TaxTMI 
TaxTMI 
2025 (7) TMI 1025
X X X X Extracts X X X X
X X X X Extracts X X X X
....celess Assessment Centre, [hereinafter referred to as "Assessing Officer"], and the assessee has filed cross-objections challenging the validity of re-assessment. Since the issues involved in all three assessment years are identical and arise from a common set of facts and circumstances, the appeals were heard together and are being disposed of by this consolidated order for the sake of convenience. Facts of the Case: 2. The assessee is engaged in the business of stock broking, portfolio management, investment banking, and other financial services. For the relevant assessment years 2013-14, 2014-15 and 2015-16, the assessee had filed its original returns of income declaring NIL taxable income after setting off brought forward business losses. The assessments for A.Ys. 2013-14 and 2014-15 were completed under section 143(3) of the Act. However, for A.Y. 2015-16, the return was processed under section 143(1) of the Act and the case was not subjected to scrutiny assessment in the original round. 2.1. Subsequently, based on information received from the Directorate of Investigation, Ahmedabad, and further corroborated by inputs from the Insight portal, the Assessing Officer in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing search proceedings in third-party cases. 4. Not satisfied with the reassessment orders, the assessee preferred appeals before the CIT(A). Before the CIT(A), the assessee raised jurisdictional grounds challenging the reopening, as well as substantive grounds against the additions made under section 69A of the Act. It was specifically contended by the assessee that: * The reopening of assessment was invalid as the reasons for reopening were either recorded after the issuance of notice or not communicated properly. * The satisfaction of the AO was based on incorrect assumptions - particularly, the AO stated that the assessee had claimed LTCG/STCG, whereas in reality, the gains/losses were declared under the head "Income from business or profession" in the regular course of business. * The assessee, being a SEBI-registered Market Maker, had undertaken genuine trading in shares of LHSL and was entitled to act as a liquidity provider under the Exchange guidelines. The entire business model and trades were duly recorded in audited financials. * The AO had failed to distinguish between speculative loss and business loss; moreover, the AO made addi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... before us and the assessee has filed cross-objections. Following are the respective grounds: ITA No. 960/Ahd/2024 a) In the facts and on the circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs. 1,45,15,798/- u/s. 69A of the Act on account of short selling of shares, without appreciating the facts that the share price of scrip, namely Looks Health Services Ltd. was manipulated and assessee generated fictitious loss in this scrip. b) In the facts and on the circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs. 22,26,798/- u/s. 69A of the Act on account of disallowance of fictitious loss, without appreciating the facts that the share price of scrip, namely Looks Health Services Ltd. was manipulated and assessee generated fictitious loss in this scrip. ITA No. 961/Ahd/2024 1. In the facts and on the circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs. 1,40,65,890/- u/s. 69A of the Act on account of disallowance of fictitious loss, without appreciating the facts that the share price of scrip, namely Looks Health Services Ltd. was manipulated and assessee generated fictitious....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a fundamentally incorrect presumption that the assessee was one of the beneficiaries of short selling transactions in the scrip Looks Health Services Ltd. The AR pointed out that such a conclusion was factually erroneous and not supported by the actual entries in the assessee's books of account or return of income. However, the AR fairly submitted that since the CIT(A) had already adjudicated the issue on merits in favour of the assessee and had deleted the additions made under section 69A of the Act, the assessee does not wish to press the jurisdictional grounds raised in the cross-objection at this stage. He clarified that this position was being adopted purely for the sake of judicial economy and without prejudice to the legal validity of the objections raised. The AR further submitted that in the event the Hon'ble Bench proposes to take a contrary view and uphold the additions made by the Assessing Officer, the assessee reserves its right to advance arguments on the grounds raised in the cross-objection relating to the invalidity of the reassessment. 7.1. On the merits of the case, the AR relied on the order of CIT(A), particularly the discussion in paragraphs 5 onwards of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e learned Departmental Representative (DR) relied upon the findings and reasoning of the Assessing Officer as set out in the reassessment orders. The DR further contended that the assessee's argument regarding receipt of shares through IPO allotment in the capacity of a Market Maker is a new claim which was not considered by the AO during the assessment proceedings. According to the DR, this aspect requires factual verification, and if necessary, may be remanded to the AO for examination in accordance with law. In response, the AR strongly refuted the contention that the fact relating to IPO allotment and Market Maker status was being raised for the first time. He submitted that the said factual disclosure was expressly brought to the notice of the Assessing Officer during the reassessment proceedings. The AR drew attention to letter dated 14.09.2021, a copy of which is placed at Page No. 12 of the Paper Book, wherein the assessee had specifically submitted that it was allotted shares in the IPO in its capacity as a SEBI-registered Market Maker, along with supporting documents. He submitted that the Assessing Officer, despite being in possession of this information, failed to c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....I and the Exchange for Market Makers. * Transaction holding statements and demat account extracts. * Ledger accounts reflecting profits and losses separately for speculative and delivery-based transactions. * Working of profits/losses from sale of shares of LHSL. 11.1 Despite such voluminous evidence submitted, the Assessing Officer merely relied on the general report of the Investigation Wing without conducting any independent enquiry or pointing out specific irregularity in the assessee's transactions. The CIT(A) has rightly noted all that the transactions entered into by the assessee were duly backed by documentary evidence. No adverse inference was drawn either with respect to the allotment of shares received through the IPO process or regarding the subsequent sale transactions executed by the assessee. Further, there was no material brought on record by the Assessing Officer to demonstrate the existence of any cash trail, unaccounted receipts, or financial benefit accruing to the assessee outside its duly recorded books of account. Accordingly, we find no infirmity in the order of the CIT(A) in deleting the additions made under section 69A of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ow that the assessee had purchased 3,99,400 shares during the year under consideration or that the recorded trading results were manipulated or fictitious. The methodology adopted by the AO for computing the alleged fictitious loss was thus found to be factually incorrect, as the assessee had in reality earned genuine profits from the trading transactions, which were duly offered to tax. The CIT(A) elaborately discussed the matter with reference to the findings recorded for A.Y. 2013-14 and concluded that no addition could be sustained on this ground. In view of the above, we find no infirmity in the order of the CIT(A). The factual position has been correctly appreciated and the addition made under section 69A has been rightly deleted. Accordingly, the ground raised by the Revenue for this year is dismissed. Assessment Year 2015-16 (ITA No. 962/Ahd/2024) 14. The addition made by the Assessing Officer relates to an alleged fictitious loss of Rs. 49,84,585/- and a fictitious gain of Rs. 13,34,300/- in respect of trading in the scrip LHSL. The Assessing Officer, while framing the reassessment order, did not demonstrate how the figures of fictitious loss and gain were arrived at....