Tarun Kumar Goyal Vs ACIT (ITAT Hyderabad)
Conclusion: Addition of on-money payment made in both these assessees’ hands on the basis of a mere dumb document and not corroborated by any other evidence was not sustainable as the department had failed to corroborate the impugned seized document indicating assessee’s alleged on money payment over and above the sale price itself.
Held: Department had carried out the impugned search dt.02-11-2016 in twin assessee’s cases namely Sri T and Sri A/vendees as well as the vendor M/s.W and other parties. The same culminated in Section 153A proceedings initiated against them. Coming to the issue of on-money payment to the vendor, M/s.W, it was an admitted fact that the purchase transaction was regarding commercial space admeasuring 38,700 sft. (11th floor) of the Western Pearl Project. AO’s case was that the impugned search had found/seized the incriminating document ‘No.A/GSR/02’ in the nature of an ‘Excel’ sheet. AO stated that the said Excel sheet revealed the assessee’s vendor and Shri Narendra Kumar Goyal’s debit and credit entries followed by registration of the sale deed in former’s name only. AO took note of the former assessee Shri T’s statement u/s.132 allegedly referring to a document recovered from partner of M/s.W during search that the same sufficiently indicated details of the on-money payment in issue. The issue arose was whether the impugned seized material / ‘Excel’ sheet (not mentioning the assessees’ names) formed a dumb document or not. It was held that the department had failed to corroborate the impugned seized document indicating assessee’s alleged on money payment over and above the sale price itself. All it had done was to rely on their father’s name only. It was nowhere clear as to whether it was an alleged document forming part of the books of account maintained in the regular course of business either by the vendor or vendee side. All it contains therefore was rough notings and jottings only. This tribunal co-ordinate bench’s decision Nishan Constructions Vs. ACIT ITA No.1502/Ahd/2015; after considering the hon’ble apex court’s landmark decision in Common Cause, Vs. Union of India (2017) 77 taxmann.com 245 (SC) and CBI Vs. V.C.Shukla (1998) 3 SCC 410 (SC) holds that such loose sheets deserves to be treated as a dumb documents only since not revealing full details about the dates containing lack of further particulars and therefore, ought not to be made basis of an addition. Therefore, the impugned addition of on-money payment made in both these assessees’ hands on the basis of a mere dumb document and not corroborated by any other evidence was not sustainable.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
The instant three appeals pertain to two assessees, S/Shri Tarun Kumar Goyal and Arun Kumar Goyal for AYs.2014-15 & 2016-17. The former assessee’s appeals ITA Nos.456 & 457/Hyd/2020 arise against the CIT(A)-11, Hyderabad’s separate orders, both dated 31-01-2020 (AYs.2014-15 & 2016-17) passed in case Nos.10252 & 10255/2018-19 followed by a latter assessee’s appeal ITA No.458/Hyd/2020 for AY.2016-17 directed against the very CIT(A)’s order; of even date, passed in case No.10253/2018-19, involving proceedings u/s.143(3) r.w.s.153A of the Income Tax Act, 1961 [in short, ‘the Act’]; (in all cases), respectively.
Heard both the parties. Case files perused.
2. We proceed appeal-wise for the sake of convenience and brevity. The former assessee’s in appeal ITA No.456/Hyd/2020 challenges correctness of both the lower authorities’ action treating his long term capital gain claim of Rs.73,89,650/- as bogus alongwith 30% alleged commission charges thereupon to the tune of Rs.2,21,690/-; respectively. The CIT(A)’s detailed discussion confirming the Assessing Officer’s action to this effect reads as under:
“5.2 I have considered the assessment order and submissions of the appellant. It is seen from the assessment order that the addition made is on estimate basis @1% on total purchases made during the year w.r.t the transactions in commodity trading. The addition made is based, on assumptions and presumptions of the AO and is not backed by any material evidence. Further, the addition in search assessment based on estimation without being backed by material evidence do not stand the test of law. In view of the factual and legal position as discussed above, the addition made is not warranted and the same is deleted.
6. Ground Nos. 10 to 21 are against the addition of Rs.73,89,650f – on account of capital gains claimed u/s.l0(38) of the I.T Act. The AO made addition of Rs.2,21,690/- on account of alleged commission for providing entries for capital gains @3% of exempt capital gains. The AO examined the issue of claim of capital gains. exemption u/s.10(38) at length. The AO discussed various facets of the facts related to the transaction in the order. The issue is discussed in P~ra-9.0 to Para 12.0 of the order. The AO brought out the SEBI order on manipulation in transactions in ‘Penny Stocks’, unrealistic circumstances as to the transaction, purchase price, sudden increase in share price of M/s.Kailash Auto Finance Ltd, which is not commensurate with financial results, unrealistic returns, the role of operators in arranging such transactions in detail. The findings of the AO are backed by results of sustained investigation, which are brought out in the order.
6.1 During the appellate proceedings, AR contended as under:
3. The AO erred in the transactions which are routed through proper banking channels and in appreciating the fact that assessee traded the c01nl1wdities through recognized stock exchange:
7.1. In relation to commodities Exchange it is to submit that during the course of assessment proceedings, the assessee filed copies of confirmation, bank statement, copy of the ITR, copy of financial statement of the parties etc. So these evidences confirm that the transactions are routed through proper banking channel.
7.2. The commodities ‘were traded through a Stock Broker, M/s. Rajgharana Commodities Trade Pvt. Ltd, registered member of MCX/NCDEX that it is to submit that the Stock Broker had issued the contract note in proper form giving settlement number, trade time, trade number, amount of CIT and other details. The assessee also received the payment relating to the Commodities Sold from the broker after deduction of CTT. Once the transaction is routed through a registered broker in a recognized commodities exchange (MCX/NCD EX) with due suffering of CTT and which are also duly covered by the requisite documentation, the genuineness and credibility of the same cannot be questioned. The assessee had duly shown that transaction were done through banking channels right from purchase to sale of commodities and all the transaction have been routed through DMAT account sold in the MCX/NCDEX as per quoted price as on that date (Copy of the documents are enclosed vide paper book page no.17-72,131132).
7.3. Further it would be submitted that the documents relating to purchase and sale of commodities have neither been controverter nor disproved by the assessing officer. The A.O. merely on the basis of information from investigation wing and without any corroborative evidence nor making any enquiry further for the justification of additions. The report of Investigation wing could not be sole ground to implicate assessee and justify additions especially when, nowhere assessee had been found to be beneficiary of any kind of accommodation entry in. any inquiry by Investigation Wing or any such material had been unearthed by department in the course of search operation.
It would be the responsibility of the broker to ensure that the transaction is properly routed and CTT was paid as per stock exchange norms. It was also stated that in the secondary market transactions, no one knows who the buyer is and who the seller of the commodities is. When the assessee sold his commodities, several other persons also transacted in these commodities on MCX/NCDEX at prices similar to the price at which the assessee sold his holding.
7.A. The assessee has submitted the following information in support of the genuineness of transactions:
> Contract note for the sale of commodities through a registered stock broker with BSE.
> CIT had been duly suffered on the sale transactions.
7.5. In this regards, reliance is to be placed on the following case laws :-
