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TMI Blog2025 (3) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... ned notice at "Annexure A" at to this petition. (b) Pending the admission, hearing and final disposal of present petition, to stay the implementation and operation of the notice at Annexure "A" to this petition and stay the further proceedings for the Assessment Year 2014-15. (c) any other and further relief deemed just and proper be granted in the interest of justice; (d) to provide for the cost of this petition." 3.1 The brief case of the facts are as under:- 3.2 The Petitioner is a partnership firm, during the year under consideration, entered into certain transactions in Futures & Options (hereinafter referred to as "F & O" for the sake of brevity) which resulted into loss of Rs. 41,56,218/- and such loss is duly reflected in the Profit & Loss account. Such transactions were carried out through the broker namely "ASE Capital Markets Ltd.". 3.3 Suddenly thereafter, the Respondent issued the impugned notice dated 30.03.2021 under section 148 of the Act seeking to reopen the case of the Petitioner for the year under consideration. 3.4 The Petitioner, in response to the impugned notice, filed return of income on 02.04.2021 and further requested the Respondent to supply co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent was requested to drop the reassessment proceedings. 3.8 The Respondent, vide order dated 28.02.2022 disposed off such objections and, inter-alia, held that the reopening is justified. 4.1 Learned Senior Advocate Mr. Hemani submits that the reasons for reopening are absolutely vague, scanty and non-specific. According to him, the respondent has not provided details of the date of receipt of information which is the foundation for reopening the petitioner's case. Neither has the department provided any clarity either on the date of transactions or the nature of transactions . Further, it is not clear that the transactions pertain to an item reflected in the balance-sheet or profit and loss account and therefore, it can be safely concluded that the reopening is in a mechanical manner without any independent application of mind and devoid of any prima facie belief as to the escapement of income chargeable to tax. 4.2 Mr. Hemani, learned Sr. Advocate further submitted that there is crucial difference between 'Futures & Option' (F&O) and "stocks". According to the petitioner, (a) "Derivatives" are assets values of which are derived from the underlying assets. (b) "Futur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning has been resorted to on the basis of information received under "Project Falcon" from DGIT (Investigation), Mumbai in March, 2021 through Insight Portal regarding coordinated and premeditated trading by brokers on behalf of their clients on the Bombay Stock Exchange by engaging in reversal trades in illiquid stock options resulting in non-genuine business loss/gains to the beneficiary. He has further submitted that the present petitioner is a party to such manipulation through ASE Capital Markets Ltd. and is the beneficiary of such fictitious loss and the petitioner had consistently recorded losses for each contract. 5.3 He has further submitted that thus, based on the analysis of trade data and comparing with chief characteristics of reversal trades, the Assessing Officer is of the prima-facie belief that the petitioner has indulged in generating non-genuine loss amounting to Rs. 27,61,650/- by trading in illiquid stock options on the BSE during the year under consideration and such amount has escaped assessment on account of failure on part of the petitioner to disclose truly and fully all material facts necessary for assessment. 5.4 Learned Senior Standing Counsel Mr. Var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . "In this connection, on going thoroughly the observations/contents for re-opening the completed assessment for A.Y. 2014-15 , we could notice in Para-3 the observation and conclusion reproduced as under: "Para 3 On perusal of the details and information, it is very clear that the asessee entered into transaction in fictitious losses in equity/derivative Trading (BSE Equity Derivative Loss) of ASE Capital Markets Ltd (PAN-AADCA4635P) amounting to Rs. 27,61,650/- during the year under consideration. In view of the above facts, I have reason to believe that income of Rs. 27,61,650/- has escaped assessment within the meaning of section 147 of the Act. Therefore, it is a fit case for re-opening of the assessment by invoking the provision of section 147 of the IT Act, 1961. Accordingly, it is fit case for issuing notice u/s 148 of the Act. Your observation as re-produced herein above carries many flaws in so far as the alleged amount of transaction entered with ASE Capital Market Ltd as mentioned by you is incorrect as against the correct amount of Rs. 41,56,218/- being Future & Option trading loss incurred debited to P&L account. Hence, details available on your records for form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng your opinion for bringing the said alleged amount to tax is fallacious since, your observation based on your records simply refers to the transaction and not F&O trading loss. Hence, on the basis of such wrongful observation, no alleged amount of Rs. 27,61,650/- could be brought to tax. 9. Thus, we find that at no point of time, was there any failure on the part of the petitioner: "(i) to make a return u/s. 139 or in response to the notice issued under sub-section (1) of section 142 or section 148; (ii) to disclose fully and truly all material facts necessary for his assessment for that Assessment Year" 10. It cannot be held that the department was justified in reopening the assessment for Assessment Year 2014-15, which, we may add, has been done mechanically without application of mind, in the absence of any tangible material. 11. It also appears from the reasons recorded that no verification of the material on record is made by the respondent and there is no independent opinion that any income has escaped assessment due to any failure on the part of the assessee in not disclosing fully and truly all material facts necessary for assessment. 12. Moreover, from the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not have assumed the jurisdiction merely and solely relying upon the information made available on the insight portal without forming any independent opinion on the basis of the material on record vis-a-vis the petitioner is concerned. 15. This Court has held in its decision in the case of The Principal Commissioner of Income Tax-1 Vs. M/s. Farmson Pharmaceuticals Gujarat Pvt. Ltd. passed in Tax Appeal No. 229 of 2024 following the decision in the case of CIT Vs. The Kelvinator of India Ltd. reported in (123 Taxmann.com 433) "9. Respectfully following the above judicial precedents, we have no hesitation in holding that when there is no failure on the part of the assessee in disclosing the income and No new tangible material on record, the reopening of assessment after 4 years period amounts to "change of opinion" only. Therefore the reopening of assessment invalid in law. Thus the finding arrived by the Ld. CITIA) does not require any interference. Therefore the grounds raised by the Revenue is devoid of merits and the same is hereby dismissed. 10. In the result, the appeal filed by the Revenue is hereby dismissed." 16. In view of the foregoing reasons, this Court is of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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