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TMI Blog2015 (3) TMI 1310X X X X Extracts X X X X X X X X Extracts X X X X ..... These are two appeals filed by assessee and Revenue respectively against the order of Ld. CIT(A) dated 23.12.2011. The grounds of appeal taken by assessee as well as Revenue are reproduced below: (i) I.T.A.No. 839/Del/2012: (Assessee s appeal): 1. That the learned CIT(Appeals) has erred in not granting relief in respect of the addition of ₹ 12 lacs made by the Assessing Officer u/s 69C of the Income Tax Act,1961. 1.2 That the learned CIT(Appeals) has erred in not adjudicating upon the issue, though taken note of on pages 12 and 20 of her order in paras 7, 23 and 24. 1.3 That the addition of ₹ 12 lacs made by the Assessing Officer deserves to be deleted. (ii) I.T.A.No. 1263/Del/2012: (Revenue s appeal): (A) Whether in the facts and circumstances of the case, CIT(A) was justified in treating ₹ 5,27,93,412/- as income from capital gain as against business income treated by AO when the sole intention of the assessee was to earn profit? 2. The brief facts of the case are that the assessee firm is engaged in the business of shares, securities and mutual funds and apart from business income, the assessee had also declared income from capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness income, we would like to submit that partnership was formed with a view to carry on activity of investment in shares and securities and has been carrying out only these activities. From the copy of the balance sheet already submitted it will kindly be seen that in the balance sheet investment in mutual funds and shares and securities are reflected as investment and value of such investment as on 31-03-2007 was ₹ 42,19,89,570/-. Details of investment in shares and securities are given in Schedule 2 attached to the balance sheet.' From the details long term capital gains claimed to be exempt u/s 10(38) of the Income Tax Act, 1961, it will kindly be seen that the holding period in respect of shares which have been sold and gains in respect of which has been claimed to be exempt u/s 10(38) of the Income Tax Act, 1961 is more than one year. Dates of acquisition of these shares is' from December, 2006 to March, 2007 and the dates of sale is between January to March, 2008. Under the Income Tax Act, 1961, if the shares are held for more than 12 months period they are to be treated as long term assets. As such profit on sale of these shares cannot be treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully into huge profit. It is difficult to understand as to how the firm is operating without any administrative personal expenditure like employee, rent, telephone and other daily expenses on account of stationery, payment of stamp duty etc. The firm also does not have any fixed asset. The total expenditure incurred by the assessee in earning the huge amount income of ₹ 5.32 crores is only ₹ 5,01 ,701/- which comprises of auditors remuneration of ₹ 11 ,236/-, depository charges ₹ 2,664/-, STT of ₹ 4,85,558/- and bank charges of 2,250/- which is hardly 1 % of the net profit earned. The cash in hand as on 01-04-2007 and 31-03-2008 is nil. 3.13 The assessee firm in its profit loss a/c for the period ending 31-03-2007 was showing sale and purchase of shares as per schedule 5 and 6 of the accounts which has been changed to profit on sale of investments during the current year which goes to show that the basic activity is in trading of shares and mutual funds. Hence, the shares/mutual funds were not investment as on 01-04-2008 but rather Stock in Trade as they have been sold during the year for earning profit. 3.14 The assessee's submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one leading to avoidance or evasion of tax should be avoided and that which prevents such avoidance or evasion should be adopted. In the case of the assessee, the interpretation by the assessee leads to avoidance of tax on facts and on merits it leads to incorrect interpretation of law also. 5. Therefore, it is clear that the nomenclature in the balance sheet. profit loss a/c and ITR would not alter the colour of transaction and I am satisfied that the assessee has willfully and deliberately avoided payment of taxes on his business income. 6. In view of the above facts and circumstance and after considering the submissions placed on record, I am fully convinced that the entire arrangement is business carried out for the sole intention of earning profit and in no way such transaction can be attributed as short term and long term capital gain. Accordingly, I hold the capital gains of the assessee firm as income from business and accordingly assess the same at ₹ 5,27,93,412/-. 7. Consequently, I am satisfied that the assessee has willfully furnished inaccurate particulars of its income within the meaning of section 271 (1 )(c) of the Income Tax Act, 1961 and thereby h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtfolio and another trading portfolio. The appellant in this year traded in shares as trading activity and hence no stock was carried forward. c) During the assessment year 2008-09 the appellant has not traded in shares as there was no stock and only sold investments out of the investment portfolio. d) To substantiate the above transactions, the AR of the appellant filed details of shares in the investment portfolio where the investments were held for more than 12 months and also for less than 12 months. Therefore, the computation of capital gains therefrom was accordingly shown in the statement of income as 'long term capital gains' and 'short term capital gains'. In this regard I place reliance on the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Rohit Anand reported in 327 ITR 445 where it was held as under: 16. In the facts and circumstances of the case as narrated hereinabove, viewing the matter in totality no inference other than one that the assessee has earned capital gains in its Investment Portfolio as declared by it in the computation of income can be drawn. 17. Assessing Officer's allegation that the entire activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, the Assessing Officer is directed to re-compute the income of the appellant treating the same under capital gains only and not under business income. 4. Aggrieved, both the parties are in appeal before us. Revenue is aggrieved with the relief allowed to assessee whereas the assessee is aggrieved for not adjudicating on the addition of ₹ 12 lacs. 5. At the outset, Ld. D.R. took up the appeal of Revenue and invited our attention to finding of A.O. and argued that the income declared by assessee was rightly held by A.O. to be the income from business and he heavily placed his reliance on the assessment order. 6. Ld. A.R. invited our attention to the ground taken by Revenue and submitted that the grounds raised by Revenue itself were wrong in view of the fact that Revenue has taken the amount of ₹ 5,27,93,412/- whereas the amount should have been ₹ 4,14,73598/- as remaining income was on account of dividend which is exempt under the provisions of Act. Explaining the facts of the case Ld. A.R. submitted that assessee is a partnership firm consisting of corporate partners and it was formed in March 2006 and was reconstituted in December 2006. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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