Case Law Details
Chandresh Luniya Vs ITO (ITAT Ahmedabad)
The facts in brief are that the assessee in the present case is an individual and engaged in the activity of derivative business of shares and securities. In the present case it was found by the AO that the assessee has obtained the benefit of accommodation entries by way of client code modification used by the broker namely M/s Mehta Finstock Pvt. Ltd. Thus the losses claimed by the assessee for Rs. 12,56,760/-, on account of client code modification was disallowed and added to the total income of the assessee.
CIT (A) held that Client Code Modifications have been made in as many as 63 transactions, It is difficult to understand how genuine punching errors can occur in such large numbers. One can understand if an error is made on one or two occasions. However, the error in punching on 63 separate occasions in respect of the same broker and client is highly unlikely and suspicious. All the derivative transactions took place with same broker but on different dates. It is very unlikely that the same mistake will be committed by same person on various dates. Especially since the error in. entry of client code has to be corrected on the same date. It is unlikely that the same broker will keep on making error and correcting it again and again within a short span of time. Addition made by the AO cannot be taken to be based merely on suspicions, conjectures and surmises, as he has collected information from the National Stock Exchange as well as the appellant’s broker before arriving at his decision.
We have heard the Ld. DR and perused the materials available on record. At the outset, we note that the matter has already been listed for hearing on several occasions but none appeared on behalf of the assessee despite the fact that the notices for hearing were issued at the given address of the assessee. It is the trite law that the assessee should be vigilant enough to pursue the appeal after filing the same. The law assist those who are vigilant in their rights and not those who sleep on their own rights. In the absence of any contrary information available on record and after considering the fact that the Ld. CIT(A) has passed a detailed reasoned order as discussed above, we do not find any infirmity in the order of the authorities below. Hence, the ground of appeal of the assessee is dismissed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-7, Ahmedabad, dated 06/10/2017 arising in the matter of assessment order passed under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Year 2009-2010.
2. The assessee has raised the following grounds of appeal:
1.1 The order passed u/s.250 on 06.10.2017 for A.Y. 2009-10 by CIT(A)-7. Abad upholding the addition of Rs.12,56,760/- on account of client code modification (CCM) made by AO is wholly illegal, unlawful and against the principles of natural justice.
1.2 The Ld.CIT(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned addition.
2.1 The Ld.CIT(A) has grievously erred in law and on facts in confirming the addition of Rs.12,56,760/- on account of client code modification (CCM).
2.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought not to have upheld the addition of Rs.12,56,760/- on account of client code modification (CCM).
3.1 The Ld.CIT(A) has grievously erred in law and on facts in confirming the impugned addition without appreciating that the appellant was not furnished complete details/ material/statements etc. relating to CCM and without providing the opportunity to cross-examine the concern parties.
4.1 The Ld.CIT(A) has failed to appreciate that the reopening of regular assessment by notice u/s.147 itself was illegal, unlawful and without jurisdiction since the condition precedent for reopening were not fulfilled.
5.1 Without prejudice to above and in the alternative, the addition confirmed by CIT(A) is highly excessive and calls for reduction.
It is, therefore, prayed that the addition of Rs.12,56,760/- upheld by the CIT(A) may kindly be deleted.
3. The only interconnected issue raised by the assessee is that the Ld. CIT(A) erred in confirming the addition of Rs. 12,56,760/- on account of undisclosed income of the assessee.
4. The facts in brief are that the assessee in the present case is an individual and engaged in the activity of derivative business of shares and securities. In the present case it was found by the AO that the assessee has obtained the benefit of accommodation entries by way of client code modification used by the broker namely M/s Mehta Finstock Pvt. Ltd. Thus the losses claimed by the assessee for Rs. 12,56,760/-, on account of client code modification was disallowed and added to the total income of the assessee.
5. Aggrieved assessee preferred an appeal to the Ld. CIT(A), who also confirmed the order of the AO by observing as under:
4.2 I have carefully considered the assessment order, facts of the case and the submissions made by the appellant. The AO made the impugned addition holding that the appellant got benefit of CCM done by the broker, which was done with a inalafide intention, to avoid taxes on true income. The appellant on the other hand claimed that the client code modifications were carried out by the broker to rectify genuine punching errors on the same day that the errors were made, and that since were committed at the broker’s end, the assessee could not he penalized.
4.3 From a perusal of all the details on record and submissions, the following observations are made-
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- Client Code Modifications have been made in as many as 63 transactions, It is difficult to understand how genuine punching errors can occur in such large numbers. One can understand if an error is made on one or two occasions. However, the error in punching on 63 separate occasions in respect of the same broker and client is highly unlikely and suspicious.
- The broker, Mehta Finstock Pvt Ltd, Mumbai, has in response to a query from the AO, stated that it cannot provide any details of CCM made in the case of the appellant.
- Provision of penalty by SEDI in case of CCM has led to a sharp decline in CCM instances. This goes to prove that CCM was being done in a calculated manner by the brokers with active participation of clients.
- If the contention of the appellant that modifications had to be carried out due to human errors is to be considered, the fact cannot be ignored that chances of human error on all the occasions are negligible, in this case, 63 instances.
- All the derivative transactions took place with same broker but on different dates. It is very unlikely that the same mistake will be committed by same person on various dates. Especially since the error in. entry of client code has to be corrected on the same date. It is unlikely that the same broker will keep on making error and correcting it again and again within a short span of time.
All cases of client code modification are with the same broker and this also indicates collusion, since the appellant must be dealing with a number of brokers and all the losses due to CCM have been with one broker only.
4.4 The appellant relied on various case laws in support of its submissions. However, the facts in these cases are at variance with the facts in this case. Moreover, the addition made by the AO cannot be taken to be based merely on suspicions, conjectures and surmises, as he has collected information from the National Stock Exchange as well as the appellant’s broker before arriving at his decision.
4.5 In view of the discussion above, the addition of Rs.12,56,760/- made by the A.O. is confirmed and the grounds of the appellant are dismissed.
6. Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.
7. The Ld. DR before us submitted that the assessee is not co-operative and further vehemently supported the order of the authorities below.
8. We have heard the Ld. DR and perused the materials available on record. At the outset, we note that the matter has already been listed for hearing on several occasions but none appeared on behalf of the assessee despite the fact that the notices for hearing were issued at the given address of the assessee. It is the trite law that the assessee should be vigilant enough to pursue the appeal after filing the same. The law assist those who are vigilant in their rights and not those who sleep on their own rights. In the absence of any contrary information available on record and after considering the fact that the Ld. CIT(A) has passed a detailed reasoned order as discussed above, we do not find any infirmity in the order of the authorities below. Hence, the ground of appeal of the assessee is dismissed.
9. In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the Court on 31/05/2022 at Ahmedabad.
