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"The department is in possession of information that some brokers had misused client code modification facilities (in short "CCM") to transfer loss and profits on account of share transactions from one client to the other. The losses/profits were shifted to reduce the tax liability in the hands of either the original client or modified client. The information received in the case of the assessee is as under:

       PAN of        Name of the   Address of    Name of Broker                     F.Y.2008-09
       Beneficiary   Beneficiary   Beneficiary
       Client Client
                                                                  When Original    When Modified    Net Reduction
                                                                  Client Client           in Income due
                                                                  (Ascertained     (Ascertained     to CCM (In
                                                                  Profit Shifted   Losses Shifted   Rs.)
                                                                  Out) (In Rs.)    In) (In Rs.)
       ACBPA0069J    PRABHU        G-47, PREET   AMRAPALI         1,37,86,298.4    -24,89,527.5     1,62,75,825.9
                     DAYAL         VIHAR,        AADYA
                     AGGARWAL      DELHI-        TRADING &
                                   110092        INVESTMENT
                                                 PVT. LTD.

The information received was examined with reference to the return of income filed by the assessee. On perusal of the ITR filed by the assessee and from the examination of the above information, it is evident that through client code modification a net reduction of income to the true of Rs.1,62.75,826/- has taken place in the case of the assessee, reducing tax liability in F.Y.2008-09.

In view of the above mentioned facts and evidences gathered, I have reasons to believe that income to the true of Rs.1,62,75,826/- chargeable to tax has escaped assessment and this income needs to be assessed/reassessed u/s 147 of the Act. It approved, notice u/s 148 of the Act may be issued.

Submitted for kind approval please.

3. In response to the notice u/s 148, the assessee submitted that the original return filed for assessment year 2009-10 may be treated as return filed in response to notice u/s 148 of the I.T. Act. Subsequently, the Assessing Officer issued notice u/s 143(2) of the I.T. Act. The Assessing Officer discussed the background of client code modification and manipulation of this facility, SEBI order, the modus operandi adopted etc.. He observed that a survey u/s 133A was conducted in the case of Amrapali Adya Trading and Investment Private Limited, which is a member of NSE and it was found to have indulged in large scale client codes modifications so as to facilitate losses and profits to the clients as per the requirement. He observed that the complete data of the client codes modified by the said member for the period from 01.04.2008 to 31.03.2012 was obtained from NSE. On perusal and analysis of the data it was found that the said broker has carried out highest client code modification on the NSE F&O segment for the three years combined. He also referred to the statement of Shri Sanjeeva Kumar Sinha, Director of the company which was recorded during the course of survey. In his statement, Shri Sanjeeva Kumar Sinha was confronted with the client code modification. He had stated that for misuse of CCM for the purposes other than rectification of punching errors penalty of Rs.20,00,000/- was levied on Amrapali Aadya by NSE. After analyzing the statement of Shri Sanjeeva Kumar Sinha, the Assessing Officer confronted the assessee regarding the same. Rejecting the various explanations given by the assessee and observing that the assessee had obtained accommodation entries through broker M/s Amrapali Aadya Trading & Investment Pvt. Ltd. by misusing the client code modification facilities to the tune of Rs.1,62,75,826/-, he made addition of the same to the total income of the assessee.

6. However, ld. CIT(A) was not satisfied with the arguments advanced by the assessee. So far as the validity of the reopening of the assessment is concerned, he upheld the action of the Assessing Officer by observing as under :-

"I have considered the facts of the case, the basis of the disallowance made by the Assessing Officer and the arguments of Ld. AR during appellate proceeding. It has twin issues involving Reopening of the assessment and addition on Client Code Modification.