ITAT Directs AO: Delete Addition for Client Code Modification, No SEBI Violation Found

Anavya Investments Pvt. Ltd Vs ITO (ITAT Delhi)

The case of Anavya Investments Pvt. Ltd. vs. ITO (Income Tax Officer) before the ITAT (Income Tax Appellate Tribunal) Delhi revolves around the reassessment proceedings initiated by the Assessing Officer (AO) for the assessment year 2010-11. The AO reopened the assessment based on information received regarding alleged tax evasion practices involving fictitious profits/losses through Client Code Modification (CCM) in the Future & Options (F & O) segment of the National Stock Exchange (NSE). The AO believed that the assessee had failed to disclose fully and truly all material facts necessary for assessment, leading to the escapement of income chargeable to tax.

However, upon examination, the ITAT found several key discrepancies and lack of tangible evidence in the AO’s approach:

1. Lack of Tangible Material: The ITAT observed that the reasons recorded by the AO for reopening the assessment did not mention the name of the assessee’s broker or specific details implicating the assessee in fraudulent CCM transactions. The information provided did not establish a direct link between the assessee and the alleged tax evasion practices.

Please become a Premium member. If you are already a Premium member, login here to access the full content.