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TMI Blog2020 (6) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred both in law and on facts in sustaining the initiation of proceedings under section 147 of the act and, further completion of assessment under section 143 (3) read with section 147 of the act without satisfying the statutory preconditions for initiation of proceedings and completion of assessment under the act 2.1 That the learned COMMISSIONER OF INCOME TAX (APPEALS) has further erred in law and on facts in sustaining the initiation of proceedings under section 147 of the act as there was no tangible material to form a belief that the income of the assessee company has escaped assessment. 2.2 That further, the reasons recorded were mere reasons to suspect and were just to make fishing and roving enquiries, such as no independent enquiry was conducted by the assessing officer before issuing such notice under section 148 and as such the proceedings so, initiated under section 148 was a mere pittance and was liable to be quashed as such. 3. That the learned COMMISSIONER OF INCOME TAX (APPEALS) has further erred in law and on facts in sustaining the addition of Rs. 1 37445/- on account disallowance of loss on account of future and options transactions in stock exchange. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me due to client code modification amounting to Rs. 1 34760/- through one broker namely M/s Crimson financial services Ltd during the financial year 2008 - 09 relevant to assessment year 2009 - 10, notice under section 148 was issued and served on the assessee on 29/3/2016. Assessee filed a letter dated 24/05/2016 asking the assessing officer to consider the original return filed on 28/7/2009 as return filed in response to notice under section 148 of the act. Assessee requested for the reasons of reopening, which were given to the assessee on 25/05/2016 and notice under section 143 (2) were issued. The assessee filed its objection on 1/6/2016 against the reopening of the assessment which was disposed of by letter dated 18/10/2016. The learned assessing officer sent verification letter on 8/11/2016 under section 133 (6) to Crimson financial services Ltd requiring it to file certain details which were filed on 10/11/2016 about the client code modification. The broker narrated the method of client code modification and stated that there is no record generated or maintained at the time of such modification and hence it is not possible to confirm whether any client code modification has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's client code was also modified in all four contracts as supplied by the assessee. He also carried out verification of characters/ numerical modified and the position in the computer keyboard also to note that these errors could not be attributed to human mistakes as complete replacement of one client code with another client code cannot be a human punching error. He also noted that in all the four contracts the client code was modified with only one party that is M/s TCG stock broking limited which is very unlikely that it was due to human error as on all the four occasions on different dates and times, the client code of assessee is replaced with the code of same another person on all the occasions. He further noted that Mr. Satinder Pal Gupta is a common director in the broker of the assessee M/s Pee Aar securities Ltd and the assessee company and therefore it had the facility to change the client code at its convenience. In view of this, the learned assessing officer made an addition of Rs. 137455/- to the total income of the assessee on account of client code modification and there after determined the total income of the assessee at Rs. 189586/- against the returned incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be a material even under section 143 (1) of the income tax act to reopen the case of the assessee and in this case there is no material available with the assessing officer. He further submitted that that suspicion alone cannot repose the reasons for reopening of the assessment. He otherwise submitted that the material relied upon by the assessing officer, if any, are totally unsupported. For this proposition he relied on the decision of the honourable Delhi High Court in 398 ITR 198. Therefore he objected to the actions of the learned assessing officer under section 148 of the act stating that reopening proceedings are bad in law as well as on the marriage the additions are not warranted. Thus on reopening he argued that reopening deserves to be quashed. 8. On the merits of the issue, he submitted the statement of accounts from Crimson financial services Ltd for the assessment year 2009 - 10 and copies of all the contract notes issued. It was also put to our attention that the assessee has mentioned before the assessing officer that it is the onus on the assessing officer to show that there is an escapement of income on the basis of the above evidence. He further referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction in the name of the TCG stock broking private limited, of same group of companies as that of broker. 10. We have carefully considered the rival contentions and perused the orders of the lower authorities. We also carefully gone through the reasons recorded by the assessing officer for reopening of the assessment. The assessing officer refers to the survey report dated 11/3/2016 with respect to the client code modification and assessee being beneficiary client has taken contrived losses and shifted out profits during the financial year 2008 - 09 to 2010 - 11. He also mentions that SEBI has conducted a probe into the modification of the client Codes by the brokers pursuant to observation of the finance ministry about many such modifications taking place in derivatives transactions at the National stock exchange. Therefore, a detailed investigation was carried out and on the basis of the data received from National stock exchange, after analysis of data received from NSE and after considering the contentions of 12 brokers and few of their clients across India, it was concluded that client code modification has been used as a tool for tax evasion. The assessee company has red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but there has been failure to truly and fully disclose all material facts and information as the modus operandi of shifting profits was not known to the Revenue as not disclosed by the petitioner when the Assessing Officer passed the order in regular assessment proceedings. 4. We note that the reasons in support of the impugned notice accept the fact that as a matter of regular business practice, a broker in the stock exchange makes modifications in the client code on sale and / or purchase of any securities, after the trading is over so as to rectify any error which may have occurred while punching the orders. The reasons do not indicate the basis for the Assessing Officer to come to reasonable belief that there has been any escapement of income on the ground that the modifications done in the client code was not on account of a genuine error, originally occurred while punching the trade. The material available is that there is a client code modification done by the Assessee's broker but there is no link from there to conclude that it was done to escape assessment of a part of its income. Prima facie, this appears to be a case of reason to suspect and not reason to believe t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the change of client code of assessee by TCG stock broking Ltd, exact nature of the changes are also available, it was also known to him that it is not miss punching or but complete change of all the keys. Such finding was also backed by the survey report. Ld AR also relied heavily up on the decision of Honourbale Delhi High court in [2018] 99 taxmann.com 409 (Delhi)/[2017] 398 ITR 198 (Delhi). However looking to the facts of the present case factutal metrix heavily tilts on another decision of Honourable Delhi High court in [2019] 112 taxmann.com 204 (Delhi)/[2020] 268 Taxman 198 (Delhi) . hence reliance on the decision of Sahb Infrastructure does not help the case of assessee. In view of this, we do not find any infirmity in his action. Therefore ground number 2 of the appeal is dismissed. 14. As ground number three deals with the addition on its merit. The only argument of the assessee that it is placed on record all the documents and enter evidences in the shape of contract notes to discharge the burden. He therefore submitted that the loss has arisen in based on the above contract notes. It is also the claim that the share broker has categorically stated that he does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore same is dismissed. 16. This order is passed beyond 90 days of hearing due to extraordinary circumstances . Coordinate bench recently has dealt with this issue in 2020] 116 taxmann.com 855 (Mumbai - Trib.) where it has been held as under :- 11. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 19th February 2020, this order thereon is being pronounced today on the day of May, 2020, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders, provides as follows: (5) The pronouncement may be in any of the following manners:- (a) The Bench may pronounce the order immediately upon the conclusion of the hearing. (b) In case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date for pronouncement. (c) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon'ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6-5-2020 read with order dated 23-3-2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that "In case the limitation has expired after 15.03.2020 then the period from 15-3-2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown". Hon'ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, "It is also c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t situation Hon'ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed "while calculating the time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly". The extraordinary steps taken suo motu by Hon'ble jurisdictional High Court and Hon'ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words "ordinarily", in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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