PRASHANT JAYANTILAL PATEL ,MUMBAI V. .INCOME TAX OFFICER, WARD, 13(3)(1), MUMBAI

ITA 3239/MUM/2024

AI Insights

The case involves an appeal by Prashant Jayantilal Patel against the order of the National Faceless Appeal Centre, Delhi, which upheld the assessment order passed by the National Faceless Assessment Centre, Delhi. The assessment order disallowed a loss of Rs. 1,10,53,250 incurred by the assessee in stock option transactions, treating them as non-genuine. The Tribunal found that the AO's conclusions were based on conjecture and not on any substantive evidence, as the AO did not independently verify the transactions nor challenge the authenticity of the documents provided by the assessee.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 474461 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 20-06-2024
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAHESH PAMNANI
• Assessee Lawyers: V.G. GINDE AW KUMAR KALE
• Keywords: Set aside; Reassessment proceedings; Onus to prove; Reopening of assessment
• Section: 147; 148; 250

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C”, MUMBAI BEFORE SHRI.B.R. BASKARAN, ACCOUNTANT MEMBER AND ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A No.3239/Mum/2024 (Assessment Year: 2015-16)) Prashant Jayantilal Patel 425, Dheeraj Heritage, S.V. Road, Santacruz (W), Mumbai- 400 054 PAN :AABPP2156M vs Income Tax Officer, Ward-13(3)(1) Room No.227, Aaykar Bhavan M.K. Road, Mumbai-400 020 APPLICANT RESPONDENT Assessee by : Shri V.G. Gindea/w Shri Kumar Kale Respondent by : Shri Mahesh Pamnani,(SR DR) Date of hearing : 05/12/2024 Date of pronouncement : 09/12/2024 O R D E R PER SHRI ANIKESH BANERJEE, JM: The instant appeal of the assessee was filed against the order of the National Faceless Appeal Centre, Delhi *for brevity, ‘Ld.CIT(A)+ passed under section 250 of the Income-tax Act, 1961 for Assessment Year 2015-16, date of order 01/06/2024. The impugned order was emanated from the order of the National Faceless Assessment Centre, Delhi (for brevity, ‘Ld.AO’) passed under section 147 read with section 144B of the Act, date of order 20/09/2021. 2 ITA No.3239/Mum/2024 Prashant Jayantilal Patel 2. The assessee has taken the following grounds:- “Being aggrieved by the order dated 01.06.2024 passed by the Ld. Commissioner of Income Tax (Appeals), Income Tax Department, National Faceless Appeal Centre, Delhi [\"Ld. CIT(A)\"] u/s. 250 of the Income-tax Act, 1961 (\"Act\"), your appellant prefers this appeal, among others, on the following grounds of appeal, each of which is without prejudice to, and independent of, the other: 1. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in upholding legal validity of the reassessment proceedings u/s. 147 of the Act. The appellant submits that the reassessment proceedings u/s. 147 is bad in law as the mandate of Section 147, 148 as well as Section 151 of the Act is not satisfied. The appellant, therefore, prays that the assessment order u/s.147 read with Section 144B of the Act dated 20.09.2021 be quashed. . 2. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in upholding legal validity of the assessment order u/s. 147 read with Section 144B of the Act dated 20.09.2021 because the Ld. AO did not get jurisdiction to pass the same without first disposing of the appellant's objections to reopening of assessment u/s. 147 raised before the Ld. AO. The appellant submits that the Ld. CIT(A)'s finding that the appellant did not raise any such objections is factually wrong and contrary to the material on record. The appellant, therefore, prays that the said assessment order, being bad in law, it be quashed. 3. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in upholding the disallowance of loss of Rs.1,10,53.250/- incurred by the appellant in stock option transactions. The appellant, therefore, prays that the said disallowance be deleted. Your appellant craves leave to alter, modify, amend or delete any of the above grounds of appeal, or to add one or more new ground(s), as may be necessary.” 2.1 The assessee has also sought to raise the following additional ground of appeal: - \"On the facts and in the circumstances of the case, and in law, tr. assessment order u/s.147 read with Section 144B of the Income-tax Act dated 20.09.2021, passed by the Faceless Assessing Officer ('FAO') of National Faceless Assessment Centre, is bad in law for lack of jurisdiction u/s 144B(1) for passing assessment 3 ITA No.3239/Mum/2024 Prashant Jayantilal Patel order u/s.147 prior to 29.03.202 when notification u/s.151A was issued by the Central Government. The appellant, therefore, prays that the impugned assessment order be quashed.\" 3. The brief facts of the case are thatduring the impugned assessment year the assessee engaged in stock exchange transactions related to stock options and incurred a loss of Rs. 1,10,53,250/-. The Ld. AO disallowed this loss, treating the transaction as non-genuine, and made an addition to the assessee's income. The assessment proceeding was completed under Section 147 read with Section 143(3) of the Act.The assessee sought the reasons for reopening the assessment U/s 148 of the Act. The Ld. AO provided the reason; however, the assessee filed objection to the reopening, which was not rebutted by the Ld. AO. Aggrieved by the assessment order, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) adjudicated the appeal on both legal grounds and merits but ultimately dismissed the appeal.Dissatisfied with the order of the Ld. CIT(A), the assessee has now filed an appeal before us. 4. The Ld.AR filed the written submission which is kept in the record. The Ld.AR placed that the assessee had gone through the stock options in recognised stock exchange and all the relevant documents were duly filed before both the authorities. The Ld.AR invited our attention in impugned appeal order paras 5.2 to 5.3, which are reproduced below: - “5.2 During the course of appellate proceedings, it is submitted that the loss incurred on account of transactions in stock option was genuine business loss and hence the disallowance made in respect of the same ought to be deleted. The appellant had furnished before the AO complete details of these transactions together with documentary evidence to substantiate genuineness thereof, which are not at all considered by the Id. AO. 4 ITA No.3239/Mum/2024 Prashant Jayantilal Patel 5.3 I have gone through the assessment order and the submissions made by the appellant by way of statement of facts. No new facts have been brought by the appellant during the course of appellate proceedings. He reiterated the facts narrated before the A.O. during the course of assessment proceedings. It is seen from the earlier submissions of the appellant before the AO that he is not a registered broker in derivatives segment of Bombay Stock exchange and hence, carried out F & O transactions on BSE through another registered broker, Odyssey Securities P Ltd. In the appellate proceedings, burden of proof lies on the assessee to prove that facts and findings of the AO are incorrect. It is the duty of the assessee to prove or rebut with cogent evidence against such facts and findings of the Assessing officer. Mere taking a ground using the words that the reopening is illegal arbitrary etc. is not sufficient. The appellant has to prove by argument and demonstration as to how the reopening is illegal. Appellant has not brought on record any reason to show that the reopening is illegal. In view of the above discussion and the case law relied, it is held that the AO correctly held that the assessee failed to discharge the onus vested on him by not filing necessary explanation with sufficient documentary evidence. Therefore, the addition made by the AO is confirmed. Ground No. 4 is dismissed.” 5. The Ld.AR also argued that the issue of the stock option was never been dealt with or verified by the Ld.AO at the time of assessment proceedings. He only relied on the investigation report and added back the same. The relevant paragraph of the assessment order is reproduced as below:- “The assessee was mainly found selling stock option without any corresponding off setting position in the underlying scrip. It is noted that many instances, these options were sold at unreasonably low prices even below the intrinsic value of the option. The assessee company was selling options much below their intrinsic 5 ITA No.3239/Mum/2024 Prashant Jayantilal Patel value and these options sold by the assessee at unreasonably low prices were subsequently bought back on the same day or on the next trading day at substantially higher price when compared to the sell price through there was no corresponding change in the underlying price justifying the difference in the traded price. The assessee was deliberately making repeated losses through their reversal trades in stock options which does not make any economic sense and the object of such intended execution of these transactions are of suspicious and non- genuine in nature. There is no reasonable and rational investor will keep making repeated losses and still continue its trading endeavours.” In the argument, the Ld.AR placed the detailed documents related to incurring of loss in the stock exchange which is claimed to be genuine in nature. The relevant documents are duly placed before the revenue authorities which is also submitted before the Bench. The respective documents are as follows:- Sr.No. Particulars APB Page Nos. 1 Copy of ITR acknowledgement, computation of Total Income for AY 2016-16 and Audited Accounts for FY 20141-15 1-15 2 Copy of the Contract Note dated 12.03.2021 and Contract Note dated 30.03.2021 in respect of stock options transactions on BSE, executed through Odyssey 60-61 3. Copy of appellant’s ledger A/c, in the books of Odyssey (broker ledger A/c.) for FY 2014-15 62 4 Copy of Ledger A/c of Odyssey in appellant’s books for FY 2014-15 63 5 Copies of Sauda Register giving details of all the scrip-wise transactions carried out by the appellant on BSE through Odyssey on 12.03.2015 and 30.03.2015 64-65 On factual aspect, the Ld.AR argued and stated that the Ld.AO has not made a separate verification. Even the veracity of the documents has not been challenged by both the authorities. The Ld.CIT(A) only followed the impugned 6 ITA No.3239/Mum/2024 Prashant Jayantilal Patel assessment order and had not made any verification from his end. The entire addition was made on the basis of surmises and conjectures. 6. The Ld. DR argued in support of the orders passed by the revenue authorities. However, he was unable to refute the documents submitted by the Ld. AR. 7. We have heard the submissions of both parties and carefully considered the documents available on record. The Ld. AO raised concerns that the options were sold at unreasonably low prices, even below their intrinsic value. It was observed that the assessee sold options significantly below their intrinsic value. However, we find that the Ld. AO merely expressed an opinion and did not bring any comparative transactions on record to substantiate the claim in relation to the assessee's transactions. The Ld. AO’s conclusion appears to be based solely on conjecture, without any corroborative evidence. The transactions in question were conducted through the stock exchange, as evidenced by the contract notes dated 12/03/2021 and 30/03/2021, which were duly submitted. The entire transaction was carried out on the Bombay Stock Exchange (BSE). Additionally, the ledger account of 'Odyssey Broker' for the financial year 2014-15 was also provided. Despite this, the revenue authorities neither rebutted nor challenged the authenticity of the submitted documents. Furthermore, we observe that no independent verification was conducted by the Ld. AO prior to making the addition. The assessee discharged their burden of proof by submitting all relevant documents supporting the transaction. The onus then shifted to the revenue authorities, who failed to bring any comparative data or evidence to substantiate their claims regarding the assessee's stock option 7 ITA No.3239/Mum/2024 Prashant Jayantilal Patel transactions. Considering the above, we find no merit in the addition made by the Ld. AO. Accordingly, the impugned appellate order is set aside, and the addition of Rs. 1,10,53,250/- is hereby deleted. 8. We find that the assessee has succeeded on the merits of the case; therefore, the legal grounds and the additional groundare rendered purely academic. 9. In the result, the appeal bearing ITA No.3239/Mum/2024 is allowed. Order pronounced in the open court on 09th day of December, 2024. Sd/- sd/- (B.R.BASKARAN) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,दिन ांक/Dated: 09/12/2024 Pavanan Copy of the Order forwarded to: 1. अपील र्थी/The Appellant , 2. प्रदिव िी/ The Respondent. 3. आयकरआयुक्त CIT 4. दवभ गीयप्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, Mumbai 5. ग र्डफ इल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, Mumbai "