Alleged fictitious commodity transactions on exchange rejected where books matched exchange data and addition deleted

Addition of income on alleged contrived commodity transactions was examined on the basis that the assessee reported profits and furnished full transaction records, contract notes, broker ledgers, contra confirmations, bank statements and books, which matched information obtained from the exchange. The assessing officer produced no independent evidence or discrepancy to prove transactions were fictitious and relied on general Investigation Wing information; the pick-and-choose treatment of parts of transactions was criticised. Consequently, the addition lacked factual and legal basis and was deleted.

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Issues: Whether the deletion of addition of Rs. 47,12,212/- made by the Assessing Officer on account of alleged contrived and fictitious profit/loss arising from commodity transactions on the NMCE platform was justified.

Analysis: The issue was examined on the basis of reassessment proceedings initiated under section 147, notices under section 148 and material obtained under section 133(6). The appellate authority considered whether the Assessing Officer produced independent evidence showing discrepancies between the assessee's books and the exchange records, whether transactions were shown to be synchronized or manipulated, and whether the Assessing Officer adopted a selective treatment of transactions. The material before the authorities included contract notes, broker ledgers, contra confirmations, bank statements and books of account which matched the exchange data obtained under section 133(6). The Assessing Officer did not point to any specific inconsistency in the records nor adduce independent proof of cash-flow, collusion or manipulation. The deletion was also considered in light of the Assessing Officer treating part of a transaction as non-genuine while accepting other parts, i.e., a pick-and-choose approach. Grounds relating to interest and penalty were treated as consequential to the substantive addition.

Conclusion: The deletion of the addition of Rs. 47,12,212/- is upheld in favour of the assessee.

Ratio Decidendi: An assessment addition based on general information from investigation requires independent or specific evidence of discrepancy, manipulation or collusion; where documentary records and exchange data correspond and no independent evidence of contrivance is produced, the addition is liable to be deleted and selective acceptance of parts of transactions (pick-and-choose) is impermissible.

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