KARAN MAHESHWARI vs. ASSISTANT COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE - 8(4), MUMBAI

1/17 907.WPL-37211-2022.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

WRIT PETITION (L) NO.37211 OF 2022 Karan Maheshwari Age – 39 Years, Occupation – Investor, 47B, Ahuja Towers, Raja Bhau, Anant Desai Marg, Mumbai – 400 025 ) ) ) ) ….Petitioner V/s. 1. Assistant Commissioner of Income Tax, Central Circle – 8(4), Mumbai having his office at Room No.658, 6th Floor, Aaykar Bhavan, Maharshi Karve Road, Mumbai – 400 020 ) ) ) ) ) 2. Chief Commissioner of Income Tax (Central)-1, having his office at Room No.423, 4th Floor, Aaykar Bhavan, Maharshi Karve Road, Mumbai – 400 020 ) ) ) ) 3. Union of India through the Secretary, Department of Revenue, Ministry of Finance, 2nd Floor, Aaykar Bhavan, Maharshi Karve Road, Mumbai – 400 020 ) ) ) ) ) ….Respondents ---- Mr. Gautam Thacker i/b. Ms. Jinal Shah for petitioner. Mr. Devvrat Singh for respondents – Revenue. ---- CORAM : K. R. SHRIRAM & DR. NEELA GOKHALE, JJ.

DATED : 8th MARCH 2024 ORAL JUDGMENT (PER K.R. SHRIRAM, J.) : 1 Since the pleadings are completed, we decided to dispose the matter at the admission stage itself. 2 Therefore, Rule. Rule made returnable forthwith. Gauri Gaekwad 2024:BHC-OS:4658-DB CNR No : HCBM020372172022 Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27

2/17 907.WPL-37211-2022.doc 3 Petitioner challenges a show cause notice dated 20th August 2022 issued by respondent no.1 under Section 148A(b) of the Income Tax Act, 1961 (the Act), order dated 30th September 2022 passed by respondent no.1 under Section 148A(d) of the Act and notices dated 30th September 2022 and 7th October 2022 issued under Section 148 of the Act. 4 Petitioner is an individual who makes investments in shares, stocks, securities and mutual funds including equity funds and debt funds. 5 On or about 13th June 2015 JM Financial Mutual Fund had made a public announcement stating that its trustees had approved the declaration of dividend for all persons holding JM Balanced Fund – (Direct) Quarterly Dividend Option units as of the record date which had been fixed at 18th June 2015. Taking note of this public notice, petitioner invested an amount of Rs.1,10,00,000/- and acquired 4,16,649.306 units on 17th June 2015. Subsequently on 25th August 2015 petitioner invested an amount of Rs.6,00,00,000/- and acquired 27,96,707.343 units. 6 During the previous year relevant to Assessment Year 2016- 2017 petitioner received dividends of Rs.19,79,084/- on 18th June 2015, Rs.1,28,53,426/- on 26th December 2015 and Rs.1,92,80,140/- on 30th March 2016 aggregating to Rs.3,41,12,650/-. On 31st March 2016 petitioner transferred the units for a consideration of Rs.3,61,19,053/- and Gauri Gaekwad Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27

3/17 907.WPL-37211-2022.doc thereby incurred a short term capital loss on the sale of the units. After considering the aforesaid dividend earned and the short terms capital loss incurred, petitioner determined his total income for Assessment Year 2016- 2017 at Rs.66,44,040/- and filed return of income accordingly on 4th August 2016. 7 Petitioner’s case was selected for scrutiny assessment on 16th December 2018 and an assessment order dated 16th December 2018 was passed under Section 143(3) of the Act making an addition of Rs.3,50,000/-. Petitioner has preferred an appeal before the Commissioner of Income Tax (Appeals) which is still pending. 8 Thereafter petitioner received a notice dated 2nd June 2021 under Section 148 of the Act alleging that there was information that petitioner had received dividend amounting to USD 57548. Petitioner replied to the notice which was converted into a notice under Section 148A(b) of the Act pursuant to the order of the Apex Court in Union of India V/s. Ashish Agarwal1. The reopening proceedings were dropped by an order dated 26th July 2022 passed under Section 148A(d) of the Act. It will be necessary to note that the Assessing Officer, even at that stage was examining the dividend that petitioner had earned and had not found in the matter at hand any illegality or irregularity in the transactions of petitioner. 1 (2022) 444 ITR 1 (SC) Gauri Gaekwad Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27

4/17 907.WPL-37211-2022.doc Interestingly the present issue relates mainly to the dividend that petitioner had earned from the said JM Financial mutual fund. 9 Within less than a month, i.e., on 20th August 2022 respondent no.1 issued the impugned show cause notice under Section 148A(b) of the Act alleging that he had information which suggested that petitioner’s income chargeable to tax for Assessment Year 2016-2017 had escaped assessment within the meaning of Section 148 of the Act. The notice reads as under : 1. Whereas I have information which suggests that income chargeable to tax for the Assessment Year 2016-17 has escaped assessment within the meaning of Section 147 of the Income-tax Act, 1961. In the instant case, information was uploaded by the DDIT (Inv.). Unit-3(1), Mumbai, on INSIGHT PORTAL of Income Tax Department flagged under 'High Risk CRIU/VRU Information' that a survey action u/s. 133A of the I.T. Act, 1961 in the case of M/s. JM Financial Asset Management Limited ("JM Financial") situated at 7th & 8th Floor, Appa Saheb Marathe Marg, Cynergy, Prabhadevi, Mumbai was conducted by DDIT, Unit 3(1), Mumbai on 15.02.2021. In the course of survey, it was found that JM Balanced Fund- Annual Dividend Option Regular scheme (the "Plan") of JM Financial had manipulated accounting methodology so as to artificially inflate the distributable surplus. In the process, the SEBI guidelines have been flouted by the J M Mutual Fund by classifying a portion of capital as distributable surplus and thereafter artificial payout to the investor in the form of dividend. As per the information received, the investors, in order to reduce their tax liability, entered into these sham transactions and received dividend and Short-Term Capital Loss. As a result, the dividend is not eligible for deduction u/s 10(35) of the I.T. Act and short-term capital loss is also not eligible for adjustment with other capital gains, being generated on account of sham transaction. In fact, being distributed out of capital itself, such dividend should be reduced from the cost of investment with resulting reduction Gauri Gaekwad Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27

5/17 907.WPL-37211-2022.doc in short term capital loss. The assessee is one the persons who claimed fictitious short term capital loss. As per the information, the assessee is one of the beneficiaries, who have received dividend and claimed fictitious losses in equity / derivative trading in JM Equity Hybrid Fund-Quarterly Dividend of JM Financial Asset Management Limited, to the tune of Rs.3,41,12,651/- during the F.Y. 2015-16 relevant to the A.Y. 2016-17 as under : Sr. No. Source PAN Source PAN Name Informati on FY Informatio n Type Informati on Value Information Date Remarks 1 AAACJ2578F JM FINANCIAL ASSET MANAGEMENT LIMITED 2015-16 Fictitious Losses in Equity/ Derivative Trading 12853427 26-12-2015 JM Equity Hybrid Fund- Quarterly Dividend 2 AAACJ2578F JM FINANCIAL ASSET MANAGEMENT LIMITED 2015-16 Fictitious Losses in Equity /Derivative Trading 19280140 30-03-2016 JM Equity Hybrid Fund- Quarterly Dividend 3 AAACJ2578F JM FINANCIAL ASSET MANAGEMENT LIMITED 2015-16 Fictitious Losses in Equity /Derivative Trading 1979084 18-06-2015 JM Equity Hybrid Fund- Quarterly Dividend On-going through the computation of income of Karan Manoj Maheshwari for the A.Y. 2016-17, it is observed that the assessee has claimed short term capital loss of Rs.3,53,81,939/-, which prima facie appears to be arising from redemption of mutual fund units and the same has been adjusted against the long-term capital gain of Rs.3.91,15,103/-. Further, from the perusal of Schedule EI of the ITR for A.Y. 2016- 17, it is seen that the assessee has claimed dividend income of Rs.3,43,69,339/-. In this case, the assessee has received dividend and claimed fictitious losses in JM Equity Hybrid Fund-Quarterly Dividend of JM Financial Asset Management Limited, to the tune of Rs.3,41,12,651/- during the F.Y. 2015-16 relevant to the A.Y. 2016- 17. 2. You are required to show-cause as to why, in view of the details & supporting evidence contained in enclosures mentioned in point number 1 above, a notice under section 148 of the Income-tax Act, 1961 should not be issued. Gauri Gaekwad Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27

6/17 907.WPL-37211-2022.doc 3. You may submit your reply to this notice, along with supporting documents (if any) on the above-mentioned issues on or before 26.08.2022 electronically at www.incometax.gov.in. 10 Petitioner filed objections to this notice by letter dated 25th August 2022. The crux of his objections were as follows : (i) Petitioner was not provided with the complete information, documents, affirmed statements, enquiry report and any material linking petitioner with the scam by JM Financial. (ii) Additional investment was genuine and he was to invest in the units based on a public announcement made by JM Financial, where in details of the dividend proposed were provided. Moreover, JM Financial, being a reputed name, petitioner had no reason to believe any untoward business being conducted by JM Financial, (iii) As an investor, petitioner was neither aware nor had any control over activities by JM Financial. (iv) The notice of reopening assessment was barred by limitation. Thus it is petitioner’s case that without providing him with any information as requested, the department proceeded to pass the impugned order dated 30th September 2022. Gauri Gaekwad Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27

7/17 907.WPL-37211-2022.doc 11 Mr. Gautam Thacker contended that firstly, petitioner cannot be held to be responsible for any transaction or violation of law by JM Financial. Petitioner was merely an investor in the mutual fund and had neither any control nor any knowledge of any activities, illegal, or otherwise being conducted by JM Financial. It is not even so alleged in the notice. Secondly, petitioner had made investments through banking channels that are reflected in its books of account and there is no reason to believe the same to be anything less than genuine. Thirdly, the notice and the order, impugned herein, are based merely on information allegedly received from the DDIT (Inv)-3(1), Mumbai, and petitioner's implication in the matter is purely based on conjectures and surmises. Fourthly, the information provided in the notice is ambiguous and does not establish any live link with evidence that income of assessee has escaped assessment. Lastly, the jurisdictional pre-conditions have not been satisfied, rendering the reassessment proceedings, illegal and bad in law. Mr. Thacker thus, seeks quashing of the notice and order impugned herein. 12 Mr. Singh defended the reopening of assessment by placing the onus of demonstrating that the dividend income and capital loss shown in his income tax return from the investment made in JM Financial Mutual Fund is not a result of a sham transaction undertaken by the said JM Financial Mutual Fund completely on petitioner. Mr. Singh contended that Gauri Gaekwad Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27

8/17 907.WPL-37211-2022.doc the information available with the Assessing Officer is in light of the findings from the survey action under Section 133A of the Act on JM Financial. Mr. Singh further stated that petitioner is not eligible to claim exempt dividend income under Section 10(35) of the Act and also not eligible to adjust the fictitious, short-term capital loss against the long-term capital gains, being generated on account of sham transactions by JM Financial. The thrust of Mr. Singh’s argument revolves around the sham transactions and illegalities allegedly committed by JM Financial. Mr. Singh draws our attention to paragraph 7.4 of the impugned order which contains statements of Mr. Chhabria, the Fund Manager, Mr. Suvendra Rakshit, the Head of Sales Team, Mr. Deepan Doshi, the Institutional Sales Head, and Mrs. Diana D'sa, the Compliance Head of JM Financial. All these persons, according to Mr. Singh, have admitted that the due process mandated by SEBI has not been followed by JM Financial. Mr. Singh urged to dismiss the petition. 13 It is necessary to observe that the officer has conveniently not mentioned the date on which he received the information because the earlier notice for reopening on the basis of dividend earned by petitioner was issued on 2nd June 2021 and closed on 26th July 2022. We should note that the notice now issued also does not indicate when the information was uploaded and when the Income Tax Department flagged the information Gauri Gaekwad Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27

9/17 907.WPL-37211-2022.doc under high risk CRIU/VRU information. Admittedly, petitioner had sought various documents from the department. Without providing any information as requested, the impugned order was passed. Surprisingly, the Assessing Officer has relied upon information which has not been made available to petitioner. Petitioner has admittedly been found blameworthy of acts which he has not been permitted to defend on merits. Petitioner was not given an opportunity to meet and explain his actions based on information withheld from him on one hand but used against him on the other. 14 Without providing any information, as sought for by petitioner, the impugned order dated 30th September 2022 under Section 148A(d) of the Act has been passed. In the order, things which have not been made available to petitioner has been relied upon. 15 It is the contention of department that between 23rd April 2015 and 15th June 2015 the mutual fund received an inflow of Rs.19.18 Crores. Thereafter between 15th June 2015 and 18th June 2015 there was an inflow of Rs.2719.33 Crores in the mutual fund. Between 20th June 2015 to 27th December 2015 a further inflow of Rs.2259.28 Crores was made in the mutual fund and between 28th December 2015 to 30th June 2016 there was a further inflow of Rs.4698.28 Crores into the mutual fund. In this, petitioner’s investment was only Rs.1,10,00,000/- on 17th June 2015 and Gauri Gaekwad Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27

10/17 907.WPL-37211-2022.doc Rs.6,00,00,000/- on 25th August 2015. 16 It is thus clear that petitioner is only a small fry in the larger scheme of things and in fact himself a victim of the alleged fraud of JM Financial and again being victimised by the Assessing Officer. Even in the order where it is mentioned that statement of the key management personnel of the mutual fund was recorded, there is nothing to indicate that petitioner was part of the alleged sham mutual fund. Infact in paragraph 7.4 of the impugned order referred to by Mr. Singh, in the statement of Mr. Suvendu Rakshith, it is recorded that the sales team had been passing on the hints to the distributors about the prospective dividend distribution, much in advance, “to lure” the prospective clients. Admittedly petitioner was not a distributor and was only a client. 17 In the notice issued under Section 148A(b) of the Act, it is alleged that petitioner was one of the persons who claimed fictitious short term capital loss. There is nothing in the notice to indicate on what basis it is alleged that the short term capital loss claimed was fictitious. Petitioner had, based on public announcement, invested in the mutual fund. The fact that petitioner received tax free dividend fund cannot be held against petitioner. The fact that petitioner had suffered a loss also cannot be held against petitioner. Even assuming that the transaction was pre-planned, there is nothing to impeach the genuineness of the transaction. Petitioner Gauri Gaekwad Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27

11/17 907.WPL-37211-2022.doc was free to carry on his business which he did within the four corners of law. Mere tax planning without any motive to evade taxes through colourable devices is not frowned upon even by the judgment of the Apex Court in McDowell & Co. Ltd. V/s. Commercial Tax Officer2. Paragraphs 18 and 20 of the judgment of the Apex Court in Commissioner of Income Tax, Mumbai V/s. Walfort Share & Stock Brokers (P). Ltd.3 read as under : 18. The next point which arises for determination is whether the "loss" pertaining to exempted income was deductible against the chargeable income. In other words, whether the loss in the sale of units could be disallowed on the ground that the impugned transaction was a transaction of dividend stripping. The AO in the present case has disallowed the loss of Rs. 1,82,12,862 on the sale of 40% tax-free units of the mutual fund. The AO held that the assessee had purposely and in a planned manner entered into a pre-meditated transaction of buying and selling units yielding exempted income with the full knowledge about the guaranteed fall in the market value of the units and the payment of tax-free dividend, hence, disallowance of the loss.

xxxxxxxxxxxxx 20. The real objection of the Department appears to be that the assessee is getting tax-free dividend; that at the same time it is claiming loss on the sale of the units; that the assessee had purposely and in a planned manner entered into a pre-meditated transaction of buying and selling units yielding exempted dividends with full knowledge about the fall in the NAV after the record date and the payment of tax- free dividend and, therefore, loss on sale was not genuine. We find no merit in the above argument of the Department. At the outset, we may state that we have two sets of cases before us. The lead matter covers assessment years before insertion of Section 94(7) vide Finance Act, 2001 w.e.f. 1.4.2002. With regard to such cases we may state that on facts it is established that there was a "sale". The sale-price was received by the assessee. That, the assessee did receive dividend. The fact that the dividend received was tax-free is the position recognized under Section 10(33) of the Act. The 2 1985 (154) ITR 148 (SC) 3 (2010) 192 Taxman 211 (SC) Gauri Gaekwad Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27

12/17 907.WPL-37211-2022.doc assessee had made use of the said provision of the Act. That such use cannot be called "abuse of law". Even assuming that the transaction was pre-planned there is nothing to impeach the genuineness of the transaction. With regard to the ruling in McDowell & Co. Ltd. v. Commercial Tax Officer [154 ITR 148(SC)], it may be stated that in the later decision of this Court in Union of India v. Azadi Bachao Andolan [263 ITR 706(SC)] it has been held that a citizen is free to carry on its business within the four corners of the law. That, mere tax planning, without any motive to evade taxes through colourable devices is not frowned upon even by the judgment of this Court in McDowell & Co. Ltd.'s case (supra). Hence, in the cases arising before 1.4.2002, losses pertaining to exempted income cannot be disallowed. However, after 1.4.2002, such losses to the extent of dividend received by the assessee could be ignored by the AO in view of Section 94(7). The object of Section 94(7) is to curb the short term losses. Applying Section 94(7) in a case for the assessment year(s) falling after 1.4.2002, the loss to be ignored would be only to the extent of the dividend received and not the entire loss. In other words, losses over and above the amount of the dividend received would still be allowed from which it follows that the Parliament has not treated the dividend stripping transaction as sham or bogus. It has not treated the entire loss as fictitious or only a fiscal loss. After 1.4.2002, losses over and above the dividend received will not be ignored under Section 94(7). If the argument of the Department is to be accepted, it would mean that before 1.4.2002 the entire loss would be disallowed as not genuine but, after 1.4.2002, a part of it would be allowable under Section 94(7) which cannot be the object of Section 94(7) which is inserted to curb tax avoidance by certain types of transactions in securities. There is one more way of answering this point. Sections 14A and 94(7) were simultaneously inserted by the same Finance Act, 2001. As stated above, Section 14A was inserted w.e.f. 1.4.1962 whereas Section 94(7) was inserted w.e.f. 1.4.2002. The reason is obvious. Parliament realized that several public sector undertakings and public sector enterprises had invested huge amounts over last couple of years in the impugned dividend stripping transactions so also declaration of dividends by mutual fund are being vetted and regulated by SEBI for last couple of years. If Section 94(7) would have been brought into effect from 1.4.1962, as in the case of Section 14A, it would have resulted in reversal of large number of transactions. This could be one reason why the Parliament intended to give effect to Section 94(7) only w.e.f. 1.4.2002. It is important to clarify that this last reasoning has nothing to do with the interpretations given by us to Sections Gauri Gaekwad Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27

13/17 907.WPL-37211-2022.doc 14A and 94(7). However, it is the duty of the court to examine the circumstances and reasons why Section 14A inserted by Finance Act 2001 stood inserted w.e.f. 1.4.1962 while Section 94(7) inserted by the same Finance Act as brought into force w.e.f. 1.4.2002. (emphasis supplied) 18 It is settled law that the reasons for the formation of the belief that there has been escapement of income must have a rational connection with or relevant bearing on the information. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and his view that there has been escapement of income of the assessee from assessment in the particular year. It is settled law that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched which would suggest escapement of the income of the assessee from assessment. The powers of the Income Tax Officer to reopen assessment, though wide, are not plenary. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The live link or close nexus should be there between the information before the Income Tax Officer and the belief which he has to prima facie form an opinion regarding the escapement of the income of the assessee. The relevant paragraphs of Income Tax Officer V/s. Lakhmani Mewal Das4 read as under : 4 (1976) 103 ITR 437 (SC) Gauri Gaekwad Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27

14/17 907.WPL-37211-2022.doc As stated earlier, the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words "definite information" which were there in section 34 of the Act of 1922 at one time before its amendment in 1948 are not there in section 147 of the Act of 1961 would not lead to the conclusion that action cannot be taken for reopening assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. The powers of the Income-tax Officer to reopen assessment though wide are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi- judicial proceedings. It is, therefore, essential that before such action is taken the requirements of the law should be satisfied. The live link or close nexus which should be there between the material before the Income-tax Officer in the present case and the belief which he was to form regarding the escapement of the income of the assessee from assessment because of the latter's failure or omission to disclose fully and truly all material facts was missing in the case. In any event, the link was too tenuous to provide a Gauri Gaekwad Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27

15/17 907.WPL-37211-2022.doc legally sound basis for reopening the assessment. The majority of the learned Judges in the High Court, in our opinion, were not in error in holding that the said material could not have led to the formation of the belief that the income of the assessee respondent had escaped assessment because of his failure or omission to disclose fully and truly all material facts. We would, therefore, uphold the view of the majority and dismiss the appeal with costs. (emphasis supplied) It is also trite law that while the Court cannot investigate into the adequacy or sufficiency of the reasons, which have weighed with the Income Tax Officer in coming to the belief, the Court can certainly examine whether the reasons are relevant and have a bearing on the matter in regard to which the Assessing Officer is required to entertain the belief before he can issue notice under Section 148 of the Act. If there is no rational or intelligible nexus between the reasons and the belief, the exercise undertaken by the Income Tax Officer can be interfered with. 19 In the notice issued under Section 148A(b) of the Act, the Assessing Officer alleges that JM Financial had manipulated accounting methodology so as to artificially inflate the distributable surplus and the investors, in order to reduce their tax liability, entered into these sham transactions and received dividend and short term capital loss. These are allegations against JM Financial and do not implicate petitioner in any manner. There is nothing to indicate that petitioner had participated knowingly in a sham transaction to reduce his tax liability or to earn Gauri Gaekwad Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27

16/17 907.WPL-37211-2022.doc dividend or book short term capital loss. Infact in the notice, in the first paragraph, it says “……. In the course of survey, it was found that JM Balanced Fund-Annual Dividend Option Regular Scheme (the Plan) of JM Financial had manipulated accounting methodology so as to artificially inflate the distributable surplus ……..”. In the next paragraph, it says “……. investors, in order to reduce their tax liability, entered into these sham transactions and received dividend and short term capital loss ……. The assessee is one the persons who claimed fictitious short term capital loss …….”. In the next paragraph, it says “……. the assessee is one of the beneficiaries, who have received dividend and claimed fictitious losses in equity / derivative trading in JM Equity Hybrid Fund-Quarterly Dividend of JM Financial Asset Management Limited, to the tune of Rs.3,41,12,651/- during the F.Y. 2015-16 relevant to the A.Y. 2016-17 …….”. Therefore, the Assessing Officer is also not clear whether the assessee had booked loss or claimed dividend in the JM Balanced Fund - Annual Dividend Option Regular scheme or JM Equity Hybrid Fund- Quarterly Dividend. This also indicates non application of mind by the Assessing Officer. 20 For all these reasons above, notice dated 20th August 2022 under Section 148A(b) of the Income Tax Act, 1961 (the Act), order dated Gauri Gaekwad Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27

17/17 907.WPL-37211-2022.doc 30th September 2022 under Section 148A(d) of the Act and notices dated 30th September 2022 and 7th October 2022 under Section 148 of the Act are hereby quashed and set aside. 21 Rule is thus made absolute. (DR. NEELA GOKHALE, J.) (K. R. SHRIRAM, J.) Gauri Gaekwad Uploaded on - 19/03/2024 Downloaded on - 27/10/2026 21:48:27 Powered by TCPDF (www.tcpdf.org)