JAGADESSHWAR RAO CHIDARA,HYDERABAD V. DCIT., CIRCLE- 2(1), HYDERABAD

ITA 83/HYD/2025

AI Insights

The case involves Jagadeshwar Rao Chidara, the appellant, who contested an order from the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center, Delhi. The original assessment for the year 2010-11 was reopened under Section 147 of the Income-tax Act, 1961, based on allegations of 'Client Code Modification' (CCM), a practice misused for tax evasion by altering client codes post-trade. The Assessing Officer (A.O.) added Rs. 4,02,582 to the assessee's income, which was upheld by the CIT(A) after the assessee failed to respond adequately during the appellate proceedings. The Tribunal, however, dismissed the appeal primarily due to the inordinate delay in filing, without addressing the substantive issues of the case.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 46056 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SM-B
• Assessment Year: 2010-2011
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Condonation of delay; Search and seizure; Recovery proceedings
• Section: 147; 148; 144; 250; 251

Judgement Text

"1 आयकर अपीलȣय Ûयायाͬधकरण मɅ, हैदराबाद ‘बी’ बɅच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ SM-B ‘ Bench, Hyderabad Įी मंजूनाथ जी, माननीय लेखा सदèय एवं Įी रवीश सूद, माननीय ÛयाǓयक सदèय SHRI G. MANJUNATHA, HON’BLE ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER (Hybrid Hearing) आयकरअपीलसं./I.T.A.No.83/Hyd/2025 (िनधाŊरण वषŊ/ Assessment Year:2010-11) Jagadeshwar Rao Chidara, Hyderabad. PAN: ACSPC4291P VS. The Deputy Commissioner of Income Tax, Circle -2(1), Hyderabad. (अपीलाथŎ/ Appellant) (ŮȑथŎ/ Respondent) करदाता का Ůितिनिधȕ/ Assessee Represented by : Shri S.K. Gupta, Advocate राजˢ का Ůितिनिधȕ/ Department Represented by : Shri Suresh Babu KN, Sr.AR सुनवाई समाɑ होने की ितिथ/ Date of Conclusion of Hearing : 10.03.2025 घोषणा की तारीख/ Date of Pronouncement : 19.03.2025 O R D E R Ůित रवीश सूद, जे.एम./PER RAVISH SOOD, J.M. The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 16/06/2023, which in turn arises from the order passed by the A.O under Section 147 r.w.s 2 144 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 29/12/2017 for the assessment year 2010-11. 2. The assessee has assailed the impugned order on the following grounds of appeal before us: “1. In the facts and circumstances of the case, the respected CIT(A) ought not to have confirmed the addition made in the assessment order. 2. In the facts and circumstances of the case, the respected CIT(A) ought to have considered the facts that the client code modification was a genuine human error. 3. The appellant may be permitted to add, delete, amend any ground with leave of the Hon'ble Tribunal.” 3. Succinctly stated, the assessee had filed his return of income for the A.Y 2010-11 on 18/03/2011, admitting a total income of Rs. 4,43,599/-. Subsequently, the A.O based on the information received from ADIT(Inv)-Unit-1(3), Ahmedabad that the assessee was a beneficiary of certain contrived losses and shifting of profits based on “Client Code Modification”, a practice under which brokers change the client codes in purchase and sale orders of securities after the trades are conducted, initiated proceedings under Section 147 of the Act. Notice under Section 148 of the Act, dated 30/03/2017 was served upon the assessee. 4. During the course of the assessment proceedings, the A.O observed that the assessee during the subject year had 250 transactions where profits of Rs. 8,64,224/-; and 77 transactions where 3 loss of Rs. 4,61,642/- were shifted out, which, thus, had resulted in net reduction of his income by an amount of Rs. 4,02,582/-. The A.O called upon the assessee to put forth an explanation as to why his total income for the subject year be not enhanced by Rs. 4,02,582/-. Although, it was the assessee’s claim that the “Client Code Modification” was due to punching errors but the same did not find favor with the A.O. Accordingly, the A.O after rejecting the aforesaid explanation of the assessee made an addition of the amount of Rs. 4,02,582/- (supra) to his returned income and vide order passed under Section 144 r.w.s 147 of the Act, dated 29/12/2017 determined his total income at Rs. 9,46,180/-. 5. Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success. As the assessee despite having been afforded sufficient opportunities on 07 occasions by the CIT(A), had neither participated in the appellate proceedings nor furnished any written submissions, therefore, the latter was constrained to proceed with and dispose off the appeal vide an ex-parte order. The CIT(A) after deliberating at length on the issue involved found no infirmity in the view taken by the A.O and dismissed the appeal, observing as under: “6. Decision As mentioned above under para 5 of his order, the appellant was accorded sufficient number of opportunities of being heard, but the appellant chooses not to avail any of the opportunity by not responding to any of the hearing notices. Be that as it may, the case is being taken up for adjudication on the basis of details available on 4 record in the form of Assessment order, statement of facts and grounds of appeal filed by the appellant. 6.1. The brief facts of the case are that the case of the assessee was reopened by issuing a notice U/s. 148 dated 30/03/2017, on the basis of information received by ADIT (Investigation) Unit-1(3), Ahmedabad regarding the indulgence of assessee in malpractice of “Client Code Modification”, or the CCM, a practice under which brokers change the client code in sale and purchase orders of securities after the trades are concluded. SEBI mandated that the stock exchanges shall not normally permit changes in the client code except to correct for genuine mistakes. However, over a period of time some persons in connivance with brokers started using CCM for purposes other than genuine errors. CCM facility was being misused by transferring gains or losses from one person to another by modifying the code in the grab of correcting an error. In this regard, SEBI conducted a probe and due to its misuse, the norms were tightened by the SEBI. 6.2. Further, to investigate the gamut behind the CCM, the investigation wing of Ahmedabad, collected the all-India data of CCM pertaining to FY 2008-09 to FY 2010-11. The preliminary analysis of this data indicated towards the systematic shifting of huge losses using CCM. After receiving the information from ADIT, Investigation, Ahmedabad, the Assessing Officer went on to analyze the data in respect of the assessee and found that in the assessee’s case, a total number of 327 modified transactions were carried out in his code SRDI. Out of these 327 transactions during the FY 2009-10, there have been 250 transactions where the assessee’s profits of Rs. 8,64,224/- have been shifted out and 77 transactions were losses of Rs. 4,61,642/- were shifted out resulting in net reduction of income of Rs. 4,02,582/-. 6.3. On the basis of these findings, the A.O show-caused the appellant to explain with supporting documentary evidence as to why his total income should not be enhanced by Rs. 4,02,582/-. In response, the appellant merely submitted that all the trades mentioned in the annexure given by A.O have resulted merely because of wrong punching of orders, which is only a human error. The A.O further noted that the change of client codes involves more than one digit in all instances and thus, the same cannot be repeatedly on account of punching errors. The A.O has also noted that the assessee’s client code is SRID where the client codes with whom repeated CCM’s happen are HYMA, NJYT, G556, D017 etc and the position of the letters and numbers are not adjacent to frequently result in human errors. In view of these observations, the A.O completed the assessment by making an addition of Rs. 4,02,582/-. 7. The existence of such malpractices of CCM in the practical commercial world is a well known fact and it was because of its rampant misuse to evade taxes that an elaborate exercise was undertaken by the SEBI who taking note of such widespread misuse by certain brokers and persons tightened the norms of CCM resulting in a drastic decline in such modification. Further, to this an elaborate exercise was undertaken by the Investigation Wing of Ahmedabad, to collect and analyze the complete date of CCM and to identify the 5 persons responsible for its misuse. After making a detailed analysis the information was shared with the A.O’s of such persons at all-India level. 7.1. The plain reading of assessment order would show that the Assessing Officer has brough out many cogent facts indicating the direct involvement of the assessee in the misuse of CCM, whereas, on the other hand, the appellant is merely making a self-serving statement that the modifications have resulted only due to human errors. During the course of appeal proceedings the appellant has not furnished any details, submissions or other evidence in order to refute the allegations made by the A.O. In the absence of any fresh evidence, I find no infirmity in the order of the A.O and accordingly the appeal of the assessee is dismissed. Order passed U/s. 250 r.w.s 251 of the Act.” 6. The assessee, being aggrieved by the order of the CIT(A), has carried the matter in appeal before us. 7. We have heard the learned Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record. 8. Sri S.K. Gupta, the Learned Authorized Representative (in short ‘Ld. AR') for the assessee, at the threshold of hearing, submitted that the present appeal involves a delay of 510 days. Elaborating on the reasons resulting to the delay in filing of the present appeal, the Ld. AR had drawn our attention to the application filed by the assessee seeking condonation of the same, Page 34 of the Assessee’s Paper Book (“APB”) a/w the “affidavit” of the assessee, dated 07/03/2025. The Ld. AR submitted that the delay in filing of the present appeal, had crept in, for the reason, that the order passed by the CIT(A) dismissing the subject appeal was lost sight of both by the assessee as well as his tax 6 consultant on whom he was dependant for his tax compliances. Carrying his contention further, the Ld. AR submitted that the assessee had gathered about the factum of dismissal of his appeal only when the Department had taken recourse to coercive recovery proceedings in his hands. The Ld. AR submitted that it was due to the aforesaid circumstances that a delay of 510 days was involved in filing the present appeal. It was, thus, the Ld. AR's claim that as the delay involved in filing of the present appeal was due to bonafide reasons, therefore, the same in all fairness be condoned. 9. Per contra, the Learned Departmental Representative (in short “Ld. Ld. DR”) objected to seeking of condonation of delay by the assessee. Elaborating on his contention, the Ld. DR submitted that as not only the delay involved in filing of the present appeal was inordinate, but also the assessee appellant had failed to come forth with any justifiable explanation as regards the same. The Ld. DR submitted that considering the fact that the assessee had failed to come forth with any plausible explanation as regards the delay involved in filing of the present appeal, therefore, the same does not merit to be condoned and, thus, the appeal was liable to be dismissed on the said count itself. 10. We have thoughtfully considered the contentions advanced by the Learned Authorized Representatives of both the parties qua the 7 reason leading to the delay of 510 days involved in filing of the present appeal. 11. At the threshold, we may herein observe, that as pointed out by the Ld. DR, and rightly so, the delay of 510 days involved in filing of the present appeal by the assessee is beyond doubt inordinate. Although, it is the claim of the assessee that the delay in filing of the present appeal, had occasioned, for the reason that both he as well as his tax consultant/counsel had lost sight of the same and had gathered about it only after the Department had taken recourse to coercive recovery proceedings in his hands, but we are afraid that the same does not find favor with us. As can be gathered from the assessee’s affidavit, it is deposed by him that apart from the appeal for the year under consideration i.e., A.Y 2010-11 another appeal for the immediately preceding year i.e., A.Y 2009-10 was also filed before the CIT(A), NFAC, which the latter had disposed off on 28.06.2022. It is the assessee’s claim that though he had opted for “Vivad-Se-Vishwas Scheme” (in short, “VSVS”) for its case for A.Y 2009-10, but inadvertently he and his tax consultant had lost sight of the appeal for the subject year i.e. A.Y 2010-11 which was disposed of by the CIT(A) on 16/06/2023. 12. We are unable to fathom the aforesaid explanation of the assessee qua the inordinate delay of 510 days involved in filing of 8 present appeal before us. Apropos the claim of the assessee that he had opted for the “Vivad-Se-Vishwas Scheme” in his case for A.Y 2009- 10, wherein the appeal was disposed off by the CIT(A) on 28.06.2022, we are unable to comprehend that as to how it would carry his explanation as regards the inordinate delay involved in filing of the present appeal before us any further. Rather, the disposal of the appeal of the assessee for AY 2009-10 by the CIT(A) on 28.06.2022, i.e a year prior to disposal of the appeal by the CIT(A) for the year under consideration on 16.06.2023, i.e a year thereafter, we are unable to fathom as to how the same would aid the explanation of the assessee as regards the delay involved in filing of the present appeal before us. Apart from that, we find it incomprehensible that the assessee would have lost sight of the fate of his appeal before the CIT(A) for a substantial period of 510 days [after lapse of a period of 60 days from the date of order of the CIT(A)]. Also, the assessee has not placed on record before us any material/evidence which would substantiate his claim that he had learnt about the disposal of his appeal by the CIT(A) only when the Department had taken recourse to recovery proceedings in his case after a lapse of 510 days (supra). 13. Be that as it may, we find no substance or merit in the explanation of the assessee based on which he has sought for condonation of the inordinate delay of 510 days involved in filing of the present appeal before us. At this stage, we may herein observe, that 9 the Hon'ble Supreme Corut in its recent judgment in the case of Pathapati Subba Reddy (Died) by L.Rs. & Ors. Vs. The Specia Deputy Collector (LA), Special Leave Petition (Civil) No. 31248 of 2018, dated 08th April, 2024, had based on a harmonious consideration of the provisions of law, therein, laid down the set of conditions on the touchstone of which the delay involved in filing of an appeal is to be looked into, as under: “26. On a harmonious consideration of the provisions of the law, as aforesaid, and the law laid down by this Court, it is evident that: (i) Law of limitation is based upon public policy that there should be an end to litigation by forfeiting the right to remedy rather than the right itself; (ii) A right or the remedy that has not been exercised or availed of for a long time must come to an end or cease to exist after a fixed period of time; (iii) The provisions of the Limitation Act have to be construed differently, such as Section 3 has to be construed in a strict sense whereas Section 5 has to be construed liberally; (iv) In order to advance substantial justice, though liberal approach, justice-oriented approach or cause of substantial justice may be kept in mind but the same cannot be used to defeat the substantial law of limitation contained in Section 3 of the Limitation Act; (v) Courts are empowered to exercise discretion to condone the delay if sufficient cause had been explained, but that exercise of power is discretionary in nature and may not be exercised even if sufficient cause is established for various factors such as, where there is inordinate delay, negligence and want of due diligence; (vi) Merely some persons obtained relief in similar matter, it does not mean that others are also entitled to the same benefit if the court is not satisfied with the cause shown for the delay in filing the appeal; (vii) Merits of the case are not required to be considered in condoning the delay; and (viii) Delay condonation application has to be decided on the parameters laid down for condoning the delay and condoning the delay for the reason that the conditions have been imposed, tantamounts to disregarding the statutory provision.” 10 14. As in the present appeal before us not only the delay of 510 days involved in filing of the appeal by the assessee is inordinate, but also there is no plausible explanation justifying the same, therefore, we decline to condone the same. Accordingly, the appeal filed by the assessee is dismissed as not maintainable on the ground of limitation itself. 15. Resultantly, the appeal filed by the assessee is dismissed as barred by limitation. 19th माच[, 2025 को खुलȣ अदालत मɅ सुनाया गया आदेश। Order pronounced in the Open Court on 19th March, 2025. Sd/- Sd/- Sd/- (मंजूनाथ जी) (MANJUNATHA G.) लेखा सद˟/ACCOUNTANT MEMBER Sd/- Sd/- (Įी रवीश सूद) (RAVISH SOOD) Ɋाियक सद˟/JUDICIAL MEMBER Sd/- Sd Hyderabad, dated 19.03.2025. ***OKK/sps आदेशकी Ůितिलिप अŤेिषत/ Copy of the order forwarded to:- 1. िनधाŊįरती/The Assessee : Jagadeshwar Rao Chidara, Flat No. 401, 3-6-493/A, the Legend Apartments, Himayat Nagar, Hyderabad. 2. राजˢ/ The Revenue : The Deputy Commissioner of Income Tax, Circle – 2(1), Signature Towers, Kondapur, Hyderabad, Telangana-500084. 3. The Principal Commissioner of Income Tax, Hyderabad 11 4. िवभागीयŮितिनिध, आयकर अपीलीय अिधकरण, हैदराबाद / DR, ITAT, Hyderabad 5. The Commissioner of Income Tax 6. गाडŊफ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Hyderabad "