ACIT, CIRCLE-3(1)(1), MUMBAI V. M/S. AAREM MANAGEMENT SERVICES PVT. LTD. , MUMBAI

ITA 5627/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2018 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 29-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

, , ! IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER . 5627 / / 2019 (%. 2009-10 ) ITA NO.5627/MUM/2019 (A.Y 2009- 10) . 5628 / / 2019 (%. 2010-11 ) ITA NO.5628/MUM/2019 (A.Y 2010-11 ) ACIT,CIR.3(1)(1), ROOM NO.607, 6 TH FLOOR, AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 ...... ' / APPELLANT % VS. M/S. AAREM MANAGEMENT SERVICES PVT. LTD., 1219, MAKER CHAMBER-V, NARIMAN POINT, MUMBAI 400 021 PAN: AADCA-0716F ..... ()/ RESPONDENT '*/ APPELLANT BY : SHRI SUSHIL KUMAR MISHRA ()*/ RESPONDENT BY : MS. SHEFALI %+) / DATE OF HEARING : 01/04/2021 ,-. +) / DATE OF PRONOUNCEMENT : 15/06/2021 / ORDER THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGA INST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-8 MUMBAI [IN S HORT 'THE CIT(A)] , FOR THE ASSESSMENT YEAR 2009-10 AND 2010-11, RESPECTIVELY. BOTH THE IMPUGNED ORDERS ARE OF EVEN DATE I.E. 04/06/2019. SINCE, THE GROUNDS R AISED BY REVENUE IN BOTH THE APPEALS ARE IDENTICAL, THESE APPEALS ARE TAKEN UP T OGETHER FOR ADJUDICATION AND ARE DECIDED BY THIS COMMON ORDER. 2 ITA NO.5627/MUM/2019 (A.Y 2009-10) ITA NO.5628/MUM/2019 (A.Y 2010-11) ITA NO.5627/MUM/2019- A.Y. 2009-10 : 2. SHRI SUSHIL KUMAR MISHRA REPRESENTING THE DEPART MENT SUBMITTED THAT THE CIT(A) HAS ERRED IN ALLOWING ASSESSEES CLAIM OF LO SS RS.2,00,195/- ARISING OUT OF CLIENT CODE MODIFICATION. THE LD. DEPARTMENTAL REPRESENTAT IVE SUBMITTED THAT THE INFORMATION WAS RECEIVED BY THE DIRECTOR INCOME TAX (INTELLIGENCE & CRIMINAL INVESTIGATION), MUMBAI THAT FICTITIOUS PROFIT AND L OSSES WERE CREATED BY BROKERS BY MISUSING CLIENT CODE MODIFICATION FACILITY. THE AS SESSEE IS ONE OF THE BENEFICIARIES OF SUCH FICTITIOUS LOSS ENTRY PROVIDED BY M/S. INFINIT Y.COM FINANCIAL SECURITIES LTD. THE ASSESSING OFFICER IN ASSESSMENT ORDER HAS DETAILED THE MODUS OPERANDI OF THE BROKERS AND THEREAFTER MADE ADDITION OF RS.2,00,195 /- BY DISALLOWING ASSESSEES CLAIM OF LOSS. IN FIRST APPELLATE PROCEEDINGS, THE CIT(A) HAS DELETED THE ADDITION WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO ESTABLISH GENUINENESS OF THE TRANSACTION. THE ASSESSEE IN CONNIVANCE WITH TH E BROKER HAS MISUSED CLIENT CODE MODIFICATION FACILITY TO REDUCE TAXABLE INCOME BY C LAIMING FICTITIOUS LOSS. 3. MS. SHEFALI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN TRADING/INVESTMENT OF SHARES, SECURITIES MUTUAL FUNDS, ETC. IN THE RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10, THE ASSESSEE HAS DECLARED TOTAL INCOME OF RS.18,37,850/- . THE ASSESSMENT IN THE CASE OF ASS ESSEE WAS REOPENED ONLY FOR THE REASON THAT THE ASSESSEE HAS ALLEGEDLY BENEFITED FR OM CLIENT CODE MODIFICATION THROUGH A BROKER. THE LD. AUTHORIZED REPRESENTATIV E OF THE ASSESSEE SUBMITTED THAT A PERUSAL OF ASSESSMENT ORDER WOULD SHOW THAT THE A SSESSING OFFICER HAS MADE GENERAL DISCUSSION ON CLIENT CODE MODIFICATION. IN ANY CASE THE ASSESSEE IS NOT AUTHORISED TO MAKE CLIENT CODE MODIFICATION, THE MO DIFICATION CAN ONLY BE MADE BY THE BROKER. THE ASSESSEE IS NOT A BROKER. THE ASSES SING OFFICER HAS NOT SPECIFIED AS TO HOW THE LOSS CLAIMED BY ASSESSEE ON ACCOUNT OF CLIE NT CODE MODIFICATION IS FICTITIOUS AND THERE IS NO FINDING AS TO WHOM PROFIT HAS BEEN TRANSFERED. THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER MERELY ON ASSUMPTIONS WITHOUT THERE BEING ANY 3 ITA NO.5627/MUM/2019 (A.Y 2009-10) ITA NO.5628/MUM/2019 (A.Y 2010-11) SPECIFIC FINDING ON ASSESSEES INVOLVEMENT IN ALLEG ED TRANSACTIONS OF CLIENT CODE MODIFICATION. THE ASSESSEE HAS EXPLAINED THAT THE C LIENT CODE MODIFICATION WAS DONE DUE TO PUNCHING ERROR. THE ASSESSING OFFICER WITHOU T ANY VALID REASONS HAS REJECTED CONTENTIONS OF THE ASSESSEE. THE LD. AUTHORIZED REP RESENTATIVE OF THE ASSESSEE RELIED ON THE DECISION IN THE CASE OF CORONATION AGRO INDUSTRIES VS. DCIT, 390 ITR 464 (BO M.) TO CONTEND THAT CLIENT CODE MODIFICATION DONE BY AS SESSEES BROKER ON ACCOUNT OF GENUINE ERROR CANNOT BE A GROUND TO BELIEVE THAT TH ERE HAS BEEN ANY ESCAPEMENT OF INCOME BY THE ASSESSEE. THE LD. AUTHORIZED REPRESEN TATIVE OF THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF CIT(A) AND PRAYED FOR DISMIS SING APPEAL OF THE REVENUE. 4. BOTH SIDES HEARD, ORDERS OF AUTHORITIES BELOW EX AMINED. THE SOLITARY ISSUE RAISED BY THE REVENUE IN APPEAL IS AGAINST RELIEF G RANTED BY THE CIT(A) IN DELETING ADDITION OF RS.2,00,195/- ON ACCOUNT OF CLIENT CODE MODIFICATION. A PERUSAL OF ASSESSMENT ORDER REVEALS THAT THE ASSESSING OFFICER HAS DISALLOWED ASSESSEES CLAIM OF LOSS OF RS.2,00,195/- ARISING OUT OF CLIENT CODE MODIFICATION PURELY ON SURMISES AND CONJECTURES. IN ASSESSMENT ORDER, THE ASSESSING OFF ICER HAS COMPREHENSIVELY GIVEN MODUS OPERANDI OF BROKERS IN GENERATING NON-GENUINE LOSSES BY MISUSING CODE MODIFICATION FACILITY. HOWEVER, THE ASSESSING OFFIC ER HAS FAILED TO ESTABLISH LINK BETWEEN THE LOSS CLAIMED BY THE ASSESSEE ON ACCOUNT OF CLIENT CODE MODIFICATION AND NON-GENUINE CLIENT CODE MODIFICATION PRACTICES ADOP TED BY THE BROKERS. THE ASSESSING OFFICER HAS NOT GIVEN ANY COGENT REASON T O REJECT EXPLANATION OFFERED BY THE ASSESSEE ON LOSS RESULTING FROM CLIENT CODE MOD IFICATION. THE ASSESSING OFFICER IN ENTIRE ASSESSMENT ORDER HAS NOT NAMED THE BROKER WH O WAS INSTRUMENTAL IN PROVIDING BOGUS CLIENT CODE MODIFICATION ENTRY TO T HE ASSESSEE. IT IS NOT EMANATING FROM THE ASSESSMENT ORDER WHETHER ANY SEARCH/SURVEY OR ANY OTHER INVESTIGATIVE ENQUIRY WAS MADE ON THE BROKER FROM WHOM IT IS ALLE GED THAT THE ASSESSEE HAS OBTAINED FICTITIOUS ENTRY OF LOSS ARISING FROM CLIE NT CODE MODIFICATION. THE OBSERVATIONS MADE BY THE ASSESSING OFFICER ARE GENE RIC AND NOT SPECIFIC TO THE ASSESSEE. THE CIT(A) HAS DELETED ADDITION INTER ALI A FOR THE REASONS: THE ASSESSING 4 ITA NO.5627/MUM/2019 (A.Y 2009-10) ITA NO.5628/MUM/2019 (A.Y 2010-11) OFFICER HAS MADE ADDITION IN THE ABSENCE OF COGENT EVIDENCE AGAINST THE ASSESSEE AND NO ADVERSE FINDING WITH REGARD TO FICTITIOUS LO SSES INCURRED AND CLAIMED BY THE ASSESSEE. 5. I CONCUR WITH THE FINDINGS OF CIT(A). THE IMPUGN ED ORDER WARRANTS NO INTERFERENCE, HENCE, THE SAME IS UPHELD AND APPEAL OF THE REVENUE IS DISMISSED, SANS-MERIT. ITA NO.5628/MUM/2019-A.Y. 2010-11 : 6. BOTH SIDES ARE UNANIMOUS IN STATING THAT THE FAC TS GERMANE TO THE GROUNDS RAISED IN APPEAL ARE IDENTICAL TO ASSESSMENT YEAR 2 009-10. 7. SINCE, THE ISSUE RAISED IN THIS APPEAL IS IDENT ICAL TO THE ONE ADJUDICATED IN ASSESSMENT YEAR 2009-10 AND THE FACTS GIVING RISE T O GROUNDS ARE IDENTICAL, THE FINDINGS GIVEN WHILE DECIDING APPEAL OF THE REVENUE IN ASSESSMENT YEAR 2009-10 WOULD MUTATIS MUTANDIS APPLY TO THE PRESENT APPEAL. THE PRESENT APPEAL OF REVENUE IS DISMISSED FOR PARITY OF REASON. 8. TO SUM UP, APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2009-10 AND 2010-11 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TUESDAY, THE 15 TH DAY OF JUNE, 2021. SD/- (VIKAS AWASTHY) / JUDICIAL MEMBER / MUMBAI, 0%/ DATED: 15/06/2021 VM , SR. PS (O/S) 5 ITA NO.5627/MUM/2019 (A.Y 2009-10) ITA NO.5628/MUM/2019 (A.Y 2010-11) COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT , 2. () / THE RESPONDENT. 3. 1) ( )/ THE CIT(A)- 4. 1) CIT 5. 23()% , . . . , / DR, ITAT, MUMBAI 6. 34567 / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI