RAJESH NANUBHAI JHAVERI,AHMEDABAD vs. THE DY.CIT, CENTRAL CIRCLE-1(1), AHMEDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: DR. BRR Kumar, Vice President And Shri T. R. Senthil Kumar, Judicial Member

ITA No: 72/Ahd/2025 Assessment Year: 2016-17 Rajesh Nanubhai Jhaveri The Dy.CIT 21, Tapovan Society, Central Circle-1(1), Nr. Manekbaug Hall, Vs Ahmedabad Ambawadi, Ahmedabad-380015 PAN:AAPPJ6927N (Respondent) (Appellant) Assessee Represented: Shri Deepak R Shah, A.R. Revenue Represented: Shri Kamal Deep Singh, Sr. D.R. Date of hearing : 23-04-2026 Date of pronouncement : 11-06-2026 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

This appeal is filed by the Assessee as against the appellate order dated 22-11-2023 passed by the Commissioner of Income Tax (Appeals)-11, Ahmedabad arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2016-17.

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the order of the Ld. CIT(A) was sent to wrong email ID i.e. vickyjhaveri@gmail.com address due to spelling mistake of the email ID. Thus when the assessee verified the pendency of the Ld. CIT(A), he came to know about the order passed by Ld. CIT(A), thereby filed the appeal with the delay of 344 days. The delay is hereby condoned.

Name of Date of Qty purchase Amount Date of sale Amount Loss company purchase and sold Unno 04/05/15 17,00,000 49,30,000 21/05/15 32,30,000 17,00,000 INdustires Ltd. Castex 06/07/15 01,14,000 3,19,20,000 26/08/15 72,23,000 2,46,97,000 Technologies Ltd Amtek Auto 18/08/15 02,55,000 3,39,15,000 20/08/15 1,29,70,000 2,09,45,000 Limited Total 7,07,65,000 2,34,23,000 4,73,42,000

3.1. The Assessing Officer found that the business loss incurred was not found to be correct and issued a show cause notice. The assessee filed a reply. However the A.O. disallowed the claim of loss and added as the income of the assessee.

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also contrary to the facts of the case which emerged during the assessment proceedings. Hence, the impugned addition deserves to be deleted. 2. The ld. CIT(A) has erred in law and on facts in not considering the elaborate submissions of the appellant as well as statements of various parties including the appellant as recorded by the AO, relevant part of which is reproduced by the AO in the assessment order itself. The appellant states that had the ld. CIT(A) properly appreciated the facts mentioned therein in right perspective, it would have been clear that the AO's conclusion that the loss incurred in trading of shares carried out with Shree Vishvamurte Tradeinvest Pvt. Ltd. as arranged bogus loss is not justified, the said conclusion having been arrived at merely on misinterpretation of correct facts 3. The ld. CIT(A) further erred in law and on facts in brushing aside the comprehensive evidences placed on record by the appellant in support of the loss incurred as well as statements of various persons recorded u/s.131 of the Act during the assessment proceedings and proceeded to make the addition thereof considering the same as arranged bogus loss on his make believe theory not supported by any material/evidences and based on his pure personal belief, imagination and wild guess work and therefore the addition based on such make believe theory of the AO and wild guess work deserves to be deleted. 4. The ld. CIT(A) further failed to appreciate that the AO had given inadequate opportunity for filing submissions as well as non-receipt of statements recorded by him apart from the fact that the e-proceedings were closed even prior to the date fixed for filing the reply in response to show cause notice as also admitted by him in the assessment order by stating that it was on account of a technical glitch. The appellant thus states and emphasizes the fact that the addition made by the AO is in flagrant violation of the settled tenets of law in respect of principles of natural justice and equity. Accordingly, the ld.CIT(A) ought to have deleted the addition on this ground itself. 5. The ld. CIT(A) has also erred in law and on facts by not appreciating the fact that the AO while considering the documents/ evidences placed on record by the appellant and the company Shree Vishvamurte Tradinvest Pvt. Ltd. as well as statements recorded by him in which each of the parties involved have confirmed the transactions as self-serving evidence for making the impugned addition has on the other side, he himself failed to bring on record any material/evidences in support of his findings/observations for making the addition except pure guess work and suspicion. Hence disallowance of loss on the basis of such contradictory stands taken by the AO is required to be deleted. 6. The ld. CIT(A) has grievously erred in law and on facts in ignoring the statements of various persons including the appellant recorded on oath

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u/s 131 of the Act as partly reproduced by the AO, in which as the parties have confirmed the transactions of trading in shares carried out by the appellant with Shree Vishvamurte Tradeinvest Pvt. Ltd. and that the AO has also conveniently brushed aside the statement of Saumil Bhavnagari time and again in the assessment order on the observation that he is not connected with the company Shree Vishvamurte Tradeinvest. Pvt. Ltd. in any capacity and is not a legal party to the whole transactions. The appellant submits that Saumil Bhavnagari & his family members are the promoters/shareholders of the company and therefore action of the AO to ignore his statement recorded u/s 131 of the Act for disallowing the loss in the hands of appellant is bad in law. 7. The ld. CIT(A) has also erred in law and on facts in failing to consider the fact that LTCG on sale of shares has arisen in the month of January, 2016 whereas the appellant has incurred the loss in share trading with Shree Vishvamurte Tradeinvest Pvt. Ltd. in the month of May to August 2015 i.e. more than 4 months prior to crystallization of LTCG and therefore presumption of the AO that the appellant in order to reduce his tax liability of LTCG has arranged bogus loss is absurd and highly illogical and therefore the addition based on such observations ought to have been deleted. In view of the above facts and grounds, the addition of Rs.4,73,42,000/- on account of loss incurred by the appellant in trading of shares of 3 Scrips through Vishvamurte Tradeinvest Pvt. Ltd. while considering the said loss as arranged bogus loss is required to be deleted. [III] AO's alternative ground for treating the business loss incurred in trading of shares of 3 scrips through Shree Vishvamurte Tradeinvest Pvt. Ltd. as speculation lossRs.4,73,42,000/- 1. The ld. CIT(A) has erred in not considering the fact that the AO had erred in raising the alternative ground for considering the business loss of Rs.4,73,42,000/- incurred by the appellant in trading of shares of aforesaid 3 scrips as speculation loss and thus concluding that it is not entitled for set off against any other heads of income on observations based on surmises, conjectures, presumptions and assumptions. Hence, the impugned alternative ground of the AO for treating the lass incurred by the appellant as speculation loss is bad in law and requires to be quashed. In view of the above fact, the addition of Rs.4,73,42,000/- on account of alternative ground raised by the AO for considering the said loss as speculation loss is required to be ignored. The appellant craves leave to add, amend, alter, modify or delete any of the above grounds as well as to submit additional grounds at the time of hearing of the appeal.

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6.1. In the present case, the assessee has produced documentary evidence including purchase and sale details of the shares; contract notes; ledger accounts; books of account; confirmations from the broker and statements recorded under section 131 of the Act. The Ld AO has not demonstrated that any of these documents are fabricated or false. The assessment order repeatedly states that the transactions are "arranged" or "bogus". However, apart from drawing inferences and making presumptions, no independent evidence has been brought on record to establish that no purchase actually took place; no sale actually took place; the consideration moved back to the assessee; the broker denied the transactions; or the transactions were merely accommodation entries. Thus, the finding is therefore based on conjectures rather than legally admissible evidence. It is well settled that suspicion, however strong, cannot take the place of proof.

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6.2. The assessee has specifically contended that statements of various persons, including representatives connected with Shree Vishvamurte Tradeinvest Pvt. Ltd., were recorded under section 131 and that such persons confirmed the transactions. Whereas the AO has selectively relied upon portions favourable to the Revenue while disregarding the portions supporting the assessee without assigning convincing reasons. Thus, evidence cannot be accepted in part and rejected in part merely because it does not support the departmental case.

6.3. The AO has further observed that the assessee arranged the loss to reduce tax liability arising from long-term capital gains. This reasoning is not supported by the factual chronology. The assessee has pointed out that the impugned share transactions took place between May and August 2015, whereas the long-term capital gains arose only in January 2016. Thus, the Revenue has not produced any evidence demonstrating that the alleged tax planning existed at the time when the impugned transactions were entered into. Therefore, the conclusion drawn by the AO is speculative.

6.4. The Revenue seeks to disregard transactions supported by documentary evidence. The burden to establish that the apparent is not the real lies upon the Revenue. Except for assumptions and inferences, no material has been brought on record to discharge this burden. The Hon'ble Supreme Court has consistently held that legal conclusions cannot be founded merely upon suspicion or conjecture.

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6.5. Further Hon’ble Gujarat High Court in the case of PCIT vs Gautam N. Jhaveri in Tax Appeal No. 631 of 2017 vide judgment dated 28-08-2017 held as follows: “…3. The Tribunal in the impugned judgment confirmed the view of CIT(Appeals) observing as under : "9. We have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that all the Impugned transactions were routed through Demat accounts. It is also an undisputed fact that the transactions have been done at market rates. Simply because some of the transactions are off market transactions, it cannot be said that such transactions are sham or fake even the off market transactions have been done at market rates. The Assessing Officer has failed to bring any cogent material evidence on record which could suggest that the transactions are sham or bogus. It is pertinent to mention here that wherever there was a profit in similar off market transactions, the AO has accepted the same. Therefore, we do not find any merit in disbelieving the losses incurred by the assessee in the ordinary course of his business. Considering the totality of the facts, we do not find any reason to interfere with the findings of the Id CIT(A). Appeal filed by the Revenue is accordingly dismissed." 4. It can thus be seen that CIT(Appeals) found that the transactions were through Demat accounts. They were confirmed by the opposite parties and payments were made through banking channel. The entire issue therefore, revolves around appreciation of evidence on record. CIT(Appeals) and Tribunal having concurrently come to factual findings, no question of law arises. 5. Counsel for the Revenue however, referred to the appeal memo and contended that in past SEBI had penalised the assessee for indulging into such off-market transactions. Firstly, there is no reference to any such past deeds of the assessee in the order of assessment. Secondly, in any case, even as per the Revenue, the referred instance is relatable to earlier period.”

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account of the broker pending settlement or transfer cannot lead to the conclusion that there was no delivery. The assessee has produced evidence that delivery existed and that the transactions were executed in the normal course of business. Whereas the Ld AO has not produced any contrary evidence to establish that the contracts were squared up otherwise than by delivery. Accordingly, the conditions prescribed under section 43(5) are not satisfied. Therefore, the alternative finding treating the business loss as speculation loss is also unsustainable.

7.1 Considering the totality of facts and circumstances, we hold that the Ld AO has failed to establish by cogent evidence that the impugned share transactions were bogus or arranged transactions. The disallowance has been made primarily on the basis of suspicion, presumptions and conjectures, which cannot substitute legal proof. The documentary evidence produced by the assessee has not been disproved by the Revenue. The alternative finding that the transactions constitute speculative transactions u/s. 43(5) is equally unsustainable. Accordingly, the disallowance of Rs.4,73,42,000 is directed to be deleted and the grounds raised by the assessee are allowed.

Order pronounced in the open court on 11-06-2026

Sd/- Sd/- (DR. BRR KUMAR) (T.R. SENTHIL KUMAR) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : True Copy Dated 11/06/2026 Rajesh आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:-

I.T.A No. 72/Ahd/2025 A.Y. 2016-17 10 Rajesh Nanubhai Jhaveri vs. DCIT 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद