I.T.A. No. 2698/DEL/2018

Assessment Year: 2010-2011

Decided On: 09.08.2023

Appellants: Captive Commerce Pvt. Ltd. Vs. Respondent: ACIT, Central Circle-26

Hon'ble Judges/Coram:
Chandra Mohan Garg, Member (J) and Pradip Kumar Kedia


Pradip Kumar Kedia, Member (A)

1. The captioned appeal has been filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-XXVI, New Delhi ('CIT(A)' in short) dated 26. 02.2018 arising from the assessment order dated 09. 12.2016 passed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2010-11.

2. As per the grounds of appeal, the assessee has challenged the assumption of jurisdiction under Section 147 of the Act as well as confirming notional income of Rs.41,48,008/- on account of client code modification.

3. We have heard the parties in length and perused the first appeal order and re-assessment order. The material referred and relied upon in the course of hearing has also been taken into consideration.

4. Since the assessee has raised the legal question of usurpation of jurisdiction by the Assessing Officer to reopen the completed assessment under Section 143(3) of the Act in the instant case, it would be pertinent to deal with the aforesaid question at the outset as it goes to the root of the matter. The ld. counsel for the assessee submits at the outset that Assessing Officer has wrongly assumed jurisdiction by issuing notice under Section 148 of the Act without authority of law. The ld. counsel further submits that the ingredients of Section 147/148 of the Act are not fulfilled in the instant case to enable the Assessing Officer to exercise jurisdiction and to proceed with the re-assessment proceedings. The ld. counsel thereafter submits that the assessment in the instant case was completed under Section 143(3) of the Act but the case was however reopened albeit within four years from the end of the relevant Assessment Year 2010-11 by issuing notice dated 30.12.2015. This notwithstanding without fulfillment of the indispensable requirement of formation of 'reason to believe' that chargeable income has escaped assessment, the issuance of notice under Section 148 r.w. Section 147 is not permissible in law.

5. Adverting to the reasons recorded by the Assessing Officer under Section 148(2) of the Act, the ld. counsel submits that the completed assessment in the instant case has been reopened on vague and non descript reasons which is not permissible in law.

6. The reasons recorded for conferment of jurisdiction to reassess the completed assessment in terms of Section 148(2) of the Act is reproduced hereunder for ready reference.

" Reasons for issue of notice us 148 in the case of M/ s. Captive Commerce Pvt. Ltd., PAN AABCC 0820 A for the assessment year 2010- 11

Return of income in this case was filed on 24 .09 .2010 declaring income of Rs.2 ,89 ,349 /-. The case was selected for scrutiny and assessed u/s. 143 (3 ) at returned income of Rs. 2 ,89 ,349 /-.

2. Subsequently, information was gathered by the Department which revealed that some share brokers are indulged in the activity of creating fictitious profits and loss by misusing the client code modification facility in F & O segment on National Stock Exchange (NSE) during March 2010. On investigation and analysis of client code modification (CCM) date and transactio........