K.A. Investments Consultancy LLP Vs ITO (ITAT Mumbai)
The appeal before the Income Tax Appellate Tribunal (ITAT), Mumbai, arose from an order dated 2 September 2025 passed by the Commissioner of Income Tax (Appeals)-51, Mumbai, relating to Assessment Year 2013–14. The assessee challenged the validity of reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961, along with additions made on merits, including disallowance of business loss, disallowance under Section 14A, and addition of alleged bogus commission.
The assessee, a resident LLP engaged in share trading, mutual funds, and investment activities, had filed its return declaring nil income. During the relevant financial year, it incurred significant losses in trading of shares, including a loss of approximately ₹22.89 crore in the scrip of Shree Nath Commercial and Finance Ltd. The case was selected for scrutiny, and the original assessment was completed under Section 143(3) on 30 March 2016 after detailed examination of records, determining total income at ₹11.23 lakh.
Subsequently, notice under Section 148 dated 27 March 2018 was issued by the Assessing Officer on the basis of alleged escapement of income. The reasons for reopening referred to a survey conducted on 9 June 2015, statements recorded during the survey, and findings of the Kolkata Investigation Wing regarding alleged penny stock transactions. It was alleged that the assessee had incurred artificial losses in a penny stock scrip to set off profits and reduce tax liability.
