ACIT Vs Dynamatic Developers Private Limited (ITAT Ahmedabad)
The Ahmedabad Bench of the Income Tax Appellate Tribunal examined a Revenue appeal challenging the deletion of additions made on account of alleged fictitious commodity trades through Client Code Modification (CCM) on the National Spot Exchange Limited (NSEL) platform for Assessment Year 2013–14. The Assessing Officer (AO) had reopened the assessment based on information from the Serious Fraud Investigation Office (SFIO) and SEBI, alleging that the assessee had manipulated trades through CCM via its broker. The AO treated certain purchases and sales as fictitious and made additions for alleged unexplained expenditure and money, along with taxing the profit from such trades separately as short-term capital gains, resulting in a substantially enhanced assessed income.
On appeal, the Commissioner (Appeals) deleted the additions after finding that the impugned purchase and sale transactions arising from CCM were already fully recorded in the assessee’s regular trading account. The Commissioner further noted that the profits from these transactions were also included in the profit and loss account and offered to tax. The Commissioner held that making separate additions for fictitious purchases, fictitious sales, and profits amounted to duplication of the same income.
Before the Tribunal, the Revenue argued that SFIO and SEBI findings had established systemic misuse of CCM on NSEL, including lack of physical delivery and broker-level manipulation, and that statements from the broker’s management supported the conclusion that the trades were bogus. The assessee countered that CCM was carried out by the broker without the assessee’s involvement, that all trades—whether modified or not—were duly disclosed in the books, and that the AO’s approach resulted in multiple additions of the same disclosed turnover and profit.
