VIKRANT MAHENDRA SACHADE,MUMBAI vs. INCOMETAX OFFICER, MUMBAI

ITA No. 1415/MUM/2026 (AY 2010-11) The Revised grounds of appeal are as under:

The assessee engaged in the business of Commodities and Securities trading, filed the return of income for the relevant year declaring Business Loss Rs 5,458/-.The AO received an information

Aggrieved, the assessee filed appeal before the ld.CIT(A) contesting the action both the legality of notice u/s 148 and subsequent assessments as also on merits of the case. The assessee challenged the reopening of the assessment stating that the Assessing officer had not made independent query before the issuing the notice under section 148 of the Act. The appellate authority dismissed the ground by observing that the AO had recorded the reasons for reopening after deriving satisfaction based on independent inquiry conducted based on the information received from Investigation Wing that the assessee had P a g e | 4 Vikrant Mahendra Sachade indulged in booking profit/loss from dummy entities inter alia stating based on the Forwards Market Commission (FMC) report that "clients/members of NMCE were found to be involved in creating artificial volume and suspected evasion of Income Tax by misuse of NMCE Platform" a focused survey action u/s. 133A of the Act was conducted which revealed that the entities who had booked loss are dummy entities who have facilitated bogus loss or profit to other real beneficiaries. Veer Securities (Proprietor - Vikrant Mahendra Sachade) was one of the beneficiaries who had booked profit/loss of Rs. 20.56 lakhs. The ld.CIT(A) further noted that the case of the assessee was never assessed under section 143(3) of the Act. Therefore, the issue on which this case was reopened was never examined by the AO and there is no question of change of opinion. The report received from the Investigation wing constituted the material, based on which, the Assessing Officer had formed his satisfaction for reopening the extant case. The decision to reopen the assessment based on the report of the Investigation wing Report cannot be dubbed as a mere fishing or roving inquiry. The AO has clearly demonstrated link between the tangible material and the formation of the belief or the reason to believe that the income had escaped assessment. Having regard to the materials on record it could not be said that there was a total non-application of mind

1 In so far as the disallowance of the impugned loss is concerned, the assessee contended that the same was based on mere conjecture without verifying it from the third party. In this regard, the ld.CIT(A) observed that that the AO was in possession of credible information that the assessee had traded through the broker M/s. Shine Futures and booked artificial loss of Rs. 20,56,000/-. The relevant excerpt of the information was reproduced hereinunder.: (iv) It was also P a g e | 6 Vikrant Mahendra Sachade reported by DDIT (Inv) the assessee has entered and settled the transactions mostly in the month of March 2010 in NMCE through its broker M/s Shine Futures and it has resulted in loss of Rs. 20.56 lakh/-. It was further seen that the assessee had adjusted this F & O commodities loss with the profit earned on account of commodities Exchanges i.e. NCDEX and MCX which resulted in less net loss of Rs. 5,458/- (i.e. after adjustment of artificial loss of Rs 96,87,987/- instead of Rs.20.56 lakh as per the return of incomewhich resulted into loss return. The assessee on the other hand, denied the allegation of the AO and submitted that during the year under consideration he had booked futures and options loss of Rs. 96,87,987/-. He further contended that the AO had failed to identify that out of loss of Rs. 96,87,987/- booked through M/s. Shine Futures which one was the artificial loss of Rs. 20,56,000/- and that the AO did not provide the statement of the Broker M/s. Shines Futures and other corroborative evidence which led to the conclusion that he had undertaken any transaction with the alleged broker. It was submitted that the entire transaction of sales and purchase of commodities was made through banking channel, duly supported by contract notes and other relevant documents such as ledger accounts and supporting cheques through which the payments were made and received.

During the appellate proceedings before the ld.CIT(A), the assessee had furnished copies of his bank account statement along with other documents. On perusal of the Bank statement maintained with Axis bank for the period 01.04.2009 to 31.03.2010, it was observed that the during the year under consideration he had transferred an amount of Rs. 1,07,11,535/- to M/s. Shine Futures and booked losses to the tune of Rs. 96,87,9871-.It was noticed that despite advancing such huge amount of money to Shine Futures, the same was not appearing under loans and advances (Assets). In case the loss of Rs. 96 lakh was genuine, the assessee was asked to explain the reason why he received back more than Rs 50 lakhs from Shine futures in A.Y 2011-12 which was also evident from his Axis bank account statement for the relevant period. In view of the same, he was requested to explain why the fictitious loss claimed against shine futures of Rs. 96.87 lakhs should not be disallowed. It is stated further that the assessee had not complied with the said notice. Therefore, the case was adjudicated based on the submissions made earlier and material available on record.

1 According to him, in the instant case it was imperative to examine the bank account statement of Veer Securities to ascertain his transaction with Shine Futures. It was observed that money was getting

2 The ld.CIT(A) further noted that the assessee had accounted for its transaction with Prithvi Broking but had not mentioned Shine Futures at all despite the fact that the money was mostly transferred in P a g e | 9 Vikrant Mahendra Sachade the month of March. Further, in the subsequent year, i.e. A.Y 2011-12, the assessee received credit of Rs. 50,00,000/- from M/s. Shine Futures, despite of booking loss of Rs. 96.87 lakhs against the debits of Rs. 1.07 Cr. Further, he failed to offer any explanation to the show cause notice issued on 13/11/2025 when asked to explain his transaction with Shine Futures based on the entries appearing in its bank account statements. Since he had not responded to the show cause notice issued during the appellate proceeding seeking explanation on the transaction undertaken with Shine Futures, it proved that the assessee had no explanation to offer to justify the loss claimed on trading carried out through Shine Futures. Accordingly, the disallowance of Futures and options loss booked from M/s. Shine Futures was enhanced from Rs. 20,56,000/- to Rs.96,87,987/- and the ground of appeal in this regard was dismissed.

Before us, the ld.AR has contested the adverse conclusions drawn by the authorities below. It is submitted that the assessee attended the assessment proceeding from time to time and provided all the required details to the AO. On the specific allegation of benefit of loss taken by manipulating trade for Rs 20.56 lakhs. The assessee had denied to have indulged in any such practice and requested the AO to provide material if any to substantiate the claim of accommodation

1 The assessee had submitted that it had done business with three brokers namely Prithvi Broking Pvt Ltd, Pinnacle Brocom Pvt Ltd and Shine Futures. His total transactions of Gross profit in NCDX &

2 The ld.DR on the other hand supported the orders of the authorities below.

We have carefully considered the relevant aspects of the case. In so far as the ground no.1 contesting the validity of the notice u/s 148 of the Act and the consequent assessment order are concerned, it is noticed that the ld.CIT(A) has duly considered all relevant aspects of the case. It has been claimed by the ld.AR that the AO blindly relied upon the Investigation wing report without making any independent enquiry in the matter. Reliance was placed on Shodiman Investment P.Ltd 422 ITR 337(Bom) and Delhi High Court decision in Meenakshi Overseas P.Ltd 395 ITR 677. 7.1 We notice that the ld.CIT(A) dismissed the ground by referring to a plethora of judicial decisions which inter alia held that at P a g e | 12 Vikrant Mahendra Sachade the time of recording of reasons, there should be a prima facie case of escapement of income. In this regard, special reference could be made to the landmark decisions of hon’ble Supreme Court in ITO vs Purushottam Das Bangar 224 ITR 362 in which it was inter alia held that as long as there is some material germane to the issue, it is not incumbent upon the Assessing Officer to conduct a further investigation and that the Assessing Officer can issue the reassessment notice. In Raymond Woollen Mills Ltd 236 ITR 34 likewise, it was held that sufficiency of correctness of the material is not a thing to consider at this stage. He further referred to the recorded reasons which was based on the Investigation Wing report containing sufficient tangible materials for the purposes of reopening u/s 147 of the Act. Therefore, we find no merit in the contentions of the ld.AR and hold that the appellate authority rightly dismissed the ground in this regard. Therefore, the above ground of appeal stands dismissed.

2 In so far as the disallowance of the loss is concerned, we find that the ld.CIT(A) before making enhancement had duly issued a show cause notice in this regard which for inexplicable reasons was not responded leading him to drawn an adverse inference. It is also noticed that the AO did not provided the materials to the assessee on the basis of P a g e | 13 Vikrant Mahendra Sachade which he disallowed the claimed loss, as has been emphatically submitted by the assessee. It is claimed that the AO did not provide the statement of broker, statement of other party and any evidences and material on which the AO was relying. The assessee had also requested for cross examination of broker and third party, however, the same was not provided nor any evidences, statements were provided to the assessee. The ld.CIT(A) has also not taken due cognizance of such claim.

3 It is a settled law that ordinarily the principle of natural justice is that no man shall be a judge in his own cause and that no man should be condemned unheard. This latter doctrine is known as audi alteram partem. It is on this principle that natural justice ensures that both sides should be heard fairly and reasonably. A part of this principle is that if any reliance is plated on evidence or record against a person then that evidence or record must be placed before him for his information, comment and criticism. Natural justice certainly includes that any materials or for that matter any statement of a person before it is accepted against somebody else, that somebody else should have an opportunity of meeting it. So long as the party charged has a fair and reasonable opportunity to see, comment and criticise the evidence, statement or record on which the charge is being made against him the P a g e | 14 Vikrant Mahendra Sachade demands and the test of natural justice are satisfied. Adverse evidence and material, relied upon in the order, to reach the finality, should be disclosed to the assessee. Accordingly, we set aside the appellate order and restore the entire issue involving merits with a direction to the AO with a direction to supply the assessee with the aforesaid materials and decide the issue afresh in accordance with the provisions of the Act. Ground nos. 2 to 4 are therefore, allowed for statistical purposes.

We may make it clear that remanding the matter should not be in any manner be construed to deciding the issue on merits. The AO would be at liberty to decide the issue after affording adequate opportunity of hearing to the assessee in this regard.

In the result, the appeal is partly allowed.

ITA No. 1416/MUM/2026(AY 2011-12)

Since all the grounds are identical on facts of the case as in ITA No.1415/Mum/2026,our decision rendered therein would apply mutatis mutandis to the instant appeal as well which is also partly allowed.