SHRI VIPUL BANSAL ,MUMBAI vs. INCOME TAX OFFICER WARD 7(1)(2), MUMBAI

This appeal by the assessee is directed against the order passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), New Delhi [hereinafter referred to as “CIT(A)”], dated 15.07.2025, passed under section 250 of the Income-tax Act, 1961[hereinafter referred to as “the Act”] in respect of Assessment Year 2010–11 arising out of the Shri Vipul Bansal assessment order, dated 19.02.2017, passed by the Income Tax Officer - 7(1)(2), Mumbai [hereinafter referred to as “Assessing Officer or AO”] under section 143(3) read with section 147 of the Act. Facts of the Case 2. The assessee, an individual, filed his return of income for Assessment Year 2010–11 declaring total income of Rs. 1,19,14,917/-. The original assessment was completed under section 143(3) of the Act by the Assessing Officer, Income-tax Officer, Ward 7(1)(2), Mumbai, vide order dated 19.03.2013, determining the total income at Rs. 1,37,94,167/-.

Subsequently, the assessment was reopened under section 147 of the Act after obtaining approval of the competent authority. Notice under section 148 was issued on 21.09.2016 on the basis of information received from the Directorate of Investigation and Central Intelligence (DIT (I&CI)) through the Additional Commissioner of Income-tax, Range 10(1), Mumbai, alleging that the assessee had availed artificial profit or loss through Client Code Modification (CCM) in share transactions carried out in the F&O segment. Pursuant to the reopening, reassessment proceedings were completed under section 143(3) read with section 147 vide order dated 19.12.2017, whereby the Assessing Officer recomputed the total income of the assessee at Rs. 2,73,92,450/-.

On the basis of data received from the Investigation Wing and analysis of broker-wise and client-wise information, the Assessing Officer noted that the assessee’s PAN appeared as the modified client code, which allegedly received fictitious profit or loss through such client code modification. The Assessing Officer tabulated details showing original client codes, modified client codes, PANs of the respective parties and the amount of profit or loss transferred.

The Assessing Officer issued notices under sections 142(1) and 133(6) of the Act and also issued summons under section 131 to the broker, M/s. Transglobal Securities Ltd. Statement of the Director of the broker, Shri Sunil Sedhmal Gupta, was recorded on oath. While the broker stated that client code modification facility existed for rectification of genuine errors and denied charging any commission for the same, he also stated that details of client code modifications were maintained by the National Stock Exchange and not by the broker.

Further, the Assessing Officer inferred that commission would have been paid for obtaining such accommodation entries. Relying upon findings from other investigation proceedings wherein brokers were found to be charging commission ranging from 0.5 percent to 2 percent for similar activities, the Assessing Officer estimated commission at 2 percent of the alleged fictitious profit and made an addition of Rs. 2,66,633/- under section 69C of the Act as unexplained expenditure. Penalty proceedings under section 271(1)(c) were also initiated separately.

Aggrieved by the reassessment order, the assessee preferred an appeal before the CIT(A). The appeal was dismissed by the CIT(A).

The CIT(A) upheld the validity of reopening under section 147, holding that the information received from the Investigation Wing constituted tangible material and that the assessee had Shri Vipul Bansal failed to disclose fully and truly all material facts relating to the alleged artificial profits or losses arising from client code modification. The contention of the assessee regarding borrowed satisfaction and lack of application of mind by the Assessing Officer was rejected.

On merits, the CIT(A) concurred with the findings of the Assessing Officer that the loss claimed in the F&O segment was fictitious in nature and that the assessee was the beneficiary of profits or losses shifted through client code modification. The CIT(A) further upheld the addition made under section 69C on account of unexplained commission expenditure, holding that no prudent businessman would render such non-genuine services without consideration. Accordingly, the additions of Rs. 1,33,31,648/- and Rs. 2,66,633/- were confirmed.

Aggrieved by the order of the CIT(A), the assessee is in appeal before us raising following grounds:

The above grounds of appeal

The learned AR contended that, in terms of the Instruction No. 1/2011 [F.NO.187/12/2010-IT(A-I)],dated 31-1-2011, issued by the Central Board of Direct Taxes under section 119 of the Act, cases having returned income beyond the specified limit were required to be assigned to the Deputy Commissioner of Income- tax or Assistant Commissioner of Income-tax, and not to an Income-tax Officer. He submitted that the jurisdiction in the present case, therefore, vested with the DCIT, and not with the ITO, Ward 7(1)(2), Mumbai. According to the learned AR, the initiation of reassessment proceedings under section 147 and issuance of notice under section 148 by an officer lacking jurisdiction was void ab initio and went to the very root of the matter.

In support of Ground No. 5, the learned AR placed strong reliance on the judgment of the Hon’ble Bombay High Court in Shri Vipul Bansal the case of Ashok Devichand Jain vs. Union of India and Others, rendered in Writ Petition No. 3489 of 2019, dated 08.03.2022 where the Hon’ble High Court held that a notice under section 148 issued by an officer lacking jurisdiction is a jurisdictional defect, which is not curable, and consequently quashed the reassessment proceedings.

Per contra, the learned Departmental Representative opposed the jurisdictional challenge raised by the assessee. The learned DR submitted that the assessee had never raised any objection regarding jurisdiction before the Assessing Officer during the course of reassessment proceedings and had fully participated in the reassessment without demur. It was contended that having acquiesced to the jurisdiction of the Assessing Officer and having participated in the proceedings, the assessee is now precluded from raising such a technical objection for the first time at the appellate stage.

The learned DR further sought to distinguish the judgment of the Hon’ble Bombay High Court in Ashok Devichand Jain vs. Union of India and Others (supra), relied upon by the assessee. It was submitted that in the said case, the assessee had directly challenged the notice issued under section 148 by way of a writ petition, whereas in the present case, no such challenge was raised at the threshold and the assessee consciously participated in the reassessment proceedings. According to the learned DR, the ratio of the said judgment cannot be mechanically applied to Shri Vipul Bansal the facts of the present case. The learned DR also pointed out that in the case before the Hon’ble High Court, the Assessing Officer had categorically admitted, by way of an affidavit, that the notice under section 148 was defective and had been issued by the Income-tax Officer only because the time available was too short to migrate the PAN to the jurisdiction of the DCIT after obtaining administrative approval. It was submitted that no such admission exists in the present case, and therefore the factual foundation on which the High Court quashed the notice is absent here.

With regard to CBDT Instruction No. 1/2011, the learned DR submitted that the instruction itself records that it was issued after the Board received representations from a large number of taxpayers, particularly from mofussil areas, highlighting hardship caused due to transfer of cases to DCIT/ACIT located in different stations, thereby increasing the cost of compliance. It was contended that the instruction was primarily intended to mitigate hardship to taxpayers. The learned DR submitted that, in the present case, the assessee is located at Parel, Mumbai, and the assessment was also carried out in Mumbai itself. Therefore, no hardship whatsoever was caused to the assessee on account of the assessment being handled by the Income-tax Officer instead of the DCIT. It was argued that since no prejudice or hardship has been demonstrated by the assessee, the invocation of the Shri Vipul Bansal CBDT instruction at the appellate stage is purely technical and academic in nature.

The learned DR thus submitted that the jurisdictional ground raised

In the present case, apart from placing reliance on the instruction, the assessee has not brought on record any material to demonstrate that the ITO who issued the notice under section 148 was not vested with jurisdiction over the assessee under the framework of section 120 read with notifications/orders allocating jurisdiction, or that the assessee’s PAN was not assigned to that officer. On the contrary, the assessee’s own conduct in filing the return with ITO 8(2)(1) and being assessed originally by the ITO under section 143(3) supports the position that, as per the then prevailing administrative arrangement, the assessee’s case stood with the ITO.

We further find merit in the Revenue’s contention that the judgment of the Hon’ble Bombay High Court relied upon by the assessee stands on a distinct factual footing. In that case, as pointed out by the learned DR, the assessee had approached the Hon’ble High Court by way of a writ petition challenging the notice itself, and the Assessing Officer had filed an affidavit Shri Vipul Bansal admitting issuance of the notice by the ITO due to paucity of time to migrate the PAN and obtain administrative approvals. The High Court, on the facts of that case, held the notice to be invalid. In the present case, the assessee did not challenge the notice at the threshold, participated throughout the reassessment proceedings without raising any jurisdictional objection, and there is no such admission on record by the Assessing Officer of issuance of a defective notice due to non-migration of PAN. Therefore, the factual substratum on which the High Court’s conclusions were recorded is not shown to exist here.

We also note the submission of the learned DR that the instruction was issued to avoid hardship to taxpayers, particularly where transfer of a case to a DCIT/ACIT situated at a different station increased compliance cost. In the present case, the assessee is located at Parel, Mumbai, and the proceedings were carried out in Mumbai. No specific prejudice or hardship on account of the officer designation has been demonstrated. The objection, therefore, is essentially directed against internal administrative assignment rather than absence of jurisdiction in law.

In view of the above discussion, we are of the considered view that the assessee has not established that the ITO lacked jurisdiction under the Act so as to render the reassessment void ab initio. At best, the assessee’s contention relates to internal administrative distribution of work based on monetary limits.

It was contended that a bare perusal of the recorded reasons for reopening clearly shows that the Assessing Officer has not alleged, much less demonstrated, any failure on the part of the assessee to make full and true disclosure of material facts during the original assessment proceedings completed under section 143(3). According to the learned AR, the reasons merely refer to information received from the Investigation Wing regarding alleged client code modification and do not attribute any omission or suppression of facts to the assessee. The learned AR further pointed out that during the course of the original assessment proceedings under section 143(3), the assessee had furnished Shri Vipul Bansal complete details in respect of his share trading activity with M/s. Transglobal Securities Ltd., including contract notes, transaction statements, and the ledger account of the broker as appearing in the books of the assessee. It was submitted that all primary facts relating to the transactions were thus placed on record before the Assessing Officer at the time of original assessment. The learned AR submitted that in the absence of any allegation or material demonstrating failure on the part of the assessee to disclose fully and truly all material facts, the reassessment proceedings are liable to be quashed as being without jurisdiction.

Per contra, the learned Departmental Representative strongly opposed the submissions advanced by the learned Authorized Representative on Ground No.

The learned DR submitted that the information regarding client code modification (CCM) was received by the Assessing Officer after completion of the original assessment under section 143(3). Such information was received from the Directorate of Investigation (DIT) and constituted fresh and tangible material coming into the possession of the Assessing Officer subsequent to the original assessment. The learned DR submitted that as per the information received from the DIT, the Assessing Officer was in possession of specific and actionable material indicating that the assessee had created fictitious profit in the F&O segment through client code modification, amounting to Rs. 1,33,31,648/-, as detailed in the annexure accompanying the information. On Shri Vipul Bansal receipt of such information, the Assessing Officer conducted enquiries and applied his mind to the material before recording the reasons for reopening. It was contended that after making such enquiry and examination, the Assessing Officer was satisfied that there existed reason to believe that income chargeable to tax had escaped assessment, and therefore, initiation of proceedings under section 147 was in accordance with law. The learned DR further submitted that the contention of the assessee that full and true disclosure was made during the original assessment is misconceived. According to the learned DR, the replies furnished by the assessee during the course of the original assessment proceedings under section 143(3) were generic in nature, and merely consisted of placing ledger accounts of the broker and related parties on record. It was argued that such ledger accounts, by themselves, did not bring out the true nature of the alleged CCM transactions. The learned DR submitted that the specific information regarding manipulation through client code modification was not within the knowledge of the Assessing Officer at the time of original assessment, and therefore, there was no occasion to examine the issue earlier. In view of the subsequent information received from the Investigation Wing, it became necessary for the Assessing Officer to verify the genuineness of the transactions, which justified the reopening of the assessment even beyond four years. Accordingly, the learned DR submitted that the reopening was based on tangible material, was not a case of mere change of Shri Vipul Bansal opinion, and the conditions prescribed under section 147 were duly satisfied.

We have carefully considered the rival submissions, perused the material available on record, and examined the reasons recorded for reopening the assessment. Ground No. 2 challenges the validity of reopening on the ground that the reassessment was initiated beyond four years from the end of the relevant assessment year and that the Assessing Officer failed to demonstrate any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.

It is an undisputed fact that the original assessment for the year under consideration was completed under section 143(3) and that the notice under section 148 was issued beyond the period of four years. Therefore, the proviso to section 147 is attracted, and the Assessing Officer was required to form a belief that income chargeable to tax had escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts.

On a careful perusal of the reasons recorded, we find that the reopening was not based on a mere reappraisal of the material already on record, but was founded on specific and tangible information received from the Directorate of Investigation (DIT) after completion of the original assessment. The information so received indicated that the assessee had allegedly created Shri Vipul Bansal fictitious profit in the F&O segment through client code modification, amounting to Rs. 1,33,31,648/-, as per the annexure forming part of the investigation report.

The nature of information received from the Investigation Wing was not general or vague, but was specific to the assessee, quantifying the alleged fictitious profit and identifying the mechanism of client code modification. Such information, in our considered view, constituted fresh tangible material which was not available before the Assessing Officer at the time of the original assessment proceedings.

The contention of the assessee that full and true disclosure was made during the original assessment by furnishing ledger accounts and transaction details with M/s. Transglobal Securities Ltd. does not, by itself, establish compliance with the requirement of full and true disclosure in the context of the proviso to section 147. Disclosure of primary facts does not extend to disclosure of embedded facts or concealed arrangements, particularly where the alleged escapement arises from a complex modus operandi such as client code modification, the existence and implications of which were not apparent from the ledger accounts or routine transaction statements.

We find merit in the submission of the learned DR that the replies furnished by the assessee during the original assessment proceedings were generic in nature and did not bring to the notice Shri Vipul Bansal of the Assessing Officer the true character of the transactions or the alleged manipulation through client code modification. The information regarding such manipulation came to the knowledge of the Assessing Officer only subsequently through the Investigation Wing, and therefore, it cannot be said that the Assessing Officer had formed any opinion on this issue during the original assessment.

In such circumstances, the reopening cannot be characterized as a mere change of opinion. Where the Assessing Officer did not have occasion to examine a particular issue in the original assessment due to absence of relevant material, subsequent receipt of specific information justifying a belief of escapement of income would validly confer jurisdiction under section 147, even beyond four years, provided the escapement is attributable to non-disclosure of material facts in substance.

We also note that at the stage of reopening, the Assessing Officer is only required to form a prima facie belief that income chargeable to tax has escaped assessment. The sufficiency or correctness of such belief is not to be examined at that stage. In the present case, the reasons recorded demonstrate a live link between the information received from the Investigation Wing and the belief formed by the Assessing Officer regarding escapement of income.

The learned AR also submitted that the Assessing Officer has not demonstrated how the assessee failed to disclose fully Shri Vipul Bansal and truly all material facts necessary for assessment. The reasons do not indicate which material fact was not disclosed by the assessee, nor do they explain how such alleged non- disclosure led to escapement of income. In the absence of such allegation and demonstration in the reasons recorded, the jurisdictional condition under section 147 remains unfulfilled.

In support of these submissions, the learned AR placed reliance on the judgment of the Hon’ble Bombay High Court in the case of M/s. Coronation Agro Industries Ltd. vs. Deputy Commissioner of Income-tax, rendered in Writ Petition No. 2627 of 2016 dated 23.11.2016, which was delivered on identical facts involving reopening based on alleged client code modification.The learned AR drew attention to the following verbatim observations of the Hon’ble High Court:

In reply, the learned Departmental Representative reiterated that the reopening of the assessment was based on fresh and tangible information which was not available with the Assessing Officer at the time of completion of the original assessment under section 143(3). The learned DR submitted that the information regarding client code modification was received from the Shri Vipul Bansal Investigation Wing subsequently and constituted new material coming into the possession of the Assessing Officer.

The learned DR further submitted that the reasons recorded clearly demonstrate the existence of a live link between the information received and the belief formed by the Assessing Officer regarding escapement of income.

We have carefully considered the rival submissions, perused the material available on record, the reasons recorded for reopening, and the judicial precedents relied upon by both the parties. Ground No. 1 raised by the assessee challenges the validity of reopening of assessment under section 147 of the Act on the ground that the statutory conditions applicable to reopening were not satisfied.

On a careful examination of the reasons recorded, we find that the reopening was initiated on the basis of specific and tangible information received from the Directorate of Investigation subsequent to the completion of the original assessment. The information so received indicated that the assessee had allegedly benefited from client code modification in the F and O segment, resulting in creation of fictitious profits amounting to Rs. 1,33,31,648/-. This information was not part of the assessment records at the time of original assessment under section 143(3) and could not have been examined by the Assessing Officer at that stage. The contention of the assessee that all material facts Shri Vipul Bansal were fully and truly disclosed during the original assessment proceedings cannot be accepted. The material placed by the assessee before the Assessing Officer during the original assessment consisted of routine details and ledger accounts of the broker, which merely reflected the transactions in the books of account. Such disclosures, in our considered view, do not amount to disclosure of the true nature and underlying modus operandi of client code modification, particularly when the allegation is that profits were artificially shifted through a structured mechanism unearthed by the Investigation Wing at a later stage. We find merit in the submission of the learned Departmental Representative that the modus operandi of client code modification as a tax evasion device was not within the knowledge of the Assessing Officer at the time of original assessment, and therefore, could not have been examined merely on the basis of ledger accounts furnished by the assessee. The subsequent receipt of investigation material, including details of CCM and the statement of the broker, constituted fresh tangible material, forming a live and proximate link with the belief that income chargeable to tax had escaped assessment.

The reliance placed by the assessee on the decision of the Hon’ble Bombay High Court in Coronation Agro Industries Ltd. (supra) is misplaced on facts. In that case, the Hon’ble High Court recorded a prima facie finding that the reasons disclosed merely a case of “reason to suspect” and not “reason to believe”, Shri Vipul Bansal and further noted the absence of any material linking CCM to escapement of income. In the present case, however, the Assessing Officer was in possession of specific information quantifying the alleged fictitious profit, coupled with investigation findings and statements of the broker, which provided a concrete basis for formation of belief. Thus, the factual matrix in the present case is clearly distinguishable.

We also note that the reasons recorded specifically allege that the assessee had derived benefit from artificial shifting of profits, which was not disclosed or explained during the original assessment proceedings. The failure to disclose such material facts relating to the true character of the transactions satisfies the condition prescribed in the proviso to section 147.At the stage of initiation of reassessment proceedings, the Assessing Officer is only required to form a prima facie belief based on material available on record, and not to conclusively establish escapement of income. The sufficiency or correctness of the material cannot be gone into at this stage. In our view, the Assessing Officer has duly recorded reasons based on tangible material and has demonstrated due application of mind. In view of the foregoing discussion, we hold that the reopening of assessment under section 147 was valid in law, and the conditions prescribed under the proviso to section 147 were duly satisfied. On the Merits of addition of Rs. 1,33,31,648/- Shri Vipul Bansal 48. On the merits of the case, the learned AR submitted that the findings recorded by the Assessing Officer are based on an incorrect appreciation of facts. It was contended that the Assessing Officer has erroneously concluded that the assessee had taken a loss of Rs. 1,33,31,648/- pertaining to other parties, which, according to the learned AR, is factually incorrect and contrary to the record.

The learned AR submitted that, in reality, the assessee had declared a profit of Rs. 1,60,05,309/- from his trading activity during the year under consideration. It was further submitted that the assessee had merely claimed set-off of brought forward loss of A.Y. 2009–10 amounting to Rs. 1,65,46,244/-, in accordance with the provisions of the Act. According to the learned AR, there was no claim of fictitious loss of the current year as alleged by the Assessing Officer.

The learned AR invited our attention to the client-wise analysis statement issued by Transglobal Securities Limited (NSE – F&O), placed at page no. 40 of the paper book, which reflects the detailed position of futures and options transactions carried out by the assessee for the period 01.04.2009 to 31.03.2010. From the said statement, it was pointed out that the net value of transactions resulted in a profit of Rs. 1,61,00,156.16/-, and not a loss, as alleged by the Assessing Officer. The learned AR further referred to Form No. 10DB (placed on page no.31 of the paper book), evidencing payment of Securities Transaction Tax (STT) in Shri Vipul Bansal respect of the assessee’s transactions on the recognised stock exchange. It was submitted that as per Form 10DB, the assessee had paid STT amounting to Rs. 1,12,319.39 during the relevant financial year. After reducing the STT paid from the gross trading profit of Rs. 1,61,00,156.16, the resultant figure stood disclosed by the assessee as business profit from F&O transactions in the return of income.

The learned AR pointed out that this factual position was duly brought to the notice of the Assessing Officer during the course of the original assessment proceedings under section 143(3). Specific reference was made to the assessee’s reply dated 18.03.2013, filed in response to the notice issued under section 142(1), wherein the details of profit earned during the year and the set-off of brought forward loss were clearly explained.

It was thus argued that the addition of Rs. 1,33,31,648/- is unsustainable even on merits and deserves to be deleted.

Per contra, the learned Departmental Representative strongly opposed the submissions advanced by the learned AR on merits. The learned DR submitted that the argument of the assessee that he had earned profit during the year and had merely claimed set-off of brought forward loss is misleading and does not address the core issue identified by the Assessing Officer. The learned DR contended that the addition made by the Assessing Officer is based on the nature and source of the Shri Vipul Bansal transactions through which such profit or loss arose. According to the learned DR, the Assessing Officer has specifically brought on record that the assessee was the beneficiary of client code modification, through which profits or losses were artificially shifted from other parties to the assessee.

We have carefully considered the rival submissions, perused the orders of the Assessing Officer and the learned CIT(A), and examined the material placed on record, including the documentary evidence referred to in the paper book.

At the outset, we note that there is a serious factual inconsistency in the approach adopted by the Assessing Officer in the reassessment proceedings. In the original assessment order passed under section 143(3) dated 19.03.2013, the Assessing Officer had finalised the assessment by determining the profit from futures and options transactions at Rs. 1,58,74,579/-, as reflected in the computation of income forming part of the said assessment order. However, the working and reconciliation on the basis of which such figure of profit was arrived at are not traceable from the records presently before us.

In the reassessment order, the Assessing Officer has proceeded to conclude that the assessee had availed fictitious loss amounting to Rs. 1,33,31,648/-, allegedly arising on account of client code modification. While the Assessing Officer has discussed, in detail, the general modus operandi of client code Shri Vipul Bansal modification, as emanating from the investigation material, we find that no transaction-wise reconciliation has been carried out by the Assessing Officer between: - the transactions reflected in the assessee’s books of account and broker statements, - the data received from the Investigation Wing, and - the figures already examined and accepted by the Department in the original assessment proceedings under section 143(3).

We further find that, notwithstanding the elaborate discussion in the reassessment order and the illustrative tables relied upon by the Assessing Officer, no direct correlation has been established between the investigation data and the actual transaction-wise details placed on record by the assessee. The Assessing Officer has proceeded on the basis of aggregated figures purportedly representing loss of Rs. 1,33,31,648/-, without reconciling the same with the client-wise analysis statement of Transglobal Securities Limited submitted by the assessee, which reflects a net profit of Rs. 1,61,00,156.16 from F&O transactions for the relevant period. The reassessment order does not demonstrate how the specific transactions identified in the CCM-related tables correspond to, override, or negate the transactions reflected in the assessee’s contemporaneous broker statements and Form No. 10DB evidencing payment of Securities Transaction Tax. In the absence of a transaction-to-transaction linkage between the material received from the Investigation Wing Shri Vipul Bansal and the assessee’s own records, the conclusion drawn by the Assessing Officer that the assessee has incurred fictitious loss remains unsupported by a clear factual nexus.

At this stage, it is also material to take note of the statement of the broker, Transglobal Securities Limited, recorded by the Assessing Officer during the reassessment proceedings. In reply to Question No. 7, the broker has stated that although he has seen the statement shown by the Assessing Officer, he is not able to confirm the reasons for client code modification, if any, in the case of the assessee. A conjoint reading of the replies to Questions Nos. 6 and 7 shows that while the broker has acknowledged the existence of a facility for client code modification at the stock exchange level, he has expressly expressed his inability to confirm the circumstances, reasons or intent behind any such modification in respect of the assessee’s transactions. This admission introduces a material ambiguity in the evidentiary chain relied upon by the Assessing Officer. In the absence of a clear attribution by the broker and without correlating such alleged modification with the assessee’s transaction-wise records and financial flows, the inference that the assessee was a beneficiary of deliberate and fictitious loss remains inconclusive.

It is also pertinent to note that the assessee has consistently contended, with reference to the broker’s statement and Form No. 10DB, that the transactions for the year resulted in a net profit, Shri Vipul Bansal after payment of Securities Transaction Tax, and that the reduction in taxable income arose only on account of set-off of brought forward losses. However, the Assessing Officer has not clarified, either in the reassessment order or by way of any working, as to how a loss is inferred when the assessee is admittedly disclosing profit from the same set of transactions.

Further, we find that profit or loss from trading transactions must necessarily be supported by corresponding inflow or outflow of funds, either through bank account or otherwise. From a perusal of the reassessment order, it is not evident whether the Assessing Officer has carried out any verification of: - bank statements, - margin money movements, - settlement entries, or - cash or fund flow corresponding to the alleged fictitious loss.

Equally, the learned CIT(A), while confirming the addition, has proceeded on the premise that the Assessing Officer’s conclusion regarding fictitious loss is correct, without independently examining or reconciling the factual position emerging from the assessee’s records vis-à-vis the investigation material. The appellate order also does not address the fundamental issue as to how a loss is assumed when profit figures were accepted earlier and are also supported by documentary evidence.

Accordingly, in the interest of justice, we deem it appropriate to restore the matter to the file of the Assessing Officer with a direction to carry out a de novo examination on the limited aspect of factual reconciliation, after affording due opportunity of being heard to the assessee.

We make it clear that we have not expressed any opinion on the merits of the addition, and all contentions of both parties are left open. The Assessing Officer shall decide the issue afresh strictly in accordance with law and on the basis of material brought on record. Accordingly, the ground on merits raised by the assessee on this issue is allowed for statistical purposes.

In the combined result the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 30.12.2025.