Vipul Bansal Vs ITO (ITAT Mumbai)
ITAT Mumbai held that artificial profits or losses arising from Client Code Modification in share transactions carried out in F&O segment requires transaction-wise reconciliation. Accordingly, matter restore to the file of AO.
Facts- The assessment of the assessee was reopened u/s. 147 of the Act. Accordingly, notice u/s. 148 was issued on 21.09.2016 on the basis of information received from the Directorate of Investigation and Central Intelligence (DIT (I&CI)) through the Additional Commissioner of Income-tax, Range 10(1), Mumbai, alleging that the assessee had availed artificial profit or loss through Client Code Modification (CCM) in share transactions carried out in the F&O segment. Pursuant to the reopening, reassessment proceedings were completed under section 143(3) read with section 147 vide order dated 19.12.2017, whereby the Assessing Officer recomputed the total income of the assessee at Rs. 2,73,92,450/-.
During the reassessment proceedings, AO observed that certain brokers were misusing the client code modification facility provided by the stock exchange to create fictitious profits and losses. According to AO, the modus operandi involved execution of trades at different rates and subsequent modification of client codes so as to shift profits to selected clients and corresponding losses to others. Accordingly, AO held that the loss(profit as disclosed by the assessee)claimed by the assessee in the F&O segment amounting to Rs. 1,33,31,648/- was non-genuine and disallowed the same u/s. 37(1) of the Act, treating it as “suppression of profit”.
