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2016 (4) TMI 989 - ITAT AHMEDABADAssessment of sale of shares - “Short Term Capital Gain” or “Long Term Capital Gain” or under the head “Business Income” - Held that:- The assessee has emphasized that mode of acquisition would not be a factor to decide the nature of transaction. Under this alleged modus operandi, at the most, the assessee could procure large number of shares, but can that would change the character of transaction from investment to trader. There is no evidence with the Revenue to establish the nexus. The moment a cartel is being formed by number of persons to carry out an activity in an organized manner with profit motive and the activity is akin to business or trade as defined in section 2(13) of the Income Tax Act, then the arguments raised by the ld.counsel for the assessee would not stand. But the AO has neither recorded statement of the assessee nor collected any material which can demonstrate that the assessee has colluded with Smt. Rupal Naresh Panchal and Sugandh Estate and Investment Pvt. Ltd. in a manner that would indicate that shares were acquired for the purpose of trade. Such nexus has not been established. The observation of the CIT(A) is only inferential without any concrete material in the possession of the AO. Therefore, in our opinion, the activity of the assessee by virtue of mode of acquisition of shares cannot be segregated into two parts. The ld.CIT(A) has erred in creating an artificial distinction only on the basis of mode of acquisition. We allow the appeal of the assessee and direct the AO to tax the surplus on sale of shares under the head “short term capital/long term capital instead of “business income” treated by him. Penalty u/s 271(1)(c) - Held that:- We have already upheld that surplus on sale of shares is to be assessed as short term capital gain. Therefore, there cannot be any question to visit the assessee with penalty. Apart from above, we are of the view that the assessee has disclosed all the facts fully and completely. There is no change in the ultimate taxable income of the assessee. The AO has only changed the head of income, i.e. the assessee has claimed the surplus on sale of shares to be assessed under the head of capital gain. The AO has assessed it under the head “Business Income”. There cannot be any allegation against the assessee for concealment of income or furnishing inaccurate particulars to this extent. Thus, otherwise also no penalty on the first is issue is imposable.- Decided in favour of assessee Non addition of dividend stripping amount and levy imposed by the National Stock Exchange - Held that:- The assessee had made huge investment in shares. Some of the shares might have been sold, and it failed to keep track that dividend might have been declared. The CIT(A) has rightly observed that there was a bona fide human error in non-inclusion of dividend stripping amounts. As far as other ground is concerned, it is always a debatable issue whether levy imposed by the National Stock Exchange was penalty in nature or compensatory in nature. It was disallowed and not disputed by the assessee, but that would not goad the AO to visit the assessee with penalty. - Decided in favour of assessee
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