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2013 (3) TMI 508 - AT - Income TaxLong Term Capital Gain or business income - Additional evidence under rule 46A - Rejection of exemption claimed by assessee u/s. 10(38) - Treating Short Term Capital Gain as business income - Interest u/s. 234B and 234C - Held that - CIT(A) vide para 5.1 and 5.2 has stated that assessee was not prevented by any cause to produce said documents before AO and therefore did not admit additional evidences / documents. - The Hon ble Jurisdictional High Court in the case of Smt. Prabhavati S. Shah v. CIT (1998 (2) TMI 107 - BOMBAY HIGH COURT) has held that the Appellate authority should not refuse to make enquiry in the case where facts and circumstances so demand. - documents proposed to be filed by assessee are relevant and necessary to be considered to decide the issue as to whether shares were held by assessee as investment or stock-in-trade. - CIT(A) directed to consider additional evidence - decided in favor of assessee - matter remanded back.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act. 2. Treatment of Long-Term Capital Gains as business income. 3. Treatment of Short-Term Capital Gains as business income. 4. Charging of interest under Sections 234B and 234C of the Income Tax Act. 5. Overall validity of the impugned order. Detailed Analysis: 1. Disallowance under Section 14A of the Income Tax Act: The assessee challenged the disallowance of Rs. 7,93,802/- under Section 14A of the Income Tax Act. The Assessing Officer (AO) made the disallowance by applying Rule 8D of the Income Tax Rules. The CIT(A) upheld this action. The assessee argued that Rule 8D, being prospective, is applicable from the assessment year 2008-09 and not for the year under consideration (2006-07). The Tribunal agreed with the assessee, referencing the decision of the Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. vs. DCIT. The Tribunal set aside the orders of the authorities below and restored the issue to the file of the CIT(A) for fresh adjudication, allowing this ground for statistical purposes. 2. Treatment of Long-Term Capital Gains as Business Income: The AO treated the Long-Term Capital Gains (LTCG) of Rs. 16,56,89,573/- as business income, citing lack of evidence for the purchase and holding of shares. The CIT(A) upheld this treatment, rejecting additional evidence submitted by the assessee on the grounds that it was not prevented by sufficient cause from producing these documents earlier. The Tribunal found that the additional evidence was crucial for determining whether the shares were held as investments or stock-in-trade. The Tribunal referenced the jurisdictional High Court decisions in Smt. Prabhavati S. Shah v. CIT and Commissioner of Income-tax v. Suretech Hospital and Research Centre Ltd., which emphasize the need to admit additional evidence when necessary for a fair decision. The Tribunal set aside the CIT(A)'s order and restored the issue to the CIT(A) for fresh adjudication, allowing this ground for statistical purposes. 3. Treatment of Short-Term Capital Gains as Business Income: The AO treated Short-Term Capital Gains (STCG) of Rs. 53,27,430/- as business income without providing any reasons. The assessee raised this as an additional ground before the CIT(A), who failed to adjudicate it. The Tribunal noted this oversight and restored the issue to the CIT(A) for a reasoned decision, allowing this ground for statistical purposes. 4. Charging of Interest under Sections 234B and 234C of the Income Tax Act: The assessee disputed the charging of interest under Sections 234B and 234C. The Tribunal noted that the levy of interest is consequential and did not require specific adjudication. 5. Overall Validity of the Impugned Order: The assessee contended that the impugned order was bad in law and required quashing. The Tribunal's decisions on the individual grounds effectively addressed the overall validity of the impugned order. Conclusion: The Tribunal allowed the appeal for statistical purposes, restoring the issues related to disallowance under Section 14A, treatment of LTCG and STCG as business income, to the CIT(A) for fresh adjudication. The stay application filed by the assessee was dismissed as infructuous.
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