2018 (3) TMI 378 - AT - Income Tax

Gains from sale of shares and derivatives as business income - non bifurcation into business income and capital gains - Held that - Evidences and documents that were filed by the assessee before the ld CITA so as to seek an opportunity for the AO and alleging violation of provisions of Rule 46A of the Rules. CIT-A had actually recomputed the entire gains as business income without any bifurcation of gains into business or capital gains, by actually enhancing the income of the assessee , from the very same materials that were available on record. There was no additional evidence filed by the assessee. It is only better appreciation of the facts already available on record which warranted recomputation of income by the ld CIT-A. The revenue cannot be aggrieved on the same. Hence the Ground No. 2 raised by the revenue is rejected outrightly. We find that the revenue had pleaded in Ground No.1 that the opening stock of shares as on 1.4.2011 should be taken at ₹ 4,16,12,081/-, for which no workings were provided by the ld DR before us. We find that this figure does not emanate either from the assessment order or from the appellate order. No workings for the same in any manner whatsoever were furnished by the ld DR before us to address the grievance of the revenue in this regard. On the contrary, we find that the ld CITA had adopted the figure of opening stock of shares as on 1.4.2011 at ₹ 5,91,73,606/- which was the same figure used by the ld AO also for computing the business income in his assessment order. Hence we hold that there cannot be any grievance for the revenue in this regard. Accordingly, the Ground No. 1 raised by the revenue is dismissed.

Summary

Issues:
1. Determination of opening stock value for assessment.
2. Treatment of gains from sale of shares and derivatives as business income.

Issue 1: Determination of opening stock value for assessment:
The appeal and cross objection arose from the order of the Commissioner of Income Tax (Appeals) regarding the assessment year 2012-13. The main issue was whether the Commissioner was justified in directing the Assessing Officer to take the value of opening stock at a specific amount instead of the amount declared by the assessee. The appellant, engaged in share dealing, had discrepancies in the declaration of income from long-term capital gains and short-term capital gains. The Assessing Officer observed inconsistencies in the claim of gains, including treating short-term gains as long-term gains and improper categorization of transactions. The Assessing Officer reworked the profits from various transactions and concluded that the activities were in the nature of trade, not investment. The Commissioner directed the income to be computed as business income, disregarding any claim of capital gains. The Commissioner also specified the values to be considered for computation, including opening stock, purchases, closing stock, and sales, based on information obtained from the broker. The Commissioner's decision was based on the frequency and volume of transactions, indicating a trade nature rather than investment.

Issue 2: Treatment of gains from sale of shares and derivatives as business income:
The Commissioner treated the entire gains from the sale of shares and derivatives as business income without distinguishing between business income and capital gains. The Commissioner's decision was based on the lack of necessary details provided by the assessee to substantiate the claims of capital gains. The Commissioner considered the transactions from the broker's information obtained under section 133(6) and concluded that the activities were more of an adventure in the nature of trade than investment. The Commissioner directed the Assessing Officer to compute the income from trading in shares as business income, ignoring any claim of capital gains. The Commissioner specified the values to be considered for this computation and directed the allowance of security transaction tax paid as a deduction. The Commissioner also addressed specific additions made by the Assessing Officer, stating that they were uncalled for and without basis. The Commissioner's decision was based on a comprehensive reevaluation of the transactions and activities, leading to the computation of income as business income.

In the final judgment, the Tribunal dismissed the revenue's appeal, as the grounds raised lacked substantiation and the figures adopted by the Commissioner were consistent with the Assessing Officer's computation. The Tribunal rejected the revenue's contentions regarding the determination of the opening stock value. The Tribunal also noted that the Cross Objection by the assessee supported the Commissioner's order, leading to the allowance of the Cross Objection. The judgment emphasized the importance of providing necessary details and evidence to support claims and highlighted the significance of proper categorization of income for tax purposes.