SHRI GHANSHYAMDAS D. SHAH,,CHENNAI vs. DCIT, NCC - 10,, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -12, Chennai, dated 26.04.2019 and pertains to assessment year 2010-11.

There was a delay of 28 days in filing this appeal by the assessee. The assessee has filed a petition for condonation of delay. We have heard the Ld. counsel for the assessee and the Ld. D.R. We find that there was sufficient cause for not filing the appeal before the stipulated time. Therefore, we condone the delay and admit the appeal.

Shri S. Sridhar, the Ld.counsel for the assessee, submitted that there are two issues arise for consideration in this appeal. According to the Ld. counsel, the first issue is with regard to reopening of assessment and the second issue is with regard to rejection of claim of loss suffered by the assessee to the extent of ₹45,11,128/- due to modification of Client Code by the stock broker.

Referring to the first ground of appeal with regard to reopening of assessment under Section 147 of the Income-tax Act, 1961 (in short 'the Act'), the Ld.counsel submitted that the assessee is a trader in shares. On the basis of communication said to be received from ITO, Non Corporate Ward 7(2), the Assessing Officer reopened the assessment by issuing notice under Section 148 of the Act. According to the Ld. counsel, reopening of assessment is not justified. Referring to the second ground of appeal, the Ld.counsel submitted that some of the brokers appear to be misusing the Client Code modification facility in F & O segment on National Stock Exchange. Based upon the general allegation said to be received by the Assessing Officer, according to the Ld. counsel, the case was reopened and without furnishing the details of such information, the Assessing Officer disallowed the loss claimed by the assessee. According to the Ld. counsel, the assessee is in no way connected with the modification of Client Code and it is the duty of the stock broker. Therefore, according to the Ld. counsel, the CIT(Appeals) is not justified in confirming the order of the Assessing Officer. Referring to the order of this Tribunal in Late Ugama Kavar v. ACIT in dated 26.07.2019, the Ld.counsel submitted that on identical situation, in respect of transaction with M/s Inventure Growth & Securities Ltd., the issue was remitted back to the file of the Assessing Officer for reconsideration. In this case also, according to the Ld. counsel, the transaction was made through the stock broker M/s Inventure Growth & Securities Ltd. Therefore, the Ld. counsel submitted that the matter may be remitted back to the file of the Assessing Officer for reconsideration on merit.

We heard Ms. R. Anitha, the Ld. Departmental Representative also. As rightly submitted by the Ld.counsel for the assessee, on the basis of the information said to be received by the Assessing Officer with regard to fictitious claim of loss by misusing the modification of Client Code facility offered by the Stock Exchange, the Assessing Officer reopened the assessment.

Now coming to the merit of the claim of disallowance made by the Assessing Officer, as rightly submitted by the Ld.counsel for the assessee, the transaction was made with M/s Inventure Growth & Securities Ltd. by the assessee. In the list received by the Assessing Officer, the assessee’s name is also found to be one of the beneficiaries who claimed bogus fictitious loss due to Client Code modification. Therefore, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer as decided by this Tribunal in the case of Late Ugama Kavar (supra). Accordingly, the orders of both the authorities below are set aside and the entire issue with regard to disallowance of the claim made by the Assessing Officer in share trading transaction is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter in accordance with law as in the case of Late Ugama Kavar (supra) and thereafter decide the issue afresh, after giving a reasonable opportunity to the assessee.

In the result, the appeal filed by the assessee is partly allowed.