2017 (1) TMI 566 - AT - Income Tax

Addition as STCG - bogus accommodation bill - speculating profit or loss on commodity trading - Held that - CIT(A) concluded that the shares were dematized on 28.07.2004 and concluded that the share might have been purchased around July 2004 and directed the AO to treat the profit on sale of share as STCG. The ld. AR of the assessee has placed on record the copy of share certificate along with certificate of M/s Talent Inforways Ltd. about the transfer of share, copies of which are available on page no. 53 to 71 of PB. The certificate of M/s Talent Inforways Ltd. shows that the shares were transferred on 31.05.2003. Therefore, considering the documentary evidence, we restore the case to the file of AO to verify the fact. The AO shall verify the fact regarding the dates of purchase, date of transfer, period of holding in accordance with the CBDT Circular No. 704 dated 28.04.1995 and shall grant relief in accordance with law. - Decided in favour of assessee for statistical purpose.

Summary

Issues:
Validity of re-opening u/s 147, Denial of exemption of LTCG, Treatment of profit on sale of share as STCG.

Validity of re-opening u/s 147:
The appeal was against the order of Ld. Commissioner of Income-tax (Appeals) for Assessment Year (AY) 2005-06. The Assessing Officer (AO) received information regarding bogus accommodation bills received by the assessee. The AO re-opened the assessment under section 147 based on reasons related to the search and seizure action conducted in the case of a group company. The assessee objected to the re-opening, but the objection was not accepted by the AO. The AO proceeded with reassessment and denied the exemption claimed by the assessee. The CIT(A) directed the AO to treat the profit on the sale of shares as Short Term Capital Gain (STCG). The assessee appealed against this decision.

Denial of exemption of LTCG:
The AO denied the exemption claimed by the assessee under section 10 in respect of Long Term Capital Gains (LTCG) in the assessment order. The CIT(A) observed that the assessee was not a shareholder of the company on the date claimed for the acquisition of shares. The CIT(A) concluded that the claim of capital gain on the purchase of shares appeared to be incorrect based on the available evidence. The CIT(A) directed the AO to treat the profit on the sale of shares as STCG. The assessee provided documentary evidence supporting the transfer of shares on a specific date. The Tribunal restored the case to the AO to verify the facts regarding the dates of purchase, transfer, and holding period in accordance with relevant circulars.

Treatment of profit on sale of share as STCG:
The Tribunal considered the contentions of both parties and reviewed the material on record. The AO's conclusions and the CIT(A)'s observations were taken into account. The Tribunal noted discrepancies in the dates provided by the assessee and directed the AO to verify the facts based on the documentary evidence submitted. The Tribunal allowed the appeal for statistical purposes, instructing the AO to re-examine the case and grant relief in accordance with the law.

In conclusion, the Tribunal allowed the appeal for statistical purposes, directing the AO to verify the facts related to the purchase, transfer, and holding period of the shares to determine the appropriate treatment of the profit on the sale of shares.