SHEHZAD VALIMOHAMED MERCHANT,MUMBAI vs. INCOME TAX OFFICER 23(3)(1), MUMBAI, MUMBAI

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ITA 6924/MUM/2025Status: DisposedITAT Mumbai04 September 2026AY 2020-216 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal admitted additional evidence submitted by the assessee and restored the matter to the AO for a de novo assessment. The AO was directed to examine the issue in light of the new evidence and provide the assessee with an opportunity of hearing.

What were the facts?

The assessee filed a return of income declaring Nil income. The AO reopened the case and made additions on account of unexplained margin money used for derivative and share transactions, treating 20% of the aggregate purchase value as unexplained investment. The CIT(A) confirmed these additions.

What were the issues?

Whether the additions made on account of unexplained margin money for derivative and share transactions were justified. Whether additional evidence should be admitted at the appellate stage.

Which sections of the Income-tax Act were involved?

Section 69A,Section 147,Section 144B

AI-generated summary — verify with the full judgment below

Before: SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR

For Appellant: Shri Fenil Bhatt, AR
For Respondent: Shri Rajgopal Parthasarathi, Sr. DR
Hearing: 30.06.2026Pronounced: 04.09.2026

PER PRABHASH SHANKAR [A.M.] :- The instant appeal emanating from the appellate order dated 24.09.2025 is preferred by the Assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 147 r.w.s. 144B of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 24.03.2025 for the Assessment Year [A.Y.] 2020-21. P a g e | 2 A.Y. 2020-21

2.

The grounds of appeal are as under:-

1.

On the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in confirming the action of ld. AO in reopening the case of the appellant which is bad in law, without jurisdiction and deserves to be quashed.

2.

On the facts and circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming the action of ld. AO in making addition of Rs. 15,36,110/- under section 69A of the Income Tax Act, 1961 on account of undisclosed margin money used for derivative transactions carried out on the Multi Commodity Exchange, by treating the same as unexplained investments, for the reasons mentioned in the impugned order or otherwise.

3.

On the facts and circumstances of the appellant's case and in law the ld. CIT(A) erred in confirming the action of ld. AO in making addition of Rs. 76,64,345/- under section 69A of the Income Tax Act, 1961 on account of undisclosed margin money used for derivative transactions carried out on National Stock Exchange(NSE), by treating the same as unexplained investments, for the reasons mentioned in the impugned order or otherwise.

4.

On the facts and circumstances of the appellant's case and in law the ld. CIT(A) erred in confirming the action of ld. AO in making addition of Rs. 3,11,34,890/- under section 69A of the Income Tax Act, 1961, on account of undisclosed margin money used for investment in shares and securities made by the appellant, by treating the same as unexplained investments, for the reasons mentioned in the impugned order or otherwise.

3.

Brief facts of the case are that the assessee, an Individual filed a return of income pursuant to the said notice on 06.06.2024, declaring total income at Nil.

4.

The AO noted that the assessee had undertaken various transactions in shares, commodities, and derivatives without filing a return of income. Based on the information available on record, he treated certain transactions as unexplained and made additions of Rs.

P a g e | 3 A.Y. 2020-21 15,36,110/-, Rs. 76,64,345/-, and Rs. 3,11,34,890/- on account of alleged unexplained investments in shares, commodities, and derivatives respectively, aggregating to Rs. 4,03,35,345/-though assessee has claimed that assessment proceedings, he furnished details and supporting documentary evidence relating to the purchase and sale of shares, commodities, and derivative transactions. It was specifically explained that a substantial portion of the trading activities had been carried out through margin facilities extended by the respective brokerage firms and that the petitioner's own capital contribution towards such transactions was comparatively limited. He also furnished details regarding the source of funds utilized for carrying out the said transactions and explained the nature and manner of execution of the trades. However, the AO failed to properly appreciate the explanations and documentary evidence placed on record and proceeded to make additions by adopting 20% of the aggregate purchase value of shares, commodities, and derivatives as unexplained investment which was confirmed by the ld. CIT(A) with the observation that the contention regarding utilization of margin was devoid of any supporting evidence i.e. sources of fund for availing margin money, bank statements reflecting the transactions. The brokers notes submitted did not explain

P a g e | 4 A.Y. 2020-21 the matter satisfactorily. Therefore, he upheld the addition stating that the AO was justified in making an estimated addition of the investment at the rate of 20% thereof.

5.

Before us, the ld.AR has vehemently agitated the actions of the authorities below and also requested for admission of certain additional evidences in order to establish the trail of the source of margin money employed for entering into the impugned transactions which are crucial for deciding the issue and go to the root of the matter. a. Copy of the Master Capital (Broker) Financial Ledger, Transaction Summary and Contract notes reflecting the details of trades undertaken by the petitioner in commodities during the relevant Assessment Year2020-21. b. Copy of the Axis Direct (Broker) Transaction Summary and Contract notes reflecting the details of trades undertaken by the petitioner in shares and derivatives during the relevant Assessment Year 2020-21. c. Copy of the Zerodha (Broker) Transaction Summary and Contract notes reflecting the details of trades undertaken by the petitioner in shares and derivatives during the relevant Assessment Year 2020-21. 6. On careful perusal of the assessment order as also the appellate order, it is evident that the lower authorities took an adverse view if the matter alleging lack of sufficient evidence brought on record by the assessee regarding the investment and the claim regarding

P a g e | 5 A.Y. 2020-21 margin money. We have also perused the proposed additional evidences as stated above and find that the same are relevant to decide the matter in hand. The powers conferred on the appellate authority being quasi judicial powers, it is incumbent on him to exercise the same if the facts circumstances justify. The assessee should not be disqualified from producing evidence merely for the fact it was not produced before the AO. It is incorrect to shut out the assessee in the process of administration of justice from leading evidence to prove its case. The earlier inability to lead evidences should not be held against the assessee unless it is known to the court or suggested to the court or there was evidence to support that the evidence was fabricated. However, where the assessee produces additional evidence in the appeal to the appellate authority, the AO ought to be afforded to evaluate and examine the same. 6.1 Accordingly, we admit the additional evidence and the entire matter is restored to the AO to examine the issue in the light of such additional evidences and pass de novo assessment order. Needless to state, he would allow sufficient opportunity of hearing to the assessee.

7.

In the result, the appeal of the assessee stands allowed for statistical purposes.

P a g e | 6 A.Y. 2020-21 Order pronounced in the open court on 04/09/2026. (SANDEEP GOSAIN) ACCOUNTANT MEMBER

Place: म ुंबई/Mumbai ददनाुंक /Date 04.09.2026 Lubhna Shaikh / Steno

आदेश की प्रतितलति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. आयकर आयुक्त / CIT 3. 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //// आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt.

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