneficiaries who had obtained bogus entries towards purchase and sale of shares and securities.
· Though the assessee placed on record the copies of contract notes, confirmations and the copies of bank statements, the AO, acting on the statement of Sh. Mukesh Chokshi, concluded that the transactions were not genuine. Thus, the sale consideration received by the assessee on sale of shares was held as income from unexplained and undisclosed sources.
· The CIT(A), not being persuaded to be in agreement with the contentions of the assessee concluded that the assessee had routed her unaccounted income in the guise of share transactions, and in the backdrop of the statement of Sh. Mukesh Chokshi, dismissed the appeal of the assessee.
· The Tribunal observed that the AO and CIT(A) have placed heavy reliance on the statement of Sh. Mukesh Chokshi, wherein he had admitted that the companies floated by him were used as facilitator in providing accommodation entries.
· The Tribunal, in view of above, has held that the conclusion drawn by the AO as well as the CIT(A) could have been drawn only after considering the complete facts and evidences in the case of assessee, and not merely on the basis of the stand alone statement of Sh. Mukesh Chokshi.
· The Tribunal, while deciding the issue, took note of the following facts:
(a) No cross examination of Sh. Mukesh Chokshi had been facilitated to the assessee
(b) In the absence of any material proving the contrary, the possibility of assessee having carried out genuine transaction could not be discarded
(c) Assessee duly discharged the onus cast upon her to prove the factum of generation of income under the head LTCG by providing voluminous documentary evidences
· Thus, the ITAT concluded that the failure on the part of the AO to provide cross examination of Sh. Mukesh Chokshi, goes to the very root of the validity of the adverse inferences drawn by the AO from such statement, and therefore, the order of the CIT(A) was set aside by the Tribunal, considering the evidences filed by assessee on record, and also considering the fact that no opportunity of cross examination of Sh. Mukesh Chokshi was provided to the assessee.
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Further Reading