TMI Blog2021 (2) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions as a separate category in books can be insisted upon in practice to ascertain the underlying intentions, the maintenance of separate D-mat account separately is not necessarily in conformity with usage of share trade and thus cannot be insisted upon. We thus find merit in the plea of assessee. Consequent claim of assessee deserves to be allowed on merits. - I.T.A. Nos. 1513, 1514 and 1515/Ahd/2019 - - - Dated:- 29-1-2021 - Rajpal Yadav, Vice President And Pradip Kumar Kedia, Member (A) For the Appellant : Ketan H. Shah and Aman K. Shah, A.Rs. For the Respondents : O. P. Sharma, CIT, DR and L.P. Jain, Sr. D.R. ORDER Pradip Kumar Kedia, Member (A) The captioned appeals directed at the instance of different assessees Revenue arise from the respective orders of the Commissioner of Income Tax (Appeals) ('CIT(A)') against different assessment years as tabulated below: ITA Nos. Name of as sessee AY CIT(A) s order dated AO s order dated AO s order under Sect ion 1513/Ahd/19 Smt . Swa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.08.2008. In response to the aforesaid notice, the assessee filed another return of income under S. 153A of the Act declaring total income at ₹ 1,58,02,820/- which was revised to ₹ 1,54,88,670/- thereafter. As per the returns filed under S. 153A of the Act, the assessee inter alia declared income under the head 'capital gains' as short term capital gains of ₹ 1,40,01,808/-. An order under S. 153A r.w.s. 143(3) of the Act was passed on 05.05.2009 determining total income of ₹ 1,56,36,030/- as against income returned at ₹ 1,54,08,670/- wherein short term capital gains of ₹ 1,40,01,808/- was treated as 'business income' by the AO as against the claim of the assessee to be assessed as 'short term capital gain'. The controversy towards realignment of head from 'Capital Gains' to 'Income from Business/Profession' travelled up to the ITAT, Ahmedabad. The ITAT vide ITA No. 57/Ahd/2010 order dated 19.05.2016 set aside the issue regarding the nature and character of gains arising to the assessee amounting to ₹ 1,40,01,808/- for re-examination. The AO, in this second round of proceeding, once again called for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares acquired from participation of borrowed funds as held in plethora of judicial decisions. A reference in this regard was made to the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Neeraj Amidhar Sur [2011] 238 CTR 294 (Guj). 9.1. Adverting to the facts briefly, the learned counsel submitted that it is a matter of record that profit/gains of ₹ 1,40,01,808/- in question arises from purchase and sale of shares of PSTL. The assessee has purchased 215802 shares of PSTL and sold 167000 shares giving rise to the impugned gains and remaining 48702 shares have remained in Investment Stock. The total number of transactions of purchase is only five and sale is barely seven. It was thus contended that frequency and repetition in the impugned scrip is prima facie absent justifying the intention of assessee to purchase the shares as capital asset. It was strongly contended that the AO has sought to realign the head of income and shift the income declared under the head 'capital gains' to 'business income' only to deny the assessee of concessional tax treatment of 10% available to the assessee under S. 111A of the Act and has sought to apply th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l ground, the learned counsel for the assessee referred to the assessment order passed under S. 143(3) r.w.s. 254 of the Act dated 20.12.2017 sought to be impugned in the present case and submitted that the AO has made no reference to the approval taken from the superior authority under S. 153D of the Act, if any, and thus in the absence of statutory approval of the designated authority in search cases, the whole assessment passed in the second round of proceedings is bad in law. The learned AR for the assessee referred to the decision of the co-ordinate bench of the Tribunal in the case of Anup Kumar Chatterjee vs. ACIT IT(SS)A Nos. 70-74/Ran/2019 order dated 19.12.2019 to support its aforesaid contention. 11.2. Joining the contention raised towards additional ground(supra) with reference to Section 153D of the Act, the learned DR pointed out that in the first round of the substantive assessment proceedings under S. 143(3) r.w.s. 153A of the Act, the approval of designated authority under S. 153D of the Act was duly taken. However, in the absence of any reference made in assessment order, it is not known whether the approval in the second round of proceedings coming into motion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the manner of maintenance of demat account etc. The co-ordinate bench inter alia observed that the order of the AO is cryptic without any proper verification of books of accounts. The AO merely deemed the borrowed funds to have been utilized for investment purposes. In para 11 of the order of the co-ordinate bench, it was observed that it was upon the assessee to demonstrate that his intention for earning investment income and share trading income are well differentiated and certainly the case of the assessee gets more strong if he is able to prove that no borrowed funds have been taken specifically for buying the shares when he intends to show as investment income. Thus, all the facts and circumstances of the case are required to be weighed cumulatively for proper determination of nature of income arising from sale of share. 13.3. The law has considerably evolved on the point and continuing. The Courts have laid down several tests for ascertaining the nature of transaction. The CBDT itself has also laid down parameters by way of circular No. 4 dated 15.06.2007. In the instant case, we note few peculiar facts from the financial statements placed in the paper book. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as law in not appreciating the facts that, in absence of any incriminating document found during the course of search on 07-02-2008, the whole proceeding under 153A is bad in law, illegal and liable to be quashed. 15.2. The assessee filed yet another additional ground under Rule 11 of the ITAT Rule vide application dated 08.07.2020 which reads as under: Ld. Lower authority has erred on facts as well as law in not appreciating the facts that, in absence of the approval u/s. 153D, the whole proceedings is itself bad in law and void as held in Ranchi Bench ITAT as well as Gujarat High Court decision in the case of Sunrise Finlease reported in 89 Taxmann.com 1 and therefore, this assessment framed is bad in law and void and liable to be quashed. 16. In the instant case, the issue involved is identical to the issue involved in ITA No. 1513/Ahd/2019 concerning AY 2007-08 (supra). The facts in brief are noted as follows. In the return filed by the assessee in pursuance of notice under S. 153A of the Act, the assessee has declared short term capital gains of ₹ 27,62,912/- chargeable at concessional rate of 10% under S. 111A of the Act. The aforesaid gains have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... geable at concessional rate of 10% under S. 111A of the Act. The aforesaid gains have been earned on purchase and sales of shares of SGLPP. The assessee had purchased 4,09,355 shares on a single day i.e. on 10.04.2016 and another 1435 shares on 04.05.2006. The assessee has sold all the shares on various dated on 14 occasions and earned gains in question. The total number of transactions of purchase is thus only 2 and of sale is only 14. In parity of the reasons recorded for AY 2007-08 (supra), we find force in the plea of the assessee for allowability of gain on sales of shares under the head 'short term capital gains' as claimed. We accordingly reverse the action of the lower authorities in this regard. 23. We thus find merit in the plea of assessee. Consequent claim of assessee deserves to be allowed on merits. 24. As the grievance of the assessee has been answered in favour of the assessee on merits, we are not inclined to address ourselves on additional ground raised by the assessee at belated stage. 25. In the result, the appeal of the assessee is allowed. 26. In the combined result, all three appeals of assessees are allowed. This Order pronounced on 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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