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TMI Blog2014 (2) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of hearing, assessee was required to furnish details regarding its investments in Mutual Funds and computation of capital gains on sales effected. Assessee had disclosed in its computation of capital gains Rs.24,81,609/-. As per the Assessing Officer details submitted by the assessee on 13.08.2008 and subsequently on 04.09.2008 revealed substantial difference. In the first list purchases of Mutual Fund Units were shown at Rs.3 crores whereas in the second list the purchase was shown at Rs.7,28,00,000/-. Explanation was sought from the assessee on such differences and also seeking why the transactions resulting in surplus should not be considered as income from business. 4. In its reply assessee stated that the actual capital gain was worked out erroneously. As per the assessee against Rs.24,81,609/- shown in the return, the actual capital gains came to Rs.26,54,797/-. In other words, assessee offered a further sum of Rs.1,73,188/- under the head "Capital Gains". Assessing Officer was of the opinion that reply given by the assessee was not convincing. Assessing Officer based on AIR information on assessee's of Mutual Fund units concluded that there were substantial diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed purchases totalling to Rs.3,75,95,906/- compiled from the above table as unexplained purchases and addition was made accordingly. 5. Assessing Officer also noted that assessee's transactions in shares and Mutual Funds were to earn profit and risks were taken, control exercised and management done skillfully to maximize its gain. Large numbers of transactions of buying and selling of shares of Units in Mutual Funds were there, and such systematic activity, as per the Assessing Officer, constituted a business. In this view of the matter, he held that the profit of Rs.28,27,982/- arising out of purchase and sale of Units in the Mutual Funds had to be considered under the head "income from business". Accordingly he declined to accept the claim of assessee that the surplus arising out of the purchase and sale of Units was capital gains and assessed such surplus under the head 'Profits and Gains of Business/Profession'. 6. Against by the above, assessee moved in appeal before the ld. CIT(Appeals). Vis-a-vis, treatment of its income under the head "business", argument of the assessee was that it's main object was not doing business in shares. As per the assessee it was deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer in the remand report. Assessee there upon explained to the ld. CIT(Appeals) that Assessing Officer had not properly considered the statement of stock, purchase, sale, switch in/out and closing stock. The Bank statements were also not properly verified though these were filed before the Assessing Officer. As per the assessee each of the discrepancies pointed out by the Assessing Officer were explained by him to the Assessing Officer. Vis-a-vis the difference in the closing stock, explanation of the assessee was that Schedule 4 of the accounts gave the break-up in the closing stock and it tallied with the details filed by the assessee on 21.05.2009 before the Assessing Officer. There was only a typographical error wherein the auditor had not shown the name of the Prudential ICICI Flowing Rate Fund against the sum of Rs.27 lakhs. Assessee had also furnished a certificate from it's auditors of M/s. S. Hossain & Associates confirming the typographical mistake, wherein it was mentioned as under: - "we regret to inform you that name of the Mutual Fund investment, 'Prudential ICICI Floating Rate Fund' was inadvertently not printed against numerical figure of inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock and missing of a scheme name would not change the value of closing stock. 13. We have heard the rival submissions and perused the material available on record. Firstly it is necessary to find, whether the surplus arising to the assessee on account of purchases and sales of Mutual Fund Units is to be considered under the head "income from capital gains" or "income from business". Assessee had shown the surplus under the head "income from capital gains". Assessing Officer was of the opinion that this was to be considered as income from business only. There is no dispute that assessee had all along shown the units purchased by it under the head "investment". Assessee was engaged in the business of manufacturing and exporting of leather goods. Ld. CIT(Appeals) finding that assessee held the Mutual Fund units as investments has not been effectively rebut ted by the Revenue. When the intention of the assessee was only to make investment, sale thereof would only result in capital gains. There is no case for the Revenue that assessee's main business was trading in Mutual Fund Units or shares. In these circumstances, we are of the opinion that the surplus arising to the assessee was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income or in detail filed in course of hearing. It is also noted that no switch out/in is shown in the detail of switch and switch out filed in course of hearing for remand report. N.B. 2 vis-a-vis Sl. No. 6 - Similar to N.B. 1 out of opening balance of investment Rs.40,00,000/- in the respective fund sale for Rs.21,29,880/- is shown and in absence of any closing balance either there is loss for Rs.18,70,120/- or suppression of C.B. but no such loss is claimed. No such switch in/out is shown. N.B. 2 vis-a-vis Sl. No. 8 - Opening balance of investment is Rs.17,92,998/- and in absence of any purchase or sale the closing balance should have been for the same amount. Switch in/out detail shows that there is switch into Reliance Vision Fund for Rs.15,00,000/- on 22.12.2005 and again Rs.15,00,000/- on 23.01.2006 showing switch in amount for Rs.14,99,479/- twice. Now switch out for Rs.30.00 lakh was made in absence of any purchase O.B. of Rs.17,92,998/-. N.B. 2B vis-a-vis Sl. No. 7 - Opening balance is Rs.71,728/- but closing balance is Rs.99,803/- without any purchase. It proves that purchase for Rs.28,075/- not disclosed. N.B. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Reliance Growth for Rs.30,00,000/- (Rs.15,00,000/- + Rs.15,00,000/-) and Rs.20,00,000/- respectively. Detail also shows sale of Rs.19,99,258/- of Reliance Growth and closing balance of Rs.30,00,000/- of Reliance Vision. N.B. 11 vis-a-vis Sl. No. 30 - It shows purchase for Rs.35,00,000/- during the year but in absence of sale it should be shown as closing balance but no closing balance is shown. N.B. 12 vis-a-vis Sl. No. 31- It shows purchase for Rs.50,00,000/- and in absence of sale it should be closing stock. N.B. 13 vis-a-vis Sl. No. 32 - It shows purchase for Rs.50,00,000/- and sale for Rs.40,37,152/-. It means either there is loss or closing balance but none of these is shown. N.B. 14 vis-a-vis Sl. No. 33 - It shows purchase for Rs.25,00,000/- and sale for Rs.15,17,884/-. It means either there is loss or closing balance. But none of these is shown. N.B. 15 vis-a-vis Sl. No. 34- It shows purchase of Rs.20,00,000/- and sale for Rs.19,19,950/-. It means there is loss for Rs.50/-. N.B. 16 vis-a-vis Sl. No. 36 - It shows purchase for Rs.35,00,000/- but neither sale nor closing balance is shown. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ind. Prime Fund on 02.01.2006, which was mentioned in our switch in/out statement. N.B.-14 : There was a switch out of Rs.10,00,000/- to HDFC Equity Fund on 02.01.2006 which was mentioned in our switch in/out statement. N.B.-15 : Yes. There was a loss for Rs.50/-. N.B.-16 : There was a sale for Rs.3522753.48/- which was mentioned in our sale statement as sl. No. 45. N.B.-18 : There was a switch out of Rs.15,00,000/- to HSBC Advantage Fund on 23.02.2006, which was mentioned in our switch in/out statement. N.B.-20 : There was two switch in of Rs.20,00,000/- from Templeton Floating Rate Income Fund on 31.05.2005 & of Rs.10,00,000/- from Frankin Templeton Tresary Fund on 02.01.2006, which was mentioned in our switch in/out statement. N.B.-21 : There was a switch in of Rs.10,00,000/- from HDFC Liquid Fund on 02.01.2006 which was mentioned in our switch in/out statement. N.B.-22 : There was two switch in of Rs.30,00,000/- (15,00,000 x 2) from Reliance Floating Rate Fund on 22.12.2005 & 23.01.2006, which was mentioned in our switch in/out statement. N.B.-23 : There was a switch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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