When purchase and sale of shares were supported by proper Contract Notes, shares were purchased and sold through recognised broker and sale considerations were received by Account Payee Cheques, the transactions could not be treated as bogus and loss on account of client code modifications should be allowed.

AO noted that assessee had operated his transactions, in the stock exchange through three brokers and NSE provided certain client code modifications pertaining to future and option segment with one of the broker. AO opined that bogus losses debited in the Profit and Loss account, by way of client code modifications, arranged through that broker should be disallowed.

Held: When purchase and sale of shares were supported by proper Contract Notes, deliveries of shares were received through demat accounts maintained with various agencies, the shares were purchased and sold through recognised broker and the sale considerations were received by Account Payee Cheques, hence, the transactions could not be treated as bogus. Therefore, addition made by AO should be deleted.

Decision: When purchase and sale of shares were supported by proper Contract Notes. Shares were purchased and sold through recognised broker and sale considerations were received by Account Payee Cheques. The transactions could not be treated as bogus and loss on account of client code modifications should be allowed.

Relied: Rahul Vasisht v. ITO in ITA No. 140/Kol/2009; Sunita Khemka in ITA No. 714 to 718/Kol/2011, order dt. 28-10-2015

Referred: Rahul Vasisht v. ITO in ITA No. 140/Kol/2009.

IN THE ITAT, KOLKATA BENCH

ABY T. VARKEY, J.M. & A.L. SAINI, A.M.