2013 (11) TMI 725 - AT - Income Tax

Conflict in head of income Whether the income falls under the head Short term capital gains or Business income - Assessee had shown income of Rs. 5,55,334/- as short term capital gains earned on shares - Holding period ranged from 1 to 6 months and the number of companies in which the assessee had traded were around 60 companies Held that - Assessee has filed the details and working of the capital gains earned giving various details therein. She has also filed the copy of the bank book of the Assessee in support of her contention that she was having own funds and further her own funds have been used for the purpose of making investments. She has also filed copy of balance sheet - To meet the ends of justice and fair play the matter needs re-examination by CIT(A) and therefore restored the issue to the file of CIT(A) for him to decide the issue after considering the submissions of the Assessee - Allowed in favor of assessee for statistical purpose.

Summary

Issues:
Appeal against order of CIT(A)-XIV for A.Y. 2006-07 regarding treatment of short-term capital gain as business income.

Detailed Analysis:

1. Background:
The appeal was filed by the Assessee against the order of CIT(A)-XIV, Ahmedabad for the assessment year 2006-07. The Assessee, an individual with income from business, capital gains, and interest income, declared a total income of Rs. 43,74,639. The Assessing Officer (A.O.) treated the short term capital gain of Rs. 5,55,334 as business income, leading to the appeal.

2. Assessment by A.O.:
The A.O. observed that the Assessee engaged in 60 transactions of buying and selling shares worth Rs. 63,11,345 and Rs. 68,66,679 respectively, with holding periods ranging from 1 to 6 months across around 60 companies. The A.O. concluded that the frequent trading indicated a business activity rather than investment, relying on precedent. The CIT(A) upheld this decision due to lack of detailed documentation.

3. Arguments Before ITAT:
The Assessee, represented by the ld. A.R., argued that the investments were made from own funds, no borrowing was involved, and no F & O activity was conducted. Detailed submissions included share-wise ledger accounts, passbook copies, and capital gains analysis over multiple years to establish investment intent. The ld. D.R. supported the A.O. and CIT(A) decisions.

4. ITAT Decision:
ITAT noted the lack of detailed documentation in the initial assessment and the subsequent appeal. The Assessee provided additional evidence, including capital gains workings and bank book copies, to support the investment nature of transactions. ITAT directed the matter to be reexamined by CIT(A) considering the Assessee's submissions and evidence, emphasizing fair play and justice. The Assessee was instructed to cooperate by providing necessary details.

5. Conclusion:
The appeal was allowed for statistical purposes, and the issue was remanded to CIT(A) for a fresh decision after considering the Assessee's submissions and evidence. The decision aimed to ensure a fair assessment based on the provided documentation and arguments, emphasizing the importance of detailed record-keeping and evidence in tax assessments.