TaxTMI 
TaxTMI 
2024 (11) TMI 427
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....tax (Appeals) 52, Mumbai ['the Learned CIT(A)') has erred in upholding the initiation of reassessment and issue of notice u/s 148 of the income Tax Act, instead of quashing the same. 1(b). The Learned CIT (A) failed to address specific facts brought to his notice showing that the report of the investigation wing forming the basis for reopening of assessment was contrary to the facts in our case such as: a. Assessment order u/s 143(3) was passed earlier on 22/12/2017 wherein all the details. were available on record and no addition in relation to alleged business loss or alleged commission was made. There is no new tangible material. b. SEBI interim order dated 20.08.2015 referred in the Assessment order was in regards to illiquid stock options only. However our case relates to currency derivatives. Even that SEBI interim order was subsequently vacated. c. The exchange involved in the case of Aryav Securities Pvt Ltd was BSE, however in our case the alleged trading is related to United Stock Exchange. d. In para 6.9 of the Order u/s 250 the Learned CIT(A) state that "The assessee has also not produced any evidence to show that this transaction was adequately disclo....
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....cluding Abans Securities Pvt Ltd on 03/12/2019 and no evidence relating to any manipulation of these alleged trades or unaccounted cash commission payment, etc were found during the course of such actions. b. The Learned CIT(A) has erroneously relied upon the case of 'Vijay Kumar Kheria vs ACIT', facts of which the case are entirely different from the Appellants case. In case of 'Vijay Kumar Kheria vs ACIT', the assessee himself has agreed that the was receiving commission for providing bogus entries, where in our case fact that no evidence was found related to alleged receipt of commission even during the action u/s 133A. c. The Learned CIT(A) has erroneously relied on the case of 'CIT v. Alag Securities Pvt Ltd', Facts of which are entirely different in as much as in that case evidence of change of commission was found but no such evidence was found related to any alleged payment of commission during the survey action u/s 133A or otherwise in our case. 4. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in levying interest of under section 234B, 234C and 234D of the Act in the case of the Appellant; 5. The Appe....
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....ss activity of the assessee in trading/derivatives in shares/securities commodities/currency: - "The assessee has traded in 10 unique contracts and has undertaken both sell as well as buy trades in each of the contracts. It is relevant to note that the buy quantity and sell quantity for each of the 10 contracts in which trades have been undertaken by assessee is identical. Also, it is to be noted that each of the trades have been squared within the same day and also there is large difference between that the buy rate and sell rate. Further, upon data analysis, it may be noted that the time-gap in buy and sell trade ranges in minutes and seconds only. Also, it is seen that by trading in each of the 10 contracts enumerated in the table above, the assessee has consistently recorded profites for each contract. Also, it is seen that by trading in each of the 10 contracts enumerated in the table above, the assessee has overall profit of Rs. 2,30,63,250/- in the above contracts which becomes non-genuine gain for other counter parties in the form of accommodation entries. Further, upon data analysis, it is seen that identical quantities of contracts are traded with the same count....
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....ounsel for the assessee that assessee had done many trades during the year in currency derivatives and commodity derivatives, out of which only couple of trades have been selected by the ld. AO holding it to be nongenuine only because in such trades assessee has incurred loss and under same trade where assessee has shown profit has been accepted. As submitted bythe ld. Counsel, assessee is engaged in screen based electronic trading wherein it is not possible to chose or even know the counter party involved in any trade and the identities of the counter parties are not displayed on the screen at the time of the trading. Unlike in the case of stock market that the SEBI has circuit breakers limits (10%, 15% and 20%), however, no such limits are there in derivative markets and therefore, derivative markets are more volatile than the traditional stock market. Further, assessee had produced all the relevant information in respect of all the trades carried out in the united stock exchange to prove the genuineness of the transaction, however, Id. AO has even failed to take note of such contract notes. Further, assessee had submitted that since the trade was executed through sister concern ....
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....sactions and how come only two transactions are fictitious and rest all the other transactions conducted in which assessee had declared profit from the same stock exchange conducted in the same manner are genuine and only two transactions in which assessee had incurred minor loss are non-genuine. This shows that AO has just misinterpreted the Report to apply in assessee's case without independent analyzing the transactions. At least Id. AO should have conducted some enquiry qua these transactions on which assessee had claimed loss instead of blindly relying upon the Project Falcon' report which has nothing to do with trades in USE. Once the transactions are based on screen based electronic trading and the identities of the buyers and sellers are not displayed, then to presume that the transactions have been manipulated are nongenuine cannot be upheld. Thus, prima facie, there is no material that trade transactions in which assessee had incurred losses (that is, in two transactions) is non-genuine especially when assessee had declared huge profit and income from such trade in similar transactions, which has not been doubted. There has to be basis and inquiry to arrive to any....
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....e for the assessment year 2015-16 is allowed. ITA No. 3648/Mum./2024 Assessee's Appeal- A.Y. 2018-19 12. In this appeal, the assessee has raised the following grounds: - "1. On the facts and circumstances of the case, the Learned Commissioner of Income tax (Appeals) - 52, Mumbai ['the Learned CIT (A)') erred in upholding the reopening of the Assessment under section 147 of the Income Tax Act 1961 (the Act) instead of quashing the same; 2. On the facts and in the circumstances of the case and in law, the Learned CIT (A) has erred in upholding the initiation of reassessment proceedings under section 148 by passing an order under section 148A (d) instead of quashing the same. a. The Original assessment order dated 15.09.2021 was after the survey action, the report of which formed the basis for reopening. b. The notice u/s 148A (b) did not enclose the material to support the allegations and reporting was done with a prejudicial mind 3. On the facts and in the circumstances of the case, the Learned CIT (A) erred in upholding the decision of treating purchases of Rs. 37,69,79,890/- from identified parties as non-genuine and sustaining an addition of Rs. 9,42,450 /-....
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....ellant's case this point was raised in the objection to reasons for reopening. h. The Learned CIT (A) failed to address that additions are made only on alleged non genuine purchase and sales of the appellant are not considered bogus. 5. The Learned CIT(A) failed to consider the specific facts of each alleged nongenuine entities: A) Manmish Traders Pvt Ltd. a. The name of the directors and shareholders mentioned in para 7.3.3 and para 7.3.4 were not the directors or shareholders of the company in AY 2018-19. ITA Nos. 3647 & 3648/Mum/2024 (A.Ys. 2015-16 & 2018-19) 11 b. The Learned CIT (A) has ignored the fact that the actual director of the company Mr. Hardik Gandhi did attend the summon. This fact is not commented upon by investigation wing in their report as appears from the extracts incorporated in the assessment order. 6. On the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in upholding the decision of the Learned AO to merely speculate that 0.25% commission has been paid without any evidence in support, search and survey action did not unearth any such evidence of any such payment; 7. On the facts and in the circumstance....
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.... filing of ITR and even the handling of emails are being done from the premises of Abans Group of companies. Accordingly, this company was found to be not carrying out any genuine business activity. Similar, facts were noted in the case of M/s Manmish Traders Private Limited. Since the assessee was found to be one of the beneficiaries, which has received non-genuine purchase entries in its books of accounts during the year to the extent of INR 37,69,79,890 and the assessee failed to prove the genuineness of the purchase transaction with the above-mentioned entities, the AO vide order dated 09/02/2023 passed under section 147 of the Act made a disallowance @0.25% of the total purchase amount, which works out to INR 9,42,450 (0.25% of INR 37,69,79,890) and added the same to the total income of the assessee. The relevant findings of the AO, in this regard, are as follows: - "In view of the above and taking into account the submissions made by the assessee that goods purchased from these entities have been further sold by the, the only fair conclusion that can be reached is that the assessee is a beneficiary of the accommodation bills issued by the above mentioned entities. However, ....
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....t of nongenuine purchases. The relevant findings of the coordinate bench are reproduced as follows: - "24. We have heard the rival submissions and also perused the materials placed on record. It is seen that the Id. AO had treated the purchases from 6 entities as nongenuine and has applied profit rate of commission on such purchases @0.25%. He has accepted that these purchases are duly recorded in the books of accounts, and has not disturbed the purchases. However, according to him as per market practice there is commission rate of obtaining such entry at @ 0.25% which needs to be added. First of all in so far as the transactions of purchases from these parties are concerned, the same had not been doubted for the reason that ultimately the ld. AO's allegation is that assessee might have earned commission on such purchases as these are non genuine parties with no credentials and on inquiry by the investigation wing various facts have emerged about their credibility. If the purchases are from the books and source of purchases are not in doubt and assessee has produced all the evidences to prove the purchases then how can on such purchases adhoc addition on account of commission....
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....hich has been ignored. If the Id. AO has simply relying upon the comments of the investigation wing and he did not ask the assessee during the course of assessment proceedings to file their confirmations and he could have independently verified once the assessee had stated that all the Directors were available at the premises and ld. AO can ask for their attendance which ld. AO had failed to do so. In so far as books of accounts found in the audit report from the premises, the assessee's contention was that neither, the Investigation Wing nor the ld. AO had provided the evidence in support of such allegation nor any details of content of date and period to which it pertain was provided or found. Thus, such ground cannot be adversely viewed. Similarly, with regard to every allegation, counter submissions as noted above has not been dealt by the ld. CIT (A) specifically when they were duly explained through various documents and facts. Once these facts were brought on record, ld. AO should have at least himself carried out any enquiry or verification rather than blindly apply and relying upon the investigation report. Thus, in view of the aforesaid submissions given by the assess....