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2012 (7) TMI 623 - AT - Income TaxDisallowance of short term capital loss on sale of mutual funds - invoking provisions of section 94(7) - Held that - The Statute of 94(7) states that where any person buys any units within a period of three months prior to the record date and such person sells such unit within a period of nine months after such record date , then loss if any arising on account of such purchase and sale of unit to the extent of dividend received would be ignored for the purpose of computing the income chargeable to tax - units have been purchased within a period of three months prior to the record date, therefore one of the condition applies on such transaction. Then it is not in dispute that the sale was made on 06/02/2006, i.e. within the period of nine months from the record date, i.e. 20/01/2006, therefore within clause(b)(ii) of section 94(7) -as the relevant conditions have been cumulatively satisfied therefore stand of the Revenue is upheld - against assessee. Addition on account of deemed divided - declaration of trust claimed to be executed on 16/11/2005 by assessee - revenue stated it to be after thought - Held that - After the search, Dy.Commissioner of Investigation submitted that the assessee has furnished the complete details of the said declaration and explained that in the absence of any other transaction or earning of NIL income, there was no necessity to open a bank account and further, about the registration of the shares, it was explained that as per section 153 of the Companies Act, 1956, a company is not permitted to include the name of the Trust in the register because trusts are not required to be entered in the register. Due to this reason, the name which was earlier noted as shareholders remained the same, however through a Board Meeting it was resolved to acknowledge the change in the vesting of the shares - that a deeming provision has to be applied strictly, so that a fiction so created by a Statute should not cover within its ambits more than what is subscribed - deemed dividend need not be taxed in the hands of the assessee on an un-established hypothecation - in favour of assessee. Addition on account of sale of Ampad land on the basis of seized papers - CIT(A) deleted the addition - Held that - The actual execution of the sale deed and parting of the possession of land took place during AY 2009-10, the same has been treated as sales in AY 2009-10 and the gains arising therefrom were treated as income for AY 2009-10 - the transaction made with Mr.Kanubhai Patel clearly states the land was transferred to him for conversion from agricultural land into non-agricultural land and the transaction was cancelled and the amount received from him was returned back - As per law since the transaction did not materialize the same cannot be treated as income of the Appellant - no reason to reverse the findings of ld.CIT(A) as if the action of the AO is affirm then the natural consequences should be to adjust the income which has already been taxed against the addition made for the year under consideration. Since double taxation is not permitted - against revenue. Addition made on account of non-genuineness of the gifts - Held that - AO has connected the impugned gift with the sale of Gotri land and that issue is yet to be decided in AY 2009-10, therefore the CIT(A) has rightly held that the gift being transferred in kind hence not to be taxed for the year under consideration - against revenue. Addition on account of sale of Gotri Land - Held that - As the land was sold on the price near to one of said amount of the offer made by one of the buyer through a broker the document is also suggesting that certain options were available to the assessee and those options were not acceptable. The assessee has noted on those papers that variation in the price was expected. Since the said noting was found in existence when the paper was seized, such a noting cannot be ignored - That noting is rather a proof which supports the contentions of the assessee that the figures were nothing but certain offers which were made in respect of the Gotri land - Had it been a noting of a single transaction, the presumption could be in favour of the Revenue but by the very presence of three dates on the said paper gives an indication that out of the three offered price, one of them was materialized - as on one hand, the Revenue has picked-up the highest figure of the three and the assessee has picked-up the figure which was documented plus the difference of Rs.3 crores so as to match with one of the cited figures the Revenue Department should not have disputed the offer as made by the assessee.
Issues Involved:
1. Confirmation of assessment/addition based on material found during the course of search. 2. Disallowance of short-term capital loss invoking provisions of Section 94(7) of the IT Act. 3. Addition of deemed dividend under Section 2(22)(e) of the IT Act. 4. Addition on account of sale of Ampad land based on seized papers. 5. Addition of gift received in kind as part of sale consideration. Detailed Analysis: 1. Confirmation of Assessment/Addition Based on Material Found During the Course of Search: - Ground No.1 (A.Y. 2006-07, 2007-08, 2008-09, 2009-10): The assessee's appeal on this ground was dismissed as it was not pressed. The Tribunal proceeded to adjudicate other grounds on merits. 2. Disallowance of Short-Term Capital Loss Invoking Provisions of Section 94(7) of the IT Act: - Ground No.2 (A.Y. 2006-07): The assessee claimed short-term capital loss on the sale of mutual funds, which was disallowed by the AO under Section 94(7). The CIT(A) upheld the AO's decision, stating that the units were bought within three months prior to the record date and sold within nine months after the record date. The Tribunal upheld the Revenue's stand, confirming the disallowance of the short-term capital loss. 3. Addition of Deemed Dividend Under Section 2(22)(e) of the IT Act: - Ground No.3 (A.Y. 2006-07, 2007-08): The AO added amounts as deemed dividend under Section 2(22)(e), asserting that the assessee held more than 10% of the voting power in M/s. Amod Stampings Pvt. Ltd. The assessee argued that the shares were transferred to a trust, reducing their holding below 10%. The CIT(A) and Tribunal found the trust's existence questionable and upheld the addition as deemed dividend. 4. Addition on Account of Sale of Ampad Land Based on Seized Papers: - Ground (A.Y. 2007-08, 2008-09): The AO added amounts based on seized papers indicating a higher sale consideration for Ampad land. The CIT(A) deleted the addition, noting that the entire amount was disclosed as short-term capital gain in A.Y. 2009-10. The Tribunal upheld the CIT(A)'s decision, emphasizing the prohibition of double taxation. 5. Addition of Gift Received in Kind as Part of Sale Consideration: - Ground No.2 (A.Y. 2008-09, 2009-10): The AO treated gifts of shares from the purchaser's spouse as part of the sale consideration for Gotri land. The CIT(A) and Tribunal found the gifts to be genuine and not connected to the sale consideration. The Tribunal concluded that the gifts were not taxable as part of the sale consideration. Summary of Results: - Shri Krupeshbhai N. Patel: - A.Y. 2006-07: Partly allowed. - A.Y. 2007-08: Partly allowed. - A.Y. 2008-09: Dismissed. - A.Y. 2009-10: Partly allowed. - Revenue's appeals: Dismissed. - Cross-Objections: Dismissed. - Shri Navinbhai N. Patel: - A.Y. 2006-07: Partly allowed. - A.Y. 2007-08: Partly allowed. - A.Y. 2008-09: Dismissed. - A.Y. 2009-10: Partly allowed. - Revenue's appeals: Dismissed. - Cross-Objections: Dismissed.
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