TaxTMI 
TaxTMI 
2026 (6) TMI 1031
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.... for both the years. However, both the Cross Objections are found to be barred by limitation for about 664 days in support of which an application for condonation of delay for each of the years have been filed the contents whereof is as follows:- To The Honourable Bench B, Income Tax Appellate Tribunal, Delhi Assessee Ravi Prakash Aggarwal PAN ADAPA3506E Assessment Year 2015-16 and 2017-18 Financial Year 2021-22 2014 - 15 and 2016-17 Subject Application for Condonation of Delay in filing Form 36 and Cross Objections. Appeal Number 789/DEL/2024 and 785/DEL/2024 Date 10th Nov 2025 MOST RESPECTFULLY SHOWETH: 1. That the present Cross Objection is being filed by the Applicant/Respondent in respect of the appeal preferred by the Department against the order passed by the learned Commissioner of Income Tax (Appeals). 2. That the Department filed the present appeal on 16.02.2024, and the same was served upon the Applicant thereafter. 3. That as per the provisions of Section 253(4) of the Income Tax Act, 1961, the Cross Objection ought to have been filed within the prescribed period of 30 days f....
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.... 4. The brief facts leading to the appeal are that the assessee is engaged in the business of trading of bullion, stones, jewellery and commodities and filed its return of income for AY 2015-16 at Rs. 49,06,260/- on 19.09.2015 which was processed under Section 143 of the Act. The case of the assessee was selected for verification under the Special Pilot Project on reversal trades in BSE Stock Options. Upon information received under Project Falcon from DGIT (Investigation), Mumbai through the Income-tax Business Application (Insight portal under the High risk CRIU/VRU information) regarding coordinated and premediated trading on the Bombay Stock Exchange by engaging in reversal trades in illiquid stock options resulting in non-genuine business loss/gains to the beneficiary wherein the assessee was found to be one of the parties to such manipulation. 5. Relevant to mention that the assessee incurred a loss of Rs. 3,39,18,784/- due to reversal trades in Bombay Stock Exchange options as per SEBI. Therefore, notice under Section 148 of the Act was issued on 31.03.2021 asking the assessee to file ITR whereupon ITR was filed on 27.04.2021 declaring total income at Rs. 49,06,260/-. ....
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....High Risk" and mentioned that the Appellant is a part of manipulation done with BSE as reversal trades in Illiquid Stock Options. It is noted from above point that these transactions were marked under the category of "High Risk" and further the Investigation Team had filtered the high loss cases and also taken the statement of Sh. Bharat Bansal of Ashlar Securities Ltd through which the Appellant used to trade in futures and options. Based on statement of Bharat Bansal and the quantum of loss the case was reopened by the AO. The AO was supposed to do further investigation on such High Risk transactions but the AO failed to investigate any further on the transactions done by the AO and without any further conclusive evidence, AO passed an order based on information provided by the Investigation Team and Interim SEBI report. The Statement recorded of Sh. Bharat Bansal under Section 131 of the Act by the Investigation Department was informed to the AO and the AO has considered the same as evidence. The Appellant in his submission dated 13th December 2023 has filed addendum wherein the appellant has contested that the Appellant name has not been taken in the ....
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....23 wherein the Appellant has in detailed discussed on every point raised by AO. The Appellant has contested that the trades executed by the Appellant are in respect of Currency Options and not Stock Options as mentioned in the SEBI report and further investigation done by the department. We have noted the same and gone through the contract notes as well the statements of Ashlar Securities, it is rightly noted that the appellant has executed trades in currency options and not stock options. Further, the appellant has contested that the Screen based trading does not allowed appellant to know who is the buyer and seller and there is no factual evidence to prove that the Appellant had executed the trade with the seller which was later on reversed by the Appellant which tantamount to Reversal trades in illiquid stock options which has been highlighted by the AO in its order. It is observed that the AO has not further investigated in detail or AO has not produced any material evidence that shows or proves that the appellant was aware about the buyer or seller or there were instances of any identical trades with same buyer or seller by the appellant. Hence, the AO's argu....
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.... the total value which is Rs. 9.85 crores. The Trade Volume for the Current Year was of Rs. 9,85,88,834/-, out of which Total Loss that the Appellant has incurred Loss during the Year of Rs. 4,01,28,635, and hence, therefore, it can be concluded that since the Loss % is mere 40.70%, therefore, the Ld. AO's allegation that 70% to 100% loss in options has been booked by the Appellant is also not applicable to the Appellant. - Fifthly, the AO has mentioned that the assessee has entered into Identical trades of Buy or Sell in same strike price, however, the appellant has also rebutted this in his submission and showed various examples wherein there is change in Currency as well as there is change in the Strike Price for a particular Option or Futures. - Lastly, the AO has not highlighted any evidence of connection with the counter-parties that the Appellant had during the screen based trading in order to prove that the appellant was connected to such parties. Summarily, it can be concluded from the above points that the Appellant's trades are not identical to the trade's characteristics that has been quoted by the AO. It is noted that the AO has note....
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....t of the authorities below to examine the issue on merit and to decide whether assessee has suffered genuine business losses out of the transactions/trades in question. However, the authorities below did not examine the issue on merits and merely relying upon the ad-interim order concluded the issue against the assessee. It is also clear from these facts that the ad-interim order which was passed ex parte - Whether would disclose any binding precedent or ratio which may be binding on the Income-tax Department?". In Tribunal view, it would not be binding precedent. It may create some suspicion or doubt. It is well settled Law that "suspicion howsoever strong may be but it cannot take place of legal proof." [Para 14.3] Unquote * From the order passed by the Delhi ITAT Bench in the case of Kundan Rice Mills Ltd. v. Assistant Commissioner of Income Tax [2020] 120 taxmann.com 422 (Delhi - Trib.), it has been noted that merely relying upon the Interim Order of SEBI cannot be a Conclusive Evidence and can only be treated as "Suspicion or Doubt". * Since, such order of SEBI and the Investigation done by Mumbai Income Tax and the AO order does not bring out any ma....
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....an act of tax planning. The correctness of findings of SAT in the case of Viram Investment (P.) Ltd. is left open." 14.6 The issue in appeal regarding violation of provisions of SEBI Rule was decided based on the facts and circumstances available on record and intention of the parties and ultimately the issue with regard to avoidance of payment of tax and act of tax planning was not adjudicated because the Adjudicating Officer has not gone into this aspect. However, in the present case, the A.O./Ld. CIT(A) have not gone into the facts and material evidence on record and merely referring to the interim USP order of the SEBI and subsequent order have decided the issue against the assessee. Since in the case of Rakhi Trading (P.) Ltd., (supra), the issue under Income-tax Act was also not adjudicated upon, therefore, in our humble opinion the decision in the case of Rakhi Trading (P.) Ltd., (supra), would not support the case of Revenue. 14.7 Considering the totality of the facts and circumstances of the case in the light of material/evidences available on record and in the absence of any investigation carried-out by the authorities below, we are of the view that asse....
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....s been outlined above and for the reasons stated above, it is held that on the pertaining facts and circumstances of the case, the AO has, thus, fallen into error by inflicting the addition of Rs. 3,49,18,784/- being fictitious and bogus losses incurred in trading in Currency Futures while passing the reassessment order under consideration u/s 147 rws 144B of the Act. The action of the AO is, therefore, disapproved of and the AO is, thus, directed to delete the said addition. Consequently, the Ground Nos. 4to 11 raised by the appellant are allowed. 10. Ground No. 12 is consequential in nature and doesn't require any adjudication. 11. In the result, the appeal of the appellant is partly allowed." 8. The Revenue joins the issue to this effect that the judgement relied upon by the Ld.CIT(A) passed by the Coordinate Bench in the case of Kundan Rice Mills Ltd. vs. ACIT, ITA No.853/Del/2020, order dated 09th July, 2020 and Saarthak Vanija India Pvt. Ltd. Vs DCIT, ITA No. 1473/Del/2022 are not applicable in view of the different set of facts available in those matters. The Ld. AO while discussing the modus of the assessee observed as follows:- "On perusal of ....
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....239 09.12.2014 4331000 5808314 1477314 11.12.2014 4360625 4368418 7793 12.12.2014 1512875 1513186 311 15.12.2014 3376650 3377303 653 16.12.2014 492650 2027445 1534795 Total 34918784 42371858 7453074 17.1. Upon analysis of the trades of the assessee as per the BSE master data, it is seen that some trades are non reversal trades and majority trades are reversal trades which are those trades in which an entity reverses its buy or sell positions in a contract with subsequent sell or buy positions with the same counterparty during the day. 18. Role of Brokers: 18.1 Such synchronised trading is not possible unless there is prior meeting of minds and without the connivance of brokers. SEBI also passed an adinterim ex-parte order dated 17.02.2016 against 22 stock brokers through whom the 59 entities had traded in the BSE Stock Options Segment restraining them from buying, selling or dealing in the securities markets, either directly or indirectly, in any manner, except as a stock broker for their existing clients in the cash segment. 18.2. The whole time member, SEBI in his concludin....
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....was having positive income in this assessment year. 21. The orders of the market regulator SEBI on reversal trades declaring them as nongenuine, the order of SEBI against the brokers on their role in facilitating reversal trades, similarities in the trades of the assessee and reversal trades and finally the order of the Hon'ble Supreme Court in the case of Rakhi Trading stamping reversal trades as non-genuine trades leave no room for any doubt that the losses incurred by the assessee are non-genuine. 22. The assessee was issued show cause notice on 26.03.2022. In response to this notice, the assessee gave his submission on 29.03.2022 and in this regard video conferencing was also held on 30.03.2022, wherein, the assessee explained the submission made by him. The submissions given by the assessee have been perused. Here, assessee has again objected to reopening of his case. Further, assessee has mentioned that he was doing business with broker M/s Ashlar Securities Pvt. Ltd. which is a member of NSE having routine dealing in commodities. Assessee has entered into transactions with this broker in normal course of business. Assessee's reply has been perused ....
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.... definition of "fraud" and such dealing is "fraudulent" as per Regulation 2(1)(c) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Security Market) Regulations 2003 and prohibited under the provisions of Section 12A(a)(b) and (c) of the SEBI Act, 1992 and Regulations 3(a), (b), (c) and (d) ; 4(1) and 4(2) thereof as observed by the SEBI's order. Having regard to the role of the brokers as mentioned hereinabove coupled with the SEBI's observation, the deletion of addition made by the Ld.CIT(A) relying upon the orders passed by the Coordinate Bench in the case of Kundan Rice Mills Ltd. (supra) and Saarthak Vanijya India Pvt. Ltd. (supra) is found to be not justified particularly having regard to the reason recorded upon examining the modus operandi of the assessee's business. Though the judgement in Kundan Rice Mills Ltd. has been taken into consideration the modus operandi of the business assessee cannot be brushed aside which has been rightly considered by the Ld. AO in making addition in the hands of the assessee. Further that the Ld.CIT(A) considered the judgement passed by the Hon'ble Apex Court in the case of Rakhi Trading Company as not applicable in t....
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.... CIT(A) erred in by not taking into consideration the view of the AO that assessee has not made any payment of the alleged purchases made, during the period under consideration, from the M/s Krishna Overseas and RVJ Overseas Pvt Ltd. However, rather making payments, assessee has been receiving payments from the sellers i.e. M/s Krishna Overseas and RVJ Overseas Pvt Ltd. and this non-genuine purchases from these entities could not be substantiated by the assessee by producing any evidence such as purchase bills and bank statement corroborating the claim of the assessee." 12. In this case, the Assessee has filed its Income Tax return declaring a total income at Rs. 61,68,050/- on 18th October, 2017, through e-filing acknowledgment number 247860031181017. The return of income was processed u/s 143(1) of the Income Tax Act, 1961 (in short "Act"). The case was selected for complete Scrutiny under CASS. Notice under Section 143(2) of the Income Tax Act, 1961 dated 16th August, 2018 was sent through ITBA System & delivered to the assessee on his email address. Subsequently, notices under Section 142(1) dated 16th May, 2019, 06 June, 2019, 07th August, 2019, 18th September, 2019, 05th N....
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....observed on careful perusal of the ledger a/c of M/s Krishna Overseas in assessee's books that it is clear that assessee has not made any payment to M/s Krishna Overseas till 27th November, 2016 for the purchases shown in his books of accounts on 27th & 28th October, 2016, rather assessee was receiving payments from M/s Krishna Overseas after 28th October. This clearly proves that assessee has merely booked false purchases in his books so as to prove its bogus sale genuine which could subsequently help him in color the black/unaccounted money into white which was deposited in SBNs by the assessee in the post demonetization period. Therefore, it clearly establishes the fact that the Assessee did not have any stock amounting to Rs. 2,41,13,823/- to claim it as Cash Sales during the year under consideration. 16. The AO further observed that the assessee has shown purchases from its related party RVJ Overseas (P) Ltd during the year under consideration. In his books assessee has shown purchases from RVJ Overseas (P) Ltd amounting to Rs. 3,73,72,059/- on 05.11.2016 and on 07.11.2016. In this case also, rather making payment for the purchases made on 05.11.2019, assessee received Rs. ....