TaxTMI 
TaxTMI 
2020 (2) TMI 1712
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....ation in the lower authorities' orders as to whether that the assessee's demat account in any way involved such a client code modification or not. This tribunal's co-ordinate bench's order in ITA No. 2395/Kol/2019 in Shagun Business Services Pvt. Ltd. vs. Income Tax Officer, Ward5(1), Kolkata has decided the very issue against the department as under:- "2. It transpires during the course of hearing that the assessee's sole substantive grievance on merit; apart from raising legal issue of validity of section 147 proceedings, seeks to reverse both the lower authorities action 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 ....
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.... reproduced hereunder: - "The stock: exchanges shall not normally permit changes in the Client ID and would keep a strict vigil on cases of client code modification and would implement a monetary penalty structure that would escalate with the number of such incidences. Besides, the exchange may take necessary action against members making repeated changes. However, genuine mistakes may be allowed to be rectified". 'Thus, a careful reading of the above, extract suggests that the change in Client ID is generally hot allowed except where there, is some genuine mistake. The SEBI circular also mandates the Stock Exchanges to keep strict vigil the instances 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 ....
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....at, the payments for the transactions were made through banking channels and confirmations are furnished to establish the genuineness of the transactions. It contended that, when the National Stock Exchange itself has confirmed that the transactions in question, the loss cannot be disallowed. The Assessing Officer applied the theory of human probabilities and relied on the decision of the Hon'ble Supreme Court in the case of Sumati Dayal v. CIT (1995) 214 ITR 801 (SC) and CIT-vs. Durga Prasad More (1971) 82 ITR 540 (SC), and made the disallowance. 2.1. On appeal the Id. First Appellate Authority, upheld this order of the Assessing Officer. He held that human error cannot occur on all occasions. He observed 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....
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....lso disallowed in the immediate preceding year. 7.1 From the foregoing discussion, we find that indeed the client's code and name were modified in respect of transactions claimed by assessee. However, on perusal of record, we find that the impugned transactions were carried out through banking channel and all the supporting evidence such as contract note, payment of STT were filed at the time of assessment proceedings. We also find that Ld. CIT(A) confirmed the order of AO on the basis of his guess-work as evident from his appellate order which is reproduced below:- "there is a possibility that the modifications might have been made to accommodate the appellant as the broker of the appellant was a sister concern." Further the Id. CIT -A has observed in 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 conf....
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.... On the basis of the materials produced, the Tribunal came to a finding of fact, which does not seem to be perverse. Whether the shares could be sold immediately on the date of purchase or not was a question of business expedience. Whether the decision was correct or wrong cannot the question, which can be a subject-matter of decision in such a case. In order to find out whether the transaction is genuine or in genuine it is neither the expedience nor correctness of the decision nor the business expertise of the person to be considered. It is to be considered on the basis of the materials that there was no such transaction and that these share transactions were paper transactions. The suffering of loss could not be a factor for such purpose. Having regard to the facts and circumstances of the case, the view taken by the Tribunal allowing share loss cannot be said to be erroneous or perverse CIT vs. Emerald Commercial Ltd & Anr (2001) 171 CTR (Cal) 193: (2001) 250 ITR 539 (Can. CIT- vs. Dhawan Investment & Trading Co. Ltd (1999) 238 ITR 486 (Can and CIT vs. Currency Investment Co. Ltd (2000) 158 CTR (Cal) 361: (2000) 241 ITR 494 (Cal) relied on. Respectfully following the s....