ITAT Mumbai’s 10/08/2026 Order in Jyoti H. Mehta Vs DCIT (AY 1993-94): Detailed Summary of Findings

This article provides a structured summary of the decision of the Income Tax Appellate Tribunal, Mumbai Bench, in the case of Jyoti H. Mehta Vs DCIT (ITAT Mumbai), ITA No. 42/MUM/2024, for Assessment Year 1993-94, decided on 10/08/2026. It was the third round of assessment proceedings arising out of the income-tax treatment of activities relating to the late Harshad S. Mehta, whose assets stood attached under the Special Courts (TORTS) Act, 1992.

The Tribunal disposed of cross-appeals filed by the assessee (legal heir) and the Revenue against the order passed under Section 250 by CIT(A)-52, Mumbai dated 19.12.2023.

The fresh assessment order dated 29.12.2016 had determined total income at Rs. 2,106.04 crore, mainly by repeating earlier additions and including issues where income had been enhanced by the first appellate authority in prior rounds. The Tribunal systematically examined each head of addition with reference to:

  • Bank statements and deal confirmations,
  • Court and Special Court proceedings,
  • Earlier ITAT and High Court decisions in the Harshad S. Mehta group, and
  • The assessee’s consistently claimed cash method of accounting.

The Tribunal partly allowed the assessee’s appeal and dismissed the Revenue’s appeal.

Background of the Litigation

  • The assessee, now deceased, was an individual carrying on business as sole proprietor of M/s. Harshad S. Mehta, a registered broker of the Bombay Stock Exchange.
  • Activities related to trading and brokerage in capital market and money market instruments.
  • For AY 1993-94, no return of income was filed. An ex parte assessment under Section 144 was completed on 29.03.1996 determining total income at Rs. 1,396.02 crore.
  • The first appeal before CIT(A) was dismissed on 28.02.2003 invoking Section 249(4)(b) on the ground of non-payment of admitted tax, which was in turn linked to the assessee’s notification on 08.06.1992 under the Special Courts law and attachment of assets.
  • In second appeal, the ITAT, by order dated 23.06.2008, remanded the matter to the CIT(A) to decide on merits.
  • CIT(A) then passed a fresh order on 24.03.2010, largely upholding and in some aspects enhancing the assessment.
  • In further appeal, the Tribunal set aside that order and remitted the matter to the Assessing Officer (AO) by order dated 13.05.2015.
  • The AO, in the third round, on 29.12.2016, again made large-scale additions, including those already enhanced by the CIT(A) earlier, arriving at Rs. 2,106.04 crore.
  • The impugned CIT(A) order dated 19.12.2023 granted partial relief, resulting in the present cross-appeals before ITAT Mumbai.

The assessee argued that the business in the relevant year had effectively run only up to 08.06.1992, that the assessment was “high-pitched”, and that many additions were pure repetitions unsupported by primary evidence.

The Revenue mainly relied upon the orders of the AO and CIT(A).

Money Market Oversold Position – Rs. 1,021.33 crore

AO’s Approach

In the original assessment, the AO compiled details of the assessee’s money market transactions by sourcing information from:

  • Banks and financial institutions,
  • Companies and brokers,
  • Bank accounts supplied through RBI, and
  • Contract notes and deal files produced by the assessee.

On that basis, he determined:

  • Opening stock,
  • Purchases,
  • Sales, and
  • Closing stock for various money market securities.

He concluded that in respect of eight securities there was a negative closing stock, which he treated as an “oversold position” of Rs. 1,021,33,43,699/-, compiled in Annexure M‑1 to the assessment order dated 29.03.1996.

Initially, Annexure M‑1 made available to the assessee only showed opening and closing quantities and values, without item-wise purchase and sale details. Those granular details were stated to have been provided by the AO only in 2009, a fact recorded by the CIT(A) in paragraph 58 of the earlier appellate order.

CIT(A)’s View (Second and Third Rounds)

  • In the second round (order dated 24.03.2010), CIT(A) accepted Annexure M‑1 as correct and complete, and treated all transactions as delivery-based.
  • He rejected the assessee’s argument that non-delivery of securities leading to suits in the Special Court by counterparties explained the negative positions, stating there was no direct link shown between the oversold positions and such suits.
  • In the impugned order dated 19.12.2023 (third round), the CIT(A) largely reaffirmed the earlier approach, refused to follow the ITAT’s order in the assessee’s AY 1990-91 on money market oversold positions, noted that income-tax proceedings are not governed by strict res judicata, and denied telescoping against other additions, relying on the earlier appellate order of 24.03.2010.

Corrected Computation and AO’s 2010 Letter

The addition of Rs. 1,021.33 crore across eight securities was later found to suffer from computational mistakes. By a letter dated 17.08.2010, the AO himself furnished a revised working:

  • Money market oversold position recomputed at Rs. 953,49,19,224/- (after removing arithmetic errors).

Despite this internal correction, the CIT(A), in the 2023 order, did not grant effective deletion and mostly reiterated the addition, issuing only limited directions for small adjustments.

Tribunal’s Examination of Each Security

The Tribunal carefully considered detailed submissions and documentary evidence filed by the assessee for each of the eight securities. The core planks of the assessee’s case were:

  • Several so‑called sales were non‑delivery transactions, particularly with National Housing Bank (NHB),
  • In some transactions the assessee had acted merely as a broker, not as principal,
  • In at least one instance, what was treated as a sale was actually a loan transaction, and
  • Opening negative balances carried forward from earlier years were already held unsustainable or explained in prior orders and could not be used as a fresh source of addition.

The Tribunal noted, inter alia, that: