ACIT CENTRAL CIRCLE 8(3), MUMBAI vs. VIVAH CLASSIQUE, MUMBAI

PER OM PRAKASH KANT, AM This appeal by the Revenue is directed against order dated 08/04/2025 passed by the Learned Commissioner of Income-tax (Appeals)-50, Mumbai [in short the ‘Ld. CIT(A)’] for assessment year 2014-15, raising following grounds: 1. "Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 9,99,91,948/- made by the Assessing assessee in c appreciating t said loss ar transactions taxes?" 2. "Whether o CIT(A) erred i the Assessin derivative tra properly con investigation, and indicativ trading?" 3. "Whether o of the Ld. CIT the basis tha exchanges a genuineness examination o in light of the reversal trade 4. "Whether o of the Ld. CIT of Rs. 37,01,1 allegedly incu circumstantia operators an conducting an 5. "Whether o of the Ld. CIT similar trades the revenue clearly found 6. "Whether o of the L.d. CI that are dist present case, investigation fictitious trans g Officer by holding that the loss incu urrency derivative trading on BSE is genu the fact brought out by the Assessing Off rose out of pre- arranged and fictitio aimed solely to create artificial losse on the facts and circumstances of the c n deleting the addition of Rs. 8,50,66,83 ng Officer in respect of alleged losses ades on USE (United Stock Exchang nsidering the findings of the Proj which identified such transactions as ve of tax evasion through circular a on the facts and circumstances of the cas T(A) erred in holding the trades as genui at the transactions were routed through and brokers, while failing to appr of transactions under the Income Tax of surrounding circumstances and intent, evidence from third-party statements an es highlighted by the Assessing Officer?" on the facts and circumstances of the cas T(A) erred in law and in facts in deleting 176/- on account of estimated commissio urred for arranging fictitious trades, desp al evidence indicating the involvemen nd accommodation entry providers, a ny proper verification of the commission fl on the facts and circumstances of the cas T(A) failed to appreciate that acceptance s in earlier or same assessment years d from disallowing losses in transactio to be and not arising from genuine tradin on the facts and circumstances of the cas IT(A) erred in placing reliance on judicia tinguishable on facts and merits appli which involves specific findings based o (Project Falcon) and tangible e sactions?" Vivah Classique 2 urred by the uine, without fficer that the ous reversal es to evade case, the Id. 37/- made by in currency ge), without oject Falcon s suspicious and reversal se, the order ine solely on h recognized reciate that Act requires , particularly d patterns of se, the order the addition on payments pite adequate nt of entry and without low.?" se, the order e of profits in does not bar ns that are ng activity? se, the order al precedents icable to the on a systemic evidence of 2. Briefly stated ‘partnership firm’ eng medallions/jewellary diamond studded gol Sachin, Surat, (Gujr assessee, in addition as incurred losses ou 2.1 For the year un income on 28/11/20 return of income filed scrutiny assessment Income-tax Act, 1961 the returned income. 2.2 Subsequently, t the Investigation Wi which revealed tha Securities and Exc operations carried approximately thirty- locations, it was fo facilitating accommo profits and losses in findings of the said was one of the bene facts of the case are that gaged in the business of manuf , trading of cut and polished ld jewellary from its units locate rat). During the year under con to jewellary business also earn ut of trading in currency derivati nder consideration, the assesse 014 declaring total income at ₹5 d by the assessee was selected f t was completed under section 1 (in short ‘the Act’) on 27/12/

the Assessing Officer received in ing of the Income-tax Depart t, pursuant to inquiries con change Board of India (SEB out under section 133A o
-five premises in Mumbai, Kolk ound that several brokers we dation entries through the crea n stock exchange transactions investigation, it was alleged th eficiaries, having purportedly b
Vivah Classique
3
assessee is a facturing of gold diamonds and ed at Surat SEZ, nsideration, the ned profit as well ives.
e filed return of 9,64,720/-. The for scrutiny and n 143(3) of the 2016, accepting nformation from ment, Mumbai, nducted by the BI) and survey of the Act at kata, and other ere engaged in ation of artificial
. Based on the hat the assessee booked artificial losses amounting t consideration. Relyin recorded reasons t accommodation entri aggregating to ₹17,5
income chargeable to and true disclosure
Consequently, after o competent authority under section 148 o initiating reassessme
2.3 In response,
16/02/2022 declarin income which was Thereafter, following
Officer completed th thereby disallowing derivative amounting
Officer also was of expenses at the rate entry, which was wo addition of ₹18,50,59
3. On further app upheld the validity to ₹17,51,14,258/- during th ng upon this information, the A to believe that the assessee ies in respect of losses on curr
1,14,258/-, thereby resulting in o tax due to the assessee’s failur of all material facts necessary obtaining the requisite prior ap
, the Learned Assessing Office of the Income-tax Act on 31.03
ent proceedings.
the assessee filed return ng total income at ₹ 59,64,720
declared in the original retu due procedure under the law he reassessment proceeding o the loss incurred on account g to be Rs.17,51,14,258/-. Fu the view that assessee incurr e of the 2% for obtaining said orked out ₹37,01,176/-. In thi
9,961/- was made in reassessme peal by the assessee, the Ld.
of the reassessment proceedi
Vivah Classique
4
he year under Assessing Officer had obtained ency derivatives n escapement of re to make a full for assessment.
pproval from the er issued notice
3.2021, thereby of income on 0/- i.e. the total urn of income.
w, the Assessing n 24/03/2022, of the currency urther Assessing red commission accommodation is manner total ent order.
CIT(A) though ng, deleted the disallowance of losse the Revenue is in app in short the ‘Tribunal on merit.
3.1 All the grounds of disallowance of c grounds it is mainly the facts brought o evidences obtained fr reversal trades highl finding of the “Project
4. Briefly stated f assessee reported d transactions carried summarised as unde
Sr. No.
Name o
1
United
2
Bomba
3
Nationa
Total cu
(Loss)
5. Before the Ass following contentions es in currency derivative on m peal before the Income-tax App l’), challenging the deletion of sa s raised by the Revenue pertain currency derivative by the Ld.
raised that the Ld. CIT(A) has on record by the Assessing O rom the third-party, statements lighted by the Assessing Office t Falcon” investigation.
facts qua the issue in disput details of currency derivative out on the different exchan er:
of Exchange
Profits/(Lo stock exchanges of India
(8,50,66,83
ay stock exchange
(9,99,91,94
al Stock Exchange
7,86,41,89
urrency derivatives Profit
(10,64,16, sessing Officer, the assessee s:
Vivah Classique
5
merit. Aggrieved, ellate Tribunal ( aid disallowance n to the deletion
CIT(A). In the not appreciated
Officer and the and patterns of er including the te are that the e loss/profit in nges, which are osses)
37)
49)
97
889) submitted the (i) That all currency assessee were genu stock exchange plat anonymous order-m between the buyer receipts were routed
(ii) That the tran registered brokers, documentary eviden ledgers, demat state furnished before the A (iii) That the assesse earned profits from relevant period, there transactions.
(iv) That the losses business, trading i volatile and high-risk gains and correspond commercial expectat erroneous trading de y derivative transactions und uine, having been executed on tforms where transactions occ matching system without any and the seller, and that all entirely through regular bankin nsactions were carried out and complete particulars the nce in the form of contract ements, and bank statements,
Assessing Officer.
ee had not only incurred losse m trading in currency derivati eby demonstrating the bona fid s were incurred in the ordin in currency derivatives being k segment, capable of yielding b ding losses. The assessee, acting tions of profit, unfortunately cisions which resulted in losses
Vivah Classique
6
ertaken by the n the recognized cur through an direct interface payments and ng channels.
through duly ereof, including notes, brokers’
had been duly es but had also ives during the de nature of the nary course of an inherently both substantial g under genuine y made certain s.

(v) That there was n between the assess impugned transaction
(vi) That neither th
Exchange Board of reported any irregula or its brokers in relat
5.1 The assessee f furnish copies of the upon for initiating details and findings
However, no such i assessee despite spec
5.2 The assessee selective or partial co was submitted that assessee had unde derivatives, some of losses. However, the chose to consider on while disregarding th in impermissible “ch already drawn.

no collusion, connivance, or see and any of its brokers in ns.
he stock exchange nor the f India (SEBI) had, at any p arity or impropriety on the part tion to the said transactions.
further requested that the As e information, materials, and e the reassessment proceedings gathered by the Investigation information or material was p cific requests.
also objected to what was d onsideration of facts by the Asse t, during the year under con ertaken numerous transaction which had resulted in profits
Assessing Officer, in forming h nly those transactions which r he profit-making transactions, th herry-picking” of facts to sui
Vivah Classique
7
understanding n respect of the Securities and point, found or of the assessee ssessing Officer evidences relied
, including the Wing, Mumbai.
provided to the described as a essing Officer. It nsideration, the ns in currency s and others in his conclusions, reflected losses, hereby engaging it the inference

(a) Identifying and selling eq
(b) Identifying
/ out of sync
(c) Examining volume in the (d) Identifying
6.2 The entit
(hereinafter r entities", resp reversal trans observed in th
(a). The loss individual sto loss-making e total traded v
(b). On major and sold by however, the buy value of loss-making e
(c) Substantia percentage of stock options in exact quan
(d) As the fi entities were corresponding cases, these below the intr option is a co former is a fu underlying pr expiry of the conditions, th demand to ta the intrinsic v were selling o g top entities making significant loss/pro qual units of stock options of scrip.
g if trades happened at unreasonably low with the underlying price.
g contribution of trades of the entities to contract on those days.
g the quantum of such reversal transactio ties who made a loss or profit of more referred to as "loss-making entities" /
pectively) in the stock option segment o sactions were shortlisted. The following w he examination:
-making entities were trading mainly ocks which were thinly traded. The tra entities, in many cases, contributed to 70
volume for the contracts on those days. - rity of occasions, the quantity of stock o the loss-making entities for a contract w re was a significant difference in the s the transactions resulting into significa entities.
al number of transactions was squared up f transactions thereof were trade revers were sold first to an entity, they would b ntity from the same entity or vice versa.
irst leg of these reversal trades, these e mainly seen selling stock options g offsetting position in the underlying s options were sold at unreasonably low rinsic value of the option. Theoretically, t ombination of its intrinsic value and tim nction of difference between option strike rice and the latter being a function of time option contract. It is well understood t he minimum price which the option ake the risk of writing the option would be value of the option, but here the loss-m options much below their intrinsic value.
Vivah Classique
9
ofit by buying w or high price o total traded ns.
than 5 crore
"profit-making on account of was, inter alia, in options on ades by these
0% to 100% of options bought was identical; sell value and ant loss to the p and a major sals i.e. if the be bought back e loss-making without any scrip. In many w prices, even the price of an me value. The e price and the e remaining till that in normal seller would e equivalent to making entities

(e) In the seco an entity at back on the s higher prices
(1) In certain which intera buying the op
(g) Further, du open, there w scrip to justif the reversal tr
(h) The tradin above manne trading on tha
(i). The loss-m were seen tr deep out-of-th thinly traded.
6.3 It was he
WTM/ RKA /I
"(i). The repea entities to a s price / intrin same set of e difference in abnormal m especially wh underlying pr of profit-maki accounts and in illiquid stoc role in facilit motive.
(ii). Consider above, |, pr deliberately m stock options profit-making counterparties intended exec ond leg of the reversal trades, the options unreasonably low prices were subsequ same day or on the next trading day at when compared to the first leg sell price.
instances, variations to the above patte alia included loss-making entities incu ptions first instead of selling them.
uring the period when stock options posi was no significant change in the price of t fy the difference between the prices of th rade.
ng done by loss-making entities in stock er, accounted for significant proportion of at segment.
making entities as well as the profit-m rading repeatedly in deep in-the-money he-money options on individual stocks, eld by the whole time member of SEBI in I 106/2015 date 20.08.2015 that:
ated sell of illiquid stock options by the set of entities at a price far lower than t nsic value and subsequent reversal tra entities within a short span of time with buy and sell value of stock options, in arket behaviour and defies economi hen there is absolutely no corresponding rice of the scrip. On the other hand, trad ing entities exhibited through opening sp d operating them exclusively to execute re ck options with a set of entities clearly i tating loss-making entities in executing ring the facts and circumstances disc rima-facie, find that the loss-making making repeated loss through their reve which does not make any economic se entities were facilitating them by be s and were acting in concert with a com cution of these suspicious and non-genuin
Vivah Classique
10
s once sold by uently bought t substantially ern were seen rring loss by ition was kept the underlying he two legs of options in the of their overall making entities y options and , which were n his order no.
e loss-making the theoretical ades with the h a significant itself, exhibits ic rationality, change in the ding behaviour pecific trading eversal trades indicates their their ulterior cussed herein entities were ersal trades in ense, and the ecoming their mmon object of ne trades. The reasons for showing artif or tax evasio private compa that the rat legitimate as logic and bas will keep m endeavours. O be able to ma profit maker /
plan, device a trades in illiqu unreasonable evasion or po could be se separately, is inasmuch as securities and (iii). In my vie making entitie plan, device a entities have manipulative market and The non-genu prima-facie, dealings as d under regulat
Unfair Trade
2003 ("PFUTP section 12A(a 3(a), (b), (c) an 6.4 The Hon'
Rakhi Trading holding as un price and tim trade transac hold that the hence anonym meeting of m and not nego transactions a loss and/or transparent n executing such trades by these entit ficial volume and trading interest in thes on or portraying artificial increase in ne any/individual. Be as it may, it is ampl tionale for such transactions is not the behaviour exhibited by these entit ic economic sense. No reasonable and ra aking repeated toss and still continu
On the other hand, an entity/scheme ma ake only profit and become equivalent t
/ scheme. I am of the considered view tha and artifice employed in this case of exec uid stock options contracts at irrational, u e prices, apart from being a possible ortrayal of artificial net worth to certain e eer, by the concerned law enforcem s prima facie, also a fraud on the secu it involves non-genuine/ manipulative tr d misuse of the securities market.
ew, the acts of the loss-making entities a es discussed hereinabove prima facie sh and artifice on their part for some ulterior
, prima-facie, used and employed a p device or contrivance while dealing indulged in non-genuine and deceptive uine and deceptive transactions of these covered under the definition of 'frau discussed herein above were, fraudulen tion 2(1)(c) of the SEBI (Prohibition of Fr
Practices relating to Securities Market)
P Regulations") and prohibited under the a), (b) and (c) of the SEBI Act, 1992 an nd (d) and 4(1) and 4(2)(a) thereof."
'ble Apex Court in a historic judgment i g Pvt Ltd. on 08.02.2018 upheld the fin nder: "Considering the reversal transacti e and sale, parties being persistent in nu ctions with huge price variations, it will b e transactions are through screen-based mous. Such conclusion would be over-loo minds involving synchronization of buy a tiated deals as per the board's circular. T are manipulative/deceptive device to cre profit. Such synchronized trading is norms of trading in securities. If the findin
Vivah Classique
11
ties could be se instruments et worth of a ly clear to me genuine and ties defies the tional investor ue its trading ay not forever to an assured at the scheme, cuting reversal unrealistic and case of tax entities, which ment agencies urities market ransactions in and the profit- how a scheme, motive. These pre meditated in securities transactions.
e entities are, ud' and their nt' as defined raudulent and t) Regulations, e provisions of nd regulations in the case of ndings of SEBI ions, quantity, umber of such be too naive to d trading and oking the prior and sell order
The impugned eate a desired s violative of ngs of SAT are to be sustain the integrity o to be set asid
6.5 Thus, it i and synchron are non-genu obtain accom meeting of mi principle of d therefore non-
6.6 The chief orders of SEB under:
1. Almost iden
2. Huge Var without any s
3. Trades car purchased X q
4. Time gap seconds and 5. Synchronis are thinly trad
6. The artificia total traded v
6.7 Another s the assessee few people tra volume of tra assessee with normal circum exchange pla mutualised s opposite side for foregoing d assessee exh declared by th as non- genu account is dis ned, it would have serious repercussions of the market and the impugned order of e."
is clear from the above discussion that nized reversal trades in BSE Stock/Cur ine transactions which are carried out w mmodation entries of profits/losses.
inds between the transacting parties whic de- mutualisation of exchange trading sy
-genuine.
characteristics of reversal trades that em
BI and later confirmed by the Hon'ble Apex ntical purchase and sale quantity.
riation in purchase price and sale pri significant change in the price of underlyin ried out between same party and counter qty from B, then A sells X qty to B only.
between purchase and sale transacti not more than an hour.
sed trading in the illiquid stock/currency ded al trades, in many cases, contribute to 70
volume for the contracts on those days.
significant characteristics of the trades c is that on the days when the assesse aded in that contract. This implies that th ade on the trade day is due to the tran h its counter-party. Such trading is not p mstances as there are so many clients t atform at any given moment and un system, nothing is known about the p unless, there is a prior meeting of mind discussion, it is clear that the trades carr hibit all the traits of reversal trades whi he market. Regulator SEBI and the Hon'b uine trades and therefore any loss cla sallowable.
Vivah Classique
12
s undermining f SAT is liable such artificial rrency Options with a view to . There is prior ch violates the ystem and are merge from the x Court are as ice of options ng asset.
r-party i.e. if A ion lasts few y option which 0% to 100% of carried out by e has traded, he substantial nsaction of the possible under trading on the nder the de- person on the ds. So, in view ried out by the ich have been ble Apex Court aimed on this 6.8 Upon ana master data, are those trad in a contract counterparty
6.9 The whole the brokers ha
"(i). The magn trading to th instant matte negligence on to be a part o profit as per t at each Trad thousands of becoming rev nature of the (ii). In my vie making entitie hereinabove p their part for facilitated th manipulative market and The act of the execution of n is, prima-faci dealings as under regulat
Trade Practice
6.10 In the ca in CA No. 19
"Nobody inten loss per se, is with the aim loss and that genuine, it is above discuss end of the ye order to avoid this assessme alysis of the trades of the assessee as it is seen that all the trades are reversal des in which an entity reverses it's buy or with subsequent sell or buy positions w in a rapid reversal of trades.
e time member, SEBI in his concluding rem as held as under nitude in which these stock brokers have heir clients and the facts and circums er prima-facie suggest that it is not onl n the part of stock brokers but also of the of the scheme to facilitate their clients to their desire. By the sheer number of reve ding Member level, am also not willing t of trades entered by trading member versal trades 'by chance' or because o contract'
ew, the acts of the stock brokers to facil es and the profit-making entities prima-facie show a scheme, plan, device a some ulterior motive. These brokers have heir clients to use and employ a device or contrivance while dealing indulged in non-genuine and deceptive e stock broker to be part of the scheme non-genuine and deceptive transactions fo ie, covered under the definition of 'fra discussed herein above are fraudulen tion 2(1)(c) of the 'prohibition of Fraudule es relating to Securities Market) Regulatio ase of Rakhi Trading Pvt Ltd delivered on 969 of 2011, the Hon'ble Apex Court h ntionally trades for a loss. An intention s not genuine dealing in securities. Trad to make profits. But if one party consis t too in pre-planned and rapid reverse tr an unfair trade practice. It is therefore sion that the losses incurred by the asses ear under consideration was deliberate d tax as the assessee was having posit ent year...
Vivah Classique
13
s per the BSE l trades which r sell positions with the same marks against facilitated the tances in the ly a matter of eir connivance o make loss or ersal instances to accept that rs ended up of the 'illiquid litate the loss- s discussed and artifice on e, prima- facie, pre-meditated in securities transactions.
by facilitating for their clients aud' and their nt as defined ent and Unfair on,.."
n 08/02/2018
has held that nal trading for ding is always stently makes rades, it is not clear from the ssee at the fag ly incurred in tive income in 6.11 The ord declaring the brokers on the trades of the the Hon'ble S reversal trade that the losse
6.12 It is characteristic
Classique, ha segment. Th synchronized
9,99,91,949/
8,50,66,837/
trades done b
Reversal trad
Observations/
above: -
It can be obs
Classique, bo
For instance, and the same
Yashashvi V
Counter part identified sha bogus profit/
Private Limite based share controlled and ders of the market regulator SEBI on re em as non- genuine, the order of SEB eir role in facilitating reversal trades, sim assessee and reversal trades and finall
Supreme Court in the case of Rakhi Trad es as non- genuine trades leave no room es incurred by the assessee are non-genui pertinent to mention that applying s it is clearly inferred that the assesse as done manipulative trades in curren he assessee by carrying out these and artificial trades has booked bogu
- on BSE Currency Derivative segm
-on USE Currency Derivative segment. T by the assessee are analysed as follows:
des on BSE Currency Derivative Segment:
/Findings emerging from the sample served from the data available that ass ought and sold the same quantity to the in above table, one can see that buy qu e 2500 quantity is reversed bu selling it Vyapar Vitt Private Limited on 18.03.2
ty member was M/s. Vedica Vanijya are broker involved in the accommoda
/loss through options trade. Yashashv ed is a client of M/s. Vedica Vanijya Pvt.
e broking entity. M/s. Vedica Vanijy d managed by Sanjay Kumar Periwal. S
Vivah Classique
14
eversal trades
BI against the milarities in the ly the order of ding stamping for any doubt ine.
g the above ee M/s. Vivah ncy derivative manipulative, us loss of Rs.
ment and Rs.
The impugned trade charts sessee, Vivah counterparty.
antity is 2500
t back to M/s.
2014 wherein
Pvt. Ltd., an ation entry of vi Vyapar Vitt
Ltd., Kolkata a Pvt. Ltd.is Sanjay Kumar

Periwal's stat
1961, during facilitated th artificial gene the U INR sold immedia table above immediately that time U Reversal tra tement was recorded u/s 131 of the In Project Falcon action. He has admitted e manipulation in share market, F&O eration of targeted profit loss to various
R contracts have been purchased on high ately on lower rates. Like the trade emer is bought on average rate of Rs.
sold back on average rate Rs. 1200/-.
D was actually priced around Rs. 60/-.
ades on USE Currency Derivative Segm
Price difference & Trade Reversal
Vivah Classique
15
ncome-tax Act- d that he has O segment for entities. Also, her rates and rging from the 2700/- and However,, at ment:

Observations/
above: -
It can be obs
Classique, bo
For instance, and the same
Maruti Ispat
Counter party share broker profit/loss thr a client of M entity. XPRO
Sunil Kayan's
Act- 1961, du has facilitated artificial gene the U INR sold immedia table above immediately s time U was 5.5 The Assessing O in reversal trade of /Findings emerging from the sample served from the data available that ass ought and sold the same quantity to the in above table, one can see that buy qu e 1500 quantity is reversed bu selling it and Energy Pvt Ltd. on 20.03.2014 wh y member was M/s. XPRO Securities, r involved in the accommodation en rough options trade. Maruti Ispat And Ene
M/s. XPRO Securities, Kolkata based s
Securities is controlled and managed by s statement was recorded u/s 131 of th uring Project Falcon action. He has adm d the manipulation in share market, F&O eration of targeted profit loss to various
R contracts have been purchased on hig ately on lower rates. Like the trade emer is bought on average rate of Rs. 24
sold back on average rate Rs. 245/-. How s actually priced around Rs. 60/-.”
Officer, in view of the observatio f the stock options and obse
Vivah Classique
16
trade charts sessee, Vivah counterparty.
antity is 1500
t back to M/s.
herein wherein an identified try of bogus ergy Pvt Ltd.is share broking y Sunil Kayan.
he Income-tax mitted that he
O segment for entities. Also, her rates and rging from the 487.50/- and wever,, at that ons of the SEBI ervations of the Hon’ble Supreme Cou concluded that optio was manipulative. Th the option trading of on Bombay stock e purchased and sold
Private Limited throu who according to th broker involved in t through options trad
Vedica Vanijya P ltd
Kumar Periwal whose the Act during ‘Projec he facilitated the ma artificial generation o
5.6 Similarly, the A currency derivative t stock exchange (USE and sold 1500 qua
Limited through a sto to the Assessing Offi the accommodation trade. The Assessing a entity controlled a urt in the case of Rakhi Trding on trade in currency derivative hen the Assessing Officer referre currency derivative carried out exchange (BSE) and observed
2500 quantity to M/s Yasha ugh a stockbroker M/s Vedica he Assessing Officer was an i the accommodation entry of bo de. The Assessing Officer ment is a entity controlled and man e statement was recorded unde ct Falcon’ action wherein he ha anipulation in share market, F of targeted profit loss to various
Assessing Officer referred to trading carried out by the asse
E) and mentioned that the asse antity to M/s Maruti Ispat an ockbroker M/s XPRO Securities icer was an identified share bro entry of bogus profit/loss th
Officer mentioned that M/s XP and managed by Snil Kayan w
Vivah Classique
17
g Private Limited by the assessee ed the sample of by the assessee d that assessee ashvi vypar Vitt a Vanijya P ltd, identified share ogus profit/loss tioned that M/s naged by Sanjay er section 131 of ad admitted that &O segment for entities.
sample data of essee on United essee purchased nd Energy Pvt.
s, who according oker involved in hrough options
RO Securities is whose statement was recorded under action wherein he ha in share market, F &
profit loss to various
5.7 In view of the a the losses on the cu
Rs.17,51,14,258/- on obtained by the asse
Officer also presume rate of the 2% for obt worked out to ₹37,01
6. Before the Ld.
made before the Ass reversal trading stoc examination by the S whereas the transac financial year 2013- not applicable to the that said report was in relation to curren there was no finding assessee or its bro manipulation activiti other regulatory au section 131 of the Act during ad admitted that he facilitated th
&O segment for artificial genera entities.
above observations, the Assess urrency derivative transactions n the BSE and USE as accomm essee and disallowed the same ed that assessee had paid com taining such accommodation en
1,176/-.
CIT(A), the assessee relied on sessing Officer. Regarding the ck options, it was submitted
SEBI pertains to 01/04/2014 t ctions carried out by the asse
14 and therefore said investiga facts of the assessee. Further it in respect of the stock options ncy options trading. He further g in the ‘Project Falcon’ report okers was directly or indirec ies. There was no finding of th thority against the assessee.
Vivah Classique
18
‘Project Falcon’
he manipulation ation of targeted sing Officer held s amounting to modation entries
. The Assessing mmission at the ntries which was the submission
SEBI report on that period of to 30/09/2015, essee pertain to ation report was t was submitted trading and not submitted that that either the ctly involved in he SEBI or any Merely for the reason that the asse carried out in the mistake resulted into mainly on the basis out by some other submission of the a conclusion of the As CIT(A) is reproduced
“22. I have c appellant an engaged in th engaged in t diamond-stud has also carr the A.Y unde has also car consideration
10,64,16,889
details of whi
Sr.No Nam
1
Unite
2
Bom
3
Natio

Tota
23. From the profit of Rs. 7
the National
18,50,58,786
Exchange an evident that suffered loss f the AO has derived from t ssee incurred losses in the cur expectation of profit but due o losses, the Assessing Officer that reversal trade manipulat r persons. The Ld. CIT(A) af assessee, in his detailed findi sessing Officer. The relevant fin as under:
considered the assessment order, subm nd facts available on record. The as he business of manufacturing gold jewelry the import and export of polished diam dded gold jewelry from its SEZ unit. The ried out trading in currency derivative se er consideration. In the earlier years the rried out hedging of dollars. In the A n, the appellant has shown total los
9/- from this currency derivative transa ich are as under:
me of Exchange
Profits/(Losses) ed stock exchange of India
(8,50,66,837) mbay Stock Exchange
(9,99,91,949) onal Stock Exchange
7,86,41,897
l currency derivatives Profit(Loss)
10,64,16,889
above, it is seen that the appellant has 7,86,41,897/- from the transactions carr
Stock Exchange and also suffered los
6/- on transactions carried out at the Un nd Bombay Stock Exchange. From this the appellant has earned a profit as from the currency derivative transaction.
accepted the profit whereas doubted the currency derivative transaction.
Vivah Classique
19
rrency derivative to judgmental cannot disallow tion was carried fter considering ng rejected the nding of the Ld.
mission of sessee is y and also monds and appellant egments in appellant
A.Y under ss of Rs.
ction. The s earned a ried out at ss of Rs.
nited Stock fact, it is s well as However, d the loss

nd ns n ng
Contentions of huge variation in the purchase price of majority^ transactions is not correct and purely base conjecture & surmises. We give herein below the sum alleged bogus loss for which the learned] AO has ma addition giving % of change in price -
% change
USE
BSE
Total
Less than 0.50%
(69)
(191.636)
(191,705
0.50% to 1.00%
Nil
(891,348)
(891,348
1.00% to 10.00%
NIL
(24,761,493) (24,761,
\l 0.00% to 50.00%
(49.427,668) (61,967,648) (111,395
50.00% to 100.00%
(48,179,577) (12,968,654) (61,148,
100.00 &
above

-
Total
(97.607,314) (100.780,778) (198,388
less profit in trade
12,540,478
788,829
13,329,3
Net Loss
Disallowed
(85,066,836) (99,991,949) (185,058

From the above chart it can be seen that Loss of Rs.24,761,493/- (13.38% of total Loss) is incurred in transactions where the variation in purchase price an price of option is less than 10.0%
Hence the characteristic that there are huge variation purchase price and sale price of option is not tenable of Appellant Company.
Further it will not be out of place to submit here that Option, the price of the Option can change drastically circumstances can even reduce to “Zero" on expiry.
Vivah Classique
21
f options of ed on mmary of ade the 5)
8)
493)
5,316)
231)
8,093)
307
8,786) the nd sale ns in e in the case in case of y or in some

3
Trader carried ou between same party and counte party i.e if A Purchased X qty
From B then Sells qty. to only
4

Time gap betwee purchase and sa transaction lasts few seconds and not more an one hour.
5

Synchronized trading in illiquid stock/currency options which are thinly traded
26. I have g appellant and derivative tra observed tha purchase and incorrect. The M/s Yashasv etc, but igno different. Me concluded tha ut er s X t First of all, while placing the trades on the Platform, we do not know the Counter party. W understand how the same are derived by the Learne
Further the total trade / loss value of transaction broker namely Trinay Securities Trading Limited securities limited is of Rs.8.50 crores and 9
respectively out of which the learned AO has all transactions having value of Rs. 7.04 crore and 6
respectively. Hence the remaining transactions ha value of Rs. 1.46 crore and Rs. 3.71 crore respective transactions where the counter parties are not the sa
Hence this observation of Ld AO is also squarely no the transactions carried out by the appellant compan en le d
This Characteristic is also grossly not applicable to th
Appellant Company as there are transactions where gap is more but those transactions are ignored/ not l by the learned AO.
d e
The Appellant Company has traded in the Future and /currencies derivatives too i.e. U , EURO,JPY which prime currencies of the Derivatives and cannot be sai illiquid currencies for the purpose of trading. The Cur breakup of the Alleged Disallowed Loss of Rs. 18,50, is as under-
Currency
USE
BSE
Total
U (93,402,983)
(91,222,454)
(184,625,437)
EURO

163,202
163,202
JPY
8,336,146
(8,932,697)
(596,551)
Total
(85,066,837)
(99,991,948)
(185,058,785)
The Appellant Company has dealt in all the aforesaid and accordingly it cannot be said that it has dealt in currency options.
Hence this observation of the Ld AO is without any v gone through the various bills furnishe d ledger account of the brokers and the ansactions. On verification of the sa at the findings of the AO that all the q d sale to the parties are identical, is e AO only considered the quantity of tra vi Vyapar Pvt Ltd, Maruti Ispat and Ener ored other transactions wherein the rely on the basis of few transactions, at entire transactions are reversal of trade
Vivah Classique
22
Exchange
We fail to d AO.
ns through and GRD
.99 crore leged loss
6.28 crore aving sale ely are the ame party.
ot apply to ny.
he in the time looked upon d options of h are the id to be rrency wise
,58, 785/- d currencies illiquid alid reason.
ed by the details of ame, it is uantity of factually ades with rgy Pvt ltd facts are , the A.O e. Further, on perusal of transactions settled after time gap betw factually inc variation in p certain trans variation in p details furnish is incurred in and sale pric contention is a 27. Regardin carried out be transaction i predetermined
Ltd, which is accommodatio that while pla possible to kn appellant's su possible to k trading. Ther appellant or t such organize appellant wer evidence agai organized tra aware of th transactions a 28. From the in the deriva incurred losse transactions losses incurre transactions inherently ca particular scr of business.
volatility and 29. Further, brokers on th channels. Th evidence to s f these transactions, it is observed that m were not squared off on the same day
1 to 2 days. Thus, the conclusion of A.O ween purchase and sales is less than a d correct for all the transactions. Rega purchase and sale prices, the AO che sactions to demonstrate that there is purchase and sale prices. It is observed hed by the appellant that loss of Rs. 2,47
n the transactions where the variation in ce of the options is less than 10%. Ther also found to be factually incorrect.
ng the allegation of the AO that the tr etween the same party (i.e., the purchase is carried out with the same party, d), the AO also stated that M/s Vedika V s a share broker, is involved in provid on entries. In this regard, the appellant acing the trade on the exchange platform now the counterparty. I find substantial fo ubmission that on the exchange platform now the counterparties with whom the re is no such finding stated by the A.O the stock broker of the appellant was in ed activity and the transactions carried o re pre- determined. Therefore, without an inst the appellant of having direct nexus ading, it cannot be held that the appe he counterparties of trade and hen are fictitious.
above, it is evident that the appellant h ative segment and has earned profits a es. It is also a fact that the profit derived f has been accepted by the A.O. Ther ed from the same cannot be held to be merely on certain assumptions. Being arries the risk of significant losses som rips, which are typical in a trader's norm
These losses are a direct outcome o are part of the trading process.
all the transactions are carried out th he exchange platform and through the he appellant has furnished all the doc substantiate the derivative transactions
Vivah Classique
23
most of the but were O that the day is also arding the rry-picked s a huge d from the 7,61,493/- n purchase refore, this rades are e and sale which is Vanijya Pvt ding such submitted m, it is not orce in the m, it is not person is O that the nvolved in out by the y concrete with such ellant was nce such has traded as well as from such refore, the e fictitious a trader metimes in mal course of market hrough the e banking cumentary s. The AO has not foun
Further, durin conducted an findings of the The A.O cher these transac
Supreme Cou above this co the AO are b transactions s
Therefore, in Supreme Cou
Further, the r the period of 30.09.2014, w pertain to the 6.1 Thereafter the coordinate bench of t

Aban
3647 a 
M/s
K
853/D

ACIT
Mumba

Raiga
ITAT,

Samra
10(2),
7. We have careful respective parties an record. The issue a deletion of disallowa learned Commissione in law and on facts.

nd any fault with these documentary e ng the assessment proceedings, the AO ny independent inquiry and relied main e investigation unit's report titled as Proje rry-picked certain transactions and concl ctions are covered by the decision of th urt in the case of Rakhi Trading. As onclusion of the A.O is incorrect as the f based on only a few transactions. Major shows that the observations are factually the facts of the case, the decision of th urt in the case of Rakhi Trading is not a reliance on the order of SEBI is also inc investigation before SEBI was from 01.0
whereas in the appellant's case, the tra period 01.04.2013 to 31.03.2014.”
Ld. CIT(A) relied on the d the Tribunal in following cases:
Realty and Infrastructure vs. ACIT and 3648/Mum/2024)
Del/2020)

19(1) vs.
Adihemshree
Financia ai (ITA no. 933, to 936/ Mum/2024) rh Jute & Textile Mills Ltd vs. ACIT
Kolkata (ITA no. 2286/Kol/2019) at Finvestors Private Limited vs. IT ITAT, Kolkata (ITA no. 840/Kol/2023) lly heard the rival submissions a nd have also perused the mater arising for our adjudication i ance of currency derivative trad er of Income Tax (Appeals) [CIT
Vivah Classique
24
evidences.
O has not nly on the ect Falcon.
luded that he Hon'ble discussed findings of rity of the y incorrect.
he Hon'ble applicable.
correct, as 04.2014 to ansactions decision of the (ITA No.
(ITA
No.
al,
ITAT,
T CC-8(2),
TO, Ward-
) advanced by the rial available on is whether the ding loss by the T(A)] is justified

not been controverted by sentative before us.
red opinion, the findings of SE tock options for a distinct pe olated to the assessee’s case inv ns in a different assessment ye r corroborative evidence. Suc ture and cannot form the enuine trading loss. The obse re, at best, in the nature of u pported by any documen the assessee was a participant o entry arrangement.
Officer has also failed to investi at all, any funds allegedly circ seeker” and “loss giver” entities.
k trail has been made to su tious loss. The reasoning a being speculative in nature on, resembles more a report ng. Such an order, based on su

Vivah Classique
27
y the learned
BI in respect of eriod cannot be volving currency ear, without any h extrapolation legal basis for ervations of the unsubstantiated ntary evidence or beneficiary in igate the crucial culated between
. No inquiry into ubstantiate the adopted in the and bereft of or commentary uspicion, cannot

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

////

e foregoing discussion, we fin well-reasoned conclusion of the owance of the currency derivati sessing Officer, founded on pre s drawn from unrelated investi dingly, the order of the learned of the appeal of the Reven he appeal of the Revenue is dism ced in the open Court on 26/
/-
CHAUHAN)
(OM PRAK
MEMBER
ACCOUNTA ded to :

BY ORDER

(Assistant Re

ITAT, Mu

Vivah Classique
28
nd ourselves in e learned CIT(A) ive trading loss.
esumptions and igations, cannot
CIT(A) calls for nue accordingly missed.
11/2025. KASH KANT)
ANT MEMBER
R, gistrar) umbai