TMI Blog2017 (3) TMI 1729X X X X Extracts X X X X X X X X Extracts X X X X ..... f trades / errors at the time of order entries are in excess of 2% of the number of orders executed, fine of 0.1% of value of trades transferred is applicable”. It is also noted from the records that the during the year the broker had carried out the broker had carried out 2380 modifications by using CCM facility which is only 0.18% of the total trades carried out by the broker during the year. It is noted that the assessee’s client code was set as default in the system is for the convenience of the broker. The assessee has no control over the system. The client brings to the notice of the broker any mistake/ error in the client code.It may be noted that in the case of ACIT vs. Kunvarji Finance (P) Ltd. [2015 (4) TMI 539 - ITAT AHMEDABAD] had observed that the client code modification is permitted intra day i.e. on the same day. - Decided in favour of assessee. - ITA No. 911/JP/2016 - - - Dated:- 23-3-2017 - Shri Bhagchand, J. Assessee by: Shri P.C. Parwal, CA Revenue by :Smt. Poonam Rai, DCIT-. DR ORDER Bhagchand, AM The assessee has filed an appeal against the order of the ld. CIT(A), Alwar dated 07-10-2016 for the assessment year 2010-11 raisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee on 15-04-2015 by the Department. In such a situation, I do not find force in the arguments of the ld. AR of the assessee and thus Ground No. 1 of the assessee is dismissed. 3.1 Apropos Ground No. 2 and 2.1 of the assessee, the facts as emerges from the order of the ld. CIT(A) is as under:- 5.3.1. I have gone through the assessment order as well as submissions made by the appellant. Following facts have emerged. 1. That the appellant is a partnership firm engaged in the business of trading in share. 2. That the firm is doing trading on its own behalf and on behalf of its clients. 3. That on the basis of an information received from Directorate of Income Tax (Intelligence Criminal Investigation) that the appellant had booked a loss of ₹ 27,63,104/- due to modification made by the assessee in F O segment to the third parties through the Client Code Modification facility. 4. That the AO had reopened the case u/s 148 of the Act by duly recording the reasons. 5. That the detail of reopening was provided to the assessee on 17-04-2015. 6. That the assessee firm had raised objections to the reopening proceedings. The objections were duly consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modifications are done 2380 times involving 55 clients over a period of 197 days during the year under consideration. Mistake cannot be repeated so brazenly over such a number of times. Even if the end of the session, still the facility cannot be allowed to be manipulated for undue gains and create a situation where the income/loss can be diverted. In this regard, I have also taken into account the Apex court judgement in the case of Mcdowell Co. Ltd. It is worthwhile to quote from the landmark judgement as under:- Misra,J. who delivered judgement on behalf of himself and three other Judges (other than Reddy. J.) extracted the following observation from the judgement of Gujarat High Court (ITR pp 200- 01) in the case of CIT vs. Sakarlal Balabhai (affirmed by the Supreme Court in CIT vs. Vadilal Lallubhai): (SCC 253-54, para 43) Tax avoidance postulates that the assessee is in receipt of amount which is really and in truth his income liable to tax but on which he avoid payment of tax by some artifice or device. Such artifice or device may apparently show the income as accruing to another person, at the same time making it available foruse and enjoyment to the assessee&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn account and for it clients. The assessee, itself, is a client of M/s Artistic Finance Pvt. Ltd which carried out transactions on behalf of the assessee and the clients of the assessee. Every client is assigned a unique client code which is punched in at the time of transactions. The AO issued notice u/s 131 to M/s Artistic Finance Pvt. Ltd. who vide letter dated 05.03.2016 (PB 37-38) explained that the assessee is its major client and provides them with a huge volume of transactions. The operating staff who are not well qualified, to save time had prefixed the client code of the assessee in the system as default which led to error in punching of client codes at the time of transactions. To rectify the error in punching of client code, a facility known as Client Code Modification (CCM) is provided by the stock exchange till 4:15 PM of the trade day itself. This can be done on only written request of the clients (Copies of letters enclosed at PB 39- 46). 2. It is submitted that in any given day, thousands of transactions are carried out by brokers. The CCM facility is provided by the National Stock Exchange to rectify the errors / mistakes made at the time of punching trades. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Reliance in this connection is placed in the case of ACIT Vs. Kunvarji Finance Pvt. Ltd. 119 DTR 1 (Ahd.) (Trib.) where it was held that as per Circular No. MCX/T S/032/2007 dt. 22.01.2007 issued by the Commodity Exchange, client code modification is permitted intra-day i.e. on the same day. There is no penalty if the client code modification is upto 1 per cent of the total orders. In the present case, client code modifications made by the assessee being only 0.94 per cent i.e. less that 1 per cent of the total trading transactions, cannot be said to be unusually high or mala fide when the modification was made on the same day. Had the client modification been done after the transaction period when the price of the commodity had changed, then perhaps there could have been some basis to presume that client code modification was intentional. Even if the view of the Revenue is accepted that client code modification was done with mala fide intention, then the profit or loss accruing till the client code modification can be considered in the case of the assessee but the profit/loss arising after such modification can by no stretch of imagination be considered in the hands of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he client brings to the notice of the broker any mistake/ error in the client code. It may be noted that ITAT Ahemdabad Bench in the case of ACIT vs. Kunvarji Finance (P) Ltd. 119 ld. DR 1 had observed that the client code modification is permitted intra day i.e. on the same day. The relevant portion of the decision is as under:- As per Circular No. MCX/T S/032/2007 dt. 22.01.2007 issued by the Commodity Exchange, client code modification is permitted intraday i.e. on the same day. There is no penalty if the client code modification is upto 1 per cent of the total orders. In the present case, client code modifications made by the assessee being only 0.94 per cent i.e. less that 1 per cent of the total trading transactions, cannot be said to be unusually high or mala fide when the modification was made on the same day. Had the client modification been done after the transaction period when the price of the commodity had changed, then perhaps there could have been some basis to presume that client code modification was intentional. Even if the view of the Revenue is accepted that client code modification was done with mala fide intention, then the profit or loss accruing till th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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