2016 (4) TMI 1182 - HC - Income Tax

Income from share transactions - business income or capital gain - Held that - It could not be effectively pleaded by learned counsel for the appellant that the approach and the conclusion of the Tribunal warranted interference by this court. It was also noticed by the Assessing Officer that the assessee had declared income from trading of shares and which was treated as income of business and profession and normal tax was paid. Further the assessee had claimed income under the head capital gains as short-term capital gains as well as long-term capital gains on some other transactions of dealing in shares. Perusal of the balance- sheet revealed that the shares were shown as stock-in-trade and not as investment. Therefore the transactions in shares were held to be in the nature of business activity and the income was assessed as income from business and profession. The finding of the Assessing Officer was confirmed by the Commissioner of Income-tax (Appeals). The Tribunal after examining the matter recorded that once the shares had been shown in stock in trade by the assessee itself it could not be said that the assessee had made investment in such shares and thus these transactions were held to be in the nature of trading transactions. the assessee-appellant was not successful in demonstrating that the findings recorded by the Tribunal were based on either misreading or misappreciation of material on record.

Summary

Issues:
Delay in refiling the appeal, rejection of additional evidence application, confirmation of addition by Tribunal, treatment of income as business income, rejection of additional evidence application by Tribunal, assessment of income from trading in shares as business income.

Delay in refiling the appeal:
The High Court condoned a delay of 59 days in refiling the appeal. The appellant-assessee filed an appeal under section 260A of the Income-tax Act, 1961 against the order passed by the Income-tax Appellate Tribunal. The appeal raised substantial questions of law regarding the rejection of additional evidence application and the addition of certain amounts as unexplained cash credits. The delay was condoned, and the appeal was allowed to proceed.

Rejection of additional evidence application:
The Tribunal rejected the appellant's application to submit additional evidence under rule 29 of the Income-tax Rules, 1962. The Tribunal found that the appellant's attempt to produce additional evidence, such as ledger accounts and bank passbooks, lacked confirmation from the relevant persons. The Tribunal concluded that the appellant was making a half-hearted effort to fabricate a story and gain a remand. The Tribunal refused to admit the additional evidence, citing the appellant's failure to produce evidence in support of the creditors and the sufficient opportunities given by the Assessing Officer.

Confirmation of addition by Tribunal:
The Tribunal confirmed the addition of unexplained cash credits under sections 68/69 of the Act. The Assessing Officer treated the receipts from various customers as unexplained cash credits and made an addition of a specific amount. The Commissioner of Income-tax (Appeals) sustained the addition due to the appellant's non-appearance. The Tribunal upheld the addition, noting discrepancies in the evidence provided by the appellant and the lack of proper confirmation from the alleged sources of the cash receipts.

Treatment of income as business income:
The Tribunal upheld the treatment of income from trading in shares as business income. The appellant had declared income from trading in shares as business income, and the Assessing Officer assessed it as such. The Tribunal found that the shares were shown as stock-in-trade in the balance sheet, indicating a trading activity. The Tribunal concluded that the transactions in shares were in the nature of trading transactions based on the appellant's trading patterns and upheld the assessment of income from business and profession.

Assessment of income from trading in shares as business income:
The Tribunal analyzed the appellant's share transactions and concluded that they were trading transactions based on the short holding periods and repetitive nature of the transactions. The Tribunal noted the large number of share transactions and the declaration of shares as stock-in-trade in the balance sheet. The Tribunal upheld the Assessing Officer's and Commissioner of Income-tax (Appeals) findings that the shares were traded and not held as investments. The Tribunal's decision was based on the appellant's trading behavior and the nature of the transactions.

Conclusion:
The High Court dismissed the appeal, finding no illegality or perversity in the Tribunal's decision. The Tribunal's findings were deemed plausible and based on a proper appreciation of the material on record. The appellant's counsel failed to demonstrate any misreading or misappreciation of the evidence. As no substantial question of law arose, the appeal was dismissed, upholding the Tribunal's decision on the issues raised.