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ACIT, Central Circle – 1 (3) , Ahmedabad Versus Hasmukh N. Vora, HUF and Vica-Versa

2015 (12) TMI 1368 - ITAT AHMEDABAD

Transaction of shares - business income or Short Term Capital Gains eligible to concessional tax treatment u/s.111A - Held that:- The assessee has indulged in violation of SEBI Regulation while making investment in IPOs. However, whatever amounts the assessee had illegally earned, which could have been assessed as their income, has been taken away by SEBI from them. Once the actual amounts of income earned through the violation of SEBI Regulation have been disgorged by SEBI, ultimately no income .....

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the finding of the CIT(A) that the sum of ₹ 2,20,76,842/- is to be assessed as business income because since we have held that on account of disgorgement the sum of ₹ 2,20,76,842/- is not to be assessed in the hands of the assessee. Once the amount is not to be taxed because it has already been recovered by the SEBI and there is no real income in the hands of the assessee, the question of the head under which it is to be assessed could not arise. Now, we revert back to the question w .....

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he finding of the CIT(A) in this regard upholding assessment of ₹ 2,20,76, 842 (out of Short Term Capital Gains of ₹ 2, 54, 93,060 shown in the appellant's return) as business income instead of as Short Term Capital Gains eligible to concessional tax treatment u/s.111A. - ITA No. 1390/Ahd/2010, ITA No. 1590/Ahd/2010 - Dated:- 7-8-2015 - SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI KUL BHARAT, JUDICIAL MEMBER For The Revenue : Shri Narendra Singh, Sr. DR For The Assessee : Shri S.N. Sop .....

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7; 34,12,218/- as per provision of Section 111A. 3. In the assessee s appeal, as per the concise grounds of appeal, following grounds are raised:- 1. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in dismissing Ground No.1 of the appellant's appeal before him challenging the validity of the assessment order impugned before him, as being general in nature and not requiring any adjudication. 2. Without prejudice to the foregoing, in .....

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holding assessment of ₹ 2,20,76, 842 (out of Short Term Capital Gains of ₹ 2, 54, 93,060 shown in the appellant's return) as business income instead of as Short Term Capital Gains eligible to concessional tax treatment u/s.111A. 4. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in refusing to entertain Ground No.4 of the appellant's appeal before him after observing that the issue of levy of interest u/s.234A, 234B, .....

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sessee s appeal, which is with regard to validity of the assessment order, was not pressed at the time of hearing before us; accordingly, the same is rejected. 5. Ground Nos. 2 & 3 of the assessee s appeal and the only ground in the Revenue s appeal are interrelated and therefore, they are being considered together and are being adjudicated as under. 6. The facts of the case are that, during the year under consideration, the assessee declared income of ₹ 2,54,93,059/- as Short Term Cap .....

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rm capital gain on account of disgorgement. He also opined that the sum of ₹ 2,54,93,059/- offered as capital gain is liable to be assessed as business income. Accordingly, he assessed the sum of ₹ 2,54,93,059/- as business income. On appeal, the CIT(A) rejected the assessee s claim of reduction in the gain on account of disgorgement. He divided the capital gain in two portion; (i) the first portion of the capital gain, i.e., ₹ 2,20,76,842/- was concerned, the CIT(A) held it to .....

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inst the non-allowance of reduction on account of disgorgement; and as an alternate claim, it was contended that the entire sum of ₹ 2,54,93,059/- should have been assessed as Short Term Capital Gain. 7. We have heard both the parties and perused the material placed before us. We find that the Ground Nos. 2 & 3 of the assessee s appeal are covered in favour of the assessee by the decision of ITAT, Ahmedabad Bench in the case of Shri Monal Y. Thakkar and Smt. Reetaben R. Thakkar vide IT .....

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e after the close of accounting year, and even after passing of the assessment order. But these payments related to same share transactions, which have given rise to the alleged income in the hands of the assessee. The appeal before the CIT(A) is a continuation of the original proceedings. Before the CIT(A), the assessee have already taken additional grounds of appeal on the strength of the SEBI order. Therefore, we find force in the contentions of the ld. Counsel for the assessee that ultimatel .....

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making investment in IPOs. However, whatever amounts the assessee had illegally earned, which could have been assessed as their income, has been taken away by SEBI from them. Once the actual amounts of income earned through the violation of SEBI Regulation have been disgorged by SEBI, ultimately no income has resulted to the assessee. Thus, applying the theory of real income and also relying upon the above decision of ITAT, Ahmedabad Bench, we are of the opinion that the sum of ₹ 2,20,76, .....

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t the sum of ₹ 2,20,76,842/- is not to be assessed in the hands of the assessee. Once the amount is not to be taxed because it has already been recovered by the SEBI and there is no real income in the hands of the assessee, the question of the head under which it is to be assessed could not arise. Now, we revert back to the question with regard to the head under which the sum of ₹ 34,12,218/- is to be assessed. The CIT(A) held this sum to be income from capital gain with the followin .....

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the arguments that the Assessing Officer's contention about period of holding are not correct particularly in view of the fact that definition of short term capital asset in respect of shares and securities itself specifically provides that the period of holding would be less than one year. This itself suggest that the short period of holding is not the criteria to be considered as trading transactions. Apart from this, the section 111A also provides for specific treatment of tax in respect .....

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