INCOME TAX OFFICER 4(3)(4), MUMBAI vs. MANOJ J DOSHI, MUMBAI

When the appeal was called for hearing, none appeared on behalf of the assessee. However, considering the nature of dispute, I proceed to dispose of the appeal ex-parte qua the assessee after hearing the learned Departmental Representative and based on materials on record.

In ground No. 1, the revenue has challenged the deletion of Rs. 6,54,067/-.

Briefly the facts are, the assessee is an individual engaged in the business of trading in shares and securities. On receiving information from Investigation Wing of the Department at Ahmedabad, the Assessing Officer (AO) found that some brokers are creating fictitious profits and losses by misusing the Client Code Modification facilities in Futures and Options (F & O) segment of National Stock Exchange (NSE). As per the modus operandi, the brokers are Assessment Year: 2009-10 transferring the fictitious losses to different clients to reduce the tax liability. He found that the assessee is a beneficiary of such fictitious loss amounting to Rs. 6,54,067/- provided by a broker namely M/s Anant Investments. Based on such information, the AO reopened the assessment under section 147 of the Act. In course of assessment proceedings, the assessee not only objected to the reopening of assessment but also vehemently contested the departments allegation of fictitious loss provided by the broker. However, the AO was not convinced. Ultimately, he disallowed the loss of Rs. 6,54,067/- and added back to the income of the assessee. Further, he alleged that for availing the benefit of such fictitious loss, the assessee must have paid commission to the concerned broker and accordingly disallowed an amount of Rs. 19,622/-, being 3% of the transaction value, as commission paid to the brokers. The assessee contested the aforesaid disallowance before learned Commissioner (Appeals). After considering the submissions of the assessee in the context of facts and material on record, learned Commissioner (Appeals) deleted the both the disallowances.

I have considered the submissions of learned Departmental Representative and perused the material on record. As could be seen from the material on record, the AO has simply proceeded based on information received from the Investigation Wing of the department at Ahmedabad and made the disallowance. The AO has not made any independent enquiry to ascertain the genuineness of the transaction with the concerned broker. Thus, no adverse material has been brought on record by the AO as a result of any fruitful enquiry conducted to establish that the assessee, indeed, has availed fictitious loss on such transaction by way of client code modification, as alleged in the report of the Investigation Wing. Therefore, the addition made purely and conjectures and surmises cannot be accepted. In view of the aforesaid, I do not find any infirmity in the decision of learned Commissioner (Appeals). Since, I have already held that there is no factual basis in holding that the assessee has availed the benefit of fictitious loss by way of client code modification, the addition made because of payment of commission to the broker is also Assessment Year: 2009-10 unsustainable. Accordingly, I uphold the decision of learned Commissioner (Appeals) on the issue. Grounds are dismissed.