TaxTMI 
TaxTMI 
2020 (1) TMI 1742
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....DGIT(lnv.), Kolkata regarding systematic evasior of taxes by clients/members of the NMCE (M/s National Multi- Commodity Exchange) during the different Financial Years by misusing the NMCE platform. Based on the Forwards Market Commission (FMC) report that "clients/members of NMCE were found to be involved in creating artificial volume and suspected evasion of Income Tax by misuse of NMCE platform," a focused survey action u/s 133A of the I. T. Act, 1961 was conducted by Pr. Director of Income Tax (Investigation), Ahmedabad at the premise of NMCE and backup of the NMCE trade was taken. After analysis of this data, 85 entities was identified who had booked contrived losses in excess of Rs.10 Crores and information was shared with concerned Director General of Income Tax (lnv.). In this context, the list of 50 clients was forwarded to the DGIT (Inv.) Kolkata jurisdiction to verify whether the contrived losses booked or NMCE were used to set off any income/profit available in the books. On the basis of the above information, investigation were carried out by DDIT(lnv.), Unit 3(1), Kolkata on these 50 dummy entities and during investigation it has been noticed that ass....
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....ch are given below for ready reference: "Information has been received from the Pr. DIT (INV), Ahmedabad vide his letter bearing No. PDIT(INV)/CCM/Dissemination/15-16 dated 08.03.2016 that some brokers by misusing the client code modification facility in derivatives on NSE during March, 2010 created fictitious losses and transferred the same to their clients as per the requirement and earned commission. The clients had taken fictitious losses to set off against their profits with a view to reduce their tax liability. The details of such client code modification transactions have been provided in CD. On analysis of the details contained in the CD, it is apparent that profit of Rs.13,11,490/- was shifted out by Neeraj Umashankar Murarka, who is assessed in this charge under PAN: AEYPM0328R, and loss of Rs.37,60,340/- were transferred in the case of the assesse by the broker R K Global Shares & Securities Limited through client code modification. Thus, the net reduction in income due to client code modification is Rs.50,71,830/-. As per information available from records, Shri Neeraj Umashankar Murarka has not filed his return of income for the assessment year 2009-1....
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....ng proceedings are on the borrowed satisfaction. No independent opinion is formed. On the plain reading of the reasons recorded what emerges is that the Assessing Officer on considering the information received from the Pr. DIT(INV), Ahmadabad reassessment proceedings have been initiated on the ground that the income escaped assessment. However, there is no assertion regarding the basis on which material on record, he come to such conclusion. It cannot be disputed that on the basis of the information received from another agency, there cannot be any reassessment proceedings. However, after considering the information/material received from other source, Assessing Officer is required to consider the material on record in case of the assessee income and thereafter, he is required to form an independent opinion on the basis of the material on record that the income has escaped assessment. Without forming such an opinion, solely and mechanically relying upon the information received from other source, there cannot be any reassessment for the verification. At this stage, it is required to be noted that even in the reasons recorded, there is not allegation that there was any failure on t....
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....s practice, a broker in the stock exchange makes modifications in the client code on sale and / or purchase of any securities, after the trading is over so as to rectify any error which may have occurred while punching the orders. The reasons do not indicate the basis for the Assessing Officer to come to reasonable belief that there has been any escapement of income on the ground that the modifications done in the client code was not on account of a genuine error, originally occurred while punching the trade. The material available is that there is a client code modification done by the Assessee's broker but there is no link from there to conclude that it was done to escape assessment of a part of its income. Prima facie, this appears to be a case of reason to suspect and not reason to believe that income chargeable to tax has escaped assessment. 5. In the above view, prima facie, we are of the view that the impugned notice is without jurisdiction as it lacks reason to believe that income chargeable to tax has escaped assessment." 12.Our view is fortified by the judgment of the Co-ordinate Bench ITAT, Kolkata, on the similar facts, in the case of Naveen Bhatta....
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....sactions. It is also nowhere mentioned as to on which dates and through which mode the bogus entries and transactions were made by the assessee. What was the information given by the Director of Income-tax (Inv.), New Delhi, vide letter dated 16.06.2006 has also not been mentioned. In other words, the contents of the letter dated 16.06.2006 of the Director of Income-tax (Inv.), New Delhi have not been given. The AO has vaguely referred to certain communications that he had received from the DIT(Inv.), New Delhi; the AO did not mention the facts mentioned in the said communication except that from the informations gathered by the DIT (Inv.), New Delhi that the assessee was involved in giving and taking accommodation entries only and represented unsecured money of the assessee company is actually unexplained income of the assessee company or that it has been informed by the Director of Income-tax (Inv.), New Delhi vide letter dated 16.06.2006 that the assessee company was involved in giving and taking bogus entries/transactions during the relevant financial year. The AO did not mention the details of transactions that represented unexplained income of the assessee company. The inform....