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ACIT-16 (1) , Mumbai Versus Pheroz R. Mody

2016 (7) TMI 451 - ITAT MUMBAI

Share transaction - Capital gain v/s business income - assessee had availed the services of a PMS provider - Held that:- ind the AO had reopened the scrutiny assessment and had held that the income of the assessee arising out of sale of shares had to be taxed under the head business income and not under the heads STCG or LTCG, that the FAA reversed the decision of the AO considering the fact that the assessee had availed the services of a PMS provider. In our opinion, once an assessee approaches .....

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assessed by the AO confirmed - Decided in favour of assessee - I.T.A. 4572/Mum/2014 - Dated:- 30-6-2016 - Sh. Rajendra, Accountant Member And Pawan Singh, Judicial Member For the Revenue : Ms. Radha Katyal Narang-DR For the Assessee : None ORDER Per Rajendra, AM Challenging the order dated 28/04/2014 of the CIT (A)-27, Mumbai, the Assessing Officer (AO) has filed the present appeal. Assessee -an individual, derives income from salary, capital gains and other sources. He filed his return of incom .....

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s income from Short-Term Capital Gains (STCG) of ₹ 2. 99 Crores and Long-Term Capital Gains (LTCG) of ₹ 87, 471/- as against the business income assessed by the AO. On verification of the records, after the completion of scrutiny assessment, he found that the assessee had indulged in largescale transaction in shares. He held that the intention of the assessee was to make profit and the income tax under the head capital gains should be taxed as business income. He found that the numbe .....

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een held for more than 365 days the same was shown as LTCG. Accordingly, the AO treated the profits from all the share transactions as business income. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). Before him, the assessee challenged the validity of reassessment proceedings. It was argued that the opening was result of change of opinion, that reopening was bad in law and illegal, that the AO had not observed the procedure laid d .....

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However, the FAA referring to various case laws held that the AO had duly recorded the reasons which had a live link with the facts of the case, that at the stage of initiation of reassessment proceedings it was not obligetory for him to conclude with evidence as to how much of income had escaped assessment, that it was not a case of change of opinion. Finally upheld the reopening. 4. Before the FAA, the assessee further argued that income from investment held under Portfolio Management Scheme .....

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el (46 SOT 23). After considering the submissions of the assessee and the assessment order, the FAA held that the issue of availing the services of portfolio manager and treatment to be given to the share transaction was no more res-integra. He referred to the cases of Radha Birju Patel (supra) and Anusuya Suren Mirchandani (supra). He held that the issue had to be decided in view of the investment objective mandated by the assessee while engaging the PMS provider which was in the nature of disc .....

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per se, that the dominant intention of the assessee at the time of making investment with PMS provider could only be said to be with a view of growth prospects and not with intention of making profits. Relying upon above-mentioned two orders of the tribunal, the FAA held that the AO was not justified and taxing the gains arising out of sale of shares under the head business income. 5. During the course of hearing before us, the Departmental Representative (DR) supported the order of the AO and s .....

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ad business income and not under the heads STCG or LTCG, that the FAA reversed the decision of the AO considering the fact that the assessee had availed the services of a PMS provider. In our opinion, once an assessee approaches a PMS provider, he loses control over the decision-making process for making investment in the shares. It is the PMS provider who decides as to how much money is to be invested and in which scripts- all the decisions related with sale and purchase of shares are taken by .....

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