V. K. Nanavaty Share and Stock Brokers Pvt. Ltd Vs ITO (ITAT Mumbai)
In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Mumbai quashed the reopening of the assessment for V. K. Nanavaty Share and Stock Brokers Pvt. Ltd by the Income Tax Officer (ITO) under section 148 of the Income Tax Act. This decision, dated May 30, 2023, concerns the assessment year 2012-13. The Tribunal found the notice issued for reopening the assessment to be wholly without jurisdiction and bad in law.
Background of the Case
V. K. Nanavaty Share and Stock Brokers Pvt. Ltd, engaged in share broking and related services on the Bombay Stock Exchange (BSE), initially filed its return of income on September 30, 2012, declaring a loss of ₹47,77,007. Later, it revised this computation, declaring a total loss of ₹45,84,419. The assessment under section 143(3) of the Income Tax Act was completed on March 23, 2015, accepting the revised loss figure.
However, the case was reopened on March 30, 2019, based on a notice issued under section 148 of the Act. The Assessing Officer (AO) noted that during the relevant year, the assessee had sold shares of M/s. VAS Infrastructure Ltd, considered “Penny Stock,” and claimed long-term capital loss (LTCL) and short-term capital loss (STCL) on these transactions. The AO argued that these transactions were part of a scheme involving circular trading, meant to manipulate share prices and create fictitious gains or losses.
