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TMI Blog2021 (2) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... cation as follows: ITA No. 1513/Ahd/2019 AY 2007-08 3. The grounds of appeal raised by the captioned assessee read hereunder: "1. The Ld. CIT (A) has erred in facts and circumstances and in law in confirming the assessment order u/s. 143(3) r.w.s. 254. 2. The Ld. CIT (Appeals)-11, Ahmedabad has erred in confirming the treatment made by the Ld. A.O. in de novo assessment for the Gain on sale of shares as business income instead of Capital Gain. The same is prayed for treatment as Capital Gain. 4. The assessee has also raised additional ground which reads as under: "Ld. Lower authority has erred on facts as 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." 5. The prayer for admission of additional grounds noted above which are not set forth in memorandum of appeal are being admitted for adjudication in terms of Rule 11 of Income Tax (Appellate Tribunal) Rules, 1963 owing to the fact that objections raised in the additional ground are legal in nature and challenges the jurisdiction of the AO for making addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first round of assessment proceedings. 7. Aggrieved by the change in the character of income and realignment of income reported under the head from 'Capital Gains' to 'Business Income', the assessee preferred appeal before the CIT(A). The CIT(A), however, confirmed the action of the AO and held that gains arising on sale of shares are liable to be treated as 'business income'. 8. Further aggrieved, the assessee preferred appeal before the Tribunal. 9. When the matter was called for hearing, the learned AR for the assessee submitted at the outset that the assessee maintains two portfolios; (i) 'investment portfolio' where the shares acquired with the long term perspective are shown as capital investment (ii) trading portfolio where the assessee purchases shares with short term perspective and is solely driven by profit motive. The gains/loss arising on sale of shares held in investment portfolio are reported under the head 'capital gains' whereas profit and loss arising on sale of shares listed in trading portfolio are reported as 'business income/loss' of the assessee on a consistent basis. The learned AR for the assessee submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis to search action conducted in the group cases of assessee on 07.02.2008 and pursuant thereto a fresh return was called for by the AO under S. 153A of the Act. In the assessment made on return filed under S. 153A of the Act, it was incumbent upon the AO to refer to some incriminating document found in the course of search to disturb the position taken by the assessee, more so, on classification of asset. It was thus claimed that in the absence of any such reference, whole proceedings under S. 153A of the Act itself is vitiated and rendered bad in law and hence liable to be quashed. It was asserted that action such as mere re-alignment of income from head to another has no impact on ultimate taxable income and thus cannot be done in special proceedings undertaken under S. 153A of the Act owing to search which carries with it an avowed objective of assessment of unaccounted income which is not present. 10. The assessee filed yet another additional ground under Rule 11 of the IT AT 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oning the validity of the action of the AO in law. 13. We shall first address ourselves on merits of the issue involved. 13.1. The solitary issue for adjudication on merits is whether gains arising on sale of certain quantity of shares of a company, namely, Pyramid Siamira Theatre Ltd. (PSTL) by the assessee in the relevant assessment order is required to be taxed under the head 'capital gains' as offered by the assessee or is to be treated as 'business income' of the assessee. The issue involved is essentially factual in nature. As regards the justification on the claim of short term capital gain (STCG), it is the case of the assessee that the gains in question have arisen on sale of only one share i.e. PSTL. The assessee has purchased 215802 shares and sold 167000 shares during the year. The total number of transactions of purchase is barely 5 and that of corresponding sale is only 7. The principal argument on behalf of the Revenue in the first round of proceedings is that transactions have been entered within a short period of less than one month and the assessee does not have sufficient own funds at its disposal and has employed borrowed funds from outsiders o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets. The issue is essentially factual and depends of peculiar facts of each case. In the absence of any straight jacket formula available despite plethora of judgments, the lack of regularity and isolated instances of capital transactions would vindicate the stand of assessee that income/loss from seven transactions have been rightly regarded as capital gains. As stated, the assessee has taken delivery of shares before sale. While maintenance of capital and trading transactions 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. 13.4. We thus find merit in the plea of assessee. Consequent claim of assessee deserves to be allowed on merits. 13.5. 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 grounds raised by the assessee at belated stage. 14. In the result, the appeal of the assessee is allowed. ITA No. 1514/Ahd/2019 AY 2008-09 15. The grounds of appeal raised by captioned assessee read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be allowed on merits. 18. 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 grounds raised by the assessee at belated stage. 19. In the result, the appeal of the assessee is allowed. ITA No. 1515/Ahd/2019 AY 2007-08 (in case of Shri Atul Hiralal Shah) 20. The grounds of appeal raised by captioned assessee read hereunder: "1. The Ld. CIT(A) has erred in facts and circumstances and in law in confirming the assessment order u/s. 143(3) r.w.s. 254. 2. The Ld. CIT (Appeals)-11, Ahmedabad has erred in confirming the treatment made by the Ld. A.O. in de novo assessment for the Gain on sale of shares as business income instead of Capital Gain. The same is prayed for treatment as Capital Gain. 21. The assessee filed 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 Sunri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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