ASSISTANT COMMISSIONER OF INCOME TAX 32(1), MUMBAI, MUMBAI, KAUTILYA BHAVAN BKC vs. ARVIND SHANTILAL SHAH, MUMBAI

PER OM PRAKASH KANT, AM

These two appeals by the Revenue are directed against two separate orders dated 27.11.2024 and 28.11.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless
Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year
2011-12, i.e. the first appeal being in relation to the quantum assessment proceed penalty levied by income/furnishing of 2. First, we take
541/Mum/2025. Th under:
1. "Whether o and in law, t
99,26,115/ - account of pro
2. "Whether o and in law. th losses to the genuine?"
3. "Whether o and in law, th
Rs. 1.98:522
alleged broke profit earned
4. "Whether o and in law, th the informati assessee is i fictitious pr brought forw
3. Briefly stated, engaged in the bu commission and sha long and intraday.
12.10.2010 declaring view of information
ITA Nos.

ings, whereas the second ap the Assessing Officer for c f inaccurate particulars of incom up the appeal of the assess he relevant grounds raised are on the fact and in the circumstances of the Ld. CIT(A) erred in deleting the addit made u/s 68 of the Income tax Act by ofit through client code modification?"
on the fact and in the circumstances of he Ld. CIT(A) erred in allowing the carry f e assessee holding the earning of prof on the fact and in the circumstances of he Ld. CIT(A) erred in deleting the additio
2/ - on account of unexplained expen erage payment @ 2 % of Rs. 99,26.11
through client code modification?"
on the fact and in the circumstances of he Ld. CIT(A) erred in gnoring the fact th ion received from DCIT (Intell& CR.
involved in client code modification and rofit for the purpose of setting ward loss?
facts of the case are that the usiness of trading in yarn, are trading business (Future &
The assessee filed return g total income at Rs.57,860/-. S received from the internal
Arvind Shantilal Shah
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541 & 542/MUM/2025
ppeal relates to concealment of me.
see in ITA No.
reproduced as f the case tion of Rs.
the AO on f the case forward of ofits to be f the case n made of ses being
5/- being f the case hat as per
Inv). the d used the off of e assessee was brokerage and Options), short, of income on Subsequently, in sources of the Income-tax Departme code modification(CC used the fictitious pr reduce his taxable reasons to believe t notice u/s 148 of th
16.03.2015. After fo assessment was com as unexplained cash paid to brokers @ 2%
to Rs.1,98,522/- in appeal, the Ld. CIT(A “7. Ground N the action of t by treating t fictious profit and treating t
7.1 From the was reopened the DGIT(I&C share tradin information assessment a make an add carry out inde and show th account of the in the assess operendi of c on record an assessee was has failed to ITA Nos.

ent that assessee got benefited
CM) in the business of share t rofit of Rs.99,25,116/- to set of income, the Assessing Office that income escaped assessme he Income-tax Act, 1961 (in sh ollowing the due procedure o mpleted treating the amount of credit along with addition for % for arranging the CCM transac n the assessment order passe
A) deleted the addition observing
No.1 to 4: All these grounds are raised ag the A.O in making an addition of Rs. 99,2
the profit earned from F&O transaction t on account of Client Code Modification the same as unexplained cash credits.
assessment order it is seen the asses d on the basis of the information received
CI) regarding client code modification i ng account of the appellant. While may have been sufficient to reopen and issue notice u/s 148 of the Act, in or dition on this account the A.O was requi ependent enquiries and ascertain the true hat the assessee had earned the prof e CCM in connivance with the broker. Th sment order has discussed the general m lient code modification but has failed to ny evidence that the trading account o s infact used to carry out the CCM. Th even provide the details of the transa
Arvind Shantilal Shah
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541 & 542/MUM/2025
by way of client rading and had ff the losses and er recorded the ent and issued ort ‘the Act’) on of the law, the Rs.99,26,115/- the commission ction amounting ed. On further g as under :
gainst
26,115
ns as n(CCM) sment d from in the e this n the rder to ired to e facts fits on he A.O modus bring of the he A.O actions carried out statement an was carried o
A.O has faile results of any how the sha manipulated to earn the details of th mentioned by manipulated that informati failed to brin established th assessee wer
CCM. There a on record by the client cod the transactio with the appe active involv spearheaded required to be this case the appellant alo broker were a profit or loss evasion. Ther credited into against the p concluded th transactions undertaken in was eligible losses.
7.2 In the ass the fact that t been earned also reproduc notice dated
ITA Nos.

by the appellant by way of an ac nd has failed to show in what way the out in the case of the assessee in this cas ed to mention the details of the broke y enquiries carried out with the broker to are transactions in the F&O segment by the assessee in connivance with the b fictitious profits as alleged. The name he broker in this case have also not y the A.O nor is there any reference trades or transactions. The A.O only me ion was called for from NSE and BSE bu ng on record what the evidence was hat the share transactions carried out b re in fact manipulated by using the moda are no material facts which have been br the A.O to prove that the broker had cha de at the directions of the appellant in a ons on the F&O segment. I am in agre ellant that in the case of CCM, there has vement and connivance of multiple c by the broker since the fictitious pro e shifted from one client to another. And t ere is nothing on record to show tha ong with other clients, masterminded b actively involved in the practice of shiftin from one to the other for the purposes re is also no indication that after the sales the account there was cash withdr rofits/sale consideration. Hence it can on hat the profit earned on the said which were duly disclosed as such, n the ordinary course of business and to be set off against the brought fo sessment order the A.O has placed relian the assessee had accepted that the prof by using client code modification. The A.
ced the reply of the assessee to the show
07.03.2016 in the order which has also Arvind Shantilal Shah
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541 & 542/MUM/2025
ccount e CCM e. The er and show were broker e and been to the ntions ut has which by the ality of rought anged any of ement s to be clients ofit is that in at the by the ng the of tax s were rawals nly be F&O were hence rward nce on fit had O has cause o been submitted by of this letter acceptance of reproduced i transactions normal course same F&O b also asserted this business
2015-16 whe and there wa amount of Accordingly, t at any point a contradiction accepted.
7.3 For the af transactions carried out by the addition carried forwa the appellant profits to be g
4. We have heard the relevant materi addition of Rs.99,26
Future & Options tra code modification a credit in terms of se
Officer failed to provi evidence in support any malafide manne
Officer neither provid
ITA Nos.

the appellant in these proceedings. On pe it is seen that there is nothing to indica f CCM by the assessee. In fact the extra in the order clearly states that the were carried out through the broker i e of business and the profit was earned usiness. The assessee thorough the A.R d that the Bonafide intentions in carryin are also brought out by the fact that in t ere he earned huge profits in F&O seg as no brought forward loss, he had paid a income tax in accordance with the the contentions of the appellant that he d agree to the use of CCM to earn these pro to the conclusions in the assessment or forementioned reasons, it is held that th in the F&O segment of Rs 99,26,115/- y the assessee in the regular course and of this amount by the A.O is deleted ard of losses is also required to be allow in accordance with law holding the earn genuine. The Grounds of Appeal are Allow rival submissions of the parti als on record. The Assessing
6,115/- treating the profit ea ansaction as fictitious profit on a nd assessed the same as un ection 68 of the Act. However ide details of such client code m as to the client code modificati er for earning fictitious profit.
ded any detail of the broker w
Arvind Shantilal Shah
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541 & 542/MUM/2025
erusal ate the act as F&O in the in the R has ng out the AY ments a large law.
did not ofits in rder is hat the - were hence d. The wed to ning of wed.”
ies and perused g Officer made arned from the account of client nexplained cash r, the Assessing modification and ion was done in The Assessing who had carried out client code mo
Assessing Officer me internal sources held as fictitious profit e absence of any suppo the order of the Ld.
we uphold the same accordingly dismissed
5. In ITA
No.
reproduced as under 1. Whethe case a penalty
Rs. 31,
2. "Wheth case a penalty ignorin concea the inf the as and u setting
5.1 We find that th of quantum addition
Options transactions already upheld the or and therefore, we do
ITA Nos.

odification on behalf of the erely on the basis of the inform d the profit from the Future & O earned by way of client code m orting evidence, we do not find
CIT(A) on the issue in dispute
. The sole ground of appeal of d.
542/Mum/2025, the ground
:
er on the fact and in the circumstances and in law, the Ld. CIT(A) erred in deletin y levied u/s 271(1)(c) of the Income Tax A ,28,512/-?"
her on the fact and in the circumstances and in law, the Ld. CIT(A) erred in deletin y levied u/s 271(1)(c) of the Income ng the fact that the assessee has alment of particulars of his income and a formation received from DCIT (Intell& CR sessee is involved in client code modifi used the fictitious profit for the purpo g off of brought forward loss?"
e Ld. CIT(A) has deleted the pe n relating to fictitious profit s amounting to Rs.99,26,116/- rder of the Ld. CIT(A) deleting th o not find any infirmity in the o
Arvind Shantilal Shah
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541 & 542/MUM/2025
assessee. The mation from the Options segment modification. In any infirmity in and accordingly f the Revenue is ds raised are of the ng the Act, of of the ng the e Tax made as per
R. Inu), ication ose of enalty in respect from Future &
. Since we have he said addition order of the Ld.

CIT(A) on the issue i we uphold the same accordingly dismissed
6. In the result, bo
Order pronoun (KAVITHA RA
JUDICIAL M
Mumbai;
Dated: 12/03/2025
Rahul Sharma, Sr. P.S.

Copy of the Order forward
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.

////

ITA Nos.

in dispute in deleting the penal e. The grounds of appeal of th d.
oth the appeals of the Revenue a ced in the open Court on 12/0 AJAGOPAL)
(OM PRAK
MEMBER
ACCOUNTA ded to :

BY ORDER

(Assistant Re

ITAT, Mu
Arvind Shantilal Shah
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541 & 542/MUM/2025
lty. Accordingly, he Revenue are are dismissed.
03/2025. d/-
KASH KANT)
ANT MEMBER
R, gistrar) umbai