ITAT held: Addition of bogus F&O losses for Client Code Modification misuse
ITAT held: Addition of bogus F&O losses for Client Code Modification misuse
Held: ITAT Mumbai has confirmed the addition of fictitious F&O losses being inflicted by misusing the Client Code Modification (CCM). The ITAT also confirmed the addition in respect of Commissions to the tune of 1% of the stated fictitious losses in the hands of the Assessee (LLP). ITAT Mumbai also upholds re-assurement for AY 2010-11 (within a 4 year period)
Time Media & Entertainment LLP vs. ITO (ITAT Mumbai)
Based on the information presented by the Investigations Wing, the Assessee was found to be one of the beneficiary of the CCM. The assessee had obtained fictitious F&O losses through the broker (inventure).
The ITAT upholds ITAT upholds re-assessment proceedings noting that the AO had first carried out independent enquiries by issuing notices u/s 133(6) and had then re-opened the assessment.
ITAT referred to the massive rush in CCMs undertaken by the brokers in March, 2010 as much as Rs 48,974 Crores in NSE. The ITAT also incidentally noted that the assessee had also incurred F&O loss which were inflicted by the CCM in March, 2010 itself.
The ITAT observed that the AO had conducted enquiries with the NSE, who who confirmed that these CCM were undertaken by brokers with stock exchanges to evade taxes. The ITAT further noted that the ratio of transactions of assessee in F&O segment inflicted with CCM undertaken with Broker Inventure was as high as 92.21%
The ITAT also noted that the assessee could not explain the question,
"as to how these large punching errors were made by the broker Inventure while executing trade deal of the assessee on stock exchanges were genuine within guidelines of SEBI/ Stock Exchanges.”
Case Reference
The ITAT has relied on Co-ordinate bench ruling in Ninja Securities and Punjab & Haryana HC ruling in Rakesh Gupta vs Commissioner Of Income Tax And Anr on 27 April, 2018
Ruling Delvered by ITAT Bench comprising:
Shri Sandeep Gosain and Shri Ramit Kochar
Attorneys:
Representing Assessee: Mr Reepal G. Tralshawala
Representing Revenue : Mr D.G Pansari.
