DCIT, CENTRAL CIRCLE-8(1), MUMBAI, MUMBAI vs. JAINAM INVESTMENTS, MUMBAI

KANT, AM y the Revenue and cross-ob d against order dated 06.12.202
f Income-tax (Appeals) – 50, Mu ssessment year 2016-17. raised by the Revenue in :
umstances of the case and in law, the Ld lowance of loss of Rs.1,96,04,400/- on ity Derivative Segment and disallowan f Rs.3,92,088/-; umstances of the case and in law, the Ld he findings of the search and survey ac g under 'Project Falcon' during which it w
Equity Derivative Segment in cases of erely accommodation entries;.
umstances of the case and in law, the Ld fact that the assessee had been con not possible without premeditate ificial trades; umstances of the case and in law, the Ld of Rs.11,50,557/- claimed by the assess of Divine Multimedia India Limited/ Kaleid to be fictitious trading on the basis aresh Jain and associates syndicate wh ding accommodation entries; umstances of the case and in law, the Ld he admittance given by Shri Naresh Ja s 132(4) of the Act during the course of ad used the some scrips (including the Jainam Investments
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bjection by the 4 passed by the umbai [in short its appeal are d CIT(A) had erred account fictitious ce of commission d CIT(A) had erred tion conducted by was revealed that f concerns under d CIT(A) had erred tinuously booking ed, manipulative, d CIT(A) had erred see on account of doscopic Films Ltd s of investigation hich was involved d CIT(A) had erred in vide statement the search at his e scrips of Divine

Multimedia India Limi entries;
6. Whether in the circu in not considering the slips etc of dummy pe residence of Shri Bhup of the syndicate wh accommodation entrie
7. Whether in the circ in not considering th
Naresh Jain and a m entire modus operan through trading in scr
8. Whether in the circu in not considering the Naresh Jain and a m movement of cash in trading in scrips opera
2.1 The grounds r reproduced as under 1. On the facts and in erred in not considerin
Officer is bad in law reassessment proceed
2. On the facts and in erred in dismissing th fact that assessment statements of third p examination to the ass
3. Briefly stated, t a partnership firm, h shares, derivatives an year under considera declaring a total inc
ITA No. 79

ited/ Kaleidoscopic Films Ltd) for providin umstances of the case and in law, the Ld e fact that many signed cheque-books, ersons who were used as exit providers, pesh Jain, an associate of Shri Naresh Ja ho admitted to be indulged in the act es; umstances of the case and in law, the Ld he statement of Shri Bhupesh Jain, an member of the syndicate, wherein he h ndi of the activity of providing accom rips operated by Shri Naresh Jain; umstances of the case and in law, the Ld e statement of Shri Bhavesh Pabari, an member of the syndicate, wherein he h n the activity of providing accommodatio ated by Shri Naresh Jain; raised by the assessee in cro
:
n the circumstances of the case and in la ng that the assumption of juri iction by w as the conditions laid down under the dings u/s 147 of the Act have not been sa n the circumstances of the case and in la he ground of cross examination, withou under 147 r.w.s 143(3) of the Act was parties and without providing any opp sessee which against the principles of na he material facts of the case ar has been carrying on the busine nd futures & options for severa ation, it filed its return of income come of ₹1,89,05,300/–. The s
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ng accommodation d CIT(A) had erred demat instruction were found at the Jain and a member tivity of providing d CIT(A) had erred associate of Shri had explained the mmodation entries d CIT(A) had erred n associate of Shri had explained the on entries through oss-objection is aw, the Ld. CIT(A) the Ld. Assessing e Act for initiating atisfied.
aw, the Ld. CIT (A) t appreciating the s made relying on portunity of cross atural justice.
re that assessee, ess of trading in al years. For the e on 27.08.2016
said return was subjected to scrutin section 143(3) of 12.12.2018, determin
3.1 Subsequently, intelligence from the assessee had alleged and premeditated tr exchange, amounting also received from th availed accommodati gain/loss arising fro
Shri Naresh Jain an beneficiary to the ext
3.2 On the basis of t recorded reasons to escaped assessment
148 of the Act on 3
return on 06.04.202
returned. The reason assessee on 07.06.2
18.08.2021 were dis speaking order dated
ITA No. 79

ny and the assessment was co the Income-tax Act, 1961
ning the total income at ₹6,60,2
the Assessing
Officer rec
Investigation Wing, Mumbai ind dly booked fictitious losses throu rading in illiquid stock option g to ₹1,96,04,400/–. Further i he same Wing alleging that th ion entries in the nature of lo m manipulation of penny-stock nd his associates, and that the tent of ₹45,500/–
the aforesaid information, the A o believe that income chargea and, accordingly, issued notic
31.03.2021. In response, the a 21 declaring the same incom ns recorded for reopening were f
2021; the objections filed by t sposed of by the Assessing Of d 19.11.2021. Jainam Investments
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ompleted under (“the Act”) on 5,080/–.
ceived specific dicating that the ugh coordinated ns on the stock information was he assessee had ong-term capital k prices by one assessee was a Assessing Officer able to tax had e under section assessee filed a me as originally furnished to the the assessee on fficer through a 3.3 Thereafter, the a Court seeking disclos the reassessment pr directions of the Hon the Assessing Office received from the Inv through manipulated
BSE options segment the BSE platform pe
2015-16. 3.4 In the course furnished multiple s queries raised by the entire material on re the loss of ₹1,96,04
segment as a fictitiou
Assessing Officer furt the same as a bogu linked to Shri Naresh
4. In the appeal pr assailed both the va as the additions m impugned order, uph
ITA No. 79

assessee approached the Hon’b sure of the underlying material oceedings had been initiated. P n’ble High Court vide order dat er supplied to the assessee t vestigation Wing concerning alle d transactions using expiry-da t, along with a copy of the expir ertaining to the assessee for th of reassessment proceedings submissions and explanations e Assessing Officer. Upon cons ecord, the Assessing Officer pro
,400/– claimed on the BSE eq us loss and made an addition a ther made an addition of ₹11,50
us loss entry allegedly obtaine h Jain.
referred before the learned CIT( alidity of the reassessment proc made on merits. The learned held the initiation of reassessm
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le Bombay High based on which Pursuant to the ted 22.02.2022, the information eged tax-evasion ay trades in the ry-trade data on he financial year s, the assessee in response to sideration of the oceeded to treat quity derivatives accordingly. The 0,557/– treating ed from entities
A), the assessee ceedings as well
CIT(A), by the ment proceedings but deleted the add
Aggrieved by the d preferred the presen
Tribunal (“the Tribun by the affirmation of cross-objection.
5. We have heard the parties and hav record. The reassess undertook an exhaus in the equity derivati illiquid stock optio reassessment itself w the Directorate of In reported large-scale coordinated trades in purpose of generating
5.1 The Assessing report, recorded that reversal or expiry-d invariably in substa gains to the counter- placed upon the judg
ITA No. 79

ditions on merits in respect deletion of the additions, the nt appeal before the Income nal”). Conversely, the assessee, f the validity of the reassessm the rival submissions advanc ve carefully perused the mate sment order reveals that the A stive examination of the assesse ves segment, with particular foc ons on the Bombay Stock was founded upon information ncome Tax (Investigation), Mum e
tax evasion through pre n illiquid options, executed with g artificial and fictitious losses.
Officer, drawing upon the sa t several entities were consisten ay trades in illiquid option s antial losses to one party and party. In support of this inferen gment of the Hon’ble Supreme
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of both issues.
e Revenue has Tax Appellate being aggrieved ment, has filed a ced on behalf of erial placed on Assessing Officer ee’s transactions cus on trades in Exchange. The emanating from mbai, which had e-arranged and h the ostensible aid investigation ntly engaging in series, resulting d corresponding nce, reliance was Court in Rakhi

Trading Pvt. Ltd. (20
transactions executed book artificial losse device rather than ge
5.2 A detailed ana undertaken. The Ass question were confi option series, predom that the assessee
Conversely, the resp profits. It was empha were entered into an without any correspo the quantities purcha mathematical precis party in each instanc evidencing a prede pattern of trading.
5.3 The Assessing O pattern could not r commerce, and that participant such as t unless the trades wer
ITA No. 79

018), wherein it was held tha d with prior meeting of minds, s, constituted a manipulative enuine trading activity.
alysis of the assessee’s trades sessing Officer noted that the ined almost entirely to highly minantly executed on the date had incurred losses in eac pective counter-parties had ea atically recorded that nearly 90
nd permitted to expire on the onding reversal or hedging trans ased by the assessee were found ion, the quantities sold by a ce, thereby, in the view of the As etermined, synchronized, an Officer concluded that such a u reasonably occur in the ordi it was inconceivable for an expe he assessee to incur losses in ev re pre-designed for the sole obje
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at synchronized and intended to and distortive was thereafter transactions in y illiquid stock e of expiry, and ch such trade.
arned matching
0% of the trades very same day saction. Further, d to match, with single counter- ssessing Officer, d orchestrated uniform trading nary course of erienced market very transaction ective of creating artificial losses.
C
Securities Finance P members of the Jhav engaged in such exp collusion and manipu
Assessing Officer hel such trades represe exclusively to reduce the same as bogus an 5.4 Additionally, commission expendi fictitious loss, ha accommodation entr under section 69C o concluded that the synchronized trading additions to the incom
5.5 Regarding the s penny stock of M/s D
Jain, the Assessing O
Rs. 11,50,557/- was documentary evidenc of De-mat accounts,
ITA No. 79

Certain counter-parties—name
P Ltd ; Shri Tiruputi Steal veri family were identified as ha piry-based trades with the asses ulation. On the strength of this ld that the loss of ₹1,96,04,40
ented a fictitious, pre-arranged e taxable income, and accordi nd artificial.
the Assessing
Officer det ture of ₹3,92,088/–, being 2%
ad been incurred for pr ries, and therefore brought th of the Act. In essence, the As e assessee had indulged in g devised to generate artificial lo me accordingly.
second issue of accommodation
Divine Multimedia Ltd provide
Officer contended that business bogus or fictitious. The assess ce comprising of copies of contra copies of bank statement, lwd
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ely
M/s
JRM
Cost Ltd and aving repeatedly ssee, suggesting s reasoning, the 00/– claimed on d loss intended ingly disallowed termined that % of the alleged rocuring such he same to tax ssessing Officer n manipulative, osses, and made entry of sale of d by Mr Naresh s loss claimed of ee however filed act notes, copies dger accounts of brokers etc and subm market, entered tran frequent fluctuations said transactions. It Sri Naresh Jain an manipulation of the entries. According to the platform of the payment made thr accommodation entr foundation. But, th contention of the ass
50, 557/-. On fu disallowance of busi
Officer.
5.6 Aggrieved with t appeal before the T
Tribunal by way of cr
6. Firstly, we take cross-objection challe
CIT(A) dismissed the reassessment observi
ITA No. 79

mitted that assessee being a tr nsactions with the aim of earn s in the stock market but suf was contended that assessee w nd not involved or connected stock price or availing of the o the assessee transaction was stock exchange, without any rough banking channel, the ry obtained are baseless an he learned Assessing Officer sessee and disallowed the busin rther appeal, the Ld. CIT(A iness loss, which was made by the finding of the Ld. CIT(A), th
Tribunal whereas the assessee ross objection, e up the grounds raised by t enging the validity of the reasse e grounds of the assessee relate ing as under:
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rader in a stock ning profit from ffered losses on was not aware of d either in the accommodation s carried out on y interface and e allegation of d without any r, rejected the ness loss of ₹ 11,
A) deleted the y the Assessing he revenue is on e is before the the assessee in ssment. The Ld.
ed to validity of “9. Section 147
Assessing Officer tax if he has reas year has escap phrase "reason to the Assessing Of suppose that inco to have reason assessment. The Assessing Officer legal evidence o
Officer is to admi exchequer with a 10. At the stage o there was releva could have form would conclusive that stage. At tha not relevant. In required is "reas escapement of in belief by the Asse satisfaction, as Selected Dalurba
ITA No. 79

7 of the Act authorizes and r to assess or reassess income son to believe that income for an ed assessment. The word "re o believe" would mean cause or j
Officer has cause or justificatio ome had escaped assessment, to believe that an income e expression cannot be read to m r should have finally ascertaine or conclusion. The function of t inister the statute with solicitude an inbuilt idea of fairness to taxpa of issue of notice, the only quest ant material on which a reaso med a requisite belief. Whether ely prove the escapement is not at stage, the final outcome of the other words, at the initiation s on to believe", but not the estab ncome. This is so because the essing Officer is within the realm held by the Hon'ble Apex Co and Coal Co. (P.) Ltd. [1996]
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d permits the chargeable to ny assessment eason" in the justification. If n to know or it can be said had escaped mean that the ed the fact by the Assessing e for the public ayers.
tion is whether onable person the materials the concern at e proceeding is stage, what is blished fact of e formation of m of subjective ourt in ITO v.
217 ITR 597

(SC)and in the c
[1999] 236 ITR 34
11. The Hon'ble
Jhaveri Stock B categorically stat the reason for ascertained by opening of an as judgment are rep
"29. In Asstt. CI
[2007] 161 Taxm
Putney, the Supre
'16 Section 147 a assess or reasse to believe that in assessment. The believe" would m
Officer has caus income had escap to believe that expression canno should have fina conclusion. The ITA No. 79

case of Raymond Woollen Mill
4 (SC).
Apex Court in the case of AC
Brokers Pvt. Ltd. (2007) (291 I ted that "reason to believe" does r
re-opening should have be legal evidence or conclusion b ssessment. The relevant excerp produced hereunder:-
IT v. Rajesh Jhaveri Stock Bro man 316/291 ITR 500 (SC), relied eme Court held:- authorises and permits the Asses ess income chargeable to tax if h ncome for any assessment year e word "reason" in the phras mean cause or justification. If se or justification to know or ped assessment, it can be said t an income had escaped ass ot be read to mean that the Ass ally ascertained the fact by lega function of the Assessing
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ls Ltd. v. ΙΤΟ
before the re- pts of the said okers (P.) Ltd.
d upon by Mr.
ssing Officer to he has reason r has escaped se "reason to the Assessing suppose that to have reason sessment. The sessing Officer al evidence or Officer is to administer the st with an inbuilt id the Supreme Cou
Ltd. v. ITO [1991
section 147 (a) ( fulfilment of the essential. At that not relevant. In required is "reas escapement of in question is whet reasonable pers
Whether the m
escapement is no the formation of realm of subjectiv
Coal Co. P. Ltd. IT [1996] 217 ITR 5
[1999] 236 ITR 34
12. Any fresh inf issue notice u/s.1
prima facie rea assessment. So ITA No. 79

tatute with solicitude for the pu dea of fairness to taxpayers. As urt in Central Provinces Manga
1] 191 ITR 662, for initiation of (as the provision stood at the e two requisite conditions in t t stage, the final outcome of the other words, at the initiation s on to believe", but not the estab ncome. At the stage of issue of n ther there was relevant materia son could have formed a req materials would conclusively ot the concern at that stage. This belief by the Assessing Officer ve satisfaction (see ITO v. Select
TR 34 (SC).
597 (SC), Raymond Woollen Mil
4 (SC).
formation received by the AO can
148, if on the basis of such infor ason to believe that income much so that it was held by Jainam Investments
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blic exchequer s observed by anese Ore Co.
f action under relevant time) hat regard is e proceeding is stage, what is blished fact of notice, the only al on which a quisite belief.
y prove the s is so because r is within the ted Dalurband lls Ltd. v. ITO n entitle him to rmation he has has escaped y the Hon'ble

Supreme Court in (SC) that informa of a subsequen initiated u/s.147
High Court in th
M.R.. Singh, DC u/s.148 based o is valid even if th
13. The Hon'ble
Woollen Mills Ltd determining whe was valid, it has facie some mater reopen the case correctness of th this stage. The reproduced here
"In this case, we under:- e do not have to give a final d suppression of material facts by only to see whether there wa n the basis of which the Dep
The sufficiency or correctness o be considered at this stage. We a Jainam Investments
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T 177 ITR 409
nt proceedings e proceedings on'ble Bombay
"It is true that particularly if h records, he woul down value of th have been able down value realiz if he had been information from saying that the fully all material
ITA No. 79

nnot strike down the reopening case. It will be open to the asse tion of facts made in the notice w ay also prove that no new fact he Income-tax Officer after comp eeding. We are not expressing a e case. The questions of fact an vestigated and decided by t ppellant will be entitled to take ssing authority. The appeals a order as to costs."
Court in Malegaon Electricity Co
6 (SC) has observed, as under:
t if the ITO had made som he had looked into the previo ld have been able to find out w he assets sold was and consequ to find out the price in excess zed by the assessee. It can be s n diligent could have got all his records. But that is not the assessee had placed before th facts necessary for the purpose
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assessment u/s raised by the app
7. Before us, the reassessment on mul
ITA No. 79

duty on the assessee to 'disclos necessary for his assessment fo ove decisions, it can be seen tha what is required under the la material on the basis of which th ome chargeable to tax has escap hould be such that on the ba on could form a prima facie be tax has escaped assessment ot conclusively prove that incom y prima facie belief is sufficient he facts and circumstances of th had bona fide material or reas f that income chargeable to tax or the year under consideratio he discussion in the foregoing p ing by the AO is valid and as pe rdingly, the action of the AO i
147 of the Act is upheld and pellant is DISMISSED.”
e assessee has assailed the ltiple grounds.
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se fully and truly or that year'".
at for re-opening aw is that there he AO could form ped assessment.
asis of which a elief that income t. The reasons me has escaped for reopening of e present case, I on for forming a in the hands of on has escaped paragraphs, it is er the provisions n reopening the d Ground No. 2
validity of the 7.1 The learned cou that during the ori section 143(3) of th furnished all materia transactions, includi confirmations and br that the assessee had and material facts n the absence of any f for invoking section urged, is thus withou
7.2 The learned c judgment of the Hon
Das [1976] 103 ITR facts were fully and assessment, any sub draw a different infe merely to a chang submitted, cannot b assessment.
7.3 The learned cou of the reopening was the reasons recorded
ITA No. 79

unsel for the assessee submitted iginal scrutiny assessment co e Act on 12.12.2018, the ass al particulars relating to its shar ng contract notes, demat statem roker-wise bank statements. It d made a full and true disclosur ecessary for the assessment, a failure on its part, the juri ic
147 stood unfulfilled. The reo ut sanction of law.
counsel further placed relia n’ble Supreme Court in ITO v. L
437 (SC), to contend that wh d truly disclosed at the time bsequent attempt by the Asse erence from the same material ge of opinion. Such a re-app be made the basis for reopenin unsel next submitted that the s factually erroneous. Attention d, wherein it was alleged that th
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d, at the outset, ompleted under sessee had duly re and derivative ments, payment was contended re of all primary and therefore, in tional condition opening, it was ance upon the Lakhmani Mewal here all primary of the original ssing Officer to l would amount praisal, it was ng a concluded very foundation n was invited to he assessee had obtained an accomm
Jain. It was contende the securities alleged during the relevant learned counsel, ha before issuing the reproduced informati any application of m decision of the Hon’b
ACIT [2002] 257 ITR based on factually in reopen an assessmen
7.4 The learned cou vague, non-specific
Assessing Officer had modus operandi alleg to Shri Naresh Jain had dealt in those sc on investigation cond rendering them inhe the statutory forma reliance placed by th
Trading Pvt. Ltd. (s matrix of that case bo
ITA No. 79

modation entry of ₹45,500/– fro ed that the assessee had not pu d to have been manipulated by S year. The Assessing Officer, a ad not undertaken any indep notice under section 148, an ion provided by the Investigatio mind. Reliance in this regard wa ble Gujarat High Court in Saga
R 335 (Guj), wherein it was he ncorrect premises cannot confe nt.
unsel further assailed the reaso and inconclusive. It was subm d merely set out a list of twelve gedly unearthed in the investiga
, without anywhere stating th crips. Thus, the reasons were s ducted in the case of an unrela rently misleading and incapabl ation of belief. The counsel em he Assessing Officer on the de supra) was wholly misplaced, ore no nexus to the assessee’s tr
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om Shri Naresh urchased any of Shri Naresh Jain according to the pendent enquiry nd had merely on Wing without as placed on the ar Enterprises v.
eld that reasons r juri iction to ons recorded as mitted that the e scrips and the ation pertaining at the assessee said to be based ated third party, le of supporting mphasised that ecision in Rakhi as the factual ransactions.

at the Assessing Officer had mer
Investigation Wing in a mech t application of mind, thereby borrowed satisfaction.” The it was submitted, was itself and not on any enquiry with bro leged to be part of the purpor al, it was contended, had been f tantiate the allegations of ing to the learned counsel, the e and undifferentiated data, and aterial on record to demonstr he issuance of notice under se trary and legally unsustainable.
learned Departmental Represent ned CIT(A) and contended that t d been initiated within four yea ssment year. Consequently, the ng a failure on the part of the as sure of all material facts—had n e. It was submitted that the rea fic and tangible information re
Mumbai, pursuant to exten pect of transactions on the Jainam Investments
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rely adopted the hanical manner, y rendering the report of the based only on okers, operators ted scheme. No furnished to the pre-meditated entire reopening the Department rate any actual ection 148 was tative supported the reopening in ars from the end e first proviso to ssessee to make no application to assessment was ceived from the nsive enquiries
Bombay Stock

Exchange. The learn not revisited any assessment, and characterised as a me
8. We have caref perused the material the reassessment. Th the first proviso to Assessing Officer mu assessee to disclose the assessment. In misconceived. The sa original assessment the reassessment is end of the relevant assessment year inv section 148 was iss within the period embodied in the first us.
8.1 The assessee’s vitiated by a mere contention. The reo
ITA No. 79

ned DR argued that the Assess issue previously examined i therefore, the reopening c
ere change of opinion.
fully considered the rival su placed on record on the issue o he assessee’s first contention is section 147 of the Act, na ust demonstrate a failure on fully and truly all material fact n our considered view, this aid proviso becomes operative has been completed under sec sought to be made beyond four t assessment year. In the pre volved is A.Y. 2016-17 and th sued on 31.03.2021, which in of four years. Consequently, t proviso has no application to next submission is that the r change of opinion. We find n opening has been triggered o
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sing Officer had in the original could not be ubmissions and of the validity of s founded upon amely, that the the part of the ts necessary for s argument is only where the ction 143(3) and r years from the esent case, the he notice under ndisputably falls the condition the facts before reassessment is no merit in this n the basis of specific information
Department, which transactions in illiq
Exchange. The form therefore, not based record, but on tang subsequent to the o opinion is thus wholl
8.2 The assessee h factually incorrect accommodation entry a careful perusal o
Assessing Officer has Divine Multimedia Lt stands reflected in therefore, cannot be factual error so fu juri iction.
8.3 The allegation t conclusive also does reasons to believe, th escapement of incom there exists relevan
ITA No. 79

received from the Investigatio had undertaken an extensiv quid stock options on the mation of belief by the Assessi d on a re-examination of mate gible information coming into riginal assessment. The doctrin ly inapplicable.
has further urged that the reop premises, particularly the re y allegedly obtained from Shri N of the reasons recorded, we s adverted to specific transactio td. / Kaleidoscopic Films Ltd., th the assessee’s own books.
e characterised as having been ndamental as to vitiate the that the reasons recorded were s not impress us. At the sta he Assessing Officer is not requi me to the point of conclusion; it i nt and intelligible material
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on Wing of the ve enquiry into Bombay Stock ing Officer was, erial already on his possession ne of change of pening rests on eference to an Naresh Jain. On find that the ons in shares of he sale of which The reasons, n founded on a assumption of e vague or non- age of recording ired to establish is sufficient that from which a reasonable person furnished by the Inve day trades in illiquid assessee, and cannot
8.4 The submissio application of mind i that the Assessing Of it germane to the ass belief that income h conforms to the statu
8.5 The further con possession of the A report of the Investig exchange-level data pre-meditated tradin assessee, constitute trigger the juri ictio
8.6 In light of the fo assumption of juri uphold the order of raised by the assesse are, therefore, dismis
ITA No. 79

could form such a belief. T estigation Wing specifically pert d stock options undertaken by t be said to be either vague or ex on that the Assessing Officer is equally unfounded. The recor fficer examined the information sessee’s transactions, and therea had escaped assessment. The p utory requirement.
ntention that no fresh material h
Assessing Officer is factually gation Wing, based on a system and identifying patterns of sy ng involving multiple entities d fresh and tangible materia on under section 147. oregoing discussion, we find no diction by the Assessing Officer.
the learned CIT(A) on this issu ee challenging the validity of th ssed.
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The information tained to expiry- y, inter alia, the xtraneous.
r acted without rd demonstrates n received, found after formed the process adopted had come to the untenable. The matic analysis of ynchronized and including the al sufficient to infirmity in the We accordingly ue. The grounds he reassessment

up the grounds of the Revenu the addition on merit. The L bmission of the assessee on tious losses, deleted the additio idered the assessment order, sub ts available on record. In the ass ussed the details of findings of Investigation Directorate, Mumbai losses due to coordinated and stock options. The AO found tha uch manipulative trading in the eq ervation of the AO is summarized as see is booking losses in all the t ades getting expired.
% of the total trades are bearing ze e is buying the various illiquid der hey were supposed to be expired.
ounterparties are continuously b xecuted with the assesse, resulting ee company.
see has purchased derivatives whi me of trading. The assesse traded s code name “JSWEA8P75” on 06.0
d.
e company has done a total of 17 d ty, i.e., M/s JRM Securities Finance d that all these transactions are refore, the loss incurred from such is held as bogus, and the same d commission paid @2% on this tra ccordingly, the AO made an a Jainam Investments
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ue raised in its Ld. CIT(A) after n the issue of on observing as bmission of the sessment order,
Project Falcon i, regarding the predetermined at the appellant quity derivative s under:
transactions by ero trade age. It rivatives mostly booking profits g in continuous ich were highly d in 1.80 lakh
08.2015, which different trades e Private Ltd.
e make-believe transactions of e is disallowed.
ansaction of Rs.
ddition of Rs.

ppellate proceedings the appellant year under consideration the usiness of share trading in all th pecially but not limited to de derivative, currency derivative, ca total trade conducted by the app chase and sale) in all the categor year. The appellant has also sub ed by AO that the appellan s by trading/making the position ss without appreciating that the usiness of trading in share and s er market segments. The appel e appellant is whole time trader/sp aving traded in numerous stocks d ning into hundreds and thousand the appellant had turnover of 147
AO of cheery Picking specific s see has incurred losses, is not corr nt has further contended that durin edings, the appellant had submitt upport of genuineness of transa in which losses have been disa s. The List of documents subm the assessment proceedings are Jainam Investments
23
94 & CO 54/MUM/2025
has submitted appellant was he segments of elivery based, all options, put pellant in stock ries during the mitted that the nt had taken n in particular e appellant is securities, F&O llant has also peculator in the during the year, ds of crores. In 7.41 crores. The scripts, merely rect.
ng the course of ted the various actions in the allowed by the mitted by the reproduced as 19.3 The appella shares are suppo evidencing transa
Securities Transac
Stock Exchange a shares were receiv the Demat account the brokers are th in the bank statem
19.4 Each contrac number, settlemen date. Further, eac order time, trade n
Tax and other cha
ITA No. 79

ant has also contended that each rted by copies of contract notes o actions through BSE & NSE wit ction Tax (STT) and margin money and SEBI. All the transactions in ved in the Demat account and trans t of the Appellant and all payment hrough proper banking channels an ments of the appellant.
ct cum bill of the Appellant has a u nt number, trade date, pay in dat ch trade of the Appellant has a un no, and trade time. All STT, Stamp arges in respect of each transaction
Jainam Investments
24
94 & CO 54/MUM/2025

transaction in of stock broker th payment of as per rules of delivery based sferred through ts/receipts with nd are reflected unique contract te and pay out nique order no, p Duty, Service n is paid and is reflected in all th margin money on per requirement of 19.5 Further, in proceedings the a judgments of Hon
Hon’ble Bench hav similar transactio additions were Investigations and 20. On perusal of consideration, it is Rs. 25,35,10,605/
shown dividend i shares of Rs. 1,55
loss of Rs. 15,197
1,20,14,502/-. On trading, it is obser appellant has show cumulative loss of profit from trading
21. On perusal of is a regular trader in cash segment du
Particular
No. of the Stocks at 01.04.2012
No. of Stock purch the year
No. of Stock sold year
No. of Stock Sold a No. of Stock Sold a No. of Stock at the ITA No. 79

he contracts cum bills. The appe each contract executed in futures f SEBI.
n its submissions made during appellant has placed its reliance n’ble Mumbai Benches of the ITAT ve decided the issue in favour of t ns in the alleged penny stocks made on the reports of the d orders of the SEBI.
of the profit and loss account for s seen that the appellant has sho
/- from the activity of trading of sha income of Rs. 4,60,700/- and cl
5,10,586/-. The appellant has sho
7/- and loss from future and option n perusal of scrip-wise details of fu rved that during the year under con wn trading in around 34 scrips an Rs. 1,20,14,502/-. The appellant h in some scrips.
the audit report, it is observed tha r in stock market. The trading activi uring the year under consideration
No. of Shares outstanding
27
hased during
2
d during the 15
at Profits
5
at Loss
10
e end of the 15
Jainam Investments
25
94 & CO 54/MUM/2025
ellant has paid and options as the appellate on the several
T in which the the assessee in in which the Directorate of r the AY under own revenue of ares. It has also losing stock of own speculative n trading of Rs.
ture and option nsideration, the nd has shown a has also shown at the appellant ities carried out is as under-
Value of Shares
(in Rs.)
15,48,87,939
7,72,36,731
25,35,10,605
9,24,15,281
5,55,18,761
1,55,10,586

Year
No.
of Share disallowed by the 22. Apart from th trading in Futures as under:
Sr.
No Nature
1. F&O Sa
2. F &O P
3. Amoun
23. From the above with huge volume the trading activity well as loss. It is trading in the scri contention of the factually incorrect.
24. It is also seen
SEBI or any oth transactions. Ther appellant broker.
Investigation Wing that the appellant generating a bog inherently carries
ITA No. 79

es losses
Ld. AO
1
he cash market, the appellant had and options and currency market.
of Trading ale
Purchase nt disallowed by the Ld. AO e facts it is apparent that the appel in cash market segment and oth y. In the trading activity, it has e also observed that the loss shown ip of JSWE is only Rs. 1,98,450/-
AO that it has mainly traded i n that the appellant has not been her regulatory authority regardin re is no allegation or adverse find
The Assessing Officer, relying g report and analysis of certain tra t engaged in accommodation entrie gus loss through these stocks. B s the risk of significant losses
Jainam Investments
26
94 & CO 54/MUM/2025
11,50,557
d also done the The details are Amount in crores
56.57
57.77
1.96
llant is a trader her segments of arned profit as n on account of - Therefore, the in the scrip is investigated by ng the alleged ding in case of solely on an ades concluded es by allegedly
Being a trader sometimes in particular scrips, w business. These lo are part of the tra year in which the Merely because th not make the tra expire instead of e losses. Further, i by the AO. Ther
Court in the case in the facts of th
25. The Hon’ble M of M/s Munish Fin on trading of sha assesse by statin various scrips and suspected scrip o there is nothing anywhere involve the appeal of the reproduced as un
11. Considered the riva assessee has dealt with Luminaire Technologies
Ltd which are suspected are categorized as pen
Assessing Officer has he conclusion that the var discussed various anal agencies and relied on proceeded to disallow th also notice from the rec purchase and sale of th were submitted before th banking channels only documents and supporti these documents and ITA No. 79

which are typical in a trader’s no osses are a direct outcome of marke ading process. This is not the iso appellant had done the share mark e options were purchased on the ex ansactions fictitious. Further, lett exercising the option is mainly to cu t is not a case of reversal of tra refore, the decision of the Hon e of Rakhi Trading Pvt Ltd is n he case.
Mumbai ITAT (In ITA 2637/ Mum/
nancial on the identical issue of b ares and securities has held in ng that the assesse being a reg d entering into many scripts eve on the basis of movement of sha g on record to prove that the ed in any type of irregularities e assesse. The relevant part of t nder- al submissions and material placed on recor h various scrips particularly, Global Infrate s Limited, UNNO Industries Limited and Sh d to be penny stock and it is also fact on reco nny stock as per the investigation wing, K eavily relied on these reports and report of S rious scrips dealt with by the assessee are p lysis made by the investigation wing of K n various submissions of various dealers i he claim made by the assessee on the long te cord that assessee has submitted all the rel hese scrips in the recognized stock exchange he Assessing Officer including the payments y. The Assessing Officer completely overl ing evidences submitted by the assessee and h he merely proceeded to make the addit
Jainam Investments
27
94 & CO 54/MUM/2025
ormal course of et volatility and olated financial ket transaction.
xpiry date does ting the option urtail the further ade as alleged n'ble Supreme not applicable
2022) , in case business of loss favour of the gular trader in n if dealt with are prices and e assesse has s, and allowed the decision is rd, we observe that ech Limited (GBL), hree Shalin Textiles ord that these scrips
Kolkata reports and SEBI to come to the penny stock and he
Kolkata and other in these scrips and erm capital loss. We levant documents of e and all the details were made through looked the various he has not analysed tion based on the investigation carried on any investigation on th assessee has dealt with disallowance. We obser shares through recogni brought on record that involved in manipulatin provider. It is fact on r already proved to be a Hon'ble High Courts an a regular trader in vari more than 150 scrips a turnover of more than speculation income dur investor and may be as movement of share pric anywhere involved in an to interfere with the fi revenue is dismissed.
12. In the result, appeal
26. On the identic options, the Hon
Kundan Rice Mil dated 09.07.202
“14.6 The issue i
Rule was decided on record and inte regard to avoidanc not adjudicated be this aspect. Howev not gone into the f referring to the inte decided the issue
Trading Pvt. Ltd., ( not adjudicated up
ITA No. 79

n by the investigation agencies and he did n he various documents submitted before hi h suspected scrips, therefore he has proce rve from the record that assessee has purcha ized stock exchange and authorised brokers assessee is one of the party involved in th ng the prices or it is proved that assessee record that all the scrips in which assessee h non penny stock based on the various decis nd Tribunal benches. Apart from that, we obse ious scrips and particularly in this year asse nd the transactions of the assessee in tradin n ₹.528.9 crores and also having substan ring this year. This proves to show that as ssessee has dealt with suspected scrip mer ces and there is nothing on record to prove ny types of irregularities. Therefore, we do n findings of the Ld.CIT(A). Accordingly, gro l filed by the Revenue is dismissed.”
cal issue of losses incurred from tra
’ble ITAT “D” Bench (Delhi) in lls Vs ACIT (ITA NO 853/DEL/202
20 has held as under:
in appeal regarding violation of pro based on the facts and circumsta ention of the parties and ultimately ce of payment of tax and act of tax ecause the Adjudicating Officer ha ver, in the present case, the A.O./L facts and material evidence on reco erim order of the SEBI and subsequ against the assessee. Since in the (supra), the issue under Income Ta pon, therefore, in our humble opini
Jainam Investments
28
94 & CO 54/MUM/2025
not eventually make m, merely because eeded to make the ased and sold these s and nowhere it is e entry provider or e is one of the exit has dealt with were sions of the various erve that assessee is essee has dealt with ng of shares having ntial dividend and sessee is a regular rely on the basis of e that assessee has not find any reason ound raised by the ading in illiquid n case of M/s
20) vide order ovisions of SEBI ances available y the issue with x planning was as not gone into Ld. CIT(A) have ord and merely uent order have e case of Rakhi ax Act was also ion the decision in the case of Rak the case of Revenu
14.7. Considering case in the light o the absence of a below, we are of t that assessee com also been suffered should not have di of the above findi below and delete the appeal of Asse
The Hon’ble Tri
933, to 936/ Mum/
1. Raigarh Jute
,Kolkata (ITA no.
2286/ Kol/ 2019)
2. Samrat Finves
Kolkata (ITA no. 8
3.Samrat Finvest
Kolkata (ITA no. 8
28. In light of th regular trader in discussed above, trading in options c
Therefore, the add
A.O is directed to ITA No. 79

khi Trading Pvt. Ltd., (supra), wou ue.
the totality of the facts and circum of material/evidences available on any investigation carried-out by the view that assessee has been a mpany has suffered genuine busine d in earlier years, therefore, au isallowed the same against the ass ings, we set aside the Orders of the entire addition. In the result, G essee is allowed.”
ibunal has held that the loss uid options as genuine loss as l against the assesse.
ng case the different benches of H issue in favour of the assesse on dihemshree Financial , ITAT, Mu
/ 2024)
& Textile Mills Ltd vs. ACIT
840/Kol/2023)
840/Kol/2023) he aforementioned facts that the stock market and in view of the loss shown of Rs 1,96,04,400
cannot be held as bogus loss.
dition made by the A.O cannot be delete the addition of Rs 1,96,04,
Jainam Investments
29
94 & CO 54/MUM/2025
uld not support mstances of the n record and in the authorities ble to establish ess loss as had uthorities below sessee. In view the authorities
Ground No.1 of s shown from s there is no Hon’ble Tribunal n similar facts.
umbai (ITA no.
CC- 8(2), ITAT ard-10(2), ITAT, ard-10(2), ITAT, appellant is a f
the decisions
0 on account of sustained. The ,400. Similarly, the commission es on this transaction of Rs 3,92,088 is ALLOWED.”
9.1 Aggrieved by th preferred the presen grievance urged in th erred in (i) deleting assessee in respect o scrip of Divine Multi material unearthed b to synchronised trad executed within a clo
9.2 As far as losse illiquid stock, th supporting the asse findings of the Invest the Assessing Offic assessee was a parti options, all of which to two days, with the purposes of setting o such losses were mer
ITA No. 79

stimated to be paid in cash @ 2%
n will also not survive. Accordingly also deleted. Appeal on these g he order of the learned CIT(A), th nt appeal before the Tribunal he grounds of appeal is that the g the disallowance of losses c of its BSE derivative transaction imedia Limited, without duly a by the Investigation Wing, Mum des in illiquid stock options and osed group of entities.
es on derivative transactions he learned
Departmental essment order, placed strong r tigation Wing which formed an cer’s reasoning. It was subm icipant in trades involving high were executed within a narrow sole object of generating artifici off genuine gains. According to rely a device to evade legitimate
Jainam Investments
30
94 & CO 54/MUM/2025
of Rs 3,92,088
y, this addition grounds is thus he Revenue has l. The principal e learned CIT(A) claimed by the ns and (ii) in the appreciating the mbai, in relation d reversal trades s alleged to in Representative, reliance on the integral part of mitted that the hly illiquid stock w window of zero ial losses for the the learned DR, tax liability.

R further contended that the A nvestigation conducted under “
assessee as a beneficiary of fic rm and short-term capital trans ndings recorded by the learn erial on record and failed to acc report which demonstrated cle anipulated trades.
hand, the learned counsel fo assessee has been engaged, fo ar business of trading in shares actions under scrutiny const business activity. The assessee p prising pages 1 to 97 contain contract notes, broker ledger, b ransaction details.
counsel submitted that the ee option-trade transactions dur
4.06.2015, 10.06.2015 and 06
ed on the screen-based, anon ised stock exchange through hasised that the magnitude of th viewed against the backdrop of Jainam Investments
31
94 & CO 54/MUM/2025
Assessing Officer
“Project Falcon,”
ctitious losses in sactions. It was ed CIT(A) were cord due weight ear instances of or the assessee or more than a and derivatives itute a routine placed on record ing all primary bank statements assessee had ring the relevant
.08.2015, all of nymous trading duly registered hese trades was f the assessee’s overall trading volum in the audited financ
9.6 Explaining the n assessee had entered typically low due t prevailing near expiry legitimate and recog premiums paid by acquiring a contract moving favourably. It dealt in multiple scr were duly listed on ranges. No trade was 9.7The learned coun loss is misconceived, which eventually exp sale transactions, an associated with pre matching purchase entry prices or depres
9.8 It was submitte market variables suc
ITA No. 79

me and that all transactions wer ial statements.
nature of the trades, it was sub d into expiry-week options wher to time decay and the accele y. Such trades, according to th gnised feature of derivative ma the assessee represented th tual right contingent on the u t was further submitted that th rips and at multiple strike pric the BSE and within the exch in breach of SEBI regulations.
nsel emphasised that the allegat as the assessee had merely pu pired worthless. There were no nd hence none of the characteri e-arranged or manipulated tr and sale quantities, circular t ssed exit prices—arose in the pr d that option pricing is governe ch as volatility, demand–supply,
Jainam Investments
32
94 & CO 54/MUM/2025
re duly reflected bmitted that the re premiums are erated volatility e counsel, are a arkets, and the he sole cost of underlying scrip he assessee had ces, all of which hange-prescribed tion of fictitious rchased options o corresponding istics commonly rades—such as trading, inflated resent case.
ed by recognised
, time value and the comparative mov regulatory prescript intrinsic value. The p was contrary to both
9.9 The learned cou relationship, direct mentioned in the as based mechanism, o priority, rendering it counter-party or se
There is no complain the BSE, and SEBI h regulatory action ag extracted by the A contended, was appli the assessee’s actual
9.10 The assessee furnished before the and 17.03.2022, whe of trades was addre primary evidences—
statements and F&O placed on the asse
ITA No. 79

vement of the underlying scrip.
ion mandates that options premise adopted by the Assessin market practice and regulatory unsel also submitted that the a or indirect, with the alleged sessment order. Under the ele rders are matched automaticall t impossible for either participa lectively transact with any id nt from any investor, no adver has neither raised any query n gainst the assessee or its bro
Assessing Officer from BSE r ied mechanically and without an trades.
also referred to the detaile
Assessing Officer vide letters da erein each allegation regarding t essed point-by-point. It was u
—namely contract notes, broke
O statements—were produced, essee stood satisfied. Thereaft
Jainam Investments
33
94 & CO 54/MUM/2025
No statutory or must trade at ng Officer, thus, y norms.
assessee has no counterparties ectronic, screen- ly on price–time ant to know the dentified entity.
rse remark from nor initiated any okers. The data records, it was ny correlation to ed submissions ated 15.03.2022
the genuineness urged that once er ledger, bank the initial onus er, the burden shifted upon the Rev that the transactions proceeded to summ independent enquiry cannot take the place
9.11 The learned cou
Assessing Officer on Rakhi Trading Pvt. L that case—such as id within seconds, repe abnormal disparity movement, and conc absent here. The as executed any sale tr counter-party, and i market volume. It wa
(supra), cannot be a substratum.
9.12 The counsel fu derivative-market b
routinely expire at ze spikes. The mere fa therefore, lead to the ITA No. 79

venue to establish, with subst s were sham. The Assessing O marily reject the explanation y, contrary to the settled law e of proof.
unsel then dealt with the relianc the judgment of the Hon’ble Su
Ltd.(supra). It was submitted t dentical buy-sell quantities, tra etitive dealing with the same between option price and u centrated volume in illiquid scri ssessee had only purchased op ransactions, did not engage w ts trades constituted no signif as submitted that the decision in applied mechanically divorced f further explained, by referenc behaviour, that out-of-the-m ero value, especially near expiry act that an option expires wo inference of fictitious trading.
Jainam Investments
34
94 & CO 54/MUM/2025
antive material,
Officer, however, n without any that suspicion ce placed by the upreme Court in hat the facts of ades squared off counter-parties, underlying price ips—are entirely ptions, had not with any known ficant portion of n Rakhi Trading from its factual ce to standard money options y when volatility orthless cannot,

is submissions, the learned cou al indicators or market-manipu vestigation reports and relied er pertain to the ed throughout as a bona fide t and risk d regulatory requirements were a natural incident of legitimate out more, warrant an adve ny alleged counter-party or ent established; essee has produced all prim genuineness of trades, the venue to rebut the same with c done.
re, urged that the reopening ion are founded on conjectu cannot be sustained in law.
the rival submissions of the pa he material placed on record n behalf of the assessee is that Jainam Investments
35
94 & CO 54/MUM/2025
unsel contended ulation patterns d upon by the e
assessee; trader within its parameters; e duly complied market trading erse inference; try operator has and mary evidences burden shifts cogent material, as well as the re rather than arties and have . The principal t the impugned transactions represen ordinary course of i claimed is nothing o options which ultima
10.1 On a considera assessee has been c over the years, and th constitute any aberr which remain uncon not enter into any options purchased w expired on the exch
Departmental Repres dislodge this factual p
10.2 The assessee h evidence, including statements, and deta by reference to the trading system, that identify or select a automated and gover that Securities Trans routed through recog
ITA No. 79

nt bona fide derivative trades ca its long-standing business, an other than the premium paid fo ately expired worthless.
ation of the financial records, w consistently trading in shares he transactions of the year unde ration. The contract notes pla ntroverted, clearly reveal that th reversal trades or matched tr were permitted to run their natu hange platform in the ordinar sentative has placed no materi position.
has produced a complete set o g
broker’s ledger, contract ails of margins paid. It has also e architecture of the screen-b t it is not possible for a marke counter-party, the matching o rned by price–time priority. It is saction Tax was duly paid, that gnised brokers and banks, and Jainam Investments
36
94 & CO 54/MUM/2025
arried out in the d that the loss or acquiring the we find that the and derivatives er appeal do not aced before us, he assessee did ransactions; the ural course and ry manner. The ial on record to of documentary notes, bank o demonstrated, based electronic et participant to of orders being s not in dispute t all trades were that no adverse comment has emana of these transactions notice to suggest th authorities below qua pre-arrangement, or 10.3 In the totality enquiry specific to t assessee’s contention business loss. The f option trades and the its usual short-term fide nature of the tran
10.4 It is also of sign any nexus between t a system where an opposite party is un upon the Departmen trades were collusive adduced. Suspicion, the theory of prepond substitute conjecture
ITA No. 79

ated from SEBI or the BSE with s. Indeed, no material has been hat any investigation was und a the assessee which would esta manipulation.
of circumstances, and in the the assessee, we are persuaded n that the loss incurred repres fact that the assessee entered ereafter discontinued such trad share trading activity, further fo nsactions.
nificance that the Revenue has he assessee and the alleged cou onymity is inherent and the nknown to both sides, the bur nt to demonstrate, by cogent ev e or pre-arranged. No such evi however strong, cannot be ele derance of probabilities cannot e for material facts.
Jainam Investments
37
94 & CO 54/MUM/2025
h respect to any n brought to our dertaken by the ablish collusion, absence of any d to accept the sents a genuine into only three ding, reverting to ortifies the bona not established unter-parties. In identity of the rden lay heavily idence, that the dence has been evated to proof; be stretched to 10.5 Once the assess primary documents upon the Revenue to present case, the Rev disallowance is thus
10.6 We have also co
Officer upon the dec
Trading Pvt. Ltd (sup features of reversal t a manner suggestive is wholly distinct. H buy-sell quantities, n no trading in dubio trades pertain to we
SAIL, IDBI, PNB and trades were entered favourable price mov expire in the absen consistent with norm has, moreover, select and ignored instance similar transactions.
ITA No. 79

see has discharged its initial onu of unimpeached character, the o establish that the loss is not venue has failed to discharge th unsustainable.
onsidered the reliance placed b cision of the Hon’ble Supreme upra). That decision turned upo rades executed with the same c of manipulation. The factual m ere, there are no reversal trad no repetitive dealings with the s ous or illiquid scrips. Indeed, ell-known blue-chip companies d NMDC. The assessee’s expla on the last day of the cycle in vement, and that the options w ce of such movement, is both mal market behaviour. The As tively highlighted transactions r es where the assessee has ear
Jainam Investments
38
94 & CO 54/MUM/2025
us by producing e burden shifts genuine. In the his burden. The by the Assessing
Court in Rakhi on the peculiar counter-party in matrix before us des, no matched same party, and the assessee’s s such as JSW, anation that the n expectation of were allowed to h plausible and ssessing Officer resulting in loss rned profit from 10.7 We find no r
Investigation Wing’s buyer or seller, or wit hypothesis of pre-co edifice of the addition
10.8 We also find su material has been b establish that the As or contrived scheme general investigation with the specific cond otherwise document consistent with the s empowered to pierc conclusion must res not on broad or undi by the Hon’ble Supre
10.9 Viewed cumula we are therefore of sufficiently discharg genuineness of the t any basis to disreg characterise them a ITA No. 79

reference in the assessment report to any enquiry under th any broker, which would lend ommitted or synchronised trad n rests upon presumption rather ubstance in the Assessee’s subm brought on record by the Asse ssessee was a participant in an of generating artificial losses. M n findings, without establishin duct of the Assessee, cannot, by ted and verifiable trades. Th settled principle that, while tax ce the veil of colourable tran st on cogent and particularised fferentiated suspicion (cf. the pr eme Court in similar contexts).
tively with the findings recorde the considered view that the ged the onus cast upon it to trades. The evidentiary record gard the transactions as non as part of a pre-arranged mec
Jainam Investments
39
94 & CO 54/MUM/2025
record or the rtaken with the d support to the ding. The entire r than proof.
mission that no essing Officer to ny pre-meditated
Mere reliance on ng a live nexus y itself, discredit his approach is x authorities are nsactions, such d evidence, and rinciple affirmed ed hereinbefore, e Assessee has o establish the does not reveal n-genuine or to chanism for tax evasion. Accordingly, to withstand scrutiny
10.10 In light of the f paid by the assessee allowable as a bus
Assessing Officer is Revenue’s appeal is a 11. Grounds Nos.
allegation that the as booked bogus Long-
Capital Loss through controlled by one Shr
11.2 The brief factua under sections 132 a syndicate of persons
DDIT (Inv.), Units materials seized ther inference that the accommodation-entry detailed appraisal of recorded in paragrap as under:
ITA No. 79

, the allegation of fictitious loss y.
foregoing discussion, we hold th represents the actual cost of th siness loss. The disallowance directed to be deleted. Groun accordingly dismissed.
2 to 9 raised by the Revenu ssessee had availed accommoda
-Term Capital Gain or Short-T h trading in certain penny scri ri Naresh Jain.
al backdrop is that a Search an and 133A was carried out on 1
s stated to be led by Shri Nare
7(1) & 7(3), Mumbai. On th ein, the Assessing Officer procee e
assessee had participated y arrangement. The Ld. CIT(A) f the record, deleted the addit phs 30 to 33 of the impugned o
Jainam Investments
40
94 & CO 54/MUM/2025
generation fails hat the premium he options and is e made by the nd No. 1 of the ue concern the ation entries and Term/Long-Term ips stated to be nd Survey action
19.03.2019 on a esh Jain by the he basis of the eded to draw an d
in a larger
, however, on a tion for reasons order, observing

eceived the information wherein it was in conducted on Shri Naresh Jain. In this s at Shri Naresh Jain was involved on entries by rigging the scrip of various
Multimedia Ltd is one is one such scrip m
Jain. The appellant has sold 35,000 s media Ltd for 45,150/- resulting in ssment order, the AO has discussed he search conducted on Shri Naresh Jain.
mation received, the AO held that the ,50,557/- on account of the sale of s media Ltd is bogus, and hence the same is ellant contended that during the course o all the documentary evidence in the form es, copies of de- mat accounts, cop edger accounts of brokers, etc. were sub ever, the AO ignored all these document n the basis of the findings of the search
Jain, held the loss shown by the appellan ntended that the appellant is a trader he stock market. The trader aims to p tuations in the stock market and, in this due to such fluctuations. The appellant is Jain and is not at all involved or conne of the stock prices or availing accommoda considered the assessment order, subm d facts available on record. While decidi
No. 3 and 4, I have held that the appellant rket and has shown a huge turnover fr es and options. It is apparent from the fa pellant has traded various scrips in th n, and one of the scrips is M/s Divine Mul ase that the appellant is a naïve investo ingle scrip. Further, the appellant h evidence in the form of brokers'
and copies of de-mat account which p nd sale transactions are carried out onlin ge. It is not the case that the purchases a no finding in the search conducted on Shr pellant is involved in rigging the price
Jainam Investments
41
94 & CO 54/MUM/2025
nformed that a search, it was in providing penny stocks.
manipulated by shares of M/s n a loss of in detail the . On the basis business loss hares of M/s s disallowed.
of assessment m of copies of pies of bank bmitted before tary evidences conducted on nt as bogus. It r and not an profit from the s course, may s not aware of ected either in ation entries.
mission of the ing the appeal t is a trader in rom trading in facts on record he year under ltimedia Ltd. It or/trader and has furnished notes, bank prove that the ne through the are carried out ri Naresh Jain of shares or availing accom no investigati
A.O has solel inquiries have There is no transaction in Therefore, con in the stock regular tradin in the case o addition mad be sustained
Accordingly, t
11.3 Before us, the upon the purported beneficiary entities w companies, enabling of exempt LTCG or c assessee’s transactio
11.4 The assessee, stands on a wholly assessee had no nexu any of his alleged
Hon’ble Bombay Hig
Assessing Officer did though such stateme
This non-production clear infraction of th the alleged accomm
ITA No. 79

mmodation entries by trading in such sh on conducted by SEBI in the case of the a y relied on report of investigation unit. No e been conducted during the assessmen evidence brought on record which i n the alleged scrip is an accommodation e nsidering the fact that the appellant is a market, and these shares have been ng activities, and in view of the decision of of M/S Munish Financials, as discusse e by the AO of the business loss of 11,50
d. Therefore, the AO is directed to dele the appeal on this ground is ALLOWED.”
Ld. Departmental Representa modus operandi, namely, tha were allegedly traded through the routing of unaccounted mo contrived losses. According to th ns bore the imprint of this large on the other hand, contended different footing. It was subm us—direct or indirect—with Shr associates. Despite specific di gh Court in Writ Petition No. 47
not furnish the statement of Sh ent was relied upon in the ass n, in the assessee’s submission he principles of natural justice.
modation entry of ₹45,500,
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hares. There is appellant. The No independent nt proceeding.
indicates that entry.
regular trader purchased in of Hon'ble ITAT ed above, the 0,557/- cannot ete the same.
”
ative elaborated at the shares of paper or shell ney in the guise he Revenue, the er scheme.
d that its case mitted that the i Naresh Jain or irections of the 78 of 2022, the hri Naresh Jain, sessment order.
n, constitutes a With regard to the assessee categorically denied person and maintai evidentiary support.
11.5 As regards the notice, the assessee c
The only relevant tr
Multimedia Ltd. amo trail of which—inclu bank ledgers—was pl
11.6 Considerable re order of the coordina
Munish Financial (IT identical allegations—
Tribunal held that m any cogent evidence cannot sustain an ad assessee in that c evidence of bona fide exchanges; and that The relevant finding o
“11. Considered record, we obse particularly, Glob
Limited, UNNO I
ITA No. 79

any transaction or acquaintanc ined that the entire allegatio twelve scrips referred to in t clarified that it had not purchas ransaction was the sale of sh ounting to ₹45,150, the comple uding contract notes, demat s laced before the Assessing Office eliance was placed by the ass ate bench in the case of its siste
TA Nos. 2637 & 2638/Mum/2
—though in respect of differ mere reliance on investigation linking the assessee to the al ddition. The Tribunal had emph case had furnished complete e purchase and sale through r suspicion, however strong, can of the Tribunal (supra) is reprod d the rival submissions and ma erve that assessee has dealt wit bal Infratech Limited (GBL), Lumin
Industries Limited and Shree Sh
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ce with the said on is devoid of the show-cause sed any of them.
hares of Divine ete documentary statements, and er.
essee upon the er concern, M/s.
022), where on rent scrips—the reports without lleged operators hasised that the e documentary recognised stock nnot substitute.
duced as under:
aterial placed on th various scrips naire Technologies halin Textiles Ltd which are suspec that these scrip investigation win heavily relied on conclusion that t penny stock an investigation win various submiss proceeded to dis term capital loss.
submitted all the scrips in the rec submitted before made through completely overl evidences submit documents and h the investigation not eventually m submitted before suspected scrips disallowance. W purchased and so and authorised b assessee is one o in manipulating t exit provider. It is has dealt with w on the various d
Tribunal benches regular trader i assessee has de of the assessee
₹.528.9 crores an income during th regular investor a merely on the bas on record to prove of irregularities.
ITA No. 79

cted to be penny stock and it is a ps are categorized as penny st ng, Kolkata reports and Assess n these reports and report of SEB the various scrips dealt with by nd he discussed various analys ng of Kolkata and other agencie sions of various dealers in th allow the claim made by the asse
. We also notice from the record th e relevant documents of purchase cognized stock exchange and all the Assessing Officer including th banking channels only. The A looked the various documents tted by the assessee and he has no he merely proceeded to make the a carried on by the investigation age make any investigation on the va e him, merely because assessee s, therefore he has proceeded
We observe from the record tha old these shares through recognize brokers and nowhere it is brough of the party involved in the entry pr the prices or it is proved that asses s fact on record that all the scrips in were already proved to be a non pe decisions of the various Hon'ble s. Apart from that, we observe th in various scrips and particular alt with more than 150 scrips and in trading of shares having turno nd also having substantial dividend his year. This proves to show th and may be assessee has dealt wit sis of movement of share prices an e that assessee has anywhere invo
Therefore, we do not find any re
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lso fact on record tock as per the sing Officer has BI to come to the the assessee are is made by the es and relied on hese scrips and essee on the long hat assessee has and sale of these the details were he payments were Assessing Officer and supporting ot analysed these addition based on encies and he did arious documents e has dealt with d to make the at assessee has ed stock exchange ht on record that rovider or involved ssee is one of the n which assessee enny stock based
High Courts and hat assessee is a rly in this year d the transactions over of more than d and speculation at assessee is a th suspected scrip nd there is nothing olved in any types eason to interfere with the findings revenue is dismis
11.7 Having carefully the findings of the Ld on the same factual assessee is a regular routed all transactio authorised brokers,
The Revenue has not assessee participated provider, or otherwis general statement o cross examined.
11.8 We have also ex the paper book. The ₹100 crores from tra allegation of collusion negligible sum—with any nexus with substituting conjectu or operators may ha facto, lead to an infe the same scrip is c
ITA No. 79

of the Ld.CIT(A). Accordingly, grou ssed.”
y perused the material placed d. CIT(A), we find that the pres footing as M/s. Munish Financ r trader dealing in a large baske ons through recognised stock and has maintained supporti t brought any material to demo d in price manipulation, acte se engaged in any colourable de f sh Naresh Jain, which was xamined the assessee’s financia e assessee has reported a turn ading activity. In such a scenar n on the strength of a solitary hout substantiating any meetin the alleged operators—woul ure for evidence. The fact that ave been involved in manipulati erence that every investor or tr complicit in such activity, par
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und raised by the on record and sent case stands cial (supra). The et of scrips, has exchanges and ing documents.
nstrate that the ed as an entry evice except the not allowed to als, as placed in nover exceeding rio, fastening an transaction of a ng of minds or ld amount to certain brokers ion cannot, ipso rader dealing in rticularly, when transaction has bee without any interface
11.9 On an overall c the scale and natu documentary eviden incriminating materia assessee arose in th concur with the conc made by the Assessin
11.10. In view of having failed to reb
CIT(A), we find no in dispute. Accordingly are dismissed.
13. In the result, bo objection of the asses
Order pronoun (RAHUL CHA
JUDICIAL M
Mumbai;
Dated: 25/11/2025
Rahul Sharma, Sr. P.S.

ITA No. 79

en carried out on stock exch e.
conspectus of the matter, takin ure of the assessee’s trading nce adduced, and the absence al, we are satisfied that the loss he normal course of business clusion of the Ld. CIT(A) that t ng Officer is unsustainable.
f the foregoing discussion, an but the factual findings record nfirmity in the impugned order
, Grounds Nos. 4 to 8 raised b oth the appeal of the Revenue a ssee are dismissed.
ced in the open Court on 25/
/-
S
AUDHARY)
(OM PRAK
MEMBER
ACCOUNTA
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hange platform ng into account operations, the e of any direct s claimed by the s. We therefore he disallowance nd the Revenue ded by the Ld.
on the issue in by the Revenue as well as cross-
11/2025. KASH KANT)
ANT MEMBER

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

////

ITA No. 79

orwarded to :

ai

BY ORD

(Assistant

ITAT,

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DER,