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The Tax PublishersITA Nos. 7002, 7004 & 7005/Mum/2018
2021 TaxPub(DT) 1113 (Mum-Trib)INCOME TAX ACT, 1961
Section 147
Where reasons did not indicate the basis for AO to come to reasonable belief that there was any escapement of income on the ground that modifications done in the client code was not on account of a genuine error, originally occurred while punching the trade and prima facie, this appeared to be a case of reason to suspect and not reason to believe that income chargeable to tax had escaped assessment, therefore, reopening of assessments was bad in law.
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Reassessment - Validity - Undisclosed client code modification - Assessee provided fictitious loss to different clients as well as fictitious profit to other clients
Assessee was dealing in shares and securities in both derivative and forward and option (F & O) segments. Returns filed by assessee were initially processed under section 143(1). Subsequently, AO received information from DDIT (Inv.) that certain assessee's were engaged in tax evasion through client code modification and present assessee was one of them. AO reopened the assessments under section 147 and made addition of various amounts and also computed commission income at 2%. Held: The reasons did not indicate the basis for AO to come to reasonable belief that there was any escapement of income on the ground that modifications done in the client code was not on account of a genuine error, originally occurred while punching the trade. Perusal of the reasons recorded for reopening of assessment reproduced in the order passed by the Tribunal makes it very much clear that reasons recorded were identical to the reasons recorded by AO in case of present assessee's. Only factual difference was, in assessment year 2010-11 AO referred to information received from DIT (Intell), whereas, in the present case he had referred to letter received from DDIT (Inv.). Except this, there was no other difference in the reasons recorded. Therefore, reopening of assessments was bad in law.
Relied:Coronation Agro Industries Ltd. v. Dy. CIT [Writ Petition No. 2627 of 2016, dt. 23-11-2016] : 2017 TaxPub(DT) 520 (Bom-HC) and Excellent Shares & Finance Services Pvt. Ltd. v. ITO [ITA No. 7003/Mum/2018 dated 28-2-2020].
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2009-10 & 2011-12
IN THE ITAT, MUMBAI BENCH
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