TaxTMI 
TaxTMI 
2026 (7) TMI 1026
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....ent order, in the facts and circumstances of the case. 2. The Ld. AO erred in law and on facts in framing the assessment order beyond the time bar period and Ld. CIT(A) erred in law and on facts in not quashing the assessment order, in the facts and circumstances of the case. 3. The Ld. AO erred in law and on facts in making the addition of Rs. 33,59,750 as business income without properly considering the evidence furnished by the assessee and the Ld. CIT(A) erred in law and facts in confirming the action of the Ld. AO. 4. The Ld. AO erred in law and on facts in making the addition of Rs. 33,59,750 as business income without following the principles of Natural Justice and the Ld. CIT(A) erred in law and facts in confirming the action of the Ld. AO. 5. The Ld. AO erred in law and on facts in charging interest of Rs. 8,92,766 u/s 234B of the Act without recording a proper satisfaction in the assessment order as stipulated by law. 6. The Appellant craves leave to add, amend, alter, OR withdraw any grounds of appeal." 3. At the outset, it is observed that this appeal is filed belatedly by the assessee by 16 days beyond the time provided u....
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....ce No. ITBA/AST/S/148/2021-22/1033849719(1). The assessee is LLP. The assessee filed return of income on 27.08.2016, declaring total income of Rs. 9,27,620. The assessee also claimed loss in derivative trading and debited an amount of Rs. 33,59,750/- against the same. As per AO, it was reported in Media and also specific information was received by the AO that there is a rampant tax evasion through coordinated and premeditated trading in illiquid stocks and on 'options' in the Bombay Stock Exchange. The AO received information that the assessee also been party to those transactions and had indulged in 'non-genuine profits/loss on illiquid derivatives' and thereby had generated fictitious loss in derivative trading to the tune of Rs. 33,59,750/-. To this effect, Investigation Wing of Mumbai, Unit-6(3) (Inv.) conducted an investigation into the matter under the aegis of 'Project Falcon' to establish the veracity of the claims of losses, and to unearth the modus operandi of coordinated and premeditated trading in-illiquid stock options. In course of investigation, it was noticed that a specific/particular set of entities were consistently incurring trading loss by executing a 'reversa....
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....e, and in response to SCN u/s 144, the assessee filed part reply on 08.04.2023 and 25.04.2023. Further SCN dated 10.05.2023 were issued by the AO to the assessee regarding proposing the addition. There was no response by the assessee to the aforesaid SCN. This led AO to pass reassessment order u/s 147 r.w.s. 144 r.w.s. 144B of the 1961 Act, wherein AO made disallowance of loss of Rs. 33,59,750/- claimed by the assessee in derivative trading considering the same to be fictitious losses for the purpose of payment of taxes. The AO relied upon judgment and order of Hon'ble Supreme Court in the case of SEBI v. Rakhi Trading Private Limited reported in (2018) 90 taxmann.com 147(SC), wherein Hon'ble Supreme Court held that an intentional trading for loss perse, is not a genuine dealing in securities. Trading is always with an intention to make profits.. 5. Aggrieved, the assessee filed first appeal with the Ld. CIT(A). The assessee submitted before ld. CIT(A) that the transactions were genuine and were carried out on the platform of the Stock Exchange through SEBI registered stock brokers. The Ld. CIT(A) rejected the contentions of the assessee because a prudent investor does trading w....
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....4.2021. The approval is to be required from the Ld. PCCIT as more than three years have elapsed from the end of the relevant assessment year. It was also submitted that no evidence were provided by the AO to the assessee with respect to the investigation conducted by the Investigation Wing, Mumbai. It was also submitted that assessee has not been provided with copies of the statement of the Brokers recorded during the course of investigation, and no cross-examination was allowed. It was submitted that the assessee has duly filed the contract notes as well as the bank statements to prove that the transactions of derivative trading in options were entered into through SEBI registered share broker though Stock Exchange. It was submitted that payment for these transactions were made through banking channel. 6.2. The Ld. Sr. DR on the other hand, relied upon the order of the authorities below 7. I have considered rival contentions and perused the material available on record. I have observed that the case of the assessee was reopened by the Revenue by invoking provisions of section 147/148 of the Act. The details as to facts and background of reopening of the assessment are incorp....
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....ons wherein positions in derivative trading in option is taken just before expiry and the position is not reversed but allowed to lapse, and the loss is created in the hands of the beneficiary. These are syndicated organized manipulated trade in connivance of the brokers and beneficiaries. The brokers have admitted to have indulged in this syndicate of organizing premeditated transactions in order to create fictitious losses in favour of beneficiary so that tax advantage can be taken against by set off of these fictitious losses in derivative trading against other taxable income chargeable to tax. The assessee is one of the beneficiary of said trade. The brokers have admitted to have indulged in aforesaid manipulation and premeditated act of creating derivative losses to set off against other incomes. There is a meeting of mind with common intention in order to defraud Revenue. Detailed investigations were carried out by Revenue under the aegis of 'Project Falcon'. The magnitude of such transactions wrt brokers covered under survey is Rs. 1276.08 crores. Thus, merely stating that contract notes are there, or payments were made through bank is not sufficient. The onus has shifted ba....