The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that error in the sale of share transaction made by the broker of the assessee hence deleted the addition on client code modification.
The assessee filed a return of income declaring a total income of Rs.92,560/-. The information was received from the Applied Computer and Information Technology (ACIT), Ahmedabad regarding client code modification carried out by the assessee. The assessment was re-opened and a notice under Section 148 of the Income Tax Act was issued.
The assessing officer issued a show-cause notice requiring the assessee to show cause as to why the contrived profit/loss of Rs. 16,47,800/- should not be added to his total income.
After taking cognizance of the same, the Assessing Officer observed that M/s. Affluence Shares & Stock Pvt. Ltd. was indulging in client code modification for the assessee in a thoughtful, systematic manner with the malafide intention to avoid the payment of taxes and the actual income. Therefore, the Assessing Officer made an addition of Rs. 16,47,800/-.
The Authorized Representative submitted that only one transaction of sale of 4000 shares of Adani Enterprise amounting to Rs. 16,47,800/- was inadvertent, wrong entered by the assessee’s broker in the code of KETAN M. CHALISHAZAR (INDIVIDUAL) instead of KETAN M. CHALISHAZAR (HUF). The said mistake was duly rectified by the assessee’s broker by modifying the client code from Individual to Hindu Undivided Family (HUF).
It was further submitted that the assessee himself cannot modify the client code and therefore, the assessee cannot be held responsible for the mere mistake which is a genuine mistake by the broker. Therefore, the Assessing Officer was incorrect in treating the entire sale value as income.
The Departmental Representative submitted that the reasons recorded were proper and the exact ground mentioned also gave the indication that the reasons were properly recorded and the reopening is justifiable. As regards, the HUF has invested 16 lakh amount which is matching with the individual assessee’s case and therefore, the client code modification in the assessee’s case is not justifiable.
A Single-bench member consisting of Suchitra Kamble (Judicial member) observed that the Assessing Officer in the assessment order has not given the specification of KETAN M. CHALISHAZAR (HUF) and KETAN M. CHALISHAZAR (INDIVIDUAL) in respect of the number of trades in which client code modification has been made by the broker M/s. Affluence Shares & Stock Pvt. Ltd.
The observation of the Commissioner of Income Tax (Appeal) [CIT(A)] that it is a mere assumption on the part of the assessee appears to be not proper as the assessee has given the details related to the share transaction as well as the client code modification which clearly set out that in assessee’s case, it is a genuine client code modification.
Therefore, the appeal of the assessee is allowed.
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