B M TRADERS,SILVASSA vs. ITO, WARD SILVASSA, SILVASSA

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT “SMC” BENCH, SURAT (HYBRID HEARING) BEFORE DR. BRR KUMAR, VICE PRESIDENT & MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A. No.1252/Srt/2025 (Assessment Year: 2014-15) B M Traders, Vs. Income Tax Officer, Shop No. 203, Yogi Complex, Nr. Ward Silvasa, Fire Bridge, Amli, Silvasa-396230 Silvasa [PAN No.AAKFB1239J] (Appellant) .. (Respondent) Appellant by : Shri Rushin Patel, AR Respondent by: Shri Ajay Uke, Sr. DR Date of Hearing 25.03.2026 Date of Pronouncement 13.05.2026 O R D E R PER: SUCHITRA KAMBLE, JM: The appeal filed by the assessee is against the order passed by the Ld. Commissioner of Income Tax (Appeals) (in short “Ld. CIT(A)”), ADDL/JCIT(A), Thane on 14.11.2025 for A.Y. 2014-15.

“1. The order passed by the Learned Commissioner of is bad in law and on facts, as the Ld. CIT(A) failed evidences produced, the verified transactions and furnished by the appellant. The impugned addition of 68 is unjust, arbitrary, and liable to be deleted. 2. The Ld. CIT(A) erred in confirming the addition made under section 68 of the Act solely on the basis of third-party statements/information, without providing any corroborative evidence, without any independent enquiry, and without granting an opportunity of cross-examination to the appellant. 3. The Ld. CIT(A) failed to appreciate that the Assessing Officer had already verified all the details including all transactions executed on BSE/NSE, bank payments through proper banking channels, contract notes, demat statements and the source of the funds, and no defect, discrepancy or adverse material was found. Despite this, the addition was sustained merely on presumption and suspicion.

ITA No. 1252/Srt/2025 B M Traders vs. ITO Asst. Year –2014-15 - 2– 4. The Ld. CIT(A) erred in law by relying on untested, generalized third-party statements which were not related specifically to the appellant and were never confronted to the appellant, in violation of the principles of natural justice. 5. The Ld. CIT(A) failed to appreciate that no material has been brought on record by the Assessing Officer to show that the impugned transactions were bogus, or that the appellant was in any manner involved in any accommodation entry or price rigging activity. 6. The Ld. CIT(A) erred in upholding the addition without establishing any nexus between the appellant and the alleged investigation findings, thereby rendering the order perverse, mechanical, and non-speaking. 7. The Ld. CIT(A) failed to consider that the appellant had discharged its onus by furnishing all documentary evidences proving identity, genuineness of the transactions, and source of funds and therefore, no addition under section 68 was justified. 8. Without prejudice, the addition is excessive, unjustified and liable to be deleted as the same is not supported by any material on record. 9. The appellant craves leave to add, alter, modify, amend, or withdraw any of the above grounds of appeal at the time of hearing.” 3. The assessee has filed return of income for A.Y. 2014-15 on 30.11.2014 declaring total income at Rs. 1,35,560/-. The said return was processed under Section 143(1) of the Act. Statutory notices were issued and the assessee filed the details from time to time. The Assessing Officer observed that the assessee had done purchased and sale of shares, trading in shares, F & O and other related activities. The assessee has shown income under the heads income from business or profession, income from capital gains and income from other sources. The Assessing Officer observed that the assessee derived loss of Rs. 5,09,675/- from limited trading in the stock mentioned at Para 4.5.7 of the assessment order Page No. 14 & 15. The assessee had treated the shares in 2148 numbers on different stocks, the Assessing Officer made addition of Rs. 5,09,675/- as bogus business loss and added the entire amount as a bogus business loss.

ITA No. 1252/Srt/2025 B M Traders vs. ITO Asst. Year –2014-15 - 3– 4. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A), the CIT(A) dismissed the appeal of the assessee.

“5.1.2 The appellant, M/s B.M. Traders, a partnership firm engaged in share trading, including futures & options and intraday transactions, objected to the addition of Rs.5,09,675 u/s 68 of the Income Tax Act. The appellant contended that all transactions were genuine, transparent, and fully verifiable, having been executed through recognized stock exchanges (NSE/BSE), with payments and receipts made via account payee cheques, duly supported by contract notes, broker statements, audit reports, and STT payments. The firm emphasized that it traded in 2,148 different scrips, of which only 21 were questions - representing less than 1 % of total transactions and 0.15% of total trading volume. Such a minor proportion, according to the appellant, cannot justify labelling the activity as suspicious. The books of accounts were duly audited and not rejected, and no unexplained cash credits, unsecured loans, or new capita! introductions were found. Moreover, Section 68 applies to unexplained credits, not to losses or explained transactions recorded in regular books. To support its position, the appellant cited numerous judicial precedents, including CIT v. Orchid Industries Pvt. Ltd. (Bombay HC), CIT v. Nangalia Fabrics Pvt. Ltd. (Gujarat HC), Sunita Jain v. ITO (Ahmedabad ITAT), and Prem Pal Gandhi (Punjab & Haryana HC), along with recent Gujarat High Court and Surat ITAT rulings (2023-2025), all reinforcing that genuine share transactions, supported by documentary evidence and conducted through banking channels, cannot be treated as bogus or unexplained u/s 68 of the Act. 5.1.3 On perusal of the assessment order, the written submissions of the appellant, and the material on record, the appellate authority is of the view that the addition of Rs.5,09,675/- made by the AO u/s 68 of the Income Tax Act, 1961, is justified and requires no interference. The findings of the AO are supported by facts, independent investigation reports, and settled judicial principles. The appellant engaged in large-scale share trading, including transactions in certain

ITA No. 1252/Srt/2025 B M Traders vs. ITO Asst. Year –2014-15 - 4–

penny stocks specifically identified by SEBI and the Income Tax Department as manipulated and used for accommodation entries. Reports of the Directorate of Investigation, Kolkata and Delhi, confirmed circular trading and artificial price rigging in several of these scrips, corroborated by sworn statements of brokers and operators admitting to facilitating bogus long-term capital gains and losses. Although the appellant traded in 2,148 stocks, the impugned loss of Rs 5,09,675/- arose only from 21 scrips - those directly linked to the manipulation network. This selective trading, inconsistent with normal business behaviour, indicates the losses were not genuine but designed to offset taxable income. The appellant submitted books of accounts, contract notes, and bank statements to establish genuineness. However, as held by the Hon'ble Delhi High Court in CIT v. Nova Promoters & Finlease (P) Ltd. [2012] 342 ITR 169 and PCIT v. NDR Promoters Pvt. Ltd. [2019] 410 ITR 379 (Delhi HC), mere production of formal documents does not discharge the onus u/s 68 when surrounding circumstances point to prearranged schemes. In the present case, the appellant failed to substantiate the commercial purpose of these trades or produce counterparties/brokers for verification.”

Therefore, there is no need to interfere with the observation made by the CIT(A) and the appeal of the assessee is dismissed.

Sd/- Sd/- (DR. BRR KUMAR) (SUCHITRA KAMBLE) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 13/05/2026 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, सूरत / DR, ITAT, Surat 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, सूरत / ITAT, Surat 1. Date of dictation 30.04.2026 2. Date on which the typed draft is placed before the Dictating Member 05.05.2026 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 11.05.2026 5. Date on which the fair order is placed before the Dictating Member for pronouncement 13.05.2026 6. Date on which the fair order comes back to the Sr.P.S./P.S 13.05.2026 7. Date on which the file goes to the Bench Clerk 13.05.2026 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order……………………………………