TMI Blog2016 (7) TMI 1492X X X X Extracts X X X X X X X X Extracts X X X X ..... ences on record and the ld. D.R. could not point out any fallacy/flaw/error in the findings of the First Appellate authority, therefore, no interference is called for. Surplus on sale of shares of IDFC - Held that:- There is nothing on record brought by the revenue authorities which could suggest that the assessee was actually trading in the shares of IDFC. There is no evidence with the Revenue to establish the nexus. There is no evidence on record which can demonstrate that the assessee has colluded with Smt. Rupal Naresh Panchal in a manner that would indicate that shares were acquired for the purpose of trade. Such nexus has not been established. The observations of the revenue authorities are only inferential without any concrete material in the possession of the A.O. The activity of the assessee by virtue of mode of acquisition of shares cannot be segregated into two parts. The First Appellate Authority has erred in creating an artificial distinction only on the basis of mode of acquisition - no hesitation in setting aside the findings of the ld. CIT(A) and directing the A.O. to tax the surplus on sale of shares of IDFC under the head short term capital gains. - Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he main reasons given by the A.O. are as under:- (i) The subject matter of realization qua the volume involved. (ii) The length of the period of holding. (iii) The frequency/number of transactions. (iv) Utilization of borrowed funds for purchase of shares. 7. Assessee vehemently agitated the assessment before the ld. CIT(A) where the claim of capital gains was reiterated. After considering the facts and the submissions, the ld. CIT(A) observed that investment in shares is shown by the assessee in the account under the head investment and not stock-in-trade. The First Appellate Authority was of the opinion that intention of making investment was clear. In so far as the utilization of borrowed funds are concerned, the ld. CIT(A) observed that the assessee has not claimed interest on borrowings for such investment. No motive was established by the A.O. except referring to the volume and number of transactions. The ld. CIT(A) was convinced that the surplus arising out of the transactions resulting into profit was in the nature of short term capital gains and directed the A.O. to tax it accordingly. 8. Aggrieved by this, the revenue is before us. 9. The ld. D.R. sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs to distinguish the shares held as investments from the shares held as stockin- trade. The Central Board of Direct Taxes ('CBDT') has also, through Instruction No. 1827, dated August 31, 1989 and Circular No. 4 of 2007 dated June 15, 2007, summarized the said principles for guidance of the field formations. 3. Disputes, however, continue to exist on the application of these principles to the facts of an individual case since the taxpayers find it difficult to prove the intention in acquiring such shares/securities. In this background, while recognizing that no universal principal in absolute terms can be laid down to decide the character of income from sale of shares and securities (i.e. whether the same is in the nature of capital gain or business income), CBDT realizing that major part of shares/securities transactions takes place in respect of the listed ones and with a view to reduce litigation and uncertainty in the matter, in partial modification to the aforesaid Circulars, further instructs that the Assessing Officers in holding whether the surplus generated from sale of listed shares or other securities would be treated as Capital Gain or Business Income, shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issed. 14. The second grievance relates to the deletion of the addition of ₹ 20 lakhs. 15. On examining the balance sheet of the assessee, the A.O. asked the assessee to prove the genuineness of the loan of ₹ 20 lakhs received from Right Finstock Pvt. Ltd. The assessee filed necessary details along with confirmation. The A.O. conducted enquiries u/s. 133(6) of the Act. Necessary details were called from the Assessing Officer of Right Finstock Pvt. Ltd. On going through the balance sheet along with the return of income of Right Finstock Pvt. Ltd., the A.O. found that there is no corresponding debit entry. 16. The assessee was given an opportunity to explain the credit entry by confronting the details of the creditor of Right Finstock Pvt. Ltd. Assessee explained that the amount outstanding in the name of assessee in the balance sheet of the creditor is grouped in the regular books of accounts under the head sundry debtors. The explanation filed by the assessee did not find any favour with the A.O. who proceeded by making the addition of ₹ 20 lakhs u/s. 68 of the Act. 17. Before the ld. CIT(A), the assessee filed all the related details justifying the ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaining to A.Y. 2006-07. 22. The grievance of the assessee relates to (i) Treatment of surplus arising from sale of shares under the head short term capital gains as against business income treated by the A.O. and (ii) Deletion of the addition made u/s. 68 of the Act. 23. The aforementioned grievances of the revenue arise out of the same set of facts which have been discussed by us in IT(SS)A No. 460/Ahd/2010 hereinabove. For our detailed discussion therein in respect of the afore-stated grievances and following our findings given in that appeal, this appeal of the Revenue is dismissed on both grounds. 24. Coming to the grievance of the assessee which relates to the surplus arising out of the sale of shares of IDFC being taxed under the head business income. 25. The reasons given by the A.O. are identical to the reasons given in IT(SS)A No. 460/Ahd/2010 (supra) for A.Y. 2005-06. 26. The facts relating to the treatment of surplus on sale of shares of IDFC are that the shares have been purchased in August, 2005 from Smt. Rupal Naresh Panchal through off market transactions. The revenue authorities in the case of Smt. Rupal Naresh Panchal had found that she had corner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(SS)A Nos. 462/Ahd/2010 IT(SS)A No. 578/Ahd/2010 for A.Y. 2006-07. 32. First we take up IT(SS)A No. 462/Ahd/2010 for A.Y./ 2006-07. 33. The grievance of the revenue is twofold;- (i) Treatment of surplus arising from sale of shares as short term capital gain as against business income treated by the A.O. and (ii) Deletion of the addition made u/s. 68 of the Act. 34. The aforementioned grievances of the revenue arise from the same set of facts and circumstances as discussed by us in IT(SS)A No. 460/Ahd/2010 (supra). For our detailed discussion of facts qua the related provisions of the Act and following our findings given therein, this appeal of the revenue is dismissed on both grounds. IT(SS)A No. 578/Ahd/2010 for A.Y. 2006-07. 35. The grievance of the revenue relates to the treatment of surplus of ₹ 32,39,820/- arising from the sale of shares as short term capital gains as against business income treated by the A.O. 36. This appeal by the Revenue has to be dismissed in the light of the CBDT Circular No. 21/2015 dated 10.12.2015 by which the Board has fixed the monetary limits for filing of appeals by the Department before the ITAT. 37. Since, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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