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TMI Blog2020 (1) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... istered broker on the Stock Exchange and only registered brokers can modify Client Code of their own clients. Hence, the observations by the AO that the assessee having done or resorted to CCM is incorrect. It is seen that nothing has been brought on record by the AO to show that instruction for CCM was given by the assessee. In fact, the assessee cannot be held responsible for CCM done at the end of the broker. In the instant case, there is no incriminating statement from the brokers of the assessee i.e. Mansi Share Stock Advisors Pvt. Ltd, Bonanza Portfolio Ltd and KM Jain Share Brokers Pvt. Ltd. Further, no evidence is brought on record by the AO of any action by SEBI on assessee or its brokers for CCM. The data provided by NSE nowhere states that loss suffered by assessee is non-genuine. In the assessment order dated 31.03.2016, the AO has stated the modus operandi of creation of fictitious profits and /or losses with a malafide intention of escaping taxes, but he has neither proved nor led any evidence in case of any single transaction, while making addition to the income of the assessee. Addition made by the AO is based on general propositions, which cannot be sust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .......client code modification is not in the assessee s hand and it is solely under the hands of the broker. Our client disowns any such client modification as alleged by your honour by which our client has received any undue benefit. We would like to submit that the details provided us do not provide any clarity on the nature of transaction and how our client has concealed the income. In the absence of self explanatory details no further submission can be made. However, the AO was not convinced with the above explanation of the assessee of the reason that (i) the DIT has not only conducted spot verification but also recorded statements of various brokers and clients, wherein they have admitted to have misused the CCM facility, (ii) generally the losses are shifted to the clients, the losses so transferred are used to claim set off against the profits and to neutralize the tax liability, likewise the profit is shifted to those parties which have suffered losses, thereby facing the problem of capital erosion, (iii) one beneficiary is the broker who does modification for the clients and second is the client in whose account modification is done, (iv) the bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers and penalise them, if there is substantial alteration in the client code. Observing as above, the ld. CIT(A) noted that the modification in client code is solely in the hand of the broker and the assessee cannot be penalized for acts of others. Further, it is noted by him that the AO in the assessment order has also not brought out any specific evidence from which it can be concluded that the modifications in the assessee s client code were done with malafide intention. Relying on the order of the ITAT, Ahmedabad in the case of ACIT v. Kunvarji Finance Pvt. Ltd on similar facts, the ld. CIT(A) deleted the addition of ₹ 1,55,31,999/- made by the AO. 5. Before us, the ld. Departmental Representative (DR) submits that in the present case the DIT has not only conducted spot verification but also recorded statements of various brokers and of clients, wherein they have admitted to have misused the CCM facility. It is stating by him that the assessee obtained these entries to cover up the profit and gains from the same segments. Thus, it is argued by him that the order passed by the AO the restored. 6. On the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed u/s. 143(1) of the Act. Thereafter, the AO on receipt of information from the DIT that the assessee had taken loss adjustment entries worth of ₹ 1,55,31,999/- in F O and Cash Segment by way of CCM, re-opened the assessment by issuing notice u/s. 148 of the Act. The assessee vide letter dated 15.10.2015 filed objection against the said notice u/s.148. The AO rejected the objection by an order dated 05.02.2016. The Hon ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. (2007) 291 ITR 500 (SC) analyzed the distinction between the acceptance of a return u/s 143(1) and an assessment which is framed u/s 143(3) of the Act. In the former case, the AO would have much wider latitude to reopen the assessment. In the case of Avirat Star Homes Venture P. Ltd. v. ITO (2019) 411 ITR 321 (Bom), the Hon ble Bombay High Court referring to the above decision has held : that the return had been accepted without scrutiny. The income-tax investigation had subsequently provided information about certain companies having bank accounts with a bank in Kolkata and who were involved in giving accommodation entries of various nature to seve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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