2023 (12) TMI 1035

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....nst the confirmation of addition of Rs. 56,67,177/- by Ld. CIT(A) as made by the AO on account of shifting of income by client code modification. 3. Facts in brief are that the assessee filed return of income on 30.09.2009 declaring total income of Rs. 72,210/- which was processed u/s 143(1) of the Act on 30.10.2010. Thereafter the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 30.03.2016 after AO received information from office of DDIT(Inv) Wing-1(3), Ahmedabad that the assessee company has indulged in manipulation of its taxable income to reduce the tax liabilities by use of client code modification amounting to Rs. 56,67,177/- in F & O segment in trades made with M/s Indianivesh Securitie....

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....changes client code is punched. Each client of a broker is first verified and each client's KYC s maintained at broker's offices. Every client is issued a distinct client code and as per SEBI regulations each transaction on stock exchange should contain the client cede of the person whose orders have been executed on the stock exchange. Transactions on stock exchange may result in profits for some clients and losses for others. Unscrupulous clients may desire to have either only profit or only losses in their transactions on stock exchanges. For this purpose they approach their brokers, who in turn manipulate the client code of other clients, with their consent, to pass on the profit or loss earned by them to some other clients. Client code....

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....ing the rival contentions and perusing the material on record, we find that the assessee is engaged in business of purchase and sale of share and securities during the year. The assessee has sold all the shares and securities to the tune of Rs. 30,44,10,646.35/- whereas the purchase were Rs. 7,99,71,923.28/- and loss in share trading in F & O segment MTM based was Rs. 18,16,26,178.83/-.During the year the assessee returned net profit before tax of Rs. 72,207.33/-. The assessee carried out these transactions through various brokers one of whom was Indianivash Securities Pvt. Ltd. Allegations by the AO are that the assessee through client code modification has shifted its income to the tune of Rs. 56,67,177/- through the said broker as is app....

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....ITR 228 (Ahd. Trib) v) Decent Financial Services (P) Ltd. vs. DCIT reported in 35 NYP TTJ 849 (Del- Trib) vi) Sri Harish Kumar Biyani vs. ACIT in ITA NO. 2547/Kol/2019 dated 14.02.2020. vii) Aereo Dealcomm (P) Ltd. vs. ITO in ITA No. 2484/Kol/2019 dated 29.05.2020. viii) ITO vs. Abhishek Fincap Services (P) Ltd. in ITA No . 2750/Del/2017 dated 13.09.2017. In all the above decisions it has been held that the addition cannot be made on the basis of DDIT report into the shifting of income through client code modification alone where the AO has not carried out any further independent verification into the matter. In the present case also the assessee has maintained all the books of account and also furnish....