R.JAYANTHI,CHENNAI vs. ACIT NON CORP. CIRCLE 4(1), CHENNAI

assessee Smt. R.Jayanthi, against the Order of Commissioner of Income Tax (Appeals)-5, Chennai, in dated 31.10.2017 & ITA No.191/CIT(A)-5/2016-17 dated 31.10.2017 for the AYs 2009-10 & 2010-11 respectively. assessee Shri Jumarmal Ostwal, against the Order of Commissioner of Income Tax (Appeals)-5, Chennai, in ITA No.193/CIT(A)-5/2016-17 dated 31.10.2017 & ITA No.195/CIT(A)-5/2016-17 dated 31.10.2017 for the AYs 2009-10 & 2010-11 respectively.

Shri B.Sagadevan, JCIT, represented on behalf of the Revenue and ‘None’ represented on behalf of the assessee.

At the time of hearing, petitions for adjournment had been filed stating that the Counsel of the assessee was currently outside the country due to a family engagement. The adjournment applications filed are not signed by the Counsel of the assessees. Further, a notice for hearing was issued by RPAD and served as early as first week of March, 2018. to 2824/Chny/2017 :- 3 -:

It was submitted by the Ld.DR that the assessees are individuals who had claimed loss in respect of the purchase and sale of shares in the forward options. It was a submission that a part of the loss was booked through client code modifications. The Ld.DR drew my attention to the Assessment Order Para No.7 to explain, what was the nature of the client code modifications and how the so-called sham transaction is done. After perusal of the Assessment Order, the Ld.DR was asked to specify as to what was the client code of the assessee and which was the client code which was modified so as to generate the loss in the hands of the assessees. It was submitted by the Ld.DR that these details have not been produced by the assessee. It was a submission that in the course of the assessment, the Ld.AR of the assessee had specifically mentioned that the client code modifications had taken place at the broker’s end and the assessee had no knowledge of it. On a further query, as to what was the total transactions done by the assessee and how many of the said transactions resulted in the client code modifications being done and out of the same, how many showed a profit figure and how many showed a loss figure. To this also, it was a submission that none of the details have been produced by the assessee but the assessee has only said that the client code modifications having been done by the broker, only broker can to 2824/Chny/2017 :- 4 -:

I have considered the rival submissions.

A perusal of the Assessment Order clearly shows that all the facts required for adjudicating the issue are not available. All that is available in the Assessment Order is the modus operandi. There is no identification as to which is the client code modifications which have been modified to which transactions modifications have been done and when such modifications have been done and whether such transactions gave rise to any speculative loss as per sec.73 or not. This being so, also taking into consideration the fact that the assessee in his reply to the AO vide the Ld.AR’s letter dated 08.12.2016 has categorically stated that the client code modifications was at the broker’s end and the assessee had no knowledge of it and that only broker can explain the client code modifications, the issues in these appeals are restored to the file of the AO for re-adjudication after granting the assessee adequate opportunity to substantiate its case. The assessee shall produce all such evidences including producing brokers who have done the client code modifications, if necessary, for the purpose of substantiating their claim of loss, if so required by the AO. to 2824/Chny/2017 :- 5 -:

In the result, the appeals filed by the assessees are partly allowed for statistical purposes.