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2017 (3) TMI 434 - AT - Income TaxIncome from Short Term Capital Gain treated as undisclosed income under the head income from other sources - non opportunity to cross examine - Held that:- The AO had relied upon the statement of MMC to make the addition. Thus, we had witness of the AO. It was his duty to provide the copy of the statement of MMC to the assessee and to afford the opportunity to cross examine him. AO on request of the assessee had issued a summon to MMC,but he did not appear. Therefore, we do not understand how the FAA has observed that the assessee did not make any specific request for cross examination of MMC. It is also very strange that the FAA,being a judicial authority, has held that non providing opportunity of cross examination would not vitiate the assessment proceedings. If the AO/assessee wants to rely upon the statements of someone it is their duty to prove the truthfulness of such statements. Filing of affidavits/cross examination of the person making assertion can be means of verifying the genuineness of the statements.There can be other means also.But,the basic principles remain the same-person relying upon statement of someone has to prove it and especially when it is challenged by another party. We have not come across the statement of MMC where he has included the name of the assessee to whom he or the group concerns had issue fictitious bills or bills for claiming non-genuine profit/ loss.MMC has given a general statement disclosing broader outline of the transactions entered into by him and the group entities. He had never stated that all the transactions entered into by group were non genuine. His statement was a good lead to take the investigation further and make specific queries. But it was not done. We are left with the general statement of MMC on side and on the other side are the facts like payment/receipt of share transaction value through banking channels, transfer of shares in and from the D-mat account, FAA’s finding that the sale was not in doubt, non observation of principle of natural justice by not providing cross examination of MMC.If all these facts and circumstances are weighed in the scale of reasoning, it would tilt in favour of the assessee. We are of the opinion that there was no justification on part of the FAA to direct the AO to tax the entire sale proceed of shares in the hands of the assessee during the year under consideration. Similarly, the AO was not justified to hold the STCG as business transaction. The assessee was not dealing in the shares and securities and the shares of KCL were held by him as investment and not as stock in trade. - Decided in favour of assessee.
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