DCIT(CC)-8(3), MUMBAI vs. SUPAMA FINANCIAL SERVICE LIMITED, MUMBAI

PER OM PRAKASH KANT, AM This appeal by the Revenue is directed against order dated 29/11/2024 passed by the learned Commissioner of Income- tax(Appeals)-50, Mumbai [in short the learned ‘CIT(A)’] for assessment year 2014-15, raising following grounds: 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (Appeal) erred in not adjudicating on the core issue of character of the scrip of "Looks Health Services Ltd."?

Limited (in short ‘look of which were manip
“long-term capital information, the Ass income escaped asse the Act on 31/03/20
return of income procedure under th reassessment procee proceedings, the A investigation report o inter alia, highlighte
Health, the trading p comparative analysis and the creditworthin the said shares. Thes the reasons record reassessment procee detailed analysis of 10.10.2019 (which h period’). During reas objected to report of s carried out transact regular course of th document in support
Sup ks health’) through Stock Exch ulated by a group of operators, loss” of Rs.9,46,26,804/-. In essing Officer recorded reasons essment and issued notice unde
021. In response to the notice, th on 30/04/2021. Thereafter, he Act, the Assessing Offic edings. During the course o
Assessing
Officer made refe of the Income-tax Department, M ed the weak financial position pattern of its shares on the sto s of such trading pattern with ness of the counterparties who se findings collectively formed th ded by the Assessing Officer dings. The investigation wing ha the scrip for the period from has been termed by the AO a ssessment proceedings, the as such analysis and submitted th tion of purchase and sales in e business. The assessee also t of purchase and sales includin pama Financial Service Ltd
3
hange, the prices resulting into a n View of the s to believe that er section 148 of he assessee filed following due cer commenced of reassessment erence to the Mumbai, which, n of M/s Looks ock exchange, a h another scrip, had purchased he foundation of r for initiating ad carried out a m 07.11.2012 to as ‘examination ssessee however hat assessee had n said scrip in filed necessary ng broker’s note, bank statement, de however was not co detailed analysis on recorded. The Asses
24.03.2022 passed trading as bogus and of the loss of the asse
2.2 On further app proceedings as well merit. The Ld. CIT(A) validity of the reas disallowance of loss before the Income-tax the grounds only on t
3. All the grounds dispute of deletion of all the grounds are d
3.1 Briefly stated, assessee had purcha
Rs.12,44,69,995/-
29.10.2013, having d
Date
Particulars
21-10-2013
Looks Health
. ,

Sup mat account etc. But the As onvinced and he supported h the issues which were basis ssing Officer accordingly in h u/s 147 of the Act held the d shame transaction and disall essee amounting to Rs.9,46,26,8
eal, the assessee challenged th as the disallowance of the loss
) though dismissed the ground ssessment by the assessee b on merit. Aggrieved, the Reven x Appellate Tribunal (in short ‘th the disallowance on merit.
s of appeal mainly concern wi f disallowance of loss by the ld C ealt together.
facts qua the issue in disput ased shares of M/s Looks Healt during the period from details as under:
Qty
Rate
Va
Services ltd

105600
402.13
4,2
pama Financial Service Ltd
4
ssessing Officer his finding with of the reasons his order dated loss on share lowed the claim
805/-.
he reassessment s by the AO on challenging the but deleted the nue is in appeal he ITAT’) raising ith the issue in CIT(A), therefore, te are that the th for a value of 11.10.2013
to alue
24,64,501.17

22-10-2013
Looks Health

,
23-10-2013
Looks Health
24-10-2013
Looks Health
29-10-2013
Looks Health
Total
3.2 Subsequently, t
25th and 26th March
Rs.2,98,42,189/-, the assessee claimed the it is a Non-Banking F the business of trad impugned transactio its business during
Officer, however, p
Investigation Wing wherein, upon a det
Looks Health Servic significant volatility
(BSE) during the peri referred to by the Ass
3.3 The Learned D attention to the wea
Ltd., as noted by the for reopening as wel
Sup

^
Services Ltd.
:

82400
408.20
3,3
Services Ltd
66400
410,78

2,7
Services Ltd
31200
411.85

1,2
Services Ltd
20000
41-2.16
82,

12
the assessee disposed of the h, 2014, for an aggregate sale c ereby incurring a loss of Rs.9,4
e said loss as a ‘business loss’,
Financial Company (NBFC) regu ding in shares and derivatives ons were undertaken in the ord the year under consideration.
placed reliance upon the of the Income-tax Departm tailed analysis of the dealings ces Ltd., it was revealed tha in its price on the Bombay S iod from 07.11.2012 to 10.10.2
sessing Officer as the “examinat
Departmental Representative ak financial position of Looks
Assessing Officer both in the re ll as in the reassessment order pama Financial Service Ltd
5
3635,272.36
72,76,064.51
28,4935743
,43,299,89
2.44,69,995.36
said shares on consideration of 6,26,805/-. The contending that ularly engaged in s, and that the dinary course of . The Assessing report of the ment, Mumbai, in the scrip of at there existed
Stock Exchange
019 (hereinafter tion period”).
(Ld. DR) drew
Health Services easons recorded r. He submitted that although the co consistent, the flu disproportionate to further pointed out shareholding pattern promoter holding o shareholding of 78.8
finding that the com across the financial company had failed capital invested. The Officer’s observation operating margins, th unexplained fluctua justification.
3.4 The Learned D invited attention to t
Services Ltd. on the B that the trading data revealed a sharp e
09.04.2013 to 22.04. decline thereafter. T observation that the low, with sporadic s
Sup ompany’s sales turnover had re ctuations in its share price such operational performance the Assessing Officer’s observ n of the company revealed a co of 22.17% and an unusuall
3%. He also referred to the Ass mpany’s return on capital emplo years 2012, 2015, and 2017
d to generate any meaningful
Ld. DR additionally emphasize n that, despite a year-on-ye he company’s share price exhib ations without any correspon
Departmental Representative (L the trading pattern of the scrip
Bombay Stock Exchange (BSE).
a for the period from 09.04.2013
escalation in prices during th
.2014, followed by a subsequen
The Ld. DR referred to the Ass trading volume in the scrip gen spikes in activity on a few spe pama Financial Service Ltd
6
emained broadly e were wholly e. The Ld. DR vation that the mparatively low ly high public sessing Officer’s oyed was erratic
7, and that the return on the ed the Assessing ear decline in bited sharp and nding financial
Ld. DR) further of Looks Health
. He pointed out
3 to 04.04.2020
he period from nt and sustained sessing Officer’s nerally remained ecific dates. He highlighted the conc was not traded on exhibited intermitten
DR further referred
Assessing Officer on National Stock Exch
(BSE), wherein it wa apparent in the trad having examined var comparative analysis
Ltd. and that of NHP of the Assessing Offic price and volume m rise and fall in the correlation with considering that it h
2012. The Assessing the scrip of NHPC strengthening the inf of Looks Health Se
Assessing Officer is r
“11.1 Result
Under this asp price moveme

Sup clusion of the Assessing Officer a regular and consistent ba nt periods of unusual trading u to the detailed analysis und n the basis of data collated hange (NSE) and the Bombay S as observed that large-scale ma ding of the said scrip. The As rious parameters of trading beh s between the scrip of Looks
PC Ltd. The Ld. DR referred to t cer and the accompanying char movement, which demonstrated price of Looks Health Service the company’s fundamenta had incurred losses during the g Officer further noted, upon co
C Ltd. exhibited no such vol ference of artificial manipulation ervices Ltd. The relevant obse eproduced as under:
t pect of trading, following different perspe ent has been checked.
pama Financial Service Ltd
7
r that the scrip asis, but rather upsurge. The Ld.
dertaken by the from both the Stock Exchange anipulation was ssessing Officer, haviour, drew a Health Services the observations rts depicting the that the sharp es Ltd. bore no als, especially e financial year omparison, that latility, thereby n in the trading ervation of the ectives of Sr#
Perspective
1
High Price Volat company’s finan major announce company
2. Movement of Pri
SENSEX (Look H
Hence it can b on technical n
3.5 The Learned D drew attention to th who observed that, u and trade count gen participation in a p proportionate rise in conversely, a declin
However, upon analy
Health Services Ltd.
count exhibited an directions. The Asses examination with th irregularity or anoma analysis, the Asses
Correlation Coeffici
Sup

Result tility due to change in ncial results or some ements made by the Price movement wasnot on an basis.
RESULT: Failed ce in tandem with Health)
No Relevance with SENSEX. D
Correlation in different period opposite also. While NHPC mo tandem with SENSEX.
RESULT: Failed be concluded that scrip price movement n nor fundamental.”
Departmental Representative (L he analytical findings of the As under normal market condition erally move in tandem—an incr particular scrip would ordinar n both trade volume and tra ne in one would be reflected ysis of the trading pattern in th
, it was found that trade vol n inverse relationship, movin ssing Officer, upon undertaking he scrip of NHPC Ltd., noted aly was present therein. In furt ssing Officer also computed ient between trade count and t pama Financial Service Ltd
8
ny underlying
Different d. Sometimes oved in neither based
Ld. DR) further ssessing Officer, ns, trade volume rease in market rily result in a ade count, and d in the other.
he scrip of Looks lume and trade ng in opposite g a comparative d that no such therance of this d the Pearson trade volume for both Looks Health Se the presence of aberr comparison by the AO
Scrip
NHPC
Look Health
3.6 The Ld. DR fur and concluded that t close group of person their own financial in of the time difference analysis by the AO is Parameter
Trade Count
Trade Volume

24431492

0 to 60 Sec.
1,294,918
Departmental Representative (L the observations of the Assessi pama Financial Service Ltd
9
ich corroborated former. The said n ue is near s too far from ume of each day ipation but only e scrip tuned to d to the analysis de. The relevant
% of Total
78.94%
4.12%
85.77%
4.55%
Ld. DR) further ing Officer, who noted that certain Pe to have contributed determination of th
Assessing Officer, in order the names of The Ld. DR also ref pertaining to the ass to the tabulated det assessee between 21
trade data and the Officer formed the vi not genuine but arti
Assessing Officer is r
“15.2.7. Almo purchase is m it is squared the same day short term los
3.8 The Ld. DR furt
Officer wherein he h the Kolkata Investig relevant finding is rep
“15.6 The D investigated t and examined companies th
Penny stock c dummy comp the transactio
Sup ermanent Account Numbers (PA between 40% and 50% to th e scrip during the examinati n this regard, reproduced in t specific clients involved in suc ferred to the Assessing Officer sessee’s own trading activity, dr tails of purchases and sales e
.10.2013 and 26.03.2016. On t e surrounding circumstances, iew that the loss claimed by th ificially engineered. The relevan eproduced as under:
ost all the instances in the table above w made in 5 days and in a very short time (f off (sold). There is no instance of the squ y. This is a deliberate trade pattern to ss in place speculative loss.”
ther referred to the observation o as relied upon the investigation gation Wing of Income-tax De produced as under:
Directorate of Investigation, Kolkata &
transactions in penny stock shares quote d on oath a large number of brokers, d hat finally purchased the shares, the pro companies, the entry operators who man panies involved in price rigging. The mon ons was also examined and, in a large n pama Financial Service Ltd
10
ANs) were found he closing price on period. The the assessment ch transactions.
r’s observations rawing attention executed by the the basis of this the Assessing he assessee was nt finding of the where the (few days) uare off on o generate of the Assessing n carried out by epartment. The & Mumbai ed on BSE irectors of omoters of naged the ney trail of number of transactions beneficiaries'
investigation
(i) Many indiv taken such b crores of rupe
(ii) The result
SEBI after in be correct. Th
SEBI.
(iii) The TOP g country were Almost all of the entries for 3.9 The Ld. DR sq
Officer and urged tha
4. On the contrary order of the Ld. CIT(A (i) The assessee also engaged in the scrip Looks course of busi promoters; thei prospectus of th
(ii) The assesse
2013, but looki
2014 for reduci prevalent marke
Sup trail right from cash deposit accoun account was unearthed. The resul in brief is as 'under:
viduals throughout the country identified bogus entries of LTCG/STCL/Loss amo ees from 2010 to 2015. of the enquiry was also shared with SEB vestigating 11 cases have found the all he balance cases are still being invest groups under each investigation director e confronted in course of further inve f them barring a few have accepted hav r a commission.”
quarely relied on the finding o at order of the Ld. CIT(A) should y, the Ld. counsel for the assess
A) and submitted that:
e is a NBFC and regular trader n future and options market etc s Health service ltd were purch iness activities looking to th ir long background in healthc he growth of the company in futu ee purchased shares in the mo ing to downward trend in price ing the further losses. The trad et price.
pama Financial Service Ltd
11
nt to the lt of the who have ounting to BI and the legation to tigated by rate of the estigation.
ving taken of the Assessing d be set aside.
see relied on the r in shares and c. The shares of hased in regular he credential of care sector and ure.
onth of October, e sold in March, de was done on (iii) The transac out on stock e brokers with no the seller.
(iv) Complete de form of contrac statement, bank
(v) No wrong do the stock excha
(vi) No evidence broker has bee
Investigation wi assessee during
(vii) No stateme participated in hypothesis of th
(viii) The price demand and su holding was of price rigging wa
Sup ction of both purchase and sal exchange platform with the he o physical user interface between etails along with documentary ct notes-cum-invoice, broker’s k statement etc. were filed.
oing was observed in the scrip t nge or by the SEBI.
e of involvement if any of the en identified by the Assessing ing and no such evidences were g assessment proceedings.
ent of any person who has b trading was recorded for ver he investigation wing.
on the stock exchange comple upply parameters. In the compa
78.83%. In such a situation, as not possible.
pama Financial Service Ltd
12
les were carried elp of registered n the buyer and evidence in the ledgers, demat rading either by assessee or its g Officer or the e provided to the been claimed as rification of the etely depends in any public share even otherwise

(ix) Merely bec unfair to stamp is also currently
4.1 The Learned Co that a mere pattern o which by itself rests constitute a valid ba absence of any cogen the assessee cannot volume or trade cou and influenced by p
Learned Counsel furt incurred in the ord business, which inhe with its potential for bona fide commercia losses owing to an e colourable or contrive
4.2 Further, the Ld.
completed u/s 143(3
the claim of busines
Trade Ltd. The Ld. co did not bring any ad suggest that loss wa
Sup cause absence of return on fi p the company as ‘penny stock’
y regularly traded on stock exch ounsel for the assessee, in respo or fluctuation in trade volume a on conjecture, suspicion, and s sis to disregard a genuine busi nt or corroborative evidence. He t be held accountable for vari nt, as such factors are entirely public sentiment and investor ther submitted that the losses i inary course of the assessee’s erently entails a degree of risk r profit. The assessee, though o al expectations of gain, unfortun erroneous business judgment r ed transaction.
. counsel submitted that in orig
3) of the Act, the Assessing Offic ss loss of trading in shares o ounsel further submitted that A dverse material or independent as fictitious. The Ld. counsel f pama Financial Service Ltd
13
inancial, it was ’ more so which hange.
onse, submitted and trade count, surmise, cannot ness loss in the contended that iations in trade y market-driven behaviour. The in question were s share trading k commensurate operating under nately sustained rather than any inal assessment cer duly verified of Looks Health
Assessing Officer t finding, which for the assessee relied on the finding doubted the transa inquiry or confrontin
4.3 In view of the assessee submitted t
5. We have heard and carefully peruse under consideration loss amounting to Rs shares of Looks Heal
2013 to March 2014. was a genuine busin trading activity, the bogus and premedita comprehensive evalu reasoning set forth
(Appeals) [Ld. CIT(A)]
findings of the Ld. C of disallowance con conjecture, presumpt cogent or credible ev
The Ld. CIT(A) has substantiated its cla documentary evidenc
Sup of the Ld. CIT(A) that Assessin action without conducting an g the assessee with adverse find e above arguments, the Ld. c hat order of the Ld. CIT(A) migh the rival submissions advance ed the material available on re pertains to the assessee’s cla s. 9.46 crores arising from tran lth Services Ltd. during the perio
. While the assessee contends th ness loss incurred in the ordina
Assessing Officer has charac ated loss designed to evade tax l uation of the evidentiary record a by the Learned Commissioner
], we find ourselves in full agre
IT(A). In our considered view, th nstructed by the Assessing O tion, and remote inference, rath vidence demonstrably implicatin s correctly observed that the aim of business loss by prod ce, including contract notes, dem pama Financial Service Ltd
14
ng Officer merely ny independent ding.
counsel for the ht be upheld.
d by both sides cord. The issue aim of business nsactions in the od from October hat the said loss ary course of its cterized it as a iability. Upon a and the detailed of Income Tax eement with the he entire edifice
Officer rests on her than on any ng the assessee.
assessee duly ducing complete mat statements, and corresponding purchase and sale o carried out on a re through proper bank cash involvement, su genuineness of the onus cast upon th discharged its prima evidence, the onus s that, notwithstandin same were in substa either engineered b connivance of, the a CIT(A), the Assessing or independent mate disallowance is foun generalized observat without any specific i any opportunity affor
The Assessing Office describing the modus
Looks Health Servic liability upon the as been established be circular or accomm
Sup bank entries, thereby establis of the impugned shares. All tra cognized stock exchange and king channels. In the absence of uch documentation prima facie transactions, thereby dischar he assessee. Once the asses ry burden by producing credibl shifted squarely upon the Reven ng the apparent form of the tr nce colourable or collusive in n by, or undertaken with the assessee. However, as rightly n g Officer has not brought on reco erial to substantiate such an nded merely upon suspicion, c tions drawn from third-party inquiry conducted in relation to rded to the assessee to rebut a r’s reliance on the general inve s operandi of price manipulation es Ltd. does not, by itself, su sessee, particularly when no d etween the assessee’s funds a modation entries. The Assessi pama Financial Service Ltd
15
shing both the ansactions were routed entirely f any element of establishes the rging the initial ssee had thus le and verifiable nue to establish ransactions, the nature, and were knowledge and noted by the Ld.
ord any tangible allegation. The conjecture, and investigations, o the assessee or adverse findings.
estigation report n in the scrip of uffice to fasten direct nexus has and any alleged ing Officer has referred to the gener observed in other ca direct nexus proving were routed through individual accounts accommodation entr identified as a “penn bona fide business l independent corrobo rely heavily upon unt or operators, yet the cross-examination, th natural justice. The such reliance and co on such infirm found
5.1 The denial of constitutes a factua justice in view of rat case of Andamon Tim based on the statem opportunity of cross-
5.2 The Revenue willingly incur such overlooks the legal an Sup ric pattern of cash deposits an ases; but the Revenue has faile that funds used by the assessee h a web of bank accounts after or loss suffered was a pa ries. A mere reference to th ny stock” cannot, in law, suffi loss into a fictitious or contrive ration. The assessment order a tested third-party statements of e assessee was not afforded the hereby violating the fundament
Ld. CIT(A) has, in our view, rig rrectly held that the disallowan dation.
cross examination or materi al flaw and violation of princ tio laid down by the Hon’ble Su mber Industries v. CIT (supra) t ment without providing the affe examination must be rejected.
contended that no prudent h substantial losses. However, nd commercial realities of mark pama Financial Service Ltd
16
nd fund layering d to establish a e for investment cash deposit in art of a bogus he scrip being ice to convert a ed one, without also proceeds to f certain brokers e opportunity of tal principles of ghtly deprecated ce cannot stand ial relied upon ciple of natural upreme Court in that any finding ected party and investor would this argument ket participation.

Financial institutions operations are inhe attendant risk of los that a counterparty questionable entity, genuine or invite pe participant. A taxpay or failures in market present case, procee seller entities were a any credible or corro including statemen counterparties. The names of purchase cannot, in the absen trails, transaction co existence of collusion
Income Tax (Appeals rightly observed tha initial burden by pr notes, demat statem
Department failed to proof of cash mov indicating that the lo
Sup s and entities engaged in high- erently exposed to market vol ss. The mere occurrence of a l in the transaction may later be cannot, by itself, render the enal consequences upon a bo yer cannot be held culpable for t regulation. The Assessing Off eded on the assumption that acting in collusion, without brin oborative evidence in support of nts or confirmations from mere act of downloading or r or sale parties from stock ex ce of tangible material such as orrespondences, or fund linkage n. In this context, the Learned C s) [Ld. CIT(A)] has, in our cons at while the assessee had duly roducing primary evidences—su ents, and corresponding banki o produce any independent evi vement, seized documents, or oss was a mere paper entry or pama Financial Service Ltd
17
-volume trading latility and the loss, or the fact e identified as a transaction in- ona fide market systemic lapses ficer has, in the the buyer and nging on record f such inference, m the alleged reproducing the xchange records communication es, establish the Commissioner of sidered opinion, y discharged its uch as contract ng records—the idence, such as r any material a manifestation of circular transacti relevant finding of th
“23. On perus
AY 2014-15, from operatio
Rs.1,60,33,77
and loss from from shares o earlier years, income from d the appellant and shares. T of its busines appellant has India Services of Citi Cable N is not a case purchased the 24. The AO m analysis of th price rise is n
Services Ltd.
enquires duri appellant has exchange onl transactions a by the broker report that th with the pers the appellant out by the appellant is facts that the financials, th be held as bog
5.3 The Ld. CIT(A) h following judicial prec

M/s Mu
Sup ons involving the assessee’s o e Ld. CIT(A) is reproduced as un sal of the profit and loss account of the ap it is seen that the appellant has show ons of Rs. 13,14,42,348/- and other
79/-. The revenue from operations incl m derivative trading of Rs.10,12,18,123/
of Rs.2,98,42,189/-. The profit and loss
, i.e. AY 2013-14 and 2012-13, also derivative trading. From this fact, it is e t is a NBFC and is a regular trader of The transactions indicate that in the rou ss activity during the year under conside s purchased and sold the shares of L s Ltd. The appellant has also purchased
Network Ltd, which is reflected in the inv e that the appellant is a naïve investo e shares of the alleged scrip offline.
mainly relied on the investigation report an he alleged company. The main contention not supported by the financials of M/s Lo
The AO has not carried out any in ing the assessment proceedings. In thi s purchased and sold the shares thr ine. It is not a case of off market purcha are routed through banking channels and rs notes. There is no reference in the in e appellant is involved in price rigging or sons providing accommodation entries. T t is also not appearing in any investigat
SEBI. Therefore, considering the facts a regular trader in stock market, only e price rise of alleged scrip is not suppo he transactions carried out by the appell gus.”
has placed relied on judicial pr cedents:
unish Financial in ITA No. 2637/Mum pama Financial Service Ltd
18
own funds. The nder:
appellant for wn revenue income of ludes profit
/- and sale s account of shows the evident that derivatives utine course eration, the Look Health the shares ventories. It or and has nd financial n is that the ooks Health ndependent is case the rough stock ase. All the d supported nvestigation r connected
The name of tion carried s that the due to the rted by the lant cannot recedents in the m/2022


ITO
2245/M

Varun
417/A 5.4 In view of settle evidence adduced b assessee to allegation of the Ld. CIT(A) is a of the fact. The Reven and are accordingly business loss of Rs upheld.
6. In the result, th
Order pron (RAJ KUMAR C
JUDICIAL M
Mumbai;
Dated: 26/11/2025
Rahul Sharma, Sr. P.S.

Copy of the Order forward
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.

////

Sup v.
Sohani
Dipak
Tanna in /Mum/2022
n
Naginbhai
Patel v.
DCIT in hd/2019
ed legal position and in absence by the Revenue to directly ns of price manipulation, we h plausible and legally sustainabl nue’s grounds of appeal therefo rejected. The deletion of the s.9,46,26,804/- by the Ld. C he appeal of the Revenue is dism nounced in the open Court on CHAUHAN)
(OM PRAK
MEMBER
ACCOUNTA ded to :

BY ORDER

(Assistant Re

ITAT, Mu pama Financial Service Ltd
No.
e of any material connecting the hold that finding le interpretation ore are meritless disallowance of CIT(A) is hereby missed.
26/11/2025. KASH KANT)
ANT MEMBER
R, gistrar) umbai