Veena Gupta Vs ACIT (ITAT Delhi)
ITAT Delhi allowed Veena Gupta’s appeal against the CIT(A)’s order, which had confirmed an addition of ₹1,39,32,231 under section 68 of the Income Tax Act for unexplained long-term capital gains (LTCG) on share sales. The Assessing Officer (AO) treated the LTCG as unexplained income, deeming the share purchase and sale as sham transactions based on statements from third parties (Amit Dalmia and Narendra Kumar Jain) who allegedly managed accommodation entries for Unno Industries, the company whose shares generated the LTCG. The AO applied the test of human probabilities to conclude the transactions were not genuine.
The assessee argued that she provided credible evidence, including a Bombay High Court merger order related to Unno Industries, and that the AO ignored favorable judicial precedents. A key grievance was the denial of the opportunity to cross-examine Amit Dalmia and Narendra Kumar Jain, whose statements formed the basis of the addition, despite a specific request. The ITAT observed that both the AO and CIT(A) relied on these statements without allowing cross-examination, violating principles of natural justice. Citing the Supreme Court’s decision in Andaman Timber Industries vs. CCE, the ITAT held that denying the assessee the right to cross-examine witnesses whose statements were used against her was a serious flaw making the assessment order null. Consequently, the ITAT quashed the assessment order, allowing the assessee’s appeal on this legal ground, without addressing the other grounds.
FULL TEXT OF THE ORDER OF ITAT DELHI
