ACIT, CENTRAL CIRCLE 2(3), AHMEDABAD vs. DYNAMATIC DEVELOPERS PRIVATE LIMITED, MUMBAI
Facts
The assessee's return for AY 2013-14 was reopened based on information about manipulated commodity trading on NSEL through Client Code Modification (CCM). The Assessing Officer (AO) made additions for fictitious buy (Rs. 11,34,20,350/-) and fictitious sale (Rs. 10,88,87,175/-) transactions under sections 69A/69C, and also added profit (Rs. 1,00,79,414/-) from these transactions as Short Term Capital Gain (STCG). The CIT(A) subsequently allowed the assessee's appeal, deleting these additions.
Held
The Income Tax Appellate Tribunal upheld the CIT(A)'s decision, ruling that the purchases, sales, and profits derived from CCM transactions were already duly accounted for in the assessee's regular books of accounts and reflected in the trading and profit & loss statements. The Tribunal noted that CCM was initiated by the broker, not the assessee, and making separate additions for amounts already disclosed would lead to double taxation. The Revenue failed to controvert these findings.
Key Issues
Whether additions for fictitious buy, fictitious sale, and Short Term Capital Gain (STCG) from NSEL commodity trading through Client Code Modification (CCM) are justified when these transactions and the associated profit were already included in the assessee's regular books of account and profit & loss statement.
Sections Cited
147, 144B, 148, 69A, 69C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI TR SENTHIL KUMAR & SHRI NARENDRA PRASAD SINHA
PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
This appeal is filed by the Revenue against the order of Commissioner of Income Tax, Appeal – 12, Ahmedabad, [in short “the CIT(A)] dated 02.01.2025 for the Assessment Year (A.Y.) 2013-14 in the proceeding u/s 147 r.w.s. 144B of the Income Tax Act.
The brief facts of the case are that the assessee had filed its return of income for A.Y. 2013-14 on 22.09.2014 declaring income of Rs.1,23,66,680/-. The case of the assessee was reopened by issue of
ITA No. 572/Ahd/2025 ACIT Vs Dynamatic Developers private Limited,AY- 2013-14 2 notice u/s 148 on 31.03.2021 on the basis of information that the assessee had manipulated commodity trading done on NSEL by Client Code Modification (CCM). In the course of assessment, the AO had analysed the information received from SFIO and other information as available with him and concluded that the assessee had entered into fictitious commodity transactions by way of CCM. The AO had worked out total fictitious buy of Rs.11,34,20,350/- and total fictitious sale of Rs.10,88,87,175/- which were added to the income. In addition, the profit of Rs.1,00,79,414/- derived in these transactions was treated as STCG and also added to income. The assessment was completed u/s 147 r.w.s. 144B of the Act on 31.03.2022 at total income of Rs. 24,47,53,619/-. at
Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the learned CIT(A) vide the impugned order and the appeal of the assessee was allowed.
Now the Revenue is in appeal before us. The original grounds taken by the Revenue were modified in the course of hearing. The modified grounds of appeal filed by the Revenue are as under:
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 10,88,87,175/- under section 69A of the Act, without appreciating the fact that the AO's finding were based on credible evidence from the Serious Fraud Investigation Office (SFIO) and SEBI which explicitly identified systematic irregularities in NSEL trading scam. The SFIO report revealed that paired contracts on the NSEL platform were structured merely as fixed return schemes, with no physical delivery of commodities taking place.
ITA No. 572/Ahd/2025 ACIT Vs Dynamatic Developers private Limited,AY- 2013-14 3 2. Whether on the facts and circumstances of the case and in law, the Ld. CITTA) has erred in deleting the addition of Rs. 11,34,20,350/-/-under section 69C of the Act without appreciating the fact that President of Anand Rathi Commodities Ltd. in his statement himself accepted that client code modifications were systematically used to manipulate profits and losses.
"Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,00,79,414/ made from bogus and sham transaction without appreciating the fact that the entire transactions of Rs. 66 Crores through the broker M/s Anand Rathi Commodities Ltd. was bogus and sham transaction and hence, the profit of Rs. 1,00,79.414/ was treated at short Term Capital Gain.
Whether on the facts and circumstances of the case and in law, the Ld. CITA) has failed to appreciate that Senous Fraud Investigation Office and Security and Exchange Board of India has established that M/s Anand Rathi Commodities Lid. misused the client code modification feature to generate bogus speculative and non-speculative gains/lasses by trading on NSEL platform.
The Appellant crave, leave to add, alter, amend or modify any or all grounds of appeal on or before the date of hearing."
Shri Alpesh Parmar, the Ld. CIT-DR has taken us through the assessment order. He explained that as per SFIO report certain brokers had mis-utilised the facility of CCM. The assessee had done the trading through the broker M/s. Anand Rathi Commodities Limited (ARCL) in commodities through NSEL. The Department had issued summon to Shri Chetan Pitamber Bharkhada (President of ARCL), who had admitted his involvement in the CCMs. He had further admitted that no physical delivery of goods took place at the time the trades were executed on NSEL. Further, when the trading on NSEL was suspended, ARCL did not fulfil payment obligation against the sale contracts of the trades in respect of which losses were claimed by different clients. The Ld. CIT-DR submitted that SEBI too had acknowledged the involvement of ARCL in
ITA No. 572/Ahd/2025 ACIT Vs Dynamatic Developers private Limited,AY- 2013-14 4 the entire NSEL scam. According to the Ld. CIT-DR, the assessee was involved in the larger racket of the NSEL scam and was a beneficiary of fictitious loss/gain on account of speculative transactions. Accordingly, the AO had worked out fictitious buy and fictitious sale transactions carried out by indulging in CCM and accordingly such fictitious buy and sale amounts were added to income of the assessee. Further, the profit derived by the assessee in such transactions was also separately added. Accordingly, the Ld. CIT-DR strongly supported in the order of the assessing officer.
Per contra, Shri Mitesh Mehta, Ld. CA of the assessee submitted that the assessee had disclosed total turn-over of Rs.67,14,19,781/- and the transactions of fictitious buy and fictitious sale as worked out by the AO on account of CCM, was part of trading account of the assessee. Therefore, no separate addition in this regard was called for as these transactions were duly reflected in the trading account of the assessee. He submitted that the profit derived by the assessee on account of CCM transactions was also duly reflected in the trading account of the assessee. According to the Ld. AR, by making separate addition for fictitious buy, fictitious sale and for profit derived in such fictitious transactions; the AO had triplicated the addition for the same income. The Ld. AR submitted that the Ld. CIT(A) had considered the facts of the case in right perspective and correctly allowed relief to the assessee. He further submitted that the transactions in which client code modification were done were duly included in the regular books of accounts and the profit derived thereon was also duly disclosed. Therefore, there was no rational
ITA No. 572/Ahd/2025 ACIT Vs Dynamatic Developers private Limited,AY- 2013-14 5 for making separate additions for fictitious buy, fictitious sale and profit derived on account of CCM transactions.
We have considered the rival submissions and carefully gone through the facts and the materials brought on record. The AO had received an information about CCM by ARCL, through whom the assessee company had traded on NSEL. The client code modification in the case of the assessee was to the extent of Rs.11,34,20,350/- on account of fictitious purchase and Rs.10,88,87,175/- on account of fictitious sales. The assessee had also provided a letter from ARCL explaining how and why client code modification was done. It was evident from the information available on record that CCM was not done by the assessee neither it was at the instance of the assessee. The CCM was done by the broker and the purchases and sales effected by CCM were part of purchase and sales as disclosed by the assessee in its trading accounts. The assessee company has dealt in agri-commodities on NSEL platform and total purchase of Rs.66.13 crores and sales of Rs.55.19 crores was disclosed in the trading account, with a closing stock Rs.11.95 crores. It is not the case of the Revenue that the purchase of Rs.11.34 crores and sales of Rs.10.88 crores made by way of CCMs were not part of the trading account or not disclosed by the assessee in its account. Since the fictitious buy and fictitious sale by way of CCMs, as worked out by the AO, was already disclosed in the trading account of the assessee, there was no rational for making separate additions in this respect. The Ld. CIT(A) after examining the facts in great detail had given a categorical finding that the purchase and sale transactions involved in CCMs were duly included in purchases and sales as disclosed by the assessee in its
ITA No. 572/Ahd/2025 ACIT Vs Dynamatic Developers private Limited,AY- 2013-14 6 trading account. Further, the profit earned by the assessee by way of manipulated trading through CCM transactions was also included in the profit as disclosed by the assessee in its P&L account. The finding given by the Ld. CIT(A) in this regard is found to be as under:
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The Revenue has been unable to controvert the findings of the Ld. CIT(A). The fact that the transactions of sales and purchases related to CCM arising from trading on NSEL platform was accounted for in the trading account of the assessee has not been disputed. Under the circumstances, no separate addition for sales and purchases related to CCM transactions could have been made. Therefore, the additions on
ITA No. 572/Ahd/2025 ACIT Vs Dynamatic Developers private Limited,AY- 2013-14 10 account of fictitious purchase of Rs.11,34,20,350/- and fictitious sale of Rs.10,88,87,175/- was rightly deleted by the Ld. CIT(A). Similarly, the profit derived by the assessee in CCM transactions was also duly reflected in the gross profit as disclosed in the trading account. Therefore, there was no justification for making separate addition of Rs.1,00,79,414/- on account of STCG derived on CCM transactions. The decision of the Ld. CIT(A) on this issue is also upheld as the transactions on account of client code modifications and profit derived thereon, were duly included in the regular books of accounts and were part of P&L account for the purpose of taxation and no separate addition on account of CCM transaction was called for. Accordingly, the order of the Ld. CIT(A) is upheld and the grounds taken by the Revenue are dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Court on 05/02/2026 at Ahmedabad.
Sd/- Sd/- (TR SENTHIL KUMAR) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member
Dated – 05th February, 2026 Neelesh Kumar True Copy आदेश क� आदेश क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड� फाईल /Guard file.
ITA No. 572/Ahd/2025 ACIT Vs Dynamatic Developers private Limited,AY- 2013-14
आदेशानुसार/BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार
पंजीकार (Dy./Asstt.Registrar) उप उप/सहायक उप उप सहायक सहायक पंजीकार सहायक पंजीकार पंजीकार आयकर आयकर अपीलीय आयकर आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, अहमदाबाद अिधकरण अहमदाबाद अहमदाबाद / ITAT, Ahmedabad अहमदाबाद
