2022 (6) TMI 186 - AT - Income Tax

Validity of reopening of assessment u/s 147 - disallowance of loss as non genuine - undue benefit gained through Client Code Modification - assessee is one of the entities which has credited fictitious profit and loss by misusing the Client Code Modification facility in the future and option segments of National Stock Exchange - HELD THAT - As return of income filed by the assessee was not subjected to scrutiny but was only processed u/s 143(1) of the Act. Subsequently, AO received the specific information indicating that the loss from share transaction claimed by the assessee is non-genuine as such undue benefit was gained through Client Code Modification. Thus, it is very much clear that the Assessing Officer had tangible material to reopen the assessment u/s 147 of the Act. Further, the objection raised by the assessee against reopening of assessment was disposed of by the Assessing Officer by a separate order. We do not find any merit in the grounds raised by the assessee challenging the validity of reopening of assessment under Section 147 of the Act. Loss as non genuine - As it can be seen that the AO in course of assessment proceedings has made inquiry to find out the genuineness of the loss claimed - the result of inquiry did not prove the genuineness of the loss claimed. Even, the assessee was not unable to furnish any conclusive evidence to support its claim that loss is genuine. Before us also, assessee has not brought any material on record to controvert the factual finding of the departmental authorities. In the aforesaid circumstances, we do not find any valid reason to interfere with the decision of learned Commissioner (Appeals). Grounds are dismissed.

Summary

Issues:
1. Validity of reopening of assessment under Section 147 of the Income Tax Act.
2. Merits of the issue regarding the genuineness of the loss claimed in share transactions.

Validity of Reopening of Assessment under Section 147:
The Tribunal noted that the assessee's return of income had not been scrutinized but was processed under Section 143(1) of the Act. Subsequently, the Assessing Officer received specific information indicating non-genuine loss from share transactions due to Client Code Modification. The Tribunal found that the Assessing Officer had tangible material to reopen the assessment under Section 147, and the objection raised by the assessee was duly addressed in a separate order. Consequently, the Tribunal dismissed the grounds challenging the validity of reopening the assessment under Section 147.

Merits of the Issue - Genuineness of Loss Claimed:
During the assessment proceedings, the Assessing Officer conducted an inquiry to verify the genuineness of the loss claimed by the assessee in share transactions. However, the inquiry did not establish the genuineness of the claimed loss. The assessee failed to provide conclusive evidence supporting the genuineness of the loss. The Tribunal observed that the assessee did not present any material to refute the departmental authorities' factual findings. Consequently, the Tribunal found no valid reason to overturn the decision of the learned Commissioner (Appeals) and dismissed the grounds raised by the assessee. As a result, the appeal was ultimately dismissed by the Tribunal.

In conclusion, the Appellate Tribunal ITAT Delhi, comprising Shri Saktijit Dey and Pradip Kumar Kedia, ruled on an appeal by an assessee against an order of the Commissioner of Income-Tax (Appeals) for the assessment year 2010-11. The Tribunal addressed the validity of reopening the assessment under Section 147 of the Income Tax Act and the genuineness of the loss claimed in share transactions. The Tribunal upheld the reopening of the assessment, citing tangible material available to the Assessing Officer. Additionally, the Tribunal found no merit in the assessee's challenge to the reopening. On the issue of the genuineness of the loss claimed, the Tribunal noted the lack of evidence supporting the claim and upheld the decision of the Commissioner (Appeals). Ultimately, the appeal was dismissed by the Tribunal on 19th May, 2022, due to the assessee's failure to substantiate its case adequately.