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TMI Blog2018 (10) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... maintaining the books of account, it is not possible to prepare statement of affairs and opening and closing balances are shown of the assets and liability, which is placed on record. Therefore, the plea of the assessee that he does not maintain any books of account is not correct. Assessee was also unable to prove the basic requirement that the impugned amount of the alleged gift was received from assessee’s mother, as no bank statement of his mother was filed by the assessee at any stage to justify the genuineness of the gift. Therefore, the ld. CIT(A) has rightly confirmed the addition made by the ld. Assessing Officer of the impugned amount as unexplained investment. - Decided against assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... AT CW 2164/1999 (SC). 4. On the other hand, the ld. DR opposed the additional ground filed by the assessee much later after 3 ½ years. Therefore, it should not be accepted. 5. After hearing both the sides on admission of additional ground, we find that the additional ground is admissible for consideration in view of the decisions relied by the assessee as referred to above. Accordingly, the additional ground is admitted on record. Grounds raised by the Revenue in ITA No. 1417/Del/2013: 1. The CIT(A) has erred in deleting the addition of ₹ 67,37,94,898/- by directing the AO to treat the profit arising from the sale of shares as long term and short term capital gains. 2. The CIT(A) has erred in treating profit from the sale of shares as STCG/LTCG in place of business income as assessed by AO." 6. The brief facts of the case are that the assessee is an individual deriving income from salary, house property, capital gains and income from other sources. The assessee filed its return of income on 25.07.2006 declaring total income at ₹ 8,33,48,262/-. The assessment u/s. 143(3) was completed on 08.12.2008. Later on, learned CIT-11, New Delhi issued notice on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54 05.08.2005 17500 1695675 1717 24.12.2004 21000 1722000 12.08.2005 55000 6149242 6225 18.02.2005 1000 95398 31.08.2005 11946 1398897 1416 04.08.2004 300000 15126303 01.09.2005 8054 978997 991 05.09.2005 12976 1548403 1568 03.01.2006 15000 1999061 2006 25.01.2006 2100000 284163600 285600 30.01.2006 85000 11239728 11297 31.01.2006 215000 27422133 27561 10.02.2006 580000 75418357 75690 17.02.2006 800000 102835504 103200 20.02.2006 843648 103567926 103937 31.03.2006 300000 36169356 36300 Total 5094124 68322581 5094124 659494608 662476 591172027 Short term capital gain Annexure-C Name of the share Nos Rate per unit Cost price Date of acquisition Date of transfer/sale Sale value per unit (Rs.) Full value of consideration Capital gain / (loss) Mawana Sugars Ltd. 11000 74.74 822181 16.06.2005 31.03.2006 120.56 84392000 10000 94.69 946948 20.10.2005 679000 0.00 12.11.2005 Total 700000 2.53 1769129 84392000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el Ltd. of ₹ 10/- each fully paid up 690000 690000 Gift from Mrs. Raula Shriram (Mother) Siel Holdinas Ltd. 152592 equity shares of ₹ 10/- each fully paid up and 125925 equity shares of ₹ 10/- each partly paid @ ₹ 7.50 per share 152592 411998400 152592 411998400 Paid on 05.12.2005 ₹ 103000000 and on 01.02.2006 ₹ 308998400/- from HSBC Ltd., New Delhi 125925 255000000 125925 255000000 Paid on 17.02.2006 ₹ 85000000 and on 23.02.2006 ₹ 170000000 from HSCB Ltd. Nanglamal Sugars Ltd. of ₹ 10/- each fully paid 2100000 21000000 2100000 21000000 Sold to siel Holdings Ltd. 2100000 equity shares of ₹ 10/- each fully paid up of Nanglamal Sugars Ltd. on same price on 08.07.2005 From the details of shares submitted by the assessee, the AO observed that the assessee has purchased shares worth ₹ 69,85,36,192/- and sold shares worth ₹ 6,28,41,499. List of shares also includes the shares of Mawana Sugar Ltd., part of which was received by the assessee as gift. On perusal of the statement of affairs of the assessee as on 31.03.2005, the assessee had shares worth ₹ 5,17,14,667/- as on 31.03.2005 and sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xure '2'). iii. Copy of an advice issued by Hong Kong and Shanghai Banking Corporation dated 10.11.2005 regarding transfer of an amount of GBP 1000000 (one million only) to Krishna Shriram (copy attached as annexure '3'). iv. A copy of bank account of Shri Krishna Shriram maintained with HSBC for the period 30.10.2005 to 30.11.2005 (copy attached as annexure '4'). 11(a) Now, if the genuineness of transaction and creditworthiness of donor are examined in light of above evidences / documents, then the following position emerges:- i. As far as the copies of gift deed and certificate in respect of the stated gift, these are not evidence which can support the genuineness of transaction and creditworthiness of the donor. ii. A copy of advice issued by Hongkong & Shanghai Bank only states that an amount of GBP One million has been/will be credited in the bank account of assessee in pursuance to the direction issued by Barclays PLC London. This advice also does not show as to who the remitter is and what the source of remittance is! iii. The copy of bank account of Shri Krishna Shriram only shows that an amount of ₹ 7,92,00,000/- has been cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attached to the order as annexure-'5'. The above details goes on to prove that the fund of ₹ 7.92 crores does not belong to the donor and it is the assessee who has channelised/routed his own funds in guise of gift from mother. Mere remittance of amount by assessee's mother will not absolve him from discharging the onus casted upon him U/s 69 of the Income-tax Act, 1961.1 place reliance on the decision of hon'ble jurisdictional High Court pronounced in the case of CIT vs. Anil Kumar (2007) 292 ITR 552 which is on similar facts. In this case the Hon'ble Delhi High Court has held that in the case of gifts mere indication of the donor and showing the movement of the gift amount through banking channels is not sufficient to prove the genuineness of the gift. Since the claim of gift is made by the assessee, the onus lies on him not only to establish the identity of the person making the gift but also his capacity to make such a gift. In view of this, the assessee is dutybound to explain not only to establish the identity of the person making the gift but also her capacity to make such gift. Thus, in all respect, the alleged gift of ₹ 7,92,00,000/- is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the apparent can be considered as the real. As laid down by this court the apparent must be considered the real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. (See : CTT v. Durga Prasad More [1971] (SC), at pages 545, 547)." 13(c) In the case of assessee also; what is apparent is not true. The assessee has not either proved it to be true or to the satisfaction of the AO. In view of this, the reply of assessee and the evidences filed by him are held unsatisfactory and unacceptable. I, accordingly reject the same and make an addition of ₹ 7,92,00,000/- in the income of assessee as unexplained deposits in bank A/c through foreign remittance. I also initiate penalty proceedings U/s 271(1)(c) of the Income Tax Act, 1961 for concealment of income as aforesaid and furnishing inaccurate particulars within the meaning of explanation 1 to the sub-section (1) of the section 271(1)(c) of the Income Tax Act, 1961. 9. Aggrieved by the order of the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not regular investment transactions but an adventure in the nature of trade to reap profits on the basis of inside information regarding these scripts. Some shares of Mawana Sugar Ltd were also claimed to have been received as Gift from mother, just to give it a colour of Capital gains. The AO assessed the profits as business profits. 4.1 The findings of CIT (A) on page 26 and 27 of the appellate order are based on his observation that assessee was not connected with the management of M/s Mawana Sugar Ltd or in some way related to the management of M/s Mawana Sugar Ltd. This observation is not only factually in correct but also reflects too narrow a perspective to examine the true nature of transactions. Though CIT (A) accepted that the intention of the assessee is the factor, which should determine the true nature of transactions, but the factual basis of determining intention itself was wrong. His observations that the assessee did not indulge in frequent transactions in shares is irrelevant here as the issue involved in this case was whether transactions in single script were with intention to make profit. As observed by Hon'ble ITAT in order in respect of appeal pertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares under the head "Profit & Gains from Business or profession". On the issue of treatment of capital gains on sale of shares as business income, he relied on the order of the AO and on the issue of gift, the ld. DR supported the order of the ld. CIT(A). He further submitted that the case laws relied by the AR are not applicable in the present case. The shares of Mawana Sugars Ltd. were kept by the assessee for a very short span of time and therefore, they cannot be said to have been purchased for investment purposes. The classification in the balance sheet under the head investment is not conclusive factor to assume investment in shares. The quantum, frequency and value of shares should be kept in mind while charging the surplus/loss as business income or business loss in the hands of the assessee. 12. After hearing both the sides and perusing the entire materials available on record, we observe that in respect of sale of shares, the ld. CIT(A) has rightly held that the assessee has earned capital gains on the sales of these shares. For this, he has considered the submissions of the assessee order of the Assessing Officer and the case laws relied by both the parties. The fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o profit was earned on sale of the said shares. Hind that the Assessing Officer rejected the claim of appellant and held that the profit on sale of shares of M/s. Mawana Sugars Ltd as ' income' mainly on the ground that- 1. The appellant being a related party, was involved in an insider trading in shares of M/s. Mawana Sugars Ltd. 2. That the appellant did not disclose the above shares as personal assets in his wealth tax returns for the Assessment years 2005-06 to 2007- 08. On perusal of the material on record, it is seen that the appellant was not connected with the management of M/s. Mawana Sugars Ltd. The Assessing Officer did not bring any material on record to show that the appellant was in some way related to the management of M/s. Mawana Sugars Ltd. Therefore, the Assessing Officer's observation that the appellant was involved in an insider trading is without any basis and based on conjectures and surmises. As per the provisions of Wealth Tax Act 1957, Wealth Tax is leviable in respect of assets defined under section 2 (ea) of WT Act 1957. On perusal of the section 2 (ea) of the WT Act, it is seen that "shares" held by an individual are not included as an "asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gains in the earlier years, the same cannot be treated as stock-in-trade in the subsequent years. In view of the above discussion, the detailed factors and past history of the appellant, it is seen that the appellant's intention was to hold the shares as "investment" and not as stock-in-trade. Therefore, the addition made by the Assessing Officer treating the profit on sale of shares as business income amounting to ₹ 67,37,94,898/- is deleted and direct the Assessing Officer to treat the profit arising from the sale of shares of M/s. Mawana Sugers Ltd. as long term and short term capital gains as the case may be depending upon the holding period of shares in accordance with law. This ground of appeal is allowed. 13. From the above findings of the ld. CIT(A), it is clear that the assessee has followed the circulars issued by the CBDT No. 4/2007 dated 15.06.2007 and another Circular No. 6/2016 dated 29.02.2016. The sale of shares has been carried out through stock exchange with Asit C. Mehta Investment Intermediaries Ltd., who is registered with SEBI registration No. INB:010607233. The guidelines given in the circular dated 29.02.2016 are as under : (a) Where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3/143(3) dated 19.12.2011 and noted that the appellant was in receipt of ₹ 7.92 crore from his mother as a gift out of natural love and affection. This gift was made by the appellant's mother Smt. Roula Shriram by a telegraphic transfer to his account maintained with HSBC. In the course of the appeal proceedings, the appellant submitted that it had furnished the following documents: "i. A copy of gift deed stated to be executed on 12.12.2008 (copy attached as annexure '1') ii. A copy of certificate dated 2.12.2008 (copy attached as annexure '2') iii. Copy of an advice issued by Hong Kong and Shanghai Banking Corporation dated 10.11.2005 regarding transfer of an amount of GBP 100000 (one million only) to Krishna Shriram (copy attached as annexure '3') iv. A copy of bank account of Sh. Krishna Shriram maintained with HSBC for the period 30.10.2005 to 30.11.2005 (copy attached as annexure '4')." It is seen that in order to examine the genuineness of the transaction and creditworthiness of the donor, the Assessing Officer examined the above documents and found the following emerged position: 1) According to the Assessing Officer the copie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umentary evidence as required to prove the genuineness of the gift^ Reliance is placed on the Hon'ble Delhi Tribunal judgment in the case of Asstt. Commissioner of Income-tax vs. Sanjeev Batra (1999) 69 ITD 23 Delhi where it was held that necessary evidence in the shape of income earned by the donor as also the financial status at the time of making the gift is necessary to prove the genuineness of the gift. In the present case despite of repeated queries the statement of the bank account of the donor Ms. Roula Shriram was not furnished by the appellant and the income tax returns filed by her did not substantiate her creditworthiness to extent an amount of ₹ 7.92 crores as a gift to her son i.e. the appellant. In the absence of documentary evidence to prove the source of the gift, the case law mentioned above clearly sums up the case of the Assessing Officer. In view of the above discussion, there is no justification or reason for me to interfere in the order passed by the Assessing Officer u/s 143(2) dated 19.12.2011. Therefore, the decision of the Assessing Officer is upheld and the addition made by him amounting to ₹ 7.92 crores is hereby confirmed." From t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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