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2018 (12) TMI 450 - AT - Income TaxReopening of assessment - assessment barred by limitation or not - addition of genuine losses by using Client Code Modification - non application of mind and without verification of facts and without connecting the information with the assessee - onus to prove allegations - Held that - In the process, the Appellant is a beneficiary in whose case the loss has been booked by modifying the client code, thereby, reducing the taxable income. As argued that margin management can be done by broker by usurping funds of clients with it. In this case, loss shifting is not the matter ; it is only the matter of usurping the funds of the Appellant. It is stated that huge voluminous transaction cannot be modified in one hour provided by the Stock Exchange. We are not convinced with the assertion of the Appellant because what required to be modified was only the client code for which limited time is given by the Stock Exchange. Now a days techniques have been evolved to get the data ready before hand for uploading on the site. Another argument by the Appellant is that if he had shifted the profits to an outsider, he would have received back corresponding amount from the recipient of the profit. However, the Assessing Officer has not brought any material on record to show that the profit was received back. This argument of the Appellant can also not be supported because the party receiving the profit, under manipulative schemes, cannot transfer the money either by book entry or by bank transaction. It is only the Assessee who can tell the manner of money received back. Appellant has not given satisfactory explanation with respect to the losses incurred by using Client Code Modification (based on the report received from National Stock Exchange and the inquiry by the Investigation Wing, Ahmedabad). The grounds of appeal are not substantiated further to prove the allegations leveled by the Appellant. Accordingly, the grounds of appeal are decided against the assessee.
Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961. 2. Onus of proof regarding allegations of Client Code Modification (CCM). 3. Confirmation of addition of ?4,63,706 on account of alleged contrived losses. 4. Allegation of concealed income and genuineness of losses claimed by the assessee. Issue-wise Detailed Analysis: 1. Validity of the Notice Issued Under Section 148: The assessee contended that the notice under Section 148 was "bad-in-law, without jurisdiction and barred by limitation" and issued without proper verification of facts. The assessee argued that the notice was issued without connecting the information with the assessee, thus making the assessment order based on such notice liable to be quashed. The Commissioner of Income Tax (Appeal) [CIT(A)] failed to quash the notice and the assessment order, which the assessee appealed against. 2. Onus of Proof Regarding Allegations of Client Code Modification (CCM): The assessee argued that the Assessing Officer (AO) wrongly shifted the burden of proof onto the assessee to disprove the allegations of CCM. The AO did not provide evidence that the CCM was done at the behest of the assessee. The CIT(A) upheld the AO's decision, which the assessee contested, claiming that there could not be any documentary evidence of a negative premise. 3. Confirmation of Addition of ?4,63,706 on Account of Alleged Contrived Losses: The assessee contested the addition of ?4,63,706 made by the AO, arguing that they never claimed such losses and that the reasons given by the CIT(A) for confirming the additions were erroneous and not sustainable. The assessee maintained that there were genuine losses of ?4,13,593.55 paid to A to Z Stock Trade Private Limited, and the transactions reported were not related to CCM. 4. Allegation of Concealed Income and Genuineness of Losses: The assessee argued that the AO erred in adding ?4,63,706 as concealed income, as the same was never claimed as a loss by the assessee. The assessee asserted that the lower authorities incorrectly confirmed this addition despite acknowledging that the transactions reported by the assessee were not related to CCM. The assessee had no other dealings with the broker named in the reasons. Judgment Analysis: Validity of Notice Under Section 148: The tribunal found that the CIT(A) had elaborately discussed the issue in dispute and upheld the AO's decision. The tribunal noted that the AO had received information from the ADIT (Investigation) Unit-1(3), Ahmedabad, about the misuse of CCM for tax evasion. The AO had reason to believe that the assessee was a beneficiary of such a scheme, and therefore, the reopening of assessment proceedings was justified. Onus of Proof Regarding CCM: The tribunal agreed with the CIT(A) that the AO was correct in holding the CCM as malafide with the intention to transfer profit to avoid taxes. The assessee failed to provide satisfactory evidence to disprove the allegations of CCM. The tribunal emphasized that the AO had sufficient information from the Investigation Wing and the National Stock Exchange to justify the reopening of the assessment. Confirmation of Addition of ?4,63,706: The tribunal upheld the CIT(A)'s decision to confirm the addition of ?4,63,706. The CIT(A) found that the assessee's argument regarding the genuineness of losses was not substantiated with credible evidence. The CIT(A) noted that the broker's statement and the data from the National Stock Exchange indicated that the losses were contrived through CCM. Allegation of Concealed Income and Genuineness of Losses: The tribunal found that the assessee's claim of genuine losses amounting to ?4,13,593.55 was not related to CCM, as per the CIT(A)'s findings. The CIT(A) concluded that the assessee failed to prove that the broker's statement was manipulated or given under duress. The tribunal agreed with the CIT(A) that the assessee was a beneficiary of the CCM scheme, which resulted in the addition of ?4,63,706 as concealed income. Conclusion: The tribunal concluded that the CIT(A) had passed a well-reasoned order, which did not require any interference. Therefore, the tribunal upheld the CIT(A)'s order and dismissed the appeal of the assessee. Order Pronouncement: The appeal of the assessee was dismissed, and the order was pronounced on 30-10-2018.
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