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TMI Blog2017 (5) TMI 1715X X X X Extracts X X X X X X X X Extracts X X X X ..... E, the question/doubt on the genuineness of the transaction arise? No justification for the allegation of the AO that the client code modification was with the mala fids intention. When the client code was modified on the stock exchange without informing the same day then it can be inferred there is some mala fide intention. Had client modification done after the transactions period when the price of the commodity has already changed, then perhaps there could have been some basis to presume that client code modification is intentional. However, when the client code modification is done online on the stock exchange, in our opinion, there was no basis or justification to hold the transaction to be bogus. All transactions at the exchanges have been duly accounted in the books of account maintained by the concerned parties. Such profit/loss has been duly accounted whenever the transactions have been closed. Thus, whatever profits/loss have been generated or accounting of actual trade, have been offered and brought to the charge of tax in the cases of concerned assessee. These findings of facts recorded by the ld CIT(A) have not been controverted by the Ld. DR at the time of heari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cations were carried out by these brokers in the codes of the client. In view of above, the AO issued notices u/s 133(6) of the Act to aforesaid brokers to ascertain the reason for the modifications in the client codes. In compliance thereto of the M/s India Capital Markets Pvt. Ltd. (ICMPL for short) submitted that the client codes were modified due to the typographical human errors and these changes were made online during the trading hours which were accepted by NSE. Similarly the M/s Alchemy Shares and Stock Brokers Pvt. Ltd. (ASSBPL for short) submitted that no changes were carried out in the back office. The AO also issued commission u/s 131(1)(d) of the Act to the Directorate of Investigation, Mumbai to verify the transactions of the assessee with the aforesaid brokers. In compliance thereto the statements u/s 131 of the Act of the directors of both the broker companies were recorded. ICMPL submitted that the client codes were modified due to the typographical human errors whereas the ASSBPL submitted that changes were carried out in the client code as per the instructions of assessee company. In view of above, the AO called upon the assessee to clarify the reasons for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough stock broker M/s Alchemy Shares and Stock Brokers Pt. Ltd., it is noticed that the statement given by the director of M/s Alchemy Share Stock Brokers that Yes, I have gone through the client code modifications date in soft copy. We had no mala fide intention for doing this. It was only done as per the instructions given by the above mentioned client M/s Amrabathi Investra Ltd. we have to follow up the instructions of the client. On going through the statement the statement of the share broker recorded u/s. 131 it is seen that the broker categorically stated that the change in the client code was made on the instruction of the appellant. Therefore, even though the loss was incurred in some other client name, it was changed to that of the appellant at the instruction of the appellant to book the loss and create losses in its books. The appellant has argued otherwise that loss was recorded in its books and that it was routed through the stock exchange, however, this fact will not take away the other compelling fact that the losses were booked intentionally to artificially create loses in the books as supported by the statement of the broker taken u/s 131 of the Act. Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. The reason for the disallowances of the losses was due to the modification of the client code. The AO believed the client code modification to be mala fide to escape the tax liability. However, on perusal of the records we find that client code modification was done negligible nos. of times whereas the total number of trade transactions are 3,11,866 only. Thus the client code modification is less than 1 per cent of the total trading transactions. The AO held the client code modifications to be mala fide with the intention to transfer the profit to other persons by modifying the client code so as to avoid the payment of tax. It is undisputed fact that the client code was modified fewer number of times and this fact was very much in the knowledge of the stock exchange. It is because that the information for the modification of the client code was gathered by the AO from the NSE which proves beyond doubt that the assessee has not modified any client code without informing to the NSE. Had there been mismatch in the code between the report submitted by the broker of the assessee and that of the NSE, the question/doubt on the genuineness of the transaction arise? Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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