Ketan M Chalishazar-HUF, Ahmedabad V. ITO, Ward-5(3)(1), Ahmedabad

ITA 67/AHD/2020

AI Insights

The case revolves around the reassessment of income for the assessment year 2010-11 concerning Ketan M. Chalishazar HUF, where the Income Tax Officer (ITO) added Rs. 16,47,800 to the assessee's income following a client code modification error by the broker. The modification was initially made under the wrong client code (individual instead of HUF), which was later corrected. The ITO treated the entire transaction value as income, leading to an appeal by the assessee to the CIT(A), which was dismissed. The Tribunal, however, found that the reassessment was based on general information without specific evidence of income escapement, and the addition made was not justified as the broker's error was a genuine mistake.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299939 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-06-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 12-01-2020
• Other Referred Cases: ACIT vs. Shri Amar Mukesh Shah, DCIT vs. M/s. Kaizen Stock Trade Pvt. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Initiation of penalty proceedings
• Section: 148; 271(1)(c); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I .T .A . N o . 6 7 /A hd / 2 0 20 ( A s se ss m e nt Y e a r : 20 10- 11 ) Ke t an M . C h a l is h a z ar H U F 4, V a s u p uj ya So c i e t y, P .T . C o ll e ge R o ad , P a ld i , A h me da b a d - 3 80 00 7 V s . I nc o me Ta x O f f ic er , War d - 5 ( 3) ( 1 ) , A h me da ba d [ P AN N o. A A DH K 3 42 2M ] (Appellant) .. (Respondent) Appellant by : Shri Parin Shah, A.R. Respondent by : Shri Suraj Bhan Garwal, Sr. D.R. D a t e of H ea r i ng 12.06.2023 D a t e of P r o no u n ce me nt 16.06.2023 O R D E R The appeal filed by the assessee is against the order passed by the Ld. Commissioner of Income Tax (Appeals)-5, (in short “Ld. CIT(A)”), Ahmedabad on 26.11.2019 for A.Y. 2010-11. 2. The grounds of appeal raised by the assessee are as under: “1. Ld. CIT(A) erred in law and on facts in confirming action of AO for reopening of assessment by issuing notice u/s 148 of the Act beyond a period of 4 years only on basis of information received without recording any finding on escapement of income. The reassessment only to verify the transactions is not permissible and required to be quashed. It be so held now. 2. Ld. CIT(A) erred in law and on facts in confirming action of AO of addition of Rs.16,47,800/- of client code modification made by broker of the appellant due to punching error while executing trade in which appellant has no role. 3. Ld. CIT(A) erred in law and on facts in confirming action of AO to treat total transaction value as income instead of considering profit or loss arising from said transaction. 4. The Order passed by AO and confirmed by CIT(A) is invalid and bad in law and required to be quashed as same was passed without observing principle of natural justice. 5. Charging of interest u/s 234A, 234B and 234C is unjustified. 6. Initiation of penalty proceedings u/s 271(1)(c) is unjustified.” ITA No. 67/Ahd/2020 Ketan M Chalishazar-HUF vs. ITO Asst.Year–2010-11 - 2 - 3. Return of income declaring total income of Rs. 92,560/- filed by the assessee on 21.12.2010. Information was received from ACIT, Central Circle- 2(3), Ahmedabad regarding client code modification carried out by the assessee. The assessment was, therefore, re-opened and notice under Section 148 was issued on 31.03.2017 after recording reasons and obtaining prior approval of the Pr. CIT. The Assessing Officer issued show-cause notice on 16.11.2017 requiring the assessee to show-cause as to why the contrived profit / loss of Rs. 16,47,800/- should not be added to his total income. The assessee filed his written submission of 23.11.2017. After taking the cognizance of the same the Assessing Officer observed that M/s. Affluence Shares & Stock Pvt. Ltd. was indulging in client code modification for the assessee in a thoughtful, systematic manner with the malafide intention to avoid the payment of taxes and the actual income. Therefore, the Assessing Officer made addition of Rs. 16,47,800/-. 4. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) dismiss the appeal of the assessee. 5. The Ld. A.R. submitted that only one transaction of sale of 4000 shares of Adani Enterprise amounting to Rs. 16,47,800/- on 24.04.2009 was inadvertently, wrong entered by the assessee’s broker in the code of KETAN M. CHALISHAZAR (INDIVIDUAL) instead of KETAN M. CHALISHAZAR (HUF). The said mistake was duly rectified by the assessee’s broker by modifying the client code from Individual to HUF. The Ld. A.R. further submitted that the assessee himself cannot modify the client code and therefore, the assessee cannot be held responsible for the mere mistake which is a genuine mistake by the broker. Besides this SEBI had also not imposed any penalty to assessee’s broker as this transaction was within the permissible ITA No. 67/Ahd/2020 Ketan M Chalishazar-HUF vs. ITO Asst.Year–2010-11 - 3 - limit. Only the sale transaction where the code has been modified and no corresponding purchase transactions were stated by the Assessing Officer. Therefore, the Ld. A.R. submitted that the Assessing Officer was incorrect in treating the entire sale value as income. The Ld. A.R. relied upon the decision of the Tribunal in case of ACIT vs. Shri Amar Mukesh Shah as well as DCIT vs. M/s. Kaizen Stock Trade Pvt. Ltd. (ITA No. 1444/Ahd/2018 order dated 03.06.2021). The Ld. A.R. further submitted that the CIT(A) has also not taken cognizance while confirming the action of the Assessing Officer that due to punching error while rescuing trade in which assessee has no role the addition is not justifiable. As regards, Ground No. 1 the Ld. A.R. submitted that the reasons for reopening was also not justifiable as it is on the general information and not on specific information establishing the direct nexus with the broker of the assessee. 6. The Ld. D.R. submitted that the reasons recorded were proper and exact ground mentioned was also give the indication that the reasons were properly recorded and the reopening is justifiable. As regards, Ground No. 2 the HUF has invested 16 lakh amount which is matching with the individual assessee’s case and therefore, the client code modification in assessee’s case is not justifiable. Thus, the Ld. D.R. relied upon the assessment order and the order of the CIT(A). 7. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the Assessing Officer in the assessment order has not given the specification of KETAN M. CHALISHAZAR (HUF) and KETAN M. CHALISHAZAR (INDIVIDUAL) in respect of number of trades in which client code modification has been made by the broker M/s. Affluence Shares & Stock Pvt. Ltd. In fact the observations and the reproduction made ITA No. 67/Ahd/2020 Ketan M Chalishazar-HUF vs. ITO Asst.Year–2010-11 - 4 - by the Assessing Officer is a general observations of Affluence Shares & Stock Pvt. Ltd. From the perusal of the records of assessee’s transaction it is the one transaction of sale of shares of 4000 and in assessee’s case the transaction is supposes to take place in individual capacity and not in HUF capacity which was inadvertently done by the broker. These aspects were not analyzed by the Assessing Officer as well as CIT(A). The observation of the CIT(A) that it is a mere assumption on part of the assessee appears to be not proper as the assessee has given the details related to the share transaction as well as the client code modification which clearly set out that in assessee’s case it is a genuine client code modification. Therefore, the appeal of the assessee is allowed. 8. In result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 16/06/2023 Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER Ahmedabad; Dated 16/06/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad