The assessee made investment in the shape of 62,500 Equity Shares of an entity namely Santoshima Tradelink Ltd. (STL) during the month of September, 2011. The face value of the share was Rs.10/- per share with premium of Rs.10/- per share and accordingly, the assessee paid a sum of Rs.12.50 Lacs to acquire the same. The shares were duly allotted in due course and the shares certificates were received in physical form and the shares were ultimately dematerialized in assessee’s account during March, 2012. Meanwhile, M/s STL got amalgamated with another entity namely M/s Sunrise Asian Ltd. (SAL) pursuant to a scheme of amalgamation u/s 391 to 394 which was duly approved by Hon’ble Bombay High Court. As per the scheme of amalgamation, share swap ratio was fixed as 1:1 and accordingly, the shares of STL were swapped with the shares of SAL which were credited in assessee’s demat account during the month of June, 2013. M/s SAL was a public limited company and its shares were listed on Bombay Stock Exchange as Group ‘A’ shares signifying that the shares were highly traded having highest degree of liquidity. The assessee sold these shares through online platform (BOLT) provided by recognized stock exchange and delivered the shares in demat form to the clearing house and received sale consideration through its stock-broker in the month of March, 2014. The sale consideration was received through banking channels. Since the investment was held for more than 1 year and the sale transactions were undertaken through recognised stock exchange on which Securities Transactions Tax (STT) was paid, the assessee apparently fulfilled the conditions laid down in S.. 10(38) and accordingly claimed exemption of the gain. The LTCG earned on these transactions was worked out to be Rs.293.88 Lacs. The AO denied the exemption applying the ratio in Sumati Dayal v.CIT (1995) 214 ITR 801 (SC) .CIT (A) confirmed the order of the AO .On appeal the Tribunal held that The allegation of price rigging / manipulation has been levied without establishing the vital link between the assessee and other entities. The whole basis of making additions is third party statement and no opportunity of cross-examination has been provided to the assessee to confront the said party. As against this, the assessee’s position that that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue
As against the assessee’s position, the primary material to make additions in the hands of assessee is the statement of Shri Vipul Bhat and the outcome of search proceedings on his associated entities including M/s SAL. However, there is nothing on record to establish vital link between the assessee group and Shri Vipul Bhat or any of his group entities. The assessee, all along, denied having known Shri Vipul Bhat or any of his group entities. However, nothing has been brought on record to controvert the same and establish the link between Shri Vipul Bhat and the assessee. The opportunity to cross-examine Shri Vipul Bhat was never provided to the assessee which is contrary to the decision of Hon’ble Supreme Court in Andaman Timber Industries v. CCE ( 2015) 127 DTR 241/ 281 CTR 241 (SC)wherein it was held that not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statement of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as it amounts to violation of principal of natural justice because of which the assessee was adversely affected . Tribunal held that considering the entirety of facts and circumstances, we are not inclined to accept the stand of Ld.CIT(A) in sustaining the impugned additions in the hands of the assessee. Resultantly, the addition on account of alleged Long-Term Capital Gains as well as estimated commission against the same, stands deleted. The grounds of appeal, to that extent, stand allowed. (ITA No, 7648/Mum/2019 dt 11-8 -2020 ( AY. 2014-15) )