INCOME TAX OFFICER, WARD-3(3)(2), AHMEDABAD vs. KRUNAL MAHESHCHANDRA SONI, AHMEDABAD

The relevant facts required for adjudication of this appeal are that, based on the information received by the Assessing Officer (AO), that the assessee had entered into high value financial transactions totaling to an amount of Rs.153.65 cr. and keeping in view the fact that the assessee has not filed return of income to the relevant assessment year, notice u/s.148 has been issued to the assessee. The assessee failed to comply to the notices issued u/s.148 and 142(1) of the Act as well as to the show-cause notice issued by the Assessing Officer to the assessee. Owing to the non- compliance by the assessee to the notices issued by the Assessing Officer and keeping in view the total transaction value of the two segments of “shares” and “Futures & Options” amounting to Rs.269.35 crores done by the assessee, the Assessing Officer treated the entire transactions as “Speculative Transaction” in terms of section 43(5) of the Income-tax Act. Having treated the transaction as “Speculative Transaction”, the Assessing Officer determined the net profit @ 6% on the total transactions and computed the net profit of Rs.16.16 cores.

Aggrieved with the determination of net profit of Rs.16.16 Crore, assessee filed an appeal before the Ld. CIT(A).

The Ld. CIT(A) held that the transactions conducted by the assessee were of Intraday transactions in “shares” as well as in “Futures & Options” The Ld.CIT(A), examined the value of sales and purchase of future and option as well as Intraday share transaction undertaken by the assessee and tabulated volumes and the profit which is as under: Particulars Intraday Transaction Future & Option Transaction Sales Value Rs.15,365,98,894/- Rs.116,92,08,925/- Less: Purchase Value Rs.153,61,26,863/- Rs.116,89,80,697 Profit Rs.4,72,031/- Rs.2,49,471/- Less: Trading Expenses Rs.5,68,800/- Rs.2,49,471/- Net Loss Rs.96,769/- Rs.21,243/-

The Ld.CIT(A) held that had the AO has called the details by the broker by issuing notice u/s.133(6) of the Income Tax Act, the AO could have refrained from making such high value transaction as undisclosed income. Having said, so the Ld.CIT(A) has directed the AO to verify the net profit for both the accounts namely intraday transactions, future and option transactions to determine the net profit after obtaining the details from the broker. The Ld.CIT(A), has also directed the assessee to comply with the notices issued by the AO and provide the relevant details. Thus, the matter effectively stands remanded to the AO for examination of the entire transaction in toto by the Ld. CIT(A).

Aggrieved with the order of the Ld.CIT(A), the revenue filed appeal before the Tribunal. The grounds raised by the revenue are as follows:

Having gone through the records before us and also hearing the arguments put forward by both the authorities, we clearly find that the Ld.CIT(A) has not accorded any relief to the assessee but has remanded the matter to the AO to verify the entire transaction of value of Rs.269.35 crores and then to determine the correct taxable profits. Thus, we find there is no reason for grievance to the revenue to appeal on the same issue before the Tribunal. Since the matter has been remanded to the AO by the Ld.CIT(A), we hold that the appeal filed by the revenue is liable to be dismissed. The directions issued to the Assessing Officer by the Ld.CIT(A), vide the order dated 11.07.2024 to verify the total transaction undertaken by the assessee stands affirmed by this Tribunal.

In the result, the appeal of the Revenue is dismissed. Order pronounced via video conferencing on 13.01.2025