TMI Blog2014 (6) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee and the allegation of the AO that the assessee had paid consideration outside the books of account was based purely on surmises and conjecture as rightly held by the CIT(A) – thus, there was no infirmity in the order of CIT(A) deleting the addition made by AO to the total income of the assessee – Decided against Revenue. Treatment of income as STCG – Income from Business – Held that:- The assessee had transacted only in 24 scrips during the year consideration out of which 12 scrips were allotted to her through IPOs – It cannot be said that the frequency of transactions in shares of the assessee was high - Even the reasons for immediate sale of the shares allotted through IPOs were satisfactorily explained by the assessee - There were no repetitive transactions entered into by the assessee in the same scrips and the entire investment in shares was made by the assessee out of her own funds - The transactions in all the delivery based shares were consistently treated by assessee as investment transactions and this treatment given by assessee in the books of account was accepted by AO in the earlier years – Relying upon CIT. Versus GOPAL PUROHIT [2010 (11) TMI 222 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inquiry was directly made by AO with Bombay Stock Exchange and National Stock Exchange which revealed that there were no such purchases made in the name of the assessee during the financial year 2007-08 The assessee was also found to have made payment against the purchases of these shares in the month of December, 2007. According to the AO 14,000 shares of M/s Orbit Corporation thus were purchased by the assessee only in the month of December, 2007 and not in the month of May 2007 as claimed by the assessee. He held that the price of shares of M/s Orbit Corporation in the month of May, 2007 was lower and in order to take advantage of the said lower price, the shares purchased in the month of December, 2007 at the prevailing high price were shown to have been purchased at lower rate in the month of May 2007. Accordingly, the difference in the purchase value of shares as worked out by him at Rs.84,24,629/- was treated by the AO as the payment made by the assessee for purchase of shares from her unaccounted income and the said amount was added by him to the total income of the assessee under the head income from other sources in the assessment completed u/s 143(3) vide order dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal purchase price of the shares in May 2007 but inference drawn by the AO is incorrect and baseless being devoid of any supportive adverse material on record. The brokers have never said that these purchases were not made in the month of May 2007 for appellant , though, for some reason or the other, the transfer of shares and payment thereto had taken place in December, 2007 as mentioned above. There is no further material available on record to suggest that either the brokers have received the differential amount of Rs.84,24,629/- outside of their books of accounts or the appellant has made a payment to this extent outside of her books of accounts. Hence, I do not find any justification of the impugned addition of differential amount on notional basis which actually is on surmises and conjectures only. Thus, I find force in the arguments and submissions of the ld. Authorized representative that in view of various decisions relied upon by him (supra), the impugned addition cannot be upheld in the eyes of law. Accordingly, the impugned addition is deleted in the facts and circumstance of the instant case and in view of the above discussions . 4. The ld. DR submitted that 14000 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He submitted that the contract notes, however, were issued by the brokers in the month of May 2007 itself and invited our attention to the copies of the said contract notes placed at pages 26 to 34 of the paper book to show that the shares were purchased by the brokers on behalf of the assessee in the month of May 2007 itself. He contended that this issue was finally sorted out in the month of December, 2007 when the mistake in recording the shares purchased on behalf of the assessee in the name of brokers was detected and immediately thereafter the shares were transferred by the brokers to the D-Mat account of the assessee and payment against the same was also made by the assessee. He invited our attention to the letter issued by one of the brokers viz M/s Jalan Securities Pvt.Ltd placed at page 35 of the paper book and pointed out that the mistake in punching the relevant share transactions initially in their own account was confirmed by the said broker. 6. We have considered the rival submissions and also perused the relevant material on record. It is observed that the genuineness of the claim of the assessee of having purchased 14000 shares of M/s Orbit Corporation has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e month of December, 2007, the assessee made the payment against the said shares immediately thereafter. The documentary evidence placed on the record by the ld. counsel for the assessee thus clearly established that the shares were purchased by the assessee in the month of May 2007 itself at the prevailing market rate and it was not a case of purchase of shares by the assessee in the month of December 2007 as alleged by the AO. It appears that this allegation of the AO was mainly based on the fact that the market price of the shares incidentally had increased in the month of December, 2007 than the market price in the month of May 2007. This allegation, however, was dislodged by the assessee on the basis of documentary evidence which clearly established that the shares were actually purchased by the assessee in the month of May 2007 at the then prevailing rates and this position was again confirmed by the concerned brokers in writing. It is also pertinent to note here that there was not an iota of evidence brought on record by the AO to show that any consideration for the purchase of said shares over and above what was shown by the assessee in her books of account was paid by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this treatment given by the assessee was accepted by the AO in the earlier years and there was no justifiable reasons to take a different view during the year under consideration. The reasons for selling the shares allotted through IPOs immediately after allotment were also explained by the assessee before the ld. CIT(A). After considering the submissions made on behalf of the assessee as well as the material available on record, the ld. CIT(A) directed the AO to treat the profit derived by the assessee from the transactions in shares as capital gains and not business income for the following reasons given in para 3.3 of his impugned order : 3.3 I have gone through the contents of the impugned assessment order, statement of facts, submissions of the appellant along with the material available on record. I find that AO s action in treating capital gains to be business income is against the law laid down by Hon ble High Court in the case of Gopal Purohit 228 CTR 582 (Bom) that had also been upheld by Hon ble Supreme Court recently. The appellant had shown impugned shares as investment in her books of accounts and not as stock-in-trade. The very fact that she persisted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is observed that the assessee had transacted only in 24 scrips during the year consideration out of which 12 scrips were allotted to her through IPOs. It, therefore, can not be said that the frequency of transactions in shares of the assessee was high. Even the reasons for immediate sale of the shares allotted through IPOs were satisfactorily explained by the assessee. There were no repetitive transactions entered into by the assessee in the same scrips and the entire investment in shares was made by the assessee out of her own funds. The transactions in all the delivery based shares were consistently treated by assessee as investment transactions and this treatment given by assessee in the books of account was accepted by AO in the earlier years. Having regard to all these facts of the case, we are of the view the ld. CIT(A) was fully justified in directing the AO to treat the profit derived by the assessee from the delivery based transaction as capital gain relying on the decision of the Hon ble Bombay High Court in the case of Gopal Purohit (supra) which has been subsequently upheld by the Hon ble Supreme Court. We, therefore, find no reason to interfere with the impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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