Sunita Devi Chordia, CHENNAI V. ITO Non Corporate Ward 6(3), CHENNAI

ITA 2805/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5284 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 21-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAHADEVAN
• Assessee Lawyers: M ABHISHEK
• Keywords: Reopening of assessment; Transactions in derivatives
• Section: 147

Judgement Text

, / , IN THE INCOME TAX APPELLATE TRIBUNAL D SMC BENCH, CHENNAI ... , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER !./ ITA NO.2805/CHNY/2017 # $%# / ASSESSMENT YEAR : 2009-10 SMT. SUNITA DEVI CHORDIA, C/O VICTOR GRACE & CO., CHARTERED ACCOUNTANTS, SPENCER PLAZA, O-704, 7 TH FLOOR, 769, ANNA SALAI, CHENNAI - 600 002. PAN : AASPS 5748 P V. THE INCOME TAX OFFICER, NON CORPORATE WARD - 6(3), CHENNAI. ('(/ APPELLANT) ()*'(/ RESPONDENT) '( + , / APPELLANT BY : SHRI M. ABHISHEK, CA )*'( + , / RESPONDENT BY : SHRI B. SAHADEVAN, JCIT - $ + ./ / DATE OF HEARING : 25.04.2018 01% + ./ / DATE OF PRONOUNCEMENT : 26.04.2018 / O R D E R THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -5, CHENNA I, DATED 12.09.2017 AND PERTAINS TO ASSESSMENT YEAR 2009-10. 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS REOP ENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 2 I.T.A. NO.2805/CHNY/17 3. SHRI M. ABHISHEK, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSING OFFICER PROCESSED THE RETURN UNDER SECTION 143(1) OF THE ACT AND ISSUED INTIMATION. T HEREAFTER WITHOUT ANY FURTHER MATERIAL, HE REOPENED THE SAME. THEREF ORE, ACCORDING TO THE LD. REPRESENTATIVE, REOPENING OF ASSESSMENT IS NOT JUSTIFIED AT ALL. 4. SHRI M. ABHISHEK, THE LD. REPRESENTATIVE FOR THE ASSESSEE, FURTHER SUBMITTED THAT THE ISSUE ON MERIT IS WITH R EGARD TO SETTING OFF OF LOSS TO THE EXTENT OF 5,87,965/-. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE EARNED INCOME FROM PUR CHASE AND SALE OF SHARES AND MONEY LENDING. IN THE PROFIT & LOSS ACCOUNT, THE ASSESSEE DEBITED 17,77,865/- AS LOSS FROM F&O TRANSACTION. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE E XPLAINED BEFORE THE ASSESSING OFFICER THAT THE PURCHASE AND SALE OF SHARES WERE MADE THROUGH APPROVED STOCK BROKER AND THE STOCK BR OKER MODIFIED THE CLIENT CODE SINCE THERE WAS TYPOGRAPHICAL ERROR WHILE TYPING THE CLIENT CODE. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS NO KNOWLEDGE ABOUT THE CLIENT CODE MODIFICATION BY THE BROKER. THE STOCK EXCHANGE CORRECTED THE MISTAKE AS POINTED OUT BY THE BROKER 3 I.T.A. NO.2805/CHNY/17 WHILE ENTERING THE DATA IN THE TERMINAL WHICH WAS F INALIZED IN THE PREMISES OF THE BROKERS OFFICE. 5. THE LD. REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE HAS ENTERED INTO 57 TRANSACTIONS IN F&O, OUT OF WHICH, 23 TRANSACTIONS RESULTED IN PROFIT AND 34 TR ANSACTIONS RESULTED IN LOSSES. OUT OF 57 TRANSACTIONS, WITH REGARD TO ONLY ONE TRANSACTION THERE WAS A MISTAKE COMMITTED BY THE BR OKER WHILE ENTERING THE DATA TO HIS TERMINAL WHICH WAS SUBSEQU ENTLY CORRECTED WITH THE APPROVAL OF THE STOCK EXCHANGE. THEREFORE , ACCORDING TO THE LD. REPRESENTATIVE, WHEN THE ASSESSING OFFICER ACCEPTED 56 TRANSACTIONS, THERE WAS NO REASON TO DOUBT ONLY ONE TRANSACTION MERELY BECAUSE THE BROKER HAS COMMITTED MISTAKE IN CHANGING CLIENT CODE. WITHOUT ANY MATERIAL, ACCORDING TO TH E LD. REPRESENTATIVE, THE ASSESSING OFFICER DISBELIEVED T HE EXPLANATION OF THE ASSESSEE AND MADE THE ADDITION OF 8,47,670/-. 6. ON THE CONTRARY, SHRI B. SAHADEVAN, THE LD. DEPA RTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSING OFFICE R FOUND THAT THE ASSESSEE CLAIMED A TOTAL LOSS OF 17,77,865/-, OUT OF WHICH A LOSS OF 5,87,965/- WAS DUE TO CLIENT CODE MODIFICATION. AC CORDING TO THE LD. D.R., THE ASSESSEE HAD TRANSACTIONS WITH TWO ST OCK BROKERS, 4 I.T.A. NO.2805/CHNY/17 NAMELY, M/S SUN N SUN FIN SERVICES AND M/S ARYAN SH ARE & STOCK BROKERS LIMITED. ACCORDING TO THE LD. D.R., THE RE VENUE HAS CONDUCTED SURVEY IN THE PREMISES OF 12 BROKERS AND FEW OF THE CLIENTS OF THE SAID BROKERS ACROSS THE COUNTRY IN R ESPECT OF CLIENT CODE MODIFICATION. ACCORDING TO THE LD. D.R., IT I S THE ROUTINE PRACTICE OF THE STOCK BROKERS TO CHANGE THE CLIENT CODE IN SALE AND PURCHASE OF SHARES OF THE SECURITIES AFTER THE TRAD ES WERE COMPLETED. EVEN THOUGH IT WAS PERMITTED TO RECTIFY INADVERTENT ERROR, ACCORDING TO THE LD. D.R., THE BROKERS WERE MISUSING THE OPPORTUNITY OF CLIENT CODE MODIFICATION FOR MANIPUL ATING THE ACTIVITIES IN THE STOCK EXCHANGE. ON PERUSAL OF THE LIST, WHI CH WAS PREPARED BY THE NATIONAL STOCK EXCHANGE, PURSUANT TO THE DIR ECTION OF THE FINANCE MINISTRY, ACCORDING TO THE LD. D.R., THE AS SESSEES NAME WAS ALSO FOUND IN THE LIST FOR MANIPULATING THE CLI ENT CODE FOR THE PURPOSE OF CLAIMING LOSS IN THE TRANSACTIONS. SINC E THE ASSESSEES NAME IS FOUND IN THE LIST PREPARED BY THE NATIONAL STOCK EXCHANGE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER FO UND THAT THE CLAIM OF LOSS OF 5,87,965/- IS A BOGUS ONE, ACCORDINGLY, THE CIT(APP EALS) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R. 7. I HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHE R SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSING 5 I.T.A. NO.2805/CHNY/17 OFFICER PROCESSED THE RETURN UNDER SECTION 143(1) O F THE ACT AND ISSUED INTIMATION. SUBSEQUENTLY, ON THE BASIS OF T HE SURVEY CONDUCTED BY THE INVESTIGATION WING OF THE DEPARTME NT, IT WAS FOUND THAT BY MODIFYING THE CLIENT CODE, THE ASSESS EE WAS CLAIMING BOGUS LOSS IN THE PROFIT & LOSS ACCOUNT. THEREFORE , THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THERE WAS A SUR VEY IN THE PREMISES OF THE ASSESSEE AND ON THE BASIS OF THE SU RVEY MATERIAL, THE ASSESSING OFFICER REOPENED THE ASSESSMENT, IT C ANNOT BE SAID THAT THERE WAS NO NEW MATERIAL WHICH CAME TO THE KN OWLEDGE OF THE ASSESSING OFFICER FOR THE PURPOSE OF REOPENING THE ASSESSMENT. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE IN THE REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE AC T. 8. NOW COMING TO THE MERIT OF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, IT IS NOT IN DISPUTE THAT REVENU E CONDUCTED SURVEY IN 12 PREMISES OF THE BROKERS AND FEW CLIENT S OF THEM ACROSS THE COUNTRY. THE REVENUE AUTHORITIES FOUND THAT BY WAY OF CLIENT CODE MODIFICATION, THE LOSSES WERE SHIFTED TO THE P ROFIT MAKING INVESTORS. THE SECURITIES AND EXCHANGE BOARD OF IN DIA CONDUCTED AN ENQUIRY PURSUANT TO THE OBSERVATION MADE BY THE FINANCE MINISTRY. THE SECURITIES AND EXCHANGE BOARD OF IND IA PREPARED A LIST OF PERSONS WHO HAVE CLAIMED BENEFIT OF LOSSES OF MORE THAN 1 6 I.T.A. NO.2805/CHNY/17 LAKH. THE ASSESSEES NAME WAS FOUND IN THE LIST AT SL.NO.40. THEREFORE, EVEN THOUGH IT WAS PERMITTED TO RECTIFY INADVERTENT ERROR WHILE ENTERING THE CLIENT CODE AT THE TERMINAL OF T HE STOCK BROKER, THERE IS A PRACTICE OF SHIFTING THE LOSS TO OTHER I NVESTORS BY MISUSING THE PROVISION FOR RECTIFICATION IN CLIENT CODE. IT IS NOT KNOWN WHETHER THE ASSESSEE HAS REALLY SHIFTED THE PROFIT TO SOME OF THE INVESTORS FOR THE PURPOSE OF CLAIMING LOSSES OR IT WAS A REAL LOS S. EVEN THOUGH OUT OF 57 TRANSACTIONS, THE CLIENT CODE MODIFICATIO N WAS ONLY IN RESPECT OF ONE TRANSACTION, IN VIEW OF THE PRACTICE SAID TO BE PREVAILING IN THE STOCK EXCHANGE FOR USING THE CLIE NT CODE MODIFICATION, THIS TRIBUNAL IS OF THE CONSIDERED OP INION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OF FICER AFTER FURNISHING THE LIST SAID TO BE PREPARED BY THE SECU RITIES AND EXCHANGE BOARD OF INDIA IN PURSUANCE TO THE OBSERVA TION MADE BY THE FINANCE MINISTRY. 9. IT IS ALSO NOT KNOWN WHETHER THE REVENUE AUTHORI TIES RECORDED ANY STATEMENT EITHER FROM STOCK BROKER OR FROM ANY OF THE PERSONS DURING THE COURSE OF INVESTIGATION. IF SUC H A STATEMENT WAS RECORDED, THE ASSESSING OFFICER HAS TO FURNISH THE SAME TO THE ASSESSEE. ACCORDINGLY, THE ORDERS OF BOTH THE AUTH ORITIES BELOW ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO FURNISH A COPY OF 7 I.T.A. NO.2805/CHNY/17 THE LIST SAID TO BE PREPARED BY THE SECURITIES AND EXCHANGE BOARD OF INDIA AND THE STATEMENT IF ANY RECORDED IN THE COUR SE OF ENQUIRY AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 26 TH APRIL, 2018 AT CHENNAI. SD/- ( ... ) (N.R.S. GANESAN) /JUDICIAL MEMBER /CHENNAI, 3! /DATED, THE 26 TH APRIL, 2018 KRI. + ).45 65%. /COPY TO: 1. '( /APPELLANT 2. )*'( /RESPONDENT 3. - 7. () /CIT(A)-5, CHENNAI-34 4. PRINCIPAL CIT-9, CHENNAI 5. 5$8 ). /DR 6. # 9 /GF.