INCOME TAX OFFICER 4(3)(4), MUMBAI V. MANOJ J DOSHI, MUMBAI

ITA 1185/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0130 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 01-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Futures and options
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC , MUMBAI BEFORE SHRI SAKTIJIT DEY (JM) ITA NO. 1185 /MUM/2019 ASSESSMENT Y EAR: 2009 - 10 ITO 4(3)(4 ), ROOM NO. 637, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - 400020 VS. MAN OJ J DOSHI, B - 22, NIRMALA APARTMENTS, SHANKAR GALLI, KANDIVALI (W), MUMBAI - 400067 PAN: AACPD9751D (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SAURABH KUMAR RAI (DR) ASSESSEE BY : NONE DATE OF HEARING : 2 7 /05 /202 1 DATE OF PRONOUNCEMENT: 06 / 0 7 /202 1 O R D E R THIS IS AN APPEAL BY T HE REVENUE AGAINST ORDER DATED 19.12.2018 OF LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) - 9 , MUMBAI FOR THE A SSESSMENT YEAR 2009 - 10 . 2. WHEN THE APPEAL WAS CALLED FOR HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER, CONSIDERING THE NATURE OF DISPUTE, I PROCEED TO DISPOSE OF THE APPEAL EX - PARTE QUA THE ASSESSEE AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE AND BASED ON MATERIALS ON RECORD. 3. IN GROUND NO. 1, THE REVENUE HAS CHALLENGED THE DELETION OF RS. 6,54,067/ - . 4. BRIEFLY THE FACTS ARE, T HE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SECURITIES. ON RECEIVING INFORMATION FROM INVE STIGATION WING OF THE DEPARTMENT AT AHME DABAD, T HE ASSESSING OFFICER (AO) FOUND THAT SOME BROKERS ARE CREATING FICTITIOUS PROFIT S AND LOSSES BY MISUSING THE CLIENT CODE M ODIFICATION FACILITIES IN FUTURES AND OPTIONS (F & O) SEGMENT OF NATIONAL STOCK EXCHAN GE (NSE). AS PER THE MODUS OPERANDI , THE BROKERS ARE 2 ITA NO. 1185 / MUM/2019 ASSESSMENT YEAR: 20 0 9 - 10 TRANSFERR ING THE FICTITIOUS LOSSES TO DIFFERENT CLIENTS TO REDUCE THE TAX LIABILITY. HE FOUND THAT THE ASSESSEE IS A BENEFICIARY OF SUCH FICTITIOUS LOSS AMOUNTING TO RS. 6,54,067/ - PROVIDED BY A BROKER N AMELY M/S ANANT INVESTMENT S . BASED ON SUCH INFORMATION , THE AO REOPEN ED THE ASS ESSMENT UNDER SECTION 147 OF THE ACT. IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE NOT ONLY OBJECTED TO THE REOPEN ING OF ASSESSMENT BUT ALSO VEHEMENTLY CONTE STED THE DEPART MENTS ALLEGATION OF FICTITIOUS LOSS PROVIDED BY THE BROKER . HOWEVER, THE AO WAS NOT CONVINCED. ULTIMATELY, HE DISALLOWED THE LOSS OF RS. 6,54,067/ - AND ADDED BACK TO THE INCOME OF THE ASSESSEE. FURTHER, HE ALLEGED THAT FOR AVAILING THE BENEFIT OF SUCH FICT ITIOUS LOSS, THE ASSESSEE MUST HAVE PAID COMMISSION TO THE CONCERNED BROKER AND ACCORDINGLY DISALLOWED AN AMOUNT OF RS. 19,622/ - , BEING 3% OF THE TRANSACTION VALUE , AS COMMISSION PAID TO THE BROKERS. THE ASSESSEE CONTEST ED THE AFORE SAID DISALLOWANCE BEFORE LEARNED COMMISSIONER (APPEALS). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD, LEARNED COMMISSIONER (APPEALS) DELETED THE BOTH THE DISALLOWANCES. 5 . I HAVE CONSI DERED THE SUBMISSIONS OF LEARNED DEPARTMENT AL REPRESENTATIVE AND PERUSED THE MATERIAL ON RECORD. AS COULD BE SEEN FROM THE MATERIAL ON RECORD, THE AO HAS SIMPLY PROCEEDED BASED ON INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT AT AHMEDABAD AND MADE THE DISALLOWANCE. THE AO HAS N OT MADE ANY INDEPENDENT ENQUIRY TO ASCERTAIN THE GENUINENESS OF THE TRANSACTION WITH THE CONCERNED BROKER. THUS, NO ADVERSE MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO A S A RESULT OF ANY FRUITFUL ENQUIRY CONDUCTED TO ESTABLISH THAT THE ASSESSEE , INDEED , HAS AVAILED FICTITIOUS LOSS ON SUCH TRANSACTION BY WAY OF CLIENT CODE M ODIFICATION , AS ALLEGED IN THE REPORT OF THE INVESTIGATION WING. THEREFORE, THE ADDITION MADE PURELY AND CONJECTURES AND SURMISES CANNOT BE ACCEPTED. IN VIEW OF THE AFORESAID, I DO NOT FIND ANY INFIRMITY IN THE DECIS ION OF LEARNED COMMISSIONER (APPEALS). SINCE, I HAVE ALREADY HELD THAT THERE IS NO FACTUAL BASIS IN HOLDING THAT THE ASSESSEE HAS AVAILED THE BENEFI T OF FICTITIOUS LOSS BY WAY OF CLIENT CODE M ODIFICATION, THE ADDITION MADE BE CAUSE OF PAYMENT OF COMMISSION TO THE BROKER IS ALSO 3 ITA NO. 1185 / MUM/2019 ASSESSMENT YEAR: 20 0 9 - 10 UNSUSTAINABLE . ACCORDING LY, I UPHOLD THE DECISION OF LEARNED COMMISSIONER (APPEALS) ON THE ISSUE. GROUNDS ARE DISMISSED. 6 . IN THE RESULT, APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JULY , 2021 . SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER MUMBAI ; DATED: 06 / 07 /202 1 ALINDRA, PS / COPY OF THE ORDER FORWAR DED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE C OPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI