Anusha Finvest Pvt. Ltd. Vs ACIT (ITAT Jaipur)
Substance Over Suspicion – Borrowed Satisfaction on Client Code Modification Not Valid – ITAT Jaipur Quashes 147
Background
- Return: Filed on 24.09.2010 declaring NIL income, processed u/s 143(1).
- Reopening: Based on info from Principal DIT (Inv.), Ahmedabad, alleging misuse of Client Code Modification (CCM) to book contrived loss of ₹5,67,147 in AY 2010-11.
- AO’s Action (21.12.2017):
Disallowed loss of ₹5,67,147 treating it as income from other sources.
Added 3% commission (₹17,014) for alleged payment to broker.
Total addition: ₹5,84,161.
CIT(A) Order (22.05.2024)
- Upheld AO’s action.
- Held reopening valid—based on specific info from Investigation Wing.
- Found CCM transactions were systematic shifting of losses, not genuine punching errors.
- Relied on McDowell & Co. Ltd. (SC) for “substance over form” principle & ITAT/HC precedents upholding addition in CCM cases.
Assessee’s Arguments before ITAT
- Reopening u/s 147 invalid—done mechanically on “borrowed satisfaction” without AO’s independent application of mind.
- Losses genuine, recorded in books & audited. Already had large carried forward losses—no motive to take contrived loss.
- Broker not cross-examined despite request—violation of natural justice.
- CCM by itself cannot prove evasion; needs corroborative evidence like cash exchange, which was absent.
- Relied on precedents: Coronation Agro (Bom HC), Pat Commodity Services (Bom HC), Kaizen Stock Trade (ITAT Ahd), Jaypee Financial Services (ITAT Del), Sandeep Sharma (ITAT Jpr), etc., which held that mere CCM suspicion without evidence cannot justify addition.
Tribunal’s Findings
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