AI Drafter 
TaxTMI 
TaxTMI 
2019 (8) TMI 101
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....3) r.w.s. 147 on 26/12/2016 wherein income of the assessee was determined at Rs. 166.28 Lacs as against returned loss of Rs. 42.13 Lacs efiled by the assessee on 20/09/2009. The assessment was originally framed u/s 143(3) on 14/12/2011. Subsequently, the case was re-opened as per due process of law, by issuance of notice u/s 148 on 28/03/2016 which was followed by statutory notices u/s 143(2) and 143(1). 2.2 The reassessment proceedings got triggered pursuant to receipt of certain information from Investigation Wing, Ahmadabad wherein it was alleged that the assessee stood beneficiary of client-code modification (CCM). The investigation arm of the department having conducted spot verifications by way of surveys and enquiries noted that some of the brokers and their clients have indulged in the practice of misuse of clientcode modification, thereby artificially shifting profits and losses from original client code to modified client code with an intention to reduce the legitimate tax liability which would have arisen had the original trades not been modified. 2.3 Upon pursual of the information, it transpired that the assessee stood beneficiary of such client-code modification....
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....en the price of the commodity has already changed, then perhaps there could have been some basis to presume that client code modification is intentional. It is precisely in the case of the assessee that the transactions have been completed when the prices have already moved in the interim. The client codes are changed at the end of the day, when profits / losses on such transactions are completely known. 4.18 The stock market rewards the investors the investors who take risk in price movement of shares. Whenever there is underlying movement in the prices of the shares, the wealth of the investor undergoes change and he make profits / losses. But in the present case, it is squarely established that NO RISK AT ALL was borne by the persons who selectively shifted in only ascertained losses. Thus these losses are contrived losses shifted in for the purpose of evading taxes due which is otherwise due on other income / gain already incurred. Thus, there is no element of price risk. This shows that the losses / profits were not incurred on account of any genuine risk taking in market but were in a way bought after they were ascertained and hence are contrived. 4....
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....lity. Reliance was also placed on number of judicial decisions to buttress the submissions on merits. 4.1 The Ld. CIT(A) upheld the action of Ld. AO in reopening the case since there was an information from investigation wing, upon perusal of which Ld. AO formed a reasonable belief that certain income escaped in the hands of the assessee. However, on merits, Ld. CIT(A) concurred with assessee's stand that the additions were made solely on the basis of inquiries conducted by investigation wing and nothing was brought on record by Ld. AO to establish that client-code modification was not genuine one. The modifications were done as permissible by the stock exchanges recognizing the fact that the errors would be inevitable. It was also observed that ratio of such modifications was quite small i.e. 0.54% of total trades carried out by the assessee during the year. 4.2 It was also observed at para 6.7 of the impugned order that Ld. AO took cognizance of the general information provided by the investigation wing without bringing on record any material to show that the parties to whom alleged profits were supposed to have been diverted to reduce the taxable income of the assessee had....
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.... We have carefully heard the rival submissions and perused relevant material on record. The undisputed position that emerges is that the assessment was reopened upon receipt of certain information from investigation wing alleging that the assessee stood beneficiary of misuse of client-code modification. Another undisputed fact that emerges is that all the transactions carried out by the assessee with the brokers were duly reflected in its books of accounts, the ledger extracts were duly confirmed and the transactions with brokers were through banking channels. No discrepancies were pointed out in the brokers' account. Nothing has been brought on record to establish that the assessee was in collusion with brokers or other parties so as to indulge in the practice of client-code modification with a view to shift the profits. On the facts, onus was on revenue to rebut the assessee's stand by bringing cogent material on record which would prove the nexus of the assessee with the activity of client-code modification. The additions have been made merely on the basis of general observation of the investigation wing. It is trite law that no additions could be made merely on the basis of pur....
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....sumption, conjectures or surmises without bringing on record any concrete material to dislodge the assessee's claim. Therefore, the allegations as levelled by Ld. AO, in our opinion, are without any cogent or supporting evidences and therefore, the same could not be sustained in the eyes of law. 5.3 We find support from the decision of this Tribunal in M/s Sambhavnath Investment V/s ACIT [supra] wherein it has been held as under: - 7. We have carefully considered the rival submissions and perused the orders of the lower authorities and the relevant material evidences brought on record before us. The AO has annexed the transactions of RSBL with the assessee as part of the assessment. The entire allegation of the Revenue authorities revolves around the modification in client code by the assessee so that it could book losses. At this stage, we failed to understand how can the assessee modify the client code or the details of transactions which have been transacted by the authorized broker RSBL on MCX. A person transacting through a registered broker cannot have any excess to the terminal of the registered broker with the exchange be it stock exchange or commodity exc....
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....it convenient to punch its own code. Further, we notice that the fact that the assessee has changed the code to the concerned client's account at the end of the day has not been disproved. If at all any person comes with a request seeking profits, there will normally be time lag and hence the fact that the assessee has changed the codes at the end of the day only shows that the assessee has carried out the transactions on behalf of its clients only. Such kind of transactions shall usually be sporadic transactions, where as in the instant case, the clients have carried out the transactions continuously. Further, it is pertinent to note that none of the clients, with whom the assessing officer has carried out the examination, has disowned the transactions. Further, all the clients have duly disclosed the profits arising from the transactions as their respective income. Though the AO has alleged that the said profits have been used to set off the past brought forward losses, yet the Ld CIT(A) has made a detailed analysis of this matter and has given a clear finding that the same was not true in all the cases. The Ld CIT(A) has pointed out that majority of the clients have pai....
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....ng the additions made in both the years under consideration. In our view also, the assessing officer has drawn adverse conclusions against the assessee without properly bringing any materials to support the view, i.e., the additions have been made on suspicion and surmises only. Accordingly, we uphold the order of Ld CIT(A) in both the years under consideration. 5.4 So far as the case laws being relied upon by the revenue is concerned, we find that the decision of Hon'ble High Court of Calcutta rendered in Pr.CIT V/s India Finance Ltd. [81 Taxmann.com 135] deals with validity of jurisdiction u/s 263 and therefore, has no application. The decision of Hon'ble Delhi High Court rendered in CIT V/s Vashishth Chay Vyapar Ltd. [66 Taxmann.com 371] deals with a situation wherein the assessee booked fictitious losses through related entities and the transactions were found to be bogus transactions, which is not the case here. 5.5 Keeping in view the entirety of facts and circumstances, we find no infirmity in the impugned order. Accordingly, revenue's appeal stands dismissed. Ground No. 4 of assessee's cross-objections stands allowed. 9. The Ld. DR has relied upon the d....