Shikha Dhawan Vs ITO (ITAT Delhi)
Income Tax Appellate Tribunal (ITAT), Delhi Bench, recently ruled in favour of assessee Shikha Dhawan, deleting an addition of Rs. 19,51,357 made by the Assessing Officer (AO) concerning long-term capital gains (LTCG) claimed as exempt under Section 10(38) of the Income Tax Act, 1961. The core issue revolved around the genuineness of share transactions undertaken by Ms. Dhawan.
Ms. Dhawan presented substantial documentary evidence to support her claim. This included copies of share certificates with transfer forms, debit notes and receipts from the broker (Shreeji Broking (P) Ltd.), bank statements showing the transactions, account statements from the broker, ledger details from Indus Portfolio (P) Ltd., and proof of payment of Securities Transaction Tax (STT). This evidence aimed to demonstrate a legitimate purchase of shares followed by a sale executed through a recognized stock exchange via a registered broker, with STT duly paid, fulfilling the requirements for exemption under Section 10(38).
The AO had disallowed the exemption based on inquiries conducted in unrelated cases, statements recorded from third parties (Sh. Anil Khemka, Sh. Sanjay Vohra, Sh. Bidyoot Sarkar), and reports from the Investigation Wing. However, the ITAT noted a critical procedural lapse: none of this adverse material, including third-party statements and a SEBI order mentioned implicitly, was ever presented to Ms. Dhawan. Consequently, she was denied the opportunity to rebut the findings or cross-examine the individuals whose statements were used against her. The Tribunal observed that Ms. Dhawan’s name did not even appear in the cited reports or statements.
Citing established legal principles, the ITAT held that evidence gathered behind the assessee’s back, without confrontation or the opportunity for cross-examination, cannot be legally used against them. The Tribunal found that Ms. Dhawan had successfully demonstrated the genuineness of her transactions through her documentation and met the conditions of Section 10(38). It relied on its own precedent in Meenu Goel vs ITO (ITAT SMC Bench, Delhi) and the binding judgment of the jurisdictional Punjab & Haryana High Court in Pr.CIT vs Prem Pal Gandhi, both of which involved similar circumstances where additions were deleted. Finding no other material to contradict the assessee’s claim, the ITAT set aside the lower authorities’ orders and allowed Ms. Dhawan’s appeal.
FULL TEXT OF THE ORDER OF ITAT DELHI
