Case at a glance
Case Name: Ganita Technologies & Services Pvt. Ltd. v. ACIT (ITAT Mumbai)
- Subject
- Client code modification loss Ganita Technologies ruling on additions based on general Investigation Wing findings
- Issue
- Can a loss be disallowed as artificially shifted merely because the broker modified client codes, without assessee‑specific evidence of collusion?
- Appeal no.
- ITA No. 3222/Mum/2026, order dated 18 August 2026
- Forum
- ITAT Mumbai
- Assessment year
- 2009-10
- Amount involved
- Rs 1,06,40,281
- Outcome
- In favour of assessee
Background
Facts of the Case
- The appeal was filed by Ganita Technologies as successor in interest to Vocation Investment & Finance Co. Pvt. Ltd.
- The AO treated a loss of Rs 1,06,40,281 from transactions involving client code modification (CCM) as artificially shifted to the assessee.
- The AO relied mainly on Investigation Wing material and on the pattern and size of the modifications.
- The assessee was not a stock-broker, and nothing showed that it had instructed the broker to make the modifications.
The ruling
Summary of Decision: What the Tribunal Held
- CCM is a facility available to brokers to correct genuine errors. A modification of client codes does not, by itself, prove that the resulting loss is fictitious.
- There was no material showing a pre-arranged scheme to shift losses, no exchange of money, cash, commission or other benefit, and no link or collusion between the assessee and the parties involved.
- General findings about misuse of CCM cannot be applied mechanically to an assessee. The Revenue must bring assessee-specific evidence of deliberate participation, which it had not done.
- The AO was directed to delete the client code modification loss addition of Rs 1,06,40,281.
Practice point
Key Takeaway: Client Code Modification Loss Ganita Technologies Ruling
- An Investigation Wing report on CCM misuse is not enough on its own. The addition needs evidence linking the specific assessee to the arrangement.
- Key defence points: the assessee is not a broker, gave no instruction for the modification, and received or paid no cash, commission or other benefit.
- Ask the AO to share the assessee-specific material relied on, and object if only general findings are cited.
- This is an ITAT order, so it is persuasive and not binding outside the bench. Outcomes in CCM cases depend heavily on the evidence in each file.
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