Mumbai ITAT Quashes ₹35.60 Lakh Addition on Alleged Bogus CCM: Investigation Wing Input Held Insufficient

Background of the Dispute

The Mumbai Bench of the ITAT, in the case of Jagruti Chetan Thakker Vs (ITAT Mumbai), has annulled an addition of ₹35,60,500 made under Section 69A read with Section 115BBE, which had been fastened on the assessee on the ground of alleged bogus profits generated through Client Code Modification (CCM) on trades executed on the National Spot Exchange Ltd. (NSEL) platform.

The reassessment in this case emanated from information received from the Investigation Wing purporting that the assessee had allegedly availed accommodation entries or artificial profits via CCM. The Revenue authorities treated such information as sufficient basis to reopen and subsequently make additions, without bringing any further corroborative material on record.

Procedural History

Original Return and Reassessment

  • The assessee, an individual, filed the original return of income declaring a total income of ₹2,68,600 for Assessment Year 2014-15.
  • Subsequently, based on inputs from the Investigation Wing relating to alleged fictitious profits from CCM transactions at NSEL, the Assessing Officer (AO) initiated reassessment proceedings under Section 147.
  • Notice under Section 148 was issued, and reassessment was completed by the National Faceless Assessment Centre (NFAC), Delhi under Section 147 r.w.s. 144B.

The AO concluded that the assessee had earned unexplained profit of ₹35,60,500 from CCM transactions and treated this as unexplained money under Section 69A, taxing it at the special rate under Section 115BBE.

First Appeal Before CIT(A)

  • The assessee challenged the reassessment and the addition before the NFAC (acting as CIT(A) under Section 250).
  • The CIT(A) upheld the addition of ₹35,60,500 under Section 69A, endorsing the AO’s reliance on the Investigation Wing’s information.

Second Appeal Before ITAT Mumbai

  • Aggrieved, the assessee preferred an appeal before the ITAT Mumbai in ITA No. 4764/MUM/2026.
  • The Tribunal examined both the legal basis of the reassessment and the evidentiary support for the addition on merits.

Evidence and Submissions Before the Tribunal

Material Filed by the Assessee

The assessee’s Authorised Representative submitted a detailed paper book (pages 1–75), which included, inter alia:

  1. Contract Notes and Broker Documentation

    • Contract notes issued by the broker reflecting purchase and sale of commodities/equity on the NSEL platform.
    • Details of warehousing charges levied by the broker and corresponding bills (APB pages 51–56).

  2. Broker Ledger and Delivery Allocation

    • Ledger account of the assessee in the books of the broker showing all debit and credit entries arising from transactions (APB pages 57–72).
    • Allocation records evidencing that commodities were stored in a warehouse on behalf of the assessee, consistent with actual trading and delivery processes.

  3. Broker’s Confirmatory Letter

    • A categorical confirmation from the broker (APB page 75) stating that:
      • Any Client Code Modification, if done, arose solely from the broker’s own punching or operational errors.
      • No CCM was carried out at the instance, instruction, or with the involvement of the assessee.
      • The assessee was not a beneficiary of any artificial arrangement via CCM.

This letter was reproduced in the ITAT order and formed a crucial part of the evidentiary analysis.

The assessee’s counsel emphasised: