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2016 (4) TMI 352 - AT - Income TaxValidity of the order passed by the AO u/s. 153A - Held that - AO has completed the assessment and made the addition in dispute without any incriminating material found during the search and seizure operation and the addition in this case was purely based on the material already available on record. Hence, the addition in the case is deleted and the ground raised by the assessee in the appeal is allowed. Share transactions - STCG or business income - Held that - CIT(A) rightly directed the AO to treat the capital gain/loss arising out of share transaction as business income /loss on account of share transaction will remain short / loss for various assessment years where the holding of shares are less than 30 days as a result, this ground of appeal was partly allowed for various assessment years. We do not find any flaw or infirmity to take a contrary decision.
Issues Involved:
1. Validity of the order passed by the AO under Section 153A. 2. Classification of gain/loss on share transactions with a holding period of less than 30 days as business income/loss versus capital gain/loss. 3. Consistency with the previous order for the assessment year 2008-09. 4. Disallowance under Section 14A of the Income Tax Act, 1961. 5. Right to raise additional grounds during the appeal. Issue-wise Analysis: 1. Validity of the Order Passed by the AO under Section 153A: The Assessee contended that the order passed under Section 153A was invalid as it was not based on any incriminating material found during the search operation. The Tribunal referenced the decision of the Hon’ble Delhi High Court in CIT(Central)-III vs. Kabul Chawla, which held that additions not based on incriminating material found during a search are unsustainable. The Tribunal found that no incriminating material was discovered during the search and thus ruled in favor of the Assessee, stating that the assessment was not justified under Section 153A. 2. Classification of Gain/Loss on Share Transactions: The Revenue appealed against the CIT(A)'s direction to treat gains on shares held for more than 30 days as short-term capital gains and those held for up to 30 days as business income. The CIT(A) had based this decision on a similar case involving M/s Dreamland Buildtech (P) Ltd. The Tribunal upheld the CIT(A)'s decision, confirming that the classification of gains/losses should be consistent with the holding period criteria set by the CIT(A). 3. Consistency with Previous Order for Assessment Year 2008-09: The Assessee argued that the CIT(A) erred by not following the precedent set in the assessment year 2008-09, where the issue had been decided in favor of the Assessee. The Tribunal did not provide a separate analysis on this point but implicitly supported the Assessee’s position by ruling in favor of the Assessee on related issues. 4. Disallowance under Section 14A of the Income Tax Act, 1961: The Assessee contested the disallowance under Section 14A for various assessment years. The Tribunal did not specifically address this issue in detail but ruled in favor of the Assessee on the primary grounds, which indirectly supports the Assessee’s position against the disallowance. 5. Right to Raise Additional Grounds: The Assessee sought the right to raise additional grounds during the appeal. The Tribunal’s comprehensive ruling in favor of the Assessee on the primary issues likely rendered this point moot, as the Assessee's primary contentions were upheld. Conclusion: The Tribunal allowed all four appeals filed by the Assessee and dismissed all four appeals filed by the Revenue. The Tribunal's decision was significantly influenced by the lack of incriminating material found during the search, which invalidated the additions made under Section 153A. The Tribunal also upheld the CIT(A)'s classification of share transaction gains/losses based on the holding period. The order was pronounced in the open court on 05/04/2016.
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