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TMI Blog2023 (2) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals)-57, Mumbai, ["learned CIT(A)"], for the assessment year 2009-10. 2. In this appeal, the Revenue has raised the following grounds:- "1. Whether on the facts and in the circumstances of the case, the La CIT(A) wax justified in restricted the addition of Rs.51,71,57,172 to the extent of Rs.32,50,881 by treating Business Income as Long-Term Capital Gain and exempted u/s 10(38) of the Income Tax Act, 1961. 2. Whether on the facts and circumstances of the case and in law, the L CIT(A) failed to appreciate the fact that the huge profit claimed to have been earned through the sale of the alleged shares of M/s. Pyramid Saimira Ltd has been claimed as exempt income and no ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss from trading in shares at Rs.4,74,61,406. The assessee has also disclosed a short-term capital loss of Rs.42,41,290. The assessee has claimed exemption under section 10(38) of the Act in respect of long-term capital gain of Rs.52,14,98,464. During the assessment proceedings, the complete details of long-term capital gain were called upon. From the details submitted by the assessee, it was observed that such long-term capital gain was earned from the following 3 scrips: Sr. No. Name of the scrip LTCG(Rs.) 1. Dhanush Technologies Ltd (-) 2,00,66,244 2. Poman Taramet 36,59,780 3. Pyramid Saimira Theatre Ltd (PSTL) 53,79,04,928 Total 52,14,19,464 4. The Assessing Officer ("AO") noted that the Securities and E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business activity of the assessee or at best an adventure in the nature of the business which needs to be taxed at maximum marginal rate. The AO further noted that the capital gain of Rs.53.37 crore in the scrip also includes sales of Rs.34.23 crore on 30,70,000 equity shares of PSTL transferred to CMD of PSTL and the entire transaction has been carried out only through book entries. The AO held that the transaction whereby the assessee earned a profit of Rs.34.23 crore and claimed the same as exempt is a colourable device and thus exemption under section 10(38) of the Act cannot be availed. The AO also noted that the assessee has sold and purchased the shares of PSTL at frequent intervals within a short span of time only with a view to ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact as to the purpose it is used as security. The learned CIT(A) also took into consideration the fact that the assessee maintains 2 sets of portfolios and the shares in question were forming part of the investment portfolio. Accordingly, the learned CIT(A) came to the conclusion that shares of PSTL were held by the assessee as an investment. On the basis that the SEBI has debarred the assessee from buying, selling, or otherwise dealing in securities for 14 years and has imposed a fine of Rs.32,50,882 (equal to the amount of unlawful gain), the learned CIT(A) directed that the profit to the extent of unlawful gain of Rs.32,50,882 can only be held as income from the unlawful activity and no expenditure is to be allowed against the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cements and CBDT circular No. 6 of 2016 dated 29/02/2016. It was further submitted that in the preceding assessment years, the same shares were treated as an investment and there is no change in facts this year. 8. We have considered the rival submissions and perused the material available on record. In this appeal, the grievance of the Revenue is against the restriction of addition by treating "business income" as "long-term capital gain". As evident from the record, the SEBI, pursuant to the investigation, passed an order dated 23/04/2009 declaring the assessee to be involved in the price manipulating of PSTL"s shares and barred the assessee from buying, selling or otherwise dealing in securities, directly or indirectly or being associat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares of PSTL by the SEBI. However, even thereafter the AO merely taxed the gains arising from the share transaction as business income. As is evident from the record, the AO never alleged in the present case that since the gains have arisen from the manipulative transaction of rigging the price by issuing the forged letter of SEBI, therefore, the entire long-term capital gain, claimed as exempt by the assessee from the transaction in shares of PSTL, is not genuine and thus added the same to the total income of the assessee. On the other hand, in the present case, the AO only sought to tax the gains by treating the same as business income by considering various factors as noted above. Thus, the AO has based its order on the issue of treatm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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