TaxTMI 
TaxTMI 
TaxTMI 
2020 (1) TMI 1665
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....n treating the disallowance of losses amounting to Rs.19,09,281/- to be bogus since involving alleged client code modification made by the broker. The CIT(A)'s detailed discussion affirming the assessing authority's action to this effect reads as under:- "6. Ground nos. 2, 3 & 4 are against the addition made u/s. 68 of the Act by the AO in the sum of Rs.19,09,281/- observing as under: - "From the reply it appears that the assessee has itself admitted that client code modification was occurred in its share dealing business. The departmental investigation wing found out that the assessee is one of beneficiary of client code modification. So it is clear that the assessee booked bogus loss of Rs.19,09,281/- under the garb of client code modification." 7. The AIR appearing on behalf of the appellant vehemently disputed the addition made on this pretext by the AO. 8. I have carefully considered the arguments of the AIR of the appellant and perused the relevant issue in the assessment order as well as the materials placed before me. The AO has recorded that the investigation carried out by the Directorate of Income Tax (Investigation), Unit 1 (3), Ahmedabad revealed that net lo....
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....ces of client code modification and implementation of a penalty structure. In the light of the reading and submission of NSE, it is to be observed that the practice adopted by NSE is scrutiny of client code modifications on a post facto basis, with monetary penalties in direct proportion to the quantum of incidence in compliance with the SEBI circular. Regarding the requirement of not allowing the change in client code except for genuine mistake, it is also to be observed that the term 'genuine mistake' has wide connotation. However, on perusal of the submissions made out by the appellant during the appellate proceedings, it does not emanate that the modifications were genuine. Further, a careful study of the SEBI Circular would reveal that a two tier penalty structure has been provided for. A monetary penalty has been envisaged when there is an escalation in the number of client code modifications. However, in the case of repeated offences, further necessary action has been recommended. Therefore, in view of matter, I hold that the AO was correct in concluding that in the present instance there was deliberate shifting of profits by the appellant in connivance with the brok....
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....d that the derivative transactions took place through a broker but on different dates. He also applied the theory of probabilities and dismissed the case of the assessee. He rejected the contentions of the assessee that addition cannot be made on mere suspicion, conjectures and surmises as held by the Hon'ble Supreme Court in the case of Messrs. Lalchand Bhagat Ambical vs The Commissioner Of Income- Tax 37 ITR 288 SC. 3. Aggrieved the assessee is before us in appeal. 4. After hearing rival contentions, I find that the assessee has provided documentary evidence by way of contract notes, bank statements evidencing cheque payments for all these transactions, payment of security transactions tax before the Assessing Officer. The National Stock Exchange has confirmed that these transactions have taken place in the exchange and in the name of the assessee. The issue that has to be adjudicated, is whether, when CCM is done to correct errors, it can be inferred that manipulation has been done by the assessee. 4.1. The Kolkata 'A' Bench of the Tribunal, in the case of M/s. Ratnabali Commodities vs. The Income Tax Officer, Ward-12(3), Kolkata, in ITA No. 787/Kol/2013, As....
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.... his order as under:- "Even though apparently it has not been established that the such modification had been done in violation of rules and regulations prescribed by SEBI and the AO had proceeded on suspicion, however at the same time it also cannot be concluded either the loss would not be attributable 10 these "modifications". On perusal of the order, we find that Ld. CIT(A) has confirmed the order of AO on his own surmise and conjecture which is not permissible in the eyes of law. Ld. DR has also not- brought anything on record contrary to the advance arguments placed by Ld. AR for the assessee as well as no defects of whatsoever has been pointed out in the documents produced by assessee in support of its impugned loss. We also find whatever modifications were carried out by the broker they were carried out within the time permitted by the NSE for the purpose of modification. Thus, we are of the view that the order of Authorities Below is based on surmise and conjecture and same is not based on tangible material to treat the impugned loss as bogus loss. 7.2 Moreover, we also find that the details furnished by the assessee in respect of transactions giving rise to the l....