TaxTMI 
TaxTMI 
2025 (1) TMI 815
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....notice dated 30.3.2021. Accordingly, the following prayers have been made :- (a) quash and set aside the impugned notice at "Annexure A" to this petition. (b) Pending the admission, hearing and final disposal of this petition, to stay the implementation and operation of the notice at Annexure "A" to this petition and stay the further proceedings for the Assessment Year 2013-14. (c) any other and further relief deemed just and proper be granted in the interest of justice; (d) to provide for the cost of this petition. 3.1 The brief case of the facts are as under:- 3.2 The Petitioner, during the year under consideration, was engaged in the business of manufacturing of dyes & chemicals and trading in color chemicals. The Petitioner had also entered into certain transactions in Futures & Options (hereinafter referred to as "F & O" for the sake of brevity) which resulted into loss of Rs. 67,72,832/- and such loss is duly reflected in the Profit & Loss account. Such transactions were carried out through the broker namely "ASE Capital Markets Ltd.". 3.3 The case of the Petitioner was selected for scrutiny assessment. The then Assessing Officer c....
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....view of the same, the Respondent has reason to believe that income of Rs. 67,66,600/- has escaped assessment. Hence, the case has been reopened. 3.8 The reasons for reopening the assessment as can be found from the notice dated 15.7.2021 under Section 143 (2) of the Act are as under:- "2. The case of the assessee has been identified as potential case flagged by the Directorate of Income tax (Systems) after risk profiling based on enquiry reports and findings of the Directorate of Income tax (Investigation) and Directorate of Intelligence & Criminal Investigation. The information has been disseminated to this office through the Insight Portal wherein enquiry reports and findings have been uploaded by the field officers of the respective directorate. In this case, information has been received that during the year under consideration, as per details available on records, it is noticed that the assessee has entered into transactions of Rs. Rs. 67,66,600/- with ASE Cpital Markets Ltd. As an outcome of enquiry / perusal and analysis of details available on records, it is noticed that the genuineness of the said transactions is not conclusively proved. After considering the m....
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....derived from the underlying assets. (b) "Futures" and "Option" fall within the ambit of "Derivatives"; (c) Futures" are essentially a contract which casts an obligation on the buyer to purchase / sell a specific asset at a specific future date and at a specific price unless holder's position is closed prior to expiration; (d) "Option" is a contract which gives its buyer an option, but not obligation, to purchase / sell a specific asset at a specific price at any time during the life of contract, (e) Transactions in "Futures" & "Option" (hereinafter referred to as "F&O") are carried out on the floor of "recognized stock exchange"; (f) "Transactions in F&O" are very much different from "transactions in shares"; (g) Transactions in F&O are "strictly regulated by SEBI and have "no connection with the underlying shares"; (h) Unlike "stocks", there are very few "F&O" wherein trading is permissible on recognized stock exchange; (i) Unlike "stocks" (where there can be a "penny stock"), there is nothing like "penny F&O". 4.3 In view of the aforesaid vital differences between F&O and 'stocks' there could never be ....
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....ose truly and fully all material facts necessary for assessment. 5.4 Learned Senior Standing Counsel Mr. Varun Patel for the respondent submitted that the contention of the petitioner that the losses are genuine are merely self-serving inasmuch as, there is coordinated and pre-meditated trading by brokers on behalf of their clients on the Bombay Stock Exchange by engaging in reversal trade in illiquid stock options resulting in non-genuine business loss/gains to the beneficiary since the petitioner is one of such beneficiary, their case must be dealt with during the course of reassessment proceedings, strictly on merits. 5.5 Learned Senior Standing Counsel Mr. Patel vehemently stressed that since the assessee is the beneficiary of a non-genuine loss, that by itself goes to show that there is a failure on the part of the petitioner with regard to full and true disclosure. It is further submitted that since the Assessing Officer has best the reopening on new and tangible material available with the office and armed with the knowledge based on the report of the investigation wing that the petitioner has booked fictitious losses and illegal trade, the reopening of assessment on t....
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....tion. Issue demand notice. Penalty notice u/s. 271 (1) (c) of the Act issued." (iii) Thereafter, the notice under Section 148 of the Act was issued on 30.03.2021 and the reasons were supplied on 15.07.2021. 7. We find that the petitioner had categorically responded to the issues raised against the petitioner in respect of the F&O trading loss as under: "8. "In this connection, on going thoroughly the observations/contents for re-opening the completed assessment for A.Y.2013-14, we could notice in Para-2 the observation and conclusion reproduced as under: "Para 2 In his case, information has been received that during under consideration, as per details available on records, it is noticed that the assessee has entered into transaction of Rs. 67,66,600/- with ASE Capital Market Ltd. As an outcome of enquiry/ perusal and analysis of details available on records, it is noticed that the genuineness of the said transaction is not conclusively proved. After considering the materials available on records, I am satisfied that the said amount of Rs. 67,66,600/- is required to be brought under tax net." Your observation as re-produced hereinabove....
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....roker Viz. ASE Capital Market Ltd, Copy of Ledger account of the said broker from our books as well as the contra account from the books of the said broker." On the basis of above mentioned submission made in reply dated 10-09-2015, the then A.O. Ward 1(2)(5) was convinced and satisfied about the allowability of the claim of F & L trading loss and thus, passed the assessment order u/s 143 (3) of the IT Act vide dated 18-03-2016 without disallowance of the said claim of loss. Thus, your observation made in this regard is false and misleading. In view of such factual backdrop, your actions to re-open the completed assessment on wrong presumption cannot be pursued. We furnish herewith the copy of reply dated 10-09-2015 along-with all the attachment forwarded to AO by way of supporting evidences. We also file here-with copy of assessment order passed u/s 143 (3) dated 18-03-2016 for your perusal. Thus, the genuineness of the transaction entered with ASE Capital Market Ltd was conclusively proved. 8. The aforesaid objections were disposed of by order dated 15.12.2021 wherein, the respondent by categorically holding as under :- "4. The objection of the assessee that ....
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....regular course of assessment by passing the order under section 143 (3) of the Act. 13. It is also pertinent to note that there is no basis to form reasonable belief for escapement of income except the information made available on the insight portal. The respondent-Assessing Officer has not considered the material on record to come to the conclusion that there is failure on the part of the petitioner to disclose truly and fully all material facts to have reason to believe for escapement of income. Therefore, on the basis of the information received from another agency on insight portal or from the SEBI report, there cannot be any reassessment proceedings unless the respondent, after considering such information/material received from other sources, consider the same with the material on record in the case of the petitioner assessee and thereafter, is required to form independent opinion that income has escaped assessment. Without forming such opinion solely and mechanically relying upon the information received from the other sources, the respondent-Assessing Officer could not have assumed the jurisdiction to reopen the assessment based on such information. This view is fortifi....