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TMI Blog2017 (3) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee Addition as unexplained cash credit u/s 68 - addition on the basis of a witness who examined at the back of the assessee - genuineness of the purchases - Held that:- The absence of proof regarding the existence of the parties cannot, in our opinion, be confused with the question of genuineness of the purchases. If the goods purchased had been accepted by the Department, it would not, in our opinion, be possible for the Department to turn round and say that the debits appearing on account of these purchases in the name of parties were cash credits. But the lower authorities do not challenge the correctness of the trading profit, and in doing so, they impliedly accept the genuineness of the purchases. As purchases were on credit, corresponding debits for them should appear in some accounts. Such credits in those accounts would not be for cash but for goods and it would be wrong to call them cash credits. The names of the suppliers may be wrong, but the supplies of the goods were reality. For wrong names of suppliers, the reality of purchases cannot be negative. It is a case of purchases having been made by the assessee without properly disclosing the identity of the suppli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer, during the course of assessment proceedings observed that the income under the head capital gain is actually a business income of the assessee on account of the following reasons : 1. The assessee has shown in the tax audit report the nature of business as export of ready-made garments and textiles and investment in shares. 2. The substantial part of the fund was invested in the activities of purchase and sale of shares whereas negligible fund was deployed in the business of ready-made garments. 3. The turnover from the activities of purchase and sales of shares was huge whereas the turnover from the ready-made business was negligible. The same pattern was also observed in the immediate preceding financial year. 4. The frequency of transactions of purchase and sale of shares was quite regular in almost in all the scripts except few. The period of holding of the securities was also arranging between 1 to 3 months. In view of above, the AO sought clarification from the assessee for treating the income shown under the head capital gain as business income. In compliance thereto it was submitted that the assessee is in export business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld AR before us relied on order of ld. CIT(A). 7. We have heard rival contentions of both the parties and perused the materials available on record. We find from the aforesaid discussion and submission that the AO has treated LTCG/STCG as business income of assessee considering the volume and frequency of the transactions in a systematic and organized manner. As per the AO numerous transactions of buying and selling of shares were carried out by assessee and which constitute business activity. It was also observed that many transactions were completed within a short span of time. Accordingly, the AO held such transactions as the business activity and therefore the profit from such transactions is business profit. 7.1 At this stage, we find that activity of sale-purchase of share has been the subject-matter of numerous disputes so as to treat the same as business transactions or capital gain transactions . Various courts have held the issue in favour of assessee and at the same time, various courts have also decided the issue in favour of Revenue. However, to stop the litigation between the Department and assessee, the CBDT very recently has came out with a Notification N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the sale-purchase of the share as STCG/LTCG, therefore, AO cannot dispute the same as business income . In this connection, we also rely in the judgment of Hon ble Bombay High Court in the case of Commissioner of Income Tax vs. Gopal Purohit (2010) 228 CTR 0582 : (2010) 34 DTR 0052 : (2011) 336 ITR 0287 : (2010) 188 TAXMAN 0140 where it was held as under : The Tribunal has entered a pure finding of fact that the assessee was engaged in two different types of transactions. The first set of transactions involved investment in shares. The second set of transactions involved dealing in shares for the purposes of business. The Tribunal has correctly applied the principle of law in accepting the position that it is open to an assessee to maintain two separate portfolios, one relating to investment in shares and another relating to business activities involving dealing in shares. The Tribunal held that the delivery based transactions in the present case, should be treated as those in the nature of investment transactions and the profit received therefrom should be treated either as short-term or, as the case may be, long-term capital gain, depending upon the period of the holding. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issed. 7. In the result, Revenue s appeal is dismissed. Coming to assessee s appeal in ITA No.1326/Kol/2013. 8. In this appeal various grounds raised out of which ground no.4 was not pressed and, therefore, same is dismissed as not pressed. Ground No.5 is of general nature and does not require separate adjudication. The only issue raised by assessee in this appeal in ground No. 1 to 3 are that that Ld. CIT(A) erred in confirming the order of AO by sustaining the addition of ₹89,02,420/- as unexplained cash credit u/s 68 of the Act. 9. The assessee in this balance sheet has shown various sundry creditors inter alia the following trade creditors. SL. No. Name of company Address as per return Address as per Bill Opening balance Transaction during the year (Rs) Closing balance (Rs) 1 Laxmi Trading Co. C/o Pawan Kejjriwala, Balka Apartment, 164, Bangur Avenue, Block-B 3rd Fl, Kol-55 6, Mandir Street,Kol-73 Nil 7,64 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was returned back to the assessee after deducting brokerage of 0.5% on the total amount credited in the account. In view of above the AO sought clarification from the assessee on the aforesaid amount shown in the name of sundry creditors. The assessee replied that all the necessary details such as copies of the ledger, PAN, Trade license, stock registers, bills, books of accounts, bank statements along with the export details were duly submitted. The assessee further submitted that no cash was received from SPK and requested the AO for cross examination before taking any adverse inference. The statement of the Director of the company was also recorded at the time of assessment proceedings where it was claimed that all are genuine creditors but expressed inability to produce them in person as it does not have any dealing with them now. However the AO disregarded the contention of the assessee and treated the aforesaid amount of sundry creditors as unexplained cash credit under section 68 of the Act and added to the total income of the assessee. 10. Aggrieved assessee preferred an appeal before ld CIT(A) who confirmed the order of the AO by observing as under:- 4. I have c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before us on the following grounds of appeal:- 1) For that the Ld. CIT(A) erred in dismissing Appeal Ground Nos 1-9 without passing a speaking order and without considering various objections raised by the Appellant. 2) For that the Ld. CIT(A) simply relied upon the Inspector s report, completely ignoring the facts already on record w.r.t. creditworthiness/identity of the trade parties. 3) For that, alternatively, since the Appellant was a trader/Exporter hence even if purchase form few trade creditors are doubted, the same might have been purchased from others. 11. The ld AR before us filed a paper book comprising of pages from 1 to 149 and submitted that the books of accounts, bills, vouchers and stock details were duly furnished before the AO at the time of assessment. No adverse inference was drawn by the AO. The ld AR further submitted that the sales shown by the assessee has been duly accepted by the AO and without purchase sales cannot be completed. The ld AR drew our attention on pages 1 and 2 of the paper book where the details with the creators were placed. Our attention was also further drawn to the stock summery which is placed on pages 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not been proved is concerned, their finding is correct and we sustain it for the reasons given by them. But the said finding does not automatically go to establish that the goods in question had not been purchased by the assessee during the year under consideration. The goods in question having been purchased and the profit arising therefrom having been accepted by the AO, it appears difficult for us to visualize as to how the debits made by the assessee with regard to the said purchases and the simultaneous credits to the sellers account could simultaneously be held by him to be cash credits. The credits in the accounts of the said parties are admittedly on account of the purchases. These purchases are not bogus, though the names of the persons, from whom the purchases have been made, are bogus. The absence of proof regarding the existence of the parties cannot, in our opinion, be confused with the question of genuineness of the purchases. If the goods purchased had been accepted by the Department, it would not, in our opinion, be possible for the Department to turn round and say that the debits appearing on account of these purchases in the name of parties were cash credits. B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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