Loading judgment…
Facts
The Assessing Officer initiated reassessment proceedings for AY 2014-2015 based on information from the Investigation Wing regarding client code modifications in NSEL trades. A discrepancy of INR 2,96,133 was found between the NSEL trade value and the value reported by the assessee.
Held
The Tribunal found merit in the assessee's submissions. It held that the CIT(A) failed to appreciate that contract notes, which included brokerage, VAT, and other charges, were provided by the broker and explained the difference. These charges were in addition to the transaction value, and the NSEL data did not contain these details.
Key Issues
Whether the difference of INR 2,96,133 in NSEL trade values represents unexplained expenditure under Section 69C of the Act, or genuine business expenses.
Sections Cited
69C, 147, 144, 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “K (SMC
order : 26.02.2026 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Assessee is directed against the Order, dated 17/10/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] whereby the Ld.CIT(A) had dismissed the appeal against the Assessment Order, dated 24/05/2023, passed under Section 147 read with Section 144 read with Section 144B of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year 2014- 2015.
The relevant facts in brief are that in the case of Assessee reassessment proceedings were initiated for the Assessment Year Assessment Year 2014-2015 2014-2015. On receiving information from the Investigation Wing to the effect that Assessee had benefited from client code modification transactions. During the assessment proceedings the Assessing Officer noted that the details pertaining to trades undertaken by the Assessee on National Spot Exchange (NSEL) did not reconcile with the data/information received from NSEL. The Assessing Officer tabulated the discrepancies as under: SI. Commodity BUY/SELL Traded Trade Value of Trade Value Difference No. Quantity Modified client submitted by code submitted the Assessee by NSEL 1 Palmolien BUY 1 5,18,000/- 10,89,440/- 53,400/- 2 Palmolien BUY 1 5,18,000/- 3 Wool BUY 2 7,23,600/- 7,24,745/- 1,145/- 4 Cotton Oil BUY 8 25,21,200/- 26,51,251/- 1,30,051/- 5 Paddy BUY 1 4,32,300/- 22,72,997/- 1,11,497/- 6 Paddy BUY 1 4,32,300/ 7 Paddy BUY 1 4,32,300/ 8 Paddy BUY 1 4,32,300/ 9 Paddy BUY 1 4,32,300/ TOTAL 64,42,300/- 67,38,433/- 2,96,133/-
According to the Assessing Officer the Assessee had failed to provide suitable explanation and supporting documents in relations to difference of INR.2,96,133/-. Therefore, the Assessing Officer made an addition of the said amount in the hands of the Assessee invoking provisions contained in Section 69C of the Act.
In appeal preferred by the Assessee on this issue the Learned CIT(A) confirmed the additions holding as under: “6.4. Findings:- I have carefully considered the assessment order, the grounds of appeal, and the submissions made by the appellant. The primary issue for determination is whether the difference of Rs.2,96,133/- between the NSEL trade value and the trade value shown by the appellant represents unexplained expenditure u/s 69C of the Act or genuine business expenditure such as brokerage and taxes.
1. 1. 1. 1. The information received from the DDIT (Inv.) and the SFIO 2 Assessment Year 2014-2015 report clearly establishes large-scale misuse of client code modifications across multiple brokers and clients to manipulate profits and losses. In the appellant's case, nine such modifications were carried out by M/s Anand Rathi Commodities Ltd. involving a total transaction value of Rs.64,42,300/-. The investigation and analysis conducted by the Investigation Wing revealed that all four numerals of the client codes were altered, indicating deliberate modification and not clerical errors.
The appellant has not produced any credible or verifiable documentary evidence to substantiate that the difference of Rs.2,96,133/- is purely on account of VAT, brokerage, or other ancillary charges. The mere submission of self-prepared statements or unverified broker bills, without corroboration from independent third-party records or the exchange data, cannot be accepted as conclusive proof. Further, the explanation offered by the appellant does not reconcile the precise difference of Rs.2,96,133/- with corresponding tax invoices or payment vouchers. In absence of proper reconciliation, the explanation remains unsubstantiated. Therefore, the AO's action of treating the said difference as unexplained expenditure u/s 69C of the Act is justified. The addition has been made based on concrete information received from the Investigation Wing, supported by exchange data and detailed analysis. The appellant has failed to rebut the findings with any cogent evidence.”
Being aggrieved the Assessee is now preferred appeal before Tribunal.
The solitary issue on merits arising in the present appeal pertains to addition of INR.2,96,133/- made by the Assessing Officer under Section 69C of the Act that was sustained by the Learned CIT(A).
The Learned Authorized Representative for the Assessee submitted that the Learned CIT(A) had dismissed the appeal preferred by the Assessee observing that the Assessee has not produced any credible Assessment Year 2014-2015 or verifiable documentary evidence to substantiate that the difference of INR.2,96,133/- was purely on account of VAT, brokerage, or other ancillary charges without appreciating that no separate invoices were raised by the broker in respect of the said charges and the same were specifically included in the contract notes issued by the broker to the Assessee which were furnished by the Assessee before the Assessing Officer and the CIT(A).
Per Contra, the Learned Departmental Representative placed reliance upon the order passed by the Assessing Officer and the Learned CIT(A).
We have considered the rival submissions and have perused the material on record (including the contract notes issued by the broker).
We find merit in the submissions advances by the Assessee. In our view the Learned CIT(A) failed to appreciate that thought the broker had issued contract notes to the Assessee in respect of the trades undertaken at NSEL which included brokerage charges, Delivery Charges, VAT Charges, Transaction Charges, Service Tax and Stamp Duty & Other Charges. The aforesaid charges were in addition to the transaction value. Since the data/information furnished by the NSEL did not contained details of the aforesaid charges/duties charged by the broker in addition to the transaction value, there was bound to be a difference. This difference of INR.2,96,133/- was duly explained and corroborated by the Assessee by placing reliance of contract notes issued by the broker. In view of the aforesaid, we find the reasoning given by the Assessing Officer to make the addition and the Learned CIT(A) to confirm the addition does not hold good and is rejected. Accordingly, we delete the addition INR.2,96,133/- made by the Assessing Officer under Section 69C of the Act. Thus, Ground No. 4 to 4.2 raised by the Assessee are allowed. Since Assessee has been granted relief on the merits, all the other grounds raised by the 4
In terms of paragraph 10 above, the present appeal preferred by the Assessee is partly allowed.
Order pronounced on 26.02.2026.