ITO-34(2)(1), MUMBAI, MUMBAI V. HARESH S JHAVERI HUF , MUMBAI

ITA 5481/MUM/2025

AI Insights

The case involves an appeal by the revenue against the decision of the CIT(A) which had allowed the appeal of the assessee, Haresh S Jhaveri HUF, for the assessment year 2013-14. The revenue challenged the deletion of disallowance and addition made on account of a loss of Rs. 39,68,700 incurred in the currency derivatives segment and unexplained expenditure of Rs. 1,98,435 under section 69C of the Income Tax Act. The revenue argued that these transactions were manipulative and aimed at creating desired losses and profits. However, the tribunal, referencing a previous decision involving similar facts and circumstances, found no evidence that the transactions were non-genuine or manipulated.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 788723 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: misc
• Appeal Filed On: 01-09-2025
• Other Referred Cases: Land Acquisition Collector vs MST Kitji & Others, SEBI Vs. Rakhi Trading(P), PCIT Vs. Swati Bajaj
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ADESH RAI
• Assessee Lawyers: NITIN DOSHI
• Keywords: Reassessment proceedings; Corroborative evidences; Unexplained expenditure; Accommodation entries; Transactions in derivatives; Bogus
• Section: 147; 69C

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA No. 5481/Mum/2025 A.Ys: 2013-14 ITO – 34(2)(1) Kautilya Bhavan, Room No. 124, 1st Floor, Mumbai PAN – AADHH1174D Vs Haresh S Jhaveri HUF 379, Priti Bldg, SV Road Vile Parle (W), Mumbai - 400056. (Appellant) (Respondent) Assessee by Shri Nitin Doshi Revenue by Shri Adesh Rai, Sr. DR Date of Hearing 28.10.2025 Date of Pronouncement 26.11.2025 ORDER PER SANDEEP GOSAIN, JM: This appeal has been filed by the revenue challenging the different impugned order dated 30.06.2025 passed under section 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2013-14. 2. From the records, I noticed that there is a delay of 1 day in filing the present appeal, in this regard the revenue has explained the reasons which prevented them to tile the appeal in time. 3. After having heard the counsel for both the parties on this application and considering the entire factual position as explained before us and also keeping in view the principles laid Printed from counselvise.com 2 ITA No. 5481/Mum/2025 Haresh S Jhaveri HUF. Mumbai. down by the Hon’ble Supreme Court in the case of Land Acquisition Collector vs MST Kitji& Others, 1987, AIR, 1353 Supreme Court Wherein it has been held that where substantial justice is pitted against technicalities of non-deliberate delay, then in that eventuality substantial justice is to be preferred. In our view, the principles of advancing substantial justice are of prime importance. Hence, considering the explanation put forth by the assessee by justifiably and properly explaining the delay, which occurred in filing the appeal and construing the expression ‘Sufficient Cause’ liberally, I am inclined to condone the delay in filing the appeal. Consequently, the application filed by the assessee for seeking condonation of the delay stands allowed. The appeal is admitted to be heard on merits. 4. The revenue has raised the following grounds of appeal: 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A)/NFAC is justified in deleting the disallowance and addition made on account of loss claimed by assessee to the tune of Rs.39,68,700/- incurred in currency derivative segment and unexplained expenditure to the tune of Rs.1,98,435/- under section 69C of the Act, without appreciating the facts and findings given by the Investigation wing in its report that various brokers including M/s Baba Bhoothnath Commex Pvt. Ltd. were involved in manipulative trades to contrive loss for their trading clients. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A)/NFAC is justified in ignoring the facts of the Hon'ble Apex Court decision pronounced in the CIVIL Appeal No. 1969 of 2011 in the case of SEBI Vs. Rakhi Trading(P) wherein it was clearly mentioned that the aforesaid type transactions are manipulative/deceptive device to create desired loss and profit. Printed from counselvise.com 3 ITA No. 5481/Mum/2025 Haresh S Jhaveri HUF. Mumbai. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A)/NFAC is justified in ignoring the decision pronounced in the case of PCIT Vs. Swati Bajaj (2022) 139 Taxmann.com 352( Calcutta H.C), wherein it was held that the tax authorities are entitled to look into the surrounding circumstances to find out the realities and the matter has to be considered by applying test of human probabilities and further coming to a conclusion only on the basis of the arguments advanced by the assessee? 4. The appellant craves the leave to add, substitute, modify, alter, delete or amend all or any ground of appeal either before or at the time of hearing. 5. The brief facts are that the assessee filed its return of income for A.Y 2013-14 on 17.09.2013 declaring total loss of Rs. 24,55,624/-. On the basis of information available with the department the case of the assessee was reopened u/s 147 of the Act and assessment completed u/s 147 r.w.s 144B of the Act determining total income of Rs. 41,67,135/-. 6. Aggrieved by the order of assessment, assessee preferred appeal and Ld. CIT(A) after considering the facts of the case allowed the appeal and deleted the additions. 7. Aggrieved by the order of Ld. CIT(A) the revenue has preferred the present appeal the grounds mentioned herein above. 8. All the grounds raised by the revenue are interconnected and interrelated and relates to challenging the order of Ld. CIT(A) in deleting the disallowance and additions made by the AO on account of loss claimed by the assessee to the tune of Rs. 39,68,700/- incurred in currency derivatives segment and unexplained expenditure to the tune of Rs. 1,98,435/- u/s 69C of the Act. Printed from counselvise.com 4 ITA No. 5481/Mum/2025 Haresh S Jhaveri HUF. Mumbai. Therefore I have decided to adjudicate these grounds through the present consolidated order. 9. Ld. DR while relying upon the order of AO submitted that Ld. CIT(A) erred in deleting the disallowance and addition made on account of loss claimed by the assessee to the tune of Rs. 39,68,700/- incurred in currency derivatives segment and unexplained expenditure to the tune of Rs. 1,98,435/- u/s 69C of the Act. It was further submitted that Ld. CIT(A) has not appreciated the fact and findings given by the investigation wing in its report that various brokers including M/s Baba Bhoothnath Commex Pvt Ltd were involved in manipulative trades to contrive loss for their trading clients. It was further submitted that Ld. CIT(A) wrongly ignored the facts of the decision of Hon’ble Supreme Court in the case of SEBI Vs. Rakhi Trading P. Ltd, in civil appeal No. 1969 of 2011, wherein it was clearly mentioned that the transactions carried out by the assessee are manipulative / deceptive device to create desired loss and profit. Ld. DR also stressed upon the point that Ld. CIT(A) also ignored the decision in the case of PCIT Vs. Swati Bajaj (2022) 139 taxmann.com 352 (Calcutta HC), wherein it was held that the tax authorities are entitled to look into the surrounding circumstances to find out the realities and the matter has to be considered by applying test of human probabilities. Printed from counselvise.com 5 ITA No. 5481/Mum/2025 Haresh S Jhaveri HUF. Mumbai. 10. Whereas on the contrary, Ld. AR relied upon the orders passed by the Ld. CIT(A) and reiterated the same arguments as were raised by him before the revenue authorities. Ld. AR also relied upon the decision of the Coordinate Bench of ITAT in the case of ACIT Vs. Haresh Shantichant Jhaveri, in ITA No. 1971/Mum/2025 and requested for dismissal of the present appeal. 11. I have heard the counsels for both the parties, perused the material placed on record, judgements cited before us and also the orders passed by the revenue authorities. From the records, I noticed that in this case the investigation wing of the department had carried out investigation and enquiries under Project Falcon into transactions executed through United Stock Exchange (USE)[since merged with BSE] which revealed that a number of manipulative trades have been executed through the Exchange Platform in the currency derivative segment by the Member Brokers / Traders to provide accommodation entries of Profit / Loss to their clients/beneficiaries. As per which during the A.Y.2013-14 the assessee has carried out trading transactions in currency derivative segment of the Stock Exchange through the Member Broker M/s Baba Bhoothnath Commex Pvt. Ltd. and in the process has earned bogus loss of Rs.39,68,700/- during the FY 2012-13 Therefore additions were made. Printed from counselvise.com 6 ITA No. 5481/Mum/2025 Haresh S Jhaveri HUF. Mumbai. 12. However, during the reassessment proceedings, the assessee had submitted the reply along with supporting evidences such as Details of derivative trading, Financials, Ledger of broker, Bills of sale and purchase. Further, the assessee had explained that transactions of are on faceless electronic platform and hence, assessee does not know and had no connection and no relation with counter party of the transaction. 13. In support assessee had relied upon and filed the copies of the order of CIT(A), NFAC, Delhi in the case of Karta of the assessee i.e Haresh Shantichand Jhaveri pronounced on 29/01/2025, wherein AO was accordingly directed to delete the addition of Rs.1,65,86,250/- made on account of losses incurred in Currency Derivative which was presumed by A.O. as non-genuine taking base of information through Project Falcon. Which has already been upheld by the Coordinate Bench of ITAT in the case of ACIT Vs. Haresh Shantichand Jhaveri in ITA No. 1971/Mum/2025. 14. Even otherwise the moot point for adjudication is whether, on the given facts and circumstances, the derivative transactions in the currency undertaken by assessee on the recognize stock exchange and resulting loss to the tune of Rs. 39,68,700/-, was a genuine financial transaction, or it was a colourable device solely aimed at claiming substantial tax benefit in the hand of the assessee. Printed from counselvise.com 7 ITA No. 5481/Mum/2025 Haresh S Jhaveri HUF. Mumbai. 15. In this regard, I noticed that the assessee, in the course of assessment proceeding, had brought on record the necessary particulars of transactions along with supporting documents relating to each transaction, viz, contract notes, ledger account of the broker, Demat account statement and relevant bank statement. On careful perusal of evidence brought on records, I find that assessee has satisfactorily discharge the primary owners cast upon it to substantiate the impugned transactions by furnishing all the relevant material evidence. In the course of assessment proceedings, the AO had merely doubted transactions under taken on the recognized stock exchange and resultant loss, primarily relying upon the report of the investigation wing (Project Falcon) and had brushed aside the plethora of documentary evidence furnished by the assessee. The report of the investigation wing relates to share transaction for providing bogus accommodation entry by the brokers. The AO had not pointed out the specific reference of the impugned transaction in his finding in the assessment order and primarily relied upon generalised report of the investigation wing. The AO had merely referred the statement of certain brokers; however, any such broker has not specifically mentioned the name of the present assessee. Further it is also pertinent to note that AO had failed to examine them on oath during the assessment proceedings in relation to the impugned transactions in derivative currency segment under taken Printed from counselvise.com 8 ITA No. 5481/Mum/2025 Haresh S Jhaveri HUF. Mumbai. by the assessee. It is also relevant to note that AO had not made any independent enquiry/verification during the assessment proceedings with regard to allegation of impugned transaction being colourable device to avoid the tax 16. All the transactions in derivatives segment had taken place on the platform of recognized stock exchange through registered stock broker namely M/s Baba Bhoothnath Commex Pvt ltd and payment had been made/received through banking channel. 17. The Coordinate Bench of ITAT in the case of Karta of the assessee in Haresh Shantichand Jhaveri (supra) had already decided the matter in favour of the assessee, the operative portion is reproduced herein below 6. We have heard both the parties and also perused the relevant finding given in the impugned orders. The entire premise of the AO for treating the transaction with TSPL is based on the Investigation wing report. The ld. CIT (A) has duly analysed the case from all possible angles before allowing the relief to the assessee holding that the assessee was a regular trader in option / currency derivatives and had worked through various brokers in the past as well as during the year and had shown profits from transaction with some brokers while losses in other transactions. The consolidated income/loss declared in the return of income had not been doubted nor the AO has carried out any enquiry to dislodge the authenticity of the trades done through any broker. In view such facts, it cannot be stated that only one isolated transaction was pre-meditated only to incur loss. From the investigations carried out under the Falcon project, no evidence had been gathered or found which could even remotely suggest that one particular transaction with TSPL was sham or non- genuine. Once the assessee has filed copies of contract notes in Printed from counselvise.com 9 ITA No. 5481/Mum/2025 Haresh S Jhaveri HUF. Mumbai. respect of the transactions of the derivative trading, copy of bank statements, reflecting payment of requisite margin money to the brokers, copy of statement of accounts of the broker in the books of the assessee company etc., the AO should have brought some material, carried out enquiry to bring any adverse material on record. With regard to the transactions done through TSPL, the assessee has provided all the necessary documents which have not been rebutted by the AO and also it has not been demonstrated by AO that assessee had colluded with the counter parties to generate fake loss. There is no iota of evidence w.r.t. action taken by SEBI or the Income Tax Department in the case of such counter party and the underlying motive of those parties behind such reversal. The transactions so executed were settled through online portal of stock exchange only and cannot be done directly with buyer or seller as they are unknown to each other. Moreover, matching of transactions on the exchange is done by Exchanges and there is no role of assessee or its broker and in case transactions do not match, they are reversed by them. In case of F&O transactions, the difference in bid and ask price is also uncontrolled and is reflected on the online portal of exchanges based on the demand and supply and such bid and ask price also varies with the strike rate of a particular script and is available online to all the traders without any control by assessee. Thus, prima facie, there is no material that trade transactions in which assessee had incurred losses were non- genuine. There has to be basis and inquiry to arrive at such conclusion that out of many transactions, few were manipulated to show fictitious loss and were non-genuine which is lacking here. 6.1 After taking into account all relevant facts of the case and also in the light of coordinate bench decisions(supra) applicable to the facts of the case involving similar facts and circumstances, we do not find any infirmity in the conclusion drawn by the ld.CIT(A) which is therefore, affirmed. Consequently, grounds of appeal of the Revenue are dismissed. 7. In the result, appeal of the Revenue is dismissed. 18. Respectfully following the decision of the Coordinate Bench in the case of Karta of the assessee in Haresh Printed from counselvise.com 10 ITA No. 5481/Mum/2025 Haresh S Jhaveri HUF. Mumbai. Shantichand Jhaveri (supra) and also keeping in view the facts of the case I am of the view that prima facie, there is no material that trade transactions in which assessee had incurred losses were non-genuine. In my view, there has to be basis and inquiry to arrive at such conclusion that out of many transactions, few were manipulated to show fictitious loss and were non-genuine which is lacking in this case. 19. After taking into account all relevant facts of the case and also in the light of coordinate bench decisions (supra) applicable to the facts of the case involving identical facts and circumstances, I do not find any infirmity in the conclusion drawn by the ld.CIT(A) which is therefore, affirmed. Consequently, grounds of appeal of the Revenue stands dismissed. 20 In the result, appeal filed by the revenue stands dismissed. Order pronounced in the open court on 26/11/2025 Sd/- (SANDEEP GOSAIN) (JUDICIAL MEMBER) Mumbai: Dated: 26/11/2025 KRK, Sr. PS. Printed from counselvise.com 11 ITA No. 5481/Mum/2025 Haresh S Jhaveri HUF. Mumbai. Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order (Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "