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2023 (12) TMI 399 - ITAT MUMBAIDisallowing loss in F&O due to change in client code modification done by broker - AO disallowed proportionate BSE/NSE charges by allocating the same in proportion of turnover of delivery and non-delivery based transaction - AO received information from the office of the Director of the Income-tax, Mumbai that assessee was one of the beneficiary of tax evasion by way of client code modification on stock exchange and taking excess loss - HELD THAT:- AO has nowhere provided details of the transactions where client code modification was carried out nor he given reasons as why the said client code modification was not for genuine purposes and for the purpose of the evasion of the tax. In absence of providing any such material to the assessee, the addition by the Assessing Officer is against the principle of natural justice. AO has neither called for the broker and made any inquiry and made addition simply on the basis of the report of the Director of the Investigation. Thus the addition made being on presumption that the client code modification carried out was for non-genuine purposes. Accordingly, the addition made by the AO and upheld by the Ld. CIT(A) being based on the presumption and being without supporting any documentary evidence that assessee has evaded the tax on those transactions and shown fictitious loss, is deleted and the order of Ld CIT(A) is set aside. The grounds of appeal of the assessee are accordingly allowed. Penalty u/s 271(1)(c) - Defective notice u/s 274 - Assessee argued that relevant limb for levy of the penalty i.e. concealment of the particulars of income or furnishing of inaccurate particulars of the income, has not been stricken off in the notice u/s 274 r.w.s. 271(1)(c) - HELD THAT:- We find that the AO has not stricken off the relevant limb for levy of the penalty and not specified whether the penalty has been initiated for concealment of particulars of income or furnishing inaccurate particulars of income. The Hon’ble Bombay High Court in the case of Mohd Farhan A Shaikh [2021 (3) TMI 608 - BOMBAY HIGH COURT] held that where penalty notice has not specified for charges for levy of the penalty, whether it is for concealment of the particulars of the income or furnishing inaccurate particulars of income, in such circumstances, levy of the penalty is bad in law and accordingly cancelled.
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