LATE UGAMA KAVAR LEGALHEIR RAJENDRA KUMAR BAGMAR,CHENNAI vs. ACIT NON CORP CIRCLE 6(1), CHENNAI

The above assessees filed these appeals against the orders of the learned Commissioner of Income Tax (Appeals)-5, Chennai in & 344/CIT(A)-5/17-18 dated 29.06.2018, respectively, for the assessment year 2010-11.

The above assessees, individuals, filed their return of income. Based on the investigation wing report from Ahmedabad, their returns were re-opened. The Ld.AO found that the transaction of purchase and sale of shares entered into by the respective assessee and the losses booked through Client Code Modifications (CCM) is a sham transaction and disallowed loss arrived due to CCM by the above assessees at Rs.8,51,927/- and Rs.8,84,924/-, respectively. Aggrieved against those orders, the above assessee’s filed appeals before the CIT(A). The Ld.CIT(A) dismissed the respective appeals. Aggrieved against those orders, the above assessee’s filed appeals before this Tribunal, supra.

The above assessee’s filed additional grounds pleading that the Ld.AO has stated Client Code Modifications by Inventure Growth and Securities at Rs.8,51,927/- and Rs.8,84,924/-, respectively and added the same in the respective cases. However, the loss transacted through Inventure Growth and Securities Ltd., for each of the assessee’s case was at Rs.4,94,934/- only. Therefore it was submitted that the following additional ground may be admitted in the respective case:- “1. Without prejudice to the above, the disallowance ought to be restricted to the losses incurred on transactions with Inventure Growth & Securities Ltd., i.e., Rs.4,94,934/-. The AO has wrongly disallowed a loss of Rs.8,51,927/-. Disallowance should be only for Rs.4,94,934/-.”

We heard the rival submission and in view of the merits, the additional ground is admitted.

The Ld.AR submitted that the assessees were engaged in the business of trading in Shares, Futures and Options. During the period relevant to the assessment year 2010-11, they carried out trading activity in Futures brokers M/s. Eden Financial Services, M/s.

Per contra, the Ld.DR supported the orders of lower authorities submitting that the assessment was re-opened based on the investigation report furnished by the Ahmedabad unit and the assessees were given due opportunity by the lower authorities and they have arrived the decision on merits.

We heard the rival submissions and gone through the relevant material. The assessees are traders in Shares, Futures and Options. During the relevant period, they entered into purchase and sale of Futures through M/s. Eden Financial Services, M/s. Inventure Growth & Securities Ltd., & M/s. Sun ‘N’ Sun Fin Services Ltd. The assessees placed their instruction to the brokers over phone and the brokers entered the order in the system. Punching errors have been conducted by the brokers at their end with no involvement of the assessee whatsoever. They have furnished the contract notes of the brokers, corresponding bills and the bank statement with regard to the CCM done by M/s. Inventure Growth and Securities Ltd., and pleaded that the same has taken place at the brokers end and the assessees has no knowledge of it. They have paid the margin money to the brokers before placing the orders. The impugned transactions were not only carried out by the assessees with M/s. Inventure Growth & Securities Ltd., alone but also with other brokers, supra. Therefore, in the facts and circumstances, it is not clear from the order, how the Assessing Officer has arrived that the transactions with M/s. Inventure and Growth Securities Ltd., alone are not genuine in nature. Further, the respective assessees have submitted that they had incurred a loss of Rs.4,94,934/- from the transactions with M/s. Inventure Growth and Securities Ltd., however, the Assessing Officer disallowed Rs.8,51,927/- & Rs.8,84,924/- in the respective assessees hand and completed the assessments. Considering the entire facts and circumstances, associated with the impugned loss claim, it is clear that these transactions have not been properly examined by the Assessing Officer. Since the loss is claimed by the assessees, the onus is on the respective assessee to place all material in support of their contention before the Assessing Officer. However, the Assessing Officer is bound to examine them, if on due examination / investigation, the Assessing Officer finds discrepancy, if any, he should after seeking due clarification from the assessee and on due consideration of them should arrive the conclusion. In these cases, such examination has not been done. Therefore, we deem it fit to remit these issues back to the Assessing Officer for a fresh examination. The respective assessee shall place all materials in support of their contention before the respective Assessing Officer and comply with the requirements of the Assessing Officer in accordance with law. The Assessing Officer is free to conduct appropriate enquiry as deemed fit, however, he shall furnish due opportunity to the assessees on the materials etc., to be used against the assessee and on due consideration of the assessee’s clarification / explanation shall pass the order in accordance with law. Thus the corresponding appeals are treated as allowed to this extent.

Though the assessees have taken other plea in the grounds of appeal, since the Ld.AR has not argued on those grounds, they are treated as dismissed.

In the result, both the appeals of the assessees are treated as partly allowed for statistical purposes.