Case Law Details
Dinesh Mulji Patel Vs ITO (ITAT Pune)
This article analyzes the recent case of Dinesh Patel vs ITO before the ITAT Pune, where the question of client code modification by a broker and its implication on tax assessment was examined. This case has become significant as it defines the parameters of the initiation of reassessment proceedings under the Income Tax Act.
Analysis: In this case, the appellant, Mr. Dinesh Patel, who is engaged in land dealing and derivative trading, was identified as a beneficiary of fraudulent transactions known as “Client Code Modification”. A notice was issued under section 148 of the Income Tax Act, prompting an assessment which added a tax of Rs.2,74,015/- as unexplained income. However, Mr. Patel contested the initiation of proceedings, arguing there was no clear link between the client code modification and the escaped income. The ITAT Pune, drawing on a precedent set by the Bombay High Court, held that a mere client code modification by a broker couldn’t lead to the belief that there had been an escapement of assessment. The reassessment proceedings were deemed to be bad in law.
Conclusion: This case highlights the critical role of a clear link between information received and the initiation of reassessment proceedings. In Dinesh Patel vs ITO, the ITAT Pune reaffirmed that client code modification by a broker, by itself, cannot indicate tax evasion.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
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