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TMI Blog2017 (5) TMI 1153X X X X Extracts X X X X X X X X Extracts X X X X ..... in response to letter dt. 06-06- 2011 as regards to Audit query. (ii) The learned CIT(A) has grievously erred in law and on facts in ignoring the fact that the learned AO had not disposed off the objections filed by the appellant by passing a speaking order and thereby not following the principles; set on by Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. V/s Income-tax Officer [2003] 259 ITR 19 (SC); as regards to notice issued u/s148 of I.T.Act,1961. (iii) The learned CIT(A) has grievously erred in law and on facts in confirming the reassessment order u/s 147 on the basis of the audit note raised by the audit party. (iv) The learned CIT(A) has grievously erred in law and on facts in reconsidering the assessment in the case of proceedings u/s 147 of the Act. [CIT v/s Sun Engineering Works (P) Ltd. 198 ITR 297 (SC)] 3) The learned CIT(A) has grievously erred in law and on facts in disallowing tie appellant's claim of exemption of Rs. 13,40,369 u/s 10(38). 4) (i) The learned CIT(A) has grievously erred in law and on facts in treating the sale proceeds of equity shares of Rs. 13,40,369 as unexplained investment u/s 69 of Income Tax Act, 1961. (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's profit on sale of shares. All this resulted in impugned long term capital gains addition. 6. The assessee preferred appeal challenging validity of reopening as well as the above long term capital gains addition on merits. The CIT(A) rejects both these pleas in lower appellate order under challenge. His findings on the former issue read as under: "5.2 I have considered the submission of the appellant and the reasons recorded by the AO. I am not in agreement with the appellant that the assessment was reopened due to audit objection and that the AO was convinced with the explanation of the appellant. The audit party may have pointed out the mistake to the assessing officer by raising an audit objection but the mistake pointed out is a mistake of facts and not that of law. Therefore, audit objection constitutes an information on the basis of which the Assessing Officer concluded that an income chargeable to tax had escaped assessment. Shares in respect of transactions done on recognized stock exchange are not transferred by writing mode of transaction as "off market". In view of this, the AO had reasons to believe that long term capital gains earned by the appellant were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stments u/s.69 of the Act as follows: "6. The third ground of appeal is directed against the addition of Rs. 13,20,685/- made by the AO towards long term capital gain. While making this addition the AO observed as under: "During course of assessment proceedings, the assessee was served with a show cause vide this office letter No.BCH/Wd.4/147/showcause /HHP/2012-13 dated 18.09.2012. In response to the same, the assessee vide her letter dated 21.11.2012 furnished a reply which read as under: "We refer to your notice on above subject as well as your notice u/s 148. in the matter, we submit that our original return E filed on 09.01.20108 shall be considered as return u/s 148 of the Act,. Without prejudice to above, we submit that you have claimed on verification of the records that we have purchased 36100 shares of talent Infoway Ltd, for Rs. 54,455/- on various dates through share broker M/s Talent Infoway Ltd.. Out of above, we have sold 23900 shares during the F.Y.2006-07 through same broker through off market transactions. You have also pointed out that these transactions are not eligible for claiming exemption u/s 10(38) of the I.T. Act 1961 as the element of paying STT is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38) of the I.T. Act emphasis that ' in computing the total income of a previous year of any person, any income arising from the transfer of a long term capital asset, being an equity share in a company or a unit of an equity oriented fund where : (a) The transaction of sale of such equity share or units is entered into on or after the date on which chapter VII of the finance ( No.2) Act 2004 comes into force, and (b) Such transaction is chargeable to securities transaction tax under that chapter:" From the above, it is very clear that for claiming exemption u/s 10(38) of the I.T. Act, payment of security Transaction Tax is an essential pre condition. In the instant case, the assessee failed to prove that the share transactions were made through a recognized stock exchange and also these transactions were subjected to payment of security transaction tax. The AR of the assessee orally stated that these transactions were made through inter connected stock Exchange of India Ltd.. However, could not furnish evidences which support his claim. It is noticed that the above transactions were made through off market dealing through stock broker Alliance Intermediates and Net work P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the trading Platform of ISE. Therefore, no Securities Transaction Tax was levied". In view of the information received from the Stock Exchange, the appellant was asked vide letter dated 20.2.2014 to show cause as to why the entire so called sale proceeds of Talent Infoway Ltd. shares may not be taxed as unexplained money in her hands. In his submission dated 7.3.2014, the AR of the appellant submitted as under: "The claim for exemption under section 10(38) was based on certificate from the broker M/s Alliance Intermediaries & Net work Pvt.Ltd. to the effect that the transaction was done on Stock \ Exchange. According to the document received by Your Honour's office the transaction was not done on Stock Exchange and hence I have no basis for pursuing the ground relating to this claim. I have considered the reply of the appellant. The appellant has not objected to the action proposed by the undersigned. Total sale proceeds received by the appellant in respect of so called sale of shares are Rs. 13,40,369/-. Since the amount is credited in the bank account of the appellant, the amount of is taxed as unexplained investment in the hands of the appellant Accordingly, addit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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