TMI Blog2020 (12) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances. Whole basis of making additions in the hands of the assessee is information of DIT (Inv.) wherein it was alleged that the profits were shifted by client code modification. To substantiate these allegations was the onus of revenue. The assessee had filed confirmatory letters of all category-3 clients wherein all these clients owned up the transactions and also confirmed that the profits so earned by them on these transactions were duly reflected in their respective returns of income. These confirmations could not be controverted by the revenue. By filing these documentary evidences, the assessee had duly discharged its onus to prove the genuineness of the modifications. AO, despite being provided with another opportunity by way of remand proceedings, could not rebut the evidences filed by the assessee and failed to bring on record any adverse material against the assessee to dislodge the assessee s claims. No additions are sustainable in law on mere doubts, conjectures or surmises. The onus was on revenue to substantiate the allegations with corroborative evidences. However, this onus has remained un-discharged. Decided in favour of assessee. - I.T.A. No. 1944/M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age nos. 67 to 69 of the impugned order. 3.1 Facts in brief are that the assessee being resident firm is stated to be engaged in trading of shares and derivatives. It works as a sub-broker for another entity namely M/s Inventure Growth Securities Ltd. (IGSL). The assessee s case for year under consideration was subjected to reassessment proceedings pursuant to receipt of certain information from Director of Income Tax (Intll. criminal inv.), Mumbai regarding tax evasion through client-code modification (CCM) with a view to reduce overall tax liabilities by shifting profits. Accordingly, the case was reopened by issuance of notice u/s 148 on 19/03/2015 as per due process of law and an assessment was framed u/s 143(3) r.w.s. 147 on 23/02/2016 wherein the assessee was saddled with additions of ₹ 347.17 Lacs on account of alleged undisclosed profit on future and option (F O) transactions in shares. Against these transactions, the commission was estimated at ₹ 3 Lacs which was also added to the income of the assessee. However, upon further appeal, Ld. CIT(A) provided substantial relief to the assessee but sustained addition to the extent of ₹ 85.29 Lacs with res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number of clients. Most of these errors were rectified immediately upon realization of the mistake after close of trading hours. It was also submitted that stock exchange had not charged any penalty / fine for such CCM transactions for the years under consideration. These facts were subsequently confirmed by M/s IGSL also. 3.6 However, not convinced, Ld. AO formed an opinion that the client codes were modified in a structured manner after ascertaining the position of profit / loss required to be accommodated. Few of the clients whose codes were modified had common addresses which would lead to a conclusion that the benefit of CCM was provided to certain persons of same group / family. 3.7 The data compiled by Ld. AO revealed that the net result of all client-code modifications was loss of ₹ 347.17 Lacs which was significantly disproportionate to the overall profit of ₹ 637.95 Lacs earned by the assessee in F O segments. Although the modified trades were 1.15% in terms of total trade but they resulted into more than 50% of loss of overall profits of the assessee. Therefore, modifications could not be accepted to be genuine. Finally, the profit of ₹ 347.17 La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned order. It was reiterated that modification was done to correct the genuine punching errors which took place at the time of carrying out the transactions. The mechanism adopted by the assessee was stated to be a common practice in the trade. The assessee also pleaded that adverse material as received from DIT (Inv.) being relied upon by Ld. AO was never confronted to the assessee for rebuttal and cross-examination of persons conveying such information. Further, the additions made on mere presumptions and suspicions without any evidences would be invalid in the eyes of law. The Ld. AO did not bring on record any material to show that the client-code modification was not genuine one. The assessee also placed on record the confirmation of all the Category- 3 clients who owned the respective transactions carried out in their account. They also submitted that the income so earned by them was duly reflected in their respective Income Tax Returns for the year under consideration. The copies of all such confirmations have also been placed before us in the paper-book and we have duly considered the same. 4.3 Since the assessee had furnished additional evidences during the course of ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock-brokers to modify the same within certain norms. We find that no such norms have been shown to have been violated by the assessee while carrying out the modification. No penalty is shown to have been imposed on the assessee since the modification done by the assessee was only to the extent of 1.15% of total trades which could not be termed as abnormal on the given facts and circumstances. 6. We also find that the whole basis of making additions in the hands of the assessee is information of DIT (Inv.) wherein it was alleged that the profits were shifted by client code modification. To substantiate these allegations was the onus of revenue. The assessee had filed confirmatory letters of all category-3 clients wherein all these clients owned up the transactions and also confirmed that the profits so earned by them on these transactions were duly reflected in their respective returns of income. The copies of confirmations have been placed on page nos. 143 to 172 of the paper-book. These confirmations could not be controverted by the revenue. By filing these documentary evidences, the assessee had duly discharged its onus to prove the genuineness of the modifications. The Ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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