TaxTMI 
TaxTMI 
2025 (6) TMI 1621
X X X X Extracts X X X X
X X X X Extracts X X X X
....2024 Shri Amit Shukla, Judicial Member And Shri Prabhash Shankar, Accountant Member For The Assessee : Shri Prateek Jain For The Revenue : Shri Vivek Perampurna (CIT DR) ORDER PER BENCH: These bench of appeals have been filed by the assessee against separate impugned orders passed by ld. CIT(A) dated 27/06/2024 and 28/06/2024 for the A.Yrs. 2015-16,2016-17,2017-18,2018-19 and 2019-20. 2. In all the appeals, issues involved are common arising out of identical set of facts, therefore, same were heard together and have been disposed of by way of this consolidated order. We will first take up the appeals of Vinay Ramanlal Shah for various caption assessment years. 3. The brief background and facts of the case are that the assessee is an individual and is the owner/promoter of Shah Coal Group. A survey action was conducted at the premises of M/s. Shah Coal Pvt. Ltd. and its related entities on 03.12.2019. Pursuant to the survey, assessment orders were passed in the assessee case. The AO has made addition in respect of three issues in all the years :- (i) Addition on account of certain ledgers recorded in the two diaries found in the survey action; ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the Shri Jatin Shah regarding the diaries. In response to the same, the assessee unequivocally denied of having any knowledge regarding the diaries or its contents. 6. Later on, when Shri Jatin Shah received the copy of the statement on 18/01/2020, he retracted the statement given by him by filing a retraction letter on 04/02/2020 which was submitted before the Ld. Dy. Director of Income Tax (Investigation) In this letter he has completely owned up the diaries and the transactions recorded in the said diaries. He has also stated that these transactions had nothing to do with the Shri Vinay Shah or his family members or any of entities. After such retraction given by Shri Jatin Shah, the assessee has also submitted a clarification letter on 08/02/2020 before DDIT(Inv) In this letter, the assessee has mentioned the same facts which were earlier submitted during the survey action that those two diaries do not belong to him. 7. In addition to the above, another statement of Shri Jatin Shah was recorded on 30/09/2020 by the Ld. DDIT (Inv.) wherein Shri Jatin Shah was again asked regarding the contents of the diary, In the said statement, Shri Jatin Shah explicitly stated that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eak working by segregating the ledger accounts in the diaries in following three parts :- * Those ledgers which was both debit and credit entries are considered for peak working. * Those ledgers which only have the debit entries considered as unexplained expenditure u/s 69C of the Act. * Those ledgers which have only credit entries considered as unexplained income u/s 69A of the Act. The Investigation Wing has re-worked the peak income in the hands of Shri Jatin Shah at Rs. 79.13 Crores in different assessment years. 10. During the course of the assessment proceedings, ld. AO again recorded the statement of Shri. Jatin Shah on 17/02/2022 and 18/02/2022, wherein he has reconfirmed his position as taken in his earlier letter dated 04/02/2020 and statement recorded on 30/09/2020. Further, the statement of assessee, i.e., Shri Vinay Shah was also recorded on 04/02/2022 by the ld. AO, wherein, he has also reaffirmed his position and has denied any knowledge with respect to the impugned diaries. Thus, right from the stage of Investigation wing to the ld. AO, both Shri Jatin Shah and Shri Vinay Shah admitted that the ownership of the diaries and contents n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee on protective basis since Shri Jatin Shah has not offered the income in his return of income. The details of the 'protective addition' are as under :- A.Y. Receipts u/s 69A Payment u/s 69C Peak Income Total addition 2015-16 84,20,450 74,10,102 8,24,76,300 9,83,06,852 2016-17 2,55,78,795 1,37,71,102 2,81,25,512 6,74,75,409 2017-18 1,37,34,550 1,76,02,060 29,70,936 3,43,07,546 2018-19 15,30,500 5,22,63,415 18,64,45,488 24,02,39,403 2019-20 5,08,37,100 5,93,62,500 19,25,250 11,21,24,850 2020-21 4,79,83,000 2,54,90,000 36,96,200 7,71,69,200 Total 14,80,84,395 17,58,99,179 30,56,39,686 62,96,23,260 14. Thus, ld. AO has made both protective and substantive addition on various grounds based on the same notings contained in the diaries found from the possession of Shri Jatin Shah in the hands of the assessee. 15. The ld. CIT (A) in his detailed judgment after incorporating all the details from the notings of diary, statement of Shri Jatin Shah and assessee, observation and the findings of the ld. AO held that once the ld. AO has accepted that the ledge....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... finding in the appeals of Shri Jatin Shah for the A.Yrs.2016-17 to A.Y.2019-20 and following the same has deleted the addition. The relevant observation and the finding read as under :- 6.7 The issue of taxability of peak credit and how the peak should be arrived has been decided by the undersigned in the appeals of Sh. Jatin R Shah for the years AY 2015-16 to AY 19-20 wherein I have held as under. 8.25 With respect to the action of the AO in treating the ledger accounts with the abbreviation 'VRS', 'KRS', 'Kunal', etc. as being related to Mr. Vinay Shah and his family members and accordingly treating the transactions as being owned and transacted by the Shah family members and therefore, proceeding to add the income arising out of such ledgers (peak credit) substantially in the hands of these persons, the appellant's submission is found tenable. Once the AO has accepted the appellant's submission that the ledgers in the diary have been maintained by him in his personal capacity, the funds utilised for making the transactions belong to the appellant and that all the transactions noted within the diary related to his financial busin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in Shah is using the word "Conduit" and also routing of funds that's not correct representation of our transactions. 13 Yes Sir, that is true I agree fully with Jatin Shah 16 Yes Sir, There is need to reconcile. Please provide us one week time to reconcile I agree with what is stated by Shri Jatin Shah 17-24> Sir, I have absolutely no idea what Jatin Shah has stated. All our transactions are entered into tally and are duly accounted for in the books of account. I do not have any idea how the diaries impounded as Annexure-A1 and Annexure-A2 have been maintained. There are references to me, my companies, my family members, my friends and my business associates and I do not transact with these persons in the way shown in the diaries." Again, in his statement dtd. 04.02 2022 he answers as "Q 25 During the course of Survey Proceeding uis 133A of the Income Tax Act 1961 on 03.12.2019 in the case of M/S Shah Coal Put. Ltd. and others at 5th Ficor, Centre Point, Junction off SV Road and Juhu Road, Santacruz (West)) Mumbai 400054, two diaries -one Red colored of make Maruti Account Book (with Index and various loose papers in between) and one....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bout these transactions are solely with the appellant. The AO has not controverted this averment made by the appellant both in form of his statement as well as in written submissions. No Incriminating evidence whatsoever has been found in the hands of the other members of the family concerning these transactions. As such, the AO was in error in unilaterally treating part of the transactions as having having been carried out by other members of the family 8.27 In light of the above discussion, it is required to be held that the ledger accounts which have both debit and credit entries but appear to bear the names of family members viz. 'VRS, 'KRS, Kunal', etc are required to be substantially taxed in the hands of the appellant. Accordingly, the peak balance taxed earlier in the hands of Vinay Shah and Ketan Shah should be subsumed in the peak calculated for the appellant. This peak balance income will be in addition to what has already been taxed by AO in the hands of the appellant on substantive basis. In a way, the calculation of peak undertaken by the DDIT is restored subject to the findings of subsequent paragraph. The year wise addition on account of peak ba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll as material referred to before us. As noted above, in this case the entire premise of the AO for making the addition is based on certain entries notings in the diaries found from the possession of Shri Jatin Shah. It is an admitted fact that at all the stages from the Investigation Wing to the stage of the First Appellate Authority, Shri Jatin Shah has owned up the diary and the contents contained therein and the assessee, i.e. Shri Vinay Shah has denied any recording of any transaction appearing in the said diary. Shri Jatin Shah had offered peak credit as his income which in principle has been accepted by the Investigation Wing, except that Shri Jatin Shah has worked out the peak credit at Rs. 49.35 Crores whereas the Investigation Wing has re-worked the peak at Rs. 79.13 Crores in the hands of Shri Jatin Shah. The ld. AO though has accepted that the diaries belong to Shri Jain Shah and the income arising out of the said entry shall be assessable in the hands of Shri Jatin Shah, however, at the same time he held that certain ledgers containing abbreviation such as VRS', 'KRS', 'Kunal', etc. were related to the assessee and contained certain personal expense....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... but appeared to bear the names of family members viz., 'VRS', 'KRS', 'Kunal', etc. now cannot be substantially taxed in the hands of Shri Vinay Shah or Shri Ketan Shah. Because, when on entire entries, peak has been worked out and taxed in the hands of Jatin Shah then everything gets subsumed in the peak calculated in the case of Shri Jatin Shah. It is a matter of fact that peak balance of income has already been taxed by the ld. AO in the hands of Shri Jatin Shah on substantive basis. 21. In so far as the quantum of peak credit which is liable to be taxed in the hands of Jatin Shah, we will discuss this issue while dealing in the appeal of Shri Jatin Shah. Accordingly, we uphold the order of the ld. CIT (A) holding that the entire entries made in the diary both with regard to debit and credit even which bear the names of family members of Shri Vinay Shah, cannot be taxed in the hand of the assessee as they have been substantively taxed in the hands of Shri Jatin Shah. Accordingly, the order of the CIT (A) is upheld and this issue raised by the department, i.e., ground No.1 in A.Y.2015-16 and ground No. 1 & 2 in A.Y.2019-20 are dismissed. 22. Now comi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent, SEBI order and statement of the broker which was recorded by the department. During his statement, assessee has clearly stated that he was not involved in predetermined trade to adjust books and if any irregularities as per SEBI, were done by the broker for which he has no knowledge. Further, the statement of assessee was again recorded on 27/12/2019 during the post survey proceedings wherein the statement of M/s. Goodluck Securities was shown to the assessee. In response to the same, the assessee incorrectly assumed that due to the said statement as well as SEBI order, the trades done by the broker were not genuine and accordingly, offered to withdraw the losses incurred in case of Vinay Shah HUF in its return of income. However, it is very relevant to note here that no disclosure was made with respect to the loss incurred by the assessee. 26. Before the ld. AO, the assessee had filed all the details pertaining to the transactions carried out with Trinay Securities Trading Pvt. Ltd. and further, the statement of the assessee was also recorded on 04/02/2022 wherein he clarified that the details relating to the transaction has already been submitted to prove the genuineness.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... * The Id. CIT(A) observed that assessee, is a regular trader in option / currency derivatives and the said fact has not been disputed by AO Further, it was also observed that assessee been working through various brokers in past as well as during the year. Such brokers include Angel Broking F&O, Angel Broking Commodities, Kotak Securities Limited, Affluence Shares and Stock Pvt. Ltd., Edelweiss Broking and Trinay Securities Trading Pvt. Ltd. * The ld. CIT(A) noted that assessee has shown profit from transactions from some brokers while losses in other transactions and the consolidated income / loss has been shown in the return of income and AO has not raised doubts about authenticity of trades done through any other broker. Hence, it is inferred that assessee has not entered into an isolated transaction with a pre-meditated intention but has been regularly trading in the same. * No incriminating documents have been found at any premises, either brokers, counter parties or the assessee themselves to support the stand of AO. * The ld. CIT(A) noted that there is no evidence that the assessee is connected with the counter-parties in the trade and there is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rokers and barring such identified traders from trading as an interim measure. This order forms the basis of the AO's presumption that the trades conducted by the assessee are pre-meditated synchronised reversal trades conducted manipulated prices to generate artificial loss / gain. * Ld. CIT (A) observed that such order by the SEBI was only an 'exparte ad interim order' without providing any opportunity to the parties and comprising of 'prima facie' observations is found to be relevant. It is also noted that vide a vide subsequent order dated 22.08.2016, SEBI has provided interim relief to the assessee like permission to buy/sell in commodities for taking hedging position, liquidating shares, mutual funds, etc. * Further, the ad interim order was vacated by subsequent order dated 05.04.2018. Therefore, once the order (which has been heavily relied by the AO) had been vacated, the observations/findings of SEBI in the said order did not survive and hence could not be the sole factor in deciding the genuineness of the trade conducted by the assessee. * Ld.CIT(A) also noted that the final order of SEBI vacating the earlier order was avail....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... AO has carried out any enquiry to dislodge the authenticity of the trades done through any broker. In such facts, it cannot be stated that only one isolated transaction was pre-meditated only to incur loss. 31. Further, during the course of survey not an Iota of evidence or incriminating documents have been found from any premises either from the brokers, counter parties or the assessee nor there is any information that assessee is connected with counter parties in the trade. The investigations carried out under the Falcon project and during the survey u/s. 133A at the office premises of the assessee, no evidence has been gathered or found which can even remotely suggest that one particular transaction with M/s. Trinay Securities Trading Ltd., is sham or non-genuine. Once the assessee has filed copies of contract notes in respect of the transactions of the derivative trading, copy of bank statements, reflecting payment of requisite margin money to the brokers, copy of statement of accounts of the broker in the books of the assessee company etc., then to its belief such documentary evidence, ld. AO should have brought some material carried out enquiry to bring any adverse materi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ents have been submitted before the AO. vii. The SEBI ad interim order dated 20.8.2015 which has been heavily relied by AO stands negated. 34. Thus, in light of these facts the addition made by the AO cannot be sustained and accordingly, the finding of the ld. CI T(A) is upheld and the grounds raised by the Revenue are dismissed. 35. Now coming to the issue of disallowance u/s. 14A which is there in assessee's appeal being ground No.17 for A.Y.2015-16, ground No.12 in A.Y.2017-18, ground No.13 in A.Y.2018-19 and ground No. 12-13 in A.Y.2019-20. 36. The facts in brief are that assessee is a regular trader and investor in shares and securities. As a result of his investments, the assessee has also earned certain exempt income. The ld. AO observed that no disallowance u/s 14A of the Act has been made by the assessee as against the exempt income earned by it. Accordingly, applying the provision of section 14A r.w.r 8D the Ld. AO has computed the disallowance for each year. The said findings of the AO has been confirmed by the Ld, CIT(A). The year-wise disallowance and exempt income earned by the assessee is tabulated as under :- Assessment Year Exempt income....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecording his satisfaction he can proceed to disallow u/s. 14A r.w.r. 8D. Accordingly, we do not agree with the contention of the ld. Counsel that no disallowance can be made, because no where assessee has given any working as to why no expenditure can be attributed. However, we agree with the alternate contention of the assessee that disallowance u/s.14A should be confined only after considering those investments which have yielded exempt income during the year under consideration. The year wise disallowance after considering those investments which have yielded exempt income during the year is as under :- AY 14A Working as per AO Exempt Income 14A Working as per Assessee 2015-16 58,88,713 3,08,11,729 29,63,038 2016-17 11,54,618 6,57,08,865, 6,73,886 2018-19 4,77,048 1,45,52,070 26,364 2019-20 1,24,471 1,24,471 1,236 39. Accordingly, AO is directed to verify the working and the disallowance u/s.14A should be restricted only after considering those investments which have yielded exempt income during the year as per the working given above in the above mentioned assessment years. Accordingly, the grounds raised by the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... contents. Thereafter, once the assessee received the copy of the statement on 18/01/2020, he retracted from the said statement given by filing a retraction letter on 04/02/2020 submitted before the Dy. Director of Income Tax (Investigation). In this letter assessee has completely owned up the diaries and the transactions recorded therein and have also categorically stated that these transactions had nothing to do with the Mr. Vinay Shah or his family members. After such retraction given by assessee, Shri Vinay Shah has also submitted that a clarification letter on 08/02/2020 before DDIT(Inv). 42. Later on another statement of Shri Jatin Shah was recorded on 30/09/2020 before DDIT (Inv) wherein he was specifically asked regarding the contents of the diary and in the said statement, he categorically admitted that the diary belonged to him and there was no relation with the any of his entities with Shri Vinay Shah or his family members. He also explained the contents of the diary wherein he had stated that these entries pertain to his financing activity deriving of any individual capacity for arranging loans & advances to other parties for which he used to charge brokerage of cert....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ipt Peak Only receipts ledger Only Payments ledger Total addition 2015-16 29,42,15,078 33,58,69,400 9,32,81,800 84,20,450 74,10,102 10,91,12,352 2016-17 43,02,06,240 42,56,98,125 3,87,74,862 2,55,78,795 1,37,71,102 7,81,24,759 2017-18 71,49,27,026 68,79,20,272 1,80,38,096 1,37,34,550 1,76,02,060 4,93,74,706 2018-19 68,88,46,054 43,13,46,439 20,26,94,588 15,30,500 5,23,63,415 25,65,88,503 2019-20 67,54,56,720 66,02,23,392 3,79,84,180 5,08,37,100 6,92,59,822 15,80,81,102 2020-21 33,44,52,228 45,01,16,739 55,79,600 4,79,83,000 4,39,01,370 9,74,63,970 Total 3,13,81,03,346 2,99,11,74,367 39,63,53,126 14,80,84,395 20,43,07,871 74,87,45,392 46. The ld. AO then excluded ledgers containing abbreviation such as 'VRS', 'KRS', 'Kunal', etc., holding that they were related to Shri. Vinay Shah and family members which contained personal expenses and the same were taxed in the hands of Shri Vinay Shah and Shri Ketan Shah which we have already dealt in the appeal for various issues in the case of Shri Vinay Shah. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 4,79,83,000 2,54,90,000 7,34,73,000 Total 2,97,68,42,931 2,93,18,33,967 29,16,03,611 14,80,84,395 16,52,29,679 60,49,17,685 48. Further, AO also held that the diaries are inextricably linked with the assessee and therefore, addition made in the case of Shri Vinay Shah and Shri Ketan Shah were made in the hands of the assessee on protective basis since assessee has not offered the income in his return of income. In view of the above, ld. AO has made addition on various counts based on the notings contained in the diaries in the hands of the assessee. 49. The ld. CIT (A) by and large accepted the contention of the assessee and his findings can be summarized in following part- i. The Ld CIT (A) in its order stated that once the AO has accepted that the ledgers in the diary have been maintained by assessee in his personal capacity, the funds utilised for making the transactions belong to the him and that all the transactions noted within the diary related to his financial business, it was not open for AO to split the transactions and attribute part of such transaction to another third party unless there were compelling-reasons for the same.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y him at various instances in his statement recorded before the investigation wing as well as before the AO. The relevant part of the statement is reproduced as under- Statement of Jatin Shah recorded on 30.09.2020 Q. 23 Kindly state as to whether interest or brokerage income was received to you in the course of financing activities? Ans: Yes sir interest and brokerage income in cash was received to me which is also a part of the cash transactions found in the two diaries. Statement of Jatin Shah recorded on 18/02/2022 by the AO Q. 38 It is seen from your return of income for various assessment years that you don't have capacity to be involved in the business of giving and taking of cash of the magnitude mentioned in the diary. Tetal of debit entries mentioned in the diary in 6 years is Rs. 3,47,27,91,589/- and total of credits entries mentioned in diaries in 6 F.Y.s is Rs. 322,22,47,454/-. Please explain the same. In this context, also explain why your post survey contentions should not be treated as an afterthought to protect Mr. Vinay R. Shah, director of M/s. Shah Coal Put. Ltd.? Ans. Sir, I would like to state that I wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to accept the amount recorded into diaries and offered the unaccounted income before investigation wing. 51. Thus, the contention of the assessee has been that it has earned commission/brokerage income to arrange such transactions. However, the same has been rejected by ld. AO on the ground that assessee has not provided the identity of the parties and has himself offered income on peak credit basis. 52. In this regard, it has been submitted that the identity of the parties has already mentioned in the impounded diaries and therefore, the question of proving identification doesn't arise. It has been clarified that in case of facilitation of transfer of cash, the assessee was not required to maintain the details of the parties once the commission of the assessee is received. Accordingly, it has been submitted that such peak was accepted by the assessee solely for the purpose of buying peace of mind and avoid litigation and on a presumption that there is no evidence to show the financing activity, he accepted the transaction as his own in order to avoid duplication of addition out of the same cash amount and he had offered income on peak credit basis. However, the fact and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ilised for making the transactions belong to the assessee and that all the transactions noted within the diary related to his financial business, it was not open to him to split the transactions and attribute part of such transaction to another third party unless there were compelling reasons for the same. The ld. CIT(A) noted that no corroborating evidence has been found in the possession of Shri Vinay Shah and other family members with respect to these transactions during the course of survey. Moreover, Vinay Shah has never accepted the transactions recorded in the said diaries. Accordingly, the Id. CIT (A) held that the transaction which alleged to be belong to Shri Vinay Shah and family should not be considered separately. The Id. CIT(A) has then re-worked the peak working after including the ledgers which were allegedly belong to Shri Vinay Shah and family. The re-worked peak as computed by the Id. CIT(A) is reproduced as under :- A.Y. Taxed by AO in the hands of the assessee Taxed by AO in the hands of Mr. Vinay Shah Taxed by AO in the hands of Mr. Ketan Shah Total peak credit to be taxed in assessee 2015-16 8,09,54,300 1,08,05,500 15,22,000 9,32....
X X X X Extracts X X X X
X X X X Extracts X X X X
....95 1,37,71,102 2017-18 1,37,34,550 1,76,02,060 2018-19 15,30,500 5,23,63,415 2019-20 5.08,37,100 6,92,59.822 10,01,01,395 16,04,06,501 59. The Ld. CIT (A) has however allowed the telescoping benefit to the assessee. He observed that the funds arising out of the transactions contained in the diaries represent a common pool of funds and hence, income which has come into the system should be deemed to have been utilised for either making fresh loans or for incurring expenditure. Since both, the income as well as the expenditure have been noted in the same books and are a part of the same business activity benefit of telescoping while determining quantum of unaccounted expenditure should be allowed. Hence, he held that only the net income year wise after reducing corresponding expenditure will be taxed in the respective years. In case the expenditure is more than the income, the excess expenditure will be taxed in such year. Accordingly, the Ld. CIT (A) has re-computed the net addition to be made u/s 69A or 69C of the Act which is tabulated as under:- A.Y. Unexplained income u/s 69A Unexplained expenses u/s 69C 2015-16 10,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly taxed not only the peak credit as worked out by the Investigation Wing but also once it has been found from the diary that there were separate ledgers representing the name of Shri Vinay Shah and Shri Ketan Shah and others that means these entries belong to these persons and other family members and therefore, the addition has to be made separately and substantive basis in the hands of Shri Vinay Shah and Shri Ketan Shah, accordingly, on the issue of separate addition u/s.69A and 69C, he submitted that whatever is appearing in the diary should be taxed and no telescopic benefit should have been given. 64. After considering the submissions made by the parties and also on the perusal of the finding given by the ld. AO and ld. CIT (A), we hold that at this stage, the addition on account of peak credit is justified on the facts of the case, because, ostensibly there are clear cut entries and cash transaction of loan which assessee could not explain the nature and source of party wise entries. Thus, the admission of the assessee before the Investigation Wing and before the ld. AO that addition should be confined to peak credit cannot be rescinded. Accordingly, in principle, we uph....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce 9,13,965 49,85,158 5,03,240 4,77,048 1,36,05,575 3,33,859 68. The issues involved in this appeal are exactly similar to the issue in the appeals in the case of Shri Vinay Ramanlal Shah. 69. The ground No. 1 & 2 of the Revenue's appeal for A.Y.2018-19 is with regard to undisclosed income based on diaries made on substantive basis, we have already dealt this issue in detail and we have confirmed the finding of the ld. CIT (A) in the case of Shri Vinay Shah. Here in this case, ld. AO has made the addition on account of ledger found in the diary which has been owned up by Shri Jatin Shah in the year-wise addition made in the hands of the assessee made by the ld. AO which is tabulated hereunder :- A.Y. Receipts u/s 69A Payment u/s 69C Peak Income Total addition 2015-16 - - 15,22,000 15,22,000 2016-17 - 25,04,750 25,04,750 2017-18 - 14,15,800 14,15,800 2018-19 - 1,06,69,500 29,36,075 1,36,05,575 2019-20 - - - 2020-21 - - 36,96,200 36,96,200 Total - 1,06,69,500 1,20,74,825 2,27,44,325 70. The ld. CI T(A) has given a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sallowance u/s 14A 9,90,612 Addition u/s 68 - Disallowance of non-genuine Losses 8,71,87,326 Addition u/s. 69C - Commission Expenses 17,43,566 Total Addition /Disallowance 9,90,612 8,89,30,892 73. We will take up the issue of disallowance of non-genuine losses which has been raised by the department in the following grounds :- * Ground no.1, 2 of department appeal for AY 2015-16 (ITA No.4462/MUM/2024) * Ground no.3 of department appeal for AY 2015-16 (ITA No. 4462/MUM/2024) 74. The brief facts are that assessee is a regular trader in equity market and derivative market. It has indulged into various trading instruments such as equity trading, derivative Futures and Options trading, currency trading, etc. during the year under consideration. Such trades are made on daily basis by the assessee which is apparent from the quantum of the trade entered into during the year under consideration. The break-up of income earned out of various trade activities were as under :- Sr. No. Nature of income Amount(in Rs.) 1. Dividend 9,40,861 2. Profit & Loss on Futures & Options -6,22,754 3. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arried out in F & O with all the brokers including Goodluck Securities. Further, in the statement recorded by the ld. AO of Vinay Shah on 04/02/2022 he has clarified that the details and submitted that this transaction was purely genuine. However, the ld. AO in his assessment order has purely relied upon Ad-interim order of SEBI and rejected the explanation of the assessee holding that loss incurred by the assessee are non-genuine. The observations of the ld.AO are summarized as under :- * It was alleged that assessee has done artificial and synchronized trading in the BSE by engaging in reversal trades in illiquid stock options resulting in non-genuine business losses based on the interim order of SEBI * The AO contended that assessee has undertaken identical buy & sale trades for contracts and consistently recorded losses. Further, it was also alleged that identical quantities of contracts are traded with the same counterparty for both the buy trade and sell trade * Further it was alleged that each of the trades have been squared within the same day and also there is large difference between buy rates and sell rates. * It was further observed t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion, has filed copies of the contract notes in respect of the transactions in question of derivative trading, copies of the bank statements reflecting payment of requisite margin money to brokers, copies of the statements of accounts of Brokers in the books of the assessee company etc * The CIT(A) noted that there are 17 counterparties to the assessee's transaction as reproduced by AO in its order However, a perusal of the SEBI's ad interim order reveals that none of these parties are mentioned in the said order as having indulged in synchronised trading. In absence of any such evidence about the parties, the AO could not have treated the entire volume of transactions as being bogus in nature * With regards to the acceptance of Shri Vinay R Shah in his statement, the Id. * CIT(A) observed that Shri Vinay Shah has offered to withdraw the loss claimed in respect of the derivative transactions in light of the statement of the proprietor of Goodluck Securities and ad interim SEBI order. Such statement was on the presumption that the statement of the proprietor of Goodluck Securities was correct and that the ad interim SEBI order was in force ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d one of the reasons cited by the AO in his order for treating the transactions as manipulative is that the price at which the options have been traded within a very short period of time show a wide variation and have no relation with the price of underlying asset indicating a collusive transaction. In this regard CIT(A) noted that there is no way of ascertaining the counter party bidding for the offer in an automated screen based environment and that the price of derivatives comprise of various elements, the price of underlying script being one of the many factors. Further, of this issue CIT(A) has also referred to decision of the Hon'ble Delhi Tribunal in the case of ACTT vs M/s Kundan Rice Mills Ltd. (supra). * Further, with regards to reliance placed by AO on decision of the Supreme Court in the case of Rakhi Trading Pvt Ltd., the CIT(AO noted that the facts of the said case are different from the present assessee. 82. Thus, the conclusions of the ld. CIT (A) are that- i. Assessee is a regular and bonafide trader in derivative segment over many years has not been doubted by the AO. ii. Assessee has been taking services of many brokers to trade ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of those investment which has yielded exempt income. In the result, this issue is partly allowed. 86. In the result, appeal of the Revenue is dismissed and appeal of the assessee is partly allowed. Ketan Ramanlal Shah HUF 87. Lastly, in the appeals of Ketan Ramanlal Shah HUF, the following issues have been raised in the cross appeals of the assessee and Revenue. Addition or Disallowances 2015-16 2016-17 2020-21 Assessee Appeal Department Appeal Assessee Appeal Assessee Appeal CO 204/MUM/2024 ITA 4466/MUM/2024 ITA 4077/MUM/2024 ITA 4137/MUM/2024 Disallowance u/s 14A 3,78,408 - 11,55,074 3,12,386 Assessing F & O profit as unexplained u/s 68. - 12,70,34,547 - - Addition U/S.69C- Commission Expenses - 25,40,691 - Total Addition/Disallowance 3,78,408 12,95,75,238 11,55,074 3,12,386 88. In so far as addition of profit earned on derivative trading which has been raised by the Revenue in the appeal for A.Y.2015-16, the brief facts are that assessee is engaged in trading in equity market through delivery trading and derivative trading. The break-up of inco....