2019 (7) TMI 1536 - AT - Income Tax

Loss suffered due to modification of Client Code by the stock broker - Non genuine claim - HELD THAT - In the facts and circumstances, it is not clear from the order, how the AO has arrived that the transactions with M/s. Inventure and Growth Securities Ltd., alone are not genuine in nature. Assessees have submitted that they had incurred a loss from the transactions with M/s. Inventure Growth and Securities Ltd., however, the Assessing Officer disallowed in the respective assessees hand and completed the assessments. Considering the entire facts and circumstances, associated with the impugned loss claim, it is clear that these transactions have not been properly examined by the Assessing Officer. Since the loss is claimed by the assessees, the onus is on the respective assessee to place all material in support of their contention before the Assessing Officer. However, the Assessing Officer is bound to examine them, if on due examination / investigation, AO finds discrepancy, if any, he should after seeking due clarification from the assessee and on due consideration of them should arrive the conclusion. In these cases, such examination has not been done. Therefore, we deem it fit to remit these issues back to the Assessing Officer for a fresh examination - Appeals of the assessees are treated as partly allowed for statistical purposes.

Summary

Issues involved:
Appeal against disallowance of losses in trading of shares through Client Code Modifications (CCM) for assessment year 2010-11. Additional grounds filed by assessee regarding incorrect quantification of disallowance. Discrepancies in disallowance amount by Assessing Officer.

Analysis:
The assessees filed appeals against the orders of the Commissioner of Income Tax (Appeals) for disallowance of losses in trading of shares through Client Code Modifications (CCM). The Assessing Officer found the transactions to be sham and disallowed losses. The assessees appealed to the Tribunal, submitting additional grounds regarding the incorrect quantification of disallowance. The Tribunal admitted the additional ground for consideration.

The assessees were engaged in trading shares, futures, and options during the assessment year 2010-11. They traded through various brokers, leading to losses. The Assessing Officer disallowed losses due to alleged adjustments of profit through CCM based on a report from the Departmental Investigation Wing. The assessees argued that the disallowance was arbitrary as the transactions were genuine, and the CCM was done by the brokers without their knowledge. The Tribunal found that the Assessing Officer did not properly examine the transactions and remitted the issues back for fresh examination.

The Tribunal emphasized that the onus is on the assessees to provide all material in support of their contentions, but the Assessing Officer must conduct a thorough examination before disallowing losses. The Tribunal directed the Assessing Officer to allow the assessees to present their materials and explanations before passing a new order in accordance with the law. The appeals were treated as partly allowed for statistical purposes.

Although the assessees raised other pleas in the grounds of appeal, since those were not argued by the representative, they were treated as dismissed. The Tribunal pronounced the order on July 26, 2019, in Chennai.