Income Tax Appellate Tribunal - Kolkata
Shri Pradeep Kumar Todi, Kolkata vs Ito, Ward-44(4), Kolkata, Kolkata on 26 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH 'C' KOLKATA
[Before Hon'ble Shri N.V.Vasudevan, JM & Shri Waseem Ahmed, AM ]
S.A.No.48/Kol/2017
(A/o ITA No.984/Kol/2017)
Assessment Year : 2010-11
Shri Pradeep Kumar Todi -versus- I.T.O., Ward-44(4)
Kolkata Kolkata
(PAN:ABMPT 7500 P)
(Appellant) (Respondent)
For the Appellant: Shri S.K.Tulsiyan, Advocate
For the Respondent: Shri David Z.Chowngthu, CIT, Sr.DR
Date of Hearing : 14.07.2017
Date of Pronouncement : 26.07.2017.
ORDER
PER N.V.VASUDEVAN, JM:
This is an application filed by the assessee praying for an order of stay of recovery of outstanding demand of Rs.70,79,420/-. The outstanding demand arises out of an order passed by the AO and confirmed by CIT(A) whereby it was held that the profit of Rs.1,58,11,057/- declared by the assessee in the return of income as F & O segment of NSE was fictitious and had to be taken as income from undisclosed sources and which should not be allowed to be set off against brought forward business loss of Rs.2,61,26,483/- for A.Y.2010-11. The basis on which the revenue came to the conclusion that the income from F & O segment of NSE was fictitious information received from the Director of Income Tax and Crime Division that some brokers have created fictitious profit and loss by misusing the client's code modification facility in F & O segment of NSE during the financial year 2009-10. As the assessee was a client of one of the brokers who had carried out client code modification in respect of transactions carried out by them on behalf of the assessee, the revenue came to the conclusion that the income from F&O segment of NSE carried out by the assessee was fictitious and therefore was to be regarded as S.A.No.48/Kol/2017 A/o ITA No.984/Kol/2017 Shri Pradeep Kumar Todi A.Y.2010-11 1 undisclosed income which cannot be treated as business income eligible for set off against carry forward business loss of earlier years.
2. The challenge by the Assessee to the order of assessment is two grounds. The first ground being that the reasons recorded by the AO cannot lead to belief of escapement of income in the hands of the assessee. Secondly, there is no material to come to the conclusion that the income declared by the assessee was fictitious and even in the worst scenario, so long as the income is declared in the return of income the same cannot be added to the total income.
3. We have perused the reasons recorded by the AO for initiating reassessment proceedings which reads as follows :-
"Reason to believe for reopening the case:
Information has been received from Departmental sources that Tax evasion through client code modification during the financial year 2009-10 has been found wherein fictitious profit and losses were created by brokers misusing the client code modification facility in F & 0 segment on NSE during March 2010. The brokers were indulging in transferring the fictitious losses to different clients to reduce tax liabilities and also to cover up their undisclosed income or to set oJ! these profits against huge losses according to their client requirements. On receiving the information, the return for the A. Y.2010-11 filed by you on 13.10.2010 has been scrutinised and found that a huge amount of losses has been carried forward for adjusting the profit."
4. Prima facie the reasons recorded talks only about carry forward loss and fictitious loss generated by various assessees with the connivance of the brokers . There is no reference to any income generated in F & O segment of NSE by client code modification by the broker of the Assessee in respect of transactions carried out by the Assessee out of which the income in F & O segment in question arose in the hands of the Assessee. Prima facie there appears to be absence of belief regarding escapement of income in the hands of the assessee. There is no nexus between the information received by the AO and his belief regarding escapement of income. Further, it is seen from a reading of the order of assessment that there is no specific material except the general investigation and information emanating from such investigation. There is no S.A.No.48/Kol/2017 A/o ITA No.984/Kol/2017 Shri Pradeep Kumar Todi A.Y.2010-11 2 co-relation as to how general information would apply to the case of the assessee also. In that view of the matter, we are satisfied that the assessee has made a prima facie case for grant of stay. We are also of the view that the balance of convenience and hardship are in favour of the assessee for grant of stay.
5. The assessee has also paid a sum of Rs.12,56,317/- out of the outstanding tax demand of Rs.83,35,719/-leaving a balance of outstanding demand of Rs.70,79,420/-. Keeping in mind the existence of prima facie balance of convenience and relative hardship and keeping in mind payments already made by the assessee, we grant an order of stay of recovery of outstanding demand for a period of six months from this date or till disposal, whichever is earlier. We make it clear that the observations in this order are only for a limited purpose of the disposal of the stay application. The appeal of the assessee is directed to be fixed for out of turn hearing on 05.09.2017. The registry is directed to issue notice to the parties accordingly.
5. In the result the Stay Application of the assessee is allowed.
Order pronounced in the Court on 26.07.2017.
Sd/- Sd/-
[Waseem Ahmed ] [ N.V.Vasudevan ]
Accountant Member Judicial Member
Dated : 26.07.2017.
[RG PS]
Copy of the order forwarded to:
1.Shri Pradeep Kumar Todi, P-16, Kalakar Street, Kolkata-700007.
2. I.T.O., Ward-44(4), Kolkata
3. C.I.T.(A)-13, Kolkata 4. C.I.T.- 15, Kolkata.
5. CIT(DR), Kolkata Benches, Kolkata.
True Copy By order, Senior Private Secretary Head of Office/D.D.O. ITAT, Kolkata Benches S.A.No.48/Kol/2017 A/o ITA No.984/Kol/2017 Shri Pradeep Kumar Todi A.Y.2010-11 3 S.A.No.48/Kol/2017 A/o ITA No.984/Kol/2017 Shri Pradeep Kumar Todi A.Y.2010-11 4