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TMI Blog2019 (2) TMI 1683X X X X Extracts X X X X X X X X Extracts X X X X ..... orded by the Ld.AO in reopening the assessment for the year 2009-10, as well as the submissions of the Ld. A.R for the appellant made in the matter. I find that in this case there had been no scrutiny proceedings earlier,and the case had only been processed u/s 143(1)(a). It is also seen that the Ld. AO has supplied the reasons for reopening to the appellant during the course of the scrutiny. It is seen that the Ld.AO has duly recorded that after verification of the office record, and on the basis of certain information received from the Investigation Wing at Mumbai, it came to light that the assessee during the financial year 2009-10 had availed of entries of bogus losses to the extent of Rs. 11,41,737 /- by indulging in Client Code modification ( CCM) and stage -managing a contrived loss. 2. The Ld. AO has also recorded that the above information, prima facie, indicated that the assessee had entered into accommodation entries through the modus operandi of CCM. Accordingly, notice under section 148 was served on the assessee on 30.03.2016 by the Ld.AO with the reason to believe that its income to the extent of Rs. 11,41,737/- for the assessment year in question. During the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come had escaped assessment - Sufficiency of reasons for forming the belief is not for the Court to judge. This is the ration emanating from ITO Vs Lakhmani Mewal Das (SC) 103 ITR 437, Phool Chand BajrangLal and Another Vs ITO & Anr. (SC) 203 ITR 456, Raymond Woollen Mills Vs ITO &Anr. (SC) 236 ITR 34, &Desh Raj Udyog Vs ITO (All) 318 ITR 6. 5. Similarly, it has been decided .by Hon'ble Courts that to judge the validity of reassessment on the basis of final outcome of reassessment proceedings on that item will not be "Information" for re-opening. The matter has been elucidated and explained in detail as - Information proper - At the time of reopening, assessing officer is not required to establish escapement of income. Sri Krishna (P) Ltd. Vs CIT (SC) 221 ITR 538&Central Provinces Manganese Ore Co. Ltd. Vs ITO (SC) 191 ITR 662. Hon'ble Courts have also held that what is necessary to re-open an assessment is not the final verdict but a prima facie reason - Once such a reason is recorded by the Assessing Authority, he assumes jurisdiction to issue notice u/s148 - Mere fact that for earlier assessment years issue in dispute has been decided by CIT(A) in assessee's favou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be asked by the assessee. If the material or the information belongs to the' assessee, in my view, the Ld. AO has a bonafide belief to record the reasons. The Hon'ble Courts cannot look into the sufficiency of the material held by the Ld. AO for the formation of the belief. Once the proceedings are initiated, the onus is on the Ld. AO to prove that the income has escaped assessment, and for that he has to give the hearing to the assessee and give all the material and evidence collected by him so that the assessee may contradict the same. If the Assessing Officer does not have the material, the reasons cannot be regarded to be bona fide and the initiation of the proceedings can be quashed. If the initiation is valid and subsequently, the assessee proves that there is no escapement of income, the assessment so framed could be quashed/cancelled. 8. In view of the above, I find that the AO had rightly reopened the assessment, after observing all the procedures and legal requirements, on the basis of prima farcie information available with him. The action of the Ld. AO in such matters is therefore upheld, and the ground Numbering 1 to 5 taken by the appellantcompany in these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication and would implement a monetary penalty structure that would escalate with the number of such incidences. Besides, the exchange may take necessary action against members making repeated changes, However, genuine mistakes may be allowed to be rectified," 12.Thus, a careful reading of the above extract suggests that the change in client ID is generally not allowed except where there is some genuine mistake, The SEBI circular also mandates the Stock Exchanges to keep strict vigil on the instances of client code modification and implementation of a penalty structure, In the light of the reading and submission of NSE, it is to be observed that the practice adopted by NSE is 'scrutiny of client code modifications on a post-facto basis', with monetary penalties in direct proportion to the quantum of incidence in compliance with the SEBI circular, Regarding the requirement of not allowing the change in client code except for genuine mistake, it is also to be observed that the term 'genuine mistake' has wide connotation. From the submissions made out by the appellant during both assessment and appeal, it does not emanate that the modifications were genuine. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought the explanation from the assessee. In compliance thereto the Director of the assessee- company and RCML namely, Shri Vikash Somani in his statement recorded dated 22.12.2010 submitted that the name of the client and code was modified due to punching errors by the clerical staff. It was also submitted that all the modification in the name of client and its code were carried out within the time permitted by the Stock Exchange. The assessee also submitted that the Security Transaction Tax (STT) was paid in respect of all the transactions giving rise to the impugned loss. However, AO disagreed with the contention of assessee on account of following reasons:- (a) The impugned loss was incurred by the assessee at the fag-end of the year and similar loss was also incurred in the immediate preceding AY 2008-09 at the fag-end of the year which was also disallowed. (b) The client code and name were modified by RCML without having instruction from the assessee. (c) The nature of modification carried out in the client's name and code do not suggest that it was a clerical punching error rather it is suggesting that the loss was taken by the assessee in order to reduce its pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anipulation of transactions entered into by the Appellant's sister ITA No.191/Kol/2015 A.Y. 2009-10 M/s Ratnabali Commodities Pvt. Ltd. Vs. ITO Ward-12(3) Page 4 concern who was the Broker and helped in manipulation for the benefit of the Appellant. Hence, this ground of appeal of the appellant is dismissed." Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us. 6. Ld. AR for the assessee filed paper book which is running pages from 1 to 20 and cited case law. Ld. AR for the assessee reiterated the arguments that were placed before Ld. CIT(A). Further, he also submitted the copies of contract notes in support of the transactions giving rise to the impugned loss which are placed on pages 1 to 5 of the paper book. He also submitted the evidence for the payment of STT on such transactions which is placed on pages 6 of the paper book. Ld. AR also submitted the copy of bank statement of the assessee and RCML along with the ledger copy of the broker and the assessee in the respective books of accounts which are placed on pages 7 to 20 of the paper book. On the other hand, Ld. DR vehemently relied on the order of Authorities Below. 7. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of modification. Thus, we are of the view that the order of Authorities Below is based on surmise and conjecture and same is not based on tangible material to treat the impugned loss as bogus loss. 7.2 Moreover, we also find that the details furnished by the assessee in respect of transactions giving rise to the loss were exactly matching with the details furnished by the NSE. In none of the case, Authorities Below have brought on record where any mismatch is found between the books of the assessee and the confirmation received from NSE. Had there been any manipulation in the impugned loss then it could have been revealed from the confirmation received from NSE. Therefore, the modifications in the client's name and code cannot justify the impugned loss as bogus. Thus, we conclude that the impugned addition has been made by the Authorities Below on the basis of surmise and conjecture which is not permissible in the eyes of law as held by the Hon'ble Supreme Court in the case of Lalchand Bhagat Ambica Ram vs. CIT Bihar and Orissa (1959) 159 ITR 289 (SC). Therefore, we hold that the impugned loss cannot be subject-matter of addition on the basis of suspicion. In this regard we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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