2021 (4) TMI 1014 - AT - Income Tax

Bogus LTCG - Addition of 30% alleged commission charges - HELD THAT - Both the lower authorities have erred in law and on facts in treating assessee s long term capital gain as bogus ones in absence of any supportive evidence in their support; whatsoever. The impugned addition(s) qua both aspects are directed to be deleted. Un-explained un accounted cash investment - addition in the nature of on-money paid to Vendor - HELD THAT - We find no reason to sustain the impugned identical addition of money payment in cash addition in these assessees hands. It is an admitted fact that learned lower authorities have gone by the alleged loose sheet only allegedly revealing the impugned payments made out at assessees behest over and above the sale price involving M/s.Western Pearl Project sold by M/s.Western Constructions/vendees. DR have treated the latter s partner s statement and the alleged Excel sheet as the basis of the impugned additions. Learned CIT-DR also quoted Section 132(4) r.w.s.292C of the Act that such an incriminating material found/seized during the course of search carries presumption of correctness as well. He fails to rebut the clinching legislative expression used in Section 292C of the Act carrying presumption inter alia that the specified categories of the incriminating material are presumed to be belonging to such persons and their contents are true validly signed and are executed and are treated to be in the possession; qua the concerned assessee only than in case of any third person as well. The Revenue s endeavour to this effect seeking to apply 292C r.w.s.132(4) presumptions fails. We make it clear that hon ble apex court s recent landmark decision M/S. DILIP KUMAR AND COMPANY ORS. 2018 (7) TMI 1826 - SUPREME COURT has recently settled the law that provisions of a taxing statement have to be interpreted in stricter parlance only. Revenue has cited statement of M/s.Western Construction s partner that the same duly proved that the on-money payments had been made in cash by these assessees. This argument also fails inter alia for the reasons that Shri Raju had made it clear during and after search that he was not aware of the company s business affairs. And that the alleged document never mentioned these assessee s names at all as it is not only the Assessing Officer in the impugned assessment but even in case of the recipient M/s.Western Construction s assessment order dt.28-12-2018 as well wherein it had been held that the on money amount was attributable to Shri Narendra Kumar Goyal than these twin assessees. Ld.CIT-DR was fair enough in informing the bench that the department has not initiated any action against Shri Narendra Kumar Goyal. That being the case the Revenue s stand of having strictly gone by the contents of the seized document only to this effect itself is self-contradictory since Shri Goyal (assessees father) has nowhere been examined till date. Assessees statement had duly admitted the impugned on money payment - We are unable to agree with the instant plea based on mere admission made post search in view of the CBDT s circular(s) dt.10-03-2003 and 18-02-2011 making it clear that such an admission of undisclosed income made during search or survey does not carry any significance and the same has to be based on evidence collected in the very process only. Whether the impugned seized material / Excel sheet (not mentioning the assessees names) forms a dumb document or not.? - We make it clear that the department has failed to corroborate the impugned seized document indicating assessee s alleged on money payment over and above the sale price itself. All it has done is to rely on their father s name only. It is nowhere clear as to whether it is 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 is rough notings and jottings only. As relying on Common Cause Vs. Union of India 2017 (1) TMI 1164 - SUPREME COURT and CBI Vs. V.C.Shukla 1998 (3) TMI 675 - SUPREME COURT 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. We accordingly hold that 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 is not sustainable. We thus direct to delete the impugned identical addition forming subject matter of adjudication in both these cases.

Summary

Issues Involved:
1. Treatment of Long Term Capital Gain (LTCG) as bogus.
2. Addition of unexplained investment in commodities and shares.
3. Non-opportunity for cross-examination of witnesses.
4. Addition of unexplained cash investment as on-money payment.

Detailed Analysis:

1. Treatment of Long Term Capital Gain (LTCG) as bogus:
The assessee challenged the correctness of the authorities' action treating his LTCG claim of ?73,89,650/- as bogus along with 30% alleged commission charges of ?2,21,690/-. The CIT(A) confirmed the AO's action based on SEBI's findings on manipulation in transactions involving 'Penny Stocks'. The AO's findings were backed by sustained investigation results. The assessee contended that transactions were routed through proper banking channels and traded through recognized stock exchanges. The documents submitted by the assessee were not disproved by the AO, who relied on information from the investigation wing without corroborative evidence. The Tribunal referred to various case laws, including Smt. Sarita Devi vs ITO and Vidhi Malhotra Vs ITO, which supported the assessee's claim of genuine transactions. The Tribunal found that the AO's addition was based on assumptions without material evidence and directed the deletion of the addition.

2. Addition of unexplained investment in commodities and shares:
The AO made an addition of ?28,48,439/- and ?2,21,690/- towards unexplained investment under section 69 of the Act. The assessee provided evidence of transactions through proper banking channels and registered brokers. The Tribunal referred to case laws, including KLR Industries Limited vs DCIT and Commissioner Of Income Tax Vs Lovely Exports (P) LTD, which held that once the identity, genuineness, and creditworthiness of the creditor are established, no addition under section 68 can be made. The Tribunal found that the AO's addition was not justified and directed the deletion of the addition.

3. Non-opportunity for cross-examination of witnesses:
The AO did not afford proper opportunity for cross-examination of the person on whose statement the addition was based. The Tribunal referred to the case of Sunitha Daddaa vs. DCIT, which supported the principle of natural justice requiring the opportunity for cross-examination. The Tribunal found that the AO's action was against the principles of natural justice and directed the deletion of the addition.

4. Addition of unexplained cash investment as on-money payment:
The AO made an addition of ?6.40 Crores each towards unexplained cash investment as on-money payment to M/s. Western Constructions. The CIT(A) confirmed the AO's action, stating that the addition was based on seized material and the appellant's explanation during the search. The assessee retracted the statement given during the search, claiming it was made under pressure and confusion. The Tribunal found that the addition was based on a mere 'dumb' document without corroborative evidence. The Tribunal referred to various case laws, including Nishan Constructions Vs. ACIT and Common Cause, Vs. Union of India, which held that such loose sheets should be treated as dumb documents. The Tribunal directed the deletion of the addition, finding no reason to sustain the impugned addition based on the alleged loose sheet.

Conclusion:
The Tribunal allowed the appeals, directing the deletion of the additions made by the lower authorities. The Tribunal found that the AO's actions were based on assumptions and uncorroborated evidence, and the principles of natural justice were not followed. The Tribunal emphasized the need for material evidence to support any addition and upheld the assessee's claims of genuine transactions.