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TMI Blog2018 (7) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-6-2018 - SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER For The Assessee : Shri K. Sampat, Adv. Shri V. Raja Kumar, Adv For The Department : Shri Atiq Ahmad, Sr. DR ORDER PER R. K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 12.02.2018 of the CIT(A)- XXV, New Delhi relating to assessment year 2009-10. 2. Facts of the case, in brief, are that the assessee is an individual and is engaged in the business of sale purchase of flat, plots, construction business and trading in shares etc. and filed his return of income on 31.07.2009 declaring total income of ₹ 1,16,37,353/-. The Assessing Officer mentioned in the assessment order that the return was processed u/s 143(1). Subsequently, the Assessing Officer issued notice u/s 148 by recording the following reasons :- The department is in possession of information that some brokers had misused client code modification facilities (in short CCM ) to transfer loss and profits on account of share transactions from one client to the other. The losses/profits were shifted to reduce the tax liability in the hands of either the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the complete data of the client codes modified by the said member for the period from 01.04.2008 to 31.03.2012 was obtained from NSE. On perusal and analysis of the data it was found that the said broker has carried out highest client code modification on the NSE F O segment for the three years combined. He also referred to the statement of Shri Sanjeeva Kumar Sinha, Director of the company which was recorded during the course of survey. In his statement, Shri Sanjeeva Kumar Sinha was confronted with the client code modification. He had stated that for misuse of CCM for the purposes other than rectification of punching errors penalty of ₹ 20,00,000/- was levied on Amrapali Aadya by NSE. After analyzing the statement of Shri Sanjeeva Kumar Sinha, the Assessing Officer confronted the assessee regarding the same. Rejecting the various explanations given by the assessee and observing that the assessee had obtained accommodation entries through broker M/s Amrapali Aadya Trading Investment Pvt. Ltd. by misusing the client code modification facilities to the tune of ₹ 1,62,75,826/-, he made addition of the same to the total income of the assessee. 4. Before the ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at variance with the terms of law were ab initio vitiated and deficient and, therefore, could not be utilised for any meaningful or sustainable action. There are a series of orders of the higher judicial authorities disapproving of the stratagem for income generation qua the CCM devise as per the relied upon Ahmedabad Investigation Report. Relying on various decisions, it was submitted that the addition made by the Assessing Officer is uncalled for. 6. However, ld. CIT(A) was not satisfied with the arguments advanced by the assessee. So far as the validity of the reopening of the assessment is concerned, he upheld the action of the Assessing Officer by observing as under :- I have considered the facts of the case, the basis of the disallowance made by the Assessing Officer and the arguments of Ld. AR during appellate proceeding. It has twin issues involving Reopening of the assessment and addition on Client Code Modification. A. First issue is pertaining to the reopening of the case assessment. The AO was in receipt of specific information in respect of the conduct of the appellant that was earlier unknown to the AO. The AO is required per law to process the inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss suffered on share trading treating the same as contrived on account of client code modification. All the above actions being most arbitrary, erroneous, unlawful and unjust must be quashed with directions for relief. 9. Ld. counsel for the assessee strongly challenged the order of the ld. CIT(A) in upholding the reassessment proceedings. He submitted that the satisfaction note recorded by the Assessing Officer on the basis of the information as stated by him to be with the Department is wholly vague, unspecific, incomplete and unreliable. He submitted that the CCM is essential concomitant of online share trading. Mistakes are bound to happen. Such mistakes cannot be arbitrarily concluded to be manipulative. To put them in the shelf of contrived transaction critical evidence in the shape of exchange of monetary consideration is crucial. In absence of such evidence, the allegation of manipulation would fall flat on its face. The accusation would become at once erroneous and untenable. 10. Referring to the satisfaction note, he submitted that the Assessing Officer in the first part records that some brokers had misused the client code modification to transfer loss a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer used such information from an outside source, such statement is required to be verified in its correctness. It cannot be based on any other person s opinion or advice. For the above proposition, he relied on the decision of the Hon ble Punjab Haryana High Court in the case of CIT vs. Paramjit Kaur reported in 311 ITR 38, the decision of the Hon ble Delhi High Court in the case of CIT vs. SFIL Stock Broking Ltd. reported in 325 ITR 285, the decision of the Hon ble Delhi High Court in the case of Sarthak Securities Co. Pvt. Ltd. vs. ITO reported in 329 ITR 110, the decision of the Hon ble Delhi High Court in the case of Pr.CIT vs. G Pharma India Ltd. reported in 384 ITR 147 and Pr.CIT vs. Meenakshi Overseas (P) Ltd. reported in 395 ITR 677. He also referred to the decision of the Hon ble Delhi High Court in the case of Rajiv Agarwal Ors. vs. ACIT reported in 395 ITR 255 to the proposition that where the reopening is based on suspicion without any tangible supportive material the reassessment was held to be unsustainable in law. 14. On the point of CCM modification not resulting into a valid reassessment, he referred to the decision of the Hon ble Bombay High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to have disposed of the objections. Ordinarily, we would have insisted on Assessing Officer doing so. However, facts in the present case are somewhat peculiar and no useful purpose would be served in ensuring only cosmetic purpose of completion of formality and then inviting a fresh litigation. Under the circumstances, we have examined the merits of the petitioner s challenge to the reopening also. 19. Referring to the decision of the Hon'ble Supreme Court in the case of Aravali Infrapower Ltd. vs. DCIT reported in 2017-TIOL-42-SC-IT, he submitted that the Hon'ble Supreme Court in the said decision has held that reopening of assessment is justified, when the bank statements as well as the ITR form disclosing returns, raises more questions than satisfying the queries already raised. 20. Referring to the decision of the Hon ble Delhi High Court in the case of Aravali Infrapower Ltd. vs. DCIT reported in 390 ITR 456, he submitted that the Hon'ble High Court in the said decision has held that where assessee company furnished only cheque numbers, but failed to provide bank details of share applicant and it was found that share applicants had meager income while i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failure to take steps u/s section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings, even when intimation u/s 143(1) has been issued. 26. Referring to the decision of the Hon'ble Supreme Court in the case of Yuvraj vs. Union of India reported in 315 ITR 84, he submitted that the Hon'ble Supreme Court in the said decision has held that points not decided while passing assessment order u/s 143(3) was not a case of change of opinion. It was held that assessment was reopened validly. 27. Referring to the decision of the Hon ble Gujarat High Court in the case of Ankit Financial Services Ltd. vs. DCIT reported in 78 taxmann.com 58, he submitted that the Hon'ble High Court in the said decision has held that where material recovered in search of another person indicated that assessee had received bogus share applications through accommodation entries, since assessee was beneficiary, initiation of reopening was justified. 28. Ld. counsel for the assessee, in his rejoinder, submitted that the various decisions relied by the ld. DR are distinguishable and not applicable to the facts of the present case. In the case of Paramount Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r had completed the assessment u/s 143(3) accepting the returned income. A perusal of the reasons recorded on 29.03.2016 show that there is no allegation by the Assessing Officer of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. Therefore, in view of the proviso to section 147 of the I.T. Act where the original assessment was completed u/s 143(3), no action shall be taken under this section after the expiry of 4 years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment on account of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. However, in the instant case, the notice u/s 148 has been issued on 31.03.2016 which is beyond a period of 4 years from the end of the relevant assessment year i.e. A.Y. 2009-10. As mentioned earlier, in the instant case the assessment was completed u/s 143(3) on 24.12.2011 and there is no allegation of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment for which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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