TMI Blog2015 (3) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT(A) deleting addition made on account of 5000 shares of Rajesh Exports. - Decided in favour of assessee. Addition made on account of undisclosed shares of M/s Hindustan Organic Chemicals ltd has been deleted by the CIT(A) after observing that there was typographical mistake with regard to purchase of shares of Hindustan Organics on 28-2-2007, which was actually 15,000 shares and not 2,17,761 shares. Since the addition was made by AO only on the basis of typographical mistake, which has been detected by CIT(A) and after considering the correct nos. of shares purchased on 28-2-2007 we do not find any infirmity in the order of CIT(A) for deleting the addition made on account of shares of M/s Hindustan Organics Chemicals Ltd. - Decided in favour of assessee. Addition made on account of deemed dividend u/s.2(22)(e) - addition was made by the AO in respect of loan taken by the assessee firm from M/s Koradia Construction Pvt. Ltd. - addition deleted by the CIT(A) - Held that:- It is not disputed that assessee is not shareholder of M/s Koradia Construction Pvt. Ltd, therefore, the amount of loan received by the assessee not in the capacity of shareholder, is not liable to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of 25,000 shares cannot be made in the hands of assessee. The finding recorded by the CIT(A) is as per material on record. Accordingly, we do not find any reason to interfere in the order of CIT(A) for deleting the addition made with regard to sale of 25000 shares of Karuturi Communication Ltd. - Decided in favour of assessee. - ITA No.4646/Mum/2011, ITA No.4711/Mum/2011 - - - Dated:- 11-3-2015 - Shri R.C.Sharma S And Shri Sanjay Garg JJ For the Appellant : Shri Vimal Punmiya For the Respondent : Shri Asghar Zain ORDER PER R.C.SHARMA (A.M.) : These are the cross appeals filed by the assessee and Revenue against the order of CIT(A) dated 28-3-2011 for the assessment years 2008-09, in the matter of order passed u/s.143(3) of the I.T.Act. 2. The only grievance of the assessee relates to treatment of capital gains offered, which was treated by the AO as business income. 3. Rival contentions have been heard and record perused. Facts in brief are that the main business of the assessee is building and construction activity. The assessee was engaged in developing real estate upto 31-3-2006. From the accounting year 2006-07, the company started investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present year only. Initially the assessee had purchased certain shares and sold them within a short span. The reason for the same has been stated to be fall in the stock market. For proving so a chart has been filed, according to which there was a fall in the BSE index. It is for that reason the assessee has suffered loss in the initial transactions. From the sale and purchase entered into by the assessee it has been described that on three days assessee has purchased those shares and on 10 days those shares were sold. A substantial portion of the shares purchased are unsold and are outstanding in the balance sheet under the head investment . From the transactions entered into by the assessee it cannot be said there was a frequent sale and purchase of shares. The reason of sale is supported by fall of BSE index. Thus according to facts and circumstances of the case, it cannot be said that assessee has entered into activity of sale and purchase of shares with a view to trade. 7.1 Though the AO in the assessment order has mentioned that assessee has utilized borrowed funds, but during the course of hearing reference was made to P L account to show that assessee does not bear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss or erosion in investment. 7.3 Keeping in view the above discussions and factual position, we are of the opinion that the activity of sale and purchase of shares entered into by the assessee during the year under consideration cannot be held to be an activity giving rise to an income assessable under the head income from business or profession. The investment was made by the assessee in the activity of sale and purchase of share was with an intention to invest and shares unsold have been shown under the head investment . The sale at the short period was supported by just cause i.e. fall in price of shares. Therefore, we reverse the finding recorded by Ld. CIT(A) and hold that the gain earned by the assessee was from sale and purchase of shares is gain assessable under the head short term capital gain . The grounds of appeal filed by the assessee is allowed. 6. On the other hand, Ld. DR relied on the decision of Hon‟ble Bombay High Court in the case of Gopal Purohit, 188 Taxman 140 (Bom); Wallfort Financial Services Ltd., 41 SOT 200; Manmohak Properties P. Ltd., 39 taxmann.com 105; Koradia Construction P. Ltd., 39 taxmann.com 20; Circular No.4/2007, dated 15-6-2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced by the assessee either before the AO or before the CIT(A). And lastly, the very fact that the assessee is in the business of speculation and trading in similar shares with same demat account, broker, mixed funds, having maintained no separate accounts prove that it is only in share trading business during the year under consideration. 7. Ld. AR submitted that most of cases cited above by ld. DR favours the plea taken by the assessee, which have also been upheld by the Tribunal in assessee‟s own case in the immediately preceding assessment year. In respect of decision in the case of Gopal Purohit, ld. AR submitted that the ratio laid down by the jurisdictional High Court squarely applies in assessee‟s case insofar as assessee has two separate portfolios maintained and only delivery based transaction were offered for Taxation under the Head Income from Capital Gains . The same are reflected in books of account under the head investment‟ only. In respect of Wallfort Financial Services Ltd. (supra), ld. AR contended that facts are totally different insofar as shares were held by assessee as investment whereas in the aforesaid case, shares were shown as stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tally different to the facts of the present appeal, therefore, the findings given in the aforesaid appeals have no relevance to the appeal of the assessee. 8. It was further contended by ld. AR that merely because assessee liquidates its investment within short span of time which had given better overall earning to assessee. It would not lead to conclusion that assessee had no intention to keep on funds as investor in equity shares, but was actually intended to trade in share. For this purpose reliance was placed the decision of Tribunal in the case of DCIT V /s E-Cap Partners [2014] 45 taxmann.com 342 (Mumbai-Trib) and Manish Karwa V /s ACIT [2014] 45 taxmann.com 351 (Ind. Trib). As per ld. AR the Tribunal held assessee as investor in earlier year, therefore, assessee has to be considered as investor in subsequent year, for this purpose reliance was placed on the decision of DCIT Vs. KRA Holding Trading P. Ltd. {2012} 26 taxmann.com 48(Pune Trib.). 9. In view of the above discussion and after going through the order of the Tribunal in assessee‟s own case for the immediately preceding assessment year, wherein facts and circumstances were the same, we direct the AO to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 28,00,004/- on the ground that no evidence was filed. However as contended by the representative, the appellant filed a copy of account of the appellant in the books of accounts of M/s Koradia Construction as the A.O. himself accepted in page 14 of the assessment order while dealing with the issue Karuturi shares. As seen from the above account a sum of ₹ 28,00,004/- is credited on 22-1-08 being sale proceeds of 5000 shares of Rajesh Exports. Further as per the statement of capital gain filed along with return of income, sale of 5000 shares is admitted on 22-1-08 at ₹ 28,00,005/- by incurring loss of ₹ 20,93,136/- in page 4 of the above statement. This means that the appellant has already admitted the sale of 5000 shares in the capital gain working and, therefore, the addition is not justified and the same is deleted Against the above order of CIT(A), the Revenue is in further appeal before us. 12. We have considered rival contentions and found that the AO has made addition of ₹ 45,60,000/- by estimating value of 5000 shares of M/s Rajesh Exports, which as per AO was neither sold nor shown in the closing stock at the end of the year. From th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck at 6,91,739/- shares without giving opportunity to the appellant. A perusal of the opening stock statement filed along with the return for A.Y2007-08 reads as under :- No. of Shares Total shares Amount(Rs.) 14.2.07 17761 13,573,212 28.2.07 21776 647,668 From the above, it could be seen that the appellant admitted purchase of 2,17,761 shares twice, once on 14-2-07 and again on 28-2-07 but the value of shares is drastically different. The value of shares purchased on 14.2.07 is 1,35,73,212 whereas the value of shares purchased on 28-2-07 was ₹ 6;47,668/-. This cannot be correct. As contended by the representative (here was a typing mistake while preparing the above statement and instead of 15000 shares purchased for ₹ 6,47,668/ - on 28-2-07 the appellant by mistake typed previous figure of 217761 and based on this wrong figure, the A .O. worked out the undisclosed sale which is not correct. The above explanation of the appellant is bonafide and acceptable.. In any case the A.O. ought to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e holder i.e. the concern. The above view of the Hon'ble Mumbai Tribunal has been confirmed by the Hon'ble Mumbai High Court in the case of CIT vs. Universal Medicare Pvt. Ltd. (3 taxmann.com 61) in ITA No.2264 of 2009 dated 22.03.2010.It was clearly held by the Hon'ble Murnbai High Court that payment even assuming that it was a dividend, would have to be taxed not in the hands of the assessee, but in the hands of the shareholder. In view of the decision of the jurisdictional Tribunal and High Court, I hold that the advance received by the appellant from M/s.Koradia Construction Pvt. Ltd. cannot be taxed u/s.2(22)(e) in the hands of the appellant firm. Against the above order of CIT(A), the Revenue is in further appeal before us. 17. We have considered rival contentions. It is not disputed that assessee is not shareholder of M/s Koradia Construction Pvt. Ltd, therefore, the amount of loan received by the assessee not in the capacity of shareholder, is not liable to be treated as deemed dividend u/s.2(22)(e) in the hands of assessee firm in view of the decision of Hon‟ble Bombay High Court in the case of Universal Medicare Pvt. Ltd., 3 taxmann.com 61. The i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive and the stand taken by the AO. the AO based on the contract notes submitted by the appellant adopted sale of 40,401 shares on 13.7.2007. It is true that as per the contract notes the appellant sold 40,401 shares of KML. However, as contended by the representative this includes 25,000 shares purchased by the appellant s sister concern M/s Koradia Construction Pvt. Ltd. in the earlier year which was lying in their demat account. Actually instead of issuing contract memo in the name of M/s Koradia Construction Pvt. Ltd., the broker issued contract memo for sale in the name of the appellant on 13.7.2007 for 25,000 shares. The appellant immediately treated the sale proceeds of 25,000 shares as loan from M/s Koradia Construction Pvt. Ltd. as seen from the copy of ledger account and same is accepted by the AO. This means that the shares were held by the appellant s sister concern and sold by them. The AO wrongly assumed that the appellant admitted sales without purchases. A perusal of the capital gain working filed by the appellant along with the return of income shows that the appellant sold only 15,401 shares on 13.7.2007 as per page 2 of the working whereas the AO wrongly adopted s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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