ITAT Ahmedabad Upholds PCIT’s Revision Over Alleged Bogus Share Trading Loss

Failure to Inquire Into Derivative and Share Transactions Rendered Reassessment Erroneous

The Ahmedabad “D” Bench of the Income Tax Appellate Tribunal has dismissed the appeal filed by Ramanbhai Jethabhai Jadav, thereby affirming the revisionary action taken by the Principal Commissioner of Income Tax-3, Ahmedabad under Section 263 of the Income Tax Act for Assessment Year 2016–17. The case arose from reassessment proceedings initiated to examine substantial profits from equity derivatives trading. While the assessee filed a belated return in response to notice under Section 148 declaring nominal income, the Assessing Officer accepted the figure without examining transactions relating to alleged long-term capital loss of ₹1.43 crore on sale of shares of Excel Castronics Pvt. Ltd.

Lack of Enquiry Justified Exercise of Section 263 Powers

The PCIT held that the reassessment was completed without any meaningful verification into the genuineness of share trading losses and alleged accommodation entries, rendering the order both erroneous and prejudicial to the interests of revenue. The Tribunal agreed, observing that the assessee’s replies before the Assessing Officer were confined only to objections against reopening and not to the merits of the trading transactions. While the assessee argued that supporting documents were produced during revision proceedings, the Bench noted that no evidence showed these materials were ever examined by the Assessing Officer during reassessment. The Tribunal further rejected claims that the revision was based on audit objections or “borrowed satisfaction,” holding that the PCIT independently identified lack of enquiry.

Accordingly, the ITAT confirmed the PCIT’s direction for fresh assessment, reinforcing that acceptance of a return without investigating significant and suspicious transactions squarely attracts revision under Section 263.