BRIGHT SECURITIES PRIVATE LIMITED,JAIPUR vs. INCOME TAX OFFICER, JAIPUR

ORDER PER: SANDEEP GOSAIN, JM These three appeals have been filed by the assessee against three different orders of the ld. CIT(A) all dated 03-04-2024, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment years 2013-14, 2016-17 and 2016-17 respectively. 2.1 First of all, the Bench takes up the appeal of the assessee in for the assessment year 2013-14 wherein the assessee has raised the following grounds of appeal.

2 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR ‘’1 .Under the facts and circumstances of the case, the Assessing Officer has erred in passing the order u/s 147 read with section 144B of the Income Tax Act, 1961 which is without recording proper reasons.

2. Under the facts and circumstances of the case, the Assessing Officer has erred in making the addition of Rs. 41,34,571/- by disallowing the loss claimed by the assessee as fictitious loss from share transaction in equity derivatives without considering the submission of the assessee. 3.1 It is noted that the ld. AR of the assessee has filed an application dated 21- 05-2024 under Rule 11 of the Income Tax Rules, 1963 for admission of following additional grounds. ‘’1 On the facts and in the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in issuing notice u/s 148 on incorrect facts, hence, the issuance of the same is ab initio void. ‘’2. On the facts and in the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in making addition on a different ground despite that the ground on which notice u/s 148 was issued did not subsist.’’ 3.2 In the application, the assessee has submitted that due to inadvertence, these additional grounds could not be taken up as these are purely of legal in nature and arise out of the order of the AO/ ld. CIT(A). These additional grounds do not require any additional evidence and the same deserves to be admitted for which the ld. AR of the assessee has quoted the following decisions in his support.

1. NTPC Ltd. vs CIT (1998) sd229 ITR 383 (SC)

3 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR 2. Ravindra Aroa vs ACIT (2018) 404 ITR 452 (Raj) – ITAT is found to accept additional ground if facts are on record. 3. Sharwan Beniwak vs ITO, Bikaner ITA No. 292/JU/2008 dated 14-01-2009 – ITAT can admit additional ground of appeal later on in case the issue raised is legal and goes to the root of the matter.

4. Jora Singh vs ITO (2010) 42 DTR 409 (Lucknow)

5. CIT vs Kerala State Cooperative Marketing Federation Ltd. (1992) 193 ITR 624 (Ker.)

6. Mahindra & Mahindra Ltd. vs DCIT (2009) 122 TTJ 577 (Mum (S/B)

7. Sunil Kumar Pugalia (HUF) vs ITO (2009) 120 TTJ 1001 (Jodh)

3.3 On the other hand, the ld. DR objected to the filing of additional grounds made by the ld. AR of the assessee and submitted that the same were not submitted before the lower authorities.

3.4 After hearing both the parties and perusing the materials available on record, the Bench observed that with a view to providing justice to the assesseee, the Bench has no constrain to allow the additional grounds. Hence, the additional grounds raised by the assessee are allowed.

4.1 Apropos ground No. 1 & 2 of the assessee and additional grounds (supra), it is noted that the ld. CIT(A) has dismissed the appeal of the assessee by observing at para 6 to 8.2 of his order as under:-

4 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR Decision 6. I have gone through the assessment order and submissions made by the appellant. The basic contention of the assessing officer in this care is that the AO received information from the office of Director General of Income Tax, Investigation, Mumbai through Insight por at in which it was informed that the appellant had made fictitious profits in equities and derivative, trading in illiquid derivative on BSE amounting to Rs.51,47,700/- This information came to the knowledge of Income Tax Department on the basis of Search Operation carried on by the Investigation Wing, Mumbai. The information received from the DDIT, (Inv.), Unit-1(1), Mumbai also enclosed the statements recorded u/s 133A of the Act of Mr. Harshvardhan Kayan and w/s.131 of the Act of Mr. Sanjay Periwal, which showed that appellant had Involved itself in such fictitious transactions on BSE and NSE. It was further stated through the information that the appellant earned fictitious profit from Hem Securities Ltd. and CM Goenka Stock Brokers Ltd. towards trading in equity derivatives on NSE amounting to Rs 10,15,600/- and fictitious profits as well as losses through Maverick Share Brokers Ltd. The AO has given the details of the transactions of such fictitious profits/loss earned/incurred by the appellant on page no. 6 to 19 of the assessment order. Accordingly, the AO issued notice u/s 148 of the Act to the appellant after recording reasons to believe and after seeking necessary approval of the competent authority. In completing the Gent, the AD made addition of Rs.41,34,571/- being fictitious profit earned. Aggrieved by the said addition, the appellant is in appeal and has raised 03 grounds which are adjudicated as under- 7. Ground no.1 is relating to reopening of assessment u/s.147 of the Act During the impugned AY, AO received information from the office of Deputy Director of Income Tax, Unit-1(1), Mumbai, according to which the appellant had ma de fictitious profits in equities and derivative trading in illiquid derivative on BSE/NSE amounting to Rs.51,47,700/-. This information came to the knowledge of Income Tax Department on the basis of Search Operation carried on by the Investigation Wing. Mumbai. The information received from the DDIT. (Inv.), Unit1(1), Mumbai al so enclosed the statements recorded u/s. 133A of the Act of Mr. Harshvardhan Kay an and u/s 131 of the Act of Mr. Sanjay Periwal which revealed that 5 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR appellant had involved itself in such fictitious transactions on BSE and NSE. It was further stated through the information that the appellant earned fictitious profit from Hem Securities Ltd. and CM Goenka Stock Brokers Ltd. towards trading in equity derivatives on NSE amounting to Rs. 10,15,600/- and fictitious profits as well as losses through Maverick Share Brokers Ltd. The AO has given the details of the transactions of such fictitious profits/loss earned/incurred by the appellant on page no. 6 to 19 of the assessment order. 7.1 The amount of profit earned or losses incurred by the appellant was through Hem Securities Ltd., CM Goenka Stock Brokers Ltd. and Maverick Share Brokers Ltd. All these three companies were managed and controlled operated whose statements were recorded u/s. 133A of the Act of Mr. Harshvardhan Kayan and u/s 131 of the Act of Mr. Sanjay Periwal. The activity carried on by those companies was to indulge in rigging of share prices and thereby earning profits or losses as per the requirements of their clients. This was confessed by Mr. Harshvardhan Kayan and Mr. Sanjay Periwal during the course of search before the Investigation Wing, Mumbai. On the basis of the said information, the AO issued the notice u/s.148 of the Act after recording reasons to believe that appellant's income had escaped assessment as provided in section 147 of the Act and after obtaining approval of the competent authority. Thus, the notice issued is valid as the same is issued after recording reasons on the basis of credible information from the Investigation Wing of the Department. Accordingly, the notice u/s. 148 of the Act is upheld. The submissions made by the appellant that there was no escaped income of the appellant and there was no failure to disclose fully and truly all material facts in the return are without any merit and hence, cannot be considered. 7.2 When the appellant had not given any information about the fictitious transactions in the return filed, the only option available with the AO on receipt of credible information from the Investigation Directorate was to reopen the assessment as provided in Section 147 of the Act and make the verification. As the appellant had not shown any details of such fictitious transactions and the information in the possession of the AO was that appellant had received profits/incurred

6 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR losses through fictitious transactions, the AO had reason to believe that the appellant's income had escaped assessment. 7.3 Hon'ble Gujarat High Court in the case of Purviben Snehalbani Panchhigar v. Asstt. CIT [2019] 101 taxmanın.com 393/(2018) 409 ITR 124 (Guj.) had an occasion to examine an identical case of that of the appellant, the Court has observed in paras 6 and 8 as under:- ‘’6. The return filed by the assessce were accepted without scrutiny, Since there was no scrutiny assessment, the Assessing Officer had to occasion to firm any opinion on any of the issue arising out of the return filed by assessee. The concept of change of opinion would therefore no application it is equally well settled that at the stage of re-opening of the assessment, the court would not minutely examine the possible additions which Assessing Officer wishes to make. The scrutiny at that stage would be limited to examine whether the Assessing Officer had formed a valid belief on the basis of the material available with him that income chargeable to tax had escaped assessment. Both these aspects he been examined by the Supreme Court in Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 161 Taxman 316/291, ITR. 500 of which follows lowing observations may be noted ‘’16. Section 147 authorises and the Assessing Officer income chargeable to lax if he has reason to believe that income to assess or reassess for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that Income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fast by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Delhi High Court in Central Provinces Manganese Ore Co. Ltd v. 170 (1991 (191) ITR 662), for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant, In other words, at the initiation stage, what is required is 7 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR reason to believe, but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove that statement is not the concern at that stage. This is so because the formation of belief the Assessing Officer is within the realm of subjective satisfaction (sce ITO v. Selected Daluarband Coal Pvt Ltd. (1996 (217) ITR 597 (SC)] Raymond Woollen Mills Ltd. v. ITO (1999 (236) ITR 34 (SC)’’ 7.4 In the present case the, AO has received the material on record which would prima facie suggest that the appellant had received profits on fictitious transactions which were not reflected in appellant's return filed. The judgment in the case of Fr. CIT v. Gokul Ceramics [2016] 71 taxmann.com 341/241 taxman 1 (Guj.), the Division Bench had examined the contention of the Assessing Officer proceeded on the basis of the information supplied by the department, and after referring to the several judgments, made following observations in para 9 which read thus:- "It con thus be seen that the entire material collected by the DGCEI during the search, which included incriminating documents and other such relevant materials, was along with report and show-cause notice placed at the disposal of the Assessing Officer. These materials prima facie suggested suppression of sale consideration of the les manufactured by the assessee to evade excise duty. On the basis of such material, the Assessing Officer also formed a belief that income chargeable to tax had also escaped assessment. When thus the Assessing Officer had such material available with him which he perused considered, applied his mind and recorded the finding of belief that income chargeable to tax had escaped assessment, the re-opening could not and should not have been declared as invalid, on the ground that he proceeded on the show-cause notice issued by the Excise Department which had yet not culminated into final ender. At this stage the Assessing officer was not required to hold conclusively that additions variably be made. He truly had to form a bona fide belief that income had escaped assessment. In this context, we may refer to various decisions cited by the counsel for the Revenue

8 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR 7.5 In the decision ING of Pushpa Uttamchand Mehta v. ITO (supra) Paragraph No. of the said judgment is relevant which is reproduced hereunder ‘’14. In Phool Chand Bajrang Lal v. ITO [1993] 69 Таxman 627/203 ITR 456 (SC), after reviewing the previous case law, and concluding that a valid re-opening is one, preceded by specific, reliable and relevant information, and that the sufficiency of such reasons is not subject to judicial review-the only caveat being that the court con examine the record, if such material existed, it was held that the facts disclosed in the return, & found later to be unfounded or false, con always be the basis of a re-opening of assessment appears to us to be, to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say ‘’you accepted my lie’’, now your hands are tied and you can do nothing". It would be travesty of justice to allow the assessee that latitude" 7.6 It is settled law that sufficiency or adequacy of the reasons for the issuance of the notice for reopening of the assessment is not required to be gone into at the stage of the reopening. It can never be said that the final outcome of the proceedings has been derived at by the authority by issuing a notice for reopening. On the basis of material before it as highlighted above, if the Assessing Officer was satisfied to harbour reasons to believe that there was escapement of income and if on such basis, he has exercised his powers under sections 147, 148 of the Income-tax Act, 1961, no fault can be found, 7.7 Similarly, Hon'ble Bombay High Court in the case of Hede Ferrominas Pvt. Lt reported in 147 taxmann.com 215 (Bombay) had occasion to examine whether there was sufficient material to form a reasonable belief that appellant's income had escaped assessment. The relevant para of the order is reproduced below:- 15. The Petitioner has not explained the amount of Rs 2,15,107 The Petitioner may have its own version about the receipt of the amount of Rs.6.74 crores. However, these are matters which can be locked into of the stage of reassessment. Based on the material available with the respondents, we cannot say that they either had no reason to beleve or that their reasons to believe were based on some non-extend material or extraneous and irrelevant material 9 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR 7.8 In view of the above, I am satisfied, that the AO had sufficient information in his possession to form a reasonable belief that the appellant income had escaped assessment by virtue of the fact that the appellant had not shown any details of fictitious transactions in the return filed. Accordingly, notice issued u/s. 148 of by the AO is upheld. Ground No.1 is dismissed 8. Ground No.2 is relating to the addition of Rs 41,34,751/- as profit-from business. The AO received information from the office of Director General of Income Tax, Investigation, Mumbai through Insight portal in which it was informed that the appellant had made fictitious profits in equities and derivative trading in illiquid derivative on BSE/NSE amounting to Rs.51,47,700/-. This information came to the knowledge of Income Tax Department on the basis of Search Operation carried en by the Investigation Wing, Mumbai, The information received from the DDIT, (inv.), Unit-1(1), Mumbai also enclosed the statements recorded u/s. 133A of the Act of Mr. Harshvardhan Kayan and u/s.131 of the Act of Mr. Sanjay Periwal which revealed that appellant had involved itself in such fictitious transactions on BSE and NSE. It was further stated through the information that the appellant earned fictitious profit from Hem Securities Ltd. and CM Goenka Stock Brokers-Ltd towards trading in equity derivatives on NSE/BSE amounting to Rs. 10,15,600/- and fictitious profits as well as losses through Maverick Share Brokers Ltd. The AO has given the details of the transactions of such fictitious profits/loss earned/incurred by the appellant con page no. 6 to 19 of the assessment order. Accordingly, the AO issued notice u/s. 148 of the Act to the appellant after recording reasons to believe and after seeking necessary approval of the competent authority.

8. The appellant in its submission merely stated that it has undertaken the Transactions on BSE and NSE through banking channels and security transaction tax (STT) has been paid on all the transactions. However, the appellant has not been able to give any other information beyond these facts. It was submitted that profit from transactions with Hem Securities Ltd. is already reflected in the P&L A/c. Similarly, profits from CM Geonka Stock Brokers Ltd. is also included in the P&L A/c The AO has made the addition of only Rs.41,34,571/- because the profit offered already has not been again brought to tax. However, the loss claimed of Rs.41,34,571/- which is 10 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR out of fictitious transactions was disallowed and added to the total income. The contention of the appellant is that all the transactions are of similar nature and how the AO can give different treatment to profit and different treatment for loss. However, as seen from the assessment order the AO has not taxed the profits earned on fictitious transactions again as it would amount to double taxation. However, the fictitious loss claimed by the appellant has been disallowed and added to the total income. Merely because profit has not been added it cannot be said that AO has accepted the transactions in questions. The AO has merely not added the profit on fictitious transactions as the same was subjected to tax as the appellant had offered the same in the return of income. 8.2 Further, it was pleaded that the Project Falcon 2, the details of which were made available showed the modus operandi of various manipulated transactions using expiry trade and it was pleaded that the appellant is not the part of the said manipulated transactions. However, the information gathered by the Investigation Wing, Mumbai showed that the appellant was part of the manipulative transactions through its brokers. The appellant has not produced any evidence to prove that the loss was borne by respective brokers through banking channels. In view of the same, the ratio of the decisions referred by the appellant are not found applicable to the facts of the appellant's case. Accordingly, Ground No.2 is found to be without merit and accordingly dismissed.’’ 4.2 During the course of hearing, the ld.AR of the assessee submitted that the ld. CIT(A) is not justified in confirming the action of the AO in passing order u/s 147 of the Act and also erred in confirming the addition of Rs.41,34,571/- for which the ld.AR of the assessee submitted as under:-

‘’In this case the learned AO has made the addition on the basis of Project Falcon from DDIT(Investigation), Unit-6(3), Mumbai regarding coordinated and premediated trading on the Bombay Stock Exchange by engaging in reversal trades in illiquid stock options that the assessee has made fictitious loss in equity and derivative trading in illiquid derivative on BSE of Rs. 41,34,571/-. The learned AO has mentioned in the assessment order that, it is found that assesse made fictitious loss from M/s Maverick Share Borkers 11 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR P. Ltd. The addition has been made with reference to the Investigation Wing, which has prepared a report "Project Falcon 2", copy of which is available on Paper Book cited supra. In this report, name of the assessee does not appear. The Learned Assessing Officer has also failed to link the case of the assessee with the report Project Falcon 2. Therefore, it was wrong on the part of the Learned Assessing Officer to have disallowed the loss without considering the individual facts of the case of the assessee. The Project Falcon report is in respect of certain group cases, such as Kamlesh Auto Private Ltd, Arihant Advertising P. Ltd, Decent Financial Services P. Ltd, Swarn Financial P. Ltd, Mentor Capital Ltd. All these groups are mainly in the business of finance whereas the assessee has got no connection with all these groups. The Learned Assessing Officer was, therefore, not justified in making addition in the case of the assessee following the findings and conclusions of this Project Falcon Report. It is further submitted that assessee has earned profits as under :- 1. Profit from trading through Hem Securities Ltd (Broker) Rs.10,13,973/- 2. Profit from trading through CM Goenka Stock Brokers P Ltd Rs. 40,99,184/- Total Rs.51,13,157/- These profits have been accepted by the Learned Assessing Officer without a murmur. The nature of transactions which have resulted in profits is same as those transactions conducted through M/s Maverick Share Brokers P. Ltd, which have resulted in loss. It is common knowledge that it is not easy to earn profits in the share market. In the case of the assessee, he has truthfully disclosed profits earned as above and has claiming losses incurred through M/s Maverick Share Brokers P. Ltd. It is further submitted in this proceedings u/s 147 were initiated on the basis of information from the Investigation Wing that the assessee had received fictitious profits of Rs. 51,47,700/-. There is no finding on this issue by the Learned Assessing Officer. No fictitious profits have been found. The profits earned through Hem Securities and CM Goenka Stock Brokers P. Ltd stand accepted by the Learned Assessing Officer. Thus, the reasons on which proceedings u/s 147 were taken have not subsisted at the stage of concluding the assessment proceedings. In view of this, there was no scope available to the Learned Assessing Officer to make addition by disallowing the loss. Further, the Investigation Wing had not passed any information in respect of the assessee regarding fictitious loss, therefore also, the Learned Assessing Officer was not justified in disallowing the loss. The same has wrongly been disallowed. The Hon'ble ITAT is requested to delete the addition made by the Learned Assessing Officer and sustained by the Learned CIT(A).’’ 12 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR On the other hand, the ld. DR vehemently argued the case and strongly 4.3 refuted the submissions of the assessee by relying upon the orders of the lower authorities.

4.4 The Bench has heard both the parties and perused the materials available on record including the submissions as well as case laws cited by the respective parties. Brief facts of the case are that assessee is a private limited company engaged in the business of share trading and broking business. Return for income A.Y . 2013-14 was filed on 23/09/2013 declaring total income of Rs. 5,46,540/-. A copy of the return of income along with computation of income is available on Paper Book Page No. 1-2. The books of accounts of the assessee were duly audited u/s 44 AB of the Income Tax Act, 1961 and Copy of the audit report u/s 44 AB along with its annexures is available on Paper Book Page No.3-24. In the case of the assessee, proceedings u/s 147 were initiated by issuance of notice u/s 148 dated 31/3/2021 on the grounds that the assessee has made fictitious profits of Rs. 51,47,000/- in equity and derivative trading in illiquid derivatives on BSE. A copy of the notice u/s 148 issued on 31/3/2021 is available on Paper Book Page No.25. In response to notice u/s 148, the assessee filed return of income on 13/4/2021. Copy of acknowledgement of return so filed along with computation of income is available on Paper Book Page No. 26-28. The assessee filed objections against initiation of proceedings u/s 147, vide letter dated 13 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR 06/07/2021. Copy of the same is available on Paper Book Page No. 29-34. The assessee during the course of assessment proceedings also filed replies along with contract notes and other details in support of the income/loss earned from share trading. The AO completed the assessment u/s 147/144B, vide order dated 23/3/2022, determining the total income at Rs. 46,81,114/-, inter-alia, making addition of Rs. 41,34,571/- by disallowing the loss from share transaction in equity derivatives conducted through M/s Maverick Share Brokers, treating the same as fictitious loss. In this case, it is noted that AO has initiated action u/s 148 on the basis of information received from Investigation Wing. A copy of the reasons recorded on 31/3/2021 is available on Paper Book Page No.35-37. It has been mentioned in the reasons by the AO that assessee earned fictitious profits in equity and derivatives trading on BSE of Rs. 51,47,700/-. The AO has further mentioned that no inquiry was required at his level as complete inquiry stood made by the Investigation Wing, Bombay. In this regard, it is observed that the AO has erred in law in issuing notice u/s 148 on the basis of incorrect facts as he did not undertake any exercise to verify whether there were any fictitious profits of Rs. 51,47,700/-. in the hands of the assessee on account of trading on BSE. In fact, the profits earned on trading in BSE were as under :-

14 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR 1. Profit from trading through Hem Securities Ltd (Broker) Rs.10,13,973/- 2. Profit from trading through CM Goenka Stock Brokers P Ltd Rs. 40,99,184/- Total Rs.51,13,157/- It is noted from the records that the above profits have been accepted as it is by the AO without terming the same as fictitious. The assessee had also disclosed these profits in the computation of income. In view of this, it is felt that the reasons recorded by the AO were incorrect in terming the profits earned on BSE by the assessee by trading. However, on the other hand, the assessee also suffered loss of Rs. 41,34,571/- on BSE trading from transactions conducted through M/s Maverick Share Brokers P. Ltd. The Bench observed from the assessment order that the AO disallowed the loss on the ground that the same is fictitious. It is noted that in the reasons recorded for initiating proceedings u/s 148, the ground taken by the AO was that assessee earned fictitious profits, but this ground has not subsisted at the stage of completion of assessment and no addition has been made on this ground. In view of this, AO was precluded in making any other addition when addition was not made on the ground on which notice u/s 148 was issued. Further, the AO made addition by disallowing loss of Rs. 41,34,571/- incurred in transactions conducted through M/s Maverick Share Brokers P. Ltd. The loss has been disallowed on the ground that the same is fictitious. It does not appeal to sound logic that on the one hand assessee would earn profits 15 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR (Rs. Rs.51,13,157/-) and also indulge in fictitious loss of Rs 41,34,571/-. If the assessee was indulging in manipulative trading/fictitious trading, then there was no need for him to have taken profits and then subsequently losses. The assessee would have either chosen to take profits only or losses suiting to his requirements but earning profit and then incurring losses by manipulation does not appeal to reason. The AO disallowed the loss without appreciating the facts of the case in proper perspective and it is observed that AO has been wrongly influenced by the report of the Investigation Wing titled as "Project Falcon 2". It is on the basis of this report which has been prepared by the Investigation Wing Bombay mainly dealing with cases of reversal trades that the AO has treated the claim of loss of the assessee as fictitious. However, the AO failed to notice that the name of the assessee does not figure in the Falcon report. The AO also failed to bring material on record to establish the trading of the assessee as reversal trades. Therefore, the loss disallowed by the AO is not justified. In first appeal, the ld. CIT(A) vide appeal order dated 03/04/2024 dismissed the appeal of the assessee. We also take into consideration the additional ground No. 1 raised by the assessee. In this ground it is noted that notice u/s 148 has been issued on 31/3/2021. The AO also furnished the copy of reasons recorded for issuing notice u/s 148 which is available at (Page 32-24). The perusal of the aforesaid reasons reveals that the main ground on which the AO issued notice is information received from 16 ITA NO. 465/JP/2024 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR Investigation Wing, Mumbai that the assessee had derived fictitious profits of Rs. 51,47,700/- in trading of BSE in equity and derivatives. The AO has further mentioned that there was no need to cause any inquiry as all the relevant inquiries already stood made by the Investigation Wing, Mumabi (Colum No. 4 of the reasons recorded). This shows that the AO accepted the information as a thumb rule and did not undertake any exercise to verify the same. The relevant para of reasons recorded is quoted below :-

“ As all the inquiries have already made by the SEBI, hence no further investigation is needed. Hence, I have reasons to believe that the income to the extent of Rs.51,47,700/- is escaped assessment for the provisions of sec. 147.” The Bench noted that it is settled position of law that before issuing notice u/s 148, the AO is under obligation to cause inquiries and to have reasons for issuing notice u/s 148. No notice u/s 148 can be issued on borrowed satisfaction. The following case-laws in this regard are quoted :-

(a) CIT Vs. Shree Rajasthan Syntex Ltd. (2008) 217 CTR 209 (Raj) Reopening of assessment on borrowed satisfaction by Assessing Officer of lesser on the basis of opinion arrived at by the Assessing Officer of lessee on the same set of documents was invalid. (b) SIGNATURE HOTELS (P) LTD. vs. INCOME TAX OFFICER (2011) 338 ITR 51 (Delhi) Reassessment—Reason to believe—Information received from Director of IT (Inv.) vis-a-vis accommodation entry—For reopening 17 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR an assessment the AO must have "reason to believe" that certain income chargeable to tax has escaped assessment and such reasons are required to be recorded in writing by the AO—Sufficiency of reasons is not a matter which is to be decided by the writ Court but existence of belief can be subject-matter of scrutiny—Notice under s. 148 can be quashed if the "belief" is not bona fide or one based on vague, irrelevant and non-specific information—Basis of the belief should be discernible from the material on record which was available with the AO when he recorded the reason—There should be a link between the reasons and the material available with the AO—In the instant case, the first sentence of the reasons recorded by the AO states that information has been received from Director of IT (Inv.) that assessee has introduced unaccounted money amounting to Rs. 5 lacs during the relevant year as per the details given in the Annexure—Said Annexure mentions a cheque received by assessee from SS Ltd. and the account number—Last sentence states that as per the information the amount received was an accommodation entry—Aforesaid information and the reasons are extremely scanty and vague and do not satisfy the requirements of s. 147—There is no reference to any document or statement, except the Annexure—Said Annexure cannot be regarded as a material or evidence that prima facie shows or establishes escapement of income—Further, it is apparent that the AO did not apply his own mind to the information and examine the basis of the information—He accepted the information in a mechanical manner— CIT also acted on the same basis by mechanically giving his approval—Company SS Ltd. had applied for and was allotted shares in the assessee company on payment of Rs. 5 lacs by cheque—SS Ltd. is an incorporated company and it has been allotted PAN—Facts on record do not show that SS Ltd. is a non-existing and a fictitious entity—Proceeding under s. 147 quashed. (c) Pr. CIT vs. G & G Pharma India Ltd (Delhi High Court) dated 08.10.2015 Reopening only on the basis of information received that the assessee has introduced unaccounted money in the form of accommodation entries without showing in what manner the AO applied independent mind to the information renders the reopening void (d)ITO vs. M. B. Jewellers P. Ltd (ITAT Delhi)dt. 14.11.2014 A perusal of the above reasons demonstrate that the reasons recorded by the AO are not reasons acceptable to law. There is no independent application of mind. The AO had mechanically issued notices u/s 148 of the Act, on the basis of information allegedly received by him from the CIT, New Delhi 2. From the proforma for approval of notice, which is extracted above, it is clear that the AO was also not aware that the assessee had filed a return of income for the said AY. The ACIT has also not applied his mind. No satisfaction has been recorded by the Ld.ACIT. Only an approval is given. Thus in our view the reopening is bad in law (Signature Hotels (P) Ltd. Vs. ITO 338 ITR 51 (Delhi) followed). (e) ACIT vs. Devesh Kumar (ITAT Delhi)dt. 31.10.2014 Reopening solely on the basis of information received from the investigation wing & without independent application of mind is void. (f) Unique Metal Industries vs Income Tax Officer (ITAT Delhi) dated 28.10.2015 Reopening solely on the basis of information received from another AO that the assessee has booked bogus bills but without independent application of mind to the information renders the reopening void. (g) CIT Vs. SFIL Stock Broking Ltd. (2010) 41 DTR 98 (Del) Reassessment-Reason to believe-Reopening on directions of superior officers-50-called reasons recorded by the AO for reopening assessee's assessment comprises mere information received from Dy. Director of IT (Inv.) followed by directions of the very same officer and the Addl. CIT to initiate proceedings under s. 147- These cannot be the reasons for proceeding under s. 147/148-From the so-called reasons it is not at all discernible as to whether the AO has applied his mind to the information and independently arrived at a belief on the basis of the material before him that income had escaped assessment- Proceedings under s. 147/148 rightly quashed by Tribunal-No substantial question of law arises for consideration.

19 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR (h) SARTHAK SECURITIES CO. (P) LTD. vs. INCOME TAX OFFICER (2010) 329 ITR 110 HIGH COURT OF DELHI Where the identity of the companies who had invested in the shares of petitioner-company was not disputed and neither the reasons in the initial notice nor the communication providing reasons remotely indicated independent application of mind by AO, reassessment proceedings were unwarranted and notice issued under s. 148 was liable to be quashed. (g)CIT V/s Shree Rajasthan syntax Ltd. (2008) 217 CTR 209 (Raj) S.L.P. Of The Department Dismissed S.L.P. (c) No 8167 Of 2009 Decision All 30/3/09 Reopening of assessment on borrowed satisfaction by Assessing Officer of lesser on the basis of opinion arrived at by the Assessing Officer of lessee on the same set of documents was invalid. In view of the ratio of the aforesaid decisions, the issuance of notice u/s 148 by the AO simply on the basis of information of the Investigation Wing is unjustified. The same requires to be quashed. Further, it is also noted that the reasons recorded were factually wrong. The AO has simply adopted the figures of Rs. 51,47,700/- alleged to be fictitious profits in the business of shares on BSE on the basis of report of the Investigation Wing of the department. The AO did not make efforts to verify as to how the figure of Rs. 51,47,700/- was arrived. There is absolutely no such profit of Rs. 51,47,700/- in the share business conducted by the assessee. Even in the assessment order, the AO has not given the working of this alleged fictitious profit of Rs. 51,47,700/- with reference to the scrips in which trading was done. In the absence of these details, the assessee was bereft of giving 20 ITA NO. 465/JP/2024 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR any defence. It is settled position of law that initiation of proceedings u/s 148 on the basis of wrong/incorrect facts is invalid in the eye of law. The following cases are quoted in support :-

Further, the Bench also take into consideration the additional Ground No. 2 of the assessee, it is noted that in this case, notice u/s 148 was issued on 31/3/2021 on the basis of reasons recorded that there was information from the Investigation Wing that the assessee had derived fictitious profits of Rs. 51,47,700/- in the trading on BSE in equities and derivatives. However, the assessment has been completed without there being any addition on the grounds of fictitious profits. The basis on which notice u/s 148 was issued did not survive. The reasons recorded by the AO that the assessee had earned fictitious profits of Rs. 51,47,700/- on BSE in trading of equity and derivatives did not figure in the assessment order and there is no addition of this amount and also there is no addition with reference to fictitious profits. The issue of fictitious profits did not subsist, as such it was not within the purview of the AO to make addition on any other ground. The AO has indulged in making addition by way of disallowance of loss of Rs. 41,34,571/- suffered by the 22 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR assessee in trading of shares. The submission of the assessee is that when the AO failed to make any addition of fictitious profits, which is the ground on which notice u/s 148 was issued, then, the AO was precluded in making addition on any other ground. The Courts have held in various decisions that in completing assessment proceedings u/s 148, the AO can make addition on other grounds if additions are made on the ground on which notice u/s 148 was issued, failing this, no addition on any other ground can be made. In view of this in the case of the assessee, the AO was not justified in making addition by rejecting the claim of loss of the assessee of Rs. 41,34,571/- suffered in share trading. The addition made deserves to be deleted. Hence, taking into consideration above deliberations in the facts and circumstances case as detailed hereinabove, the Bench does not concur with the findings of the ld. CIT(A) and thus the appeal of the assessee is allowed. 5.1 Now, we take up the appeal of the assessee in ITA No.466/JP/2024 for adjudication wherein the assessee has raised following grounds of appeal. ‘’1 .Under the facts and circumstances of the case, the Assessing Officer has erred in passing the order u/s 147 read with section 144B of the Income Tax Act, 1961 which is without recording proper reasons.

2. Under the facts and circumstances of the case, the Assessing Officer has erred in making the addition of Rs. 16,08,223/- by disallowing the loss claimed by the assessee as fictitious loss from 23 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR share transaction in equity derivatives without considering the submission of the assessee.’' 5.2 It is noted that the ld. AR of the assessee has filed an application dated 21- 05-2024 under Rule 11 of the Income Tax Rules, 1963 for admission of following additional grounds.

‘’1. On the facts and in the circumstances of the case and in law, the AO erred in issuing notice u/s 148 of the Act on the issue and facts which already stood considered in scrutiny assessment completed u/s 143(3) on 19-11-2018 2 On the facts and in the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in issuing notice u/s 148 on incorrect facts, hence, the issuance of the same is ab initio void.

24 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR Decision 6. I have gone through the assessment order and submissions made by the appellant. The basic contention of the assessing officer in this care is that the AO received information from the office of Director General of Income Tax, Investigation, Mumbai through Insight porat in which it was informed that the appellant had made fictitious profits in equities and derivative, trading in illiquid derivative on BSE amounting to Rs.16,08,223/-. This information came to the knowledge of Income Tax Department on the basis of Search Operation carried on by the Investigation Wing, Mumbai. The information received from the DDIT, (Inv.), Unit-1(1), Mumbai also enclosed the statements recorded u/s 133A of the Act of Mr. Harshvardhan Kayan of Kayan Securitiies (P) Ltd. during the course of survey u/s.131 of the Act of Mr. Sanjay Periwal, showed that appellant had involved itself in such fictitious transactions on BSE and NSE. It was further stated through the information that the appellant earned fictitious profit from Bahubal Forex (P) Ltd. and CM Goenka Stock Brokers Ltd. towards trading in equity derivatives on NSE amounting to Rs 44,836/- and fictitious profits as well as losses through CM Goenka Stock Brokers Ltd. of Rs.5,01,923/-. The AO has given the details of the transactions of such fictitious profits/loss earned/incurred by the appellant on page no. 6 to 8 of the assessment order. Accordingly, the AO issued notice u/s 148 of the Act to the appellant after recording reasons to believe and after seeking necessary approval of the competent authority. In completing the assessment, the AO made addition of Rs.16,08,223/- being fictitious profit earned. Aggrieved by the said addition, the appellant is in appeal and has raised 03 grounds which are adjudicated as under:- 7. Ground no.1 is relating to reopening of assessment u/s.147 of the Act. During the impugned AY, AO received information from the office of Deputy Director of Income Tax, Unit-1(1), Mumbai, according to which the appellant had made fictitious profits in equities and derivative trading in illiquid derivative on BSE amounting to Rs.16,08,223/-. This information came to the knowledge of Income Tax Department on the basis of Search Operation carried on by the Investigation Wing, Mumbai. The information received from the DDIT. (Inv.), Unit1(1), Mumbai also enclosed the statements recorded u/s. 133A of the Act of Mr. Harshvardhan Kayan showed that 25 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR appellant had involved itself in such fictitious transactions on BSE and NSE. It was further stated through the information that the appellant earned fictitious profit from Bahubali Forex (P) Ltd. and CM Goenka Stock Brokers Ltd. towards trading in equity derivatives on NSE amounting to Rs. 16,08,223/- and fictitious profits as well as losses through Bahubali Forex (P) Ltd. and CM Goenka Stock Brokers Ltd. The AO has given the details of the transactions of such fictitious profits/loss earned/incurred by the appellant on page no. 6 to 8 of the assessment order. 7.1 The amount of profit earned or loss incurred by the appellant was through Bahubali Forex (P) Ltd. and CM Goenka Stock Brokers Ltd. Both these companies were managed and controlled/ operated by Mr. Harshvardhan Kayan whose statements were recorded u/s 133A of the Act. . The activity carried on by these companies was to indulge in rigging of share prices and thereby earning profits or losses as per the requirements of their clients. This was confessed by Mr. Harshvardhan Kayan during the course of survey before the Investigation Wing, Mumbai. On the basis of the said information, the AO issued the notice u/s.148 of the Act after recording reasons to believe that appellant's income had escaped assessment as provided in section 147 of the Act and after obtaining approval of the competent authority. Thus, the notice issued is valid as the same is issued after recording reasons on the basis of credible information from the Investigation Wing of the Department. Accordingly, the notice u/s. 148 of the Act is upheld. The submissions made by the appellant that there was no escaped income of the appellant and there was no failure to disclose fully and truly all material facts in the return are without any merit and hence, cannot be considered. 7.2 When the appellant had not given any information about the fictitious transactions in the return filed, the only option available with the AO on receipt of credible information from the Investigation Directorate was to reopen the assessment as provided in Section 147 of the Act and make the verification. As the appellant had not shown any details of such fictitious transactions and the information in the possession of the AO was that appellant had received profits/incurred losses through fictitious transactions, the AO had reason to believe that the appellant's income had escaped assessment.

26 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR 7.3 Hon'ble Gujarat High Court in the case of Purviben Snehalbani Panchhigar v. Asstt. CIT [2019] 101 taxmanın.com 393/(2018) 409 ITR 124 (Guj.) had an occasion to examine an identical case of that of the appellant, the Court has observed in paras 6 and 8 as under:- ‘’6. The return filed by the assessce were accepted without scrutiny, Since there was no scrutiny assessment, the Assessing Officer had to occasion to firm any opinion on any of the issue arising out of the return filed by assessee. The concept of change of opinion would therefore no application it is equally well setlied that at the stage of re-opening of the assessment, the court would not minutely examine the possible additions which Assessing Officer wishes to make. The scrutiny at that stage would be limited to examine whether the Assessing Officer had humed a valid belict on the basis of the material available with him that income charg lo to las had escaped assessment. Both these aspects he been examined by the Supreme Court in Asstt. CIT v. Rajes haveri Stock Brokers (P) Ltd. (2007) 161 Taxman 316/291. ITR. 500 of which follows lowing observations may be noted: ‘’16. Section 147 authorises and the Assessing Officer income chargeable to lax if he has reason to believe that income to assess or reassess for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that Income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fast by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Delhi High Court in Central Provinces Manganese Ore Co. Ltd v. 170 (1991 (191) ITR 662), for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant, In other words, at the initiation stage, what is required is reason to believe, but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have 27 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR formed a requisite belief. Whether the materials would conclusively prove that statement is not the concern at that stage. This is so because the formation of belief the Assessing Officer is within the realm of subjective satisfaction (sce ITO v. Selected Dalunbend Coal Pvt Ltd. (1996 (217) ITR 597 (SC)] Raymond Woollen Mills Ltd. v. ITO (1999 (236) ITR 34 (SC)’’ 7.4 In the present case the, AO has received the material on record which would prima facie suggest that the appellant had received profits on fictitious transactions which were not reflected in appellant's return filed. The judgment in the case of Pr. CIT v. Gokul Ceramics [2016] 71 taxmann.com 341/241 taxman 1 (Guj.), the Division Bench had examined the contention of the Assessing Officer proceeded on the basis of the information supplied by the department, and after referring to the several judgments, made following observations in para 9 which read thus:- "It con thus be seen that the entire material collected by the DGCEI during the search, which included incriminating documents and other such relevant materials, was along with report and show-cause notice placed at the disposal of the Assessing Officer. These materials prima facie suggested suppression of sale consideration of the les manufactured by the assessee to evade excise duty. On the basis of such material, the Assessing Officer also formed a belief that income chargeable to tax had also escaped assessment. When thus the Assessing Officer had such material available with him which he perused considered, applied his mind and recorded the finding of belief that income chargeable to tax had escaped assessment, the re-opening could not and should not have been declared as invalid, on the ground that he proceeded on the show-cause notice issued by the Excite Department which had yet not culminated into final ender. At this stage the Assessing officer was not required to hold conclusively that additions variably be made. He truly had to form a bona fide belief that income had escaped assessment. In this context, we may refer to various decisions cited by the counsel for the Revenue 7.5 In the decision of Pushpa Uttamchand Mehta v. ITO (supra) Paragraph No. 14 of the said judgment is relevant which is reproduced hereunder 28 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR ‘’14. In Phool Chand Bajrang Lal v. ITO [1993] 69 Таxman 627/203 ITR 456 (SC), after reviewing the previous case law, and concluding that a valid re-opening is one, preceded by specific, reliable and relevant information, and that the sufficiency of such reasons is not subject to judicial review-the only caveat being that the court con examine the record, if such material existed, it was held that the facts disclosed in the return, & found later to be unfounded or false, con always be the basis of a re-opening of assessment appears to us to be, to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say ‘’you accepted my lie’’, now your hands are tied and you can do nothing". It would be travesty of justice to allow the assessee that latitude" 7.6 It is settled law that sufficiency or adequacy of the reasons for the issuance of the notice for reopening of the assessment is not required to be gone into at the stage of the reopening. It can never be said that the final outcome of the proceedings has been derived at by the authority by issuing a notice for reopening. On the basis of material before it as highlighted above, if the Assessing Officer was satisfied to harbour reasons to believe that there was escapement of income and if on such basis, he has exercised his powers under sections 147, 148 of the Income-tax Act, 1961, no fault can be found, 7.7 Similarly, Hon'ble Bombay High Court in the case of Hede Ferrominas Pvt. Lt reported in 147 taxmann.com 215 (Bombay) had occasion to examine whether there was sufficient material to form a reasonable belief that appellant's income had escaped assessment. The relevant para of the order is reproduced below:- 15. The Petitioner has not explained the amount of Rs 2,15,107 The Petitioner may have its own version about the receipt of the amount of Rs.6.74 crores. However, these are matters which can be locked into of the stage of reassessment. Based on the material available with the respondents, we cannot say that they either had no reason to believe or that their reasons to believe were based on some non-extend material or extraneous and irrelevant material 7.8 In view of the above, I am satisfied, that the AO had sufficient information in his possession to form a reasonable belief that the appellant income had escaped assessment by virtue of the fact that the 29 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR appellant had not shown any details of fictitious transactions in the return filed. Accordingly, notice issued u/s. 148 of by the AO is upheld. Ground No.1 is dismissed 8. Ground No.2 is relating to the addition of Rs 16,08,223/- the AO received information from the office of Director General of Income Tax, Investigation, Mumbai through Insight portal in which it was informed that the appellant had made fictitious profits in equities and derivative trading in illiquid derivative on BSE amounting to Rs.16,08,223/-. This information came to the knowledge of Income Tax Department on the basis of Search Operation carried on by the Investigation Wing, Mumbai. The information received from the DDIT, (inv.), Unit-1(1), Mumbai also enclosed the statements recorded u/s. 133A of the Act of Mr. Harshvardhan Kayan which showed that appellant had involved itself in such fictitious transactions on BSE and NSE. It was further stated through the information that the appellant earned fictitious profit from Bahubali Forex (P) Ltd. and CM Goenka Stock Brokers Ltd. towards trading in equity derivatives on NSE amounting to Rs. 16,08,223/- and fictitious profits as well as losses through Bahubali Forex Pvt. Ltd. and CM Goenka Brokers Ltd. The AO has given the details of the transactions of such fictitious profits/loss earned/incurred by the appellant on page no. 6 to 8 of the assessment order. Accordingly, the AO issued notice u/s. 148 of the Act to the appellant after recording reasons to believe and after seeking necessary approval of the competent authority. 8.1 The appellant in its submission merely stated that it has undertaken the Transactions on BSE and NSE through banking channels and security transaction tax (STT) has been paid on all the transactions. However, the appellant has not been able to give any other information beyond these facts. It was submitted that profit from transactions with Hem Securities Ltd. is already reflected in the P&L A/c. Similarly, profits from CM Geonka Stock Brokers Ltd. is also included in the P&L A/c. The AO has made the addition of only Rs.16,08,223/- because the profit offered already has not been again brought to tax. However, the loss claimed of Rs.16,08,223/- which is out of fictitious transactions was disallowed and added to the total income. The contention of the appellant is that all the transactions are of similar nature and how the AO can give different treatment to profit and different treatment for loss. However, as seen from the assessment 30 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR order the AO has not taxed the profits earned on fictitious transactions again as it would amount to double taxation. However, the fictitious loss claimed by the appellant has been disallowed and added to the total income. Merely because profit has not been added it cannot be said that AO has accepted the transactions in questions. The AO has merely not added the profit on fictitious transactions as the same was subjected to tax as the appellant had offered the same in the return of income. 8.2 Further, it was pleaded that the Project Falcon 2, the details of which were made available showed the modus operandi of various manipulated transactions using expiry trade and it was pleaded that the appellant is not the part of the said manipulated transactions. However, the information gathered by the Investigation Wing, Mumbai showed that the appellant was part of the manipulative transactions through its brokers. The appellant has not produced any evidence to prove that the loss was borne by respective brokers through banking channels. In view of the same, the ratio of the decisions referred by the appellant are not found applicable to the facts of the appellant's case. Accordingly, Ground No.2 is found to be without merit and accordingly dismissed.’’ 6.2 The Bench has heard both the parties and perused the materials available on record including the written submissions of the assessee alongwith case laws cited by respective parties. The Bench in the appeal of the assessee in ITA No. 466/JP/2024 for the assessment year 2016-17 noted that the order passed by the ld. CIT(A) is stereo as in the case of the assessee in ITA No. 465/JP/2024 for the assessment year 2013-14 except the change in the amount in the respective appeals. Hence, the decision taken by the Bench in the appeal of the assessee in ITA No. 465/JP/2024 for the assessment year 2013-14 shall apply mutatis 31 ITA NO. 465/JP/2024 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR mutandis in the appeal of the assessee for the assessment year 2016-17. Thus the appeal of the assessee is allowed. 7.1 Now the Bench takes up the appeal of the assessee in ITA No. 467/JP/2024 for the assessment year 2016-17 for adjudication wherein the assessee has raised the following grounds of appeal. ‘’1. Under the facts and circumstances of the case, the learned CIT(A) has erred in confirming of action of Learned Assessing Officer in passing the order u/s 147 read with section 144B of the Income Tax Act, 1961 which is void ab-initio deserves to be quashed as the same are repeated proceedings completed earlier by passing order dated 22.03.2022 on the same issue and which is also subject matter of appeal simultaneously with these proceedings.

2. Under the facts and circumstances of the case, the learned CIT(A) has erred in confirming the action of the learned Assessing Officer in making the addition of Rs. 27,67,800/- by assuming business profit for the fictitious transaction in equity derivatives which is loss suffered by the assessee and the same amount was also disallowed in separate proceedings u/s 148 in simultaneous proceedings. ‘’ 8.1 It is noted that the ld. AR of the assessee has prayed for admission of following additional grounds. ‘’1. On the facts and in the facts and circumstances of the case and in law the AO erred in issuing notice u/s 148 on 27-07-2022 the issue and facts which already stood considered in scrutiny assessment completed u/s 143(3) on 19-11-2018 and again completed u/s 148 on 22-02-2022. There is more than duplicity in the completion on assessment, hence, the same requires to be quashed. The ld. CIT(A) erred in confirming the action of the AO. 2. . On the facts and in the facts and circumstances of the case and in law the AO erred in issuing notice u/s 148 on incorrect facts, hence 32 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR the issuance of the same is ab initio void. The ld. CIT(A) erred in confirming the action of the AO. 3. . On the facts and in the facts and circumstances of the case and in law the AO erred in passing order u/s 148(d) on 27-07-2022 for issuing notice u/s 148 again on 27-07-2022 on the ground that notice issued earlier on 31-03-2021 was not served by 31-03-2021. The ld. CIT(A) erred in confirming the action of the AO.’’ 8.2 The Bench has admitted the additional grounds of appeal as raised by the assessee in view of the findings given in the case of the assessee in ITA No. 465/JP/2024 for the assessment year 2013-14 9.1 Apropos Ground No. 1 & 2 of the assessee and additional grounds (supra), the facts as emerges from the order of the ld. CIT(A) wherein the ld. CIT(A) has dismissed the appeal of the assessee by observing at para 6 to 8.2 of his order as under:- Decision :- ‘’6. I have gone through the assessment order and submissions made by the appellant. The basic contention of the Assessing Officer (AO) in this case is that the AO received information from the office of Director General of Income Tax, Investigation, Mumbai through Insight portal in which it was informed that the appellant had made fictitious profits in equities and derivative trading in illiquid. derivative on BSE amounting to Rs.27,67,800/-. This information came to the knowledge of Income Tax Department on the basis of Search Operation carried on by the Investigation Wing, Mumbai. The information received from the DDIT, (Inv.). Unit-1(1), Mumbai also enclosed the statements recorded u/s. 133A of the Act of Mr. Harshvardhan Kayan of Kayan Securities Pvt. Ltd. during the course of Survey u/s.131 of the Act showed that appellant had involved itself in such fictitious transactions on BSE and NSE. It was further stated 33 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR through the information that the appellant earned fictitious profit from Bahubali Forex Pvt. Ltd. and CM Goenka Stock Brokers Ltd. towards trading in equity derivatives on NSE amounting to Rs.23,38,000/- and fictitious profits as well as losses through CM Goenka Stock Brokers Ltd. of Rs.4,29,000/-, The AO has given the details of the transactions of such fictitious profits/loss earned/incurred by the appellant in the assessment order. Accordingly, the AO issued notice u/s 148 of the Act to the appellant after recording reasons to believe and after seeking necessary approval of the competent authority. In completing the assessment, the AO made addition of Rs.27,67,800/- being fictitious profit earned. Aggrieved by the said addition, the appellant is in appeal and has raised 03 grounds which are adjudicated as under- 7. Ground no.1 is relating to reopening of assessment u/s.147 of the Act. During the impugned AY AO received information from the office of Deputy Director of Income Tax, Unit-1(1), Mumbai, according to which the appellant had made fictitious profits in equities and derivative trading in illiquid derivative on BSE amounting to Rs.27,67,800/- This information came to the knowledge of Income Tax Department on the basis of Search Operation carried on by the Investigation Wing, Mumbai. The information received from the DDIT, (Inv.), Unit1(1), Mumbai also enclosed the statements recorded uls.133A of the Act of Mr. Harshvardhan Kayan and u/s. 133A of the Act revealed that appellant had involved itself in such fictitious transactions on BSE and NSE. It was further stated through the information that the appellant earned fictitious profit from Bahuballi Forex Pvt. Ltd. and CM Goenka Stock Brokers Ltd. towards trading in equity derivatives on NSE amounting to Rs.27,67,800/-and fictitious profits as well as losses through Bahubali Forex Pvt. Ltd. and CM Goenka Stock Brokers Ltd. The AO has given the details of the transactions of such fictitious profits/loss earned/incurred by the order. 7.1 The amount of profit earned or loss incurred by the appellant was through Bahubali Forex Pvt. Ltd. and CM Goenka Stock Brokers Ltd. Both these companies were managed and controlled/operated by Mr. Harshvardhan Kayan, whose statements were recorded u/s.133A of the Act. The activity carried on by these companies was to indulge in rigging of share prices and thereby earning profits or losses as per the 34 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR requirements of their clients. This was confessed by Mr. Harshvardhan Kayan during the course of Survey before the Investigation Wing, Mumbai. On the basis of the said information, the AD issued the notice u/s. 148 of the Act after recording reasons to believe that appellant's income had escaped assessment as provided in section 147 of the Act and after obtaining approval of the competent authority. Thus, the notice issued is valid as the same is issued after recording reasons on the basis of credible information from the Investigation Wing of the Department. Accordingly, the notice u/s 148 of the Act is upheld. The submissions made by the appellant that there was no escaped income of the appellant and there was no failure to disclose fully and truly all material facts in the return are without any merit and hence, cannot be considered. 7.2 When the appellant had not given any information about the fictitious transactions in the return filed, the only option available with the AO on receipt of credible information from the Investigation Directorate was to reopen the assessment as provided in Section 147 of the Act and make the verification. As the appellant had not shown any details of such fictitious transactions and the information in the possession of the AO was that appellant had received profits through fictitious transactions, the AO had reason to believe that the appellant's income had escaped assessment. 7.3 Hon'ble Gujarat High Court in the case of Purviben Snehalbhai Panchhigar v. Asstt. CIT [2019] 101 taxmann.com 393/[2018] 409 ITR 124 (Guj.) had an occasion to examine an identical case of that of the appellant, the Court has observed in paras 6 and 8 as under:- ‘’6. The return filed by the assessee were accepted without scrutiny. Since there was no scrutiny assessment, the Assessing Officer had no occasion to firm any opinion on any of the issue arising out of the return filed by assessee. The concept of change of opinion would therefore no application. It is equally well settler hat at the stage of re- opening of the assessment, the court would not minutely examine the possible additions which Assessing Officer wishes to make The scrutiny at that stage would be limited to examine whether the Assessing Officer had formed a valid belief on the basis of the material available with him that income chargeable to tax ad escaped 35 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR assessment Both these aspects have been examined by the Supreme Court in Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd, [2007] 161 Taxman 316/291 ITR 500 of which following observations may be noted 16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The wont reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that Income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Delhi High Court in Central Provinces Manganese Ore Co. Ltd ν. ΠΟ (1991 (191) ITR 662), for initiation of action under section 147ja) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason to believe, but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see 170 v. Selected Dalurabadn Coal Pvt. Ltd (1996 (217) ITR 597 (SC) Raymond Woollen Alls Ltd. v ITO (1999 (236) ITR 34 (SC) 7.4 In the present case the, AO has received the material on record which would prima facie suggest that the appellant had received profits on fictitious transactions which were not reflected in appellant's return filed. The judgment in the case of Pr. CIT v. Gokul Ceramics [2016] 71 taxmann.com 341/241 taxman 1 (Guj.), the Division Bench had examined the contention of the Assessing Officer proceeded on the basis of the information supplied by the department, 36 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR and after referring to the several judgments, made following observations in para 9 which read thus:- ‘’It can thus be seen that the entire material collected by the DGCEI during the search, which included incriminating documents and other such relevant materials, was along with report and show-cause notice placed at the disposal of the Assessing Officer. These materials prima facie suggested suppression of sale consideration of the tiles manufactured by the assessee to evade excise duty. On the basis of such material, the Assessing Officer also formed a belief that income chargeable to tax had also escaped assessment. When thus the Assessing Officer had such material available with him which he perused, considered, applied his mind and recorded the finding of belief that income chargeable to tax hat escaped assessment, the re- opening could not and should not have been declared as invalid, on the ground that he proceeded on the show-cause notice issued by the Excise Department which had yet not culminated into final order. At this stage the Assessing Officer was not required to hold conclusively that additions invariably be made. He truly had to form a bona fide belief that income had escaped assessment. In this context, we may refer to various decisions cited by the counsel for the Revenue 7.5 In the decision of Pushpa Uttamchand Mehta v. ITO (supra) Paragraph No. 14 of the said judgment is relevant which is reproduced hereunder- ‘’14. In Phool Chand Bajrang Lal v. ITO [1993 ] 69 Taxman 627/203 ITR 456 (SC), after reviewing the previous case low, and concluding that a valid re-opening is one, preceded by specific, reliable and relevant information, and that the sufficiency of such reasons is not subject to judicial review the only caveat being that the court can examine the record, if such material existed, it was held that the facts disclosed in the return, if found later to be unfounded or false, can always be the basis of a re-opening of assessment appears to us to be, to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice to turn around and say "you accepted my lie, now your hands are tied and you can do nothing". It would be travesty of justice to allow the assessee that latitude"

37 BRIGHT SECURITIES PVT LTD. VS ITO, WARD 2(2), JAIPUR 7.6 It is settled law that sufficiency or adequacy of the reasons for the issuance of the notice for reopening of the assessment is not required to be gone into at this stage of the reopening. It can never be said that the final outcome of the proceedings has been derived at by the authority by issuing a notice for reopening. On the basis of material before it as highlighted above, if the Assessing Officer was satisfied to harbour reasons to believe that there was escapement of income and if on such basis, he has exercised his powers under sections 147, 148 of the Income-tax Act, 1961, no fault can be found. 7.7 Similarly, Hon'ble Bombay High Court in the case of Hede Ferrominas Pvt. Ltd. reported in 147 taxmann.com 215 (Bombay) had occasion to examine whether there was sufficient material to form a reasonable belief that appellant's income had escaped assessment. The relevant para of the order is reproduced below:- 15. The Petitioner has not explained the amount of Rs 2,15,107/ The Petitioner may have its own version about the receipt of the amount of Rs.6.74 crores. However, these are matters which can be looked into at the stage of reassessment. Based on the material available with the respondents, we cannot say that they either had no reason to believe or that their was no reason to believe were based on some non-extent material or extraneous and relevant material" 7.8 In view of the above, I am satisfied that the AO had sufficient information in his possession to form a reasonable belief that the appellant's income had escaped assessment by virtue of the fact that the appellant had not shown any details of fictitious transactions in the return filed. Accordingly, notice issued u/s. 148 of the Act by the AO is upheld. Ground No.1 is dismissed.