ORDER : (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) [1] By this petition under Article 226 of the Constitution of India, the petitioner has challenged the notice dated 31st March 2021 issued by the respondent – Assessing Officer under Section 148 of the Income Tax Act, 1961 (for short, “the Act”) for reopening of the Assessment Year 2015-16. [2] The brief facts of the case are as under: [2.1] The petitioner is an individual and was engaged in the activity of trading in shares and securities. During the year under consideration, the petitioner had also traded in two contracts of “purchase” and “sale” of derivatives of Rs.19,20,000/- each and there was neither any profit nor any loss on account of such transactions. The petitioner filed return of income for the year under consideration on 31st October 2015 declaring total income at Rs.64,40,890/-. [2.2] Thereafter, the respondent issued the impugned notice dated 31st March 2021 under Section 148 of the Income Tax Act, 1961 (for short, “the Act”) seeking to reopen the case of the petitioner for the year under consideration. [2.3] The petitioner, in response to the impugned notice, filed return of income on 19th April 2021 and further requested the respondent to supply copy of reasons for reopening. [2.4] The respondent supplied copy of reasons for reopening vide letter notice dated 5th March 2021. The case of the petitioner has been reopened by the respondent broadly on the count that the petitioner has indulged into generating non-genuine losses and profits by trading in illiquid stock options on the Bombay Stock Exchange. An information has been received by the respondent from the Insight Portal in March 2021 regarding coordinated and premediated trading on the Bombay Stock Exchange by engaging in reversal trades in illiquid stock options resulting into non-genuine business loss / gains to various beneficiaries and it is alleged that the petitioner is a party to such manipulation. It is stated that from the data made available under Project Falcon on the ITBA, it is seen that the petitioner has created “losses” and “profits” of Rs.38,40,000/-. Both “buy” and “sell” trades have been executed on the Bombay Stock Exchange. The petitioner has undertaken two unique trades which, in turn, resulted into “fictitious losses of Rs.19,20,000/-” as well as “fictitious profits of Rs.19,20,000/-”. Both “buy” and “sell” trades have been executed on the Bombay Stock Exchange. The petitioner has undertaken two unique trades which, in turn, resulted into “fictitious losses of Rs.19,20,000/-” as well as “fictitious profits of Rs.19,20,000/-”. Thus, the petitioner has traded in two unique contracts and has undertaken both “buy” and “sell” trades in each of the contracts and selling transactions is identical. The respondent is of the view that the petitioner has indulged in generating non-genuine losses and profits of Rs.38,40,000/- by trading in illiquid stock options on the Bombay Stock Exchange and therefore, the respondent has reason to believe that the income of Rs.38,40,000/- has escaped assessment and thus, the case of the petitioner has been reopened by the respondent – Assessing Officer. [2.5] The petitioner, vide letter dated 24th May 2021, raised objections against reopening wherein various factual and legal submissions were raised. As per para 5 of the objections raised by the petitioner against reopening, the petitioner requested for large number of documents from the respondent and the respondent was also requested to drop the reassessment proceedings. [2.6] The respondent, vide order dated 13th November 2021, disposed of the objections, inter alia, holding that reopening is justified. Therefore, the impugned notice issued by the respondent under the provisions of Section 148 of the Act is bad, illegal and barred by limitation and without jurisdiction. Being aggrieved, the petitioner has approached this Court. [3] Learned Senior Advocate Mr. Tushar Hemani with learned advocate Ms. Vaibhavi Parikh for the petitioner submitted that there is no escapement of income chargeable to tax so as to assume the jurisdiction to reopen the assessment by the respondent – Assessing Office. It was submitted that on perusal of the reasons recorded, the Assessing Officer has found that the income has escaped and on the basis of the information received from the Insight Portal regarding coordinated and premediated trading on the Bombay Stock Exchange by engaging in reversal trades in illiquid stock options resulting into non-genuine business loss / gains to the assessee on the ground that the assessee has traded Rs.38,40,000/- by executing buy and sell transactions on the Bombay Stock Exchange. It was submitted that the assessee has entered into derivatives transactions involving “buying and selling” trades of identical quantity and as such the assessee has incurred loss of Rs.19,20,000/- and therefore, there is no revenue impact of such transactions. It was submitted that the assessee has entered into derivatives transactions involving “buying and selling” trades of identical quantity and as such the assessee has incurred loss of Rs.19,20,000/- and therefore, there is no revenue impact of such transactions. It was submitted that the respondent – Assessing Officer has reason to believe by adding Rs.19,20,000/- by considering loss and profit together of double the amount of Rs.19,20,000/- and has concluded that there is an escapement of income and found escapement of income of Rs.38,40,000/-. It was, therefore, submitted that there is no income chargeable to tax as escaped assessment so as to reopen the assessment for the Assessment Year 2015-16. [4] It was further submitted by learned Senior Advocate Mr. Hemani that reasons recorded are vague and non-specific as it includes transactions pertaining to equity and derivatives. There is no date of execution of trades recorded in the reasons. The respondent has also not specified quantity involved for “buying and selling” trades. It was, therefore, submitted that the case of the petitioner has been reopened in the mechanical manner without there being any application of mind and therefore, there is no, prima facie, belief as to escapement of income chargeable to tax. [5] It was further submitted that the assessee has carried out transactions in F&O (Futures and Options) on the floor of the “recognized stock exchange” and there cannot be any “non-genuine loss” on account of the transactions in F&O carried out by the assessee. It was, therefore, submitted that the transactions carried out by the assessee in the segment of F&O are different from stocks and therefore, there cannot be any escapement of income chargeable to tax. Learned Senior Advocate Mr. Hemani contended that sanction for issue of notice under Section 148 of the Act in term of Section 151 of the Act has not been obtained by the respondent, as required. [6] It was further submitted that the impugned notice is issued on a borrowed satisfaction and is liable to be quashed and set aside. [7] On the other hand, learned Senior Standing Counsel Mr. [6] It was further submitted that the impugned notice is issued on a borrowed satisfaction and is liable to be quashed and set aside. [7] On the other hand, learned Senior Standing Counsel Mr. Varun K. Patel for the respondent submitted that the respondent – Assessing Officer issued notice under Section 148 of the Act after considering the information on the Insight Portal and the modus operandi of manipulative reversal trades, which has emerged from the orders of SEBI and confirmed by the Hon’ble Apex Court in the case of SEBI vs. Rakhi Trading Private Limited [Civil Appeal No.1969 of 2011 vide order dated 8th February 2018] has considered fictitious loss and profit in the case of the petitioner to form a belief that the income has escaped assessment. It was submitted that the petitioner failed to justify in the objections filed pursuant to the reasons recorded. Learned advocate has relied upon the following averments made in affidavit-in-reply filed on behalf of the respondent: “8. In the present case, information has been received on Insight Portal in March 2021 regarding coordinated and premediated trading on the Bombay Stock Exchange by engaging in reversal trades in illiquid stock options resulting in non genuine business loss/gains to the beneficiary assessees and that the present assessee is a party to such manipulation From the data made available under Project Falcon on the ITBA, it is seen that the assessee has created a losses and Profits of Rs 38,40,000/- Both, buy and sell trades have been executed on the Bombay Stock Exchange. Detailed perusal of information shows that the Securities Exchange Board of India (SEBI) has been Investigating cases involving reversal trades covering the period 01.04.2014 to 31.03.2015. In the interim order dated 20.08.2015, the SEBI had found that: a) The loss-making entities were trading mainly in options on individual stocks which were thinly traded. The trades by these loss-making entities in many cases contributed to 70% to 100% of total traded volume for the contracts on those days. In the interim order dated 20.08.2015, the SEBI had found that: a) The loss-making entities were trading mainly in options on individual stocks which were thinly traded. The trades by these loss-making entities in many cases contributed to 70% to 100% of total traded volume for the contracts on those days. b) The trading done by loss-making entities in stock options in the above manner, accounted for significant proportion of their overall trading on that segment c) On majority of occasions, the quantity of stock options bought and sold by the loss making entities for a contract was identical, however, there was a significant difference in the sale value and buy value of the transactions resulting into significant loss to the loss- making entities. Earlier, the Hon'ble Apex Court in the case of Rakhi Trading Private Limited delivered on 08.02.2018 in CA No. 1969 of 2011 has, on similar facts, categorically stated in its order at page no. 45 that “Nobody intentionally trades for a loss. An intentional trading for loss per se, is not a genuine dealing in securities Trading is always with the aim to make profits. But if one party consistently makes loss and that too in preplanned and rapid reverse trades, it is not genuine, it is an unfair trade practice.” The chief characteristics of manipulative reversal trades that emerge from the orders of SEBI and confirmed by the Hon'ble Apex Court, on similar facts, are as under: (i) Identical purchase and sale quantity (ii) Huge variation in purchase price and sale price (iii) Trades carried out between same party and counterparty ice if a client A purchased X qty from a counter-party client B. then A sells X qty to B only. (iv) Time gap between purchase and sale transaction lasts few seconds and not more than an hour. (v) Insignificant change in the price of the underlying scrip as compared to the change in buy rates and sell rates. (vi) Trading repeatedly in deep in-the-money options and deep out-of-the-money options on individual stocks, which were thinly traded. (vii) The trades by these loss-making entities, in many cases, contribute to 70% to 100% of total traded volume for the contracts on those days. Further, on analysis of trading data received under Project Falcon, it is seen that the assessee has undertaken trades in the following unique contracts during year under consideration: Sr. (vii) The trades by these loss-making entities, in many cases, contribute to 70% to 100% of total traded volume for the contracts on those days. Further, on analysis of trading data received under Project Falcon, it is seen that the assessee has undertaken trades in the following unique contracts during year under consideration: Sr. No. Source of PAN Source of PAN name Informati on F.Y Information Type Informatio n value Infor matio n date Remarks 1 AABCS9622C SPS Share Brokers Pvt Ltd 2014-15 Fictitious losses in Equity/ Derivative Trading 1920000 BSE Equity Derivativ e loss 2 AABCS9622C SPS Share Brokers Pvt Ltd 2014-15 Fictitious losses in Equity / Derivative Trading 1920000 Total 3840000 From perusal of the table above, it is seen that the assessee has traded in 2 unique contracts and has undertaken both sell as well as buy trades in each of the contracts. Further, it is relevant to mention that the buy quantity and sell quantity for each of the 2 contracts in which trades have been undertaken by assessee is identical. Also, it is seen that by trading in each of the 2 contracts enumerated in the table above, the assessee has recorded losses and Profits for each contract. Thus, based on the analysis of trade data as present in this paragraph and comparing with chief characteristics of reversal trades as discussed above, it is seen that the assessee has indulged in generating non-genuine losses and Profits amounting to Rs.38,40,000/- by trading in illiquid stock options on the BSE. In this case, specific information has been received clearly outlining the systematic evasion of taxes by the assessee. The said information was flagged on INSIGHT portal. The facts as enumerated above have been found out on examination on the case records of the assessee and are self explanatory. Therefore, no further enquiry is required in this case. On the basis of the same there are reasons to believe that the income chargeable to tax has escaped assessment.” [8] Referring to the above averments, it was submitted that the respondent – Assessing Officer has assumed jurisdiction under Section 148 of the Act by recording the reasons is required to be upheld as the impugned notice issued is, after following due procedure of law and after due application of mind, formed an independent opinion, which requires no interference. [9] It was further submitted that the impugned notice is within limitation and after obtaining requisite sanction under Section 151 of the Act by the competent authority. [10] Having heard the learned advocates for the respective parties and having considered the facts of the case, the reasons recorded by the respondents are as under: “Further, on analysis of trading data received under Project Falcon, it is seen that the assessee has undertaken trades in the following unique contracts during year under consideration: Sr. No. Source of PAN Source of PAN name Information F.Y. Information Type Information value Information date Remarks 1 AABCS9622C SPS Share Brokers Pvt Ltd 2014-15 Fictitious losses in Equity/ Derivative Trading 1920000 BSE Equity Derivative Loss 2 AABCS9622C SPS Share Brokers Pvt Ltd 2014-15 Fictitious losses in Equity / Derivative Trading 1920000 BSE Equity Derivative Profit Total 3840000 From perusal of the table above, it is seen that the assessee has traded in 2 unique contracts and has undertaken both sell as well as in each of the contracts. Further, it is relevant to mention that the buy quantity and sell quantity for each of the 2 contracts in which trades have been undertaken by assessee is identical. Also, it is seen that by trading in each of the 2 contracts enumerated in the table above, the assessee has recorded losses and Profits for each contract. Thus, based on the analysis of trade data as present in this paragraph and comparing with chief characteristics of reversal trades as discussed above, it is seen that the assessee has indulged in generating non-genuine losses and Profits amounting to Rs.38,40,000/- by trading in illiquid stock options on the BSE.” [11] On perusal of the above reasons, it appears that the respondent – Assessing Officer is not clear as to how the income has escaped assessment as it considered loss as well as profit both for escapement of income as the petitioner – assessee has incurred loss and profit of equal amount, there is no question of any escapement of income. [12] The contention raised on behalf of the petitioner that no proper sanction is granted under Section 151 of the Act, however, the same is not tenable in law on perusal of sanction / approval under Section 151 of the Act at page : 18 of this petition. [12] The contention raised on behalf of the petitioner that no proper sanction is granted under Section 151 of the Act, however, the same is not tenable in law on perusal of sanction / approval under Section 151 of the Act at page : 18 of this petition. [13] On perusal of the reasons recorded, it is not disclosed any income which has escaped assessment of income as the effect of loss and profit earned by the petitioner would be ‘nil’. There is no any other information recorded by the Assessing Officer, which shows that the petitioner has earned any income which is not offered to tax. It is not in dispute that the transactions referred to by the respondent – Assessing Officer were carried out on the Bombay Stock Exchange and no co-relation of the petitioner is established in the reasons recorded between the transactions of loss and profit of the equal amount in the case of the assessee with the observations of the Hon’ble Apex Court referred to in the reasons recorded. Even the chief characteristics of manipulative reversal trades, on the basis of the order passed by the SEBI, recorded the fact reasons by the Assessing Officer which has no connection, as stated in the reasons recorded. Therefore, merely referring to the order of the Hon’ble Apex Court and the observations of the SEBI, without there being co-relation of the petitioner – assessee and only because the two contracts, in which the trades have been undertaken by the assessee, was identical resulting into loss and profit. The Assessing Officer could not have come to the, prima facie, conclusion that the income has escaped assessement to the tune of Rs.38,40,000/-. There is no effect on the income of the assessee in view of loss and profit incurred on the F&O transactions. [14] In view of above, reasons recorded by the respondent – Assessing officer therefore, cannot, by any stretch of imagination, be said to form any reason to believe as to escapement of income for assuming the jurisdiction under Section 148 of the Act to reopen the assessment for the year under consideration. [15] For the foregoing reasons, this petition succeeds. The impugned notice dated 31st March 2021 issued under Section 148 of the Act to reopen the assessment for the Assessment Year 2015- 16 is, therefore, not sustainable and is, accordingly, quashed and set aside. [15] For the foregoing reasons, this petition succeeds. The impugned notice dated 31st March 2021 issued under Section 148 of the Act to reopen the assessment for the Assessment Year 2015- 16 is, therefore, not sustainable and is, accordingly, quashed and set aside. Rule is made absolute. No order as to cost.