New Wave Realtor Pvt. Ltd. , Delhi V. Ward No. 18(2), Delhi

ITA 272/DEL/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0735 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-10-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 07-02-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transactions in derivatives; Initiation of penalty proceedings; Tangible material; Reason to believe
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘SMC’ BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA No. 272/DEL/2022 [A.Y 2010-11) M/s New Wave Realtors Pvt. Ltd., Vs. B-9, Bhagwan Dass Nagar Ward 18(2) Delhi Delhi PAN: AABCN 7896 F [Applicant] [Respondent] Assessee By : Shri Baldev Raj, CA Department By : Shri Om Prakash, Sr. DR Date of Hearing : 12.10.2022 Date of Pronouncement : .10.2022 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER:- This appeal by the assessee is preferred against the order dated 10.12.2021 by the National Faceless Appeal Centre [NFAC] pertaining to Assessment Year 2010-11. 2 2. The grievances of the assessee read as under: “1. That the Learned Commissioner of Income Tax (Appeal] has grossly erred both in law and on facts in upholding in the initiation of proceedings under section 147 of the Act, and, completion of assessment under section 147/144 of the Act, without appreciating that the same was without jurisdiction and hence deserved to be quashed. 2. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there was no specific relevant, reliable and tangible material on record to form a "reason to believe" that income of the appellant had escaped assessment and in view thereof the proceedings initiated are illegal, untenable and therefore unsustainable. 3. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that reasons recorded mechanically without application of mind do not constitute valid reasons to believe for assumption of jurisdiction u/s 147 of the Act 4. That The learned Commissioner of Income Tax (Appeals) has proceeded to sustain the addition on mere speculation, generalized statements, theoretical assumptions and allegations and assertions, mechanically borrowed and, lifted from report of investigation wing without any inquiry of his own and, the addition made without there being any supporting direct or indirect or circumstantial evidence is not in accordance with law. 3 5. That the Learned Commissioner of Income Tax has erred in both law and facts ot the case in sustaining an aggregate addition of Rs 31,34,269/- as assumed profit on the basis of Client Code Modification Mechanism by the broker of the appellant. 6. That the Learned Commissioner of Income Tax has erred in confirming the disallowance of loss Claimed on F& 0 Transactions for which complete details were assessing officer and the assessing officer has not stated any reason for such addition in its assessment order. It also amounts to double taxation of the same transactions. 7. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in failing to appreciate the written submissions furnished by the appellant and overlooking the judicial pronouncements relied upon by the appellant 8. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that all transaction of appellant were supported by documentary evidence in the shape of contract notes, account payee transactions and therefore addition made on .surmises, conjectures and suspicion and without bringing on record any specific evidence establishing that claim made is not genuine or incorrect is highly arbitrary, unjustified and untenable. 4 9. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in recording various adverse inferences which are contrary to the facts on record, material placed on record and, are otherwise unsustainable in law and therefore, addition so confirmed is absolutely unwarranted. It is therefore, prayed that, it be held that assessment made by the learned Assessing Officer and sustained by the learned Commissioner of Income Tax (Appeals) deserves to be quashed as such. It be further held that additions made and sustained by the learned Commissioner of Income Tax (Appeals) be deleted and appeal of the appellant company be allowed.” 3. Briefly stated, the facts of the case are that the assessee filed return of income declaring loss of 39,17,423/- which was processed u/s 143(1) of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] on 14.04.2011. Thereafter, assessment was reopened u/s 148 of the Act and statutory notices were accordingly issued and served upon the assessee. 4. Basis for reopening assessment was that information was received from the office of the Director of Income Tax, Mumbai on the subject of Tax Evasion through Client Code Modification [CCM] during F.Y. 2009-10. The Assessing Officer came to know that fictitious profits and 5 losses were created by some brokers by misusing the CCM in F&O segment on NSE during March 2010. It was mentioned in the report that the brokers were alleged to be indulging in transferring the fictitious losses to different clients to reduce their tax liability and also fictitious profit to other clients. 5. The Assessing Officer found that the assessee is one of the beneficiaries which had availed/taken fictitious loss to the extent of Rs. 31,34,269/- generated by misusing the facility of CCM. 6. After discussing the modus operandi at length, the Assessing Officer concluded that CCM of the impugned securities transactions were not approved by the stock exchange which lead to the irresistible conclusion that CCM under consideration were not carried out to correct bonafide mistake but was deliberately done for oblique purpose. 7. The Assessing Officer finally concluded as under: “From the above facts it was clear that an amount of Rs.31,34,269/- had escaped assessment b) misuse of C'CM by the assessee. In other words the assessee is not allowed shifting of 6 profit of Rs.31,34,269/- earned by the assessee in normal course of trading in F&O. This will result into an addition of Rs.31,34,269/-. Penalty proceedings u/s 2.71(1 )(c) are hereby initiated separately for furnishing inaccurate particulars of its income thereby concealing its income for the reasons recorded in the above said paras and the same are not reproduced here for the sake of brevity. The reasons described should be considered as the reasons for initiation of penalty proceedings. (Addition Rs.31,34,269/-) 11. The assessee has debited a loss of Rs.30.72,098/- on F&O as claimed under the head administrative and other expenses(Sch.- H). The same is disallowed in the light of the above facts and manipulations of transaction in F&O/ misuse of CCM. (Disallowance of Rs. 30,72,090/-) With these remarks income of the assessee is computed as under:- Description Amount (in Rs.) Loss declared by assessee (039,17,227/- Add:- 31,34,269 30,72,098 (+)62,06,367/- Total Income 22,89,140/ Rounded off u/s 288A 22,89,140/- 7 12. The assessee challenged the assessment order before the ld. CIT(A) but without any success. 13. Before me, the ld. counsel for the assessee drew my attention to the relevant documentary evidences and pointed out that the assessee has earned profit of only Rs. 1,15,053/- from F&O and loss of Rs. 30,72,098.56 from the same F&O transaction. The ld. counsel for the assessee vehemently stated that the assessee has not manipulated anything to earn fictitious profit to bring its unaccounted money in the books of account. It is the say of the ld. counsel for the assessee that the Assessing Officer has misguided himself on erroneous facts. 14. Per contra, the ld. DR strongly supported the findings of the Assessing Officer. 15. I have carefully perused the assessment order and have considered the relevant documentary evidences brought to my notice u/r 18(6) of the ITAT Rules. Exhibit 32 and 33 is the copy of ledger account of the broker Multiplex Capital India Ltd. No adverse findings have been given by the Assessing Officer in respect of the transactions recorded therein. 8 16. Exhibit 35 is loss from F&O which is as under: Date Bill No. Particular Amount Refer Paper Book Page no. 31.08.2009 FDLY/CKJ22-3108 Daily Future MTM 44,941.32 37-39 01.09.2009 FDLY/CKJ22-0109 Daily Future MTM 235,574.33 40-43 02.09.2009 FDLY/CKJ 22-0209 Daily Future MTM 8,758.83 44-46 03.09.2009 FDLY/CKJ22-0309 Daily Future MTM 83,217.77 47-50 04.09.2009 FDLY/CKJ 22-0409 Daily Future MTM 22,102.78 51-54 07.09.2009 FDLY/CKJ22-0709 Daily Future MTM 33,312.55 54-56 08.09.2009 FDLY/CKJ 22-0809 Daily Future MTM 20,911.86 57 08.09.2009 OPTDLY/CKJ 22-0809 Option Premium Bill 55,488.61 58 17.09.2009 OPTDLY/CKJ22-1709 Option Premium Bill 58,558.93 59-60 25.09.2009 FDLY/CKJ22-2509 Daily Future MTM 1,476,058.27 61-74 29.09.2009 FDLY/CKJ22-2909 Daily Future MTM 90,242.15 75-77 30.09.2009 FDLY/CKJ22-3009 Daily Future MTM 319,425.19 77-81 08.10.2009 FDLY/CKJ22-0810 Daily Future MTM 146,647.18 82-84 09.10.2009 FDLY/CKJ22-0910 Daily Future MTM 127,099.45 85-87 12.10.2009 FDLY/CKJ22-1210 Daily Future MTM 248,498.71 88-90 15.10.2009 FDLY/CKJ22-1510 Daily Future MTM 44,615.24 91-93 16.10.2009 FDLY/CKJ22-1610 Daily Future MTM 1,357.20 94 20.10.2009 FDLY/CKJ22-2010 Daily Future MTM 42,707.59 95-98 22.10.2009 FDLY/CKJ22-2210 Daily Future MTM 78.00 99 26.10.2009 FDLY/-CKJ22-2610 Daily Future MTM 1,310.40 100 28.10.2009 FDLY/CKJ22-2810 Daily Future MTM 156.00 101 29.10.2009 FEXP/CKJ22-2910 Future Expiry Bill 704.78 102 20.11.2009 FDLY/CKJ22-2011 Daily Future MTM 9,067.85 103-104 17. Exhibit 36 of profit from F&O which is as under: Date Bill No. Particular Amount Refer Paper Book Page no. 07.09.2009 OPTDLY/CKJ 22-0709 Option Premium on 07.09.2009 30,543.00 105-106 16.09.2009 OPTDLY/CKJ22-1609 Option Premium on 16.09.2009 6,504.00 107-109 17.09.2009 FDLY/CKJ22-1709 Daily Future MTM on 17.09.2009 16,478.00 109 22.09.2009 OPTDLY/CKJ 22-2209 Option Premium Bill on 22.09.2009 58,661.00 110 17.10.2009 FDLY/CKJ 22-1710 Daily Future MTM on 17.10.2009 312.00 111 9 21.10.2009 FDLY/CKJ22-2110 Daily Future MTM on 21.10.2009 718.00 112 23.10.2009 FDLY/CKJ22-2310 Daily Future MTM on 23.10.2009 936.00 113-114 27.10.2009 FDLY/CKJ22-2710 Daily Future MTM on 27.10.2009 328.00 115-116 29.10.2009 FDLY/CKJ22-2910 Daily Future MTM on 29.10.2009 574.00 117-118 18. The entire assessment is based upon the premise that the assessee company had deliberately intentions to create loss /profit by using CCM in which the assessee was helped by the broker Multiplex Capital Ltd and ascertained profit/loss have been shifted by changing original CCM. 19. In my considered opinion, this entire premise is based upon surmises and conjectures supported by the information received by the Assessing Officer from the Director of Income tax, Mumbai. The Assessing Officer grossly erred in holding that the assessee has shifted profit of Rs. 31,34,269/- which was earned by it in normal course of trading in F&O whereas, as per the computation of income and copy of accounts, the assessee has, in fact, incurred loss of Rs. 30,72,098/-. 20. In my considered view, no prudent business man would convert his accounted tax paid money into unaccounted slush money by indulging in such activity by which it is converting accounted money into accounted money as alleged by the Assessing Officer. 10 21. I am of the considered view that that the Assessing Officer has been completely misguided by wrong facts and, therefore, I do not find any merit in the impugned addition /disallowance and, therefore, direct the Assessing Officer to delete the addition of Rs. 62,06,367/-. 22. In the result, the appeal of the assessee in ITA No. 272/DEL/2022 is allowed. The order is pronounced in the open court on 14.10.2022. Sd/- [N.K. BILLAIYA] ACCOUNTANT MEMBER Dated: 14 th October, 2022. VL/ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi 11 Date of dictation Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr.PS/PS Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr.PS/PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order