The Delhi bench of the Income Tax Appellate Tribunal (ITAT), in a matter involving misuse of client Code Modification, confirmed the addition against the assessee finding that the assessee could not prove the allegations of the tax department as wrong and could not substantiate the genuineness of the transactions with adequate proof.
The assessment against the assessee was re-opened by the department alleging that the share transactions were not genuine and suspected the misuse of client code modification.
On the second appeal, the Tribunal observed that the assessee earned short term capital gain amounting to Rs. 29,50,000/- on sale of the plot but the same was set off against the loss from F & O Securities Transactions & other business loss.
“The Investigation Directorate, Ahmedabad carried out survey u/s 133(A) to examine the misuse of Client Code Modification for tax evasion. In this case, the client code of the assessee was SS 493 & as per the Assessing Officer the error by the operator could be in the form of punching Client Code as FS-493, HS-493, SS-439 or similar phonic sounds but certainly, Code was S-1. Hence, the modification, in this case, was not found genuine by the Assessing Officer as well as CIT (A). Before the Assessing Officer, the assessee has not at all proved as to why the error has incurred. In the written submissions as well, the assessee submitted that the details of trading and how the loss come across, but the same was not fully satisfied before the Assessing Officer as well as before the CIT(A) by the assessee. Therefore, the Assessing Officer has rightly made the addition of Rs.15, 25,782/- and the same was properly confirmed by the CIT (A). There is no need to interfere with the said finding of the CIT (A),” the Tribunal noted.
A few months ago, the Central Board of Direct Taxes (CBDT) flagged the misuse of client code modification, a practice it said was aimed at avoiding taxes. Modifications in client code are a unique trading id given to all clients are required in cases of a manual error on the part of the investor or broker while punching in the client code at the time of order. For instance, a broker may have mixed up an order for Client A with that of Client B.Subscribe Taxscan AdFree to view the Judgment