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TMI Blog2017 (9) TMI 1346X X X X Extracts X X X X X X X X Extracts X X X X ..... . The AO has not disputed the identity of the person or the capacity of the donor. The AO has not brought any material on record. Thus, this ground of appeal is allowed in favour of assessee. Denying the benefit of set off of Short Term Capital Loss (STCL) against LTCG - assessee argued that the assessee is an Investor and is entitled for setting off of loss on STCL against STCG in accordance with section 74 - Held that:- Considering the facts that we have allowed the appeal of the assessee and allowed the gain on sale of share as STCG or LTCG as the case may be instead of Business Income. Thus, the AO is directed to verify the loss and set off of the claim in accordance with law. Thus, this ground of appeal is allowed for statistical purpose. Addition on account of dividend stripping u/s 94(7) - Held that:- AO disallowed the dividend without verifying the fact. The AO made the addition only on the observation of ld PCIT. Before us, the ld. AR of the assessee has placed on record the copy of statement showing the record and date of scripts (page No. 47-49) Considering the fact that the assessee has provided the specific details of shares of M/s Kamala Dials and M/s Hemadri C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 76,36,602/- made under the head 'Business income' is not at all justified and the same may be deleted. ii. Without prejudice to the above, the Ld. CIT(A) erred in not directing the Ld. A.O. to allow the benefit available to the Appellant under section 45(2) of the Act while treating the 'Short Term Capital Gain' as 'Business Income' of the Appellant. Without Hence, the Appellant prays that the benefit of provisions of section 45(2) may be granted to the Appellant. 3. Treating 'Long Term Capital Gain' as 'Business Income' unjustified - ₹ 64,37,452/- i. The Ld. CIT(A) erred in upholding the action of the Ld. A.O. in treating the 'Long Term Capital Gain' as 'Business Income' without appreciating the fact that the Appellant is an investor in the shares and also has shown the same as investments in her Balance Sheet. Hence, the addition of ₹ 64,37,452/- made under the head 'Business income' is not at all justified and the same may be deleted. ii. Without prejudice to the above, the Ld. CIT(A) erred in not directing the Ld. A.O. to allow the benefit available to the Appellant under section 45(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT) on the ground that order passed by AO u/s 143(3) r.w.s. 147 was erroneous and prejudicial to the interest of Revenue. While doing so the ld. PCIT held that fact for the AY 2005-06 was similar to the facts of AY 2007-08 wherein the activity of assessee of trading in shares was held business activity and accordingly LTCG and STCG was brought to tax as Business Income vide order dated 12.11.2012 passed u/s 263 of the Act. The assessee filed appeal against the order dated 12.11.2012 passed u/s. 263 before the Tribunal. The assessee simultaneous filed appeal against the similar treatment for AY 2006-07, 2008-09 and 2009-10. Before the Tribunal. The Tribunal restored all the appeals of the assessee by composite order, vide order dated 25.09.2013 in ITA No.(s) 1963- 1970/M/2013 to the file of AO with the following direction: Therefore we are of the considered opinion that the Ld. CIT(A)'s action u/s.263 is justified as the action of the AO in dropping the proceedings initiated uls.147 accepting the returned income during the year under consideration is erroneous and prejudicial to the interest of Revenue. No doubt that the Id. CIT(A) is competent and empowered u/s263 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on 12.11.2011 on the basis of observations of facts for AY 2007-08 wherein the capital gain of the assessee was treated as Business Income . It was further argued that for AY 2007-08, the AO treated the STCG and LTCG as Business Income in assessment order dated 22.12.2009 passed under section 143(3). However, on appeal before the ld. CIT(A), the action of AO was reversed vide order dated 14/052010 in CIT(A)-29/RG/-17/180/09-10. Thus, the assessee was allowed capital gain. 7. It was argued that against the order of CIT(A) dated 14/05/201 the Revenue filed appeal before the Tribunal vide ITA No. 5883/Mum/2010. The assessee also filed Cross Objection therein. The appeal of the Revenue was dismissed by the Tribunal on 06.02.2015. The Tribunal confirmed the order of ld. CIT(A). It was further argued that the assessment was revised on the basis of treatment of capital gain as Business Income on the basis of observation of the AO for AY 2007-08, wherein the action of AO was reversed by ld. CIT(A) and which was affirmed by the Tribunal. Thus, the income earned by assessee on account of capital gain should be treated as STCG and LTCG as the case may be and not as Business Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year on entire shares investment. It is also evident from record that investment was always made by assessee out of after tax surplus generated. Contention of A.O. that the assessee had borrowed funds was found false by ld. CIT(A). It is also not in dispute that both sale and purchase transactions took place through account payee crossed cheque only and there was no running account with the broker as is in the case of businessmen. Furthermore It has always been the intention of the assessee to earn dividend income from such investments in shares and the same is reflected in the dividend income of Rs, 12,85,694/- and intention was duly supported by Books of accounts and balance sheet produced before the A.O. It is also not in dispute that the assessee has invested the surplus funds not just in shares but also in tax free bonds like an investor. A trader will not invest in tax free bonds and continue to hold the same for tax free interest income and many cases for 24 months. From the record we found that the shares were held for at least 14 months in case of Long Term Capital Gains and fairly long period for Short Term Capital Gains. A trader would not hold shares for such a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has proved the identity and capacity of persons and genuinenity of the transaction. The AO instead of bringing any contrary material on record treated all the gifts as unexplained cash credit u/f 68 of the Act. On the other hand, the ld. DR for the Revenue supported the order of authorities below. It was argued that the assessee was unable to discharge the onus to prove the genuinenity of the transaction despite the sufficient opportunity. 11. We have considered the rival submission of the parties and have gone through the orders of authorities below. We have seen that during the assessment proceeding, the assessee has claimed to have received the gift from 14 parties totaling of ₹ 21,50,000/-. The assessee was asked to produce the evidence in support of claim of gift. The assessee furnished the confirmation of all the donors along with their Income-tax Returns (ITR) and copy of passbooks. The confirmation filed by assessee was not accepted by the AO holding that all the gift-deeds are stereo-typed and are prepared by assessee in the same format and is signed by the respective person. The AO also relied upon the statement of assessee during the revision proceeding by PCIT. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. Considering the peculiarity of the facts the addition of ₹ 1,50,000/- is deleted. 15. In the result, appeal of the assessee is allowed. ITA No. 590/Mum/2017 AY 2006-07 16. The assessee has raised the following grounds of appeal: 1. The Ld. Commissioner of Income-tax (Appeals)-33, Mumbai [hereinafter referred to as Ld. CIT(A) ] erred in passing the order dated 02.11.2016 upholding the order passed by Ld. A. O. dated 31.03.2015 under section 143(3) r.w.s. 254 of the Income Tax Act, 1961 ['of the Act' for short] determining total income of the Appellant at ₹ 4,95,70,750/- as against returned income of ₹ 2,13,99,470/- without appreciating the facts and circumstances of the case. The Appellant, therefore, prays that the order dated 02.11.2016 passed by Ld. CIT(A) is bad in law and the same may be quashed. 2. Treating 'Short Term Capital Gain' as 'Business Income' unjustified - ₹ 2,07,36,968/- i. The Ld. CIT(A) erred in upholding the action of the Ld. A.O. in treating the 'Short Term Capital Gain' as 'Business Income' without appreciating the fact that the Appellant is an investor in the shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withdrawals without appreciating the facts and circumstances of the case. The Appellant, therefore, prays that the addition of ₹ 1,50,000/- on account of low withdrawal is unjustified and the same may be deleted. 17. Ground No.1 is general in nature and need no specific adjudication. Hence, dismissed. Ground No.2 3 relates to treatment of STCG and LTCG as Business Income. This ground of appeal is identical to the ground no.2 of ITA No. 589/Mum/2017 which we have allowed in para 9 10 above in appeal for AY 2005-06. Considering the similarity of the fact and following the principle of consistency, this ground of appeal is allowed in favour of assessee. 18. Ground No.4 relates to denying the benefit of set off of Short Term Capital Loss (STCL) against LTCG. of ₹ 1,29,665/-. The ld. AR of the assessee argued that the assessee is an Investor and is entitled for setting off of loss on STCL against STCG in accordance with section 74 of the Act . On the other hand, the ld. DR for the Revenue supported the order of authorities below. 19. We have considered the rival submissions of the parties and have gone through the orders of the authorities below. The ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be granted to the Appellant. 3. Treating 'Long Term Capital Gain' as 'Business Income' unjustified - ₹ 7,40,19,132 /- i. The Ld. CIT(A) erred in upholding the action of the Ld. A.O. in treating the 'Long Term Capital Gain' as 'Business Income' without appreciating the fact that the Appellant is an investor in the shares and also has shown the same as investments in her Balance Sheet. Hence, the addition of ₹ 7,40,19,132/- made under the head 'Business income' is not at all justified and the same may be deleted. ii Without prejudice to the above, the Ld. CIT(A) erred in not directing the Ld. A.O. to allow the benefit available to the Appellant under section 45(2) of the Act while treating the 'Long Term Capital Gain' as 'Business Income' of the Appellant. Without Hence, the Appellant prays that the benefit of provisions of section 45(2) may be granted to the Appellant. 4. Addition on account of dividend stripping under section 94(7) of the Act unjustified- ₹ 20,799/- i. The Ld. CIT(A) erred in upholding the action of the Ld. A.O. in making addition of ₹ 20,799/- invoking the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other hand, the ld. DR for the Revenue supported the order of authorities below. 25. We have considered the rival submission of the parties and have gone through the orders of authorities below. During the assessment proceeding, the AO observed that the assessee received dividend during the year under consideration. The assessee was asked to explain whether the provision of section 94(7) of the Act is applicable and any loss to the extent of income to be ignored. The assessee filed its reply and submitted the details of dividend which is liable for disallowance u/s 94(7) of the Act in respect of M/s Hemadri Chemicals and M/s Kamala Dials for ₹ 5,620/- and 15,179/- respectively. The AO on the basis of observation of ld PCT during the proceeding u/s 263 of the Act made the disallowance of ₹ 15,179/- being the dividend on share in respect of M/s Kamala Dials. The AO also disallowed dividend of ₹ 5,620/- on share of M/s Hemadri Chemicals. The ld. CIT(A) observed that during the proceeding u/s 263 of the Act, the ld. PCIT has analyzed the stripping and confirmed the disallowance. We have seen that the AO disallowed the dividend without verifying the fact. The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished by the assessee in accordance with law. Needless to say that the AO shall provide opportunity to the assessee before passing the order. In the result this ground of appeal is allowed for statistical purpose. 28. Ground No.6 relates to the addition on account of low withdrawal. We have seen that this ground of appeal is identical to the ground no. 5 of appeal for AY 2005-06, which we have already allowed. Hence, this ground of appeal is also similar observations. 29. In the result the appeal of the assessee is partly allowed. ITA No. 592/Mum/2017 AY-2009-10 30. The assessee has raised the following grounds of appeal: 1. The Ld. Commissioner of Income-tax (Appeals)-33, Mumbai [hereinafter referred to as Ld. CIT(A) ] erred in passing the order dated 02.11.2016 upholding the order passed by Ld. A. O. dated 31.03.2015 under section 143(3) r.w.s. 254 of the Income Tax Act, 1961 ['of the Act' for short] determining total income of the Appellant at ₹ 58,57,290/- as against returned income of ₹ 1,00,900/- without appreciating the facts and circumstances of the case. The Appellant, therefore, prays that the order dated 02.11.2016 passed by Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted. 5. Addition on account low withdrawals unjustified- ₹ 2,25,000/. i. The Ld. CIT(A) erred in confirming the action of Ld. A.O. in making addition of ₹ 2,25,000/- on account of low withdrawals without appreciating the facts and circumstances of the case. The Appellant, therefore, prays that the addition of ₹ 2,25,000/- on account of low withdrawal is unjustified and the same may be deleted. 31. Ground No.1 is general in nature and need no specific adjudication. Hence, dismissed. 32. Ground No.2 3 relates to treatment of STCG and LTCG as Business Income of the assessee. This ground of appeal is similar to the ground of appeal no. 2 3 of ITA No. 589/Mum/201. We have already allowed the similar ground of appeal in favour of assessee for AY 2005-06, for AY 2006-07 and for AY 2008-09. Hence, following the principle of consistency both the grounds of appeal are allowed in favour of assessee. 33. Ground No. 4 relates to addition on account of dividend striping under section 94(7). This ground of appeal is identical to the ground No. 4 of appeal for AY 2008-09, which we have already restored to the file of AO. Hence, this ground of appeal i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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