Failure to prove Malafide purpose of Shifting Profit under Client code modification: ITAT quashes Reassessment Proceedings [Read Order]

The Delhi bench Income Tax Appellate Tribunal ( ITAT ) quashed the reassessment proceedings due to failing to prove the malafide purpose of shifting the profit under Client code modification by the assessing officer.

The Assessee, Vayoo Nandan Finance filed return of income for the Asst Year 2009-10 by declaring total loss of Rs 73,315/. AO observed that the assessee had derived income from the business of financing activities and trading in shares and securities. The assessment of the assessee was sought to be reopened by the  AO on the ground that the assessee was one of the beneficiaries of Client Code Modification ( CCM ) by some broker.

Aggrieved by the order assesee filed an appeal before the CIT(Appeal). The CIT(A) dismissed the appeal filed by the assessee. Thereafter the assessee filed an appeal before the tribunal.

The tribunal observed that it is very clear that there is no information provided in the reasons as to in whose hands, a survey u/s 133A of the Act was conducted by Ahmedabad Investigation wing for initiating the reassessment proceedings by the AO .

Therefore the bench found that the reason only speaks that some survey in Ahmedabad conducted revealed that some broker was involved in misusing the CCM facility of NSE and engaged in providing non-genuine losses and profits. The reason does not specify whether the broker through whom the assessee had carried out the transation of trading of shares and securities was involved in such malpractices.

After analyzing the submission of both parties, the bench comprising M. Balaganesh ( Accountant Member ) held that  there is no material to infer that such client code modification has been done with the malafide purpose of shifting of the profit or evasion of the tax.

Dr. Rakesh Gupta counsel appeared for the assessee and  Kirti Sankratyayan, counsel appeared for revenue.

To Read the full text of the Order CLICK HERE

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