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TMI Blog2024 (7) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer which has no connection, as stated in the reasons recorded. Therefore, merely referring to the order of the Hon ble Apex Court and the observations of the SEBI, without there being co-relation of the petitioner assessee and only because the two contracts, in which the trades have been undertaken by the assessee, was identical resulting into loss and profit. The Assessing Officer could not have come to the, prima facie, conclusion that the income has escaped assessement to the tune of Rs. 38,40,000/-. There is no effect on the income of the assessee in view of loss and profit incurred on the F O transactions. Thus, reasons recorded by AO therefore, cannot, by any stretch of imagination, be said to form any reason to believe as to escapement of income for assuming the jurisdiction under Section 148 of the Act to reopen the assessment for the year under consideration. Decided in favour of assessee. - HONOURABLE MR. JUSTICE BHARGAV D. KARIA AND HONOURABLE MR. JUSTICE NIRAL R. MEHTA Appearance: For the Petitioner(s) No. 1 : Mr Tushar Hemani Senior Advocate With Ms Vaibhavi K Parikh (3238). For the Respondent(s) No. 1 : Mr. Varun K. Patel(3802). ORAL ORDER (PER : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racts and has undertaken both buy and sell trades in each of the contracts and selling transactions is identical. The respondent is of the view that the petitioner has indulged in generating non-genuine losses and profits of Rs. 38,40,000/- by trading in illiquid stock options on the Bombay Stock Exchange and therefore, the respondent has reason to believe that the income of Rs. 38,40,000/- has escaped assessment and thus, the case of the petitioner has been reopened by the respondent Assessing Officer. [2.5] The petitioner, vide letter dated 24th May 2021, raised objections against reopening wherein various factual and legal submissions were raised. As per para 5 of the objections raised by the petitioner against reopening, the petitioner requested for large number of documents from the respondent and the respondent was also requested to drop the reassessment proceedings. [2.6] The respondent, vide order dated 13th November 2021, disposed of the objections, inter alia, holding that reopening is justified. Therefore, the impugned notice issued by the respondent under the provisions of Section 148 of the Act is bad, illegal and barred by limitation and without jurisdiction. Being ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the transactions carried out by the assessee in the segment of F O are different from stocks and therefore, there cannot be any escapement of income chargeable to tax. Learned Senior Advocate Mr. Hemani contended that sanction for issue of notice under Section 148 of the Act in term of Section 151 of the Act has not been obtained by the respondent, as required. [6] It was further submitted that the impugned notice is issued on a borrowed satisfaction and is liable to be quashed and set aside. [7] On the other hand, learned Senior Standing Counsel Mr. Varun K. Patel for the respondent submitted that the respondent Assessing Officer issued notice under Section 148 of the Act after considering the information on the Insight Portal and the modus operandi of manipulative reversal trades, which has emerged from the orders of SEBI and confirmed by the Hon ble Apex Court in the case of SEBI vs. Rakhi Trading Private Limited [Civil Appeal No. 1969 of 2011 vide order dated 8th February 2018] has considered fictitious loss and profit in the case of the petitioner to form a belief that the income has escaped assessment. It was submitted that the petitioner failed to justify in the objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale quantity (ii) Huge variation in purchase price and sale price (iii) Trades carried out between same party and counterparty ice if a client A purchased X qty from a counter-party client B. then A sells X qty to B only. (iv) Time gap between purchase and sale transaction lasts few seconds and not more than an hour. (v) Insignificant change in the price of the underlying scrip as compared to the change in buy rates and sell rates. (vi) Trading repeatedly in deep in-the-money options and deep out-of-the-money options on individual stocks, which were thinly traded. (vii) The trades by these loss-making entities, in many cases, contribute to 70% to 100% of total traded volume for the contracts on those days. Further, on analysis of trading data received under Project Falcon, it is seen that the assessee has undertaken trades in the following unique contracts during year under consideration: Sr. No. Source of PAN Source of PAN name Information F.Y. Information Type Information value Information date Remarks 1 AABCS9622C SPS Share Brokers Pvt Ltd 2014-15 Fictitious losses in Equity/ Derivative Trading 1 920000 BSE Equity Derivativ e loss 2 AABCS9622C SPS Share Brokers Pvt Ltd 2014-15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Fictitious losses in Equity/ Derivative Trading 1920000 BSE Equity Derivative loss 2 AABCS9622C SPS Share Brokers Pvt Ltd 2014-15 Fictitious losses in Equity / Derivative Trading 1920000 BSE Equity Derivative Loss Total 3840000 From perusal of the table above, it is seen that the assessee has traded in 2 unique contracts and has undertaken both sell as well as in each of the contracts. Further, it is relevant to mention that the buy quantity and sell quantity for each of the 2 contracts in which trades have been undertaken by assessee is identical. Also, it is seen that by trading in each of the 2 contracts enumerated in the table above, the assessee has recorded losses and Profits for each contract. Thus, based on the analysis of trade data as present in this paragraph and comparing with chief characteristics of reversal trades as discussed above, it is seen that the assessee has indulged in generating non-genuine losses and Profits amounting to Rs. 38,40,000/- by trading in illiquid stock options on the BSE. [11] On perusal of the above reasons, it appears that the respondent Assessing Officer is not clear as to how the income has escaped assessment as it considered loss as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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