TMI Blog2014 (2) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... re erroneous or wrong - the Assessing Officer found that the differences in purchases highlighted by him in the assessment order stood explained - CIT(Appeals) has given a finding that discrepancies pointed out by the Assessing Officer were on account of non-application of mind while preparing remand report - Assessee had clearly explained it as Units of Prudential ICICI Floating Rate Fund – there is no reason to disbelieve it – thus, none of the discrepancies alleged by the Assessing Officer existed – the CIT(Appeals) was justified in holding that there was no difference in purchase of units or closing stock of investment in Mutual Fund Units and the additions deleted by the CIT(A) also upheld – Decided against Revenue. - ITA No.95/Kol./2010 - - - Dated:- 8-1-2014 - Mahavir Singh And Abraham P George, JJ. For the Appellant : Shri Saboorul Hasan Usmani , JCIT, Sr. DR For the Respondent : Shri Soumitra Choudhury, Adv. ORDER:- PER : Abraham P George In this appeal filed by the Revenue, it has taken four grounds in which Ground No. 3 is general in nature and needs no adjudication. 2. Through its grounds 1 and 2 Revenue is aggrieved on ld. CIT(Appeals)'s direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006 -do- 10,00,000 6. 09.08.2005 Standard Chartered MF 30,00,000 Disclosed 7. 28.06.2005 Sundaram BNP Paribas MF 35,00,000 Disclosed 8. 31.03.2006 Kotak Mahindra MF 15,00,000 9. 01.12.2005 Templeton MF 50,00,000 10. 25.05.2005 -do- 20,00,000 Disclosed 11. 31.05.2005 -do- 30,00,000 12. 02.01.2006 Frankl in Templeton MF 10,00,000 13. 22.12.2005 HSBC MF 15,00,000 Disclosed 14. 28.06.2005 -do- 50,00,000 Disclosed 15. 19.05.2005 -do- 40,22,578 Disclosed 16. 23.02.2006 -do- 15,05,906 17. 21.07.2005 -do- 25,00,000 Disclosed 18. 27.12.2005 -do- 22,00,000 19. 23.02.2006 -do- 20,00,000 20. 14.12.2005 -do- 20,00,000 21. 29.01.2006 Pru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome from business . Accordingly he declined to accept the claim of assessee that the surplus arising out of the purchase and sale of Units was capital gains and assessed such surplus under the head Profits and Gains of Business/Profession'. 6. Against by the above, assessee moved in appeal before the ld. CIT(Appeals). Vis-a-vis, treatment of its income under the head business , argument of the assessee was that it's main object was not doing business in shares. As per the assessee it was dealing only in Mutual Funds and not dealing in shares at all. Gains arising out of sale of mutual fund could not be treated as business income. Reliance was placed on the decision of Hon'ble Mumbai Bench of this Tribunal in the case of Bombay Gymkhana Ltd. - vs. - ITO [115 TTJ 639]. As per the assessee, mutual funds were held as investment in its accounts and the intention at the time of purchasing of mutual fund units were only investment. Surplus arising were on redemption of investment in Mutual Fund Units. According to assessee such surplus on redemption of such Mutual Fund Units, could only be considered as capital gains. 7. Ld. CIT(Appeals) was appreciative of these contentions. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. There was only a typographical error wherein the auditor had not shown the name of the Prudential ICICI Flowing Rate Fund against the sum of Rs.27 lakhs. Assessee had also furnished a certificate from it's auditors of M/s. S. Hossain Associates confirming the typographical mistake, wherein it was mentioned as under: - we regret to inform you that name of the Mutual Fund investment, Prudential ICICI Floating Rate Fund' was inadvertently not printed against numerical figure of investment of Rs.27,00,000/- already shown in schedule No. 4 of investment which formed part of balance sheet for the year 2005-06 . 10. Ld. CIT(Appeals) after considering the remand report, submission of the assessee and the reconciliation, was of the opinion that the discrepancies pointed out by the Assessing Officer relating to purchases were all explained by the assessee. As per ld. CIT(Appeals), what were pointed out by the Assessing Officer as suppression of the closing stock were actually switch-in and switch-out between various Mutual Fund Schemes. Further as per ld. CIT(Appeals) the only error in the investment disclosed in the Schedule 4 of the audited accounts was non-mentioning of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of manufacturing and exporting of leather goods. Ld. CIT(Appeals) finding that assessee held the Mutual Fund units as investments has not been effectively rebut ted by the Revenue. When the intention of the assessee was only to make investment, sale thereof would only result in capital gains. There is no case for the Revenue that assessee's main business was trading in Mutual Fund Units or shares. In these circumstances, we are of the opinion that the surplus arising to the assessee was rightly considered by the ld. CIT(Appeals) as income from capital gains. We do not find any reason to interfere with the direction of ld. CIT(Appeals). 14. Coming to the addition of Rs.3,75,95,906/- for unexplained purchases in Mutual Fund Units, no doubt there was a difference in purchase details furnished by the assessee before the Assessing Officer on 13.08.2009 and 04.09.2009. The difference between these two statements as compiled by the Assessing Officer is reproduced hereunder: - Sl. No. Particulars Amount in statement dated 13.08.2008 Amount in statement dated 04.09.2008 i) Detail of opening stock of mutual fund as per detail date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn. N.B. 2 vis-a-vis Sl. No. 8 - Opening balance of investment is Rs.17,92,998/- and in absence of any purchase or sale the closing balance should have been for the same amount. Switch in/out detail shows that there is switch into Reliance Vision Fund for Rs.15,00,000/- on 22.12.2005 and again Rs.15,00,000/- on 23.01.2006 showing switch in amount for Rs.14,99,479/- twice. Now switch out for Rs.30.00 lakh was made in absence of any purchase O.B. of Rs.17,92,998/-. N.B. 2B vis-a-vis Sl. No. 7 - Opening balance is Rs.71,728/- but closing balance is Rs.99,803/- without any purchase. It proves that purchase for Rs.28,075/- not disclosed. N.B. 3 vis-a-vis Sl. No. 14- There is purchase/investment for Rs.20,00,000/- during the year but neither sale nor closing balance is shown. In absence of sale suppression of closing stock for Rs.20,00,000/- is considered. Switch in/out detail does not contain information about ABN Amro Monthly Income Fund. N.B. 4 vis-a-vis Sl. No. 15- Like N.B. 3, there is purchase in respective fund for Rs.30,00,000/- and in absence of sale the same should have been shown as closing stock. But the assessee has not shown the respective fund as closin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase for Rs.50,00,000/- and sale for Rs.40,37,152/-. It means either there is loss or closing balance but none of these is shown. N.B. 14 vis-a-vis Sl. No. 33 - It shows purchase for Rs.25,00,000/- and sale for Rs.15,17,884/-. It means either there is loss or closing balance. But none of these is shown. N.B. 15 vis-a-vis Sl. No. 34- It shows purchase of Rs.20,00,000/- and sale for Rs.19,19,950/-. It means there is loss for Rs.50/-. N.B. 16 vis-a-vis Sl. No. 36 - It shows purchase for Rs.35,00,000/- but neither sale nor closing balance is shown. It proves suppression of closing stock. N.B. 17 vis-a-vis Sl. No. 38 - It shows purchase for Rs.25,00,000/- and in absence of any sale and closing stock it can be considered that there was suppression of closing stock. N.B. 18 to 30 vis-a-vis Sl. No. 42 to 52 respective of the chart - In these serials thee are sale/closing stock without any opening stock and purchase during the year. The reconciliation is required. In absence of reconciliation the respective sale and closing stock may be considered as sale and closing stock out of unaccounted purchases. 15. Explanation given by the assessee for each of the new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement. N.B.-21 : There was a switch in of Rs.10,00,000/- from HDFC Liquid Fund on 02.01.2006 which was mentioned in our switch in/out statement. N.B.-22 : There was two switch in of Rs.30,00,000/- (15,00,000 x 2) from Reliance Floating Rate Fund on 22.12.2005 23.01.2006, which was mentioned in our switch in/out statement. N.B.-23 : There was a switch in of Rs.20,00,000/- from Reliance Floating Rate Fund on 30.05.2005, which was mentioned in our switch in/out statement. N.B.-24 : There was an opening stock of Rs.71,728/-, which was mentioned in our opening balance statement as sl no. 83. N.B.-25 : There was an opening stock of Rs.1792998.71, which was mentioned in our opening balance statement as sl. No. 84. N.B.-26 : There was a purchase of Rs.35,00,000/- which was mentioned in our purchase statement as sl. No. 24. N.B.-27 : There was a purchase of Rs.35,00,000/- which was mentioned in our purchase statement as sl. No. 18. N.B.-28 : There was two purchase of Rs.50,00,000/- Rs.25,00,000/- which was mentioned in our purchase statement as sl. No. 19 26. N.B.-29 : There was six switch in of Rs.18,00,000/- (5,00,000 x 3 + 1,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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