TaxTMI 
TaxTMI 
2025 (5) TMI 1860
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....te enquiry by the AO himself and therefore, was on simply on the borrowed reasons; c) without any tangible material available with the Ao and without disclosing which material facts were not fully and truly declared by the assessee during the original scrutiny assessment completed vide assessment order passed u/s 143(3) of the Act on 29/08/2016; d) without proper application of mind by the AO as the notice u/s 143(2) of the Act dated 17.06.2021 issued Prior to providing the reasons recorded for reopening the completed assessment own 23/06/2021; e) without disposing off the assessee's objections to the impugned reopening by a speaking order as has been held by the Hon'ble Apex Court; f) without giving reasonable opportunity to respond as the SCN dated 09.03.2022 was to be replied by 13.03.2022; g) without objectively meeting the contentions of the appellant made during the appellate proceedings in his appellate order; Thus, the impugned notice issued u/s 148 of the Act and the consequent assessment order passed u/s 147 of the Act are void ab initio and must be quashed. 2. B) Disallowance of part of the F & O Loss - Rs. 2,07,67,350/- 2. The CIT(A) NFAC er....
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....tions with the sole motive of generating losses by letting the option expire rather than engaging in reversal of trade. The AO concluded by observing that in the facts and circumstances of the case and in absence of any details from the assessee, the amount of Rs. 2,07,67,350/- claimed as loss from derivative transactions is hereby disallowed and added to the income of the assessee. 7. The assessee challenged the validity of the reopening of the assessment and also the disallowance made by the AO. On both counts, the ld. CIT(A) confirmed the action of the AO. 8. We have given a thoughtful consideration to the orders of the authorities below. 9. Facts on record show that the assessee itself is a trading member registered with BSE/NSE since 2009, carrying out proprietary trades in all segments strictly adhering to the mandated regulations and took the benefits of incentives by BSE under various incentive schemes for the period 2011 to 2015. 10. The entire quarrel revolves around the allegation that the assessee artificially shifted loss and profit with a motive of tax evasion through expired trades in illiquid options. 11. We find that the BSE introduced incentive scheme on turn....
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.... region from where dealer has registered. In this case the dealer will not be eligible for LEIPS Dealer incentive of May 2013 even though he has qualified under minimum 5 trading days participation criteria but he has failed in maximum 2 trading days waiver from daily participation criteria. Case 3 - A dealer registers for LEIPS dealer incentive scheme and becomes active under scheme 7 trading days prior to end of calendar month. Dealer does eligible volume as per scheme for 5 trading days and fails to meet eligible volume target for 2 trading days. Dealer also qualifies in top 15 dealers based under the region from where dealer has registered. In this case dealer shall be eligible for LEIPS Dealer incentive as per the scheme. B) LEIPS Scheme - Prop Member/desk Index and Stock Futures volume done in spread contracts, CFS contracts, near and far month contracts on which LEIPS scheme is ruining will not be counted under LEIPS Prop member/desk scheme except 2 days prior to expiry including day of expiry. For the purpose of May 2013 dealer and prop desk/member incentive amendments as per point A and B shall be applicable to current dealer and prop desk/member scheme with ef....
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....ve trading members. The Exchange monitors performance of the programme including presence of MMs and their compliance with the quote obligations through a mix of online and offline monitoring tools. The Exchange also publishes information on the programme from time to time as applicable vide SEBI Circular CIR/DNPD/5/2011 dated June 2, 2011. LEIPS-IX programme shall remain in force till July 31, 2013 i.e. 6 months. In accordance with the aforesaid SEBI circular the Exchange may amend / discontinue the programme at any time with an advance notice of 15 days. Also, the programme shall be discontinued as soon as the average trading volume on the Exchange, during the last 60 trading days, reaches 1% of market capitalization of the underlying, or six months from introduction of the scheme, whichever is earlier. For any further clarifications, please contact your designated Relationship Managers." 11.1. The aforementioned incentive schemes were discontinued effective from 13/02/2014 as the per the notice as under:- NOTICES Notice No. 20140128-18 Notice Date 28 Jan 2014 Category Trading Segment Derivatives Subject Discontinuation of LEIPS XIII programme. Content ....
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....me period. 3. The expiry of the options is justified by the Assessee. * The Assessee is a professional company, and to state that the premium reduces or the discount deepens hear the expiry, and it would make no sense for the reversal, and there would not be much difference, is not comprehensible. 'Not much difference' has led to a loss of Rs. 2.07 crores, thereby reducing the profit declared by the Assessee by as much as 72%. Hence, this 'not much difference' theory of the Assessee is rejected in The burden of proof regarding genuineness of the loss incurred in such dubious transactions is on the Assessee, and no cogent arguments have been advanced by the Appellant Accordingly, the disallowance of loss of Rs. 2,07,67,350/- made by the AO is upheld and the ground of appeal no. 2 is thus dismissed." 11.3. We find that each of the alleged 58 transactions were carried out from the online trading system of BSE. Each transaction has time and transaction number generated by the Trading system. The option trades in these scrips were carried out to support BSE initiative to enhance option volume in illiquid scrips and linked to BSE incentive scheme extracted elsewhere. Full deta....
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....oday, on the date of hearing, the ld. D/R expressed his inability to submit such report in spite of reminders to the AO. 13. After considering the facts on record, we are of the considered view that the assessee's genuine trades during the period 01/04/2013 to 31/03/2014 have been wrongly alleged to be fictitious prima facie by extrapolating the outcome of enquiry carried out for transactions during the period 01/04/2014 onwards. We are of the considered view that there is nothing unusual to trade in thinly traded/illiquid stock options. Moreover, when the BSE has introduced incentive schemes (extracted elsewhere). A perusal of the incentive schemes shows that that the stock exchanges itself encourages brokers to augment trades in such low volume stocks and awarded incentives, which the assessee received. The same can be understood from the following chart:- "SILVER STREAM EQUITIES PRIVATE LIMITED Incentive Report from 01.04.2013 to 31.03.20214 Sr. No Period Invoice Type Service Tax Service Tax Invoice Number 1 1 APR 2013-14 APR 2013 DAILY 97942.7 12105.72 SSEPL_40 2 15 APR 2013-30 APR 2013 DAILY 249747.3 30868.77 SSEPL_41 3 1 MAY 2013-14 MAY 2013 DAILY 25....