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2021 (12) TMI 1425 - AT - Income TaxBogus LTCG - Capital Gains Generated on Sale of Penny Stock - realince on third party information - A.O. has accepted the statements recorded by some other officers of the Department in some unconnected proceeding and believed it as a gospel truth against the Appellant and relying on it proceeded to draw inference against the Appellant - genuineness of claim of Long Term Capital Gain u/s 10(38) of the Act for sale of equity shares of listed companies denied - HELD THAT:- AO failed to perform his twin duties that of the investigator and adjudicator resulting in the additions being vitiated in the process. The entire disallowances in this case is based on third party information gathered by the Investigation Wing of the Department which have not been independently subjected to further verification by the A.O., who has not provided the copy of such statement to the Appellant, thus denying opportunity of cross-examination to the Appellant, who has prima facie discharged the initial burden, the impugned addition made by the A.O. is not sustainable, thus is directed to be deleted. In the fact of the present case, save and except relying on the statement of so called entry operators, the Revenue could not bring on record any credible evidence which could show that, the Appellant has routed his unaccounted money in the form of bogus capital gain. The A.O. never examined any one of these persons, whose statement relied upon by him in the Assessment order nor did he grant an opportunity for cross-examination except the bald references to the recorded statement. The Revenue could not bring on record any material which could link the Assessee with any wrong doing. When the learned CIT(A) found that, the A.O. has not followed the due procedure of law as stated in the above paragraph, he rightly deleted the impugned additions. Assessee should be assessed for the correct income and ignorance if any made by the assessee in filing the return but brought to the notice of the Ld. AO before the conclusion of the assessment proceedings should be entertained and also as per the principle of natural justice if any addition is made on the basis of statement of 3rd party, a proper opportunity of cross examination should be given to the affected party and if the same is not done, action of the Ld. AO making additions cannot be held to be justified. Exemption u/s 10(38) - As assessee has fulfilled necessary conditions to claim the exemption u/s 10(38) of the Act for the Long Term Capital Gain earned from sale of equity shares of M/s Kailash Auto Finance Ltd. and M/s Lifeline Drugs & Pharma Ltd. Therefore, we hold that the assessee has rightly claimed the exemption u/s 10(38) of the Act before the conclusion of assessment proceedings. We, therefore, find no reason to interfere in the finding of ld. CIT(A) and the same is confirmed. Assessee appeal allowed.
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