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“circular trading”

Cash Credits & Unexplained ItemsSection 68Section 68323 judgments

The decision most relied on for circular trading is Sanjay Bimalchand Jain v. PCIT-1, Nagpur (89 Taxmann.com 196), cited in 251 judgments on BharatTax.

Leading authorities on circular trading

Sanjay Bimalchand Jain v. PCIT-1, Nagpur
89 Taxmann.com 196 · 2018 · High Court
251
citing judgments

The exemption for long-term capital gains on share transactions is unavailable if the assessee fails to discharge the onus of proving the genuineness of gains arising from dubious share transactions designed to convert unaccounted income into tax-exempt capital gains. Courts will uphold an assessment based on the Revenue's evidence of price rigging or penny stock manipulation if the assessee cannot provide cogent evidence for the abnormal rise in share value.

Celestial Aviation Trading 15 Ltd. v. ACIT
176 Taxmann.com 902 · Reported
92
citing judgments

Lease agreements are considered operating leases if they meet the criteria examined by the Tribunal, even when the Assessing Officer re-characterizes them as financial leases. The Tribunal's decision in Celestial Aviation Trading 15 Ltd. (supra) examined the terms and conditions of lease agreements and relevant circulars and precedents.

DCIT v. Sharp Mint Ltd.
159 Taxmann.com 1381 · 2024 · High Court
23
citing judgments

An ad hoc disallowance of purchases cannot be made if the corresponding sales have been accepted. Excluding both purchases and sales where transactions are fictitious would result in profits lower than the returned income.

Oriental Insurance Co. Ltd. v. DCIT
407 ITR 658 · 2018 · High Court
19
citing judgments

Income earned on sale or redemption of investments made by an insurance company is not necessarily business income and may be eligible for exemptions, even if the department contends the investments are stock-in-trade. The applicability of CBDT Circular No. 528 needs examination in such cases.

Pr.CIT v. Gaurav Bagaria
453 ITR 513 · 2023 · High Court
16
citing judgments

Transactions in shares are considered genuine if conducted through a recognized stock exchange with payments via account payee cheques, and the addition of sale proceeds as undisclosed income under section 68 is unjustified without contrary evidence.

Pr. CIT v. Prem Lal Gandhi
94 Taxmann.com 156 · 2018 · Reported
13
citing judgments

Gains arising on the sale of shares cannot be treated as sham solely because purchases were made in cash, if the surrounding facts and circumstances support the transaction.

Judgments citing circular trading

Lloyds Metals and Energy Limited, Mumbai vs. Deputy Commissioner of Income Tax Central Circle -7(1), Mumbai

ITA 2646/MUM/2025[2019-20]Status: DisposedITAT Mumbai27 Nov 2025AY 2019-20

Bench: SHRI AMIT SHUKLA (Judicial Member), SHRI GIRISH AGRAWAL (Accountant Member)

Section 143(3)Section 145Section 153C

failed to properly consider the earlier findings of the Assessing Officer that lending entities formed part of a network indulging in bogus circular trading and that loans were merely accommodation entries; and that the assessee has reserved liberty to add, alter or amend grounds and file further submissions ... physical verification of premises, LC documentation and banking trails. The Assessing Officer painstakingly records that, in his view, a discernible pattern emerged of alleged circular trading and accommodation entries amongst group entities. At the core of the Assessing Officer’s findings is the allegation that none of the searched entities

Lloyds Metals and Energy Limited, Mumbai vs. Deputy Commissioner of Income Tax Central Circle -7(1), Mumbai

In the result, for all the

ITA 2645/MUM/2025[2018-19]Status: DisposedITAT Mumbai27 Nov 2025AY 2018-19
Section 143(3)Section 145Section 153C

failed to properly consider the earlier findings of the Assessing Officer that lending entities formed part of a network indulging in bogus circular trading and that loans were merely accommodation entries; and that the assessee has reserved liberty to add, alter or amend grounds and file further submissions ... physical verification of premises, LC documentation and banking trails. The Assessing Officer painstakingly records that, in his view, a discernible pattern emerged of alleged circular trading and accommodation entries amongst group entities. At the core of the Assessing Officer's findings is the allegation that none of the searched entities

Lloyds Metals and Energy Limited, Mumbai vs. Deputy Commissioner of Income Tax Central Circle -7(1), Mumbai

ITA 2644/MUM/2025[2017-18]Status: DisposedITAT Mumbai27 Nov 2025AY 2017-18

Bench: SHRI AMIT SHUKLA (Judicial Member), SHRI GIRISH AGRAWAL (Accountant Member)

Section 143(3)Section 145Section 153C

failed to properly consider the earlier findings of the Assessing Officer that lending entities formed part of a network indulging in bogus circular trading and that loans were merely accommodation entries; and that the assessee has reserved liberty to add, alter or amend grounds and file further submissions ... physical verification of premises, LC documentation and banking trails. The Assessing Officer painstakingly records that, in his view, a discernible pattern emerged of alleged circular trading and accommodation entries amongst group entities. At the core of the Assessing Officer’s findings is the allegation that none of the searched entities

Lloyds Metals and Energy Limited, Mumbai vs. Deputy Commissioner of Income Tax Central Circle -7(1), Mumbai

ITA 2643/MUM/2025[2016-17]Status: DisposedITAT Mumbai27 Nov 2025AY 2016-17

Bench: SHRI AMIT SHUKLA (Judicial Member), SHRI GIRISH AGRAWAL (Accountant Member)

Section 143(3)Section 145Section 153C

failed to properly consider the earlier findings of the Assessing Officer that lending entities formed part of a network indulging in bogus circular trading and that loans were merely accommodation entries; and that the assessee has reserved liberty to add, alter or amend grounds and file further submissions ... physical verification of premises, LC documentation and banking trails. The Assessing Officer painstakingly records that, in his view, a discernible pattern emerged of alleged circular trading and accommodation entries amongst group entities. At the core of the Assessing Officer’s findings is the allegation that none of the searched entities

Lloyds Metals and Energy Limited, Mumbai vs. Deputy Commissioner of Income Tax Central Circle -7(1), Mumbai

ITA 2642/MUM/2025[2015-16]Status: DisposedITAT Mumbai27 Nov 2025AY 2015-16

Bench: SHRI AMIT SHUKLA (Judicial Member), SHRI GIRISH AGRAWAL (Accountant Member)

Section 143(3)Section 145Section 153C

failed to properly consider the earlier findings of the Assessing Officer that lending entities formed part of a network indulging in bogus circular trading and that loans were merely accommodation entries; and that the assessee has reserved liberty to add, alter or amend grounds and file further submissions ... physical verification of premises, LC documentation and banking trails. The Assessing Officer painstakingly records that, in his view, a discernible pattern emerged of alleged circular trading and accommodation entries amongst group entities. At the core of the Assessing Officer’s findings is the allegation that none of the searched entities

Lloyds Metals and Energy Limited, Mumbai vs. Deputy Commissioner of Income Tax Central Circle -7(1), Mumbai

ITA 2641/MUM/2025[2014-15]Status: DisposedITAT Mumbai27 Nov 2025AY 2014-15

Bench: SHRI AMIT SHUKLA (Judicial Member), SHRI GIRISH AGRAWAL (Accountant Member)

Section 143(3)Section 145Section 153C

failed to properly consider the earlier findings of the Assessing Officer that lending entities formed part of a network indulging in bogus circular trading and that loans were merely accommodation entries; and that the assessee has reserved liberty to add, alter or amend grounds and file further submissions ... physical verification of premises, LC documentation and banking trails. The Assessing Officer painstakingly records that, in his view, a discernible pattern emerged of alleged circular trading and accommodation entries amongst group entities. At the core of the Assessing Officer’s findings is the allegation that none of the searched entities

Lloyds Metals and Energy Limited, Mumbai vs. Deputy Commissioner of Income Tax, Central Circle, 7(1), Mumbai

ITA 2640/MUM/2025[2013-14]Status: DisposedITAT Mumbai27 Nov 2025AY 2013-14

Bench: SHRI AMIT SHUKLA (Judicial Member), SHRI GIRISH AGRAWAL (Accountant Member)

Section 143(3)Section 145Section 153C

failed to properly consider the earlier findings of the Assessing Officer that lending entities formed part of a network indulging in bogus circular trading and that loans were merely accommodation entries; and that the assessee has reserved liberty to add, alter or amend grounds and file further submissions ... physical verification of premises, LC documentation and banking trails. The Assessing Officer painstakingly records that, in his view, a discernible pattern emerged of alleged circular trading and accommodation entries amongst group entities. At the core of the Assessing Officer’s findings is the allegation that none of the searched entities

Vishwas Shashikant Choksi, Mumbai vs. Assistant Commissioner of Income Tax Central Circle 6(2), Mumbai

In the result, all the appeals of the assessee are allowed

ITA 1399/MUM/2025[2015-16]Status: DisposedITAT Mumbai26 Nov 2025AY 2015-16

Bench: Shri Om Prakash Kant () & Shri Raj Kumar Chauhan () Assessment Year: 2015-16

trading of PMC Fincorp Ltd. that the entities involved in the trading of PMC Fincorp Ltd. shares manipulated the share prices through circular trading, shares manipulated the share prices through circular trading, shares manipulated the share prices through circular trading, artificially inflating the share price f artificially inflating the share

Gautam Ashok Choksi, Mumbai vs. Assistant Commissioner of Income Tax Central Circle 6(2), Mumbai

In the result, all the appeals of the assessee are allowed

ITA 1398/MUM/2025[2015-16]Status: DisposedITAT Mumbai26 Nov 2025AY 2015-16

Bench: Shri Om Prakash Kant () & Shri Raj Kumar Chauhan () Assessment Year: 2015-16

trading of PMC Fincorp Ltd. that the entities involved in the trading of PMC Fincorp Ltd. shares manipulated the share prices through circular trading, shares manipulated the share prices through circular trading, shares manipulated the share prices through circular trading, artificially inflating the share price f artificially inflating the share

Gaurav Abhay Choksi, Mumbai vs. Assistant Commissioner of Income Tax Central Circle 6(2), Mumbai

In the result, all the appeals of the assessee are allowed

ITA 1397/MUM/2025[2015-16]Status: DisposedITAT Mumbai26 Nov 2025AY 2015-16

Bench: Shri Om Prakash Kant () & Shri Raj Kumar Chauhan () Assessment Year: 2015-16

trading of PMC Fincorp Ltd. that the entities involved in the trading of PMC Fincorp Ltd. shares manipulated the share prices through circular trading, shares manipulated the share prices through circular trading, shares manipulated the share prices through circular trading, artificially inflating the share price f artificially inflating the share

Vikram Sajanlal Choksi, Mumbai vs. Assistant Commissioner of Income Tax Central Circle 6(2), Mumbai

In the result, all the appeals of the assessee are allowed

ITA 1391/MUM/2025[2015-16]Status: DisposedITAT Mumbai26 Nov 2025AY 2015-16

Bench: Shri Om Prakash Kant () & Shri Raj Kumar Chauhan ()

Section 153ASection 68

SEBI's order dated 26.02.2021, which concluded that the entities involved in the trading of PMC Fincorp Ltd. shares manipulated the share prices through circular trading, artificially inflating the share price for tax evasion purposes. The AO relied upon the SEBI order dated 26.02.2021 against entities involved in price manipulation

Tanu Gautam Choksi, Mumbai vs. Assistant Commissioner of Income Tax, Central Circle 6(2), Mumbai.

In the result, all the appeals of the assessee are allowed

ITA 1345/MUM/2025[2015-16]Status: DisposedITAT Mumbai26 Nov 2025AY 2015-16

Bench: Shri Om Prakash Kant () & Shri Raj Kumar Chauhan ()

Section 153A

SEBI's order dated 26.02.2021, which concluded that the entities involved in the trading of PMC Fincorp Ltd. shares manipulated the share prices through circular trading, artificially inflating the share price for tax evasion purposes. The AO relied upon the SEBI order dated 26.02.2021 against entities involved in price manipulation

Sidharth Abhay Choksi, Mumbai vs. Assistant Commissioner of Income Tax, Central Circle 6(2), Mumbai.

In the result, all the appeals of the assessee are allowed

ITA 1344/MUM/2025[2015-16]Status: DisposedITAT Mumbai26 Nov 2025AY 2015-16

Bench: Shri Om Prakash Kant () & Shri Raj Kumar Chauhan ()

Section 153ASection 68

SEBI's order dated 26.02.2021, which concluded that the entities involved in the trading of PMC Fincorp Ltd. shares manipulated the share prices through circular trading, artificially inflating the share price for tax evasion purposes. The AO relied upon the SEBI order dated 26.02.2021 against entities involved in price manipulation

Ashish Shashikant Choksi, Mumbai vs. Assistant Commissioner of Income Tax, Central Circle 6(2), Mumbai

In the result, all the appeals of the assessee are allowed

ITA 1341/MUM/2025[2015-16]Status: DisposedITAT Mumbai26 Nov 2025AY 2015-16

Bench: Shri Om Prakash Kant () & Shri Raj Kumar Chauhan () Assessment Year: 2015-16

trading of PMC Fincorp Ltd. that the entities involved in the trading of PMC Fincorp Ltd. shares manipulated the share prices through circular trading, shares manipulated the share prices through circular trading, shares manipulated the share prices through circular trading, artificially inflating the share price f artificially inflating the share

DCIT, Central Circle-8(1), Mumbai vs. Jainam Investments, Mumbai

In the result, both the appeal of the Revenue as well as cross-

ITA 794/MUM/2025[2016-17]Status: DisposedITAT Mumbai25 Nov 2025AY 2016-17

Bench: Shri Om Prakash Kant () & Shri Rahul Chaudhary ()

For Respondent: Mr. Suchek Anchaliay
Section 132(4)Section 147

corresponding sale transactions, and hence none of the characteristics commonly associated with pre-arranged or manipulated trades—such as matching purchase and sale quantities, circular trading, inflated entry prices or depressed exit prices—arose in the present case. 9.8 It was submitted that option pricing is governed by recognised market

Shri Swatantra Kumar Shukla, Kanpur vs. Deputy Commissioner of Income Tax-3, Kanpur

In the result, the appeal of the assessee is allowed for statistical purposes

ITA 575/LKW/2019[2015-16]Status: DisposedITAT Lucknow24 Nov 2025AY 2015-16

Bench: Sh. Sudhanshu Srivastava & Sh. Nikhil Choudharya.Y. 2015-16 Swatantra Kumar Shukla, Vs. Dy. Cit-3, Kanpur 61/139, Sita Ram Mohal, Kanpur- 208001 (U.P.) Pan: Acaps5484N (Appellant) (Respondent) Assessee By: Sh. P.K. Kapoor, C.A. Revenue By: Sh. R.R.N. Shukla, Addl Cit Dr Date Of Hearing: 03.09.2025 Date Of Pronouncement: 24.11.2025 O R D E R Per Nikhil Choudhary, A.M.: This Is An Appeal Filed By The Assessee Against The Orders Of The Ld. Cit(A)- 1, Kanpur, Passed On 29.07.2019 Wherein The Appeal Of The Assessee Against The Orders Passed By The Assessing Officer Under Section 143(3) Of The Act For The A.Y. 2015-16 On 29.12.2017 Has Been Dismissed. The Grounds Of Appeal Are As Under: - “1. That The Ld Cit(A) Was Wrong In Confirming The Addition Of Rs. 1,39,81,850- Made By The Ao Without Any Valid Reason. 2. That The Revenue Was Wrong In Disallowing The Claim Of Long Term Capital Gains U/S 10(38) Of The Act & The Same Is Against Facts & Law. 3. That The Various Case Law Cited By The Revenue In Rejecting The Claim Is Wrong In As Much As The Facts Of The Appellant'S Case Are Distinguishable From The Cited Case Law. 4. That The Revenue Was Wrong In Invoking Section 68 Of The Act & The Same Is Not Justified & Unwarranted. 5. That It Was Wrong On The Part Of Revenue To Invoke Section 68 Of The Act In As Much As Initial Onus On The Assessee To Establish Identity, Credit Capacity Of The Creditor & Genuineness Of The Transaction Was Discharged. 6. That The Finding Of The Ld Ao That 'Long Term Capital Gains Of Rs.1 39,81,850/ Claimed By The Assessee Is Held To Have Been Arranged By The Assessee Through

For Appellant: Sh. P.K. Kapoor, C.AFor Respondent: Sh. R.R.N. Shukla, Addl CIT DR
Section 10(38)Section 143(3)Section 68

sheet or business activities to demonstrate that the higher quoted price of the Penny Stocks was a result of the rigging of script through circular trading without any intrinsic value of the shares of such Penny Stocks. Furthermore, it had been demonstrated that the persons who purchased the shares

Anju Parekh, Dhamtari vs. Income Tax Officer, Ward-Dhamtari, Dhamtari

In the result, appeal of the assessee is allowed

ITA 384/RPR/2023[2013-14]Status: DisposedITAT Raipur20 Nov 2025AY 2013-14

Bench: Shri Partha Sarathi Chaudhuryआयकर अपील सं. / Ita No.384/Rpr/2023 "नधा"रण वष" / Assessment Year : 2013-14 Anju Parekh, Prop. M/S. Kushal Investment, Near Petrol Pump, Station Road, Dhamtari, Chhattisgarh-493773 Pan No. Akepp9283A

For Appellant: Shri Sunil Kumar Agrawal, CAFor Respondent: Shri Ram Tiwari, CIT-DR
Section 10(38)Section 68

preferential allotment (private placement) and off market transaction. Thereafter, the prices of the shares of the penny stock companies are rigged and raised through circular trading. These are done through the involvement of entry operator, share brokers etc. and they managed the bogus companies and used them for circular transactions

Smt. Satyawati Marwaha Through Legal Heir Sh, Chander Sheikhar Marwaha, Jalandhar vs. Assistant Commissioner of Income Tax, Jalandhar

In the result, the appeal for Asstt

ITA 347/ASR/2024[2015-16]Status: DisposedITAT Amritsar30 Oct 2025AY 2015-16

Bench: Sh. Manoj Kumar Aggarwal & Sh. Udayan Dasgupta

For Appellant: Sh. Ashray Sarna, C. A
Section 10(38)Section 132Section 144Section 144rSection 147Section 148Section 151Section 250(6)Section 68

companies. The AO has held that initially when the prices of the share are low, the beneficiaries of bogus -LTCG purchase the shares. Thereafter, circular trading is done and the prices of the shares are increased. Once the prices increase unrealistically, the shares held by the beneficiaries of bogus LTCG ... sold to either paper entities or beneficiaries of bogus Short-Term Capital Loss. Thereafter, circular trading is done and the prices of the shares are decreased and afterwards, the shares bought by the beneficiaries of Short-Term Capital Loss are sold at low price. In the case of the assessee

Smt. Satyawati Marwaha Through Legal Heir Sh. Chander Sheikhar Marwaha, Jalandhar vs. Assistant Commissioner of Income Tax, Jalandhar

In the result, the appeal for Asstt

ITA 346/ASR/2024[2014-15]Status: DisposedITAT Amritsar30 Oct 2025AY 2014-15

Bench: Sh. Manoj Kumar Aggarwal & Sh. Udayan Dasgupta

For Appellant: Sh. Ashray Sarna, C. A
Section 10(38)Section 132Section 144Section 144rSection 147Section 148Section 151Section 250(6)Section 68

companies. The AO has held that initially when the prices of the share are low, the beneficiaries of bogus -LTCG purchase the shares. Thereafter, circular trading is done and the prices of the shares are increased. Once the prices increase unrealistically, the shares held by the beneficiaries of bogus LTCG ... sold to either paper entities or beneficiaries of bogus Short-Term Capital Loss. Thereafter, circular trading is done and the prices of the shares are decreased and afterwards, the shares bought by the beneficiaries of Short-Term Capital Loss are sold at low price. In the case of the assessee

DCIT Central Circle 7 4 Mumbai, Mumbai vs. Indo Count Industries Ltd, Delhi

Appeal stands dismissed

ITA 3854/MUM/2024[2017-18]Status: DisposedITAT Mumbai30 Oct 2025AY 2017-18

Bench: Shri Sandeep Gosain & Shri Omkareshwar Chidara

Section 1Section 132Section 143(2)Section 143(3)Section 153ASection 250

were deleted. 22. Whereas on the contrary, the Ld. AR submitted that the purchase transactions are not accommodation entries, but just first step of circular trading, which is explained as under: a) It was submitted that that assessee had first sold the goods and after two stages, same goods were ... bank statement highlighting the payment and purchase invoices issued by MTPL and CVPL. 27. It was also submitted that no element of cash in circular trading of goods was involved and even no record of any cash transaction was found during the course of search and survey proceedings. Even