2015 (7) TMI 1304 - AT - Income Tax

Correct head of income - characterization of income - bogus LTCG - Income on sale and purchase of shares - income assessable under the head income from other sources OR long term capital gain - Held that - In the case of the assessee as well as in the case of Jagdish H. Shah(2012 (9) TMI 1154 - ITAT MUMBAI) the shares were purchased from the same broker namely DPS Shares and Securities Pvt. Ltd. AO carried out a verification exercise which involved recording of statement of one Shri Raj Kumar Masalia Principal Officer of DPS Shares similar action was taken in the case of Jagdish H. Shah (supra) also. It is quite clear that the stand of the Revenue as well as the assessee in the present case is on similar footing to their respective stands in the case of Jagdish H. Shah (supra). Having regard to the aforesaid similarities which are not controverted by the Revenue we deem it fit and proper to rely upon the reasoning taken by the Co-ordinate Bench in the case of Jagdish H. Shah(supra) and hold that the income tax authorities have erred in treating the sale consideration on the sale of shares of Robinson Worldwide Trade Ltd. as an income from undisclosed sources - decided in favour of assessee.

Summary

Issues:
Assessment of income from sale and purchase of shares as income from other sources instead of long term capital gain.

Analysis:
The appellant filed an appeal against the appellate order dated 16/08/2011 passed by Ld. CIT(A)-22, Mumbai for the assessment year 2005-06. The primary issue raised in the appeal was the treatment of income declared on the sale and purchase of shares of Robinson Worldwide Trade Ltd. as income assessable under the head 'income from other sources' by the income tax authorities, contrary to the assessee's claim of it being assessable as long term capital gain.

During the assessment proceedings, it was observed that the assessee had purchased 11,500 shares of Robinson Worldwide Trade Ltd. and subsequently sold them for a considerable amount. The Assessing Officer (AO) deemed the purchase of shares as a sham transaction and treated the sale consideration as income from undisclosed sources. Consequently, the exemption claimed under section 54 EC of the Act was disallowed. The Ld. CIT(A) affirmed the AO's decision, leading to the current appeal.

The appellant highlighted a similar case of Jagdish H. Shah where the Tribunal accepted the income earned from the sale of shares as long term capital gain. The appellant presented a tabulation showcasing the similarities between the two cases, including the broker involved and the actions taken by the AO and CIT(A) in both cases. The Revenue did not dispute the factual similarities presented by the appellant.

After examining the orders of the authorities and the submissions made, the Tribunal found significant parallels between the present case and the case of Jagdish H. Shah. The Tribunal decided to rely on the reasoning from the previous case and held that the income tax authorities erred in treating the sale consideration as income from undisclosed sources. The Tribunal referred to specific details from the previous case to support its decision and directed the AO to accept the long term capital gain as returned by the assessee.

In conclusion, the Tribunal allowed the appeal of the assessee, overturning the lower authorities' decision and directing the AO to accept the long term capital gain as declared by the assessee.