MONEY MAGNUM CONSTRUCTIONS,MUMBAI vs. DCIT, CIRCLE 27(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH: MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 106/Mum/2026 (Assessment Year: 2014-15)

Money Magnum Deputy Commissioner of Constructions Income Tax, Circle 27(2) Plot No. 157, Samruddhi, vs. Room No. 419, 4thFloor, Tower 18thRoad, Near Ambedkar No. 6, Vashi Railway Station Garden, Chembur East, Commercial Complex, Navi Mumbai, Maharashtra, 400071 Mumbai, Maharashtra, 400703

PAN: AACFN9126C (Appellant) (Respondent) For Assessee : Shri Paresh Shaparia For Revenue : Shri Manish Ajudiya - SR.DR Date of Hearing : 25.03.2026 Date of Pronouncement : 23.06.2026 O R D E R PER VIKRAM SINGH YADAV, A.M:

This is an appeal filed by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [‘Ld.CIT(A)’], dated 04.12.2025, pertaining to Assessment Year (AY) 2014-15, wherein the Assessee has taken the following grounds of appeal:

“I. VIOLATION OF PRINCIPAL OF NATURAL JUSTICE AND REASONABLE OPPORTUNITY 1. The Learned CIT (A)-NFAC erred in law and facts by not giving reasonable opportunity and for violation of principal of natural justice thereby the order is bad in law.

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions 2. The Learned CIT (A)-NFAC violated the principal of natural justice by not granting an opportunity of video conference hearing which had been specifically requested by the appellant in submission dated 4 March 2025. 3. The Learned CIT(A)-NFAC erred in passing a cryptic order without adjudicating/considering the appellant's detailed written submissions with supporting documents and specific point-wise contentions and propositions. II. CONFIRMATION OF DISALLOWANCE OF NSEL LOSS RS 8,68,70,608 1. The Learned CIT(A)-NFAC erred on the facts and in law in confirming the disallowance of loss of Rs 8,68,70,608 on account of NSEL scam 2. The Learned CIT(A)-NFAC erred in not considering or countering the contentions and propositions made for claim of business loss of Rs. 8,68,70,608 on account of NSEL transactions. 3. The Business Loss of Rs. 8,68,70,608 requires to be allowed. The appellant craves leave and reserves the right to add, alter, amend, modify or delete any of the ground/s before or during the course of the hearing. The appellant reserves the right to produce additional evidence before or during the course of the hearing. Each one of the above grounds of appeal are without prejudice to the other.”

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions loss has been set off by the assessee against the regular business income, however, the trades executed by the assessee in NSEL were not against delivery of goods and therefore, the same were speculative in nature and as such, the said losses cannot be adjusted against the regular business income of the assessee. In this way, the assessee has shown loss of Rs. 4.05 crores, whereas it has taxable income to the extent of Rs.4.63 crores, if the speculative losses on NSEL are not adjusted. In view of the same, income of Rs. 8,68,70,608/- being speculative losses earned on NSEL which had been set off against the business income for the year has escaped assessment and basis the said information, the Assessing Officer recorded reasons to believe that the income chargeable to tax amounting to Rs. 8,68,70,608/- has escaped assessment within the meaning of Section 147 of the Act as there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Thereafter, notice u/s. 148 was issued and after calling for necessary information/documentation, order u/s. 147 read with Section 144B was passed on 24.03.2022 accepting the total loss declared by the assessee, without making any addition or disallowances and without drawing any adverse inference in respect of matter in respect to which the reasons were recorded.

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions undertaken by the assessee. It was held that the AO has not made any enquiry whether the trading and investment activity was backed with actual delivery of goods or is it a case of client code modification. Further, reference was drawn to the investigation report and the report of the Serious Fraud Investigation office as well as the client code modification carried out in the case of the assessee and it was held that the client code modification has been carried out with dishonest or fraudulent intent, referring to contract notes of Rs. 2,99,37,927/- issued on 25.04.2013 and contract note of Rs.1,35,14,656/- issued on 04.07.2013 by Anand Rathi Commodities Pvt. Ltd.(ARCL). It was noted by the ld. PCIT that whether other transactions of July, 2013 is the case of client code modification or not has not been verified by the Assessing Officer and the Assessing Officer has not collected CCM data with respect to the assessee neither from the broker firm nor from the assessee. It was further held that the assessee has booked losses in respect of investment made in the month of July, 2013 and no enquiry has been made by the Assessing Officer as to whether the assessee was involved in regular trading in earlier years as business transaction or not. It was further noted that the assessee has stated that it has incurred losses due to NSEL scam. Post NSCL payment crisis, several complaints were filed by clients against the member-brokers. However, the assessee has not taken any such efforts and he simply booked the losses and the Assessing Officer has also not made any enquiry in this regard. Further, the investigation report suggested to verify the source of the investment, however, the AO has only called for the bank statement and the same has been submitted by the assessee without detail of source of the funds and therefore, the sources of funds have also not been enquired or verified by the Assessing Officer during the assessment proceedings. It was accordingly held that both M/s. Anand Rathi Commodities Pvt. Ltd. and M/s. Motilal Oswal Commodities Brokers Pvt. Ltd were involved in NSEL scam and the assessee was one

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions of the beneficiary. Therefore, the claim of the assessee that NSEL was providing delivery based spot trading and he has not done any client code modification is not correct. The Assessing Officer has not made any proper enquiry with respect to commodity transactions and he has passed the order relying on the submissions of the assessee without enquiry or verification and the assessee cannot take shelter under the provisions of section 43(5)(e) of the Act, when the intention was to book fictitious losses to reduce business profits. It was accordingly held that the Assessing Officer has failed to properly examine the matter which has rendered the assessment order erroneous in so far as prejudicial to the interest of the Revenue and accordingly, the assessment order so passed by the Assessing Officer u/s. 147 read with section 144B was set aside with the direction to pass a fresh assessment order considering the issues raised in the order so passed in accordance with law after providing necessary opportunity to the assessee.

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions assessment order to be erroneous in so far as it is prejudicial to the interest of Revenue.

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions following submissions inter alia made by the assessee during the course of set aside proceedings before the Assessing officer: “Proposition 1: No client code modification (CCM) was done by the assessee The transactions on National Spot Exchange limited (NSEL) were done through M/s. Anand Rathi Commodities Pvt. Ltd. and Motilal Ostwal Commodities Brokers Pvt. Ltd, who are SEBI registered brokers. The modus operandi of the transactions as carried out on NSEL was very clear and transparent which is online, automatic and without any intervention except putting to sauda on terminal by the broker. It is practically not possible for anyone to buy quantity from specific seller on higher price and then to sell the same quantity to the same seller on lower price to book the losses as alleged in the reasons recorded and do client code modification (CCM) On online terminal, selection of buyers and sellers is beyond human control and in order to prove the transaction entered into with the brokers the necessary documents in the form of contract notes, ledger accounts of the brokers, etc. are already on record. NSEL was a spot exchange incorporated as company under the provisions of the Companies Act, 1956. The NSEL was a national level, electronic spot trading platform for commodities with operations in 18 States in India and providing delivery-based spot trading in around 52 commodities. It was an exchange for trading in commodities and carrying out its activities since 2007. NSEL was platform for automated trading system for conducting spot trading system in commodities. In or around September 2009, the NSEL for the first time introduced paired traders contracts, and from time to time the company issued circulars, regarding the commencement of spot trading in a particular commodity. These circulars would be issued in pairs, one of which would permit a short settlement cycle such as T+2 and the other of which would permit a longer settlement cycle such as T+25. The appellant company had purchased and sold commodities on the exchange platform of NSEL by trading in the paired trader's contracts offered by the NSEL through the SEBI registered broker M/s. Anand Rathi Commodities Pvt. Ltd. and Motilal Ostwal Commodities Brokers Pvt. Ltd, who are registered as a member with the NSEL. The transaction of purchase and sale of commodities was done by the broker-members on the electronic exchange platform of the NSEL. As is usually the norm in any electronic exchange, at the time of trading on the anonymous order driven trading system on the exchange, the buyer does not know the seller and in the same way the seller does not know the buyer (similar to the transactions carried out on BSE and NSE in relation to listed shares), At the time of settlement of the contract, the same was settled through the exchange platform of the NSEL.

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions Therefore, the appellant had entered into the paired trader's contracts without actually knowing at the time of entering into the contract who the buyer/seller was at the other end. As per the Bye-laws of the NSEL, all outstanding transactions in commodities are generally required to be for compulsory delivery at any one or more delivery points, and/or warehouses approved, certified and designated by the NSEL as per Bye-Law 4.20(a) thereon. The circulars issued by the NSEL at the time of commencement of trading in each commodity. These Circulars together with the risk management practices set out by the NSEL in its Bye-laws, confirmed that the warehouses, quantity and quality of goods were under the complete administration and control of the NSEL Further, as per the Bye-laws of the NSEL, it acts as the legal counter party in respect of transactions executed on the NSEL platform in accordance with its Bye-law No. 5.26. In any event, the NSEL also guarantees the settlement of net financial obligation. When a client trades on the anonymous order driven trading system on the NSEL, the buyer does not know the seller and in the same way the seller does not know the buyer, and the NSEL guarantees the settlement of trade executed in compliance with the Bye- laws as per Bye-Law Nos. 7.9.1., 7.9.2 and 9.6. thereon. The Exchange issues Delivery Allocation report for the purchase transaction. The warehouse receipts are in the custody of the exchange and the warehouse receipts will be tendered by NSEL against the commodity pay-in obligation of client Further as per the Exchange delivery allocation letter, the said deliveries will be taken as early commodity pay in against the sale transaction In case of any modification by Broker for genuine errors was made on NSEL platform in a fully transparent manner and to the knowledge of NSEL Such modification, if any were made on a real time basis by the broker and automatically recorded in the NSEL systems, records and log All daily transactions on the exchange including any CCM were monitored by NSEL and at no point of time did NSEL or any of its concerned departments ever raised any objections as regards to the modification of client code. All the contract notes and bill issued to clients after modification and such clients having made payments confirms that trades were executed on such client's instructions CCM if any is done by the broker for administrative convenience / to boost business and not at the instance of client which is also confirmed and clarified by Mr. Chetan Pitamber Bharkhada President of Anand Rathi Commodities Pvt Ltd in his statement recorded on 12.03.2019 at question no 19 has stated that CCM was allowed by NSEL and this did not require any instruction from the clients. These were solely done to facilitate rapid execution of trades. The copy of the statement of Mr. Chetan Pitamber Bharkhada has already been furnished by your office which is on record.

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions

The clients were unaware that the contract note issued to them is on the basis of original punching or after client code modification. Correction of errors in punching is officially allowed by NSEL vide circular no NSEL/TRP/2011/2012 dated 8th July 2011 The transaction on NSEL platform did not have intraday/hedging /speculative loss/profit as in equity market and therefore question of transfer of any profit/loss from one client to another client by way of CCM was not possible at all. Through the broker, AnandRathi Commodities Ltd the assessee had carried out total of 36 transactions on NSEL (36 paired i.e. simultaneous 4 buy and 32 sell transactions), out of 36 transactions (Total 4 buy of Rs.7,17,21,396 less 32 sell of Rs. 3,28,17,991 Net of Rs.3,89,03,405) it is alleged that there is CCM of Rs 3,89,03,405 as per variation carried out in the assessment order which accounts for merely 0.12% of the total transactions on NSEL. There was no alleged CCM in the case of Motilal Oswal Commodities Brokers Pvt. Ltd. Further, kindly refer to above submission wherein we have clarified and substantiated that the assessee has not carried out any CCM. However, in case any CCM has been done, is end at the end of the registered brokers for their administrative convenience which is also referred by SFIO in their report. Prior to NSEL shutting down trading operations, there is a profit amounting to Rs. 3,66,392. The assessee company has earned total income from commodity trading of Rs. 3,66,392 on all NSEL transaction through SEBI registered broker Anand Rathi Commodities Ltd which is duly offered to tax. After placing of bonafide order for buy and sell of the commodity with Broker the execution part thereof on the NSEL is not within the asssessee's control and they have not carried out any Client Code Modification. The transactions are duly reflected in the books of accounts under the head Business income - Other Income from commodities trading after charging brokerage, warehouse charges, service tax, exchange turnover charge, stamp duty etc. The assessee does not have transactions that involve Client Code Modification as the assessee has no control on the transaction carried out on the NSEL exchange by the SEBI registered brokers.” 6. It was further submitted that the transactions so undertaken cannot be deemed to be speculative transactions and reference was drawn to the provisions of Section 43(5) read with the proviso and the various Coordinate Benches decisions. In this regard, it was further submitted that the source of funds for requirement for carrying out the

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions trading were assessee's own funds and funds of the partners of the assessee mainly Money Magnum Nest Pvt. Ltd. and details of the bank statements were submitted. It was further submitted that assessee has disbursed an amount of Rs. 12,28,13,958/- to both the brokers. However, it has been able to recover only a sum of Rs. 3,59,43,350/- and the remaining amount of Rs.8,68,70,608/- which is not recoverable on account of the scam and collapse of NSEL has been written off as bad debts/business loss in the books of accounts and same be allowed to be set off against the other business income shown by the assessee. It was accordingly, submitted that all the commodity transactions on NSEL were carried out through the SEBI registered broker, broker ledgers, contract notes, bank statements are on record, the company's own funds were used, the profit has been duly offered to tax and the transactions are duly recorded in the books of accounts and it was further submitted that the assessee has not carried out any CCM and given that the money so disbursed to the brokers were not recoverable on account of scam and collapse of NSEL, the loss of Rs. 8,68,70,608/- deserve to be allowed to the assessee.

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions note of Rs.2,99,37,927/- on 25.04.2013 to the assessee. It was further stated that the broker has modified the client code on 02.07.2013 amounting to Rs. 1,34,88,000/- with the same original client Shri Navratan Gupta and a contract note/bill of Rs.1,35,14,656/- has been issued on 04.07.2013 to the assessee. It was held by the Assessing officer that it seems that the unique client code modification has been carried out with dishonest or fraudulent intent and the assessee was also aware that there was modification of unique client code as he has been supplied information on transaction made on 25.04.2013 and 02.07.2013 and therefore, the claim of the assessee that he has not done any client code modification does not hold any ground. It was accordingly held that M/s. Anand Rathi Commodities Pvt. Ltd. and M/s. Motilal Oswal Commodities Brokers Pvt. Ltd were involved in scam of NSEL and the assessee was one of the beneficiary and therefore, the claim of the assessee that NSEL was providing delivery based spot trading and he has not done any client code modification is not correct. It was held that the assessee cannot take shelter under the provisions of Section 43(5)(e) of the Act, where the intention was to book fictitious losses to reduce business profit. Accordingly, the loss of Rs.8,68,70,608/- set off by the assessee against its regular business income was disallowed and the reassessed income was determined at Rs. 4,62,91,349/-.

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions could have provided any acceptable satisfactory evidence or explanation against the finding of the Assessing Officer so as to establish that NSEL was providing delivery based spot trading and the assessee has not done any client code modification and has carried out general business activity. Further, in the appellate proceedings, again the assessee is unable to file any satisfactory written submission substantiating its claim corroborating with supporting documents that the transaction carried out with the two brokers who are SEBI registered brokers being genuine. It was observed from the case records including the assessment order that the assessee is unable to prove either the genuineness of the transaction of the said parties or able to establish the genuineness of the receivable outstanding amount of Rs. 8,68,70,608/- in commodity arbitrage conducted through NSEL recognized exchange brokers M/s. Anand Rathi Commodities Pvt. Ltd. and M/s. Motilal Oswal Commodities Brokers Pvt. Ltd.,in as much as the assessee itself claimed to be a victim of the NSEL scam due to sudden suspension of trading on NSEL. The ld. CIT(A) accordingly held that he does not find any infirmity in the order of the Assessing Officer and his decision of determining total income after disallowance/addition of fictitious losses of Rs.8,68,70,608/- and the grounds of appeal so taken by the assessee was dismissed.

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions that in fact the ld. CIT(A) has passed a very cryptic order without taking into consideration the detailed written submissions and the supporting documentation filed by the assessee, wherein, the assessee has submitted its detailed explanation vis-à-vis each of the findings so recorded by the Assessing Officer.

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions disbursed to the brokers for carrying out the transactions on the stock exchange and given the fact that the said amount has become irrecoverable on account of sudden suspension of the trading and the scam on the NSEL, the assessee has written off in its books of accounts. It was submitted that it is a settled legal position as supported by the various Coordinate Benches decisions that where the assessee has incurred certain amount in the course of its business and has written off that amount and the necessary entry has been passed in the books of accounts, the assessee be allowed the necessary claim of business loss in its hands. In this regard, reference was drawn to the following decisions of Coordinate Benches:

a. DCIT vs Remi Securities Limited, ITA No. 6311/Mum/2024, dated 28.02.2025, Mumbai ITAT. b. ACIT vs Late Kishore kant Bhimji Sanghvi, ITA No. 3727/Mum/2024, dated 15.01.2025, Mumbai ITAT. c. ACIT vs Ketan Anil Shah, ITA No. 2188/Mum/2022, dated 19.01.2023, Mumbai ITAT. d. ITO vs Fairdeal Infin Services Pvt Ltd., 173 taxmann.com 517, dated 07.04.2025, Mumbai ITAT. e. Jinal Capital Services Pvt. Ltd. vs ITO, ITA No. 2603/Mum/2022, dated 24.01.2023, Mumbai ITAT. f. DCIT vs Cello pens and stationery Pvt Ltd., ITA No. 305/Mum/2019, dated 22.10.2021, Mumbai ITAT. g. Jay Ashkaran Shah vs ITO, 18(1)(5), 129 taxmann.com 6, dated 03.05.2021, Mumbai ITAT. h. Chowdry Associates vs ACIT, 117 taxmann.com 840, dated 05.09.2018, Delhi ITAT. i. DCIT vs N.K. Industries Ltd., 174 taxmann.com 609, dated 25.04.2025, Ahmedabad ITAT.

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions j. M/s Megh Sakariya International P. Ltd vs DCIT, Corporate Circle, ITA No. 59/CHNY/2018, dated 05.09.2018, Chennai ITAT. 12. Further, our reference was drawn to page no. 215 of the assessee’s paper book wherein, the details of the transactions so undertaken by the broker M/s. Anand Rathi Commodities Pvt. Ltd. on behalf of the assessee has been reflected:

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions 13. It was submitted that on perusal of the aforesaid table, it is evident that there are simultaneous trades which have been executed by way of purchase and sales and referring to the transaction undertaken on 25.04.2013, it was submitted that as against the purchase value of Rs. 2,99,37,927/-,the sale transaction has been executed for a sum of Rs. 3,03,04,318/- resulting in a profit of Rs. 3,66,392/- which has duly been offered as ‘business income’ while filing the return of income. It was accordingly, submitted that where the Assessing Officer has referred to the client code modification so undertaken in respect of the said transactions and allegedly booking of losses, without prejudice to the fact that no client code modification has been carried out at the behest of the assessee, it is a case where the assessee has in fact offered profits rather than claiming any fictitious losses. Therefore, the matter is not prejudicial to the interest of the Revenue. It was further submitted that regarding the remaining transactions, since the settlement could not be carried out by the broker, the assessee has not booked the profits in respect of the subsequent three transactions, however, the principal amount which has been given to the brokers as reflected in its books of accounts and duly supported by the contract notes have been written off in the books of accounts. It was submitted that on similar lines, the transactions have been undertaken with M/s. Motilal Oswal Financial Services Ltd and details thereof are mentioned at page no. 214 of the assessee’s paper book. It was accordingly submitted that it is a case of losses being incurred by the assessee on account of non-recovery of the payment made to the brokers rather than the losses on account of fictitious trading transaction as so alleged by the Assessing Officer. It was accordingly submitted that the necessary relief be provided to the assessee by allowing the loss so claimed by the assessee. 14. The ld. DR has been heard, who has relied on the order passed by the lower authorities. The contents and findings therein have been

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions already taken note of supra and the same are not being repeated for the sake of brevity.

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions not just M/s. Anand Rathi Commodities Pvt. Ltd. but also with M/s. Motilal Oswal Commodities Brokers Ltd. by way of a generic statement, it was held that the assessee was one of the beneficiary of client code modification and therefore, the losses so claimed by the assessee against its regular business income was disallowed. Against the findings of the Assessing Officer, the assessee again carried the matter before the ld. CIT(A), who has since dismissed the appeal of the assessee.

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions as against any fictitious losses. The said profit has not been realized and is part of the total receivable which has subsequently been written off. Except these two transactions, there is no material on record that there were any client code modification so carried out on behalf of the assessee in respect of any other transactions and any extrapolation/linkage with other transactions therefore cannot be sustained. Given that the money disbursed to the brokers for carrying out the aforesaid transactions on NSEL got stuck on account of suspension of the trading and the NSEL scam is corroborated by the fact that the assessee has filed various complaints/FIR before the Economic Offences Wing and Serious Fraud Investigation Office and a legal suit has also been filed before the Bombay High Court against both the brokers for recovery of the outstanding amount. No doubt, the outcome of these proceedings is not known at this stage as these proceedings are currently pending adjudication. At the same time, the fact of the matter is that the assessee has written off the amount so recoverable from these two brokers in its books of accounts for the year under consideration and claimed as business loss. At the latter stage, on conclusion of these proceedings or otherwise, where there is recovery of any of the amounts so receivable by the assessee, the same would be subject to tax in the year of recovery. In any case, it is not the case of the Revenue and no dispute as such has been raised regarding the factum of initial payment by the assessee to the two brokers and the fact that the amount so outstanding has been written off in the books of accounts. We therefore find that on totality of facts and circumstances of the case, it is the amount, which was initially disbursed by the assessee to two of its brokers for executing trades on NSEL platform and which has remained outstanding/non-recoverable on account of suspension of the trading on the NSEL platform, which has been written off in the books of accounts and it is not the amount/loss which has resulted on account of fictitious trading on the NSEL platform as so

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions alleged by the Assessing Officer. We therefore find that where the assessee has written off the amount advanced to the brokers in the normal course of its business as non-recoverable and has passed the necessary accounting entries in its books of accounts which has been duly demonstrated before us, the assessee has rightly claimed the loss as business loss which is eligible for set-off against other business income.

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions towards the assessee amounted to Rs. 7,64,90,724/-, It was submitted by the assessee that after considering all the facts of the case, the management of the assessee company had decided to 'write off 25% of the outstanding amount i.e. Rs. 1,98,70,000/- as bad debts' on 30.09.2013. Accordingly, after writing off the 'bad debts' of Rs. 1,98,70,000/- in its books of accounts, the outstanding balance of NSEL towards the assessee as on 31.03.2014 stood reflected as Rs. 5,67,77,130/-. It was the claim of the assessee that as it had duly shown the income from the aforesaid trading transactions as its 'business income' in its profit and loss account, therefore, the 'writing off the aforesaid amount of Rs. 1,98,70,000/- as 'bad debts was allowable under Sec. 36(2) of the Act However, the A.O was not inclined to accept the aforesaid claim of 'bad debts' that was raised by the assessee. The A.O observed that the matter was under investigation by the Economic Offenses Wing (EOW) and the recovery process was being monitored by a committee appointed by the Hon'ble High Court of Bombay Also, it was observed by the A.O that as per the information available in the public domain NSEL had sufficient assets to liquidate and repay the outstanding amounts. It was also noticed by him that the properties of NSEL and the various entities which had fraudulently benefitted from the funds of NSEL had been attached. In fact, the A.O observed that the assessee in part discharge of its outstanding dues was in itself in receipt of amount from NSEL even after FY. 2013-14. Apart from that, the A.O held a conviction that since the trading transactions were guaranteed by NSEL, therefore, compensations against nondelivery of commodities bought on the exchange platform were legally enforceable. On the basis of his aforesaid observations, the A.O was of the view that the claim of bad debts' raised by the assessee due to non-delivery of stock was premature and hence could not be allowed. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(A) Observing, that the matter was sub judice and the recovery was still in progress, the CIT(A) was of the view that as the 'writing off of part of the outstanding amount of Rs. 1,98,70,000/- by the assessee was not backed by any sound reasoning, therefore, the A.O had rightly disallowed the claim of the assessee. Accordingly, the CIT(A) dismissed the appeal of the assessee. 5. The assessee being aggrieved with the order of the CIT(A) has carried matter in appeal before us. The Learned Authorized Representative (for short 'A.R') for the assessee took us through the facts of the case. It was submitted by the Ld. A.R that as the profit arising from the trading transactions carried out on the NSEL platform had been taken into account in computing its income, therefore, the 'writing off the part of the outstanding debt (including profit) as a 'bad debt was rightly claimed as a deduction by the assessee under Sec. 36(2)(1) of the Act. It was submitted by the Ld. A.R that subsequent to 01.04.1989, it was no more necessary for the assessee to establish that the debt, in fact, had become irrecoverable, and it was sufficient if the "bad debt' was 'written off as irrecoverable in the account of the assessee. In support of the aforesaid contention the Ld. A.R had relied on the judgment of the Hon'ble Supreme Court in TRF LId. Vs. CIT (2010) 323 ITR 397 (SC). Apart from that, the Ld. A.R submitted that the issue involved in the present appeal was squarely covered by the order of a coordinate bench of the Tribunal in the case of a 'sister concern' of the assessee company viz. assesses own case in M/s Remi Securities and Engineering Limited vs. ACIT, Circle 13(3)(1), Mumbai [ITA No. 3650/Mum/2108 dated 06.09.2019] for A.Y 2014-15 (Copy placed on record).

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions 6. Per contra the Learned Departmental Representative (for short 'D.R) relied on the orders of the lower authorities. It was submitted by the Ld. D.R that as the issue was sub judice and recovery work from NSEL was also in progress, therefore, the 'writing off a part of the outstanding debt due towards the assessee from NSEL was premature and had rightly been rejected by the lower authorities. 7. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities, material available on record, as well as the judicial pronouncements relied upon by them. Admittedly, the assessee had been carrying out purchase and sale of commodities on the platform of NSEL through M/s Motilal Oswal Commodities Broker Private Limited. The assessee company as on 30.09.2013 had an outstanding receivable of Rs. 7,94,79,966/- from NSEL. The NSEL which had started functioning in the year 2007 was an exchange for trading in commodities, acting as a platform for automated trading system for conducting spot trading in commodities. Later, the NSEL had introduced the concept of paired traders contracts and would from time to time issues circulars regarding the commencement of spot trading in a particular commodity. The traders would deal in purchase and sale of commodities on the exchange platform by trading in the paired traders contract through brokers over an electronic platform. As per the bye-laws of NSEL, it acted as a legal counter party in respect of transactions executed and also guaranteed the settlement of net financial obligations. The traded commodities were claimed to be kept in the designated warehouses controlled by NSEL. The exchange used to issue delivery allocation report for the purchase transaction. The warehouse receipts were kept in the custody of exchange and the same were tendered by NSEL against the commodity pay-in obligation of the client. 8. As is discernible from the orders of the lower authorities, the assessee had entered into numerous paired traders contracts in which it bought the commodities and obtained allocation report in lieu of warehouse receipts. As observed by us hereinabove, a scam was unearthed in July, 2013, which revealed that NSEL had defaulted in its payment obligation to its various Investors and traders from August, 2013. On a perusal of the records, we find, that the assessee company which was one of the trader in NSEL could recover only an amount of Rs. 58 lacs (approx.), as against its outstanding dues of Rs. 8,22,62,078/- on 01.08.2013. As such, the balance outstanding due by NSEL towards the assessee amounted to Rs. 7,64,90,724/-, As can be gathered from the orders of the lower authorities, the NSEL investors forum of which the assessee is also a member had filed a writ petition with the Hon'ble High Court of Bombay, which had thereafter appointed a committee for monitoring the recovery process. Also, the EOW of Mumbai Police, SFIO and SEBI are also conducting investigations in the aforesaid case. As observed by us hereinabove, the assessee had also recovered an amount of Rs. 58 lacs from NSEL in two parts viz. (1) amount received in FY 2013-14 Rs. 56,14,948/- and (ii) amount received thereafter Rs. 1,56,406/-. We find that in the totality of the facts, the management of the assessee company being of the view that the full outstanding amount of Rs. 7,64,90,724/- could not be recovered from NSEL, had thus 'written off 25% of the aforesaid amount i.e. Rs. 1,98,70,000/- as 'bad debts' in its books of accounts on 30.09.2013. 9. Our indulgence in the present appeal has been sought by the assessee for adjudicating the solitary issue as to whether the 'writing off of 25% of the outstanding amount from NSEL as 'bad debt' by the assessee is in order, or

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions not. As observed by us hereinabove, it is a matter of fact borne from the records that pursuant to a scam unearthed in July, 2013, it surfaced that NSEL had defaulted in meeting out its payment obligations towards the various investors and traders from August, 2013. Admittedly, the recovery process from NSEL was being monitored by a committee appointed by the Hon'ble High Court of Bombay. Also, the matter was under Investigation of EOW of Mumbai Police, SFIO and SEBI. Apart from that, it is matter of fact bome from the records that the assessee had recovered an amount of Rs. 58 lacs from NSEL. As observed by us hereinabove, both the lower authorities had declined the assesses claim of 'bad debt', for the reason, that as the matter was under investigation and the seized assets of NSEL and its beneficiaries are yet to realized, therefore, it would be premature to treat any part of the amount receivable by the assessee from NSEL as bad debt. We have given a thoughtful consideration and are unable to persuade ourselves to subscribe to the view taken by the lower authorities. As per the post amended Sec. 36(1)(vii), as had been made available on the statute vide the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 01.04.1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the 'debt" is 'written off as irrecoverable in the accounts of the assessee. Admittedly, in the case before us, the assessee company had 'written off 25% of the balance outstanding from NSEL i.e. Rs. 1,98,70,000/- as a 'bad debt in its books of accounts for the year under consideration. As observed by us hereinabove, the only reasoning for declining of the aforesaid claim of the assessee by the lower authorities was that as the case was under investigation and the seized assets were yet to be realized, therefore, the aforesaid claim of the assessee was premature. In our considered view, the aforesaid observations of the lower authorities are not in conformity with the settled position of law. As observed by the Hon'ble Supreme Court in the case of TRF Ltd. Vs. CIT (2010) 323 ITR 397 (SC), as per the post-amended Sec.36(1) (vii), it is not necessary for the assessee to establish that the debt in fact, had become irrecoverable. It is enough if the 'bad debt' is written off as irrecoverable in the accounts of the assessee. As per the aforesaid settled position of law, we are of the considered view that now when the assessee holding a conviction that the entire amount receivable from NSEL could not be recovered, had thus 'written off 25% of the entire receivable amount i.e. Rs. 1,98,70,000/- in its books of accounts, therefore, there was no justification on the part of the lower authorities to have declined the said claim of deduction so raised by the assessee. Apart from that, we find, that the said issue also covered by the view taken by a coordinate bench of the Tribunal in the case of a 'sister concern' of the assessee company viz. M/s Remi Securities and Engineering Limited vs. ACIT, Circle 13(3)(1), Mumbai [ITA No. 3650/Mum/2108; dated 06.09.2019] for A.Y 2014-15. Accordingly, in terms of our aforesaid observations and finding no reason to take a view different from that arrived at by the Tribunal in the case of the 'sister concern' of the assessee company, we herein 'set aside' the order of the CIT(A) and vacate the disallowance of the assesses claim for 'bad debt' of Rs. 1,98,70,000/-.” 4. Thus, respectfully following the aforesaid order of the Tribunal, which has been followed by the CIT(A) and also applies mutatis mutandis in the present year, the order of Ld. CIT(A) is upheld and accordingly, the appeal of the Revenue is dismissed.”

ITA No. 106/Mum/2026; A.Y. 2014-15 Money Magnum Constructions 18. In light of aforesaid discussion and in the entirety of facts and circumstances of the case, we find merit in the contention so advanced by the ld. AR and hereby direct the Assessing Officer to allow the loss so claimed by the assessee amounting to Rs. 8,68,70,608/-as eligible for set off against other business income.

Order pronounced on 23.06.2026

Sd/- Sd/- RAHUL CHAUDHARY VIKRAM SINGH YADAV (JUDICIAL MEMBER) (ACCOUNTANT MEMBER)

Mumbai, Dated: 23.06.2026 Karishma J. Pawar, Sr. PS Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file

By Order

Dy./Asst. Registrar I.T.A.T, Mumbai