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Facts
The assessee filed an original return of income. Subsequently, the Assessing Officer (AO) issued a notice under section 148, believing that income had escaped assessment based on information received from the DGIT Investigation Wing regarding client code modification in share trading. The AO made an addition, which was upheld by the Ld. CIT(A).
Held
The Tribunal held that the reasons for reopening the assessment were not based on a "reason to believe" but rather a "reason to suspect." The AO failed to establish a nexus or provide specific details about the alleged client code modification being non-genuine or with ulterior motives, rendering the notice under section 148 void ab initio.
Key Issues
Whether the reassessment proceedings initiated under Section 148 were based on valid "reason to believe" or merely "reason to suspect," and whether the AO applied his mind while recording the reasons.
Sections Cited
147, 148, 143(1)
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Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAHUL CHAUDHARY
This appeal by the assessee is directed against order dated 06.12.2021 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2010-11, raising following grounds:
1. On the facts and circumstances in the case in law, Ld. CIT(A) erred in confirming reopening the case on reasons which were in general nature.
Bharat Vanmalibhai Modiya 2 ITA No. 125/M/2022
On the facts and circumstances in the case in law, Ld. CIT(A) erred in 2. On the facts and circumstances in the case in law, Ld. CIT(A) erred in 2. On the facts and circumstances in the case in law, Ld. CIT(A) erred in confirming reopening of the case on the basis of borrowed satisfaction. confirming reopening of the case on the basis of borrowed satisfaction. confirming reopening of the case on the basis of borrowed satisfaction.
3. On the facts and cir 3. On the facts and circumstances in the case in law, Ld. CIT(A) erred in cumstances in the case in law, Ld. CIT(A) erred in confirming reopening without application of mind. confirming reopening without application of mind. 4. On the facts and circumstances in the case in law, Ld. CIT(A) erred in 4. On the facts and circumstances in the case in law, Ld. CIT(A) erred in 4. On the facts and circumstances in the case in law, Ld. CIT(A) erred in confirming reopening without establishing nexus with Assessee in confirming reopening without establishing nexus with Assessee in confirming reopening without establishing nexus with Assessee in Manipulation. 5. On the facts and in the circumstances of the case and in law, the Ld. On the facts and in the circumstances of the case and in law, the Ld. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in confirming addition of Income of Rs. 34,33,074/ CIT (A) erred in confirming addition of Income of Rs. 34,33,074/ CIT (A) erred in confirming addition of Income of Rs. 34,33,074/- (64,34,831/- minus 30,01,757/ minus 30,01,757/-). 6. On the facts and circumstances in the case in law, Ld. CIT(A) erred in 6. On the facts and circumstances in the case in law, Ld. CIT(A) erred in 6. On the facts and circumstances in the case in law, Ld. CIT(A) erred in not allowing set off carry forward losses of Rs. 26,94,470/ set off carry forward losses of Rs. 26,94,470/ set off carry forward losses of Rs. 26,94,470/- and carry forward deprecation of Rs. 9270/ forward deprecation of Rs. 9270/- 7. The assessee craves leave to add, alter or amend the existing grounds The assessee craves leave to add, alter or amend the existing grounds The assessee craves leave to add, alter or amend the existing grounds of appeal
on or before the date of hearing." appeal on or before the date of hearing."
2. Briefly stated facts of the case are that Briefly stated facts of the case are that the assessee filed the assessee filed original return of income for the assessment year under original return of income for the assessment year under original return of income for the assessment year under consideration consideration consideration on on on 26.09.2010 26.09.2010 26.09.2010 declaring declaring declaring total total total income income income of of of Rs.3,19,500/- which was processed u/s 143(1) of the Income which was processed u/s 143(1) of the Income which was processed u/s 143(1) of the Income-tax Act, 1961 (in short ‘the Act’). Subsequently, on the basis of the Act, 1961 (in short ‘the Act’). Subsequently, on the basis of th Act, 1961 (in short ‘the Act’). Subsequently, on the basis of th information received from the office of the DGIT Investigation Wing, information received from the office of the DGIT Investigation Wing, information received from the office of the DGIT Investigation Wing, Mumbai, the Assessing Officer recorded reasons to believe that Mumbai, the Assessing Officer recorded reasons to believe that Mumbai, the Assessing Officer recorded reasons to believe that income escaped assessment and issued notice u/s 148 of the Act income escaped assessment and issued notice u/s 148 of the Act income escaped assessment and issued notice u/s 148 of the Act on 28.03.2015. In response, the assessee file on 28.03.2015. In response, the assessee filed a d a letter dated 30.03.2015 stating to treat the original return of income filed as in 30.03.2015 stating to treat the original return of income file 30.03.2015 stating to treat the original return of income file compliance to notice to notice u/s 148 of the Act. The Assessing Officer u/s 148 of the Act. The Assessing Officer completed the reassessment proceedings on 28.03.2016 wherein he completed the reassessment proceedings on 28.03.2016 wherein he completed the reassessment proceedings on 28.03.2016 wherein he made addition for the benefit taken by the assessee by way of client made addition for the benefit taken by the assessee by w made addition for the benefit taken by the assessee by w code modification while hile trading trading in in shares shares amounting amounting to to Bharat Vanmalibhai Modiya 3 ITA No. 125/M/2022 Rs.63,08,657/-. The Ld. CIT(A) also upheld the addition and he Ld. CIT(A) also upheld the addition and he Ld. CIT(A) also upheld the addition and justified the reassessment proceedings u/147 of the Act. justified the reassessment proceedings u/147 of the Act. justified the reassessment proceedings u/147 of the Act.
3. Aggrieved, the assessee Aggrieved, the assessee is in appeal before the Tribunal by way in appeal before the Tribunal by way of grounds raised as reproduced above. as reproduced above.
We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. In ground No relevant material on record. In ground Nos. 1 to 4, the assessee has . 1 to 4, the assessee has challenged the validity of the reassessment p challenged the validity of the reassessment proceedings. The Ld. roceedings. The Ld. CIT(A) has dismissed the above grounds observing as under: CIT(A) has dismissed the above grounds observing as under: CIT(A) has dismissed the above grounds observing as under:
“8.1 Grounds of appeal
1 8.1 Grounds of appeal 1-4 challenge the legality of the notice 4 challenge the legality of the notice issued u/s 148 and the reassessment completed under section 147 issued u/s 148 and the reassessment completed under section 147 issued u/s 148 and the reassessment completed under section 147 of the Act. The appellant has stated that the not of the Act. The appellant has stated that the notice is a defective ice is a defective notice which is issued without any application of mind and that the notice which is issued without any application of mind and that the notice which is issued without any application of mind and that the reasons recorded by the Assessing Officer does not satisfy the reasons recorded by the Assessing Officer does not satisfy the reasons recorded by the Assessing Officer does not satisfy the requirements of Section 147 of the Act. The assessment order has requirements of Section 147 of the Act. The assessment order has requirements of Section 147 of the Act. The assessment order has been perused and it is seen that the reas been perused and it is seen that the reason for reopening is on the on for reopening is on the basis of information received from the Investigation wing, Mumbai basis of information received from the Investigation wing, Mumbai basis of information received from the Investigation wing, Mumbai as per which the appellant has been mentioned by name as being as per which the appellant has been mentioned by name as being as per which the appellant has been mentioned by name as being a beneficiary of fictitious profits and losses created by some a beneficiary of fictitious profits and losses created by some a beneficiary of fictitious profits and losses created by some Brokers by misusing the "Client Code Brokers by misusing the "Client Code Modification Facility in F &
0. Modification Facility in F & 0 segment on NSE during March, 2010. On the basis of this segment on NSE during March, 2010. On the basis of this segment on NSE during March, 2010. On the basis of this information the AO had reason to believe that income had escaped information the AO had reason to believe that income had escaped information the AO had reason to believe that income had escaped assessment and was justified in reopening proceedings under assessment and was justified in reopening proceedings under assessment and was justified in reopening proceedings under section 147. In this regard reliance is plac section 147. In this regard reliance is placed on the case of ed on the case of Vasudev Fatandas Sawlani Vs Santosh Kumar, 2018 Vasudev Fatandas Sawlani Vs Santosh Kumar, 2018-TIOL TIOL-2305- HC-AHM-IT, of Gujarat High Court wherein the appellants writ IT, of Gujarat High Court wherein the appellants writ IT, of Gujarat High Court wherein the appellants writ petition was dismissed by the Hon'ble court by holding that when petition was dismissed by the Hon'ble court by holding that when petition was dismissed by the Hon'ble court by holding that when issuing notice for re issuing notice for re-opening assessment, the AO is only required to ly required to show reasonable belief that income escaped assessment & is not show reasonable belief that income escaped assessment & is not show reasonable belief that income escaped assessment & is not required to establish the same beyond reasonable doubt. required to establish the same beyond reasonable doubt. required to establish the same beyond reasonable doubt. Accordingly these grounds of appeal are dismissed Accordingly these grounds of appeal are dismissed.” 4.1 Before us, the Ld. Before us, the Ld. Counsel for the assessee has challenged the for the assessee has challenged the reassessment proceedings on the reason that the Assessing Officer ssessment proceedings on the reason that the Assessing Officer ssessment proceedings on the reason that the Assessing Officer did not apply his mind w did not apply his mind while recording reasons to believe hile recording reasons to believe. The Ld. Counsel submitted that in the reasons recorded the Assessing submitted that in the reasons recorded the Assessing submitted that in the reasons recorded the Assessing
Bharat Vanmalibhai Modiya 4 ITA No. 125/M/2022 Officer has nowhere mention Officer has nowhere mentioned the name of the brokers the name of the brokers through whom client code modification was alleged to be carried out by the client code modification was alleged to be carried out by the client code modification was alleged to be carried out by the assessee. He further submitted that the Assessing Officer has assessee. He further submitted that the Assessing Officer has assessee. He further submitted that the Assessing Officer has nowhere recorded that client code modification nowhere recorded that client code modification was was not in the normal course and it was normal course and it was with any ulterior motive any ulterior motive. In support of contention, he relied on the decision of the Tribunal in the case of he relied on the decision of the Tribunal in the case of he relied on the decision of the Tribunal in the case of M/s Excellent Shares & Finance Services Pvt. Ltd. (Formerly M/s Excellent Shares & Finance Services Pvt. Ltd. (Formerly M/s Excellent Shares & Finance Services Pvt. Ltd. (Formerly known as Pashupati Shares & Finance Services Pvt. Ltd.) v. The known as Pashupati Shares & Finance Services Pvt. Ltd.) v. The known as Pashupati Shares & Finance Services Pvt. Ltd.) v. The Income Tax Officer 13(1)(3) in for Income Tax Officer 13(1)(3) in ITA No. 7003/Mum/2018 Income Tax Officer 13(1)(3) in ITA No. 7003/Mum/2018 assessment year 2010 year 2010-11. Before us, the Ld. Counsel Counsel for the assessee has filed a comparison of reasons recorded in the case of comparison of reasons recorded in the case of the assessee and in the case of M/s Excellent Shares & Finance the assessee and in the case of M/s Excellent Shares & Finance the assessee and in the case of M/s Excellent Shares & Finance Services Pvt. Ltd. (supra) Services Pvt. Ltd. (supra), which is reproduced as under: which is reproduced as under:
Comparison of reasons Reasons in case of Bharat Modiya for the Reasons in case of Bharat Modiya for the Reasons in case of M/s Excellent Shares & Reasons in case of M/s Excellent Shares & AY 2010-11 Finance Services Pvt. Ltd for the A Y 2010- Finance Services Pvt. Ltd for the A Y 2010 11 "In this case information was received from the "In this case information was received from the "Information has been received from DIT (Intell. "Information has been received from DIT (Intell. office of DIT (Inv.) (Int. & CR), Mumbai vide CR), Mumbai vide & CR. Inv.), Mumbai, vide letter No. DIT (I & & CR. Inv.), Mumbai, vide letter No. DIT (I & letter No. DIT {I & CI)/CCM/2014 letter No. DIT {I & CI)/CCM/2014-15 dated CI)/CCM/2014-15 15 dated dated 27.02.2015 27.02.2015 that that 27th February, 2015 that fictitious profits and 27th February, 2015 that fictitious profits and fictitious profits and losses were created by ious profits and losses were created by losses were created by some Brokers by losses were created by some Brokers by some brokers by misusing the client code some brokers by misusing the client code misusing the "Client Code Modification Facility misusing the "Client Code Modification Facility modification facility in F&O segment on NSE modification facility in F&O segment on NSE in F & O segment on NSE during March, 2010. in F & O segment on NSE during March, 2010. during March, 2010. The brokers were alleged during March, 2010. The brokers were alleged The brokers were indulging in transferring the indulging in transferring the to be indulging in transferring the fictitious to be indulging in transferring the fictitious fictitious losses to different clients to reduce fictitious losses to different clients to reduce losses to different clients to reduce their tax losses to different clients to reduce t their tax liability and also fictitious profit to their tax liability and also fictitious profit to liability and also fictitious profit to other clients. liability and also fictitious profit to other clients. other clients. Accordingly, the client code other clients. Accordingly, the client code As per the information received by the DIT As per the information received by the DIT modification modification transactions transactions (CCM) (CCM) data data for for (I&CI), (I&CI), Mumbai Mumbai from from NSE, NSE, Client Client Code Code F.Y.2009-10 was obtained from NSE and the 10 was obtained from NSE and the Modification (CCM) data for F.Y. 2009-10, and Modification (CCM) data for F.Y. 2009 CCM transactions received from NSE were CCM transactions received from NSE were the CCM transactions received from NSE were the CCM transactions received from NSE were further analyzed. Mapping of the data was further analyzed. Mapping of the data was further analysed and the mapping of data was he mapping of data was done to ascertain the exact amount of fictitious done to ascertain the exact amount of fictitious done to ascertain the exact amount of fictitious done to ascertain the exact amount of fictitious profit/losses profit/losses in in each each case. case. On On detailed detailed profits/losses in each case. On detailed profits/losses in each case. On detailed analysis it was established that the brokers analysis it was established that the brokers analysis by the DIT (I & CI), Mumbai, it was analysis by the DIT (I & CI), Mumbai, it was had misused client code modification fac had misused client code modification facility established that the brokers has misused client established that the brokers has misused client
Bharat Vanmalibhai Modiya 5 ITA No. 125/M/2022 and created non-genuine losses and profits. genuine losses and profits. code modification facility and created non- code modification facility and created non These losses and profits were given to different These losses and profits were given to different genuine losses and profits. These losses and losses and profits. These losses and clients/beneficiaries clients/beneficiaries according according to to their their profits profits were were given given to to different different requirement- The assessee is also one of the The assessee is also one of the clients/beneficiaries clients/beneficiaries according according to to their their beneficiaries who evaded tax through client beneficiaries who evaded tax through client requirement. The clients have taken fictitious requirement. The clients have taken fictitious mode modification during F.Y. 2009 Y. 2009-10 for the losses to set off against their profits with a losses to set off against their profits with a relevant A.Y. 2010-11 on a profit of Rs. 11 on a profit of Rs. view to reduce their tax liability. Some of the view to reduce their tax liability. Some of the 63,08,657/- earned because of client code earned because of client code Client have confirmed that they have misused ent have confirmed that they have misused modification." the facility of client code modification in order the facility of client code modification in order to create fictitious losses/profits. They have to create fictitious losses/profits. They have admitted that they have received commission admitted that they have received commission at the rate varying from 0.5% upto 2% on the at the rate varying from 0.5% upto 2% on the amount of losses/profits for transferring such amount of losses/profits for losses/profits to their client. The names of such losses/profits to their client. The names of such brokers are i) Transglobal Securities Ltd. ii) brokers are i) Transglobal Securities Ltd. ii) Crosseas Crosseas Capital Capital Services Services Pvt. Pvt. Ltd. Ltd. iii) iii) Indianivesh Securities Pvt. Ltd. and iv) Anugrah Indianivesh Securities Pvt. Ltd. and iv) Anugrah Stock & Broking Pvt. Ltd. This CCM data are Stock & Broking Pvt. Ltd. This CCM data are relating to the beneficiaries in whose account ng to the beneficiaries in whose account more than Rs. 25 lacs Losses/Profits have more than Rs. 25 lacs Losses/Profits have been generated through CCM. In this case, been generated through CCM. In this case, assessee has executed the transaction during assessee has executed the transaction during the F.Y. 2009-10. As per the information 10. As per the information received, assessee company is one of the received, assessee company is one of the beneficiaries and create fictitious Profit/Loss ficiaries and create fictitious Profit/Loss amounts to Rs. 1,12,08,455/- Assessee has amounts to Rs. 1,12,08,455/ modified 2,58,47,552 Quantity of shares and modified 2,58,47,552 Quantity of shares and the value of shares modified as per the the value of shares modified as per the information information was was to to the the tune tune o o f f Rs Rs 2,23,01,04,598/- resulting into loss of Rs. resulting into loss of Rs. 1,12,08,485/- due to client code modification". due to client code modification". 4.2 The relevant para of the decision of the Tribunal in the case of The relevant para of the decision of the Tribunal in the case of The relevant para of the decision of the Tribunal in the case of M/s Excellent Shares & Finance Services Pvt. Ltd. (supra) is M/s Excellent Shares & Finance Services Pvt. Ltd. (supra) is M/s Excellent Shares & Finance Services Pvt. Ltd. (supra) is reproduced as under: reproduced as under:
7. As pointed out by the Ld. counsel, in the case of As pointed out by the Ld. counsel, in the case of M/s Coron M/s Coronation Agro Industries Ltd. us. DCIT (supra), Agro Industries Ltd. us. DCIT (supra), the Hon'ble Bombay High Court the Hon'ble Bombay High Court has decided the identical issue in favour of the assessee and held the has decided the identical issue in favour of the assessee and held the has decided the identical issue in favour of the assessee and held the notice issued u/s 148 of the Act lacks reason to believe that the income notice issued u/s 148 of the Act lacks reason to believe that the income notice issued u/s 148 of the Act lacks reason to believe that the income chargeable to tax has escaped assessm chargeable to tax has escaped assessment holding as under: ent holding as under:-
2. This petition challenges notice dated 31st March, 2016 This petition challenges notice dated 31st March, 2016 issued This petition challenges notice dated 31st March, 2016 under Section 148 of the Income Tax Act, 1961. The impugned under Section 148 of the Income Tax Act, 1961. The impugned under Section 148 of the Income Tax Act, 1961. The impugned notice seeks. to reopen the assessment for Assessment notice seeks. to reopen the assessment for Assessment notice seeks. to reopen the assessment for Assessment Year 2009-10.
The regular assessment proceedings were proceedings were completed on 28th December, 2011 under 28th December, 2011 under Section 143 (3) of the Act. Section 143 (3) of the Act.
Bharat Vanmalibhai Modiya 6 ITA No. 125/M/2022
The reasons in support of the impugned notice relies upon the 3. The reasons in support of the impugned notice relies upon the 3. The reasons in support of the impugned notice relies upon the information received from the Principal Director of Income Tax that information received from the Principal Director of Income Tax that information received from the Principal Director of Income Tax that the petitioner has benefitted from a client code modifi the petitioner has benefitted from a client code modifi the petitioner has benefitted from a client code modification by which a profit of Rs. 22.50 lakhs was shifted out by the which a profit of Rs. 22.50 lakhs was shifted out by the which a profit of Rs. 22.50 lakhs was shifted out by the petitioner's broker resulting in reduction of the petitioner's taxable petitioner's broker resulting in reduction of the petitioner's taxable petitioner's broker resulting in reduction of the petitioner's taxable income. The only basis for forming the belief is the report from the income. The only basis for forming the belief is the report from the income. The only basis for forming the belief is the report from the Principal Director of Income Tax and the applicat Principal Director of Income Tax and the application of mind to the ion of mind to the report of the Assessing Officer along with the record available report of the Assessing Officer along with the record available report of the Assessing Officer along with the record available with him. with him. This information and application of mind has led the application of mind has led the Assessing Officer to form a reasonable belief that there is not only Assessing Officer to form a reasonable belief that there is not only Assessing Officer to form a reasonable belief that there is not only an escapement of income but there has an escapement of income but there has been failure to truly and been failure to truly and fully disclose all material facts and information as the modus fully disclose all material facts and information as the modus fully disclose all material facts and information as the modus operandi of shifting profits was not known to the Revenue as not operandi of shifting profits was not known to the Revenue as not operandi of shifting profits was not known to the Revenue as not disclosed by the petitioner when the Assessing Officer passed the disclosed by the petitioner when the Assessing Officer passed the disclosed by the petitioner when the Assessing Officer passed the order in regular assessment proceedi order in regular assessment proceedings.
4. We note that the reasons in support of the impugned notice 4. We note that the reasons in support of the impugned notice 4. We note that the reasons in support of the impugned notice accept the fact that as a matter of regular business practice, a accept the fact that as a matter of regular business practice, a accept the fact that as a matter of regular business practice, a broker in the stock exchange makes modifications in the client broker in the stock exchange makes modifications in the client broker in the stock exchange makes modifications in the client code on sale and/ or purchase of any securities, after the tr code on sale and/ or purchase of any securities, after the tr code on sale and/ or purchase of any securities, after the trading is over so as to rectify any error which may have occurred while is over so as to rectify any error which may have occurred while is over so as to rectify any error which may have occurred while punching the orders. The reasons do not indicate the basis for the punching the orders. The reasons do not indicate the basis for the punching the orders. The reasons do not indicate the basis for the Assessing Officer to come to reasons do not indicate the basis for Assessing Officer to come to reasons do not indicate the basis for Assessing Officer to come to reasons do not indicate the basis for the Assessing Officer to come to reasonable belief the Assessing Officer to come to reasonable belief that there has that there has been any escapement of income on the ground that the been any escapement of income on the ground that the been any escapement of income on the ground that the modifications done in the client modifications done in the client code was not on account of a code was not on account of a genuine error, originally occurred while punching the trade. The genuine error, originally occurred while punching the trade. The genuine error, originally occurred while punching the trade. The material available is that there is a client code modificatio material available is that there is a client code modificatio material available is that there is a client code modification done by the Assessee's broker but there is no link from there to by the Assessee's broker but there is no link from there to by the Assessee's broker but there is no link from there to conclude that it was done to escape assessment of a part of its conclude that it was done to escape assessment of a part of its conclude that it was done to escape assessment of a part of its income. Prima facie, this appears to be a case of reason to income. Prima facie, this appears to be a case of reason to income. Prima facie, this appears to be a case of reason to suspect and not reason to believe that income chargeable to tax suspect and not reason to believe that income chargeable to tax suspect and not reason to believe that income chargeable to tax has escaped assessment. as escaped assessment. 5. In the above view, prima facie, we are of the view that the 5. In the above view, prima facie, we are of the view that the 5. In the above view, prima facie, we are of the view that the impugned notice is without jurisdiction as it lacks reason to impugned notice is without jurisdiction as it lacks reason to impugned notice is without jurisdiction as it lacks reason to believe that income chargeable to tax has escaped assessment." believe that income chargeable to tax has escaped assessment." believe that income chargeable to tax has escaped assessment." 8. The legal ground raised
by the assessee is 8. The legal ground raised by the assessee is covered by the ratio laid covered by the ratio laid down by the Hon'ble High Court discussed above. As per the law laid down by the Hon'ble High Court discussed above. As per the law laid down by the Hon'ble High Court discussed above. As per the law laid down by the Honble Court, the material available with the AO was not down by the Honble Court, the material available with the AO was not down by the Honble Court, the material available with the AO was not sufficient to form a belief that income chargeable to tax has escaped sufficient to form a belief that income chargeable to tax has escaped sufficient to form a belief that income chargeable to tax has escaped assessment. Hence, res assessment. Hence, respectfully following the ratio laid down by the pectfully following the ratio laid down by the Hon'ble Court, we hold that the notice issued by the AO is bad in law. Hon'ble Court, we hold that the notice issued by the AO is bad in law. Hon'ble Court, we hold that the notice issued by the AO is bad in law. Since we have held the notice issued by the AO as without jurisdiction, Since we have held the notice issued by the AO as without jurisdiction, Since we have held the notice issued by the AO as without jurisdiction, the appellate proceedings has also become bad in law. Hence, we al the appellate proceedings has also become bad in law. Hence, we al the appellate proceedings has also become bad in law. Hence, we allow this ground of appeal of the assessee and set aside the impugned order this ground of appeal of the assessee and set aside the impugned order this ground of appeal of the assessee and set aside the impugned order passed by the Ld. passed by the Ld. CIT(A).”
Bharat Vanmalibhai Modiya 7 ITA No. 125/M/2022 4.3 We find that the Hon’ble Bombay High Court in the case of We find that the Hon’ble Bombay High Court in the case of We find that the Hon’ble Bombay High Court in the case of M/s Coronation Agro Industries Ltd. v. DCIT in Writ Petition No. M/s Coronation Agro Industries Ltd. v. DCIT in Writ Petition No. M/s Coronation Agro Industries Ltd. v. DCIT in Writ Petition No. 2627 of 2016 has held that the Assessing Officer has not indicated 2627 of 2016 has held that the Assessing Officer has not indicated 2627 of 2016 has held that the Assessing Officer has not indicated basis for arriving at reasonable believe that income escaped due to basis for arriving at reasonable believe that income escaped due t basis for arriving at reasonable believe that income escaped due t modification done in the client code was not on account of genuine modification done in the client code was not on account of genuine modification done in the client code was not on account of genuine error to the originally occurred while punching the trade. The client error to the originally occurred while punching the trade. The client error to the originally occurred while punching the trade. The client code modification is permitted is permitted by the SEBI in view of the genuine SEBI in view of the genuine error while punching the transaction by the stock b punching the transaction by the stock broker and punching the transaction by the stock b therefore, the Assessing Officer was required to form his believe therefore, the Assessing Officer was required to form his believe therefore, the Assessing Officer was required to form his believe only on the basis of information of information as to whether there was any client as to whether there was any client code modification with ulterior motive code modification with ulterior motive and not carried out on not carried out on account of genuine error committed by the broker. In view of the account of genuine error committed by the broker. account of genuine error committed by the broker. comparison of reasons recorded above we find that in the case of comparison of reasons recorded above we find that i comparison of reasons recorded above we find that i M/s Excellent Shares & Finance Services Pvt. Ltd.(supra) , the AO M/s Excellent Shares & Finance Services Pvt. Ltd.(supra) M/s Excellent Shares & Finance Services Pvt. Ltd.(supra) recorded the name of brokers who carried out client code recorded the name of brokers who carried out client code recorded the name of brokers who carried out client code modification but in the case in hand even the name of brokers have modification but in the case in hand even the name o modification but in the case in hand even the name o not been recorded by the AO in reasons recorded. The AO has not been recorded by the AO in reasons recorded. not been recorded by the AO in reasons recorded. particularly not mentioned whether the client code medication was particularly not mentioned whether the client code medication was particularly not mentioned whether the client code medication was done otherwise than genuine error of punching transactions in done otherwise than genuine error of punching transaction done otherwise than genuine error of punching transaction normal course of trade normal course of trade. Only such material could be relevant for . Only such material could be relevant for forming belief that there was a tax evasion in the case and without forming belief that there was a tax evasion in the case and forming belief that there was a tax evasion in the case and which there is no relevant material to believe that income escaped which there is no relevant material to believe that income escaped which there is no relevant material to believe that income escaped assessment. In absence of any such information, the reasons to In absence of any such information, the reasons to In absence of any such information, the reasons to believe recorded by the assessee are d by the assessee are based on presumption or guess based on presumption or guess work and without application of mind application of mind by the AO, t by the AO, therefore, the Bharat Vanmalibhai Modiya 8 ITA No. 125/M/2022 reassessment notice issued on such reasons recorded is liable to be reassessment notice issued on such reasons recorded is reassessment notice issued on such reasons recorded is quashed. Accordingly, the reassessment proceedings are held to be quashed. Accordingly, the reassessment proceedings are held to be quashed. Accordingly, the reassessment proceedings are held to be void ab initio. The ground No initio. The ground Nos. 1 to 4 of the appeal of the assessee . 1 to 4 of the appeal of the assessee are accordingly allowed. are accordingly allowed.
5. Since, we have already quashed the reassessment proceedings, Since, we have already quashed the reassessment proceedings, Since, we have already quashed the reassessment proceedings, we are not adjudicated on the we are not adjudicated on the other grounds raised by the assessee grounds raised by the assessee and same are rendered only academic. and same are rendered only academic.
In the result, the appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed.