ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-4(3),MUMBAI, MUMBAI vs. AMBALAL MOHANLAL SHAH HUF, MUMBAI

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ITA 3200/MUM/2026Status: DisposedITAT Mumbai22 May 2026AY 2015-167 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the deletion of the addition, finding no cogent evidence of actual commission payment beyond the regular brokerage already accounted for. The Tribunal noted that assumptions without supporting material cannot justify invoking Section 69C.

What were the facts?

The Revenue appealed the deletion of an addition made under Section 69C for alleged unexplained commission expenditure. The Assessing Officer had made the addition based on the assumption that commission must have been paid for non-genuine transactions.

What were the issues?

Whether commission expenditure can be added under Section 69C based on assumptions of non-genuine transactions without direct evidence. Whether the deletion of such an addition by the CIT(A) was justified.

Which sections of the Income-tax Act were involved?

Section 69C,Section 131,Section 143(3),Section 147,Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “K” MUMBAI

Before: SHRI OM PRAKASH KANT & SHRI KAVITHA RAJAGOPAL

For Appellant: Shri Karna Thakar
For Respondent: Shri Bhagirath Ramawat (Sr. DR)
Hearing: 14/05/2026

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “K” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI KAVITHA RAJAGOPAL (JUDICIAL MEMBER)

ITA No. 3200/MUM/2026 Assessment Year: 2015-16

Assitant Commissioner of Ambalal Mohanlal Shah HUF, Income Tax Central Circle – 401, Morya Estate New Andheri Vs. 4(3), Room No.425, Kautilya Link Road, Andheri West, Bhavan, Bandra (E), Mumba – Mumbai – 400053, Maharashtra. 400051, Maharashtra. PAN NO. AACHA 7510 B Appellant Respondent

Assessee by : Shri Karna Thakar Revenue by : Shri Bhagirath Ramawat (Sr. DR)

Date of Hearing : 14/05/2026 : 22/05/2026 Date of pronouncement ORDER PER OM PRAKASH KANT, AM

The present appeal by the Revenue is directed against the order dated 14.01.2026 passed by the learned Commissioner of Income Tax (Appeals) [“Ld. CIT(A)”] for Assessment Year 2015–16, whereby the addition of ₹2,97,942/- made under Section 69C of the Income-tax Act, 1961 (“the Act”) on account of alleged unexplained commission expenditure has been deleted. The grounds raised by the assessee are reproduced as under:

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“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.2,97,942/ eting the addition of Rs.2,97,942/- made under section 69C of the made under section 69C of the income-tax Act, 1961 on account of unexplained commission expenditure, ignoring tax Act, 1961 on account of unexplained commission expenditure, ignoring tax Act, 1961 on account of unexplained commission expenditure, ignoring the material brought on record including the statement recorded under section the material brought on record including the statement recorded under section the material brought on record including the statement recorded under section 131 and the established modus op 131 and the established modus operandi of entry operators charging commission erandi of entry operators charging commission @2% of turnover. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that once the primary transactions were held to be non- failed to appreciate that once the primary transactions were held to be non failed to appreciate that once the primary transactions were held to be non genuine and accommodation entries, th genuine and accommodation entries, the payment of commission for arranging e payment of commission for arranging such entries was a natural and consequential inference based on preponderance such entries was a natural and consequential inference based on preponderance such entries was a natural and consequential inference based on preponderance of probabilities, and therefore the deletion of the estimated commission of probabilities, and therefore the deletion of the estimated commission of probabilities, and therefore the deletion of the estimated commission expenditure u/s 69C is contrary to settled principles governing tax proceedings. expenditure u/s 69C is contrary to settled principles governing tax expenditure u/s 69C is contrary to settled principles governing tax 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that estimation of commission expenditure in cases involving failed to appreciate that estimation of commission expenditure in cases involving failed to appreciate that estimation of commission expenditure in cases involving accommodation entries and bogus transactions is a recognized and accepted accommodation entries and bogus transactions is a recognized and accepted accommodation entries and bogus transactions is a recognized and accepted practice, particularly when such payments are generally made in cash and are ce, particularly when such payments are generally made in cash and are ce, particularly when such payments are generally made in cash and are not supported by direct documentary evidence. not supported by direct documentary evidence. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in rejecting the reliance placed on third erred in rejecting the reliance placed on third-party statements and investigation ments and investigation findings merely on the ground that the assessee had routed transactions through findings merely on the ground that the assessee had routed transactions through findings merely on the ground that the assessee had routed transactions through a different broker, without appreciating that entry operators function through a a different broker, without appreciating that entry operators function through a a different broker, without appreciating that entry operators function through a network of intermediaries and brokers. network of intermediaries and brokers. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that once the primary derivative transactions undertaken by failed to appreciate that once the primary derivative transactions undertaken by failed to appreciate that once the primary derivative transactions undertaken by the assessee have been held to be non the assessee have been held to be non-genuine and arranged transactions, it genuine and arranged transactions, it necessarily follows that certain out-of-books expenditure would have been books expenditure would have been incurred for arranging such fictitious gains/losses through entry operators or incurred for arranging such fictitious gains/losses through entry operators or incurred for arranging such fictitious gains/losses through entry operators or intermediaries.” 2. The solitary issue arising for consideration in the present appeal The solitary issue arising for consideration in the present appeal The solitary issue arising for consideration in the present appeal pertains to the deletion of the add pertains to the deletion of the addition made by the Assessing ition made by the Assessing Officer towards alleged commission expenditure, computed at 2% of Officer towards alleged commission expenditure, computed at 2% of Officer towards alleged commission expenditure, computed at 2% of the turnover of Futures and Options (F&O) transactions. the turnover of Futures and Options (F&O) transactions. the turnover of Futures and Options (F&O) transactions.

3.

Briefly stated, the facts borne out from the record are that the Briefly stated, the facts borne out from the record are that the Briefly stated, the facts borne out from the record are that the assessee filed its return of income on 20.09.2015 declaring total assessee filed its return of income on 20.09.2015 declaring total assessee filed its return of income on 20.09.2015 declaring total at ₹2,43,810/ income 2,43,810/-. Subsequently, the . Subsequently, the assessment was assessment was

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reopened by issuance of notice under Section 148 dated reopened by issuance of notice under Section 148 dated reopened by issuance of notice under Section 148 dated 30.03.2021. In response thereto, the assessee filed a return response thereto, the assessee filed a return response thereto, the assessee filed a return reiterating the same income originally declared. The reassessment reiterating the same income originally declared. The reassessment reiterating the same income originally declared. The reassessment under Section 143(3) read with Section 147 of the Act came to be under Section 143(3) read with Section 147 of the Act came to be under Section 143(3) read with Section 147 of the Act came to be completed on 28.03.2022 determining the total income at completed on 28.03.2022 determining the total income at completed on 28.03.2022 determining the total income at ₹39,17,529/- after mak after making additions of ₹36,19,587/ 36,19,587/- under Section 68 and ₹2,97,942/- under Section 69C of the Act. under Section 69C of the Act.

4.

In appellate proceedings, the Ld. CIT(A) observed that the In appellate proceedings, the Ld. CIT(A) observed that the In appellate proceedings, the Ld. CIT(A) observed that the derivative trading profit of ₹36,19,587/- had already been credited derivative trading profit of had already been credited in the profit and loss account a in the profit and loss account and offered to tax as business income nd offered to tax as business income in the original return of income. However, concurring with the in the original return of income. However, concurring with the in the original return of income. However, concurring with the Assessing Officer on the nature of the impugned derivative Assessing Officer on the nature of the impugned derivative Assessing Officer on the nature of the impugned derivative transactions, the Ld. CIT(A) sustained the addition under Section transactions, the Ld. CIT(A) sustained the addition under Section transactions, the Ld. CIT(A) sustained the addition under Section 68 by holding that the transact 68 by holding that the transactions in options trading were pre ions in options trading were pre- arranged and lacked commercial genuineness. According to the arranged and lacked commercial genuineness. According to the arranged and lacked commercial genuineness. According to the appellate authority, although the identity of the counter-party appellate authority, although the identity of the counter appellate authority, although the identity of the counter remained anonymous on the exchange platform, the peculiar remained anonymous on the exchange platform, the peculiar remained anonymous on the exchange platform, the peculiar pattern pattern of of deep deep in in-the-money money and and deep deep out-of-the-money ou transactions indicated that the trades were structured in a manner transactions indicated that the trades were structured in a manner transactions indicated that the trades were structured in a manner ensuring a predetermined outcome between specifically chosen ensuring a predetermined outcome between specifically chosen ensuring a predetermined outcome between specifically chosen counterparties. The Ld. CIT(A) further observed that one of the The Ld. CIT(A) further observed that one of the The Ld. CIT(A) further observed that one of the counterparties appeared to have intentionally incurred losses, counterparties appeared to have intentionally inc counterparties appeared to have intentionally inc possibly to offset its own taxable profits, thereby facilitating possibly to offset its own taxable profits, thereby facilitating possibly to offset its own taxable profits, thereby facilitating corresponding gains to the assessee. On such reasoning, the corresponding gains to the assessee. On such reasoning, the corresponding gains to the assessee. On such reasoning, the

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addition under Section 68 was upheld, though the assessee was addition under Section 68 was upheld, though the assessee was addition under Section 68 was upheld, though the assessee was granted consequential set granted consequential set-off of business losses agains off of business losses against income assessed under Section 115BBE of the Act. assessed under Section 115BBE of the Act.

Insofar as the separate addition of ₹2,97,942/- 5. Insofar as the separate addition of - under Section 69C is concerned, the Assessing Officer proceeded on the basis of 69C is concerned, the Assessing Officer proceeded on the basis of 69C is concerned, the Assessing Officer proceeded on the basis of the statement of Shri Arun Shah in the case of M/s Aryav Securities the statement of Shri Arun Shah in the case of M/s Aryav Securities the statement of Shri Arun Shah in the case of M/s Aryav Securities Pvt. Ltd., wherein it was allegedly stated that entry operators td., wherein it was allegedly stated that entry operators td., wherein it was allegedly stated that entry operators generally charge commission at the rate of 2% of the buy and sell generally charge commission at the rate of 2% of the buy and sell generally charge commission at the rate of 2% of the buy and sell turnover for arranging accommodation entries. Relying upon the turnover for arranging accommodation entries. Relying upon the turnover for arranging accommodation entries. Relying upon the said statement and the alleged modus operandi, the Assessing said statement and the alleged modus operandi, the Assessing said statement and the alleged modus operandi, the Assessing Officer inferred that the assessee must have incurred commission inferred that the assessee must have incurred commission inferred that the assessee must have incurred commission expenditure of ₹2,97,942/ 2,97,942/-, being 2% of the total turnover of , being 2% of the total turnover of ₹1,48,97,089/-, and accordingly treated the same as unexplained , and accordingly treated the same as unexplained , and accordingly treated the same as unexplained expenditure under Section 69C of the Act. expenditure under Section 69C of the Act.

5.1 Before the Ld. CIT(A), the Before the Ld. CIT(A), the assessee categorically contended assessee categorically contended that no material whatsoever had been brought on record to that no material whatsoever had been brought on record to that no material whatsoever had been brought on record to establish payment of any unaccounted commission. It was further establish payment of any unaccounted commission. It was further establish payment of any unaccounted commission. It was further submitted that reliance on the statement of Shri Arun Shah was submitted that reliance on the statement of Shri Arun Shah was submitted that reliance on the statement of Shri Arun Shah was wholly misconceived since the assesse wholly misconceived since the assessee had carried out the e had carried out the impugned transactions through M/s Goodluck Securities and not impugned transactions through M/s Goodluck Securities and not impugned transactions through M/s Goodluck Securities and not through M/s Aryav Securities. The assessee also pointed out that through M/s Aryav Securities. The assessee also pointed out that through M/s Aryav Securities. The assessee also pointed out that regular brokerage paid to M/s Goodluck Securities had already regular brokerage paid to M/s Goodluck Securities had already regular brokerage paid to M/s Goodluck Securities had already been duly accounted for in the books of accou been duly accounted for in the books of account and reflected in the nt and reflected in the

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contract notes. It was, therefore, contended that the impugned contract notes. It was, therefore, contended that the impugned contract notes. It was, therefore, contended that the impugned addition was founded entirely on conjectures and presumptions. addition was founded entirely on conjectures and presumptions. addition was founded entirely on conjectures and presumptions.

5.2 Upon consideration of the submissions advanced, the Ld. Upon consideration of the submissions advanced, the Ld. Upon consideration of the submissions advanced, the Ld. CIT(A) deleted the addition observing that, although the addition CIT(A) deleted the addition observing that, although the addition CIT(A) deleted the addition observing that, although the addition under Section 68 had been sustained on the basis of surrounding under Section 68 had been sustained on the basis of surrounding under Section 68 had been sustained on the basis of surrounding circumstances and preponderance of probabilities, there was not circumstances and preponderance of probabilities, there was not circumstances and preponderance of probabilities, there was not even a semblance of evidence, whether direct or circumstantial, to semblance of evidence, whether direct or circumstantial, to semblance of evidence, whether direct or circumstantial, to indicate that the assessee had paid any unaccounted commission. indicate that the assessee had paid any unaccounted commission. indicate that the assessee had paid any unaccounted commission. The appellate authority further accepted the contention that the The appellate authority further accepted the contention that the The appellate authority further accepted the contention that the statement of Shri Arun Shah could not be relied upon against the statement of Shri Arun Shah could not be relied upon against the statement of Shri Arun Shah could not be relied upon against the assessee, who had admittedly transacted through a different ssessee, who had admittedly transacted through a different ssessee, who had admittedly transacted through a different broker. The Ld. CIT(A) accordingly held that no addition under broker. The Ld. CIT(A) accordingly held that no addition under broker. The Ld. CIT(A) accordingly held that no addition under Section 69C could be sustained merely on the basis of generalized Section 69C could be sustained merely on the basis of generalized Section 69C could be sustained merely on the basis of generalized allegations regarding prevailing market practices, unsupported by allegations regarding prevailing market practices, unsupported by allegations regarding prevailing market practices, unsupported by any tangible material relatable to the assessee. y tangible material relatable to the assessee. The relevant finding The relevant finding of ld CIT(A) is reproduced as under of ld CIT(A) is reproduced as under:-

“8.3. Decision: Though the addition of Rs.36,19,587 is upheld in this order based on Though the addition of Rs.36,19,587 is upheld in this order based on Though the addition of Rs.36,19,587 is upheld in this order based on preponderance of probabilities coupled with circumstantial evidences as preponderance of probabilities coupled with circumstantial eviden preponderance of probabilities coupled with circumstantial eviden discussed in para 6.3 of this order but there is not even an iota of circumstantial discussed in para 6.3 of this order but there is not even an iota of circumstantial discussed in para 6.3 of this order but there is not even an iota of circumstantial evidence with regard to payment of unaccounted commission. Moreover, the AR evidence with regard to payment of unaccounted commission. Moreover, the AR evidence with regard to payment of unaccounted commission. Moreover, the AR submits that the statement of Shri Arun Shah of M/s.Aryav Securities cannot be submits that the statement of Shri Arun Shah of M/s.Aryav Securities cannot be submits that the statement of Shri Arun Shah of M/s.Aryav Securities cannot be relied upon in the appellant's case because the appellant n in the appellant's case because the appellant-assessee traded n in the appellant's case because the appellant through M/s.Goodluck Securities to whom brokerage was already paid and through M/s.Goodluck Securities to whom brokerage was already paid and through M/s.Goodluck Securities to whom brokerage was already paid and accounted for in the books of account. I hold that additions cannot be made only accounted for in the books of account. I hold that additions cannot be made only accounted for in the books of account. I hold that additions cannot be made only based on unproved and so based on unproved and so-called common practices without circumstantial ractices without circumstantial evidences. Therefore, the addition made of Rs.2,97,942 u/s.69C is deleted.” evidences. Therefore, the addition made of Rs.2,97,942 u/s.69C is evidences. Therefore, the addition made of Rs.2,97,942 u/s.69C is

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6.

We have heard the rival submissions and carefully perused the We have heard the rival submissions and carefully perused the We have heard the rival submissions and carefully perused the material available on record. We find that the impugned addition material available on record. We find that the impugned addition material available on record. We find that the impugned addition under Section 69C under Section 69C has been made purely on surmises and has been made purely on surmises and presumptions without there being any cogent evidence to establish presumptions without there being any cogent evidence to establish presumptions without there being any cogent evidence to establish actual payment of commission by the assessee. The Assessing actual payment of commission by the assessee. The Assessing actual payment of commission by the assessee. The Assessing Officer has merely proceeded on an assumption that, since the Officer has merely proceeded on an assumption that, since the Officer has merely proceeded on an assumption that, since the transactions were alleged to be transactions were alleged to be accommodation entries, some accommodation entries, some commission expenditure must necessarily have been incurred. commission expenditure must necessarily have been incurred. commission expenditure must necessarily have been incurred. Such inference, in the absence of supporting material, cannot by Such inference, in the absence of supporting material, cannot by Such inference, in the absence of supporting material, cannot by itself constitute a valid basis for invoking Section 69C of the Act. itself constitute a valid basis for invoking Section 69C of the Act. itself constitute a valid basis for invoking Section 69C of the Act.

6.1 It is further evident from th It is further evident from the record that the assessee had e record that the assessee had already accounted for the regular brokerage paid to its broker, already accounted for the regular brokerage paid to its broker, already accounted for the regular brokerage paid to its broker, namely M/s Goodluck Securities, in the books of account. No namely M/s Goodluck Securities, in the books of account. No namely M/s Goodluck Securities, in the books of account. No evidence has been brought on record by the Revenue to evidence has been brought on record by the Revenue to evidence has been brought on record by the Revenue to demonstrate payment of any additional or clande demonstrate payment of any additional or clandestine commission stine commission over and above the disclosed brokerage expenditure. Equally, no over and above the disclosed brokerage expenditure. Equally, no over and above the disclosed brokerage expenditure. Equally, no nexus has been established between the assessee and the nexus has been established between the assessee and the nexus has been established between the assessee and the statement of Shri Arun Shah of M/s Aryav Securities Pvt. Ltd., statement of Shri Arun Shah of M/s Aryav Securities Pvt. Ltd., statement of Shri Arun Shah of M/s Aryav Securities Pvt. Ltd., upon which the Assessing Officer has placed reliance. upon which the Assessing Officer has placed reliance. upon which the Assessing Officer has placed reliance. 6.2 In these circumstances, we are of the considered opinion that In these circumstances, we are of the considered opinion that In these circumstances, we are of the considered opinion that the Ld. CIT(A) has rightly appreciated the factual and legal position the Ld. CIT(A) has rightly appreciated the factual and legal position the Ld. CIT(A) has rightly appreciated the factual and legal position and has passed a well and has passed a well-reasoned and legally sustainable order reasoned and legally sustainable order deleting the impugned addition under Section 69C of the Act. We deleting the impugned addition under Section 69C of the Act. deleting the impugned addition under Section 69C of the Act. find no infirmity therein warranting interference. Accordingly, the find no infirmity therein warranting interference. Accordingly, the find no infirmity therein warranting interference. Accordingly, the

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grounds raised by the Revenue are dismissed and the order of the grounds raised by the Revenue are dismissed and the order of the grounds raised by the Revenue are dismissed and the order of the Ld. CIT(A) on the issue under consideration is upheld. Ld. CIT(A) on the issue under consideration is upheld. Ld. CIT(A) on the issue under consideration is upheld.

7.

In the result, the appeal of the result, the appeal of the Revenue is dismissed. dismissed.

Order pronounced in the open Court on 22 ounced in the open Court on 22/05/2026. /05/2026.

Sd/- Sd/- Sd/ (KAVITHA RAJAGOPAL KAVITHA RAJAGOPAL) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 22/05/2026 M. Ranganath Vittal , Sr. P.S. M. Ranganath Vittal , Sr. P.S.

Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai

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