| The Tax Publishers2020 TaxPub(DT) 4482 (Mum-Trib) INCOME TAX ACT, 1961
Section 147
Where payment for loss in F&O transaction was made by assessee to broker through banking channel and AO had not disputed the same and had also not brought out any evidence of cash coming back to the assessee; the AO was not justified in treating such loss as fictitious loss merely on the basis of suspicion, presumptions, surmises and conjectures.
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Reassessment - Validity - Disallowance of loss in F & O transaction by treating it as fictitious loss -
Assessee was dealing in business of investment/trading in shares, stocks, securities, etc. During the year, assessee recorded a loss in F&O transaction. AO came to know through the investigation wing that some brokers were indulged in misusing the client code modification procedure. The investigation wing carried on survey operation under section 133A in the premises of such brokers and certain clients. Based on the said information, the AO took the view that the assessee had taken fictitious loss with the help of the broker. Therefore, the income had escaped within the meaning of section 147 and assessment of the assessee was reopened. Held: It was found that addition was made by AO merely on the basis of suspicion, presumptions, surmises and conjectures. The modification in the client code was in the hands of the broker and the assessee could not be made responsible for the act of others. Further, the payments for the losses were made by the assessee to the broker through banking channel and the AO had not disputed the same and had also not brought out any evidence of cash coming back to the assessee. Further, all the modifications were made on the same day of the transaction which further substantiated that the same could not be made with mala fide intention. Further, the client code modification could be made on the request of the client or suo moto by the broker before the close of the day. Since the transaction was made through banking channel and settlement was already made for that transaction, therefore, it could be said that the transaction must be completed subsequent to the completion of that transaction. So, the broker could not make modification after closure of the trading for the particular day. Therefore, reopening of assessment was not valid and accordingly, the addition made on account of loss in F&O transaction was deleted.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2009-10
IN THE ITAT, MUMBAI BENCH
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