M/s. Siddhi Beverages, Ahmedabad V. The ACIT, Circle-11, Ahmedabad

ITSSA 409/AHD/2013

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2315 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 31-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-08-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 22-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Transactions in derivatives
• Section: 153A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER (SS) ./ IT(SS)A NO.409/AHD/2013 ( / ASSESSMENT YEAR : 2006-07) M/S.SIDDHI BEVERAGES SURVEY NO.240 B/H. BHAGYODAY HOTEL CHANGODAR AHMEDABAD / VS. THE ACIT CIRCLE-11 AHMEDABAD $ ./ ./ PAN/GIR NO. : ABE-FS-0199-K ( $& / APPELLANT ) .. ( '($& / RESPONDENT ) $&) / APPELLANT BY : MS.URVASHI SHODHAN '($&*) / RESPONDENT BY : SHRI JAMES KURIAN, SR.DR +* / DATE OF HEARING 01/08/2016 ,-./* / DATE OF PRONOUNCEMENT 31/08/2016 / O R D E R PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-XVI, AHMEDABAD DATED 01/10/2012 FOR THE ASSESSMENT YEAR(AY) 2006-07. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- IT(SS)A NO. 409 /AHD/2013 M/S.SIDDHI BEVERAGES VS. ACIT ASST.YEAR 2006-07 - 2 - 2.1. ASSESSEE IS A PARTNERSHIP-FIRM STATED TO BE E NGAGED IN THE BUSINESS OF MANUFACTURING OF PACKAGED DRINKING WATER. ASS ESSEE FILED ITS RETURN OF INCOME FOR AY 2006-07 ON 31/12/2006 DECLARIN G TOTAL INCOME OF RS.7,57,228/-. THE CASE WAS INITIALLY PROCESSED U/S .143(1) OF THE INCOME TAX ACT.1961 (HEREINAFTER REFERRED TO AS 'THE ACT') . A SEARCH AND SEIZURE OF ACTION U/S.132 OF THE ACT WAS CONDUCTED IN THE CASE OF KUNWARJI GROUP ON 25/03/2008 AND SUBSEQUENT DATES. DURING THE COURSE OF SEARCH, VARIOUS DOCUMENTS/BOOKS OF ACCOUNTS/OTHER V ALUABLE ARTICLES/THINGS WERE FOUND AND SEIZED AND ON ITS VE RIFICATION, IT WAS FOUND THAT THERE ARE CERTAIN DOCUMENTS WHICH WERE BELONGI NG TO THE ASSESSEE. ACCORDINGLY, PROCEEDINGS U/S.153C R.W.S.153A OF TH E ACT WERE INITIATED IN THE CASE OF ASSESSEE AND NOTICES U/S.153C R.W.S. 153A OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE AND IN RESPONSE TO WHICH ASSESSEE VIDE LETTER DATED 09/11/2011 SUBMITTED THAT THE OR IGINAL RETURN OF INCOME THAT WAS FILED ON 31/12/2006 BE CONSIDERED AS RETUR N OF INCOME IN RESPONSE TO NOTICE U/S.153C R.W.S.153A OF THE ACT. THEREAFTER, ASSESSMENT WAS FRAMED U/S.153C R.W.S.153A R.W.S.143 (3) OF THE ACT VIDE ORDER DATED 30/12/2011 AND THE TOTAL INCOME WAS DET ERMINED AT RS.74,02,800/- AGGRIEVED BY THE ORDER OF ASSESSING OFFICER (AO), ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A) WH O VIDE ORDER DATED 01/10/2012 (IN APPEAL NOD.CIT(A)-XVI/ACIT/CIR.11/64 7/11-12) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF IT(SS)A NO. 409 /AHD/2013 M/S.SIDDHI BEVERAGES VS. ACIT ASST.YEAR 2006-07 - 3 - LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE AND HAS RAISED FOLLOWING GROUNDS:- 1. ASSESSEE IS DISSATISFIED WITH THE ORDER PASSED BY T HE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - XVI, AHMEDABAD RECEIVED ON 16 TH OCTOBER, 2013 IN AN APPEAL AGAINST ORDER PASSED U/ S 250 DATED 01.10.2012 PASSED BY THE ASSTT. COMMISSIO NER OF INCOME TAX, CIRCLE-11, AHMEDABAD PRESENTS THIS APPEAL AGAINST T HE SAME ON THE FOLLOWING AMONGST OTHER GROUNDS: 2. THE LEARNED AO HAS ERRED IN FACTS AND IN LAW IN ISSUING IN NOTICE U/S. 153C R.W.S. 153A OF THE ACT ON THE BASIS OF SEIZED MATERIAL DURING THE SEARCH & SEIZURE ACTION CONDUCTED ON THE 'KUNWARJI GROUP'. 3. THE LEARNED AO HAS ERRED IN FACTS AND LAW IN MA KING AN ADDITION ON ACCOUNT OF SUPPRESSION OF PROFIT OF RS. 66,45,567/- TO THE INCOME OF THE ASSESSEE. 4. AO HAS ERRED IN FACTS AND IN LAW ON DERIVING A ASSUMPTION THAT BROKER KCBPL HAS MISUSED THE FACILITY OF CLIENT COD E MODIFICATION AS PROVIDED BY NCDEX AND MCX, WITH MALAFIDE INTENTIONS AND FOR THE PURPOSE OF TRANSFERRING THE PROFIT/LOSSES FROM ON C LIENT TO ANOTHER FOR COMMODITY TRANSACTIONS CARRIED THROUGH THEM FOR THE F.Y.S 2004-05, 2005-06, 2006-07, WHICH HAS REVENUE IMPLICATIONS TH AT THOSE TRADES RESULTING INTO LOSSES/LOWERING PROFIT HAVE BEEN TRA NSFERRED FROM ONE CLIENT TO ANOTHER I.E. PURCHASE OF LOSSES/REDUCED P ROFITS. AO HAS ERRED IN FACTS AND IN LAW IN COMING TO THE CONCLUSION THAT T HERE IS A SUPPRESSION OF PROFITS BY ADOPTING THE METHODOLOGY OF CLIENT CO DE MODIFICATIONS. 5. AO HAS ERRED IN FACTS AND IN LAW AND NOT ACCEPT ING THE REFERENCES OF THE FOLLOWING DETAILS, WHICH ARE VERY IMPORTANT IN THE APPEAL MATTER. DURING THE ASSESSMENT PROCEEDINGS CA SHRI ASHOK GUP TA HAS DRAWN THE ATTENTION OF RESPECTED AO THAT SIDDHI BEVERAGES WAS PROPRIETORSHIP CONCERN OF SMT. MEENABEN PARIKH UPTO 07.11.2005 AND W.E.F 08.11.2005, IT IS A PARTNERSHIP FIRM HAVING TWO PAR TNERS NAMELY MEENA PARIKH AND JAY M. PARIKH. AO-DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1 AHMEDABAD HAS ASSESSED SMT. MEENABEN PARIK H FOR A.Y. 2006- IT(SS)A NO. 409 /AHD/2013 M/S.SIDDHI BEVERAGES VS. ACIT ASST.YEAR 2006-07 - 4 - 07 (F.Y.2005-06). DEPUTY C.I.T, CENTRAL CIRCLE-L(L) AHMEDABAD VIDE HIS ORDER DT.29.12.2011 FOR A.Y.2006-07, IN CASE OF SMT . MEENA PARIKH, HAVE ADDED RS.3167986/-, ADDITION ON AN ACCOUNT OF SUPPRESSED PROFIT. SMT. MEENA PARIKH HAS PREFERRED AN APPEAL TO C.I.T. (A)-1 AHMEDABAD. C.I.T (A) VIDE HIS ORDER DT. 18.01.2011 HAS DELETED THE ADDITION OF RS.3167986/- ON ACCOUNT OF SUPPRESSED PROFIT. THIS FACTS ARE CONVEYED AND DISCUSSED WITH ASSESSIN G OFFICER DURING ASSESSMENT PROCEEDINGS OF THIS CASE, INCLUDING ABOU T THE CORRESPONDENCE OF BROKER KCBPL VIDE LETTERS DT. 30. 09.2009, 01.10.2009, 09.10.2009, 09.10.2009, 16.12.2009, 16. 11.2009 AND DT. NIL, SUBMITTED DURING ASSESSMENT PROCEEDINGS OF SMT . MEENA PARIKH. THE ABOVE REFERRED LETTERS OF BROKERS KCBPL, ORDER DT.29.12.2009 BY AO CENTRAL CIRCLE-L(L) AHMEDABAD AND ORDER DT. 18.0 1.2011 PASSED BY C.I.T.(A)-1 AHMEDABAD ARE VERY IMPORTANT IN THIS MA TTER AS FACTS OF ASSESSMENTS FOR A.Y.2006-07 FOR MEENA PARIKH AND FA CTS FOR ASSESSMENTS FOR A.Y.2006-07 FOR SIDDHI BEVERAGES, P ARTNERSHIP FIRM ARE SIMILAR AND SAME. IN FACT SUPPRESSED PROFIT COMPUTED BY AO IN THE CAS E OF PARTNERSHIP FIRM SIDDHI BEVERAGES, HAS BEEN APPORTIONED ON THE BASIS OF INCOME OFFERED FOR A.Y.2006-07 BY PROP. MEENA PARIKH AND F IRM SIDDHI BEVERAGES IN THE PROPORTION OF 727086: 3517498 AN D SUPPRESSED PROFIT ATTRIBUTABLE TO SIDDHI BEVERAGES IS RS.6645567/-. THIS VERY IMPORTANT FACTS, THOUGH CONVEYED TO AO BY CA SHRI ASHOK GUPTA, HAS NOT BEEN BROUGHT ON RECORD BY AO WHILE P ASSING THE ASSESSMENT ORDER FOR A.Y. 2006-07 FOR FIRM SIDDHI B EVERAGES. 6. AO HAS ERRED IN FACTS AND IN LAW IN NOT ACCEPTI NG THE WRITTEN CONTENTIONS AND EXPLANATIONS GIVEN BY KCBPL VIDE TH EIR LETTERS DATED 30.09.2009, 01.10.2009, 09.10.2009, 16.12.2009, AS REFERRED IN ASSESSMENT ORDER DATED 29.12.2009 OF AO AND ASSESSM ENT ORDER DT.12.01.2011 OF C.I.T.(A)-1 AHMEDABAD, DELETING TH E ADDITION OF RS- 31679867- BEING THE ADDITION ON AN ACCOUNT OF SUPPR ESSED PROFIT. IT(SS)A NO. 409 /AHD/2013 M/S.SIDDHI BEVERAGES VS. ACIT ASST.YEAR 2006-07 - 5 - 7. AO HAS ERRED IN FACTS, IN LAW IN NOT ACCEPTING THE WRITTEN CONTENTIONS AND EXPLANATIONS GIVEN BY MEENBEN M. PA RIKH VIDE HIS LETTER DATED 16.12.2009, AND DATED NIL DURING ASSES SMENT PROCEEDINGS. 8. AO HAS ERRED IN FACTS AND IN LAW IN REJECTING THE VARIOUS CONTENTIONS RAISED BY THE ASSESSEE AND KCBPL DURING ASSESSMENT PROCEEDINGS AND COMPUTING THE SUPPRESSION PROFIT OF RS. 66,45,567/- 9. THE LEARNED AO HAS ERRED IN LAW AND IN FACTS IN INITIATING THE PENALTY PROCEEDINGS U/S. 274 R.W.S. 271(L)(C) OF TH E INCOME TAX ACT, 1961. 10. THE LEARNED AO HAS ERRED IN LEVY OF INTEREST U/ S. 234A, 234B, 234C, 234D OF THE INCOME TAX ACT. 3. BEFORE US, AT THE OUTSET, LD.AR SUBMITTED THAT T HOUGH THE ASSESSEE HAS RAISED VARIOUS GROUNDS AND THE GROUNDS RAISED B Y THE ASSESSEE BEING DESCRIPTIVE ARE NOT IN CONSONANCE WITH THE RULE 8 O F ITAT RULES, 1963 BUT THE PRAYER IN THE GROUNDS RAISED BE TREATED AS THE EFFECTIVE GROUND. SHE FURTHER SUBMITTED THAT ASSESSEE DOES NOT WISH T O PRESS GROUND NO.2 WITH RESPECT TO CHALLENGING THE ASSESSMENT ORDER FR AMED U/S.153C R.W.S. 153A OF THE ACT AND THEREFORE THE GROUND NO.2 BE TR EATED AS NOT PRESSED. IN VIEW OF ARS SUBMISSION, GROUND NO.2 IS DISMISSE D AS NOT PRESSED. 3.1. WE NOW PROCEED TO DISPOSE OF OTHER GROUND OF ASSESSEE. 3.2. AO NOTICED THAT THE PROPRIETORSHIP-FIRM SIDDHI BEVERAGES (PROPRIETOR MEENABEN M.PARIKH) WAS CONVERTED INTO PARTNERSHIP-F IRM W.E.F. 08/11/2005 WITH MEENABEN M.PARIKH AND SHRI JAY MARK AND PARIKH AS ITS PARTNERS WITH PROFIT SHARING RATIO OF 60% AND 40% R ESPECTIVELY. IT WAS IT(SS)A NO. 409 /AHD/2013 M/S.SIDDHI BEVERAGES VS. ACIT ASST.YEAR 2006-07 - 6 - NOTICED THAT ASSESSEE WAS ENGAGED IN COMMODITY TRAN SACTIONS THROUGH ITS BROKER KUNWARJI COMMODITY BROKERS PVT.LTD. AO NOTE D THAT DISCREET ENQUIRIES CONDUCTED BY INVESTIGATION WING REVEALED THAT M/S.KUNWARJI COMMODITY BROKERS PVT.LTD. (KCBPL) HAD DONE CLIENT CODE MODIFICATION FOR AN UNUSUALLY VERY HIGH NUMBER OF T IMES WITH MALAFIDE INTENTION AND FOR THE PURPOSE OF TRANSFERRING THE PROFITS/LOSSES FROM ONE CLIENT TO ANOTHER. AO NOTED THAT MEENABEN PARIKH, PROPRIETOR OF SIDDHI CORPORATION AND SIDDHI BEVERAGES HAD ACCOUNT WITH KCBPL AND CLIENT CODE MODIFICATIONS WERE CARRIED OUT ON MANY OCCASI ONS WHICH HAD RESULTED INTO DIVERSION OF PROFITS FROM THE ASSESSE E TO OTHER PERSONS AND ASSESSEE HAD ALSO TAKE OVER LOSSES OF OTHER PERSONS AND BY ADOPTING THE METHODOLOGY OF CLIENT CODE MODIFICATIONS, THE PROFI TS/LOSSES WAS TRANSFERRED FROM ONE PERSON TO ANOTHER. THE AO THE REAFTER WORKED OUT THE PROFIT/LOSS WHICH ASSESSEE WOULD HAVE EARNED HA D THE CLIENT CODE MODIFICATION NOT TAKEN PLACE AND ACCORDING TO HIS C ALCULATION THE AMOUNT OF SUCH PROFITS WAS WORKED OUT AT RS.80,19,242/-. THE AFORESAID AMOUNT WAS TREATED AS THE SUPPRESSED PROFITS IN THE HANDS OF SIDDHI BEVERAGES AND OF THAT HE CONSIDERED RS.35,17,498/- BEING THAT OF PARTNERSHIP- CONCERN AS SIDDHI BEVERAGES WAS CONVERTED INTO PART NERSHIP-FIRM WITH EFFECT FROM 09/11/2005 AND THE BALANCE AMOUNT OF RS .65,45,587/- WAS CONSIDERED AS PROFIT OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A) WH O UPHELD THE ORDER OF AO BY HOLDING AS UNDER:- IT(SS)A NO. 409 /AHD/2013 M/S.SIDDHI BEVERAGES VS. ACIT ASST.YEAR 2006-07 - 7 - 6.0 GROUND NOS.4 TO 9 ARE REGARDING ADDITION MA DE BY LD.ASSESSING OFFICER OF RS.31,67,986/- ON ACCOUNT OF SUPPRESSION OF PROFITS RELATED TO CLIENT CODE MODIFICATIONS. BRIEF FACTS OF THE CASE ARE TH AT SEARCH AND SEIZURE PROCEEDINGS WORK CONDUCTED UPON ONE KUNWARJI COMMOD ITIES BROKERS PRIVATE LIMITED (KCBPL) WHO WERE ACTING AS BROKERS FOR COMM ODITIES TRANSACTIONS IN RESPECT OF TRANSACTIONS UNDERTAKEN ON NCDEX AND MCX . IT WAS REVEALED THAT THE SAID BROKER WERE MISUSING THE FACILITY OF CLIEN T CODE MODIFICATIONS PROVIDED BY THE COMMODITIES EXCHANGES IN SUCH A WAY SO AS TO GIVE UNDUE ADVANTAGE TO THE CLIENTS OF THE SAID BROKER IN TERM S OF GENERATING BOGUS PROFITS OR LOSSES AS THE CASE MAY BE. THUS IT WAS INDICATED THAT THE ORIGINAL PROFITS/LOSSES WERE MODIFIED IN THE NAME OF CLIENT CODE MODIFICATIONS SO AS TO SUPPRESS THE ACTUAL PROFITS. 6.1. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE IN THE LIGHT OF SUBMISSIONS MADE BY THE APPELLANT AND THE ARGUMENTS TAKEN BY THE ASSESSING OFFICER. THE APPELLANT HAS PRIMARILY ARGUED THAT S INCE ON SIMILAR FOOTINGS AN ADDITION MADE BY THE ASSESSING OFFICER BEING DCIT C IRCLE-1(1), IN THE CASE OF MEENA PARIKH WHO WAS EARLIER PROPRIETOR OF THIS BUS INESS STANDS DELETED BY CIT(A)-1 AHMEDABAD BY HIS ORDER DATED 12/1/2011 THE REFORE THE IMPUGNED ADDITION DESERVES TO BE DELETED IN THIS CASE ALSO. THE APPELLANT HAS ALSO ARGUED THAT THE ASSESSING OFFICER HAS NOT CONSIDERE D COMMUNICATIONS MADE BY M/S.KCBPL. THE ARGUMENTS PUT FORTH BY THE APPEL LANT HAVE BEEN EXAMINED IN DETAIL AND HAVE BEEN FOUND TO BE DEVOID OF ANY MERITORIOUS CONSIDERATION. 6.2. THE APPELLATE ORDER BEARING NUMBER CIT(A)-I/CC .1(1)/301/2009/10 DATED 12.01.2011 OF CIT(A)-1, AHMEDABAD HAVE BEEN E XAMINED. IT HAS BEEN NOTED THAT WHILE DELETING THE ADDITIONS MADE BY DCI T CIRCLE-1(1) AHMEDABAD, LEARNED CIT(A)-1, AHMEDABAD HAS PLACED R ELIANCE ON HIS OWN ORDER PASSED IN THE CASE OF KCBPL. A PERUSAL OF TH E SAID ORDER SHOWS THAT LEARNED CIT(A)-1, AHMEDABAD HAS BASED HIS FINDINGS, INTER ALIA, UPON FOLLOWING:- THE MISMATCH HAS BEEN WORKED OUT BY THE ASSESSING O FFICER ONLY ON ACCOUNT OF ASSUMPTION OF NOTIONAL PROFIT BEING EMBE DDED IN CLIENT CODE MODIFICATIONS. THE PROFITS ACCRUED TO THE CLIENTS MATCH WITH THE B OOKS OF ACCOUNTS THE NUMBER OF CLIENT CODE MODIFICATIONS IS MINUSCUL E WHEN COMPARED WITH TOTAL TRANSACTIONS UNDERTAKEN BY THE BROKER IT(SS)A NO. 409 /AHD/2013 M/S.SIDDHI BEVERAGES VS. ACIT ASST.YEAR 2006-07 - 8 - A LARGE NUMBER OF PLANNED CODE MODIFICATIONS WERE A CTUALLY DONE BY CLIENTS OF KCBPL THEMSELVES THAT THE COMMODITY EXCHANGES PERMIT CLIENT CODE MOD IFICATIONS WITH A VIEW TO RECTIFY PUNCHING ERRORS AND THAT THE MODIFI CATIONS IN DISPUTE WERE ACTUALLY DONE TO REMOVE GENUINE ERRORS AND THA T IF THE SAME WERE NOT DONE IT WOULD HAVE RESULTED INTO A CHAOTIC COND ITION. 6.3. AFTER CAREFULLY CONSIDERING THE ORDER OF LEARN ED CIT(A)-1, AHMEDABAD WITH REFERENCE TO THE FACTS OF THE CASE DISCUSSED B Y THE ASSESSING OFFICER IN THE ORDER APPEALED AGAINST, I AM UNABLE TO AGREE WITH T HE CONCLUSIONS DRAWN BY THE SAID APPELLATE AUTHORITY. THE ASSESSING OFFICE R HAS CLEARLY INDICATED IN THE ASSESSMENT ORDER THAT THE CLIENT CODE MODIFICAT IONS UNDERTAKEN IN THIS CASE DO NOT ALLUDE TOWARDS AN EXERCISE UNDERTAKEN T O MEET BONAFIDE GENUINE NEEDS. IT IS NOT A CASE OF CLIENT CODE MODIFICATIO NS DONE WITH THE OBJECTIVE OF ATTENDING TO INADVERTENT PUNCHING ERRORS BUT CLEARL Y INDICATE TOWARDS AN EXERCISE UNDERTAKEN DELIBERATELY WITH PREMEDITATED MOTIVES. TO BRING HOME HIS POINT THE ASSESSING OFFICER HAS DRAWN ATTENTION TO FOLLOWING:- CLIENT CODE MODIFICATIONS IN CLIENT CODE 0001 TO TH E EXTENT OF 12155(6821+5334) NUMBER OF TIMES IS PRACTICALLY NOT POSSIBLE. SUCH A HUGE MODIFICATIONS ON THE PRETEXT OF PUNCHING ERR ORS ARE UNIMAGINABLE. FOR EXECUTING A SINGLE TRADE, A PERSON IS REQUIRED TO PUNCH IN ABOUT 5- 10 COLUMNS. IT WAS NOTED THAT MODIFICATION WAS ALW AYS DONE IN THE COLUMN OF CLIENT CODE AND NOT IN ANY OTHER COLUMN. THE ASSESSING OFFICER HAS ARGUED THAT 6.5. THE ARGUMENT OF THE APPELLANT TOWARDS NON CO NSIDERATION OF THE EXPLANATIONS OFFERED BY HER BEFORE THE ASSESSING OF FICER HAS BEEN EXAMINED. IT IS SEEN THAT THE ASSESSING OFFICER HAS CLEARLY S TATED IN THE ASSESSMENT ORDER (PARA 6) THAT THE APPELLANT HAS NOT OFFERED ANY EXP LANATION WITH A REGARD TO THE PROFIT EARNED BY IT THROUGH CLIENT CODE MODIFIC ATIONS EXCEPT THAT ALL THE INCOME EARNED FROM COMMODITY EXCHANGES THROUGH KCBP L HAS BEEN OFFERED FOR TAXATION. 6.6. AFTER CAREFULLY CONSIDERING THE ABOVE IT IS H ELD THAT THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.66,45,567/- TO THE TOTA L INCOME OF THE APPELLANT ON ACCOUNT OF SUPPRESSED PROFITS IS BASED UPON CORRECT UNDERSTANDING OF THE FACTS OF THE CASE AND DO NOT REQUIRE ANY FURTHER INTERFER ENCE AT THIS STAGE. IT(SS)A NO. 409 /AHD/2013 M/S.SIDDHI BEVERAGES VS. ACIT ASST.YEAR 2006-07 - 9 - ACCORDINGLY, THE ADDITION OF RS.66,45,567/- IS CONF IRMED AND THE GROUNDS OF APPEAL RAISED BY THE APPELLANT DISMISSED. 4. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 5. BEFORE US, LD.AR REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT THE ISSUE IS C OVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF COORDINATE BENCH (ITAT A BENCH AHMEDABAD) IN ASSESSEES CASE (M/S.KUNVARJI FINANCE PVT.LTD. & OTHERS), ORDER DATED 19/03/2015. ON THE OTHER HA ND, LD.SR.DR SUPPORTED THE ORDERS OF THE AO & LD.CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO AD DITION ON ACCOUNT OF SUPPRESSED INCOME DUE TO CLIENT CODE MODIFICATIONS. WE FIND THAT THE COORDINATE BENCH OF TRIBUNAL IN A CONSOLIDATED ORDE R DATED 19/03/2015 IN THE CASE OF KUNVARJI FINANCE PVT.LTD. IN IT(SS)A NOS.615 TO 618/AHD/2010 FOR AYS 2005-06 TO 2008-09 & OTHERS ( WHERE THE ASSESSEE BY WAY OF IT(SS)A NO.301/AHD/2011 FOR AY 2006-07 WAS ALSO ONE OF THE PARTY), HAD DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER:- IT(SS)A NO. 409 /AHD/2013 M/S.SIDDHI BEVERAGES VS. ACIT ASST.YEAR 2006-07 - 10 - 8. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF B OTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE ASSESSI NG OFFICER BELIEVED THE CLIENT CODE MODIFICATION TO BE MALAFIDE BECAUSE IN HIS OPINION THE CLIENT CODE MODIFICATION WAS FOR UNUSUALLY HIGH NUMBER OF CASES . THEREFORE, FIRST THING TO BE DECIDED IS WHETHER THERE WAS THE CLIENT CODE MOD IFICATION FOR UNUSUALLY HIGH NUMBER OF CASES. THE COMMODITY EXCHANGE I.E. M CX VIDE CIRCULAR NO.MCX/T&S/032/2007 DATED 22.01.2007, ISSUED GUIDEL INES WITH REGARD TO THE CLIENT CODE MODIFICATION, WHICH READS AS UNDER: - CIRCULAR NO. MCX/T&S/032/2007 JANUARY 22, 2007 CLIENT CODE MODIFICATIONS IN TERMS OF PROVISIONS OF THE RULES, BYE-LAWS AND B USINESS RULES OF THE EXCHANGE, THE MEMBERS OF THE EXCHANGE ARE NOTIF IED AS UNDER: FORWARD MARKETS COMMISSION (FMC) VIDE ITS LETTER NO . 6/3/2006/MKT-II (VOL III) DATED DECEMBER 20, 2006 A ND JANUARY 5, 2007 HAS DIRECTED AS UNDER. A. THE FACILITY OF CLIENT CODE MODIFICATIONS INTRA- DAY ARE ALLOWED. B. THE MEMBERS ARE ALSO ALLOWED TO CHANGE THEIR CLI ENT CODES BETWEEN 5:00 P.M. TO 5:15 P.M., IN CASE OF THE CONTRACTS TR ADED TILL 5:00 P.M. AND BETWEEN 11:30 P.M. TO 11:45 P.M. FOR THE CONTRA CTS TRADED TILL 11:30 P.M. ON ALL THE TRADING DAYS FROM MONDAYS TO FRIDAYS AND ON SATURDAYS THE SAME SHALL BE ALLOWED BETWEEN 2:00 P. M. TO 2:15 P.M. C. HOWEVER, ON THE DAYS WHEN TRADING IN COMMODITIE S TAKES PLACE TILL 11:55 P.M. THE CLIENT CODE MODIFICATION WILL BE ALL OWED ONLY UPTO 12:00 P.M. D. AT ALL TIMES, PROPRIETARY TRADES SHALL NOT BE AL LOWED TO BE MODIFIED AS CLIENT TRADES AND CLIENT TRADES SHALL NOT BE ALL OWED TO BE MODIFIED AS PROPRIETARY TRADES. E. IN ORDER TO ENSURE THAT CLIENT CODES ARE ENTERE D WITH ALERTNESS AND CARE, A PENALTY ON THE CLIENT CODE CHANGES MADE ON A DAILY BASIS SHALL BE IMPOSED AS UNDER: S. NO PERCENTAGE OF CLIENT CODE CHANGED TO TOTAL ORDERS (MATCHED) ON A DAILY BASIS PENALTY (RS.) IT(SS)A NO. 409 /AHD/2013 M/S.SIDDHI BEVERAGES VS. ACIT ASST.YEAR 2006-07 - 11 - 1 LESS THAN OR EQUAL TO 1% NIL 2 GREATER THAN 1% BUT LESS THAN OR EQUAL TO 5% 500 3 GREATER THAN 5% BUT LESS THAN OR EQUAL TO 10% 1000 4 GREATER THAN 10% 10000 F. IT IS CLARIFIED THAT THE FACILITY OF CLIENT COD E MODIFICATION IS ALLOWED AS AN INTERIM MEASURE ONLY UPTO MARCH 31, 2007 AND AFTER THIS DATE THE SAID FACILITY WILL BE COMPLETELY STOPPED. WITH REFERENCE TO POINT C. AS REFERRED ABOVE, MEMBE RS MAY PLEASE NOTE THAT THE CLIENT CODE MODIFICATIONS WILL BE ALL OWED ONLY UPTO 11:55 P.M. IN INTERNATIONAL REFERENCEABLE COMMODITIES (I. E. COMMODITIES TRADED UPTO 11:55 P.M.) MEMBERS ARE REQUESTED TO TAKE NOTE OF THE FMC DIREC TIVES AND ENSURE STRICT COMPLIANCE. FROM THE ABOVE, IT IS EVIDENT THAT CLIENT CODE MOD IFICATION IS PERMITTED INTRA-DAY, I.E. ON THE SAME DAY. AS PER COMMODITY EXCHANGE, IF CLIENT CODE MODIFICATION IS UPTO 1% OF THE TOTAL ORDERS, THERE IS NO PENALTY AND IF IT IS GREATER THAN 1% BUT LESS THAN 5%, THE PENALTY IS RS .500/-. IF IT IS GREATER THAN 5% BUT LESS THAN 10%, PENALTY IS RS.1000/- AND IF I T IS GREATER THAN 10%, THEN PENALTY IS RS.10,000/-. FROM THE ABOVE, THE ONLY INFERENCE THAT CAN BE DRAWN IS THAT AS PER MCX, THE CLIENT CODE MODIFICATION UP TO 1% IS ABSOLUTELY NORMAL AND THEREFORE, THE BROKER IS PERMITTED TO MODIFY TH E CLIENT CODE UPTO 1% WITHOUT PAYING ANY PENALTY. EVEN CLIENT CODE MODIF ICATION UPTO 5% IS NOT CONSIDERED UNUSUALLY HIGH BECAUSE THAT IS ALSO PERM ITTED WITH THE TOKEN PENALTY OF RS.500/-. IN THE CONTEXT OF THE CIRCULA R ISSUED BY COMMODITY EXCHANGE, LET US EXAMINE WHETHER THE CLIENT CODE MO DIFICATION DONE BY THE BROKER I.E. KCBPL IS UNUSUALLY HIGH. AT PAGE NO.16 ON PARAGRAPH NO.4.3, THE CIT(A) HAS GIVEN THE NUMBER OF TRANSACTIONS ENT ERED INTO BY THE ASSESSEE FOR THE PERIOD 2004-05 TO 2007-08 AND THE NUMBER OF CLIENT CODE MODIFICATION AND PERCENTAGE THEREOF. WE HAVE ALSO REPRODUCED TH E SAME AT PARAGRAPH NO.6 OF OUR ORDER. FROM THE SAID DETAILS, IT IS EVI DENT THAT THE CLIENT CODE MODIFICATION WAS DONE IN FOUR YEARS 36,161 TIMES. AS AN ABSOLUTE FIGURE, THE CLIENT CODE MODIFICATION MAY LOOK VERY HIGH, BUT IF WE LOOK IT AT IN TERMS OF TOTAL TRANSACTIONS, IT IS ONLY 0.94%. THE TOTAL NUM BER OF TRADE TRANSACTIONS IS IT(SS)A NO. 409 /AHD/2013 M/S.SIDDHI BEVERAGES VS. ACIT ASST.YEAR 2006-07 - 12 - 38.58 LACS AND THE CLIENT CODE MODIFICATION IS ONLY 36,161. THEREFORE, THE CLIENT CODE MODIFICATION IS LESS THAN 1% OF THE TOT AL TRADING TRANSACTIONS. AS PER CIRCULAR OF COMMODITY EXCHANGE, CLIENT CODE MOD IFICATION UPTO 1% IS QUITE NORMAL AND IS PERMITTED WITHOUT ANY PENALTY. THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY REASON ON WHAT BASIS HE PRESUMED THE CLIENT CODE MODIFICATIONS TO BE UNUSUALLY HIGH. IN THE LIGHT O F THE MCX CIRCULAR, WE ARE OF THE OPINION THAT THE CLIENT CODE MODIFICATION WA S QUITE NOMINAL AND NOT UNUSUALLY HIGH AS ALLEGED BY THE ASSESSING OFFICER. 9. THE ASSESSING OFFICER HELD THE CLIENT CODE MODIF ICATIONS TO BE MALAFIDE WITH THE INTENTION TO TRANSFER THE PROFIT TO OTHER PERSON BY MODIFYING THE CLIENT CODE SO AS TO AVOID THE PAYMENT OF TAX. FROM THE CI RCULAR OF THE COMMODITY EXCHANGE, IT IS EVIDENT THAT CLIENT CODE MODIFICATI ON IS PERMITTED ON THE SAME DAY. THEREFORE, WE ARE UNABLE TO FIND OUT ANY JUST IFICATION FOR THE ALLEGATION OF THE ASSESSING OFFICER THAT THE CLIENT CODE MODIF ICATION WAS WITH THE MALAFIDE INTENTION. WHEN THE CLIENT CODE WAS MODIFI ED ON THE SAME DAY, THERE CANNOT BE ANY MALAFIDE INTENTION. HAD CLIENT MODIFI CATION DONE AFTER THE TRANSACTIONS PERIOD WHEN THE PRICE OF THE COMMODITY HAS ALREADY CHANGED, THEN PERHAPS THERE COULD HAVE BEEN SOME BASIS TO PR ESUME THAT CLIENT CODE MODIFICATION IS INTENTIONAL. HOWEVER, WHEN THE CLI ENT CODE MODIFICATION IS DONE ON THE SAME DAY, IN OUR OPINION, THERE WAS NO BASIS OR JUSTIFICATION TO HOLD THE SAME TO BE MALAFIDE. 10. MOREOVER, THE LD. ASSESSING OFFICER HAS COMPUTE D THE NOTIONAL PROFIT/LOSS TILL THE TRANSACTIONS PERIOD AND NOT TI LL THE PERIOD BY WHICH THE CLIENT CODE MODIFICATION TOOK PLACE. EVEN IF THE VI EW OF THE REVENUE IS ACCEPTED THAT THE CLIENT CODE MODIFICATION WAS WITH MALAFIDE INTENTION, THEN THE PROFIT OR LOSS ACCRUED TILL THE CLIENT CODE MOD IFICATION CAN BE CONSIDERED IN THE CASE OF THE ASSESSEE BUT BY NO STRETCH OF IMAGI NATION THE PROFIT/LOSS ARISING AFTER THE CLIENT CODE MODIFICATION CAN BE CONSIDERE D IN THE HANDS OF THE ASSESSEE. 11. THE LD. CIT(A) IN PARAGRAPH 4.13 OF HIS ORDER H AS ALSO RECORDED THE FINDINGS THAT ALL TRANSACTIONS AT THE COMMODITIES EXCHANGES HAVE BEEN DULY ACCOUNTED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE CONCERNED PARTIES. SUCH PROFITS/LOSS HAS BEEN DULY ACCOUNTED WHENEVER THE T RANSACTIONS HAVE BEEN CLOSED. THUS, WHATEVER PROFITS HAVE BEEN GENERATED OR ACCOUNTING OF ACTUAL TRADE, HAVE BEEN OFFERED AND BROUGHT TO THE CHARGE OF TAX IN THE CASES OF IT(SS)A NO. 409 /AHD/2013 M/S.SIDDHI BEVERAGES VS. ACIT ASST.YEAR 2006-07 - 13 - CONCERNED ASSESSEES. THESE FINDINGS OF FACT RECORD ED BY THE LD. CIT(A) HAS NOT BEEN CONTROVERTED BY THE REVENUE AT THE TIME OF HEARING BEFORE US. WHEN THE TRANSACTION HAS BEEN DULY ACCOUNTED FOR AND THE PROFIT/LOSS HAS ACCRUED TO THE CONCERNED PARTIES IN WHOSE NAMES TRANSACTIONS H AVE BEEN CLOSED, THERE CANNOT BE ANY BASIS OR JUSTIFICATION FOR CONSIDERIN G THOSE PROFIT/LOSS IN THE CASE OF THE ASSESSEE ON THE BASIS OF MERE PRESUMPTI ON OR SUSPICION. IT IS NOT THE CASE OF THE REVENUE THAT SUCH ALLEGED PROFIT HA S ACTUALLY BEEN RECEIVED BY THE ASSESSEE. IN VIEW OF THE TOTALITY OF THE ABOVE FACTS, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CI T(A) IN THIS REGARD AND THE SAME IS SUSTAINED; AND GROUND NOS. 1 AND 3 OF THE R EVENUES APPEAL ARE REJECTED. . IT(SS)A NO.301/AHD/2011 : AY 2006-07 (BY REVENUE) [MEENABEN M. PARIKH] 40. THE ONLY GROUND RAISED IN THIS APPEAL IS AGAINS T THE DELETION OF THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F CLIENT CODE MODIFICATION. THIS GROUND IS IDENTICAL TO GROUND NOS. 1 & 3 OF TH E REVENUES APPEAL IN THE CASE OF M/S. KUNVARJI FINANCE PVT LTD. VIDE IT(SS)A NO.615/AHD/2010 FOR ASSESSMENT YEAR 2005-06. THEREFORE, FOR THE DETAIL ED DISCUSSION IN THE CASE OF M/S. KUNVARJI FINANCE PVT LTD IN IT(SS)A NO.615/ AHD/2010 (SUPRA) FOR ASSESSMENT YEAR 2005-06, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE AND ACCORDINGLY, THE SAME IS REJECTED. 7. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL O N RECORD TO DEMONSTRATE THAT THE FACTS IN THE PRESENT CASE IS D ISTINGUISHABLE FROM THE CASE CITED HEREINABOVE WHICH HAS BEEN DECIDED BY TH E COORDINATE BENCH OF TRIBUNAL. REVENUE HAS ALSO NOT PLACED ANY MATE RIAL TO DEMONSTRATE THAT THE AFORESAID DECISION OF COORDINATE BENCH OF TRIBUNAL HAS BEEN SET ASIDE BY HIGHER JUDICIAL FORUM. IN VIEW OF THE AFO RESAID FACTS AND FOLLOWING THE AFORESAID DECISION OF THE COORDINATE BENCH OF TRIBUNAL, WE IT(SS)A NO. 409 /AHD/2013 M/S.SIDDHI BEVERAGES VS. ACIT ASST.YEAR 2006-07 - 14 - DIRECT THE DELETION OF ADDITION MADE BY THE AO AND THUS THE ISSUE IS DECIDED IN FAVOUR OF ASSESSEE. THUS, THE GROUND OF ASSESSEE IS ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 31/08/2016 SD/- SD/- () () (RAJPAL YADAV) ( ANIL CHATURVEDI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 31/ 08 /2016 3..,.../ T.C. NAIR, SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT. 3. 456 7 / CONCERNED CIT 4. 7 ( ) / THE CIT(A)-XVI, AHMEDABAD 5. 89:'56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<=+ / GUARD FILE. / BY ORDER, (8' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 2.8.16 (DICTATION-PAD 8+ PA GES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 30.8.16 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.31.8.16 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.8.16 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER