The officer refused me cross-examination of the person whose statement he used. Does that alone get the addition deleted?
Not by itself, and this case shows why. The assessee's counsel argued in the Madras High Court that she had been denied the opportunity to cross-examine Shri Deepak Patwari, on whose sworn statement before the Investigation Wing the addition rested. The Court did not reject the principle. It dismissed the appeal because she had not co-operated in the assessment, had not appeared before the CIT(A) on any of five hearing dates, and had put no evidence on record to show that the statement was wrong or to explain how she came to identify and sell the scrip. The concurrent findings that the transaction was sham and taxable under s.68 were therefore not perverse.
Decided by the High Court (Dr. Vineet Kothari J and C.V. Karthikeyan J) on 2019-02-11, reported as Tax Case Appeal No. 128 of 2019 (Madras High Court). It bears on section 68, section 10(38), section 131, section 271(1)(c), section 260A of the Income Tax Act 1961, in Capital Gains, Cash Credits & Unexplained Money, Evidence & Burden of Proof and Assessment & Scrutiny matters.
The cross-examination point is the strongest procedural argument in a penny-stock appeal, and this library already carries Andaman Timber Industries, Kishinchand Chellaram and Odeon Builders on it. This case is the necessary corrective: the argument is made from the record, not instead of one. An assessee who does not attend, does not answer and does not rebut will not be saved by it.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For assessment year 2013-14 the assessee claimed long-term capital gain on shares of a company recorded in the assessment order as Luminairine Technologies Limited. The Assessing Officer relied on a statement given on oath on 22 July 2013 by Shri Deepak Patwari before the DDIT (Investigation), Unit 1(3), Kolkata, to the effect that the assessee had taken entries for bogus long-term capital gain, and on the fact that the scrip appeared in the Department's database as a penny stock trade. A summons under s.131 was issued to Shri Deepak Patwari on 8 February 2016 requiring him to appear on 26 February 2016; he did not appear, and the officer decided the matter on the material on record, adding Rs. 1,03,24,645 as taxable capital gain and initiating penalty under s.271(1)(c). The CIT(A) recorded that the case was posted five times and that neither the assessee nor her authorised representative appeared or filed any written submission on any of those dates, and confirmed the addition. The Tribunal dismissed her appeal by order dated 21 December 2017, recording that the notice served on her had been returned unserved and that she had brought no evidence to show the statement was incorrect beyond saying she had no knowledge of the person. A miscellaneous application to set aside the ex parte order and to condone delay was rejected. She appealed under s.260A, her counsel urging that she had not been given the opportunity to cross-examine Shri Deepak Patwari.
The appeal was dismissed with no order as to costs. It was for the assessee to appear and adduce evidence of the genuineness of the sale of shares; she was neither vigilant nor co-operative, did not produce the relevant evidence before the authorities below, and did not even appear before the appellate authorities to contradict the Revenue's case. The resulting findings of fact, that the sale of shares of a shell company was sham and taxable as undisclosed income under s.68, could not be said to be perverse, and no substantial question of law arose under s.260A (para 7).
The Court examined what had actually happened in the proceedings below rather than the abstract merits of the cross-examination complaint. It set out the Assessing Officer's order, which recorded the unanswered summons to Shri Deepak Patwari and the reliance on his sworn statement and on the departmental penny-stock database; the CIT(A)'s order, which tabulated five notices and five non-appearances; and the Tribunal's order, which recorded that the assessee had brought no evidence to show that the statement was incorrect and that nothing was forthcoming as to how she had identified the company for investment or how she had sold its shares (paras 5 and 6). Against that record the concurrent findings were findings of fact resting on material, and the appeal raised no question of law (para 7).
Thus it appears that while it was for the Assessee to appear and adduce the relevant evidence for the genuineness of the transaction of sale of the shares, the Assessee was not vigilant and co-operative enough and did not produce the relevant evidence before the authorities below and did not even appear before the appellate authorities concerned to contradict the case against her, as set up by the Revenue during the course of assessment proceedings.
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Handle my notice → Ask a CA on WhatsAppNot by itself, and this case shows why. The assessee's counsel argued in the Madras High Court that she had been denied the opportunity to cross-examine Shri Deepak Patwari, on whose sworn statement before the Investigation Wing the addition rested. The Court did not reject the principle. It dismissed the appeal because she had not co-operated in the assessment, had not appeared before the CIT(A) on any of five hearing dates, and had put no evidence on record to show that the statement was wrong or to explain how she came to identify and sell the scrip. The concurrent findings that the transaction was sham and taxable under s.68 were therefore not perverse. This was decided by the High Court (Dr. Vineet Kothari J and C.V. Karthikeyan J) and bears on section 68, section 10(38), section 131, section 271(1)(c), section 260A of the Income Tax Act 1961. It is reported as Tax Case Appeal No. 128 of 2019 (Madras High Court). The cross-examination point is the strongest procedural argument in a penny-stock appeal, and this library already carries Andaman Timber Industries, Kishinchand Chellaram and Odeon Builders on it. This case is the necessary corrective: the argument is made from the record, not instead of one. An assessee who does not attend, does not answer and does not rebut will not be saved by it. If it applies to you, the first step is this: Ask for cross-examination in writing, during the assessment, naming the person and the statement, and keep the acknowledgement. A request first made in appeal is worth much less.
For assessment year 2013-14 the assessee claimed long-term capital gain on shares of a company recorded in the assessment order as Luminairine Technologies Limited. The Assessing Officer relied on a statement given on oath on 22 July 2013 by Shri Deepak Patwari before the DDIT (Investigation), Unit 1(3), Kolkata, to the effect that the assessee had taken entries for bogus long-term capital gain, and on the fact that the scrip appeared in the Department's database as a penny stock trade. A summons under s.131 was issued to Shri Deepak Patwari on 8 February 2016 requiring him to appear on 26 February 2016; he did not appear, and the officer decided the matter on the material on record, adding Rs. 1,03,24,645 as taxable capital gain and initiating penalty under s.271(1)(c). The CIT(A) recorded that the case was posted five times and that neither the assessee nor her authorised representative appeared or filed any written submission on any of those dates, and confirmed the addition. The Tribunal dismissed her appeal by order dated 21 December 2017, recording that the notice served on her had been returned unserved and that she had brought no evidence to show the statement was incorrect beyond saying she had no knowledge of the person. A miscellaneous application to set aside the ex parte order and to condone delay was rejected. She appealed under s.260A, her counsel urging that she had not been given the opportunity to cross-examine Shri Deepak Patwari. The matter was decided on 2019-02-11 by the High Court (Dr. Vineet Kothari J and C.V. Karthikeyan J). On those facts the High Court held as follows. The appeal was dismissed with no order as to costs. It was for the assessee to appear and adduce evidence of the genuineness of the sale of shares; she was neither vigilant nor co-operative, did not produce the relevant evidence before the authorities below, and did not even appear before the appellate authorities to contradict the Revenue's case. The resulting findings of fact, that the sale of shares of a shell company was sham and taxable as undisclosed income under s.68, could not be said to be perverse, and no substantial question of law arose under s.260A (para 7).
The Court examined what had actually happened in the proceedings below rather than the abstract merits of the cross-examination complaint. It set out the Assessing Officer's order, which recorded the unanswered summons to Shri Deepak Patwari and the reliance on his sworn statement and on the departmental penny-stock database; the CIT(A)'s order, which tabulated five notices and five non-appearances; and the Tribunal's order, which recorded that the assessee had brought no evidence to show that the statement was incorrect and that nothing was forthcoming as to how she had identified the company for investment or how she had sold its shares (paras 5 and 6). Against that record the concurrent findings were findings of fact resting on material, and the appeal raised no question of law (para 7). In the words reproduced by the source cited on this page: "Thus it appears that while it was for the Assessee to appear and adduce the relevant evidence for the genuineness of the transaction of sale of the shares, the Assessee was not vigilant and co-operative enough and did not produce the relevant evidence before the authorities below and did not even appear before the appellate authorities concerned to contradict the case against her, as set up by the Revenue during the course of assessment proceedings."
It was decided by the High Court on 2019-02-11 and is reported as Tax Case Appeal No. 128 of 2019 (Madras High Court). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 68, section 10(38), section 131, section 271(1)(c), section 260A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The appeal was dismissed with no order as to costs. It was for the assessee to appear and adduce evidence of the genuineness of the sale of shares; she was neither vigilant nor co-operative, did not produce the relevant evidence before the authorities below, and did not even appear before the appellate authorities to contradict the Revenue's case. The resulting findings of fact, that the sale of shares of a shell company was sham and taxable as undisclosed income under s.68, could not be said to be perverse, and no substantial question of law arose under s.260A (para 7). It arises in Capital Gains, Cash Credits & Unexplained Money, Evidence & Burden of Proof and Assessment & Scrutiny matters, on section 68, section 10(38), section 131, section 271(1)(c), section 260A of the Income Tax Act 1961, and was decided by Dr. Vineet Kothari J and C.V. Karthikeyan J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. At the same time, file a substantive rebuttal: how the scrip was identified, who advised the purchase, the source of the purchase money, and the full demat and banking trail. The Tribunal here recorded that nothing was forthcoming on how she identified the company or how she sold the shares. Attend every hearing or file a written adjournment request on record. The CIT(A) order here listed five notices and five non-appearances, and that list decided the appeal. If a statement is used against you, say expressly on record why it is wrong so far as it touches you, rather than only saying you do not know the person. Where an ex parte order has already been passed, move promptly; the miscellaneous application filed here to set aside the ex parte Tribunal order was rejected and that rejection stood.
Still good law. No later decision doubting or reversing this judgment was located, and no order on any special leave petition against it could be traced. Its reach is narrow and should not be overstated: it decides that concurrent findings of fact reached on an unrebutted record are not perverse, and it does not decide that a properly pressed and properly recorded demand for cross-examination can be refused. On that separate question the library carries Andaman Timber Industries v. CCE, Kishinchand Chellaram v. CIT and CIT v. Odeon Builders. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Paragraphs 5, 6 and 7 were transcribed verbatim from the source page and paragraph 8 was read; paragraphs 1 to 4 came back only partly, with the sentences broken off, so the summary of the arguments here is taken from the source page's own rendering and not from a verbatim transcription. The judgment spells the name of the company inconsistently in the extracts it reproduces (Luminairine, Luminairire, Luminaireire, Luminairie); that inconsistency is in the source and has not been tidied up. The cross-examination request is recorded in paragraph 3, which could not be transcribed in full, so no quotation from it is given. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was dismissed with no order as to costs. It was for the assessee to appear and adduce evidence of the genuineness of the sale of shares; she was neither vigilant nor co-operative, did not produce the relevant evidence before the authorities below, and did not even appear before the appellate authorities to contradict the Revenue's case. The resulting findings of fact, that the sale of shares of a shell company was sham and taxable as undisclosed income under s.68, could not be said to be perverse, and no substantial question of law arose under s.260A (para 7).
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Valuables were found at my premises and I say they are not mine. Who has to prove ownership?
Is penalty under s.271(1)(c) criminal, quasi-criminal or civil?
You have a document that says so. Does that settle it?
If the department doubts my shareholders, can it add the money to my income?