DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-8(1), MUMBAI V. VIPUL D. SHAH, MUMBAI

ITA 5688/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9586 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 07-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH LD
• Assessee Lawyers: DR K SHIVARAM; RAHUL HAKANI LD ARS
• Keywords: Reopening of assessment; Unexplained expenditure; Transactions in derivatives; Difference of opinion; Corroborative evidences; Reason to believe; Change of opinion; Reassessment proceedings; Borrowed satisfaction
• Section: 69C; 143(3); 143(2); 148; 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5688/MUM/2017 ( / ASSESSMENT YEAR:2010-11) D CIT - CENTRAL CIRCLE - 8(1) ROOM NO.656, 6 TH FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020 / VS. SHRI VIPUL D. SHAH 1303, IMPERIAL RESIDENCY GULMOHAR, CROSS ROAD NO.12, JVPD, NEAR JUHU CIRCLE & AXIS BANK PARLE (W), MUMBAI-400 056. ! ./ ./PAN/GIR NO. AAUPS-0598-M ( /APPELLANT ) : ( / RESPONDENT ) & CROSS OBJECTION NO.350/MUM/2018 ARISING OUT OF I.T.A. NO.5688/MUM/2017 ( / ASSESSMENT YEAR:2010-11) SHRI VIPUL D. SHAH 1303, IMPERIAL RESIDENCY GULMOHAR, CROSS ROAD NO.12, JVPD, NEAR JUHU CIRCLE & AXIS BANK PARLE (W), MUMBAI-400 056. / VS. D CIT - CENTRAL CIRCLE - 8(1) ROOM NO.656, 6 TH FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020 ! ./ ./PAN/GIR NO. AAUPS-0598-M ( /APPELLANT ) : ( / RESPONDENT ) REVENUE BY : CHAUDHARY ARUN KUMAR SINGH-LD. DR ASSESSEE BY : DR. K. SHIVARAM AND RAHUL HAKANI LD. ARS / DATE OF HEARING : 06/05/2019 / DATE OF PRONOUNCEMENT : 03/07/2019 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2010-11 CONTEST THE ORDER OF LD. COMMISSIO NER OF INCOME-TAX (APPEALS)-9, MUMBAI, [IN SHORT REFERRED TO AS CIT( A)], APPEAL NO. CIT(A) 9/CIR.4/131/2016-17 DATED 23/06/2017. THE ASSESSEE HAS FILED CROSS- OBJECTION AGAINST THE SAME. THE GROUNDS RAISED BY THE REVENUE READ AS UNDER: - 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DEL ETING THE DISALLOWANCE OF RS. 2,31,82,203/- MADE ON ACCOUNT OF SUPPRESSION OF PRO FIT AND OBTAINING FICTITIOUS LOSS BY THE ASSESSEE BY WAY OF CLIENT CODE MODIFICA TION (CCM) BY THE BROKERS IN LARGE NUMBER OF COMMODITY TRANSACTION. 2. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS. 6,95,466/- MADE ON ACCOUNT OF COMMISSION PAID TO BROKERS TO OB TAIN FICTITIOUS LOSS THROUGH CLIENT CODE MODIFICATION WITHOUT CONSIDERING THE FA CT THAT A SIGNIFICANT PERCENTAGE OF TRANSACTION IS CHARGED FROM CLIENTS B Y THE BROKERS TO OBTAIN SUCH FICTITIOUS LOSS. THE GROUNDS RAISED IN CROSS-OBJECTIONS READS AS UND ER: - 1. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT RE OPENING OF ASSESSMENT IS BAD IN LAW AS A.O. DID NOT HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND HE MERELY RELIED ON INFORMATION RECEIVED FROM INVESTIGATION W ING AND FURTHER REOPENING IS NOTHING BUT CHANGE OF OPINION AND HENCE REOPENING IS BAD IN LAW. 2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT A .O FOR JUSTIFYING REOPENING RELIED ON INFORMATION NOT CONTAINED IN RECORDED REASONS AND H ENCE, REOPENING IS BAD IN LAW. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT REO PENING OF ASSESSMENT IS BAD IN LAW AS NOTICE U/S 143(2) WAS ISSUED BEFORE DISPOSING OBJEC TIONS TO REOPENING THEREBY VIOLATING THE MANDATORY PROCEDURE LAID DOWN IN GKN DRIVE-SHAF TS (INDIA) LTD V ITO (2003) 259 ITR 19(SC) AND HENCE REOPENING IS BAD IN LAW. 4. THE ORDER OF THE LEARNED CIT(A) DELETING AD DITION OF RS. 2,31,82,003/- IS IN ACCORDANCE WITH LAW AND JUSTIFIED. 2.1 BRIEF FACTS ARE THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL STATED TO BE ENGAGED IN SHARE TRADING ACTIVITIES WAS ASSESSED FOR IMPUGNED AY U/S 143(3) R.W.S. 147 OF THE ACT ON 22/03/2016 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.622.61 LACS AFTER CER TAIN ADDITIONS / 3 DISALLOWANCES AS AGAINST ASSESSED INCOME OF RS.383. 83 LACS DETERMINED U/S 143(3) R.W.S 154 ON 23/01/2013. THE ADDITION OF RS.231.82 LACS REPRESENTING FICTITIOUS LOSS & ANOTHER ADDITION OF RS.6.95 LACS ON ACCOUNT OF UNEXPLAINED EXPENDITURE IS THE SUBJECT MATTER OF PR ESENT APPEAL BEFORE US. THE ASSESSEE, BY WAY OF CROSS-OBJECTIONS, HAS CONTE STED THE LEGALITY OF REASSESSMENT PROCEEDINGS. 2.2 THE REASSESSMENT PROCEEDINGS GOT TRIGGERED PURS UANT TO RECEIPT OF CERTAIN INFORMATION FROM THE DIRECTORATE OF INCOME TAX (INTELLIGENCE AND CRIMINAL INVESTIGATION) [DIT (I&CI)], THAT THE ASSESSEE STOOD BENEFICIARY OF MISUSE OF CLIENT-CODE MODIFICATION [CCM]. ACCORDING LY, THE CASE WAS REOPENED BY ISSUANCE OF NOTICE U/S 148 ON 17/03/201 5. THE ASSESSEE, VIDE RESPONSE DATED 05/04/2015, REQUESTED TO TREAT THE O RIGINAL RETURN FILED ON 19/09/2010 AS RETURN IN COMPLIANCE TO NOTICE U/S 14 8 AND ASKED LD. AO TO SUPPLY REASONS FOR REOPENING OF ASSESSMENT, WHICH W ERE DULY SUPPLIED TO THE ASSESSEE. SUBSEQUENTLY NOTICE U/S 143(2) WAS ST ATED TO BE ISSUED TO THE ASSESSEE ON 14/07/2015. THE ASSESSEE RAISED OBJ ECTIONS AGAINST THE REOPENING WHICH WERE DISPOSED-OFF BY WAY OF A SPEAK ING ORDER ON 10/08/2015. 2.3 PURSUANT TO RECEIPT OF AFORESAID INFORMATION, I T TRANSPIRED THAT THE ASSESSEE WAS IDENTIFIED AS A BENEFICIARY OF MISUSE OF CLIENT-CODE MODIFICATION. THE INVESTIGATION ARM OF THE DEPARTME NT HAVING CONDUCTED SPOT VERIFICATIONS BY WAY OF SURVEYS AND INQUIRIES NOTICED THAT SOME OF THE BROKERS AND THEIR CLIENTS HAVE INDULGED IN THE PRAC TICE OF MISUSE OF CLIENT- CODE MODIFICATION THEREBY ARTIFICIALLY SHIFTING PRO FITS AND LOSSES FROM ORIGINAL CLIENT CODE TO MODIFIED CLIENT CODE WITH AN INTENTI ON TO REDUCE THE LEGITIMATE 4 TAX LIABILITY WHICH WOULD HAVE BEEN ARISEN HAD THE ORIGINAL TRADES NOT BEEN MODIFIED. 2.4 PROCEEDING FURTHER, IT WAS ALSO NOTED THAT THE CLIENT-CODE MODIFICATION FACILITY WAS APPROVED BY SEBI AND PROVIDED BY THE E XCHANGES TO BROKERS SO AS TO ENABLE RECTIFICATION OF GENUINE MISTAKES OF P UNCHING OF ORDERS OF A PARTICULAR TRADE GIVEN BY A PARTICULAR CLIENT IN IT S PARTICULAR ACCOUNT MAINTAINED WITH THE BROKER. IN THIS FACILITY, THE B ROKER COULD CHANGE THE CLIENT-CODE OF A PARTICULAR TRADE AND TRANSFER THE TRADE FROM ONE ACCOUNT TO ANOTHER ACCOUNT DURING THE TRADING HOURS & WITHIN T IME LIMIT PERMITTED BY THE STOCK EXCHANGE AFTER THE CLOSE OF TRADING HOURS. AF TER THE MODIFICATION IN CLIENT-CODE IS MADE, IT WAS SUBMITTED TO THE STOCK EXCHANGE FOR INFORMATION AND NECESSARY MODIFICATION / UP-DATION IN THE DATA. HOWEVER, MANY BROKERS MISUSED THIS FACILITY FOR CREATING ARTIFICIAL LOSSE S / PROFITS AND PROVIDED SUCH FICTITIOUS PROFITS / LOSSES TO VARIOUS CLIENTS BY C HARGING SOME COMMISSION. AN EXPERT OPINION WAS OBTAINED FROM NSE TO INDICATE TH E EXISTENCE OF GENUINE AND NON-GENUINE CLIENT-CODE MODIFICATION. 2.5 IN THE ABOVE BACKGROUND, LD. AO FORMED AN OPINI ON THAT THE ASSESSEE COMPANY WAS A BENEFICIARY OF SUCH PRACTICE AND HAS REDUCED ITS OVERALL PROFIT BY TAKING FICTITIOUS LOSSES TO THE EXTENT OF RS.231.82 LACS FROM THE CONCERNED BROKERS. THE ASSESSEE WAS ASKED TO PROVID E COMPLETE DETAILS OF CLIENT-CODE MODIFICATION DONE BY THE BROKER IN HIS ACCOUNT. THE ASSESSEE WAS ALSO CONFRONTED WITH DETAILS OF FICTIOUS LOSS ALLEGED TO TAKEN BY THE ASSESSEE BY WAY OF CLIENT-CODE MODIFICATION AND THE ASSESSEE WAS DIRECTED TO PROVE THAT THE SAID LOSSES WERE GENUINE. THE ASS ESSEE DEFENDED THE SAME BY SUBMITTING THAT THE MODIFICATION WAS DONE B Y THE BROKER AS 5 PERMITTED BY LAW AND THE ASSESSEE WAS NOT AWARE ABO UT THE SAME. THE ASSESSEE GAVE CONFIRMATIONS FROM FEW PARTIES IN WHO SE NAME THE TRADES WERE ULTIMATELY BOOKED STATING THAT CCM WAS DONE AT THEIR DIRECTIONS. IT WAS FURTHER SUBMITTED THAT MAINLY TRANSACTIONS WERE MOD IFIED IN THE NAME OF SOME OTHER CLIENT FROM ITS NAME AND THEREFORE, THER E WAS NO IMPACT ON ASSESSEES PROFITS FROM SUCH CCM. HOWEVER, THE SAME COULD NOT FIND FAVOR WITH LD.AO, WHO TREATING THE LOSS AS FICTIOUS / NON -GENUINE LOSS, ADDED THE SAME TO THE INCOME OF THE ASSESSEE. CONSEQUENTLY, L D.AO FORMED AN OPINION THAT THE ASSESSEE PAID CERTAIN COMMISSION T O OBTAIN SUCH TRANSACTIONS. THE SAME WAS ESTIMATED @ 3% WHICH RESULTED INTO ANOTHER ADDITION OF RS.6.95 LACS AS UNEXPLAINED EXPENDITURE U/S 69C IN THE HANDS OF THE ASSESSEE. 3.1 AGGRIEVED, THE ASSESSEE CONTESTED THE VALIDITY OF REASSESSMENT PROCEEDINGS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER D ATED 23/06/2017 WHICH WAS DISMISSED IN VIEW OF THE FACT THAT LD. AO WAS IN RECEIPT OF CERTAIN INFORMATION FROM INVESTIGATION WING ABOUT MISUSE OF CCM FACILITY AND THEREFORE. LD. AO HAD NO CHOICE BUT TO REOPEN THE C ASE FOR EXAMINING THE ISSUE AND TAKING FURTHER STEPS TO VERIFY THE SAME A ND COME TO CONCLUSION REGARDING THE SAID ALLEGATIONS. 3.2 ON MERITS, IT WAS, INTER-ALIA, SUBMITTED THAT THE IMPUGNED ADDITIONS WERE MADE ON MERE ASSUMPTION, SURMISES AND PRESUMPT ION WITHOUT ANY CONCRETE EVIDENCE. THE ATTENTION WAS DRAWN TO THE F ACT THAT ALL THE TRANSACTIONS WERE DULY SUPPORTED BY BILLS / CONTRAC T NOTES AND THE ASSESSEE COULD NOT AND HAS NOT DONE ANY CLIENT-CODE MODIFICA TIONS. THE ATTENTION WAS DRAWN TO THE FACT THAT DATA PROVIDED TO HIM BY LD. AO NEITHER PERTAINED 6 TO ASSESSEE NOR ANY MODIFICATION WAS CARRIED OUT AT THE BEHEST OF THE ASSESSEE. FEW CONFIRMATIONS OF THE PERSONS / BENEFI CIARIES WHOSE NAME APPEAR IN THE SAID DATA, CONFIRMING THAT THE TRANSA CTIONS BELONGED TO THEM AND HAD BEEN CARRIED OUT ON THEIR INSTRUCTIONS, WER E ALSO SUBMITTED. 3.3 AFTER CONSIDERING THE MATERIAL ON RECORD AND AS SESSEES SUBMISSIONS, LD. CIT(A) CONCURRED WITH ASSESSEES STAND BY OBSER VING AS UNDER: - 6.3.1. I HAVE PERUSED THE ASSESSMENT ORDER, AND VAR IOUS SUBMISSIONS OF THE APPELLANT FILED BEFORE ME. ASSESSING OFFICER REACHED THE CONC LUSION THAT APPELLANT HAS OBTAINED NON GENUINE LOSS OF RS 2,31,82,203/- IN SHARES TRAD ING I.E. DERIVATIVES (F&O) TRADING WITH THE INTENTION TO REDUCE TAX LIABILITY ON THE B ASIS THAT CCM IS MISUSED AT THE END OF THE YEAR TO SHIFT PROFITS AND LOSSES. HOWEVER, THIS OBSERVATION IS FACTUALLY INCORRECT AS IT IS FOUND FROM THE RECORDS THAT CCM WAS CARRIED OUT BY THE BROKER ON DAILY BASIS THROUGHOUT THE YEAR AND NOT AT THE YEAR END. 6.3.2. THE ASSESSING OFFICER HAS NOT BROUGHT ON REC ORD ANY MATERIAL TO SHOW THAT THE BROKER WAS IN CONNIVANCE AND UNDER THE CONTROL OF T HE ASSESSEE AND THAT THE ASSESSEE HAD GIVEN ANY INSTRUCTIONS FOR CCM TO BE DONE IN HI S NAME. 6.3.3. IT HAS BEEN EXPLAINED BY THE LD. AR THAT THE APPELLANT HAD DONE A GENUINE BUSINESS IN TRADING IN DERIVATIVE (F&O) THROUGH REG ISTERED SHARE BROKERS AND ALL TRANSACTIONS ARE SUPPORTED BY BILLS/CONTRACTS AND A LL TRANSACTIONS ARE RECORDED IN THE BOOKS OF ACCOUNTS. THE ASSESSING OFFICER HAS NOT FO UND ANY DEFECT IN THE BOOKS OF ACCOUNTS. 6.3.4. IT HAS BEEN EXPLAINED BY THE LD.AR THAT WHEN THE FILE WAS REOPENED BY THE AO ON WHATEVER INFORMATION SUPPLIED TO HIM BY THE I&CI, T HE AO WAS REQUIRED TO MAKE VERIFICATION FROM ALL THE CONCERNED PARTIES AND COM E TO A LOGICAL CONCLUSION AFTER REBUTTING THE SUBMISSIONS OF THE APPELLANT MADE DUR ING THE ASSESSMENT PROCEEDINGS. HOWEVER, THE LD. AR HAS POINTED OUT THAT THE AO HAS NOT REBUTTED THE DETAILED SUBMISSIONS OF ASSESSEE, WHICH GO TO THE ROOT OF TH E MATTER, MADE VIDE LETTER DATED 7/3/2016, PARTICULARLY THE FOLLOWING: (I) DATA PROVIDED DOES-NOT PERTAIN TO ASSESSEE. (II) CCM IS NOT DONE BY BROKER AT THE INSTANCE OF A SSESSEE. (III) REASONS FOR INVOKING CCM BY BROKERS SUCH AS E XECUTING LARGE NO OF TRADES IN TIME BOUND MANNER RESULTING IN PUNCHING ERRORS ETC. (IV) EXAMPLE GIVEN BY ASSESSEE FROM THE DATA GIVEN BY AO TO HIGHLIGHT THE FACT THAT CCM EXECUTED BY THE BROKER WAS GENUINE. (V) CONFIRMATION OF PERSONS/BENEFICIARIES WHOSE NAM E APPEAR IN THE DATA CONFIRMING THAT THE CCM TRANSACTIONS BELONG TO THEM . 6.3.5 FURTHER THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY INFORMATION REGARDING ANY ACTION AGAINST THE BROKER OR THE ASSESSEE BY TH E SEBI OR THE STOCK EXCHANGE. THUS, THE CONCLUSION DRAWN BY THE AO IS NOT INCONFO RMITY WITH THE POLICY OF THE SEBI TO ALLOW CCM. 7 6.3.6. HENCE, WITHOUT REBUTTING THE REPLIES OF THE ASSESSEE THE AO HAS IN A MECHANICAL AND UNILATERAL MANNER MADE THE ADDITION ON BASIS OF ASSUMPTIONS, SURMISES AND CONJECTURES BASED ON THE INFORMATION OF I&CI. 6.3.7. I HAVE FURTHER CONSIDERED THE RIVAL STANDS/S UBMISSIONS AND PERUSED THE ORDER OF THE A.O. AND ON THE RELEVANT MATERIAL EVIDENCES BRO UGHT ON RECORD BEFORE ME. I AM OF THE OPINION THAT THE ENTIRE ALLEGATION OF THE AO RE VOLVES AROUND THE MODIFICATION IN CLIENT CODE BY THE ASSESSEE SO THAT THE APPELLANT COULD BO OK LOSSES. AT THIS STAGE, IT WILL BE DIFFICULT TO UNDERSTAND AS TO HOW CAN THE ASSESSEE MODIFY THE CLIENT CODE WHEN THE APPELLANT OR ITS STAFF IS NOT SITTING ON THE TERMIN AL OF THE SAID STOCK EXCHANGE AS ONLY THE MEMBER SHARE BROKERS ARE AUTHORIZED TO HANDLE THE S AME AND IT WOULD BE OUT OF REACH FOR THE APPELLANT TO DO SO. THE TRANSACTIONS ARE TO BE CARRIED OUT BY THE AUTHORIZED BROKER. A PERSON TRANSACTING THROUGH A REGISTERED B ROKER CANNOT HAVE ANY ACCESS TO THE TERMINAL OF THE REGISTERED BROKER WITH THE EXCHANGE BE IT STOCK EXCHANGE OR COMMODITY EXCHANGE. THUS, THE ALLEGATIONS THAT THE ASSESSEE H AS MODIFIED THE CLIENT CODE, DOES NOT HAVE ANY BASIS. 6.3.8. FURTHER, IT WAS HELD THAT DUE TO HUGE VOLUME OF TRANSACTION CCM BECOME INEVITABLE. FURTHER IF CCM IS DONE AT THE END OF TH E DAY/SAME DAY WITHIN THE SEBI, THEN THERE IS NO QUESTION OF SHIFTING PROFITS OR LOSSES. 6.3.9. THE AO HAS NOT BROUGHT ON RECORD ANY MATERIA L TO SHOW THAT THE CLIENT CODE MODIFICATION MADE BY THE ASSESSEE WAS NOT GENUINE O NE. IT HAS BEEN POINTED OUT THAT THAT NONE OF THE CLIENTS HAS DISOWNED THE TRANSACTI ONS CARRIED ON BY THE ASSESSEE. AS NOTICED, THE STOCK EXCHANGE IS VERY MUCH AWARE ABOU T CLIENT CODE MODIFICATIONS AND HENCE IN ORDER TO DISCOURAGE FREQUENCY OF MODIFICAT IONS, IT HAS BROUGHT IN PENALTY MECHANISM. EVEN UNDER THE PENALTY MECHANISM ALSO, N O PENALTY SHALL BE LEVIABLE IF THE MODIFICATION WAS LESS THAN 1% OF THE TOTAL TRANSACT IONS, MEANING THEREBY, THE STOCK EXCHANGE IS ALSO ACCEPTING THE FACT THAT SUCH KIND OF CLIENT CODE MODIFICATION IS INEVITABLE. THE AO HAS NOT BROUGHT ON RECORD THAT I N THE RELEVANT CASE THE RATIO BETWEEN GROSS TOTAL TRANSACTIONS TRADES AND THE CCM TRADE W ERE ABNORMALLY HIGH. ON THE CONTRARY, THE LD. AR HAS SUBMITTED THAT THE RATIO I S QUITE SMALL COMPARED TO THE TOTAL TRANSACTIONS, OTHERWISE THE SEBI OR THE CONCERNED S TOCK EXCHANGE WOULD HAVE IMPOSED PENALTY ON THE APPELLANT OR ITS BROKERS OR BOTH BUT THE AO HAS NOT BROUGHT ANY SUCH THING ON RECORD IN THE ASSESSMENT ORDER. 6.3.10. FURTHER, THE MOVEMENT OF PRICES OF SHARES C ANNOT BE PREDICTED BY ANYONE WITH ACCURACY AND HENCE IT IS INCONCEIVABLE OR UNLIKELY THAT THE ASSESSEE COULD HAVE MADE PROFITS / LOSSES CONSISTENTLY, EVEN IF IT IS ASSUME D FOR A MOMENT THAT THE ASSESSEE HAD ACTUALLY CARRIED OUT THE TRANSACTIONS FOR ITS OWN B ENEFIT. SINCE THE TIMING OF ENTERING THE TRANSACTIONS IS CRUCIAL IN THE ONLINE TRADING, THE STAFFS OF THE BROKER FOUND IT CONVENIENT TO PUNCH ONE CODE BECAUSE IF THE BROKER HAS TO PUNCH E VERY TRANSACTIONS/ EVERY SET OF SHARES IN ALL THE NAMES OF THE CLIENT, IT WILL TAKE LOT OF TIME AND BY THE TIME THE PUNCHING OF A PARTICULAR SHARE SCRIP FOR ALL THE CLIENTS, AR E FINALLY FINISHED, BY THAT TIME THERE WOULD BE LOT OF CHANGES IN THE PRICE AND IN THE PROCESS T HERE WOULD BE MANY CLIENTS WITH DIFFERENT AMOUNTS OF SHARE PRICE OF SAME SCRIP WITH IN THAT GIVEN TIME AND THE BROKER WILL HAVE TO BEAR THE BRUNT OF VARIOUS CLIENTS AND THEIR ALLEGATIONS THAT WHY THE PRICE OF THAT PARTICULAR CLIENT WAS HIGHER OR LOWER COMPARED TO H IS PRICE. THIS MAY LEAD TO EROSION OF CONFIDENCE OF CLIENTS WITH THE BROKERS AND ULTIMATE LY THE BROKERS WILL HAVE TO LOSE THEIR BUSINESS BECAUSE AFTER THE ENTIRE SHARE MARKET IS R UN BY SENTIMENTS ALSO. 8 6.3.11 FURTHER, IF AT ALL ANY PERSON COMES WITH A REQUEST SEEKING PROFITS, THERE WILL NORMALLY BE TIME LAG AND SUCH KIND OF TRANSACTIONS AND SHALL USUALLY BE SPORADIC TRANSACTIONS, WHERE AS IN THE INSTANT CASE, THE APP ELLANT'S BROKER HAS CARRIED OUT THE TRANSACTIONS CONTINUOUSLY. FURTHER, IT IS PERTINENT TO NOTE THAT NONE OF THE CLIENTS, WITH WHOM THE ASSESSING OFFICER HAS CARRIED OUT THE EXAM INATION, HAS DISOWNED THE TRANSACTIONS. FURTHER, ALL THE CLIENTS HAVE CONFIRM ED THE TRANSACTION AND DULY DISCLOSED THE PROFITS ARISING FROM THE TRANSACTIONS AS THEIR RESPECTIVE INCOME. 6.3.12. IT WAS HELD THAT THE ADDITION ON THE BASIS OF CLIENT CODE MODIFICATIONS WAS ON THE BASIS OF ASSUMPTION AND SURMISES AND WAS NOT ON THE BASIS OF CONCEPT OF REAL INCOME. WHEN TRANSACTION HAD BEEN DULY ACCOUNTED FO R AND PROFIT/LOSS HAD ACCRUED TO CONCERNED PARTIES IN WHOSE NAMES TRANSACTIONS HAD B EEN CLOSED, THERE COULD NOT BE ANY BASIS OR JUSTIFICATION FOR CONSIDERING THAT PRO FIT/LOSS IN CASE OF ASSESSEE ON BASIS OF MERE PRESUMPTION OR SUSPICION. THERE IS NO MATERIAL ON RECORD IN THE ASSESSMENT ORDER TO PROVE THAT THE OTHER PARTIES, ALLEGED TO BE COUN TERPARTS/ BENEFICIARY OF PROFIT OR LOSS/ RECEIVED THE PROFIT BUT DID NOT INCLUDE THE SAME WH ILE COMPUTING P&L A/C OR THEY WERE FICTITIOUS AND WERE MECHANISM TO SIPHON OFF THE PRO FIT OF THE APPELLANT. 6.3.13.WHILE THE AO HAS TAKEN COGNIZANCE OF THE GEN ERAL INFORMATION PROVIDED BY I&CI AND THEREAFTER REOPENED THE FILE. HOWEVER, THE AO H AS NOT BROUGHT ANY MATERIAL ON RECORD TO PROVE THAT THAT THE PARTIES TO WHOM THE A LLEGED PROFITS OR LOSS IS SUPPOSED TO HAVE BEEN DIVERTED TO REDUCE THE TAXABLE INCOME OF THE APPELLANT. NO CORRELATION BETWEEN THE APPELLANT, ON THE ONE HAND AND THE OTHE R PARTIES, ON THE OTHER HAND, HAS BEEN BROUGHT ON RECORD TO CORRELATE THAT THESE PART IES WERE IN COLLUSION WITH EACH OTHER AND WERE KNOWN TO EACH OTHER SO THAT ONE PARTY DIVE RTED ITS PROFIT OR LOSS TO THE OTHER PARTIES. THERE IS NOTHING ON RECORD TO SUGGEST THAT THE SAID LOSSES WERE PURCHASED AND THE OTHER PARTIES WERE GIVEN CASH OR CHEQUE PAYMENT IN VIEW OF SUCH FAVOURS. HENCE, THE CORRELATION OF SUCH TRANSACTIONS ALSO, IS NOT E STABLISHED IN THE ASSESSMENT ORDER. 6.3.14. THUS IT MAY BE SEEN THAT THE ASSESSMENT ORD ER DOES NOT BRING OUT THE FOLLOWING FACTS, NAMELY, PERCENTAGE OF MODIFIED TRADE VALUE B EING SIGNIFICANTLY HIGHER THAN THE TOTAL CREDIT VALUE OF THE APPELLANT; NUMBER OF MODI FIED TRADE BEING SIGNIFICANT TO TOTAL NUMBER OF TRADES OF THE APPELLANT; PROFIT/LOSS ARIS ING ON ACCOUNT OF SUCH MODIFICATIONS BY THE APPELLANT BEING SIGN IFICANT IN COMPARISON TO THE PROFIT/LOSS IN THE TRADES WERE NO MODIFICATION WERE CARRIED OUT BY THE APPELLANT; PROFIT/LOSS ARISING DUE TO CCM BEING IN SIGNIFICANT RATIO; BUYING AND SELLI NG LEG OFF DIFFERENT TRADES TO HAVE BEEN MODIFIED TO SAME CLIENTS BY THE APPELLANT; THE SAME SET OF CLIENTS BEING INVOLVED IN MAKING PROFITS/LOSS DUE TO CCM; TOTAL NUMBER OF TRA DE MODIFICATIONS BEING INCREASED BEFORE CLOSING OF THE FINANCIAL YEAR SO AS TO REDUC E THE GENUINE TAXABLE INCOME OF THE APPELLANT ETC. AND UNLESS THE SAME IS BROUGHT ON RE CORD IN THE ASSESSMENT ORDER AND THE CORRELATION OF TRANSFER/RECEIPT OF PROFIT/LOSS IS ESTABLISHED TO BE ILLEGAL OR HAVING QUID PRO QUO TYPE OF TRANSACTION WHERE ONE PARTY RECEIVE S PROFIT/LOSS BY MAKING CERTAIN PAYMENT TO THE OTHER PARTY OUT OF THEIR UNDISCLOSED INCOME AND IN THE PROCESS THE TAXABLE INCOME HAS ESCAPED OR ARTIFICIAL OR ILLEGAL LOSS HAVE BEEN PURCHASED THROUGH OFF THE FLOOR TRANSACTIONS BEING IN CONTRAVENTION OF SE BI ACT, 1992 OR THE SECURITIES CONTRACTS (REGULATION) ACT, 1956, THE DISAL LOWANCE/ADDITIONS MADE BY THE AO CANNOT BE SUSTAINED BECAUSE IN THE REASSESSMENT PRO CEEDINGS ONUS IS UPON THE AO TO PROVE THAT THE TRANSACTIONS CLAIMED BY THE APPELLAN T AND INCOME/LOSS DISCLOSED BY THE APPELLANT IN ITS RETURN OF INCOME, WAS NOT CORRECT, AND MORE PARTICULARLY BECAUSE THE 9 SAME WERE ACCEPTED IN THE ORIGINAL ASSESSMENT PROCE EDINGS AND ASSESSMENT ORDER PASSED U/S 143(3) EARLIER. 6.3.15 KEEPING IN VIEW OF THE ABOVE FACTUAL ANALYSI S OF THE CASE AS WELL AS APPLYING THE RATIO OF JUDGEMENTS OF HON'BLE COURTS, AS REFERRED IN THE APPELLANTS SUBMISSION IN EARLIER PARAGRAPHS, MORE IMPORTANTLY THE DECISION OF HON'BL E JURISDICTIONAL ITAT, MUMBAI IN THE CASE OF ITO VS. PAT COMMODITY SERVICES P. LTD. ITA NOS. 3498 AND 3499/MUM/2012 DT. 7TH AUG,2015 (MUM)(TRIB), THE DISALLOWANCE OF RS.2, 31,82,203/- AS FICTITIOUS LOSS BY THE AO CANNOT BE SUSTAINED AND IS THEREFORE, DIRECTED T O BE DELETED. HOWEVER, THE AO WILL BE FREE TO TAKE REMEDIAL MEASURES IN CASE THE DECIS ION OF HON'BLE ITAT, MUMBAI IN THE CASE OF PAT COMMODITY SERVICES P. LTD. (SUPRA) IS R EVERSED OR MODIFIED BY THE HON'BLE HIGH COURT OF BOMBAY OR SUPREME COURT. IN THE RESULT THIS GROUND OF THE APPELLANT ON THE A BOVE ISSUE IS ALLOWED. CONSEQUENTLY, THE ESTIMATED ADDITION OF 3%, BEING A LLEGED COMMISSION PAID BY THE ASSESSEE TO PROCURE THE ABOVE TRANSACTIONS, WAS ALSO DELETED. AGGRIEVED THE REVENUE IS IN FURTHER APPEAL BEFORE U S. 4.1 THE DR, RELYING UPON THE STAND OF LD. AO, SUBMI TTED THAT THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS AND THEREFORE THE ADDITIONS WERE JUSTIFIED. RELIANCE HA S BEEN PLACED ON THE DECISION OF HONBLE HIGH COURT OF CALCUTTA RENDERED IN PR.CIT V/S INDIA FINANCE LTD. [81 TAXMANN.COM 135] & HONBLE DELHI HIGH COURT RENDERED IN CIT V/S VASHISHTH CHAY VYAPAR LTD. [66 TAXMANN.COM 371]. THE LD. DR ALSO JUSTIFIED THE VALIDITY OF REASSESSMENT PROC EEDINGS IN VIEW OF THE FACT THAT LD. AO WAS IN RECEIPT OF TANGIBLE INFORMATION WHICH, PRIMA-FACIE, INDICATED ESCAPEMENT OF INCOME. 4.2 THE LD. SR. COUNSEL, DR.K.SHIVRAM, CONTROVERTIN G THE SAME, SUBMITTED THAT NOTHING ON RECORD WOULD ESTABLISH THAT THE LOS S TRANSACTIONS WERE NOT GENUINE. ARGUMENTS HAVE BEEN MADE TO SUBMIT THAT TH E ASSESSEE WAS NOT REGISTERED BROKER AND COULD NOT DO MODIFICATION IN THE CLIENT CODE. NOTHING HAS BEEN BROUGHT ON RECORD BY LD. AO TO ESTABLISH T HAT THE MODIFICATIONS WERE DONE AT ASSESSEES BEHEST AND THEREFORE, THE A SSESSEE COULD NOT BE 10 HELD RESPONSIBLE FOR CCM DONE AT BROKERS END. THE ATTENTION WAS ALSO DRAWN TO THE FACT THAT PERSONS WHOSE NAMES APPEAR I N THE INFORMATION HAVE FILED CONFIRMATIONS THAT TRANSACTIONS WERE DONE THR OUGH THE BROKERS AT THEIR INSTANCE. IT HAS ALSO BEEN SUBMITTED THAT CCM WAS N OT DONE AT YEAR-END TO GENERATE ARTIFICIAL PROFITS / LOSSES BUT TRANSACTIO NS HAVE TAKEN PLACE THROUGHOUT THE YEAR WHICH WOULD CONTROVERT THE STAN D OF LD. AO THAT THE ASSESSEE INDULGED IN CREATING FICTITIOUS LOSS SO AS TO SET-OFF THE GAINS EARNED DURING THE YEAR. IT HAS BEEN SUBMITTED THAT LD. AO HAS MECHANICALLY MADE IMPUGNED ADDITIONS. RELIANCE HAS BEEN PLACED, INTER-ALIA, ON THE DECISION OF THIS TRIBUNAL RENDERED IN ITO V/S. PAT COMMODITIES SERVICES P.LTD. [ITA NOS. 3498/MUM/2012 07/08/2015] & M/S SA MBHAVNATH INVESTMENT V/S ACIT [ITA NO.3109/MUM/2011 19/12/201 3]. 4.3 ON LEGAL GROUNDS, IT HAS BEEN SUBMITTED THAT TH ERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS DURING ORIGINAL ASSESSMENT PROCEEDINGS AND THE REASSESSMENT PROCEED INGS WERE NOTHING BUT MERE CHANGE OF OPINION. IT HAS ALSO BEEN SUBMIT TED THAT LD. AO ACTED ON BORROWED SATISFACTION. 5.1 WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS. SO FAR AS LEGAL GROUNDS RAISED IN ASSESSEES CROSS-OBJECTIONS ARE CONCERNED , WE FIND THAT THE CASE HAS BEEN REOPENED BY ISSUE OF NOTICE U/S 148 ON 17/ 03/2015 WHICH IS WITHIN 4 YEARS FROM THE END OF RELEVANT AY I.E. 2010-11. T HEREFORE, THE ONLY REQUIREMENT, IN SUCH A CASE, TO ACQUIRE REASSESSMEN T JURISDICTION, WAS THAT LD. AO HAD REASONS TO BELIEVE THAT CERTAIN INCOME E SCAPED ASSESSMENT. WE FIND THAT SUBSEQUENT TO COMPLETION OF ASSESSMENT U/S 143(3), LD. AO WAS CLINCHED WITH TANGIBLE INFORMATION FROM INVESTI GATION WING WHICH 11 SUGGESTED POSSIBLE ESCAPEMENT OF INCOME IN THE HAND S OF THE ASSESSEE. AT THIS STAGE, NOTHING MORE WAS REQUIRED AND LD. AO WA S NOT REQUIRED TO CARRY OUT DETAILED INVESTIGATION SO AS TO REACH A CONCLUS IVE FINDING THAT THE INCOME, IN FACT, ESCAPED IN THE HANDS OF THE ASSESS EE. THEREFORE, WE ARE NOT CONVINCED WITH THESE SUBMISSIONS. IN GROUND NO. 2 OF CROSS-OBJECTIONS, IT HAS BEEN ASSERTED THAT REOPENING WAS BAD SINCE N OTICE U/S 143(2) HAS BEEN ISSUED PRIOR TO DISPOSING OFF THE OBJECTIONS R AISED BY THE ASSESSEE. HOWEVER, WE FIND THAT THERE WAS NO BAR UNDER LAW FO R ISSUE OF NOTICE U/S 143(2) PRIOR TO DISPOSAL OF ASSESSEES OBJECTIONS A ND THE DISPOSAL-OFF OF THE OBJECTIONS WAS NOT PRE-REQUISITE FOR THE ISSUE OF N OTICE U/S 143(2). ACCORDINGLY, GROUND NOS. 1,2 & 3 OF CROSS-OBJECTION S STAND DISMISSED. 5.2 COMING TO THE MERITS OF THE CASE, WE FIND THAT CLIENT-CODE MODIFICATION IS A FACILITY GRANTED BY STOCK EXCHANGES / SEBI TO BROKERS SO AS TO TAKE CARE OF THE PUNCHING ERRORS WHICH TAKE PLACE DURING TRAD ING HOURS. IT IS UNDISPUTED FACT THAT THE ASSESSEE WAS NOT A REGISTE RED BROKER AND COULD NOT CARRY OUT ANY MODIFICATIONS AT HIS END. ANOTHER FAC T IS THAT NOTHING ON RECORD ESTABLISHES THE FACT THAT THE SAID MODIFICATIONS WE RE DONE AT ASSESSEES BEHEST. THE TRANSACTIONS OF THE ASSESSEES WERE DUL Y SUPPORTED BY BILLS / CONTRACT NOTES. THE ASSESSEE PLACED ON RECORD CONFI RMATION OF FEW PARTIES WHOSE NAME APPEAR IN THE DATA PROVIDED TO THE ASSES SEE WHEREIN THEY HAVE CONFIRMED THE TRANSACTIONS AS BELONGING TO THE M ONLY. NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO ESTABLISH THAT ANY OF THE PARTY DISOWN THE TRANSACTIONS. THE ASSESSEE MAINTAINED THAT THE DATA DID NOT PERTAIN TO THE ASSESSEE WHICH HAS NOT BEEN REBUTTED BY LD. AO. NO NEXUS OF THE SAID DATA HAS BEEN ESTABLISHED WITH THE LOSSES SUFFERED BY THE ASSESSEE. 12 NOTHING ON RECORD ESTABLISHES ANY COLLUSION / CONNI VANCE OF THE ASSESSEE WITH THE SHARE BROKER. IT IS TRITE LAW THAT ADDITIO NS COULD NOT BE MADE MERELY ON THE BASIS OF PRESUMPTION, CONJECTURES OR SURMISE S WITHOUT BRINGING ON RECORD ANY CONCRETE MATERIAL TO DISLODGE THE ASSESS EES CLAIM. THEREFORE, THE ALLEGATIONS AS LEVELLED BY LD. AO, IN OUR OPINI ON, ARE WITHOUT ANY COGENT OR SUPPORTING EVIDENCES AND THEREFORE, THE SAME COU LD NOT BE SUSTAINED IN THE EYES OF LAW. 5.3 WE FIND SUPPORT FROM THE DECISION OF THIS TRIBU NAL IN M/S SAMBHAVNATH INVESTMENT V/S ACIT [SUPRA] WHEREIN IT HAS BEEN HELD AS UNDER: - 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE RELEVANT MATERIAL EVIDENC ES BROUGHT ON RECORD BEFORE US. THE AO HAS ANNEXED THE TRANSACTIONS OF RSBL WITH THE AS SESSEE AS PART OF THE ASSESSMENT. THE ENTIRE ALLEGATION OF THE REVENUE A UTHORITIES REVOLVES AROUND THE MODIFICATION IN CLIENT CODE BY THE ASSESSEE SO THAT IT COULD BOOK LOSSES. AT THIS STAGE, WE FAILED TO UNDERSTAND HOW CAN THE ASSESSEE MODIFY THE CLIENT CODE OR THE DETAILS OF TRANSACTIONS WHICH HAVE BEEN TRANSACTED BY THE AUTH ORIZED BROKER RSBL ON MCX. A PERSON TRANSACTING THROUGH A REGISTERED BROKER CANN OT HAVE ANY EXCESS TO THE TERMINAL OF THE REGISTERED BROKER WITH THE EXCHANGE BE IT ST OCK EXCHANGE OR COMMODITY EXCHANGE. THUS, THE ALLEGATIONS OF THE REVENUE AUTH ORITIES THAT THE ASSESSEE HAS MODIFIED THE CLIENT CODE DOES NOT HAVE ANY BASIS. ON THE CONTRARY, THE TRANSACTIONS OF THE ASSESSEE WITH RSBL WHO IN TURN HAS TRANSACTED W ITH MCX ARE SUPPORTED BY VARIOUS CONTRACT NOTES. ALSO, IN ITO V/S. PAT COMMODITIES SERVICES P.LTD. [SUPRA], IT HAS BEEN HELD AS UNDER: - 11. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. A CAREFUL PERUSAL OF THE ORDER PASSED BY THE LD CIT(A) WOULD SHOW THAT THE L D CIT(A) HAS MET EACH AND EVERY POINT RAISED BY THE ASSESSING OFFICER. THE LD CIT( A) HAS POINTED OUT THAT THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT THE CLIENT CODE MODIFICATION MADE BY THE ASSESSEE WAS NOT GENUINE ONE. IT WAS FURTHER N OTICED THAT NONE OF THE CLIENTS EXAMINED BY THE TAX AUTHORITIES HAS DISOWNED THE TR ANSACTIONS CARRIED ON BY THE ASSESSEE. AS NOTICED BY THE LD CIT(A), THE MCX, TH E STOCK EXCHANGE, IS VERY MUCH AWARE ABOUT CLIENT CODE MODIFICATIONS AND HENCE IN ORDER TO DISCOURAGE FREQUENCY OF MODIFICATIONS, IT HAS BROUGHT IN PENALTY MECHANISM. EVEN UNDER THE PENALTY MECHANISM 13 ALSO, NO PENALTY SHALL BE LEVIABLE IF THE MODIFICAT ION WAS LESS THAN 1% OF THE TOTAL TRANSACTIONS, MEANING THEREBY, THE MCX IS ALSO ACCE PTING THE FACT THAT SUCH KIND OF CLIENT CODE MODIFICATION IS INEVITABLE. 12. UNDER THESE SET OF FACTS, THE NEXT QUESTION T HAT ARISES IS WHETHER THE CLIENT CODE MODIFICATION HAS RESULTED INTO SHIFTING OF PROFITS, OTHERWISE EARNED BY THE ASSESSEE. IT IS A FACT THAT THE ASSESSEE COMPANY HAS STARTED ITS OP ERATIONS ONLY IN JULY, 2005 BY CONVERTING INDIVIDUAL MEMBERSHIP INTO CORPORATE MEM BERSHIP. FURTHER, THE COMMODITY EXCHANGE WAS ABOUT 3-4 YEARS OLD ONLY AT THE RELEVA NT POINT OF TIME. HENCE, THE ASSESSEE CANNOT BE CONSIDERED TO BE AN ESTABLISHED PLAYER IN THE YEARS UNDER CONSIDERATION. FURTHER, THE MOVEMENT OF PRICES OF COMMODITIES CANNOT BE PREDICTED BY ANYONE WITH ACCURACY AND HENCE IT IS INCONCEIVABLE OR UNLIKELY THAT THE ASSESSEE COULD HAVE MADE PROFITS CONSISTENTLY, EVEN IF IT IS ASSUM ED FOR A MOMENT THAT THE ASSESSEE HAD ACTUALLY CARRIED OUT THE TRANSACTIONS FOR ITS O WN BENEFIT. WE NOTICE THAT THE ASSESSEE HAS OFFERED EXPLANATIONS AS TO WHY IT CARR IED OUT THE TRANSACTIONS IN ITS OWN CODE, I.E. SINCE THE TIMING OF ENTERING THE TRANSAC TIONS IS CRUCIAL IN THE ONLINE TRADING, THE STAFFS OF THE ASSESSEE COMPANY FOUND IT CONVENIENT TO PUNCH ITS OWN CODE. FURTHER, WE NOTICE THAT THE FACT THAT THE ASSESSEE HAS CHANGED THE CODE TO THE CONCERNED CLIENTS ACCOUNT AT THE END OF THE DAY HAS NOT BEEN DISPROVE D. IF AT ALL ANY PERSON COMES WITH A REQUEST SEEKING PROFITS, THERE WILL NORMALLY BE TIM E LAG AND HENCE THE FACT THAT THE ASSESSEE HAS CHANGED THE CODES AT THE END OF THE DA Y ONLY SHOWS THAT THE ASSESSEE HAS CARRIED OUT THE TRANSACTIONS ON BEHALF OF ITS C LIENTS ONLY. SUCH KIND OF TRANSACTIONS SHALL USUALLY BE SPORADIC TRANSACTIONS, WHERE AS IN THE INSTANT CASE, THE CLIENTS HAVE CARRIED OUT THE TRANSACTIONS CONTINUOUSLY. FURTHER, IT IS PERTINENT TO NOTE THAT NONE OF THE CLIENTS, WITH WHOM THE ASSESSING OFFICER HAS CARRIE D OUT THE EXAMINATION, HAS DISOWNED THE TRANSACTIONS. FURTHER, ALL THE CLIENTS HAVE DU LY DISCLOSED THE PROFITS ARISING FROM THE TRANSACTIONS AS THEIR RESPECTIVE INCOME. THOUGH TH E AO HAS ALLEGED THAT THE SAID PROFITS HAVE BEEN USED TO SET OFF THE PAST BROUGHT FORWARD LOSSES, YET THE LD CIT(A) HAS MADE A DETAILED ANALYSIS OF THIS MATTER AND HAS GIV EN A CLEAR FINDING THAT THE SAME WAS NOT TRUE IN ALL THE CASES. THE LD CIT(A) HAS POINT ED OUT THAT MAJORITY OF THE CLIENTS HAVE PAID TAX ON THE PROFITS. IT WAS FURTHER NOTICED TH AT THE SOME OF THE TRANSACTIONS HAVE RESULTED IN LOSS ALSO AND THE SAID LOSS HAS ALSO BE EN ACCEPTED BY THE CONCERNED CLIENTS. ALL THESE FACTORS, IN OUR VIEW, GO TO SHOW THAT THE ASSESSEE HAS CARRIED OUT THE TRANSACTIONS ON BEHALF OF ITS CLIENTS ONLY, EVEN TH OUGH THE TRANSACTIONS WERE EXECUTED IN THE CODE OF THE ASSESSEE INITIALLY. 13. FURTHER, THE LD CIT(A) HAS POINTED OUT THAT THERE WAS NO MODIFICATION OF CLIENT CODE TO THE TUNE OF RS.3.31 CRORES AND FURTHER THER E WAS CHANGE OF CODE FROM ONE CLIENT TO ANOTHER CLIENT TO THE TUNE OF RS.6.16 CRORES. I N BOTH THESE CASES, THE QUESTION OF SHIFTING OF PROFIT EARNED BY THE ASSESSEE DOES NOT ARISE AT ALL. THE ACTION OF THE AO IN ASSESSING THE ABOVE SAID PROFITS IN THE HANDS OF TH E ASSESSEE ONLY SHOW THAT THERE WAS NO PROPER APPLICATION OF MIND ON THE PART OF THE AS SESSING OFFICER. 14. ANOTHER IMPORTANT POINT THAT IS RELEVANT HER E IS THAT NONE OF THE CLIENTS WAS SHOWN AS RELATED TO THE ASSESSEE HEREIN. NORMALLY THE QU ESTION OF SHIFTING OF PROFIT WOULD ARISE BETWEEN THE RELATED PARTIES ONLY. IF THE ASSESSEE H AD REALLY SHIFTED THE PROFITS TO AN OUTSIDER, THEN THE HUMAN PROBABILITIES WOULD SUGGES T THAT THE ASSESSEE WOULD HAVE RECEIVED BACK CORRESPONDING AMOUNT FROM THE RECIPIE NT OF PROFIT. HOWEVER, IN THE INSTANT CASE, THE AO HAS NOT BROUGHT ANY MATERIAL O N RECORD TO SHOW THAT THE ASSESSEE 14 HAD RECEIVED BACK CORRESPONDING AMOUNT EQUIVALENT T O THE AMOUNT OF PROFIT CLAIMED TO HAVE BEEN SHIFTED TO THE CLIENTS. THE AO HAS MAIN LY RELIED UPON THE REPORT GIVEN BY THE MCX AND HAS DRAWN ADVERSE CONCLUSIONS WITHOUT BRING ING ANY MATERIAL TO SUPPORT HIS VIEW. 15. THE LD CIT(A) HAS ALSO POINTED OUT THAT MODI FICATIONS CARRIED OUT BY THE ASSESSEE WORKS OUT TO AROUND 3% OF THE TOTAL TRANSACTIONS ON LY AND IN OUR VIEW, THE SAID VOLUME, IN FACT, VINDICATES THE EXPLANATION OF THE ASSESSEE . FURTHER NONE OF THE CLIENTS HAS BEEN FOUND TO BE BOGUS AND ALL OF THEM HAVE COMPLIED WIT H KYC NORMS, MEANING THEREBY THE IDENTITY OF ALL THE CLIENTS STAND PROVED. NONE OF THEM HAS DISOWNED THE TRANSACTIONS AND ALL OF THEM HAVE ALSO DECLARED THE INCOME IN THEIR RESPECTIVE RETURNS OF INCOME. ALL THESE FACTORS, IN OUR VIEW, SUPPORT THE CONTENTIONS OF THE ASSESSEE. 16. IN VIEW OF THE FOREGOING DISCUSSIONS, WE A RE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN DELETING THE ADDITIONS MADE IN BOTH TH E YEARS UNDER CONSIDERATION. IN OUR VIEW ALSO, THE ASSESSING OFFICER HAS DRAWN ADVERSE CONCLUSIONS AGAINST THE ASSESSEE WITHOUT PROPERLY BRINGING ANY MATERIALS TO SUPPORT THE VIEW, I.E., THE ADDITIONS HAVE BEEN MADE ON SUSPICION AND SURMISES ONLY. ACCORDINGLY, WE UPHOLD THE ORDER OF LD CIT(A) IN BOTH THE YEARS UNDER CONSIDERATION. 5.4 SO FAR AS THE CASE LAWS BEING RELIED UPON BY TH E REVENUE IS CONCERNED, WE FIND THAT THE DECISION OF HONBLE HIG H COURT OF CALCUTTA RENDERED IN PR.CIT V/S INDIA FINANCE LTD. [81 TAXMANN.COM 135] DEALS WITH VALIDITY OF JURISDICTION U/S 263 AND THEREFORE , HAS NO APPLICATION. THE DECISION OF HONBLE DELHI HIGH COURT RENDERED IN CIT V/S VASHISHTH CHAY VYAPAR LTD. [66 TAXMANN.COM 371] DEALS WITH A SITUATION WHEREIN THE ASSESSEE BOOKED FICTITIOUS LOSSES THROUGH RELATED E NTITIES AND THE TRANSACTIONS WERE FOUND TO BE BOGUS TRANSACTIONS, WHICH IS NOT THE CASE HERE. 5.5 KEEPING IN VIEW THE ENTIRETY OF FACTS AND CIRCU MSTANCES, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER. ACCORDINGLY, REVEN UES APPEAL STANDS DISMISSED. GROUND NO. 4 OF ASSESSEES CROSS-OBJECTI ONS STANDS ALLOWED. 6. IN NUTSHELL, THE REVENUES APPEAL STANDS DISMISS ED WHEREAS ASSESSEES CROSS-OBJECTION STAND PARTLY ALLOWED. 15 ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD JULY, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 03/07/2019 SR.PS:-JAISY VARGHESE ! ' ! / COPY OF THE ORDER FORWARDED TO : 1. !% / THE APPELLANT 2. &' !% / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ( )&* , * , / DR, ITAT, MUMBAI 6. ) ,-. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI