DCIT, NEW DELHI V. AMIT GOEL, DELHI

ITA 2965/DEL/2024

AI Insights

The case involves an appeal by the Revenue against the order of the Ld. CIT(A) which had deleted the additions made by the Assessing Officer regarding unexplained income and commission paid related to Client Code Modifications (CCM) during the Assessment Year 2012-13. The Assessee, Amit Goel, was accused of being a beneficiary of these modifications which allegedly led to unexplained income. The Revenue contended that the information from the Investigation Wing was sufficient to reopen the assessment. However, the Tribunal, referencing a similar case involving the Assessee's brother, found that the reopening was not based on concrete evidence specific to the Assessee and thus upheld the CIT(A)'s decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711984 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: 2012-2013
• Other Referred Cases: DCIT Vs. Atul Goel in ITA No.4145/Del/2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR ARORA
• Assessee Lawyers: VED JAIN; AMAN GARG
• Keywords: Speculation loss; Business income; Opportunity of being heard; Reassessment proceedings; Unexplained investment; Income from undisclosed sources; Reopening of assessment; Sham transactions; Reason to believe; Bogus
• Section: 148; 143(3); 142(1); 69C

Judgement Text

"ITA No.2965/Del/2024 & CO No.85/Del/2024 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A” NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI M BALAGANESH, ACCOUNTANT MEMBER आ.अ.सं/.I.T.A No.2965/Del/2024 िनधा रणवष /Assessment Year:2012-13 DCIT, Room No.221, 2nd Floor, C.R. Building, I.P. Estate, New Delhi. बनाम Vs. AMIT GOEL, S-33, Panchsheel Park, Hauz Khas, New Delhi. PAN No.AAAPG7084L अपीलाथ\u0014 Appellant \u0016\u0017यथ\u0014/Respondent & Cross Objection No.85/Del/2024 (Arising out of I.T.A No.2965/Del/2024) िनधा रणवष /Assessment Year:2012-13 AMIT GOEL, S-33, Panchsheel Park, Hauz Khas, New Delhi. PAN No.AAAPG7084L बनाम Vs. DCIT, Room No.221, 2nd Floor, C.R. Building, I.P. Estate, New Delhi. अपीलाथ\u0014 Appellant \u0016\u0017यथ\u0014/Respondent Assessee by Shri Ved Jain, Adv. & Shri Aman Garg, CA, Ms. Kirti, CA Revenue by Shri Ajay Kumar Arora, Sr. DR सुनवाईक\bतारीख/ Date of hearing: 03.06.2025 उ\u000eोषणाक\bतारीख/Pronouncement on 23.07.2025 आदेश /O R D E R PER C.N. PRASAD, J.M. This appeal and cross objection are filed by the Revenue and Assessee respectively against the order of the Ld. CIT(Appeals)-NFAC, Printed from counselvise.com ITA No.2965/Del/2024 & CO No.85/Del/2024 2 dated 02.05.2024 for the AY 2012-13. The Revenue has raised the following grounds in its appeal: (i) “Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in not appreciating that information received from Investigation wing is valid piece of evidence on the basis of which reopening can be done? (ii) Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in ignoring the fact that it was evidently established by the Investigation wing that assessee was one of the beneficiaries in the Client Code Modifications? (iii) Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in holding that there was no independent enquiry by the AO in reopening the case without appreciating that AO has formed a clear opinion about the bogus/fraudulent nature of transaction upon the receipt of evidently established information from Investigation Wing in Client Code Modification cases and AO has recorded the reasons for reopening of the case? (iv) Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in holding that the Assessing Officer did not take cognizance of complete details of transactions of Client Code Modifications and addition was made in arbitrary manner without appreciating that the information was analyzed by the Assessing Officer and a speaking order was passed accordingly after giving opportunity of being heard to the assessee? (v) Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the disallowance of Rs. 3,23,43,450/- being unexplained income in Client Code Modification and Rs.13,57,009/- being commission paid to the entry operator?. (vi) The appellant craves leave to add, alter, amend, append or delete any of the above grounds of appeal.\" Printed from counselvise.com ITA No.2965/Del/2024 & CO No.85/Del/2024 3 2. At the outset, the Ld. Counsel for the assessee submitted that the issue in Revenue’s appeal is against deletion of addition of Rs.3,23,43,450/- made by the AO on account of Client Code Modification (CCM) and addition of Rs.13,57,009/- u/s 69C of the Act on account of unexplained commission expenditure. The Ld. Counsel further submitted that the issue in appeal is squarely covered by the order of the Delhi Tribunal in the case of DCIT Vs. Atul Goel in ITA No.4145/Del/2024 dated 30.05.2025 which was passed in assessee’s brothers case exactly on similar facts. 3. Ld. DR strongly supported the orders of the authorities below. 4. Heard rival contentions, perused the orders of the authorities below and the order of the Tribunal in the case of DCIT Vs. Atul Goel. We find that in the case of Atul Goel the brother of the assessee the Tribunal upheld the order of the Ld. CIT(A) in holding that the reopening of assessment is bad in law. In the case before us the Ld. CIT(A) on examining the reasons for reopening and the materials available on record held that the AO had no information which could have lead him to form a reason to believe that the assessee’s income for AY 2012-13 had escaped assessment. While holding so the Ld. CIT(A) observed as under: - Printed from counselvise.com ITA No.2965/Del/2024 & CO No.85/Del/2024 4 “5. I have examined the facts of the case and have perused both the assessment order passed by the Assessing Officer and also the detailed submissions of the appellant. The sole ground of appeal which needs adjudication is the appellant’s contention that the Assessing Officer has incorrectly initiated reassessment proceedings in the appellant’s case for Assessment Year 2012-13 and that consequently the order passed u/s 143(3) r.w.s. 147 of the Income Tax Act is null and void. The appellant had filed his original return of income for Assessment Year 2012-13 on 27.07.2012 declaring a taxable income of Rs.3,28,02,826/- and paid a total tax of Rs.90,85,972/- on the same. The case of the assessee was taken up for scrutiny assessment and the assessment order u/s 143(3) of the Income Tax Act was passed on 09.03.2015 wherein the returned income of the assessee was accepted. Subsequently, the appellant received a notice u/s 148 of the Income Tax Act dated 29.03.2019 and in response the appellant filed his return of income on 22.04.2019. The reason for re-opening of the appellant’s case was give by the Assessing Officer as follows:- “Client Code modification for the assessee for the assessment year 2012-13 on the basis of data produced by the Investigation Wing, it has been found that the assessee has traded to the extent of Rs.4,52,33,645/- (total value of transactions for purchase/ sale of National Spot Exchange Limited) in which Client Code was modified. ” Subsequently, the Assessing Officer passed an order u/s 143(3) r.w.s. 147 of the Income Tax Act on 22.11.2019 and added an amount of Rs.3,23,43,400/- to the appellant’s income by treating ail the transactions undertaken by the appellant on the NSEL as fraudulent and unexplained transactions. A further addition of Printed from counselvise.com ITA No.2965/Del/2024 & CO No.85/Del/2024 5 Rs.13,57,009/- was also made u/s 69C of the Income Tax Act on account of unexplained commission expenditure. Now, since the concerned assessment year is Assessment Year 2012-13 and scrutiny assessment u/s 143(3) has also been carried out for that year and a notice u/s 147 was issued after the expiry of 4 years from the end of the relevant assessment year, the same would be a valid notice under the provisions of the Income Tax Act, 1961 only if the assessee had failed to disclose fully and truly all material facts necessary for his assessment for that assessment year. Hence, in order to adjudicate on the ground of appeal and to examine if the reassessment proceedings were initiated in accordance with the provisions of the Income Tax Act, it is necessary to examine the following points:- (a) Were any material facts suppressed by the appellant during the course of original assessment proceedings u/s 143(3) of the Income Tax Act, 1961? (b) Was the Assessing Officer in possession of any information which could lead him to form a reason to believe that income for AY 2012-13 had escaped assessment? From the documents placed on record it is seen that during the course of original assessment proceedings, in response to the notice u/s 142(1) dated 12.01.2015, the assessee vide reply dated 04.02.2015 submitted full details regarding the transactions undertaken by him on the National Spot Exchange Limited (NSEL) and Multi Commodity Exchange (MCX) and the same were duly considered by the Assessing Officer and no adverse inference was drawn. The appellant also disclosed the profit earned on the transactions entered into him on the NSEL and MCX at a figure of Rs.2,07,63,862/- and the same was accepted by the Assessing Officer. The information supplied by the assessee during the course of original assessment proceeding could not possibly have contained any information about Client Code Modifications (CCM) as these CCM’s were carried out by Printed from counselvise.com ITA No.2965/Del/2024 & CO No.85/Del/2024 6 the broker of the assessee in order to rectify any data entry error committed at the time of punching orders. It must be kept in mind that Client Code Modification (CCM) is a facility routinely provided by all Stock Exchanges to rectify genuine errors committed at the time of carrying out orders for the clients. The client himself was not in possession of the various modifications carried out by the brokers at the end of the trading session each day and therefore the question of furnishing the information of CCM’s by the assessee to the Assessing Officer does not arise. Hence, no material facts were suppressed by the assessee during the course of the original assessment proceedings before the A Assessing Officer. Now, the Assessing Officer in his order u/s 147 states that he came in possession of information from the Serious Frauds Investigation Office (SFIO) based on the investigation of transactions carried out at NSEL that the assessee was engaged in carrying out sham transactions. The reasons recorded by the Assessing Officer while reopening the assessee’s case are reproduced as under: “Investigation revealed that several brokers have indulged in unique client code modifications contrary to normal practice of using this feature only to correct genuine data entry errors. This feature of permitting the brokers to modify the client code shows the weak checks and balances on the NSEL platform. NSEL had provided a feature, which could lead to huge manipulation of paired contract trades. The brokers were aware of this and fully exploited this feature with most of them in their testimony affirming that they have changed the UCC for paired contracts. 5(H).Performed Client Code Modifications & Misused their Back office: The brokers indulged in rampant client code modification where dummy / ghost client codes were used to book trades and later the client codes were modified. Brokers also carried modifications of the trades from their back office. On the basis of the Printed from counselvise.com ITA No.2965/Del/2024 & CO No.85/Del/2024 7 study of complaints of few of the clients, it can be inferred that the brokers also issued contract notes for the trades not executed on the exchange. Based on the complaints filed by the clients against the member- brokers and the responses received by the investigation team from the clients, it is clear that in many cases the pay-outs made by NSEL to the brokers were not paid to the traders by the member-brokers. The member- brokers allured their Clients to trade on NSEL by funding them through their NBFC arms and also funded clients over and above their sanctioned limits without any income verification or risk profiling of the clients and sanctioned, loans disproportionate to the clients' income levels, suggests that the member- brokers/ their associate NBFCs may possibly have channelled their unaccounted money on the NSEL Exchange platform and laundered it, which they are now writing off as bad debt. Therefore, prima facie it appears that the NBFC companies of the major brokers, who traded on NSEL, might have laundered large amount of money with questionable colour and source. 5(iii). Further it was informed that many of the client in their Income Tax returns have shown the income earned on NSEL exchange through trading in paired contracts under the head \"income from other source\" indicating that they knew that the income accruing to them from the paired contracts was in the nature of interest income and not business income under the head \"income from business and profession\", Further, none of the traders have pot their books audited even though they were covered by the Income Tax guidelines. They did not prepare profit and loss account and declared stock in trade of commodities owned by them as on 31st March of the year 2011- 12 and 2012-13 thereby suppressing income on which they were supposed to pay income tax. Thus, they evaded income tax for the year 2011-12, 2012-13. The privity of contract existed between the clients and their respective brokers. However, it is noted that barring a few, none of the clients have claimed the Printed from counselvise.com ITA No.2965/Del/2024 & CO No.85/Del/2024 8 money lost by them on NSEL transactions from their respective brokers. 5(iv). In order to understand the modus operandi, summon/s 131 was issued to one broker AnandRathi Commodities Ltd as maximum client code modification to the tune of Rs. 3073.48 Cr. Were done by AnandRathi Commodities Ltd. It has been reported that Shri Chetan Pitamber Bharkhada, President, AnandRathi Commodities Ltd in his statement recorded on 12.03.2019 stated that: \"No physical delivery of goods took place at any time whatsoever in all trades executed on NSEL.\" The SFIO has made a similar finding in its report that \"No Physical delivery of goods were ever taken by their clients\". Further the inquiries made done by the Investigation department in the aftermath of the NSEL scam by means of survey has revealed that these godowns where goods were supposedly placed were empty and the goods not found. Therefore as the themselves were not in place, there is no question of the goods being delivered. Hence the assessee could not recover his losses by selling the goods and hence these losses are speculative losses which are not allowable to be set off against normal business income of the assessee. 6. In the above report, the names of parties involved in the client code, modifications is forwarded to this charge and the name of the assessee Shri Amit Goel is included in the list of modified clients in the details provided by NSEL. On the analysis of the details of client code modification for the assessee during the F.Y. 2011- 12 relevant to the A.Y. 2012-13, on the basis of data provided by the Investigation wing, it has been found that assessee Shri Amit Goel has traded to the extent of Rs.4,52,33,645/-( total value of transaction for purchases/sales) in NSEL in which client codes are modified. As the assessment for the A.Y. 2012-13 was completed at the returned income, Printed from counselvise.com ITA No.2965/Del/2024 & CO No.85/Del/2024 9 the source of investment i.e. loan, share capital, own fund, the involvement of shell companies/bogus companies/NBFC in routing funds to the assessee Shri Amit Goel remained unexplained. As the new information has surfaced and the assessee has not disclosed the fact of client code modifications in his assessment, it is a case of failure on part of the assessee. 7. Further, the inputs from investigation wing coupled with the fact of the assessee has traded in NSEL and his name was included in the list of modified clients in the details provided by NSEL was a reasonable material for coming to the conclusion that the assessee has made unexplained investment/ escaped income arising out of such transaction during the F.Y. 2011-12 relevant to the assessment year 2012-13. 8. In the present case, there is live link between the material provided by the Investigation Wing, Delhi and escapement of income exists, I have the reason to believe that amount at least exceeding Rs.1,00,000/- has escaped from the assessment of income for Asstt. Year 2012-13 which was chargeable to tax. I am also satisfied that on account of failure on the part of the assessee to disclose truly and fully all the material facts in the return of income necessary for the assessment for above assessment year, the income chargeable to tax to the amount exceeding Rs.1,00,000/- has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. As the relevant assessment year falls within six assessment year, necessary approval as provided u/s 151 for issue of notice u/s 148 of the Act may kindly be accorded.” Now, an examination of the reasons recorded by the Assessing Officer while reopening the case reveals that they are extremely general in nature. The Assessing Officer has outlined a modus operandi wherein member brokers of stock exchanges are abusing the facility of Client Code Modification to book fraudulent profits and Printed from counselvise.com ITA No.2965/Del/2024 & CO No.85/Del/2024 10 losses. The Assessing Officer has not produced a single piece of specific evidence against the assessee. Even the disputed trades wherein the alleged Client Code Modification has taken place have not been mentioned. The AO has simply given the sum total of these trades and has then stated that this amount of income has escaped assessment. The Assessing Officer has failed to mention the name of the share broker through whom these transactions have taken place, the original client code, the modified client code, name of the modified client code, PAN of the modified client, the name of the scrip and the details of Demat accounts and trading accounts maintained by the assessee. Only after being in possession of this information could the AO have formed an opinion if income had escaped assessment. The AO, on the contrary, does not even know the name of scripts in which the Client Code Modifications have been carried out. After receiving the information form the SFIO/ Investigation Wing, the AO failed to carry out any independent analysis or verification of the information received but acted hastily on the ‘information’ received and held that an amount of Rs.4,52,33,645/- (total value of sales/ purchase in NSEL in which Client Codes have been modified) had escaped assessment in the assessee’s case. Hence, the AO had no information which could have led him to form a ‘Reason to believe’ that the assessee’s income for AY 2012- 13 had escaped assessment. It is also observed that during the reassessment proceedings u/s 147, the assessee filed a reply before the Assessing Officer on 05.11.2019 giving complete details of all the trades in which Client Code Modification were carried out. Contract notes issued by the broker of the client M/s Pace Commodity Brokers (p) Ltd. have been furnished for the transaction entered into by the assessee on 14.11.2011, 13.03.2012, 13.12.2011, 10.02.2012, 23.02.2012, 26.12.2011, 30.12.2011 and 09.02.2012 i.e. for all the dates on which Client Code Modification were carried out by the broker of the assessee. It is seen that the Assessing Officer did not analyze even this information and completely ignored the same while passing his Printed from counselvise.com ITA No.2965/Del/2024 & CO No.85/Del/2024 11 assessment order. The arbitrary nature of the Assessing Officer’s order can further be gauged by the fact that the Assessing Officer has accepted the profit figures of Rs.1,28,90,195/- which the assessee earned from transactions on the NSEL, the profit from trades in which Client Code Modification were carried out being included in this figure, but has then added the value of the sale/ purchase of trades in which Client Code Modifications were carried out as income from undisclosed sources. Hence, in light of the preceding discussion, it is seen that the Assessing Officer’s order suffers from both legal and factual infirmities. The Assessing Officer had no information which could have led him to form a ‘Reason to believe’ that the assessee’s income for AY 2012-13 had escaped assessment. Furthermore, even when complete details of transactions in which Client Code Modification were carried out were furnished to the Assessing Officer during the reassessment proceedings, the Assessing Officer did not take cognizance of it and proceeded to make the addition in an arbitrary manner, Hence, the addition made by the Assessing Officer of Rs.3,23,43,450/- as income from undisclosed sources and of Rs.13,57,009/- u/s 69C are hereby deleted. The assessee’s appeal is allowed. 6. In the result, appeal is allowed.” 5. On careful perusal of the Ld. CIT(Appeals) findings, we do not see any valid reasons to interfere with the findings of the Ld. CIT(A) which are all on appreciation of facts on record and the legal position. 6. Coming to the cross objection filed by the assessee the Ld. Counsel for the assessee stated that the assessee wishes not to press Printed from counselvise.com ITA No.2965/Del/2024 & CO No.85/Del/2024 12 the cross objection. In the light of the submissions of the Ld. Counsel for the assessee this cross objection filed by the assessee is dismissed as not pressed. 7. In the result, appeals of the Revenue as well as cross objection of the Assessee are dismissed. Order pronounced in the open court on 23.07.2025 Sd/- Sd/- (M BALAGANESH) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 23.07.2025 *Kavita Arora, Sr. P.S. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "