|CORAM:||G. D. Agrawal (VP), Kul Bharat (JM)|
|CATCH WORDS:||retraction, statement on oath|
|COUNSEL:||S. N. Soparkar|
|DATE:||March 19, 2015 (Date of pronouncement)|
|DATE:||March 23, 2015 (Date of publication)|
|AY:||2006-06 to 2008-09|
|FILE:||Click here to download the file in pdf format|
|(i) Modification to client code of client is not necessarily a mala fide act, (ii) Disclosure made in a statement recorded at unearthly hours cannot be given credence, (iii) if a voluntary disclosure is retracted, the AO has to make addition on the basis of documentary evidence|
(i) The AO held the client code modifications to be malafide with the intention to transfer the profit to other person by modifying the client code so as to avoid the payment of tax. From the circular of the Commodity Exchange, it is evident that client code modification is permitted on the same day. Therefore, we are unable to find out any justification for the allegation of the Assessing Officer that the client code modification was with the malafide intention. When the client code was modified on the same day, there cannot be any malafide intention. Had client modification done after the transactions period when the price of the commodity has already changed, then perhaps there could have been some basis to presume that client code modification is intentional. However, when the client code modification is done on the same day, in our opinion, there was no basis or justification to hold the same to be malafide.
(ii) Moreover, the AO has computed the notional profit/loss till the transactions period and not till the period by which the client code modification took place. Even if the view of the Revenue is accepted that the client code modification was with malafide intention, then the profit or loss accrued till the client code modification can be considered in the case of the assessee but by no stretch of imagination the profit/loss arising after the client code modification can be considered in the hands of the assessee.
(iii) In Kailashben Manharlal Chokshi vs. CIT (2010) 328 ITR 411 (Guj), the High Court held that if a statement is recorded at midnight, much credence cannot be given to such statement because the person would not be in a position to make any correct or conscious disclosure in a statement recorded at odd hours. The ratio of the above decision of the jurisdictional High Court would be squarely applicable to the facts of the assessee’s case because the statement was recorded at the midnight of 25th and 26th March 2008.
(iii) In Kailashben Manharlal Chokshi the Hon’ble High Court has noticed that when during the course of assessment proceedings the assessee has given the proper explanation for investment in various properties, the addition cannot be made on the basis of statement made at odd hours. Similarly, in the case of Ratan Corporation (2005) 145 Taxman 503 (Guj.), the Hon’ble jurisdictional High Court reiterated that when the statement made during the course of search has been retracted, then it is duty of the Assessing Officer to make further inquiries. Similar view is expressed by their Lordships of Hon’ble Jurisdictional High Court in the case of Radhe Associates (2013) 37 taxmann.com 336 (Guj.), wherein the Assessing Officer has made the addition by mentioning that there were clinching documentary evidences with respect to receipt of on-money. However, these clinching documentary evidences were not specified. In the case under appeal before us also, we find that the officer recording the statement of Shri Nayan Thakkar has mentioned that various defects and discrepancies have been observed from the papers and documents seized from the assessee’s premises. However, any defects or discrepancies were not specified. In view of the above, we are of the opinion that on the facts of the assessee’s case the decisions of the Hon’ble Jurisdictional High Court in the cases of Kailashben Manharlal Chokshi, Ratan Corporation and Radhe Associates would be squarely applicable.