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30-10-2019, Guthey Ramakrishna, Section 147(a), 148, Tribunal Visakhapatnam

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1 week 4 days ago #11276 by amit
Section - 147(a), 148
Order Date - 30-10.2019
Favouring - Assessee
Court - Tribunal Visakhapatnam
Appellant - Guthey Ramakrishna
Respondent - DCIT
Citation - 1119Taxpundit17
Appeal No. - I.T.A.No.372 & 373/Viz/2018
Asstt. Year - 2009-10 & 2010-11


PER : D.S.Sunder Singh

These appeals are filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-9, Hyderabad in I.T.A.No.10310 &10311/DCIT, Circle-4(1)/2017-18 dated 25.06.2018 for the Assessment Year (A.Y.) 2009-10 and 2010-11. For the sake of convenience, these appeals are clubbed, heard together and disposed of by a common order as under.

2. The assessee filed common ground challenging the issue of notice u/s 148 of the Income Tax Act, 1961(in short ‘Act’) in both the appeals. The assessee filed the return of income for the A.Y. 2009-10 on 29.09.2009, declaring total income of Rs.18,87,990/-. The assessment was completed u/s 143(1) of the Act. Subsequently, the Assessing Officer (AO) had issued the notice u/s 148 of the Act. In response to the said notice, the assessee filed the return of income requesting to treat the return of income already filed as return in response to the notice issued u/s 148 of the Act. Subsequently, the AO issued notice u/s 143(2) and 142(1) and completed the assessment on total income of Rs. 33,28,840/- for the A.Y.2009-10. In the assessment order, the AO made the addition of Rs.14,40,855/- relating to the profit on account of Client Code Modifications (in short ‘CCM’) shifted to other clients. Similarly for the A.Y. 2010-11, the reassessment was completed on total income of Rs.15,73,815/- against the returned income of Rs.12,70,540/- and the addition of Rs.3,03,275/- was made representing the income relating to CCM.

3. The AO reopened the assessment after having recorded the reasons which are extracted from para No.2 of the assessment order and reads as under :

“2. Subsequently, certain information emanated from the enquiries conducted by the Asst.Director of Income Tax (Inv), Unit-1(3), Ahmedabad was communicated to this office on 21.03.2016, the details of which are as under :

a. Consequent to observation of Finance Ministry about the modifications taking place in derivatives transactions at the National Stock Exchange (NSE), SEBI conducted a probe into ‘client code modification (CCM)” by brokers as such modifications could be misused for the manipulated activities in the market.

b. The Ahmedabad Investigation Directorate conducted surveys at the premises of some brokers and clients across India on 23.03.2015. After analyzing the data received from NSE and considering the contention of brokers, the ADIT (Inv), Unit-1(3) found that CCM has been used as a tool for tax evasion.

c. During the F Y.2008 09 to 2011-12, 4890 assessees availed “contrived losses”. As per Annexure B(Soft copy) enclosed, the details of assessees who have taken losses of Rs.1 lakh and above and assessees who shifted out profit of Rs.1 lakh and above were considered.”

From the reasons recorded above, it is observed that as per the information received from the Asst.Director of Income Tax (Investigation), Unit-1(3),Ahmedabad, it has come to the notice of the department that modifications that were taking place in derivatives transactions at the National Stock Exchange (NSE) by brokers through CCM were misused for the manipulated activities in the market. As a result, the profits were shifted to other clients and contrived losses were availed. The Investigation Wing of Ahmedabad Unit has passed on information stating that the assessee had availed the contrived losses for the year 2009-10 and 2010-11. The AO collected the information from the Ahmedabad Stock Exchange and noticed that certain profits earned by the assessee from trade of derivatives done through the share broker M/s Sree Bheemeswara Securities Pvt. Ltd. were shifted to other clients accounts to the tune of Rs.14,46,954.80 and ascertained profits of Rs.6,100/- were shifted to the assessee during the previous year relevant to the A.Y.2009-10 resulting in net reduction of income to the tune of Rs.14,40,854.80 in the hands of the assessee for the A.Y. 2009-10. Therefore, the AO believed that the assessee had shifted the profits, hence, issued notice u/s 148 of the Act. Before the AO, the assessee challenged the validity of issue of notice u/s 148 stating that CCM is very common in share trading due to mistakes committed by the employees in the office of the share broker and it is done at the level of share broker, but not by the assessee. Hence, there is no escapement of income in the case of the assessee. The AO rejected the contentions of the assessee and completed the assessment u/s 143(3) of the Act.

4. Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) confirmed the order of the AO.

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