2026 (1) TMI 942 - AT - Income Tax

Alleged fictitious NMCE commodity trade profits found genuine; income-tax additions deleted for lack of evidence

Dominant issue: whether alleged contrived/fictitious profits from NMCE commodity trades warranted income-tax additions. Reasoning: the assessee declared ... Addition on account of alleged contrived and fictitious profit/loss arising from commodity transactions carried out on the NMCE platform - HELD THAT:- Assessee had not claimed any loss in her return of income for the year under consideration and, on the contrary, had disclosed profit from the NMCE transactions which was offered to tax. Assessee had furnished complete details of all commodity transactions carried out through a registered broker on the NMCE platform, including contract notes, broker ledger accounts, contra confirmations, bank statements and books of account. These details were found to be matching with the information obtained by the AO directly from NMCE u/s 133(6) of the Act. We note that the AO has not pointed out any discrepancy between the transactions recorded in the books of the assessee and the data received from NMCE, nor has he brought on record any independent material or evidence to establish that the transactions were fictitious, manipulated or synchronized with a view to generate artificial profit or loss. The addition has been made primarily on the basis of general information from the Investigation Wing, without any specific evidence linking the assessee to any alleged modus operandi. We also find considerable force in the finding of the CIT(Appeals) that the AO has adopted an impermissible pick-and-choose approach by treating part of the same transaction as genuine and another part as non-genuine, particularly in respect of the transaction dated 11.10.2010. We are in agreement with the conclusion of the CIT(A) that the addition has no factual or legal basis and was rightly deleted. 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.