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10. On the other hand, the ld AR of the assessee has submitted that the assessee has no direct excess to the stock exchange terminal and all transactions are being carried out by the brokers. For the year under consideration, even the KYC norms were not formulated and finalized. The KYC was not mandatory for the assessment year under consideration as it was made mandatory vide circular dated 29/07/2011, this cannot be applied for the year under consideration. Even otherwise as per the said circular it is only the broker who has got terminal and excess to the exchange mechanism and authorize to change the code in case of punching error. The changes are as per the exchange norms and SEBI circulars. The ld AR has submitted that as per the NSE/SEBI circular dated 29/07/2011, which has been issued in pursuant to the SEBI circular dated 05/7/2011 allows 5% error margin regarding modification of client code for non-institutional trades subject to penalty of 1% and if the error margin is more than 5% then the penalty is 2% of turnover value. Thus, the modification is permitted even after the said circular which allows 5% error and assessee's error percentage is only 0.47%. Though, prior to the said circular, there was no provision of penalty.

DCIT Vs. Gyandeep Khemka However, even under the provisions of the said circular it permits the modification of client code in respect of error up to 5%, thus the client code added in the case of the assessee is less than even ½% then the said cannot be considered a non-genuine mistake when the SEBI and NSE permits the error margin of 5% in wrong punching of codes. The Assessing Officer has not conducted any independent enquiry while making the addition in the reassessment but has solely relied upon the reports of the DIT(Inv.). Despite the specific request made by the assessee, the Assessing Officer refused to allow the cross examination of the brokers whose statements were allegedly recorded by the Investigation Wing and relied upon by the Assessing Officer. Even notice U/s 133(6) or 131 of the Act were not issued by the Assessing Officer despite the specific request made by the assessee. The ld AR has referred to the details of the correct figures of Client Code Modification in the case of assessee at 499 which is only 0.47%. Thus, once the error is within the limit of the reasonable margin as per the NSE/SEBI circular dated 05/7/2011 and 29/07/2011 and then such an error which is rectified by the brokers as per the facility of Client Code Modification cannot be held as misuse and bogus transactions. The ld AR has pointed out that the modification of client code is allowed which is to correct the mistakes and the transactions carried out on behalf of a particular client should not be recorded in the account of the other client and therefore it DCIT Vs. Gyandeep Khemka is the rectification exercise which corrects the transaction in the hand of the client on whose behalf the trade is executed. In support of the contention he has relied upon the following case laws:

Thus, it is clear that the stock exchange has accepted the reasonable error margin up to 5% and undisputedly in the case of the assessee, the error and rectification of the same by using the Client Code Modification constitute only 0.47%, therefore, the percentage of trade which are rectified are not only within the range but it is on lower side of the range of error margin acceptable in such transactions. The Mumbai Benches of the Tribunal in the case of ITO Vs. M/s Pat Commodity Services P. Ltd. has considered this issue in para 11 to 16 as under:

Thus, in the said case, the modification carried out by the assessee were 3% of the total transaction, which was found by the Tribunal as within the permissible limit of error margin. The Ahmadabad Benches of the Tribunal in the case of ACIT Vs. M/s Kunvarjit Finance Pvt. Ltd. (supra) and others in bunch of appeals has analysed the issue in para 8 to 11 as under:

"8. We have carefully considered the arguments of both the sides and perused the material placed before us. The Assessing Officer believed the client code modification to be malafide because in his opinion the client code modification was for unusually high number of cases. Therefore, first thing to be decided is whether there was the client DCIT Vs. Gyandeep Khemka code modification for unusually high number of cases. The Commodity Exchange i.e. MCX vide circular No.MCX/T&S/032/2007 dated 22.01.2007, issued guidelines with regard to the client code modification, which reads as under:-