Neetha Suneel Shah , CHENNAI V. ITO Non Corporate Ward 5(2) , CHENNAI

ITA 1741/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6063 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 14-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS S VIJAYA PRABHA
• Assessee Lawyers: M KARUNAKARAN
• Keywords: Cost of acquisition

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI , , ! ' BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ./ ITA NO.1741/MDS/2017 /ASSESSMENT YEAR: 2010-11 SMT. NEETHA SUNEEL SHAH, 178 (OLD NO.88) NSC BOSE ROAD, SOWCARPET, CHENNAI-600 079. VS. THE INCOME TAX OFFICER, NON-CORPORATE WARD-5(2), CHENNAI-6. [PAN: AAQPS 8486 E ] ( & /APPELLANT) ( '(& /RESPONDENT) & ) / APPELLANT BY : MR.M.KARUNAKARAN, ADV. '(& ) /RESPONDENT BY : MRS.S.VIJAYAPRABHA, JCIT ) /DATE OF HEARING : 09.10.2017 ) /DATE OF PRONOUNCEMENT : 10.10.2017 / O R D E R PER GEORGE MATHAN , JUDICIAL MEMBER : ITA NO.1741/MDS/2017 IS AN APPEAL FILED BY THE ASS ESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-5 , CHENNAI, IN ITA NO.134/CIT(A)-5/16-17 DATED 22.06.2017 FOR THE AY 2 010-11. 2. MRS.S.VIJAYAPRABHA, JCIT, REPRESENTED ON BEHALF OF THE REVENUE AND MR.M.KARUNAKARAN, ADV., REPRESENTED ON BEHALF OF TH E ASSESSEE. ITA NO.1741/MDS/2017 :- 2 -: 3. IT WAS SUBMITTED BY THE LD.AR THAT THE ISSUE IN THE APPEAL WAS AGAINST THE ACTION OF THE LD.CIT(A) IN CONFIRMING T HE ADDITION OF RS.25,05,304/- REPRESENTING CLIENT CODE MODIFICATIO N DONE BY THE ASSESSEES BROKER IN RESPECT OF THE SHARE TRANSACTI ONS DONE BY THE ASSESSEE FOR WHICH THE ASSESSEE HAD DISCLOSED SHORT TERM CAPITAL GAINS AND LONG TERM CAPITAL GAINS. IT WAS A SUBMISSION T HAT THE ASSESSEE HAD ADMITTED SHORT TERM CAPITAL GAINS U/S.111A BY DISCL OSING FULL VALUE OF THE TRANSACTIONS AT RS.1,23,56,265/- AND AFTER DEDUCTIN G COST OF ACQUISITION AT RS.63,96,011/- HAD DISCLOSED RS.59,56,614/-. IT WA S A SUBMISSION THAT THE AO HAD OBTAINED THE CLIENT CODE MODIFICATION AN D HAD MADE THE ALLEGATION THAT THE SAID MODIFICATIONS WERE DONE WI TH AN INTENTION TO REDUCE THE ASSESSEES PROFITS. CONSEQUENTLY, THE A O HAD MADE AN ADDITION OF RS.25,05,304/- REPRESENTING THE SHORT T ERM CAPITAL GAINS IN RESPECT OF SHARE TRANSACTIONS ON WHICH CLIENT CODE MODIFICATION HAD BEEN DONE. IT WAS A SUBMISSION THAT THE ASSESSEE HAD OF FERED HER ENTIRE PROFITS ON THE SALE OF THE SHARES AS HAS BEEN CONFIRMED BY THE BROKER. IT WAS A FURTHER SUBMISSION THAT THE CLIENT CODE MODIFICATIO N IS DONE BY THE SHARE BROKER AND THE ASSESSEE HAS NO ROLE TO PLAY IN THE SAME. IT WAS A SUBMISSION THAT THE ASSESSEE WAS ENTITLED TO THE BE NEFIT OF THE PROVISIONS OF SEC.111A OF THE ACT. IT WAS A FURTHER SUBMISSION THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL, A BENCH, AHMEDABAD IN THE CASE OF M/S.KUNVARJI FI NACE PVT. LTD. IN IT(SS)A NOS.615 TO 618/AHD/2010 DATED 19.03.2015 WH EREIN IN PARA NO.11 OF THE ORDER, WHICH HAS BEEN HELD AS FOLLOWS: ITA NO.1741/MDS/2017 :- 3 -: 11. THE LD. CIT(A) IN PARAGRAPH 4.13 OF HIS ORDER H AS ALSO RECORDED THE FINDINGS THAT ALL TRANSACTIONS AT THE COMMODITIES EXCHANGES HAVE BEEN DULY ACCOUNTED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE CONCERNED PA RTIES. SUCH PROFITS/LOSS HAS BEEN DULY ACCOUNTED WHENEVER THE TRANSACTIONS HAVE BEEN CLOSED. THUS, WHATEVER PROFITS HAVE BEEN GENERATED OR ACCOUNTING OF ACTUAL TRADE, HAVE BEEN OFFERED AND BROUGHT TO THE CHARGE OF TAX IN THE CASES OF CONCER NED ASSESSEES. THESE FINDINGS OF FACT RECORDED BY THE LD. CIT(A) HAS NOT BEEN CON TROVERTED BY THE REVENUE AT THE TIME OF HEARING BEFORE US. WHEN THE TRANSACTION HAS BEEN DULY ACCOUNTED FOR AND THE PROFIT/LOSS HAS ACCRUED TO THE CONCERNED PA RTIES IN WHOSE NAMES TRANSACTIONS HAVE BEEN CLOSED, THERE CANNOT BE ANY BASIS OR JUSTIFICATION FOR CONSIDERING THOSE PROFIT/LOSS IN THE CASE OF THE AS SESSEE ON THE BASIS OF MERE PRESUMPTION OR SUSPICION. IT IS NOT THE CASE OF THE REVENUE THAT SUCH ALLEGED PROFIT HAS ACTUALLY BEEN RECEIVED BY THE ASSESSEE. IN VIEW OF THE TOTALITY OF THE ABOVE FACTS, WE DO NOT FIND ANY JUSTIFICATION TO IN TERFERE WITH THE ORDER OF THE CIT(A) IN THIS REGARD AND THE SAME IS SUSTAINED; AN D GROUND NOS. 1 AND 3 OF THE REVENUES APPEAL ARE REJECTED. 4. IN REPLY, THE LD.DR SUBMITTED THAT THE FACTS AND FIGURES AS MENTIONED BY THE ASSESSEE REQUIRES VERIFICATION AND THE ASSESSEE HAS NOT BEEN ABLE TO RECONCILE THE CLIENT CODE MODIFICATION WITH THE SHARE TRANSACTIONS WHICH HAVE BEEN EXTRACTED BY THE AO IN THE CHART AT PAGE NOS.3 & 4 OF THE ASSESSMENT ORDER. IT WAS A SUBMIS SION THAT THE PROVISIONS OF SEC.111A DID NOT APPLY IN THE ASSESSE ES CASE IN RESPECT OF THE CLIENT CODE MODIFICATION IN SO FAR AS THE SAME HAVE NOT BEEN SHOWN TO BE BONAFIDE AND NO EVIDENCE HAS BEEN PRODUCED. IT WAS A SUBMISSION THAT THE REVENUE WAS ALSO RELYING UPON BY THE DECISION I N THE CASE OF M/S.KUNVARJI FINACE PVT. LTD. REFERRED TO SUPRA. I T WAS A SUBMISSION THAT THE CLIENT CODE MODIFICATION BEING IN EXCESS OF 1% AS PERMITTED BY THE MARKETS COMMITTEE, THE ADDITION WAS LIABLE TO BE CO NFIRMED. IT WAS A SUBMISSION THAT THE ORDER OF THE LD.CIT(A) WAS CORR ECT AND DID NOT MERIT ANY INTERFERENCE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT TH E OUTSET, A PERUSAL OF THE DECISION OF THE CO-ORDINATE BENCH OF THIS TR IBUNAL IN THE CASE OF ITA NO.1741/MDS/2017 :- 4 -: M/S.KUNVARJI FINACE PVT. LTD. REFERRED TO SUPRA CLE ARLY SHOWS THAT THE CIRCULAR WHICH HAS BEEN RELIED UPON BY THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S.KUNVARJI FINACE PVT. LT D. MORE SPECIFIC. CIRCULAR NO.MCX/T&S/032/2007 DATED 22.01.2007 CLEARLY SPECIF Y IN CLAUSE-F THAT THE FACILITY OF CLIENT CODE MODIFICATIONS IS ALLOWE D AS INTERIM MEASURE UP TO THE MARCH 31, 2007 AND AFTER THIS DATE, THE SAID FACILITY WILL BE COMPLETELY STOPPED. THE ASSESSMENT YEAR INVOLVED I N THE IMPUGNED APPEAL IS AY 2010-11 AND CONSEQUENTLY, THE SAID CIR CULAR WOULD HAVE NO APPLICABILITY TO THE CLIENT CODE MODIFICATIONS FOR THE RELEVANT AY. THE DECISION RELIED UPON BY THE AO, CONSEQUENTLY, WOULD HAVE NO APPLICABILITY AS THE SAID DECISION HAS BEEN RENDERED ON THE BASIS OF THE SAID CIRCULAR ISSUED BY THE COMMODITIES EXCHANGE. FROM WHERE THE ASSESSING AUTHORITY HAS OBTAINED THE CLIENT CODE MODIFICATIONS IN RESPE CT OF THE ASSESSEE WHICH HAS BEEN EXTRACTED AT PARA NO.6 IN PAGE NOS.3 & 4 OF THE ASSESSMENT ORDER IS ALSO NOT COMING OUT OF THE ASSE SSMENT ORDER. THE ASSESSEE HAS ALSO NOT BEEN ABLE TO SHOW ANY RECONCI LIATION IN RESPECT OF THE SAID CLIENT CODE MODIFICATIONS AND THE SHARE TR ANSACTIONS. THE ASSESSEE IS ONLY CLAIMING THAT THE NUMBER OF SHARES AS DISCUSSED IN THE CLIENT CODE MODIFICATIONS ARE LESS THAN THE NUMBER OF SHARES TRANSACTED BY THE ASSESSEE IN RESPECT OF THE EACH OF THE SCRIP TS AND CONSEQUENTLY, IT SHOULD BE CONSIDERED THAT THE SAID MODIFICATIONS HA VE BEEN TAKEN INTO CONSIDERATION WHEN COMPUTING THE PROFITS AS PROVIDE D BY THE STOCK BROKER. THIS DOES NOT HOLD THE WATER IN SO FAR AS THE ASSES SEE HAS NOT BEEN ABLE TO TALLY THE RATE PER SHARE WHICH HAS BEEN EXTRACTED B Y THE AO IN HIS ITA NO.1741/MDS/2017 :- 5 -: ASSESSMENT ORDER AT PARA NO.6 WITH THE TRANSACTION CHARTS AND THE CONFIRMATION PROVIDED BY THE STOCK BROKER. THUS, I T IS NOTICED THAT THE FACTS RELEVANT FOR DECIDING THIS ISSUE HAS NOT BEEN PROPERLY ASSIMILATED NOR THEY BEING PRODUCED BY THE ASSESSEE. IT HAS ALSO N OTICED THAT THE ASSESSEE IS RELYING UPON THE PROFITS AND LOSS ACCOU NT PREPARED BY THE BROKER THROUGH WHOM THE ASSESSEE HAS DEALT WITH AND NOTHING HAS BEEN DONE TO VERIFY THE CLIENT CODE MODIFICATIONS AS DON E BY THE BROKER WITH THE BROKER ITSELF. THIS BEING SO, IN THE INTEREST OF N ATURAL JUSTICE, THE ISSUE IN THIS APPEAL IS RESTORED TO THE FILE OF THE AO FOR R E-ADJUDICATION AFTER VERIFYING THE DETAILS OF THE CLIENT CODE MODIFICATI ONS WHICH HAS BEEN EXTRACTED BY THE AO IN THE CHART AT PARA NO.6 OF TH E ASSESSMENT ORDER. THE ASSESSEE SHALL RECONCILE THE TRANSACTIONS WITH THE SHARE TRANSACTIONS AS RECORDED BY THE SHARE BROKER. THE AO IS ALSO AT LIBERTY TO HAVE THE SAME TO BE VERIFIED WITH THE STOCK BROKER. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 10, 2017, AT CHENNAI. SD/- SD/- ( ) ( CHANDRA POOJARI ) ! /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) ! /JUDICIAL MEMBER ITA NO.1741/MDS/2017 :- 6 -: /CHENNAI, 1 /DATED: OCTOBER 10, 2017. TLN ) '23 43 /COPY TO: 1. & /APPELLANT 4. 5 /CIT 2. '(& /RESPONDENT 5. 3 ' /DR 3. 5 ( ) /CIT(A) 6. /GF