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TMI Blog2025 (2) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... , A.M. For the Appellant : Dr. K. Shivaram a/w Mr. Shashi Behkal For the Respondent : Shri R.R. Makwana, Addl. CIT ORDER PER SAKTIJIT DEY, V.P.: 1. The Captioned appeals by the Revenue and Cross Objections by the assessee arise out of two separate orders passed by National Faceless Appeal Centre (NFAC), Delhi pertaining to Assessment Years (AY) 2012-13 and 2014-15. 2. At the first instance, we will deal with the appeals filed by the Revenue. Common issue arising in both the appeals relates to deletion of additions made on account of Client Code Modification relating to commodity trading. 3. Briefly the facts, more or less common, in both the appeals are, the assessee is a resident corporate entity stated to be engaged in manufacturing and trading activities. For the assessment years under dispute, the assessee had filed its return of income under Section (u/s.) 139(1) of the Act, declaring income of Rs. 60,14,050/- and Rs. 2,84,14,510/- for the Assessment Years (A.Ys) 2012-13 and 2014-15 respectively. The returns filed for these assessment years were selected for scrutiny and assessments were completed u/s. 143(3) of the Act. Post completion of assessments as aforesaid, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that on identical reasoning assessment for AY 2013-14 was reopened u/s. 147 of the Act. However, in an order passed u/s. 148A(d) of the Act, the AO, after making necessary enquiry and examining all the evidences found that there was no specific allegation in the report of the Serious Fraud Investigation Office (SFIO) or DDIT (Investigation) against the assessee. The AO had also observed that there was no finding in the report of the authorities concerned that assessee's own fund has been brought back in the form of profits on the NSEL platform. The AO had also recorded a factual finding that through documentary evidences, the assessee had established that its own funds were utilized to conduct transactions on the NSEL platform. Thus, taking cognizance of these facts, the AO concluded that there was no escarpment of income viz- a-viz transaction entered on NSEL platform. Thus, upon analysis of the aforesaid facts, learned first Appellate Authority concluded that the additions made on the allegation that the transactions are non-genuine/bogus on account of client code modifications are unsustainable. 6. Before us, learned Departmental Representative (DR) strongly relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation in NSEL and shared the report with DGIT(Inv), Mumbai. In the report, the issue of client code modification has been discussed in cases of few brokers. During the course of investigation, the details of client code modification were called for from the NSEL and as per the data there are total 219 brokers who have made 51565 client code modification and the volume of sale and purchase transactions is 6311 crore. During the investigation, it is revealed that the brokers indulged in rampant client code modification where dummy/ghost client code were used to book trades and later the client codes were modified. The trading done in NSEL was in the form of paired contracts. The purchases and sales were executed on the same day. Contract note was received in the evening for both purchase and sale. The Brokers were found to be involved in unauthorized funding to the clients by obtaining funds from their NBFC subsidiaries. The Brokers had also stated that the verification of quality and quantity of goods was done by NSEL. The borrowers and borrowing brokers were supposed to deliver and deposit the goods in NSEL owned/accredited godowns. The warehouse receipts were then issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has made the transactions under paired contracts. Under the paired contract, generally the purchases were made at T+2 cycle and sales were made at T+25 or T+35 cycle. Under these transactions, the assessee made full payment for purchase immediately and delivery of the commodity lying in the warehouse was assigned to it. The transactions were subjected to VAT, delivery charges, service tax. As far as sale is concerned, the assessee immediately put a contract for sale on T+25 and T+35 and delivery was assigned from buyer to the seller. The amount is received as and when the transaction is completed. In the assessment years 2013-14 whatever the transactions were made on NSEL, whatever the profits or losses obtained, the same were duly disclosed in the profit & loss account and assessed as business income. From the above discussion the conclusion is drawn that assessee has traded on the platform of NSEL and offered the profit of Rs. 4,48,09,881 for taxation. There has been no specific allegation against the assessee company in the report of SFIO or DDIT(Inv) report. There has been no finding in the report that assessee's own fund has been brought back in the form of profits ..... X X X X Extracts X X X X X X X X Extracts X X X X
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