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2014 (11) TMI 397 - AT - Income TaxValidity of proceedings u/s 147 –Treatment of transactions in shares - Whether CIT(A) was justified in treating the transactions in shares by assessee as investment only and thereby treating the gain there from as capital gain in stead of business income – Held that:- Assessee is transacting in shares and units from the inception itself - Income shown by assessee from transactions in shares and units as capital gain was also accepted by the AO till the AY 2006-07 - Assessment completed for AY 2006-07 was revised by CIT u/s 263 by holding that income from share transactions to be assessed as business income of assessee - assessments for the impugned AY was reopened after expiry of four years from the end of relevant AY - Therefore, as per the proviso u/s 147(1) in a case where assessment is completed u/s 143(3) reopening of assessment can be made after expiry of four years if the escapement of income is on account of failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment. There was no failure in furnishing material facts truly and fully is either visible or evident from the reasons recorded - It is clearly evident the assessment has been reopened primarily on the basis of the order passed by CIT u/s 263 for AY 2006-07, which was upheld by ITAT and only for the purpose of assessing the gain derived from share transaction as profits and gains of business or profession in stead of capital gain as claimed by assessee and accepted in the original assessment - as there is no failure on the part of assessee to disclose fully and truly all material facts necessary for its assessment, the reopening of assessment beyond a period of four years is in violation of statutory provision, hence, invalid in law - there are no fresh and tangible material before the AO on the basis of which AO could have formed belief that income has escaped assessment - the foundation on which assessment was reopened do not survive - the finding of the CIT(A) with regard to the validity of reopening u/s 147 has to be sustained - thus, the order of the CIT(A) is set aside – Decided against revenue. Capital gains on sale of shares - STCG or business income - Held that:- CIT(A) was of the view that the income derived from sale of shares and units of mutual funds is to be treated as ‘income from capital gains’ - the transactions in sale of shares and units of mutual funds in the impugned assessment year is any way different from AY 2006-07 - income derived from sales of shares and units of mutual funds has to be assessed ‘as income from capital gains’ as they are in the nature of investment only - in the latest assessment order for the AY 2011-12, the AO himself while completing assessment u/s 143(3) vide order dated 26/03/2014 has accepted assessee’s transaction in shares and units of mutual fund as investment activity and assessed the gain derived therefrom as capital gain – Decided in favour of assessee.
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