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2017 (5) TMI 1715 - AT - Income TaxLoss on account of derivative activities - modification of the client code - AO believed the client code modification to be mala fide to escape the tax liability - AO confirmed the aforesaid loss from National Stock Exchange (NSE) u/s 133(6) and found that several modifications were carried out by these brokers in the codes of the client - HELD THAT:- On perusal of the records we find that client code modification was done negligible nos. of times whereas the total number of trade transactions are 3,11,866 only. Thus the client code modification is less than 1 per cent of the total trading transactions. It is undisputed fact that the client code was modified fewer number of times and this fact was very much in the knowledge of the stock exchange. It is because that the information for the modification of the client code was gathered by the AO from the NSE which proves beyond doubt that the assessee has not modified any client code without informing to the NSE. Had there been mismatch in the code between the report submitted by the broker of the assessee and that of the NSE, the question/doubt on the genuineness of the transaction arise? No justification for the allegation of the AO that the client code modification was with the mala fids intention. When the client code was modified on the stock exchange without informing the same day then it can be inferred there is some mala fide intention. Had client modification done after the transactions period when the price of the commodity has already changed, then perhaps there could have been some basis to presume that client code modification is intentional. However, when the client code modification is done online on the stock exchange, in our opinion, there was no basis or justification to hold the transaction to be bogus. All transactions at the exchanges have been duly accounted in the books of account maintained by the concerned parties. Such profit/loss has been duly accounted whenever the transactions have been closed. Thus, whatever profits/loss have been generated or accounting of actual trade, have been offered and brought to the charge of tax in the cases of concerned assessee. These findings of facts recorded by the ld CIT(A) have not been controverted by the Ld. DR at the time of hearing before us. When the transaction has been duly accounted for and the profit/loss has accrued to the concerned parties in whose names transactions have been closed, there cannot be any basis or justification for considering those profit/loss in the case of the assessee on the basis of mere presumption or suspicion. It is not the case of the Revenue that such alleged has not actually been incurred - Decided in favour of assessee.
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