TMI Blog2018 (10) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... re shown of the assets and liability, which is placed on record. Therefore, the plea of the assessee that he does not maintain any books of account is not correct. Assessee was also unable to prove the basic requirement that the impugned amount of the alleged gift was received from assessee’s mother, as no bank statement of his mother was filed by the assessee at any stage to justify the genuineness of the gift. Therefore, the ld. CIT(A) has rightly confirmed the addition made by the ld. Assessing Officer of the impugned amount as unexplained investment. - Decided against assessee. - ITA No. 866/Del/2013 And ITA No. 1417/Del/2013 - - - Dated:- 13-9-2018 - Shri Amit Shukla, Judicial Member And Shri L.P. Sahu, Accountant Member For The Assessee : Sh. Ajay Vohra, Sr. Advocate Sh. Deepesh Jain, C.A. For The Revenue : Sh. Vijay Verma, CIT/DR Sh. Amit Jain, Sr. DR ORDER Per L.P. Sahu, A.M.: These are cross appeals filed by the assessee and the Revenue against the order passed by the ld. CIT(A)-XXVI, New Delhi dated 28.12.2012 for the assessment year 2006-07. The grounds raised by both the parties in their respective appeals read as under: Gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Khajanchi vs. ITAT CW 2164/1999 (SC). 4. On the other hand, the ld. DR opposed the additional ground filed by the assessee much later after 3 years. Therefore, it should not be accepted. 5. After hearing both the sides on admission of additional ground, we find that the additional ground is admissible for consideration in view of the decisions relied by the assessee as referred to above. Accordingly, the additional ground is admitted on record. Grounds raised by the Revenue in ITA No. 1417/Del/2013: 1. The CIT(A) has erred in deleting the addition of ₹ 67,37,94,898/- by directing the AO to treat the profit arising from the sale of shares as long term and short term capital gains. 2. The CIT(A) has erred in treating profit from the sale of shares as STCG/LTCG in place of business income as assessed by AO. 6. The brief facts of the case are that the assessee is an individual deriving income from salary, house property, capital gains and income from other sources. The assessee filed its return of income on 25.07.2006 declaring total income at ₹ 8,33,48,262/-. The assessment u/s. 143(3) was completed on 08.12.2008. Later on, learned CIT-11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Short term capital gain on sale of shares on which STT is paid Annexure-C Rs.8,26,22,871/- Less: Brought forward loss of 2002-03 (Details enclosed) Rs.3,26,760/- Rs.8,22,96,111 Name of the share Date of acquisition No. of shares Book value Date of sale No. of shares Net sale value Securities Transact ion Tax Capital gain/ (loss) Mawana Sugar Ltd. 30.10.2003 3000000 30000000 25.07.2005 20000 1957011 1981 21.10.2004 1716624 18134926 04.08.2005 30000 2950718 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 843648 103567926 103937 31.03.2006 300000 36169356 36300 Total 5094124 68322581 5094124 659494608 662476 591172027 Short term capital gain Annexure-C Name of the share Nos Rate per unit Cost price Date of acquisition Date of transfer/sale Sale value per unit (Rs.) Full value of consideration Capital gain / (loss) Mawana Sugars Ltd. 11000 74.74 822181 16.06.2005 31.03.2006 120.56 843920 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 250 25000 250 25000 -do- Funkalscious Hospital Pvt. Ltd. 100 1000 100 1000 Written off during the year Hurryknshna Venture Pvt. Ltd. of ₹ 10/- each fully paid up 150000 1500000 270000 2700000 420000 4200000 Paid on 14.11.2005 from HSBC Ltd. New Delhi out of sale proceeds of MS Ltd. Shares India Infrastructure Publishing of 4181 3000000 4181 3000000 Finance Technologies India Ltd. of 59 59 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5925 equity shares of ₹ 10/- each partly paid @ ₹ 7.50 per share 152592 411998400 152592 411998400 Paid on 05.12.2005 ₹ 103000000 and on 01.02.2006 ₹ 308998400/- from HSBC Ltd., New Delhi 125925 255000000 125925 255000000 Paid on 17.02.2006 ₹ 85000000 and on 23.02.2006 ₹ 170000000 from HSCB Ltd. Nanglamal Sugars Ltd. of ₹ 10/- each fully paid 2100000 21000000 2100000 21000000 Sold to siel Holdings Ltd. 2100000 equity shares of ₹ 10/- each fully paid up of Nanglamal Sugars Ltd. on same price on 08.07.2005 From the details of shares submitted by the assessee, the AO observed that the assessee has purchased shares worth ₹ 69,85,36,192/- and sold s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original and also during afresh assessment proceeding, the assessee has furnished following evidences in support of the stated gift. i. A copy of gift deed stated to be executed on 12.12.2008 (copy attached as annexure'1'). ii. A copy of certificate dated 02.12.2008 (copy attached as annexure '2'). iii. Copy of an advice issued by Hong Kong and Shanghai Banking Corporation dated 10.11.2005 regarding transfer of an amount of GBP 1000000 (one million only) to Krishna Shriram (copy attached as annexure '3'). iv. A copy of bank account of Shri Krishna Shriram maintained with HSBC for the period 30.10.2005 to 30.11.2005 (copy attached as annexure '4'). 11(a) Now, if the genuineness of transaction and creditworthiness of donor are examined in light of above evidences / documents, then the following position emerges:- i. As far as the copies of gift deed and certificate in respect of the stated gift, these are not evidence which can support the genuineness of transaction and creditworthiness of the donor. ii. A copy of advice issued by Hongkong Shanghai Bank only states that an amount of GBP One million has been/w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. Income from salary NIL ii. Income from house property Rs.7,35,500/- iii. Income from business/profession Rs.3,30,065/- iv. Income from other sources + Income of any other person Rs.60.223/- Gross total income Rs.4,65,658/- Returned income Rs.4,65,658/- Tax paid Rs.86,197/- 13(a) An abstract of form 2D of Ms. Roula Shriram is attached to the order as annexure-'5'. The above details goes on to prove that the fund of ₹ 7.92 crores does not belong to the donor and it is the assessee who has channelised/routed his own funds in guise of gift from mother. Mere remittance of amount by assessee's mother will not absolve him from discharging the onus casted upon him U/s 69 of the Income-tax Act, 1961.1 place reliance on the decision of hon'ble jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the books of the appellant. The appellant has offered her explanation about the said receipts being her winnings from races. The said explanation has been considered in the tight of the sworn statement of the appellant dated January 6,1973, and other material on record. The Income- tax Officer and the Appellate Assistant Commissioner have not accepted the explanation offered by the appellant. The two members constituting the majority in the Settlement Commission have also taken the same view. There is no dispute that the amounts were received by the appellant from various race dubs on the basis of winning tickets presented by her. What is disputed is that were they really the winnings of the appellant from the races. This raises the question whether the apparent can be considered as the real. As laid down by this court the apparent must be considered the real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. (See : CTT v. Durga Prasad More [1971] ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mawana Sugar Ltd costing just ₹ 683,22,581/-. The sale value is ₹ 65;94,94,608/-. The purchase date of shares was from 30.1.2003 to 4.8.2004. The STCG is also in respect of the 7,00,000 shares of Mawana Sugar Ltd, the cost price being ₹ 17,69,129/- and sale price being ₹ 84,39,2000/-. 4. The shares of Mawana Sugar Ltd have been sold for ₹ 74.39 crores. The cost is ₹ 7 crores only. Only two other scripts have been sold by the assessee during the year of negligible amounts. Closing balance in respect scripts transacted during the year mainly consists of shares of Siel Holdings Ltd and Mawana Sugars Ltd. These details are available on page 2 and 3 of the assessment order, which establish that assessee is not an that the transactions are not regular investment transactions but an adventure in the nature of trade to reap profits on the basis of inside information regarding these scripts. Some shares of Mawana Sugar Ltd were also claimed to have been received as Gift from mother, just to give it a colour of Capital gains. The AO assessed the profits as business profits. 4.1 The findings of CIT (A) on page 26 and 27 of the appellate order a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year shares worth ₹ 6.28 crores sold during the year (ii) Number of transactions was high (iii) Period of holding was low - From October 2003 to March 2006 (iv) It was not disclosed in Wealth Tax Returns (v) Dividend received is not mentioned. It was negligible. This shows that the motive for purchase of shares was to earn a profit. (vi) Earned profit of ₹ 59.11 crores on investment of ₹ 6.83 crores which is abnormally high. This is not normal investment activity, particularly when the assessee belongs to the Sri Ram Group and Mawana Sugars Ltd. is one of the Group companies. In view of the above facts and case laws, it is established that the assessee purchased the shares to earn profit. - Hence, the AO was perfectly justified in assessing income from sale of these shares under the head Profit Gains from Business or profession . On the issue of treatment of capital gains on sale of shares as business income, he relied on the order of the AO and on the issue of gift, the ld. DR supported the order of the ld. CIT(A). He further submitted that the case laws relied by the AR are not applicable in the present case. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sale purchase of shares, but was holding for a considerable period of time. These shares which were held by the appellant since 2003 were sold after a period of more than 2 years and 6 months respectively. From this, it is evident that the appellant did not indulge in regular and requent sale of shares. This fact also draws its support from the charts furnished by the appellant, which the Assessing Officer incorporated in his order dated 29.12.2011, which clearly shows the period of holding. 7.1 It was further submitted by the appellant that during the previous year, relevant to the assessment year under consideration, the appellant sold the shares of only one company i.e. M/s. Mawana Sugars Ltd, held as investment on which the capital gain was earned and declared by the appellant in his return. It was also submitted that the appellant also sold the shares of Nangamalmal Sugars Ltd. during the year under consideration but no profit was earned on sale of the said shares. Hind that the Assessing Officer rejected the claim of appellant and held that the profit on sale of shares of M/s. Mawana Sugars Ltd as ' income mainly on the ground that- 1. The appellant being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in-trade, has been the subject matter of considerable debate. It is a matter of intention of the assessee, which has to be gathered from his conduct and surrounding circumstances. Various parameter/criteria have been elucidated and explained. A pragmatic and common sense approach has to be adopted, when we determine and decide the question always keeping in mind commercial consideration. The appellant also cited a number of decisions of various High Courts and Tribunals who stated that the intention of the appellant is paramount to determine the character of the asset as to whether it is capital asset or business asset (stock-in-trade). The appellant has also cited the judgement of Bombay, Madras, Punjab and Haryana High Court in the following cases: 1) CIT vs. Girish Mohan Ganeriwale 260 ITR 417(P H) 2) CIT vs. Ramaamirtham 306 ITR 239 (Mad.) 3) CTR vs. Gopal Purohit 228 ITR 582 (Mum) To state that where it had been accepted as capital gains in the earlier years, the same cannot be treated as stock-in-trade in the subsequent years. In view of the above discussion, the detailed factors and past history of the appellant, it is seen that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intaining consistency in approach on the issue of treatment of income derived from transfer of shares and securities. All the relevant provisions of the Act shall continue to apply on the transactions involving transfer of shares and securities. It is clear from the bill cum contract note submitted by the assessee that the transaction has been done through the stock exchange and the transaction has not been question by the Assessing Officer. Merely, he has disputed the taxability under the head capital gain or business income. The circulars cited by the AR are applicable in the present case. In view of the above, the ld. CIT(A) has rightly deleted the addition made by the AO. Therefore, the appeal of the Revenue is dismissed. 14. Further in regard to the gift received by the assessee of ₹ 7.92 crores, the findings reached by the ld. CIT(A) are as under : 10. I have considered the written submissions filed by the appellant and perused the assessment order passed u/s 263/143(3) dated 19.12.2011 and noted that the appellant was in receipt of ₹ 7.92 crore from his mother as a gift out of natural love and affection. This gift was made by the appellant s mother ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bell Hooper seems to be an intermediary. 10.2 The appellant did not file any document to substantiate the creditworthiness of Smt. Roula Shriram. The Assessing Officer also mentioned that Ms. Roula Shriram is holding an Indian passport and assessed to tax under PAN AACPS3802W. The Assessing Officer retrieved the data from the departmental database and found that Ms. Roula Shriram did not have the creditworthiness to gift an amount of ₹ 7.92 crore. 10.3 In the submission and the rebuttal filed by the appellant during the course of appeal t proceedings before me, the appellant has not chosen to file any additional evidence to explain the source of the gift from the donor, and has instead argued on technical ground pertaining to the provisions of section 69A its applicability by the Assessing Officer in the present case. The appellant also vehemently argued that a bank pass book is not part of the books of accounts of the appellant. The appellant has failed to avail the opportunity to furnish requisite documentary evidence as required to prove the genuineness of the gift^ Reliance is placed on the Hon'ble Delhi Tribunal judgment in the case of Asstt. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s regard. The AR also objected that the impugned addition can neither be made u/s. 68 or section 69. The Assessing Officer observed that the amount of ₹ 7.92 crores has been credited into the bank account maintained by the assessee. In general, the bank maintains ledger accounts of his customers. Section 2(12A) has defined the books or books of account as under : (12A) books or books of account includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electromagnetic data storage device; Even otherwise, wrong quoting of section does not vitiate the whole proceedings as held by Hon ble Supreme Court in the case of P.K. Palanisamy v. N. Arumugham Anr. Dated 23.07.2009, Shree Hari Chemicals Export Ltd. v. Union of India Anr. Dated 16.12.2005 and T. Nagappa v. Y.R. Murlidhar dated 24.04.2008. 16. The assessee has prepared statement of affairs as on 31.03.2005 31.03.2006 and the opening and closing balance of assets and liabilities have been shown by the assessee. Without maintaining the books of account, it is not possible to prepare s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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