Krishan Khadaria Vs DCIT (ITAT Mumbai)
Principles of natural justice prevail – ITAT directs fresh hearing in penny stock commission case- Cross-examination cannot be a formality; matter sent back for de novo adjudication
Background
A search u/s 132 was conducted on 13.06.2014 in the case of R.K. Kedia Group, alleged to be running an accommodation-entry syndicate providing bogus long-term capital gains (LTCG) through penny stock companies. Assessee, whose premises were also covered, was stated to be controlling companies such as Nouveau Global Ventures Ltd., Pearl Agriculture Ltd., & Pearl Electronics Ltd., which were allegedly used for generating fictitious LTCG for various beneficiaries
AO relied on seized ledgers, statements of Shri R.K. Kedia, his employee Manish Arora, & others, to conclude that Assessee was part of the syndicate. On the alleged trade value of ₹682.05 crore spread over seven years, AO estimated commission income @4.75%, making additions aggregating to ₹33.39 crore across A.Ys. 2009-10 to 2015-16
Order of CIT(A)
Before CIT(A), Assessee denied involvement & contended that:
- No incriminating material directly implicated him.
- He was denied effective cross-examination of Kedia & others.
- Commission, if any, could not exceed 1%.
CIT(A), NFAC held that evidence indicated Assessee’s control over three companies used for LTCG generation but found AO’s rate excessive. Referring to Kedia’s statement & general trade practices, CIT(A) restricted commission to 1% of total trades instead of 4.75%, partly allowing the appeal
