TaxTMI 
TaxTMI 
2013 (3) TMI 198
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.... of Income Tax erred in confirming the penalty u/s.271(1)(c) of Rs. 13,00,000/-. 2. On the facts and circumstances of the case and in law the Ld. Commissioner of Income Tax failed to appreciate the fact that the client code modifications were for genuine reasons for which the explanation was furnished which the CIT (A) failed to appreciate. 3. On the facts and circumstances of the case and in law the Ld. Commissioner of Income Tax erred in holding that additions made in the assessment proceedings is not merely agreed additions and relied on irrelevant factors such as information received from the MCX and statement made by the Directors in the course of survey. 2. The facts which revealed from the record are as under. The assessee company....
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....ri Pratik Doshi, Director and Shri Sushil K. Parikh, Manager - Operations were recorded under sec. 131 of the Act. Both confirmed that some code modifications were non-genuine but those were done by the Dealers on behalf of the assessee company. It was also stated that two dealers namely Shri Ajay Shah and Shri Akhil Gupta did code modifications without knowledge of the assessee company and their services were terminated. Subsequently, on 7.5.2008 statement of Shri Pratik Doshi, Director of the assessee company was again recorded. It was brought to his notice that there were 22081 transactions on MCX in which clients codes have been modified by the assessee and his explanation was sought. Shri Pratik Doshi stated that the assessee had a ver....
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....erational difficulties in lot sizes, expiry date of the transactions, prices quoted in kgs./gms etc. Market hours were from 10.00 a.m. to 11.55 p.m. as a result it was practically impossible to regulate the activities of the staff. iii) Many times, the client codes appear by default on the trading terminal and the correct client code will not appear unless the set up in the computer is changed resulting in frequent change in client codes. iv) Client codes have been changed within reasonable time of executing the same Many times punching errors have been made so as to record the transaction in the name of 'B' instead of 'A' when it is realized at the end of the day the entry is made reverse otherwise on the next day the position of the cli....
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....ther or vice versa. For this purpose you may consider the following submissions: i) No broker / sub broker would indulge in modification of client code when the effect of shifting profit from one head to other head is small/less than compared to brokerage earned. Costs viz; brokerage, service tax, stamp duty and exchange transaction cost for one leg of the transaction is as under: For every Rs. 1,00,00,000: Brokerage Rs. 5,000 Service Tax Rs. 612 Stamp Duty Rs. 100 Exchange Transaction Cost Rs. 400 Rs. 6,112 Thus for a two leg transaction, the total transaction cost inclusive of brokerage earned, will be Rs. 12,224. Thus when effect is small in the transaction one can very well assume that the modification is without any mot....
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....sp; 3. It is further submitted that the income conceded in the survey is just to buy a peace of mind and to avoid protracted litigation. There is no precise finding that income has been derived by the assessee on account of trade modification and further more the submission made by the assessee has not been controverted by the survey party and also in the assessment proceedings. In absence of any specific finding merely on account of conceding certain income to be added in the assessment would not ipso facto amounts to concealed income particularly for the various factors stated above for the trade modification." 3. The A.O. was not convinced with the explanation of the assessee and he rejected the same and levied the penalty of Rs. 12,24....
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....rs for unauthorised modification in the code. He, therefore, pleaded that the assessee cannot be faulted for the change in the code. He vehemently argued that there is no reason to disbelieve the assessee and hence, the penalty may be cancelled. Per contra, the Ld. D.R. supported the orders of the authorities below. 5. We find that there is a modification of the Clients' code in the transactions and considering the nature of the trade involved, in our opinion, the explanation of the assessee appears to be bona fide. On the perusal of the penalty order, we find that the A.O. has not taken any pains to negativate the explanation of the assessee as to why the same should be treated as not bona fide or genuine. The Director of the company, in ....