TaxTMI 
TaxTMI 
2024 (7) TMI 508
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....rivatives of Rs. 19,20,000/- each and there was neither any profit nor any loss on account of such transactions. The petitioner filed return of income for the year under consideration on 31st October 2015 declaring total income at Rs. 64,40,890/-. [2.2] Thereafter, the respondent issued the impugned notice dated 31st March 2021 under Section 148 of the Income Tax Act, 1961 (for short, "the Act") seeking to reopen the case of the petitioner for the year under consideration. [2.3] The petitioner, in response to the impugned notice, filed return of income on 19th April 2021 and further requested the respondent to supply copy of reasons for reopening. [2.4] The respondent supplied copy of reasons for reopening vide letter notice dated 5th March 2021. The case of the petitioner has been reopened by the respondent broadly on the count that the petitioner has indulged into generating non-genuine losses and profits by trading in illiquid stock options on the Bombay Stock Exchange. An information has been received by the respondent from the Insight Portal in March 2021 regarding coordinated and premediated trading on the Bombay Stock Exchange by engaging in reversal trades in illiq....
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.... the Bombay Stock Exchange by engaging in reversal trades in illiquid stock options resulting into non-genuine business loss / gains to the assessee on the ground that the assessee has traded Rs. 38,40,000/- by executing buy and sell transactions on the Bombay Stock Exchange. It was submitted that the assessee has entered into derivatives transactions involving "buying and selling" trades of identical quantity and as such the assessee has incurred loss of Rs. 19,20,000/- and therefore, there is no revenue impact of such transactions. It was submitted that the respondent - Assessing Officer has reason to believe by adding Rs. 19,20,000/- by considering loss and profit together of double the amount of Rs. 19,20,000/- and has concluded that there is an escapement of income and found escapement of income of Rs. 38,40,000/-. It was, therefore, submitted that there is no income chargeable to tax as escaped assessment so as to reopen the assessment for the Assessment Year 2015-16. [4] It was further submitted by learned Senior Advocate Mr. Hemani that reasons recorded are vague and non-specific as it includes transactions pertaining to equity and derivatives. There is no date of execut....
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....From the data made available under Project Falcon on the ITBA, it is seen that the assessee has created a losses and Profits of Rs 38,40,000/- Both, buy and sell trades have been executed on the Bombay Stock Exchange. Detailed perusal of information shows that the Securities Exchange Board of India (SEBI) has been Investigating cases involving reversal trades covering the period 01.04.2014 to 31.03.2015. In the interim order dated 20.08.2015, the SEBI had found that: a) The loss-making entities were trading mainly in options on individual stocks which were thinly traded. The trades by these loss-making entities in many cases contributed to 70% to 100% of total traded volume for the contracts on those days. b) The trading done by loss-making entities in stock options in the above manner, accounted for significant proportion of their overall trading on that segment c) On majority of occasions, the quantity of stock options bought and sold by the loss making entities for a contract was identical, however, there was a significant difference in the sale value and buy value of the transactions resulting into significant loss to the loss- making entitie....
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....s. Further, it is relevant to mention that the buy quantity and sell quantity for each of the 2 contracts in which trades have been undertaken by assessee is identical. Also, it is seen that by trading in each of the 2 contracts enumerated in the table above, the assessee has recorded losses and Profits for each contract. Thus, based on the analysis of trade data as present in this paragraph and comparing with chief characteristics of reversal trades as discussed above, it is seen that the assessee has indulged in generating non-genuine losses and Profits amounting to Rs. 38,40,000/- by trading in illiquid stock options on the BSE. In this case, specific information has been received clearly outlining the systematic evasion of taxes by the assessee. The said information was flagged on INSIGHT portal. The facts as enumerated above have been found out on examination on the case records of the assessee and are self explanatory. Therefore, no further enquiry is required in this case. On the basis of the same there are reasons to believe that the income chargeable to tax has escaped assessment." [8] Referring to the above averments, it was submitted that the respondent - Ass....
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.... income as the petitioner - assessee has incurred loss and profit of equal amount, there is no question of any escapement of income. [12] The contention raised on behalf of the petitioner that no proper sanction is granted under Section 151 of the Act, however, the same is not tenable in law on perusal of sanction / approval under Section 151 of the Act at page : 18 of this petition. [13] On perusal of the reasons recorded, it is not disclosed any income which has escaped assessment of income as the effect of loss and profit earned by the petitioner would be 'nil'. There is no any other information recorded by the Assessing Officer, which shows that the petitioner has earned any income which is not offered to tax. It is not in dispute that the transactions referred to by the respondent - Assessing Officer were carried out on the Bombay Stock Exchange and no co-relation of the petitioner is established in the reasons recorded between the transactions of loss and profit of the equal amount in the case of the assessee with the observations of the Hon'ble Apex Court referred to in the reasons recorded. Even the chief characteristics of manipulative reversal trades, on the basis o....