DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 2 1 1 AHMEDABAD, AHMEDABAD vs. SUNALI BIREN SHAH, AHMEDABAD

The Department has raised the following grounds of appeal: “1. Whether on facts and circumstances and in law, the Ld. CIT(A) has erred in deleting addition of Rs. 47,12,212/- made when the assessee has systematically evaded taxes by misuse of the NMCE platform through accommodation entries with the help of entry operators and thereby tried to introduce unaccounted money in the garb of contrived profits/losses?

Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in ignoring the fact that the assessee had booked fictitious profit/loss of Rs.47,12,212/- by trading with Divya Commodities through the NMCE platform, being premeditated tax evasion arrangement?

The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary.

It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored.”

The assessee has raised the following grounds of appeal in Cross Objection: “1. The Ld. CIT(A) – NFAC after carefully considering the facts of the case, submission of the Respondent as well as various judicial pronouncements relied upon by the Respondent, has correctly deleted the addition made by the A.O. u/s. 143(3) r.w.s. 147 of the Act of Rs. 47,12,212/-.

Your Respondent craves right to add, amend, alter, modify, substitute, delete or modify all or any of the above grounds of cross objection.”

The brief facts of the case are that the assessee, an individual, filed her return of income for A.Y. 2011-12 on 27.01.2011 declaring a total income of ₹3,25,091/-. The return was processed under section 143(1) of the Income-tax Act, 1961 (“the Act”). Subsequently, based on information received from the Investigation Wing alleging misuse of the National Multi Commodity Exchange (NMCE) platform and systematic tax evasion by certain clients/members through booking of fictitious profits and losses, reassessment proceedings under ITA No. 1726/Ahd/2025 & C.O. No. 84/Ahd/2025 DCIT vs. Sunali Biren Shah & Sunali Biren Shah vs. DCIT Asst. Year–2011-12 - 3–

1 During the reassessment proceedings, the Assessing Officer relied upon information received from the Investigation Wing and also obtained details from NMCE by issuing a notice under section 133(6) of the Act. On the basis of the reply received from NMCE, the Assessing Officer held that the assessee had booked contrived and fictitious profits and losses through synchronised and manipulated transactions. According to the Assessing Officer, the assessee had allegedly earned bogus profit of ₹5,37,812/- and booked bogus loss of ₹41,74,400/-, aggregating to ₹47,12,212/-. Holding that these transactions were non-genuine and fictitious, the Assessing Officer added the entire amount of ₹47,12,212/- to the total income of the assessee and assessed the total at ₹50,64,290/-. Interest under sections 234A and 234B was charged and penalty proceedings under section 271(1)(c) were also initiated.

Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). In the grounds of appeal, the assessee primarily challenged the addition of ₹47,12,212/- on the ground that the Assessing Officer had erred in treating genuine commodity transactions carried out through a recognised commodity exchange as fictitious merely on the basis of suspicion, surmises and information from the Investigation Wing. It was contended that the Assessing Officer failed to properly consider the submissions and documentary evidence furnished by the assessee, including contract notes, broker ledger accounts, contra confirmations, bank statements and books of account, all of which established the genuineness of the transactions. The assessee further contended that the Assessing Officer relied

1 The Commissioner of Income-tax (Appeals), after considering the assessment order, the grounds of appeal and the submissions made by the assessee, adjudicated the appeal ground-wise. With respect to Grounds Nos. 1 to 10 relating to the addition of ₹47,12,212/-, the CIT(A) noted that although the Assessing Officer alleged contrived profit and loss based on information from the Investigation Wing and NMCE, the assessee had disclosed profit of ₹15,01,000/- from NMCE transactions and had not claimed any loss in her return. The CIT(A) observed that the assessee had furnished complete details

2 The CIT(A) further found merit in the assessee’s contention that the Assessing Officer had adopted a pick-and-choose method, particularly in relation to the transaction dated 11.10.2010, where part of the purchase value was treated as non-genuine while the remaining purchase and the entire sale value were accepted as genuine. The CIT(A) held that such an approach was arbitrary and contrary to settled principles of law, as a transaction must be examined and accepted or rejected as a whole unless supported by cogent evidence. In the absence of any evidence of cash flow, collusion, or manipulation, and considering that all transactions were duly recorded in the books and supported by documentary evidence, the CIT(A) concluded that the addition of ₹47,12,212/- had no factual or legal basis. Accordingly, the addition was deleted and Grounds Nos. 1 to 10 were allowed.

3 As regards Ground No. 11 relating to charging of interest under sections 234A and 234B and Ground No. 12 relating to initiation of penalty proceedings under section 271(1)(c), the CIT(A) held that since the substantive addition itself had been deleted, these grounds became consequential and infructuous. Accordingly, these grounds were dismissed as infructuous.

4 In the result, the Commissioner of Income-tax (Appeals) partly allowed the appeal of the assessee by deleting the addition of ₹47,12,212/- made by the ITA No. 1726/Ahd/2025 & C.O. No. 84/Ahd/2025 DCIT vs. Sunali Biren Shah & Sunali Biren Shah vs. DCIT Asst. Year–2011-12 - 6–

The Department is in appeal before us against the order passed by CIT(Appeals). The assessee has also filed a cross-objection primarily supporting the observations made by CIT(Appeals) in the appellate order.

Before us, Ld. DR has placed reliance on the observations made by the Assessing Officer in the assessment order. In response, the assessee placed reliance on the observations made by CIT(Appeals) in the appellate order, the Counsel for the assessee submitted that CIT(Appeals) has correctly observed that the assessee has made a profit to the tune of 15 lakhs whereas the Assessing Officer has reopened assessment proceedings against the assessee on the ground that the assessee has booked fictitious losses.

We have heard the rival contentions and perused the material on record.

The Department is in appeal against the order of the CIT(Appeals) deleting the addition of ₹47,12,212/- made by the Assessing Officer on account of alleged contrived and fictitious profit/loss arising from commodity transactions carried out on the NMCE platform. The learned Departmental Representative has relied upon the findings recorded by the Assessing Officer in the assessment order, whereas the learned counsel for the assessee has strongly supported the order of the CIT(Appeals) and submitted that the reopening itself proceeded on an incorrect factual premise that the assessee had booked fictitious losses, whereas in reality the assessee had earned profit which was duly offered to tax.

On consideration of the facts on record, we find that the CIT(Appeals) has passed a well-reasoned and detailed order after examining the entire material available. It is undisputed that the assessee had not claimed any loss in her return of income for the year under consideration and, on the contrary, had disclosed profit from the NMCE transactions which was offered to tax. The assessee had furnished complete details of all commodity transactions carried out through a registered broker on the NMCE platform, including contract notes, broker ledger accounts, contra confirmations, bank statements and books of account. These details were found to be matching with the information obtained by the Assessing Officer directly from NMCE under section 133(6) of the Act. We note that the Assessing Officer has not pointed out any discrepancy between the transactions recorded in the books of the assessee and the data received from NMCE, nor has he brought on record any independent material or evidence to establish that the transactions were fictitious, manipulated or synchronized with a view to generate artificial profit or loss. The addition has been made primarily on the basis of general information from the Investigation Wing, without any specific evidence linking the assessee to any alleged modus operandi. We also find considerable force in the finding of the CIT(Appeals) that the Assessing Officer has adopted an impermissible pick-and-choose approach by treating part of the same transaction as genuine and another part as non-genuine, particularly in respect of the transaction dated 11.10.2010. 11. In view of the above facts, we are in agreement with the conclusion of the CIT(Appeals) that the addition of ₹47,12,212/- has no factual or legal basis and was rightly deleted. We find no infirmity or perversity in the order of the CIT(Appeals) warranting interference by us. Consequently, the grounds raised by the Department challenging the deletion of the addition are dismissed.

As regards the assessee’s cross-objection, since the substantive addition itself has been deleted and we have upheld the order of the CIT(Appeals) on merits, the assessee’s cross-objection are allowed.

In the result, the appeal filed by the Department is dismissed the Cross Objection filed by the assessee is allowed. This Order pronounced in Open Court on 16/12/2025 (DR. BRR KUMAR) JUDICIAL MEMBER Ahmedabad; Dated 16/12/2025