TMI Blog2016 (8) TMI 1488X X X X Extracts X X X X X X X X Extracts X X X X ..... ally been received by the assessee. In view of the totality of the above facts, we do not find any justification to interfere with the order of the CIT(A) in this regard and the same is sustained - Decided against revenue. - IT(ss)A No.409/Ahd/2013 - - - Dated:- 31-8-2016 - SHRI RAJPAL YADAV, JUDICIAL MEMBER And SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER For The Appellant : Ms.Urvashi Shodhan For The Respondent : Shri James Kurian, Sr.DR ORDER PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : This appeal by the Assessee is directed against the order of the Commissioner of Income Tax(Appeals)-XVI, Ahmedabad dated 01/10/2012 for the Assessment Year(AY) 2006-07. 2. The relevant facts as culled out from the materials on record are as under:- 2.1. Assessee is a partnership-firm stated to be engaged in the business of manufacturing of packaged drinking water. Assessee filed its return of income for AY 2006-07 on 31/12/2006 declaring total income of ₹ 7,57,228/-. The case was initially processed u/s.143(1) of the Income Tax Act.1961 (hereinafter referred to as the Act ). A search and seizure of action u/s.132 of the Act was conducted in the case of Kunw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne client to another i.e. purchase of losses/reduced profits. AO has erred in facts and in law in coming to the conclusion that there is a suppression of profits by adopting the methodology of Client Code modifications. 5. AO has erred in facts and in law and not accepting the references of the following details, which are very important in the appeal matter. During the Assessment proceedings CA Shri Ashok Gupta has drawn the attention of respected AO that Siddhi Beverages was Proprietorship concern of Smt. Meenaben Parikh upto 07.11.2005 and w.e.f 08.11.2005, it is a partnership firm having two partners namely Meena Parikh and Jay M. Parikh. AO-Deputy Commissioner of Income Tax Circle-1 Ahmedabad has assessed Smt. Meenaben Parikh for A.Y. 2006- 07 (F.Y.2005-06). Deputy C.I.T, Central Circle-l(l) Ahmedabad vide his order dt.29.12.2011 for A.Y.2006-07, In case of Smt. Meena Parikh, have added ₹ 3167986/-, addition on an account of suppressed profit. Smt. Meena Parikh has preferred an Appeal to C.I.T.(A)-1 Ahmedabad. C.I.T (A) vide his order dt. 18.01.2011 has deleted the addition of ₹ 3167986/- on account of suppressed profit. This facts are conveyed and disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the Rule 8 of ITAT Rules, 1963 but the prayer in the grounds raised be treated as the effective ground. She further submitted that assessee does not wish to press ground No.2 with respect to challenging the assessment order framed u/s.153C r.w.s. 153A of the Act and therefore the ground No.2 be treated as not pressed. In view of AR s submission, Ground No.2 is dismissed as not pressed. 3.1. We now proceed to dispose of other ground of assessee. 3.2. AO noticed that the proprietorship-firm Siddhi Beverages (Proprietor Meenaben M.Parikh) was converted into partnership-firm w.e.f. 08/11/2005 with Meenaben M.Parikh and Shri Jay Markand Parikh as its partners with profit sharing ratio of 60% and 40% respectively. It was noticed that assessee was engaged in commodity transactions through its broker Kunwarji Commodity Brokers Pvt.Ltd. AO noted that discreet enquiries conducted by Investigation Wing revealed that M/s.Kunwarji Commodity Brokers Pvt.Ltd. (KCBPL) had done client code modification for an unusually very high number of times with malafide intention and for the purpose of transferring the profits/losses from one client to another. AO noted that Meenaben Parikh, Proprieto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition deserves to be deleted in this case also. The appellant has also argued that the Assessing Officer has not considered communications made by M/s.KCBPL. The arguments put forth by the appellant have been examined in detail and have been found to be devoid of any meritorious consideration. 6.2. The appellate order bearing number CIT(A)-I/CC.1(1)/301/2009/10 dated 12.01.2011 of CIT(A)-1, Ahmedabad have been examined. It has been noted that while deleting the additions made by DCIT Circle-1(1) Ahmedabad, Learned CIT(A)-1, Ahmedabad has placed reliance on his own order passed in the case of KCBPL. A perusal of the said order shows that learned CIT(A)-1, Ahmedabad has based his findings, inter alia, upon following:- the mismatch has been worked out by the Assessing Officer only on account of assumption of notional profit being embedded in client code modifications. the profits accrued to the clients match with the books of accounts the number of client code modifications is minuscule when compared with total transactions undertaken by the broker a large number of planned code modifications were actually done by clients of KCBPL themselves th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rieved by the order of ld.CIT(A), assessee is now in appeal before us. 5. Before us, Ld.AR reiterated the submissions made before AO and ld.CIT(A) and further submitted that the issue is covered in favour of assessee by the decision of Coordinate Bench (ITAT A Bench Ahmedabad) in assessees case (M/s.Kunvarji Finance Pvt.Ltd. Others), order dated 19/03/2015. On the other hand, ld.Sr.DR supported the orders of the AO ld.CIT(A). 6. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The issue in the present case is with respect to addition on account of suppressed income due to client code modifications. We find that the Coordinate Bench of Tribunal in a consolidated order dated 19/03/2015 in the case of Kunvarji Finance Pvt.Ltd. in IT(ss)A Nos.615 to 618/Ahd/2010 for AYs 2005-06 to 2008-09 Others (where the assessee by way of IT(SS)A No.301/Ahd/2011 for AY 2006-07 was also one of the party), had decided the issue in favour of assessee by holding as under:- 8. We have carefully considered the arguments of both the sides and perused the material placed before us. The Assessing Officer be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m measure only upto March 31, 2007 and after this date the said facility will be completely stopped. With reference to point C. as referred above, Members may please note that the client code modifications will be allowed only upto 11:55 p.m. in international referenceable commodities (i.e. commodities traded upto 11:55 p.m.) Members are requested to take note of the FMC directives and ensure strict compliance. From the above, it is evident that client code modification is permitted intra-day, i.e. on the same day. As per Commodity Exchange, if client code modification is upto 1% of the total orders, there is no penalty and if it is greater than 1% but less than 5%, the penalty is ₹ 500/-. If it is greater than 5% but less than 10%, penalty is ₹ 1000/- and if it is greater than 10%, then penalty is ₹ 10,000/-. From the above, the only inference that can be drawn is that as per MCX, the client code modification upto 1% is absolutely normal and therefore, the broker is permitted to modify the client code upto 1% without paying any penalty. Even client code modification upto 5% is not considered unusually high because that is also permitted with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and not till the period by which the client code modification took place. Even if the view of the Revenue is accepted that the client code modification was with malafide intention, then the profit or loss accrued till the client code modification can be considered in the case of the assessee but by no stretch of imagination the profit/loss arising after the client code modification can be considered in the hands of the assessee. 11. The ld. CIT(A) in paragraph 4.13 of his order has also recorded the findings that all transactions at the Commodities Exchanges have been duly accounted in the books of account maintained by the concerned parties. Such profits/loss has been duly accounted whenever the transactions have been closed. Thus, whatever profits have been generated or accounting of actual trade, have been offered and brought to the charge of tax in the cases of concerned assessees. These findings of fact recorded by the ld. CIT(A) has not been controverted by the Revenue 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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