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2021 (3) TMI 927 - AT - Income TaxGain on sale of long term asset (shares) - year of assessment - Denial of exemption u/s. 10(38) - contention of the assessee is that it purchased the impugned shares in the year 1999-2000 and converted it into Demat account during the year 2006-07, as such no adverse inference could be drawn against the assessee - HELD THAT - In this case, the assessee has not produced the requisite evidence to show that he has purchased the shares in the year 1999-2000. Being so, in our opinion, it is proper to remit the issue in dispute to the file of AO with a direction to the assessee to substantiate its claim that he purchased the shares in 1999-2000 by producing the copies of certificates in physical form and also members register with Shilpa Medicare Ltd. at the relevant point of time supported by requisite statutory forms filed by Shilpa Medicare Ltd. before the concerned Registrar of Companies. With these observations, the issue is restored to the AO for fresh consideration, after affording opportunity of being heard to the assessee. Appeal of the assessee is treated as allowed for statistical purposes.
Issues:
Appeal against order sustaining addition of gain on sale of long term asset, denial of exemption u/s 10(38) of the Act, lack of evidence for share purchase claim. Analysis: 1. The appeal challenged the order of the CIT(A) sustaining the addition of ?44,78,676 as the gain on the sale of a long-term asset (shares). The appellant contended that the CIT(A) erred in law and facts by not considering the nature of the transaction as a long-term investment. The appellant argued that the shares were purchased in 1999-2000 and converted into a Demat account in 2006-07, supporting the claim with substantial documents. The appellant relied on circulars emphasizing the classification of portfolios and the provisions of section 43(5) of the Act regarding non-speculative transactions. The appellant also cited various judicial precedents supporting the maintenance of two portfolios and the intention of the assessee in classifying assets. 2. The assessment under section 143(3) of the Income-tax Act, 1961 determined the total income of the assessee at ?5,66,360, differing from the returned income of ?2,94,790. The CIT invoked section 263 of the Act, alleging that the assessee engaged in buying and selling shares, earning a profit of ?44,76,676 claimed as exempt under section 10(38) of the Act. The CIT directed the AO to reframe the assessment, leading to the appeal before the Tribunal. The Tribunal upheld the CIT's order under section 263, denying the exemption under section 10(38) and treating the gain as long-term capital gain. 3. The AO, in the assessment order under section 143(3) read with section 263, denied the exemption under section 10(38) and treated the gain as long-term capital gain. The assessee contended that the shares were purchased in 1999-2000 and converted to a Demat account in 2006-07, arguing against adverse inferences drawn by the authorities. 4. The contention raised by the assessee focused on the purchase of shares in 1999-2000 and their conversion to a Demat account in 2006-07. The lack of evidence supporting the purchase claim for the shares in 1999-2000 was a key point of dispute. 5. The arguments presented by the ld. DR emphasized the absence of necessary evidence to substantiate the claim of share purchase in 1999-2000. Relying on the lower authorities' orders, the ld. DR supported the denial of the exemption under section 10(38) and the treatment of the gain as long-term capital gain. 6. After hearing both parties and examining the material on record, the Tribunal concluded that the assessee failed to provide adequate evidence to establish the purchase of shares in 1999-2000. Consequently, the Tribunal directed the issue to be remitted to the AO for further consideration, instructing the assessee to substantiate the claim with relevant documents and statutory forms. 7. The Tribunal allowed the appeal for statistical purposes, restoring the issue to the AO for fresh consideration based on the directions provided. The decision was pronounced in open court on March 10, 2021.
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