TaxTMI 
TaxTMI 
2016 (8) TMI 1488
X X X X Extracts X X X X
X X X X Extracts X X X X
....ring the course of search, various documents/books of accounts/other valuable articles/things were found and seized and on its verification, it was found that there are certain documents which were belonging to the assessee. Accordingly, proceedings u/s.153C r.w.s.153A of the Act were initiated in the case of assessee and notices u/s.153C r.w.s. 153A of the Act was issued and served upon the assessee and in response to which assessee vide letter dated 09/11/2011 submitted that the original return of income that was filed on 31/12/2006 be considered as return of income in response to notice u/s.153C r.w.s.153A of the Act. Thereafter, assessment was framed u/s.153C r.w.s.153A r.w.s.143(3) of the Act vide order dated 30/12/2011 and the total income was determined at Rs. 74,02,800/- Aggrieved by the order of Assessing Officer (AO), assessee carried the matter before the ld.CIT(A) who vide order dated 01/10/2012 (in Appeal Nod.CIT(A)-XVI/ACIT/Cir.11/647/11-12) granted partial relief to the assessee. Aggrieved by the order of ld.CIT(A), assessee is now in appeal before and has raised following grounds:- 1. Assessee is dissatisfied with the order passed by the order passed by the learn....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... about the correspondence of Broker KCBPL vide letters dt. 30.09.2009, 01.10.2009, 09.10.2009, 09.10.2009, 16.12.2009, 16.11.2009 and dt. Nil, submitted during assessment proceedings of Smt. Meena Parikh. The above referred letters of brokers KCBPL, order dt.29.12.2009 by AO Central Circle-l(l) Ahmedabad and order dt. 18.01.2011 passed by C.I.T.(A)-1 Ahmedabad are very important in this matter as facts of Assessments for A.Y.2006-07 for Meena Parikh and facts for assessments for A.Y.2006-07 for Siddhi Beverages, Partnership Firm are similar and same. In fact suppressed profit computed by AO in the case of partnership firm Siddhi Beverages, has been apportioned on the basis of income offered for A.Y.2006-07 by Prop. Meena Parikh and Firm Siddhi Beverages in the proportion of 727086: 3517498 and suppressed profit attributable to Siddhi Beverages is Rs. 6645567/-. This very important facts, though conveyed to AO by CA Shri Ashok Gupta, has not been brought on record by AO while passing the assessment order for A.Y. 2006-07 for Firm Siddhi Beverages. 6. AO has erred in facts and in law in not accepting the written contentions and explanations given by KCBPL vide their letters ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t on many occasions which had resulted into diversion of profits from the assessee to other persons and assessee had also take over losses of other persons and by adopting the methodology of client code modifications, the profits/losses was transferred from one person to another. The AO thereafter worked out the profit/loss which assessee would have earned had the client code modification not taken place and according to his calculation the amount of such profits was worked out at Rs. 80,19,242/-. The aforesaid amount was treated as the suppressed profits in the hands of Siddhi Beverages and of that he considered Rs. 35,17,498/- being that of partnershipconcern as Siddhi Beverages was converted into partnership-firm with effect from 09/11/2005 and the balance amount of Rs. 65,45,587/- was considered as profit of the assessee. Aggrieved by the order of AO, assessee carried the matter before the ld.CIT(A) who upheld the order of AO by holding as under:- "6.0 Ground Nos.4 to 9 are regarding addition made by Ld.Assessing Officer of Rs. 31,67,986/- on account of suppression of profits related to client code modifications. Brief facts of the case are that search and seizure proceeding....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rors and that the modifications in dispute were actually done to remove genuine errors and that if the same were not done it would have resulted into a chaotic condition. 6.3. After carefully considering the order of learned CIT(A)-1, Ahmedabad with reference to the facts of the case discussed by the Assessing Officer in the order appealed against, I am unable to agree with the conclusions drawn by the said appellate authority. The Assessing Officer has clearly indicated in the assessment order that the client code modifications undertaken in this case do not allude towards an exercise undertaken to meet bonafide genuine needs. It is not a case of client code modifications done with the objective of attending to inadvertent punching errors but clearly indicate towards an exercise undertaken deliberately with premeditated motives. To bring home his point the Assessing Officer has drawn attention to following:- • client code modifications in client code 0001 to the extent of 12155(6821+5334) number of times is practically not possible. Such a huge modifications on the pretext of punching errors are unimaginable. • For executing a single trade, a person is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n was for unusually high number of cases. Therefore, first thing to be decided is whether there was the client code modification for unusually high number of cases. The Commodity Exchange i.e. MCX vide circular No.MCX/T&S/032/2007 dated 22.01.2007, issued guidelines with regard to the client code modification, which reads as under:- "Circular no. MCX/T&S/032/2007 January 22, 2007 Client Code Modifications In terms of provisions of the Rules, Bye-Laws and Business Rules of the Exchange, the Members of the Exchange are notified as under: Forward Markets Commission (FMC) vide its letter no. 6/3/2006/MKT-II (VOL III) dated December 20, 2006 and January 5, 2007 has directed as under. a. The facility of client code modifications intra-day are allowed. b. The members are also allowed to change their client codes between 5:00 p.m. to 5:15 p.m., in case of the contracts traded till 5:00 p.m. and between 11:30 p.m. to 11:45 p.m. for the contracts traded till 11:30 p.m. on all the trading days from Mondays to Fridays and on Saturdays the same shall be allowed between 2:00 p.m. to 2:15 p.m. c. However, on the days when trading i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... number of client code modification and percentage thereof. We have also reproduced the same at paragraph No.6 of our order. From the said details, it is evident that the client code modification was done in four years 36,161 times. As an absolute figure, the client code modification may look very high, but if we look it at in terms of total transactions, it is only 0.94%. The total number of trade transactions is 38.58 lacs and the client code modification is only 36,161. Therefore, the client code modification is less than 1% of the total trading transactions. As per circular of Commodity Exchange, client code modification upto 1% is quite normal and is permitted without any penalty. That the Assessing Officer has not given any reason on what basis he presumed the client code modifications to be unusually high. In the light of the MCX circular, we are of the opinion that the client code modification was quite nominal and not unusually high as alleged by the Assessing Officer. 9. The Assessing Officer held the client code modifications to be malafide with the intention to transfer the profit to other person by modifying the client code so as to avoid the payment of tax. From th....