ITO Vs Lalkar Commodities Pvt Ltd (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, in the case of ITO vs. Lalkar Commodities Pvt Ltd, has upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] to restrict an addition of to 1% of the total transaction value. The restriction was based on the finding that the assessee acted solely as a broker in the disputed transactions and was not the ultimate beneficiary of the alleged tax evasion scheme involving client code modification.
ITAT Upholds 1% Addition on Broker Transactions in Client Code Misuse Case
The case originated from the reopening of the assessment for the Assessment Year (AY) 2012-13. The Assessing Officer (AO) initiated action based on information received from the Deputy Director of Income Tax (DDIT), Mumbai, alleging that the assessee, Lalkar Commodities Pvt Ltd, was involved in the misuse of the ‘client code modification’ feature on the National Spot Exchange Limited (NSEL) to evade tax by converting taxable income into losses.
The AO specifically identified that the assessee’s original Unique Client Code (UCC) S0760 was modified to UCC K0142 in transactions, and consequently added the entire amount of to the assessee’s income, treating it as unexplained income derived from the scheme.
