2024 (7) TMI 831 - AT - Income Tax

Reopening of assessment - client code modification and commission paid - information received from DIT (1 CI), Mumbai which contained details of the manner in which fictitious losses and profits were created by some brokers by misusing the client code modification facility in the future and options (F O) segment on NSE - case of the assessee specific information was that the client code had been modified in 54 trades as a result of which the profit accruing to these trades was transformed into loss HELD THAT - In the case of the appellant all the modifications were done on three days only i.e. 22.03.2010, 23.03.2010 and 25.03.2010 and there was no modification either on previous dates or later dates during the period of 01.04.2009 to 31.03.2010. The client codes of other clients are entirely different from client code of the appellant Sh. Naveen Gaba and all the modifications have resulted in losses. All these facts creates suspicion about the transaction carried out by the appellant and it does not appear the bonafide client code modification transaction. Further it is proved by way of investigation carried out by the DIT(I CI) that CCM was misused for obtaining fictitious losses / profits and brokers received commission @ 0.5% to 2% on the amount of losses/profits for transferring such losses/ profits to their clients. Thus AO has added commission @ 1.25% on the loss claimed by the appellant by CCM correctly. The assessee failed to put fort any argument in support of the grounds of Appeal. On the other hand as observed above, the Ld. CIT(A) has decided the issues involved in the Appeal against the assessee after deliberating all the issues in detail, in the absence of any material on record to prove contrary to the observations of the Ld. CIT(A), we find no merit in the Grounds of Appeal of the assessee, accordingly, the Grounds of Appeal of the assessee are dismissed.

Summary

Issues:
Appeal against order of Ld. Commissioner of Income Tax (Appeals) for Assessment Year 2010-11 - Alleged misuse of client code modification facility on NSE - Addition made by AO on account of client code modification and commission paid - Dismissal of Appeal by CIT(A) - Assessee's failure to appear before Tribunal - Department's submission for dismissal of Appeal.

Analysis:
The appeal was filed against the Ld. Commissioner of Income Tax (Appeals) order for Assessment Year 2010-11 concerning the alleged misuse of the client code modification facility on the NSE. The Assessing Officer (AO) had added an amount to the taxable income of the assessee due to client code modification and commission paid, following reassessment proceedings initiated under section 147 of the Income Tax Act, 1961. The AO's decision was based on information received regarding fictitious losses and profits created by misusing the client code modification facility. The CIT(A) dismissed the appeal filed by the assessee, leading to the current appeal. Despite multiple notices issued, the assessee failed to appear before the Tribunal, resulting in the proceedings being conducted in the absence of the assessee.

The Departmental Representative strongly argued that the grounds of appeal lacked merit and urged for the dismissal of the assessee's appeal based on the Lower Authorities' orders. The Tribunal reviewed the material on record and the submissions made. The AO had added a specific amount to the income of the assessee based on the client code modifications and commission paid. The appellant, being a Director of a company involved, was deemed to have control over the employees responsible for data entry related to trades. The AO's decision was supported by the fact that modifications resulting in losses were made only on specific dates and not on others within the relevant period. The Tribunal considered the appellant's submissions during the appellate proceedings but found them insufficient to counter the AO's findings. The Tribunal upheld the AO's decision to add the specified amount to the taxable income of the appellant.

Although the assessee raised similar grounds of appeal, no arguments were presented to support them during the proceedings. Given the detailed consideration by the CIT(A) and the lack of contrary evidence on record, the Tribunal found no merit in the assessee's grounds of appeal. Consequently, the Tribunal dismissed the grounds of appeal and the appeal itself. The order was pronounced in an open court on 3rd July 2024.