TaxTMI 
TaxTMI 
2020 (12) TMI 303
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....,160/-. (Tax effect: Rs. 26,35,510) 3. On facts and in law, the Ld. CIT(A] had erred in upholding a sum of Rs. 73,703/- being commission earned from contra parties on client code modification without appreciating the full facts of the case. Under the facts and circumstances of the matter, he ought not to have upheld the said sum of Rs. 73,703/-. (Tax effect: Rs. 22,774/-) It is evident that the assessee is aggrieved by part confirmation of additions on account of Client-code modification (CCM) to the extent of Rs. 85.29 Lacs. Ground No. 3 is consequential ground which contests the action of Ld. AO in estimating commission on certain transactions. 2. We have carefully heard rival submissions and perused relevant material on record including documents placed in the paper book. The Ld. AR Shri Neel Khandelwal, enumerating the factual matrix, has relied upon various judicial pronouncements which have duly been deliberated upon by us. The Ld. Sr. DR, Shri Manpreet Singh Duggal, on the other hand, sought dismissal of the appeal on the basis of surrounding circumstances and preponderance of probabilities. Our adjudication to the subject matter of appeal would be as given in....
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....The trades were cancelled / modified based on the request made by the clients for correcting the error in punching the client code in the trading system. 3.4 However, the assessee, vide submissions dared 09/09/2015, submitted that the transactions where codes were modified belonged to the assessee and the modification was genuine. The modifications were executed by the broker to rectify possible mistakes which should be contributed to human error. The attention was drawn to the facts that modification was only to the extent of 1.15% which was attributable to human error. The code modifications were done by the broker due to wrong punching of sauda by their office and the assessee had no role in such modifications but it was done by virtue of modification procedure as allowed by the stock exchange NSE. 3.5 After perusing the replies received from M/s IGSL and the assessee, Ld. AO reached a conclusion that the assessee was actively involved in the practice of client code modification. All the trades were executed by the assessee on his own terminal and client codes were also modified by the assessee for their benefits. The assessee clarified that it punched orders for F & O seg....
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....lients of the assessee but the clients of the main broker only. These entities were categorized as Category-1 transactions. The CCM transactions with entities which were clients but covered under family and relatives were categorized as Category-2 transactions. The CCM transactions with remaining entities were categorized as Category-3 transactions which form the subject matter of present appeal before us. These transactions aggregated to Rs. 85.29 Lacs. 4.2 The assessee contended that assessee's own volume of trades was as high as 90% of total trades undertaken by the assessee. Since the assessee's trade was high, the staff of the assessee, in order to save time, had prefixed the client code of the assessee in the system as default which led to punching errors of client code at the time of transactions. Therefore, the mistakes were not typographical errors but because of punching of default code at the time of carrying out the transactions on behalf of the clients. These codes were later on modified to correct the same. The attention was drawn to the fact that CCM transactions were 2720 in number which merely constitute 1.15% of total number of total trades undertaken by the as....
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.... had executed the transactions in F&O segment. After considering assessee's submissions and documentary evidences, Ld. CIT(A) deleted additions for Category-1 and Category-2 transactions but chose to confirm additions for Category-3 transactions by observing that the mistake of client code could not be repeated so often and in a brazen manner several times. Therefore, the addition for this category aggregating to Rs. 85.29 Lacs was to be confirmed. As a logical consequence, the commission income of Rs. 3 Lacs as estimated by Ld. AO was restricted to the extent of Rs. 73,703/-. Aggrieved, the assessee is in further appeal before us. 5. We have carefully heard the rival submissions. From the enumeration of facts, it is quite evident that the practice of client-code modification is permissible as per the rules of stock exchanges since the possibility of punching errors could not be ruled out at the time of carrying out the transactions and human error was inevitable. The modifications to the extent of 1% could be done without any penalty and even the modification of 5% would attract meager penalty of Rs. 500/-. The same would support the fact that due to large volume of transaction....