ACIT Vs Shri Ravi Shankaran (ITAT Delhi)
ITAT Delhi Deletes Addition on Alleged Bogus Loss from Client Code Modification – No Evidence of Misuse Revenue appealed against CIT(A)’s order deleting addition of ₹3.63 crore, which AO had disallowed treating loss from Client Code Modification (CCM) as non-genuine.
Assessee, engaged in share transactions through registered broker Pace Stock Broking Services Pvt. Ltd., had filed return declaring loss of ₹5.44 crore. AO, based on Investigation Wing report from Ahmedabad, alleged misuse of CCM to purchase losses & reopened assessment u/s 147. Since broker did not respond to notice u/s 133(6), AO disallowed ₹3.63 crore loss citing bogus CCM entries.
CIT(A) deleted addition noting that AO had brought no concrete material to prove connivance between Assessee & broker or that CCM was misused. It was observed that even after disallowance, Assessee had huge carried forward loss of ₹1.80 crore, hence no motive to buy losses. Reliance was placed on ITAT Kolkata rulings in Amrabathi Investra Pvt. Ltd. & Manoj Kumar Damani where CCM-based additions were quashed.
Before ITAT, Revenue argued non-response of broker implied connivance. However, Tribunal noted contradictions- AO himself admitted broker never replied, yet Revenue claimed broker admitted misuse. Further, Revenue failed to identify scrips, counterparties, or any SEBI action. No evidence of money exchange or collusion was on record. ITAT also relied on its recent coordinate bench ruling in DCIT Vs. Gen X Commodities Pvt. Ltd. (25.07.2025), which held that mere CCM entries without corroborative material cannot justify disallowance.
