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TMI Blog2013 (3) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... L, JJ. Assessee by: Shri Rajeev Khandelwal Respondent by: Shri Raumuan Paite ORDER PER B.R. MITTAL, JM : The assessee has filed this appeal for assessment year 2006-07 against order of Ld. CIT(A) dt. 21st July, 2010 on following grounds: 1. The Ld. CIT(A) erred in upholding the action of ITO- 10(3)(1), Mumbai in disallowing a sum of Rs. 7,93,802/- u/s. 14A of the Act. The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the impugned disallowance of Rs. 7,93,802/- as there is no expenditure incurred in relation to earning the income not forming part of the total income and as such, no disallowance can be made u/s. 14A. Without prejudice, the appellants contend that the calculation of proportionate expenses allocated to the earning of exempt income is not in consonance with the provisions of law and hence, needs to be calculated as per law. 2. The CIT(A) erred in upholding the action of the AO in treating long-term capital gains of Rs. 16,56,89,573/- as business income. The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return on 30.11.2006 declaring Nil income. However, Assessing Officer completed the assessment vide order dt. 31.12.2008 assessing total income at Rs. 17,13,64,780/- by (i) making disallowance u/s. 14A of I.T. Act as per formula prescribed under Rule 8D of I.T. Act of Rs. 7,93,802/- (ii) to disallow claim of assessee of Long Term Capital Gain of Rs. 16,56,89,573/- and treated it as business income and consequently to reject the exemption claimed by assessee u/s. 10(38) of I.T. Act on purchase and sale of shares and (iii) to treat Short Term Capital Gain of Rs. 53,27,430/- as business income. 5. Being aggrieved, assessee filed appeal before First Appellate Authority. Ld. CIT(A) vide his impugned order dt. 21.7.2010, dismissed appeal of assessee. Hence, assessee is in appeal before Tribunal. 6. In respect of ground No. 1 of appeal, Ld. AR submitted that AO made disallowance u/s. 14A of the I.T. Act by applying Rule 8D of I.T. Rules and Ld. CIT(A) has confirmed the action of AO. He submitted that in view of decision of Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. Vs DCIT 328 ITR 81; Rule 8D which has been inserted with effect from 24.3.2008 by Income ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch were sold during F.Y. 2005-06 relevant to A.Y. 2006-07. The assessee has not explained date of acquisition of these shares so as to prove the proceeds on sale of these shares are L.T.C.G. That assessee was asked to bring books of account for verification. However, assessee produced computerized books of account and few sale bills/broker s notes for test-check but no details of purchase/acquisition of shares were produced. The AO stated that summons was also issued u/s. 131 of I.T. Act on 26.12.2008 to Axis Bank for verification of Demat Account and possession of shares by the assessee. That said bank submitted the statement on 31.12.2008. AO has stated that, it is observed that assessee had closing balance of 36,593 shares of Ruchi Soya and 10,552 shares of Ruchi Infrastructure as on 31.3.2004. He has stated that in the absence of substantial evidence with regard to acquisition and holding of shares, the gain on sale of shares cannot be considered as Long Term Capital Gain. He has further stated that assessee is actually involved in trading of shares rather than investment, looking to the volume frequency, continuity and regularity of transaction of purchase and sales in sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) refused to admit the said documents even though those documents go to the root of the issue to decide as to whether said shares were held as investment or not. Ld. AR relying on decision of Hon ble Jurisdictional High Court in the case of Smt. Prabhavati S. Shah v. CIT 231 ITR 01 submitted that the Appellate authority has to exercise his discretion judicially and to admit additional evidences to make enquiry where the facts and circumstances so demand. The Ld. AR also referred the decision of Hon ble Jurisdictional High Court, Nagpur Bench in the case of Commissioner of Income-tax v. Suretech Hospital and Research Centre Ltd. 293 ITR 53 and submitted that Hon ble High Court while confirming order of Tribunal held that where the Tribunal found the documents produced was necessary for disposal of the appeal on merit, the said additional documents should be considered to decide the matter. Ld. AR submitted that in the preceding assessment years, i.e. assessment years 2003-04, 2005-06 and 2008-09, department accepted Long Term Capital Gain in respect of shares sold by assessee. He submitted that if additional documents proposed to be filed by assessee vide its letter dt. 22.5.2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. DR has not disputed the fact that said documents go to the root of the issue involved. We also observe from pages 195 to 198 of Paper Book r.w. pages 199-200 that assessee claimed capital gain in assessment year 2005-06 and the department accepted the capital gain disclosed by assessee. Similarly for assessment year 2008-09, copy placed at pages 356 -377 r.w. pages 358 of Paper Book, assessee disclosed capital gain and same was allowed by the department. The Hon ble Jurisdictional High Court in the case of Smt. Prabhavati S. Shah v. CIT (supra) has held that the Appellate authority should not refuse to make enquiry in the case where facts and circumstances so demand. We observe that documents proposed to be filed by assessee are relevant and necessary to be considered to decide the issue as to whether shares were held by assessee as investment or stock-in-trade. It is relevant to state that Hon ble Apex Court has held in the case of CIT Vs Prabhu Dayal 82 ITR 804 that question as to whether receipt is a capital receipt of income, has to be judged from the facts of each case and question of law can be drawn such facts. The Hon ble Apex Court in the case of CIT Vs. H. Holck Larsen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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