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2016 (5) TMI 1305 - AT - Income TaxUnexplained cash credit - addition u/s 68 - Sale proceeds from sale of shares - Held that:- The undisputed fact which emanates from the assessment order is that the purchases were made in the month of April, 2004 i.e. financial year 2004-05 relevant to assessment year 2005-06. A perusal of the record shows that assessment of A.Y. 2005-06 was made u/s. 143(3) r.w.s. 147 of the Act vide order dated 08.10.2012 and the reasons for the reopening of the assessment shows that the assessment was reopened to verify the deposits made in the bank account which were used for the investment in shares. After thorough scrutiny the investment in shares was accepted. It is pertinent to note that the impugned order of the First Appellate Authority is dated 25.03.2010 and the reassessment order is dated 08.10.2012 which means that when the officer made the reassessment order, the order of the First Appellate Authority was on record before him. In spite of the adverse findings given by the First Appellate Authority, the A.O accepted the investment in shares. The revenue cannot blow hot and cold in the same breath since in the scrutiny reassessment the purchases have been accepted. We do not find any reason/logic in not accepting the subsequent sales of the shares and since the credit in the books pertained to the sale consideration received, in our considered opinion, the same cannot be treated as unexplained cash credit. Therefore, we do not find any merit in the impugned additions made u/s. 68 by treating the sale proceeds as unexplained cash credit. The additions on this account are directed to be deleted. - Decided in favour of assessee Sale proceeds from sale of shares - Treatment of short term capital gain OR business income - Held that:- A prudent investor always keep a watch on the volatility of the market and makes sound investment decision in accordance with such market fluctuation and has the liberty to liquidate its investments in shares as and when necessary. The law itself has recognized this fact by treating the same as short term capital gains for shares held less than 12 months and long term capital gains where the shares are held for more than 12 months. Had this been not the case, all the gains on shares would have been considered as business income only. The fact that the law recognizes such volatility and has specifically provided a separate holding period in respect of such shares makes it very clear those gains on such shares having a holding period of less than 12 months and held as investment would be considered as short terms capital gains only. Thus the assessee’s claim cannot be negated on the basis of frequency of transaction. Considering the entire facts in totality, we find that the assessee has shown shares as investment right from the year of purchase and that was shown as such in the balance sheet of the assessee which was filed before the A.O. Thus the shares have to be treated as investments and, therefore any profit earned on the sale thereof is to be treated as capital gains. Capital gains be it short terms or long term shall be assessed as such and not as business income.- Decided in favour of assessee Disallowance of interest expenses - Held that:- Ld. counsel could not adduce any evidence to show that there is no nexus between the borrowings and the lending of money. Since no evidence has been brought on record, neither before the lower authorities nor before us. Disallowance of interest expenses is confirmed.
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