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TMI Blog2013 (11) TMI 898X X X X Extracts X X X X X X X X Extracts X X X X ..... d - It is a clear case of systematic activity being perused with a profit motive, deploying capital and bearing the concomitant risk, both business and financial, inasmuch as the borrowed capital stands also deployed - Therefore, no infirmity inflicts the Revenue finding their nature as of business, and assessing the income accordingly as business income – Decided against the Assessee. - ITA No.4998,4999/Mum/2009 - - - Dated:- 28-3-2013 - Sanjay Arora and Vijay Pal Rao, JJ. For the Appellant : Shri Beharilal For the Respondent : Dr Manjunath Karkihalli ORDER:- Per: Sanjay Arora: These are a set of two Appeals arising out of the separate Orders by the Commissioner of Income Tax (Appeals)-VIII, Mumbai ('CIT(A)' for short) dated 13.07.2009 and 22.07.2009 for the two consecutive appeals respectively, disposing the assesse/s's appeals contesting its assessment for the assessment year (A.Y.) 2006-07 u/s.143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) vide separate orders of even date, i.e., 28.11.2008. The appeals raising common issues, were heard together, and are, accordingly, being disposed of vide a common, consolidated order. 2. Before we may delin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was conceded to be only income, routed thus, to avail of the concessional tax rate as well as the exemption u/s.54F of the Act on the said income, which claims were admitted for being withdrawn per revised returns. Shri Ratanchand J. Oswal and his family members were also found to be in receipt of gifts totalling to Rs.1040.50 lakhs from various persons during the previous years relevant to A.Ys. 2002-03 to 2005-06, which stand tabulated at Question # 20 of the said statement. Shri Mukesh M. Choksi was himself found to have given two gifts of Rs.2.5 lakhs each on 20.03.2003, besides similar gifts from his wife, Smt. Minakshi M. Choksi to Madhulika Oswal, daughter-in-law of Shri Ratanchand J. Oswal, even as admittedly Mukesh Choksi was not personally known to them (refer Ans. to Q. # 13). Except for a gift of Rs.10 lakhs by Shri Popatlal Fulchand (father-in-law of daughter of Shri Ratanchand J. Oswal), all other gifts were considered to be from unrelated or even unknown persons, and their sum, i.e., Rs.1030.50 lakhs, again admitted as being the additional income of self and family, routed thus, assuring of filing revised returns admitting the same as income for the relevant years an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transactions as not genuine and, accordingly, treat the capital gains as business income? With regard to the second issue, i.e., the share transactions carried out by the assessees through other brokers, there is no whisper of the same in the statement of Shri Ratanchand J. Oswal. The Revenue has only proceeded by inferring non genuineness without examining the assessee's case on merits, even as it has submitted full details in respect thereof. In fact, there is a clear contradiction between the orders by the Assessing Officer (A.O.) and the ld. CIT(A). While the former records the transactions as genuine, so that the Revenue's case is limited to the nature of the income arising there-from, i.e., whether as 'capital gains' on transfer of an investment or capital asset, or as trading transactions, the ld. CIT(A) has doubted the transactions themselves, treating them at par with the 'transactions' carried out through MSPL on the ground that the modus operandi followed is the same. On being questioned by the Bench as to what is the assessee's case in the matter, i.e., whether it concedes to the same modus operandi being followed with other brokers, i.e., as in the case of share t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said transactions to be only in the nature of business, so that the income therefrom stood assessed as business income, adverting our attention to the findings at para 5.3 and 6.3 in the case of Shri Ratanchand J. Oswal and Shri Rishi R. Oswal respectively. These findings have not been rebutted by the assessee in any manner, but only endorsed by the ld. CIT(A), so that referring to his findings would be, under the circumstance, of no assistance to the assessee. The findings by the A.O., therefore, were prayed for being confirmed. 3.3 In rejoinder, the ld. AR would submit that the statement of Shri Mukesh M. Choksi could not be relied upon for the reason that the same was never confronted to the assessee/s. With regard to the share transactions carried out through other brokers, the matter, in the absence of definite findings by the ld. CIT(A), would warrant being restored back to his file. On being called upon by the Bench to take us through the details of the relevant transactions, he would advert to pages 44 to 46 and 32 to 33 of the paperbooks in the case of Shri Ratanchand J. Oswal and Shri Rishi R. Oswal respectively. On instances of repeated transactions, as in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public domain, and whose shares in fact had not value, offering to 'disclose' the same as 'other income', and also requesting for a 'lenient view' in the matter. Further, the statement of Shri Ratanchand J. Oswal having been taken on 28.12.2006, it would presumably cover all the transactions through MSPL and other companies through which Shri Mukesh M. Choksi operated (listed in answer to Q. No. 13) up to that date, i.e., unless an exception is drawn, and that too by leading evidence, bringing out the reasons or the basis for any difference, and which has not been. In its absence, it is not possible to distinguish the entries with reference to the time period to which they relate. Accordingly, we find no infirmity in the Revenue treating the said transactions for the current year at par with that for the preceding years, being A.Y's. 2002-03 to 2005-06, for which a total of Rs.1821.38 lakhs stands offered to tax by the two assessees along with their HUFs and family members. 4.2 Coming to the assessee's case, the same rests solely on the exoneration of the admitted income from the levy of penalty u/s. 271(1)(c) by the tribunal vide its order dated 23.03.2010 (supra) for A.Y. 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions to be not genuine but only accommodation entries, having been rather black listed - which could only be under the auspices of SEBI - for that reason/s. Couple this with the fact of the assessee's ignorance or absence of any knowledge of the companies in which shares in such large numbers were 'purchased' and investments made by him, as well as the assessee's admission followed by 'revising' the returns for the preceding four years, paying taxes thereon, and the picture is complete. No distinguishing feature with reference to the said preceding years (AYs. 2002-03 to 2005- 06) has been brought on record or to our notice by the assessee. The irresistible and unmistakable conclusion is of the profits for the current year being booked similarly as 'capital gains', to avail of the tax benefits attending the same. 4.3 In sum, we do not think that the scope of the tribunal's order (supra) in the case of, among others, the assessee-appellants, extends beyond the penalty proceedings, which are separate and distinct proceedings under the Act, and for the years to which it relates. Also, it is well accepted that the standard of proof required to sustain a penalty is higher than th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and J. Oswal and Shri Rishi R. Oswal respectively; all of which we find pertinent, relate as they do to the various incidents and aspects of the transactions, viz., the number and volume of the transactions; frequency; holding period; utilization of borrowed capital, etc., which have to be considered in their entirety, even as it is trite that even a single transaction could be in the nature of trade, so as to qualify for being considered as a business transaction or on trading account. The same have not been met, much less rebutted, at any stage of the proceedings by the assessee. In fact, as pointed out by the A.O., the assessee has itself classified the said transactions as share trading transactions in the tax audit report. We find no infirmity in the said findings, since confirmed by the first appellate authority, i.e., in principle. Our perusal of the said transactions (appearing at PB pgs. 44-46 in the case of Shri Ratanchand J. Oswal and PB pgs. 32-33 in the case of Shri Rishi R. Oswal), leads us to the same set of findings, so that that by the Revenue are in our view borne out and, thus, consistent with the material on record. The total number of transactions works to 150 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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