TMI Blog2017 (9) TMI 1346X X X X Extracts X X X X X X X X Extracts X X X X ..... i [hereinafter referred to as "Ld. CIT(A)"] erred in passing the order dated 02.11.2016 upholding the order passed by Ld. A. O. dated 31.03.2015 under section 143(3) r.w.s. 254 of the Income Tax Act, 1961 ['of the Act' for short 1 determining total income of the Appellant at Rs. 1,70,34,120/- as against returned income of Rs. 1,10,70,840/- without appreciating the facts and circumstances of the case. The Appellant, therefore, prays that the order dated 02.11.2016 passed by Ld. CIT(A) is bad in law and the same may be quashed. 2. Treating 'Short Term Capital Gain' as 'Business Income' unjustified - Rs. 76,36,602/- i. The Ld. CIT(A) erred in upholding the action of the Ld. A.O. in treating the 'Short Term Capital Gain' as 'Business Income' without appreciating the fact that the Appellant is an investor in the shares and mutual funds and also has shown the same as investments in her Balance Sheet, Hence, the addition of Rs. 76,36,602/- made under the head 'Business income' is not at all justified and the same may be deleted. ii. Without prejudice to the above, the Ld. CIT(A) erred in not directing the Ld. A.O. to allow the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital Gain (STCG) of Rs. 56,49,475/- and Long Term Capital Gain of Rs. 28,61,567/. The assessee claimed LTCG exemption u/s 10(38) of Rs. 35,75,885/-. The return was processed u/s 143(1) and was accepted. The Assessing Officer (AO) while making scrutiny of assessment for AY 2007-08 observed that assessee is engaged in the business of venture of trading in shares and treated the STCG and LTCG as "Business Income". After treating the STCG and LTCG as Business Income for AY 2007-08, the assessment for AY 2005-06, 2006-07,2008-09 &2009-10 was re-opened under section 147 of the Act. The notice u/s 148 was issued to the assessee. The assessee contested the re-opening proceeding. The AO passed the assessment order u/s 143(3) r.w.s. 147 of the Act and accepted the return of income of Rs. 1,10,70,840/-, without any variation. Subsequently, proceeding u/s 263 was initiated by Principle Commissioner of Income-tax (PCIT) on the ground that order passed by AO u/s 143(3) r.w.s. 147 was erroneous and prejudicial to the interest of Revenue. While doing so the ld. PCIT held that fact for the AY 2005-06 was similar to the facts of AY 2007-08 wherein the activity of assessee of trading in shares was he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treatment of STCG and LTCG as "Business Income". The addition u/s 68 and addition on account of law withdrawal was confirmed. Thus, further aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before the Tribunal. 5. We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. Ground No.1 is general in nature and need no specific adjudication. Hence, dismissed. 6. Ground No. 2 & 3 relates to treating the STCG and LTCG as "Business Income". The ld. AR of the assessee argued that the AO made the reopening on the basis of STCG and LTCG treating them as "Business Income" in AY 2007-08. However, after hearing the assessee, the AO allowed the LTCG and STCG in the order passed u/s 143(3) r.w.s. 147 dated 30.11.2011. The ld. PCIT revised the assessment on 12.11.2011 on the basis of observations of facts for AY 2007-08 wherein the capital gain of the assessee was treated as "Business Income". It was further argued that for AY 2007-08, the AO treated the STCG and LTCG as "Business Income" in assessment order dated 22.12.2009 passed under section 143(3). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tments was always accepted by department in all previous assessment years up to and including A.Y. 2006-07. Shares at the year and were always valued "at cost" and not "at cost or market value, whichever is lower" as per AS-2 of ICAI as applicable to stock in trade. We also found that profit on sale of shares so held has always been offered and taxed as capital gains in all previous years and the said offering has been accepted in earlier assessment years including and up to AY 2006-07 by speaking order and there was no change of circumstances for the year as compared to earlier assessment years. With regard to period of holding of shares, we found that long Term shares were held for 14 to 24 months and short term shares were held for a fairly longer period before the same were sold. Substantial dividend income of Rs. 12,85,694/- on shares was earned during the said assessment year on entire shares investment. It is also evident from record that investment was always made by assessee out of after tax surplus generated. Contention of A.O. that the assessee had borrowed funds was found false by ld. CIT(A). It is also not in dispute that both sale and purchase transactions took place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 143(3) rws 147 order for directing the AO to treat the Capital Gain as Business income. Further, the AO allowed Capital Gain for AY 2014-15in assessment order passed under section 143(3) dated 26.11.2016. Thus, respectfully following the decision of the coordinate bench of the Tribunal and the principle of consistency the Ground No. 2 & 3 are allowed. 10. Ground No.4 related to addition u/s 68 of the Act of Rs. 21,50,000/-. The ld. AR of the assessee argued that during the assessment proceeding, the assessee provided all the details about the gift received by the assessee. All the gifts were received through the cheques. The assessee has proved the identity and capacity of persons and genuinenity of the transaction. The AO instead of bringing any contrary material on record treated all the gifts as unexplained cash credit u/f 68 of the Act. On the other hand, the ld. DR for the Revenue supported the order of authorities below. It was argued that the assessee was unable to discharge the onus to prove the genuinenity of the transaction despite the sufficient opportunity. 11. We have considered the rival submission of the parties and have gone through the orders of author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ails were filed by assessee. On the basis of proceeding before the PCIT u/s 263 of the Act. The AO added Rs. 1,50,000/- in the total income of assessee. We have seen that the addition is made by AO without giving any specific opportunity during the se-aside proceedings, before making the addition. the contention of the assessee throughout the proceedings before PCIT was that the assessee was not the head of the family and the aggregate expenditure of the family was commensurate with the life style of the family. The AO made ad-hock additions without any evidence. The AO has not made any inquiry nor brought any material or record. Considering the peculiarity of the facts the addition of Rs. 1,50,000/- is deleted. 15. In the result, appeal of the assessee is allowed. ITA No. 590/Mum/2017 AY 2006-07 16. The assessee has raised the following grounds of appeal: 1. The Ld. Commissioner of Income-tax (Appeals)-33, Mumbai [hereinafter referred to as "Ld. CIT(A)"] erred in passing the order dated 02.11.2016 upholding the order passed by Ld. A. O. dated 31.03.2015 under section 143(3) r.w.s. 254 of the Income Tax Act, 1961 ['of the Act' for short] determining total income of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Rs. 1,29,665/ - against the short term capital gain earned during the year without appreciating the fact that the Appellant has furnished all relevant evidence to prove the genuineness of loss suffered by the Appellant in the share transactions. Hence, disallowance of short term capital loss against the short term capital gain is unjustified and the same may be deleted 5. Addition on account low withdrawals unjustified- Rs. 1,50,000/- i. The Ld. CIT(A) erred in confirming the action of Ld. A.O. in making addition of Rs. 1,50,000/- on account of low withdrawals without appreciating the facts and circumstances of the case. The Appellant, therefore, prays that the addition of Rs. 1,50,000/- on account of low withdrawal is unjustified and the same may be deleted. 17. Ground No.1 is general in nature and need no specific adjudication. Hence, dismissed. Ground No.2 & 3 relates to treatment of STCG and LTCG as Business Income. This ground of appeal is identical to the ground no.2 of ITA No. 589/Mum/2017 which we have allowed in para 9 & 10 above in appeal for AY 2005-06. Considering the similarity of the fact and following the principle of consistency, this ground of appeal is all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her Balance Sheet. Hence, the addition of Rs. 2,45,79,767/- made under the head 'Business income' is not at all justified and the same may be deleted. ii. Without prejudice to the above, the Ld. CIT(A) erred in not directing the Ld. A.O. to allow the benefit available to the Appellant under section 45(2) of the Act while treating the 'Short Term Capital Gain' as 'Business Income' of the Appellant. Without Hence, the Appellant prays that the benefit of provisions of section 45(2) may be granted to the Appellant. 3. Treating 'Long Term Capital Gain' as 'Business Income' unjustified - Rs. 7,40,19,132/- i. The Ld. CIT(A) erred in upholding the action of the Ld. A.O. in treating the 'Long Term Capital Gain' as 'Business Income' without appreciating the fact that the Appellant is an investor in the shares and also has shown the same as investments in her Balance Sheet. Hence, the addition of Rs. 7,40,19,132/- made under the head 'Business income' is not at all justified and the same may be deleted. ii Without prejudice to the above, the Ld. CIT(A) erred in not directing the Ld. A.O. to allow the benefit available to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy both the grounds of appeal are allowed in favour of assessee. 24. Ground No.4 relates to addition on account of dividend stripping u/s 94(7) of the Act. The ld. AR of the assessee argued that the ld. CIT (A) erred in upholding the action of AO in making the addition of Rs. 20,799/- by invoking the provisions of section 94(7) of the Act. It was argued that the disallowance was made by AO without verifying the facts. On the other hand, the ld. DR for the Revenue supported the order of authorities below. 25. We have considered the rival submission of the parties and have gone through the orders of authorities below. During the assessment proceeding, the AO observed that the assessee received dividend during the year under consideration. The assessee was asked to explain whether the provision of section 94(7) of the Act is applicable and any loss to the extent of income to be ignored. The assessee filed its reply and submitted the details of dividend which is liable for disallowance u/s 94(7) of the Act in respect of M/s Hemadri Chemicals and M/s Kamala Dials for Rs. 5,620/- and 15,179/- respectively. The AO on the basis of observation of ld PCT during the proceeding u/s 263 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O while passing the order observed that the assessee has not any submission nor filed evidences. Considering the facts that the AO has neither considered the evidences filed by assessee nor verified the facts before making the addition. Hence, we deem it appropriate to restore this ground of appeal to the file of AO to considered the facts afresh and pass the order after verification of the evidences furnished by the assessee in accordance with law. Needless to say that the AO shall provide opportunity to the assessee before passing the order. In the result this ground of appeal is allowed for statistical purpose. 28. Ground No.6 relates to the addition on account of low withdrawal. We have seen that this ground of appeal is identical to the ground no. 5 of appeal for AY 2005-06, which we have already allowed. Hence, this ground of appeal is also similar observations. 29. In the result the appeal of the assessee is partly allowed. ITA No. 592/Mum/2017 AY-2009-10 30. The assessee has raised the following grounds of appeal: 1. The Ld. Commissioner of Income-tax (Appeals)-33, Mumbai [hereinafter referred to as "Ld. CIT(A)"] erred in passing the order dated 02.11.2016 upholding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. The Ld. CIT(A) erred in upholding the action of the Ld. A.O. in making addition of Rs. 18,929/- invoking the provisions of section 94(7) of the Act without appreciating the fact and circumstances of the case. The Appellant, therefore, prays that the addition of Rs. 18,929/- under section 94(7) is unjustified and the same may be deleted. 5. Addition on account low withdrawals unjustified- Rs. 2,25,000/. i. The Ld. CIT(A) erred in confirming the action of Ld. A.O. in making addition of Rs. 2,25,000/- on account of low withdrawals without appreciating the facts and circumstances of the case. The Appellant, therefore, prays that the addition of Rs. 2,25,000/- on account of low withdrawal is unjustified and the same may be deleted. 31. Ground No.1 is general in nature and need no specific adjudication. Hence, dismissed. 32. Ground No.2 & 3 relates to treatment of STCG and LTCG as Business Income of the assessee. This ground of appeal is similar to the ground of appeal no. 2 & 3 of ITA No. 589/Mum/201. We have already allowed the similar ground of appeal in favour of assessee for AY 2005-06, for AY 2006-07 and for AY 2008-09. Hence, following the principle of consistency bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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