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2019 (8) TMI 1520 - AT - Income TaxBogus LTCG - Unexplained credit u/s 68 - CIT (A) has wrongly confirmed the action of the AO in rejecting the claim of long term capital gain holding the transaction as bogus - AO has rejected the claim of the assessee on the basis of the outcome of investigation carried out by the investigation wing of the department which unearthed the organized racket which used to provide bogus entries to the beneficiaries to facilitate them in claiming exempt income u/s 10(38) - HELD THAT:- We notice that the authorities below have not referred any witness, who has deposed during investigation that the assessee obtained accommodation entries in the present case from the bogus operators. We further notice that AO has not doubted the sale and purchase of the shares in question - The authorities below have not pointed out any cogent and convincing evidence to hold that the transaction is bogus. AO has not doubted the genuineness of the bank statement showing payment of ₹ 60,000/- made for purchase of shares of Conart Traders Ltd. AO has not doubted the sale of the shares in question. AO has held the transaction as bogus on the basis of the general report of the investigation wing of the department without affording an opportunity to confront or cross examine the witnesses whose statements were relied upon by the AO. In the case of Smt. Shikha Dhawan vs. ITO [2018 (6) TMI 1451 - ITAT DELHI] has held that where the AO fails to afford an opportunity to the assessee to cross examine the witnesses whose statements were relied upon, such evidence cannot be used against the assessee. Authorities below have not pointed out any evidence on record to hold that the assessee has obtained bogus entries in connivance with entry operators and brokers etc. in order to claim bogus LTCG. As pointed out the assessee was not given an opportunity to cross examine the witnesses whose statements were relied upon and on the basis of their statements it was concluded that the transaction in question was a part of penny stock scam. As relying in the case of M/s Andaman Timber Industries [2015 (10) TMI 442 - SUPREME COURT] we are of the considered view that the CIT (A) has wrongly confirmed the assessment order passed by the AO in violation of the principles of natural justice. Hence, the impugned order passed by the Ld CIT(A) suffers from legal infirmity. - Decided in favour of assessee.
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