2023 (9) TMI 588 - AT - Income Tax

Correct head of income - investing activity done by the assessee - business receipts or Capital Gains - contention of the assessee that the gain that he has received from the investing activity is the capital receipt/gain and shall be chargeable to tax as capital gain only - HELD THAT - Based on this instruction issued by the CBDT vide its No. 6/2016 F.No.225/12/2016-ITA-III dated 29.02.2016 we observed that even the CBDT is instructing their officer that once the stand taken by the assessee shall not be disturbed by the assessing officer and here in this case the assessee has already taken a stand to offer the income under the head capital gain the same cannot be rejected without taking any reason to the assessee and the ld. AO cannot the dispute the income that has already been offered by the assessee under the head capital gain. Based on these observations the ground no. 1 taken by the assessee is allowed. Travel, stay and food expenditure reimbursed, FD maturity receipts and transferred from own other bank account were added as income in assessment order - Whether these receipts should not be included in the income? - HELD THAT - DR not contended to these averments on facts but at the same time ld. SR. DR submitted that so far these contentions were not raised or submitted before the lower authorities, needs verification on the part of the ld. AO. She further submitted that let these receipt be verified by the ld. AO and if found in accordance with the law AO may grant the relief to the assessee after verification of evidence based on these evidences contending that the receipt is not taxable. The bench noted that the contentions raised by the assessee cannot be brushed aside and he cannot be taxed on the receipt which is the maturity amount of the fixed deposit receipt with the bank and reimbursement of the expenditure received. But since the assessee has not raised this issue before the ld. AO we admit these additional evidences and direct the ld. AO to verify the contentions of the assessee and as agreed by AO will complete the assessment after verifying the required information from the assessee and grant the relief in accordance with the law with in certain time frame. Based on these observations the ground no. 2 raised by the assessee is allowed for statistical purpose.

Summary

Issues Involved:
1. Classification of income from securities transactions as capital gains or business income.
2. Inclusion of travel, stay, food expenditure reimbursements, FD maturity receipts, and bank transfers as income.

Summary:

Issue 1: Classification of Income from Securities Transactions
The assessee contended that he is a salaried employee who invested in the securities market for investment purposes, not as a trader, and thus the income should be treated as capital gain/loss. The AO, however, treated the securities transactions as business activities, applying the provisions of section 44AD(1) of the Income Tax Act, estimating a deemed income of Rs. 2,26,864 at 8% of the turnover of Rs. 28,35,802. The CIT(A) upheld this view, dismissing the appeal on the grounds that the assessee failed to maintain and audit books of accounts as required.

Upon appeal, the Tribunal noted that the assessee is primarily a salaried employee of the World Health Organization, and his regular income source is salary. The Tribunal referred to CBDT Circular No. 6/2016, which allows for the treatment of income from listed shares held for more than 12 months as capital gains. The Tribunal concluded that the AO could not dispute the income offered by the assessee under the head capital gain without providing reasons. Hence, the Tribunal allowed the assessee's ground, treating the income as capital gain.

Issue 2: Inclusion of Reimbursements and FD Maturity Receipts as Income
The AO added Rs. 16,06,387, comprising Rs. 3,37,731 (reimbursement of expenses) and Rs. 12,68,656 (FD maturity receipts), to the assessee's income, treating them as unexplained investments. The CIT(A) upheld this addition, stating that the assessee failed to disclose these receipts in the return of income.

The Tribunal, however, observed that the assessee provided evidence that the amount of Rs. 12,68,656 was the maturity amount of fixed deposits and Rs. 3,37,731 was reimbursement of expenses from the employer. The Tribunal accepted these additional evidences and directed the AO to verify the claims. The Tribunal held that these receipts are not taxable and allowed the ground for statistical purposes, directing the AO to grant relief after verification.

Conclusion:
The Tribunal allowed the appeal, treating the income from securities transactions as capital gains and directing the AO to verify and exclude the reimbursement and FD maturity receipts from taxable income.