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2014 (8) TMI 238 - AT - Income TaxSale of shares Income from business or STCG Held that - Assessee has furnished before us the details of transactions in shares made by the assessee to show that the nature of transactions including their frequency, holding period etc. was similar in both these years Relying upon CIT v/s Gopal Purohit 2010 (1) TMI 7 - BOMBAY HIGH COURT - it was open to the assessee to maintain two separate portfolios, one relating to investment in shares and another relating to business of dealing in shares - there should be uniformity in treatment given to transactions in shares and the rule of consistency should be followed when facts and circumstances for different years are identical the AO is directed to accept the claim of the assessee for Short Term Capital Gain on sale of shares Decided in favour of Assessee. Penalty u/s 271(1)(c) Held that - Assessee pointed out that from the assessment order passed by the AO, even after making the corresponding addition in respect of which the penalty is imposed, the total income of the assessee as computed as per the normal provisions of the Act was less than the book profit computed u/s 115JB and the assessee thus was finally assessed for the year under consideration on the basis of book profit as per the section 115JB of the Act Relying upon CIT vs. Nalwa Sons Investment Ltd. 2010 (8) TMI 40 - DELHI HIGH COURT - when assessment was made on income computed u/s115JB and tax had been paid on income so computed, penalty u/s 271(1)(c) would not be imposed with reference to addition that would have been made while making assessment under normal procedure Decided in favour of Assessee.
Issues involved:
1. Classification of profit from sale of shares as income from business or Short Term Capital Gain. 2. Disallowance under section 14A of the Act. 3. Imposition of penalty under section 271(1)(c). Issue 1: Classification of profit from sale of shares The assessee challenged the treatment of profit from the sale of shares as income from business instead of Short Term Capital Gain. The assessee, a company engaged in trading in shares, claimed the profit from the sale of shares treated as investment to be Short Term Capital Gain. The Assessing Officer (AO) noted the high frequency of transactions and shorter holding period, concluding that the intention was trading, not investment. The AO treated the profit as business income, upheld by the CIT(A). The assessee presented past assessments where similar claims were accepted. Citing CIT v/s Gopal Purohit, the Tribunal directed the AO to accept the Short Term Capital Gain claim, as consistency and separate portfolios for investment and trading were maintained. Issue 2: Disallowance under section 14A of the Act The second ground raised by the assessee, regarding the disallowance of expenses under section 14A, was not pressed by the counsel during the hearing. Consequently, the disallowance of expenses made by the AO and confirmed by the CIT(A) was dismissed as not pressed. Issue 3: Imposition of penalty under section 271(1)(c) The penalty imposed under section 271(1)(c) was challenged in the appeal. The Tribunal observed that even after the addition that led to the penalty, the total income computed as per normal provisions was less than the book profit under section 115JB. Referring to CIT vs. Nalwa Sons Investment Ltd., where it was held that if assessment was based on section 115JB, penalty under section 271(1)(c) wouldn't apply for additions under normal procedure. Following this precedent, the Tribunal canceled the penalty, allowing the appeal against the penalty imposition. In conclusion, the Tribunal partly allowed the appeal related to the classification of profit from the sale of shares and dismissed the disallowance under section 14A. Additionally, the penalty imposed under section 271(1)(c) was canceled, resulting in the allowance of the corresponding appeal.
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