JAVERILAL OSWAL COMMODITIES PRIVATE LIMITED,AHMEDABAD V. ASSESSMENT UNIT, NFAC PRESENT-ITO WARD-1(2)(3), AHMEDABAD

ITA 2039/AHD/2025

AI Insights

Javerilal Oswal Commodities Pvt. Ltd., a broker for Multi Commodity Exchange of India Ltd. (MCX) and National Spot Exchange Ltd. (NSEL), appealed against the order of the National Faceless Appeal Centre (NFAC), which upheld an addition of Rs. 96,702 to their income for the assessment year 2014-15. This addition was based on findings that the company had engaged in client code modifications, which were not genuine and were used to manipulate profit allocations among clients. The Tribunal noted that similar issues had been addressed in the previous assessment year (2013-14), where the CIT(A) had accepted the company's explanations. However, in the current year, the CIT(A) and the Tribunal found that the modifications were not within the parameters prescribed by the statute and were done with the intent to provide undue benefits to certain clients.

• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2026
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Ahmedabad
• Assessment Year: 2014-2015
• Appeal Filed On: 29-10-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VEERBADRAM VISLAVATH
• Assessee Lawyers: P. F. JAIN
• Keywords: Condonation of delay; Tax effect; Non compliance
• Section: 147; 148; 143(3); 133(6)

Judgement Text

"THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH Before Dr. BRR Kumar, Vice President And Ms. Suchitra Kamble, Judicial Member Javerilal Oswal Commodities Pvt. Ltd. 605-E, Sakar-I, Opp. Nehru Bridge, Ashram Road, Near Gandhigram Railway Station, Ahmedabad PAN: AABCJ5034B (Appellant) Vs The ITO, Ward-1(2)(3) Ahmedabad (Respondent) Assessee by: Shri P.F. Jain, A.R. Revenue by: Shri Veerbadram Vislavath, Sr. D.R. Date of hearing : 12-01-2026 Date of pronouncement : 27-03-2026 आदेश/ORDER Per Suchitra Kamble, Judicial Member: This is an appeal filed against the order dated 10-01-2025 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2014-15. 2. The grounds of appeal are as under:- “1. The Ld. CIT(A) has erred in law and on facts in upholding the order of A.O. dated 26/03/2022 making addition of Rs. 96,702/- as commission income and thereby reducing the loss to 2,89,386/- without properly appreciating the ground of appeal as per appeal memo. 2. He has erred in law and on facts in dismissing the appeal on the ground of non compliance to the notices without ITA No. 2039/Ahd/2025 Assessment Year 2014-15 Printed from counselvise.com I.T.A No. 2039/Ahd/2025 Javerilal Oswal Commodities Pvt. Ltd., A.Y. 2014-15 2 considering the fact that similar addition was made in A.Y. 2013- 14 which was deleted by the CIT(A) by order passed on 07/02/2025. 3. The appeal ought to have been accepted by the Ld. CIT(A) in as much as that the assessment order u/s 147was passed for the same issue for A.Y. 2013-14 on 26/03/2022 and the order under consideration for 2014-15 has also been passed on the same date and the similar addition made for A.Y. 2013-14 has been deleted and duly accepted by the department. 4. The appeal is belated on account of unavoidable reasons and for condonation thereof affidavit is to be submitted. 5. On the facts of the assessee no addition of Rs. 96,702/- as commission income ought to have been made. 6. The appellant craves leave to add, to alter and/or to modify any grounds of appeal.” 3. The assessee was a registered broker of Multi Commodity Exchange of India Ltd. (MCX) and National Spot Exchange Ltd. (NSEL). The Original return of income for A.Y. 2014-15 was filed on 26.11.2014 declaring nil total income and current year loss at Rs. 3,86,088/-. Subsequently, the return was scrutinized under Section 143(3) of the Income Tax Act, 1961 vide order dated 27.12.2016 assessing total income at Nil. The information received from Investigation Wing stated that the assessee is one of the brokers of NSEL, who indulged in client code modification during the period from 01.04.2012 to 31.07.2013. As per the information, the total value of the transaction made by the assessee during the A.Y. 2014-15 was Rs. 21,79,06,257/-. Accordingly, the assessee’s case was reopened under Section 147 of the Act and notice under Section 148 of the Act was issued to the assessee on 28.03.2021 and served. In response to the said notice, the assessee filed a return of income on 28.04.2021 disclosing total income at Nil as shown in the original return filed on 26.11.2014. The statutory notices were issued upon the assessee which was replied by the assessee from time to time. The assessee submitted that only some of the client codes were modified while carrying out transactions as a broker at NSEL platform during the Printed from counselvise.com I.T.A No. 2039/Ahd/2025 Javerilal Oswal Commodities Pvt. Ltd., A.Y. 2014-15 3 F.Y. 2013-14 due to punching error, where incorrect client code was punched instead of actual client code and that also was done with exchange parameters. Notice under Section 133(6) of the Act was also issued to the NSEL asking the details. The NSEL vide its reply dated 21.02.2022 informed that the assessee had indulged in client code modifications during the F.Y. 2013-14 and the purpose of client code facility as provided to the members of the exchange was only for carrying out the correction of genuine punching error(s) in the client code, which doesn’t appear to be the reason in assessee’s case. The NSEL also furnished the details of trades carried out and details of client codes modified by the assessee. The Assessing Officer made addition of Rs. 96,702/- as undisclosed commission income (2% of Rs. 48,35,100/-). 4. The assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 5. The ld. A.R. submitted that there is a delay of 212 days in filing the present appeal for which the assessee has filed separate application for condonation of delay along with affidavit of the assessee (director of the assessee). The delay is condoned as the explanation given by the assessee appears to be correct. 6. The ld. A.R. submitted that the Revenue in assessee’s case for assessment year 2013-14 has granted the relief to the assessee in the similar addition whereby the assessee presumed to earn 2% commission on the amount of Rs. 2,97,42,520/-. The ld. A.R. submitted that the business structure of the assessee did not change in the assessment year 2014-15 as well, which is a subsequent year to that of assessment year 2013-14. Therefore, the Department cannot change their stand once the factual aspect and the business model is similar to the earlier assessment year. Therefore, ld. A.R. submitted that the assessee does not sustain. Printed from counselvise.com I.T.A No. 2039/Ahd/2025 Javerilal Oswal Commodities Pvt. Ltd., A.Y. 2014-15 4 7. The ld. D.R. relied upon the order assessment and the order of the CIT(A). 8. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that in the earlier assessment year the client code modification was added by the Assessing Officer but deleted by the CIT(A) and the revenue could not appeal the said order of the CIT(A) due to low tax effect. The CIT(A) therein has simply accepted the contention of the assessee that the assessee has explained the reasons for client code modifications which was done within the parameters of exchange and for genuine reasons i.e. punching errors and specifically on the request of clients with no other intentions to shift profit or accommodate clients. But the CIT(A) in A.Y. 2013-14 has totally ignored the fact that there is no punching error but the deliberate attempt on the part of the assessee to help two types of clients i.e. one who wanted profit and who did not want profit by modifying the client codes. A profit of Rs. 12,000/- made in the account of one client was nullified by shifting buy and sell transactions to two different clients by modifying the original client code. Thus, the assessee has allowed undue benefits to its clients to the extent of Rs. 2,97,42,520/- in A.Y. 2014-15. There is silence on part of the CIT(A) in A.Y. 2013-14 regarding this observation made by the Assessing Officer in that year. So the plea of the Ld. AR that since it was allowed in earlier year, it should be allowed in this year is not justified as in this year the CIT(A) in A.Y. 2014-15 has taken cognizance that the client code modification was not within the parameters prescribed under the relevant provisions of the statute. This plea of the Ld. AR is rejected. In the present Assessment Year 2014-15, profit made through buy and sell trades relating to particular client was shifted to another client by modifying the client code as mentioned in the table at para 7 page 3 and 4 of the Assessment order. From the perusal of the said table it can be seen from one example that the original client code is ‘R001’ but it was modified and shifted to ‘V888’, as per the norm of Printed from counselvise.com I.T.A No. 2039/Ahd/2025 Javerilal Oswal Commodities Pvt. Ltd., A.Y. 2014-15 5 punching in client code modification if the key of the key board of the computer is on first line and immediate key in that same line is punched then that client code modification is allowable. But in the present case the letter ‘R’ is on the second line of the key board and letter ‘V’ is on last i.e. fourth line of the key board. Thus, the NSEL rightly gave the reply that assessee had indulged in client code modification not in genuine format. Besides this the observation of the Assessing Officer that the client code modification were done either only in respect of buy trades or sell trades and in some cases, profit made through buy and sell trades for a particular client was shifted to another client code, these observations were not refuted by the assessee at any stage. The only plea of punching error fails in the present assessee’s case and the client code modification is not genuine. Therefore, the observation made by the Assessing Officer relating to profit to the extent of Rs. 24,17,500/-(Rs.73,200 + Rs. 30,300 + Rs. 15,150 + Rs. 22,50,000 + Rs. 15,750 + Rs. 15,300 + Rs. 17,850) was shifted from one client to the other by changing the client codes was for the benefits of the assesee’s clients who wanted profit and who did not want profit by modified client codes, is correct. Thus, the Assessing Officer rightly held that the assessee is found to have allowed undue benefits to its clients to the extent of Rs. 48,35,100/- (Rs.24,17,550*2). Thus, the 2% undisclosed commission was rightly added to the income of the assessee by the Assessing Officer. The addition is correctly made. The CIT(A) has also rightly confirmed the addition. 9. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 27-03-2026 Sd/- Sd/- (Dr. BRR Kumar) (Suchitra Kamble) Vice President Judicial Member Ahmedabad : Dated 27/03/2026 a.k. आदेश क\u0006 \u0007\bत ल प अ\u000fे षत / Copy of Order Forwarded to:- Printed from counselvise.com I.T.A No. 2039/Ahd/2025 Javerilal Oswal Commodities Pvt. Ltd., A.Y. 2014-15 6 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील\u0012य अ\u0013धकरण, अहमदाबाद Printed from counselvise.com "