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TMI Blog2019 (6) TMI 1469X X X X Extracts X X X X X X X X Extracts X X X X ..... considering the totality of facts and circumstances of the case. Thus, in our view, no interference is required in the order passed by the ld. CIT(A). Therefore, taking into account the above judicial precedents, we dismiss the grounds raised by the assessee. Sale of shares - business income OR STCG - HELD THAT:- No dividend income was received on the said shares of M/s. Akruti City Ltd., The period holding was mostly within a week, which does not point to investment objective. Thus, considering the totality of facts and circumstances of the case, the assessee had not done business in futures and options and earned profit of ₹ 1.07 crores (shown as business income) and speculation loss in shares of ₹ 37.43 crores (wrongly claimed as set-off against F O). Thus, considering the entire facts, the ld. CIT(A) had rightly concluded that the intention of the assessee at the time of transaction was not to earn dividend income of capital appreciation, but to indulge in adventure in the nature of trade. Thus, he has rightly upheld the action of the AO in treating the Short term capital gain as business income. As no new facts have been brought on record, therefore, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012 by the ld. Dy. Commissioner of Income Tax-14(2), Mumbai (hereinafter referred to as ld. AO). 2. The following grounds have been taken by the assessee:- 1. Under the circumstances and facts of my case, the Ld. CIT(Appeal) erred in confirming : a. The treatment of sale of shares as 'Business Income' as against STCG declared by the appellant. b. Interest income of ₹ 4,20,234 as Income from Other Sourcesand disallowing various expenses claimed. c. Addition of ₹ 3,07,556 on account of alleged low withdrawals. d. The direction for special audit u/s 142(2A) of the Act. 2. Order under appeal is not only bad in law and invalid, but also against the principals of natural law of equity and justice. 3. The appellant craves leave to add, to amend, alter / delete and /or modify the above ground on or before the final date of hearing. 3. The brief facts of the case are that assessee is a proprietor of M/s. Ajit Enterprises. However, no business was carried out in the above proprietary concern. Assessee declared income from F O transactions, speculation loss, short term capital gain and interest income. The return of income was e- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required for adjudication of the said additional ground of appeal are already on record and no new facts are required to be brought on record, therefore, considering the law laid down by the Hon ble Supreme Court in the case of National Thermal Power Corporation vs. CIT (229 ITR 383) (SC) supra and Union of India vs. British India Corporation Ltd., (268 ITR 481 (SC) supra, we allow the application filed of the assessee for filing of additional ground of appeal and admit the additional ground for adjudicating the same on merits. Since the additional ground raised by the assessee goes to the root of the case and legal in question, therefore, we have decided to dispose the said ground firstly. 8. The brief facts of the case are that the assessee is engaged in share trading and F O transactions. The assessee had declared short term capital gain of ₹ 1,39,91,448/- calculated as sales purchases=gains. However, according to the AO neither the names of the shares and quantities, nor the dates of purchases, costs, dates of sales, amount of sales and profit / gains were given, therefore, according to the AO the assessee had simply gave the figures of debit / credit balances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T-LB). It was submitted that for referring the matter for special audit, there are twin conditions i.e. one AO should consider the nature and complexity having regard to the account of the assessee and second the matter can be referred only if it is in the interest of revenue. According to the ld. AR both the twin conditions have not been specified by the AO as AO has not found any opinion before referring the matter for special audit. It was submitted that the AO in a casual manner had referred the matter for special audit in contravention to the provision of Section 142(2A) of the Income Tax Act whereas on the contrary, the ld. DR submitted that vide letter dated 30/11/2011, the assessee was requested to explain the transactions of the shares mentioned in the AIR information. It was also submitted that the copies and details of AIR information available with the AO was already given to the assessee with a request to explain the source of investment / purchases. However, even inspite of receipt of all the documents, the assessee could not explain and only stated vide letter dated 08/12/2011 that the transactions of the above shares are voluminous , therefore, the same cannot be ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e opinion that it is necessary so to do, then with the previous approval of the Chief Commissioner or Commissioner he may direct the assessee to get these accounts audited by the Chartered accountant as defined in the explanation below sub-section(2) of section 288 nominated by the Chief Commissioner or Commissioner in this behalf and to furnish a report of such audit in the prescribed form and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as the AO may require. In this respect, we noticed that AIR data consisting of 1133 entries pertaining to share transactions running 66 pages involving 115 crores approximately which remain unverified by the AO. Thus, the AO sought explanation from the assessee but the assessee made excuse by mentioning reply cannot be given in writing in view of number of days are required to be reduced in writing . Thus, looking at the nature of reply, the AO issued show cause notice to the assessee as to why his case should not be referred to Special Audit u/s.142(2A). However, at the same time, the assessee objected to it and said that there is no complexity in his case. The AO after consideri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22' ' December, 2011 and furnish a report of such audit duly signed and verified by the said M/s Bhuta Shah Co., Chartered Accountants in the prescribed proforma being Form No. 6B of |the Income-Tax Rules, 1962. The assessee is also directed to give necessary co-operation to the Auditor M/s. Bhuta Shah Co., Chartered Accountants and get their accounts audited on the terms of reference separately attached as per annexure 'A' and submit a report of the said M/s Bhuta Shah Co., Chartered Accountants, on the issues stated in the terms of reference. The report of such audit may be furnished within 120 days of the receipt of this order by the assessee. The expenses of, and incidental to the audit will be paid to M/s Bhuta Shah Co., Chartered Accountants by the Department as per Rule14(B) of I.T. Rules 1962, The said firm simply maintain time sheet and submit the same to Commissioner of Income Tax - 14 along with the bill. 5. This order has been passed after obtaining necessary approval from the Commissioner of Income Tax -14, Mumbai, as required under the provisions of section 142(2A) of Income Tax Act, 1961. 13. According to the AO, the assessee s non-co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation of differential tax, scope of audit-etc. In Part-11, it has given the Special Audit Report containing detailed analysis of the transactions of the assessee, along with audit report in Form 6B. In Part-III, it has given answers to specific directions given by the CIT, and finally in Part-IV, it has enclosed the Balance Sheet, P L account, all the Annexure, Computation of Income etc. The assessee seems to have raised concerns over the expressing of opinion by Special Auditors in Part-1 Part-II, and alleged reliance by the AO thereon. 16. The Special Auditor has brought out all facts of the transactions of the assessee on record, which were utmost necessary for the purpose of assessment. We also find that the Special Auditor has given point-wise answers to specific points contained in the scope of work in Part-III of its report, merely because it also expressed its opinion based on specific facts revealed during the special audit, on this reason, the said special audit report cannot be faulted. . It was entirely for the AO to accept or reject such opinion on the given facts. In this context, it is also noteworthy that the AO, after referring the findings of Special Audit R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14(b) of the Income Tax rules, 1962. Thus, in this way also, there is no monetary loss to the assessee on account of reference of matter to the Special Auditor. Thus, the judgments relied upon by the ld. AR in the case of Sahara India(Firm) vs. CIT (2008-TIOL-73-SC-IT-LB) is not applicable to the facts of the present case. Even otherwise, the order of the Special Auditor is only a step towards assessment and being in the nature of an enquiry before the assessment and is also purely an administrative act. In the present case, before passing the order u/s.142(2A), adequate opportunity was given to the assessee and AO had participated in the proceedings by seeking explanations and replies with regard to the transactions involved in multiple accounts, contra entries, inter account settlement and transfer of funds, investments and bank accounts etc., Thereafter, necessary orders passed. Thus, the judgments cited by the ld. AR in the case of West Bengal State Co-operative Bank Ltd., vs. JCIT (267 ITR 345) and Delhi Development Authority and Another vs. Union of India and Another (350 ITR 432) and RPS Associates vs. DIT (IT) (280 CTR 582) are not applicable to the facts of the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 20. We have heard both the parties and perused the material available on record, orders passed by the lower authories and the judgments cited by the party. We find that the ld. CIT(A) has dealt in para 5 of its order, the operative portion is contained in 5.1 to 5.4, which are reproduced hereinbelow:- 5.1. The AO has covered the issue in para 3 to 8 of the assessment order. The AO has discussed various facts brought out by the Special Auditor, and also relied upon certain judicial pronouncements. The AO reached at a conclusion that the assessor's dealing in Shares though his PMS agencies is adventure in the nature of trade and therefore, all the accruals from the PMS accounts amounting to ₹ 1,39,91,448/- are brought to tax under the head profit and gains of business or profession and taxed accordingly. 5.2. The appellant further submitted during appellate proceedings that the express provisions u/s 111 A says that if transactions of sale of equity or units are chargeable to SIT and done through stock exchange, then income shall be chargeable to STCG, liable to 15% tax. It seems that there was an intention of the Parliament to collect huge tax by way of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Akruti City Ltd. The period holding was mostly within a week, which, does not point to investment objective. Besides, the assessee had done business in Futures Options and earned profit of ₹ 1.07 crores (shown as Business income), and Speculation Loss in shares of ₹ 37.43 crores (wrongly claimed as set-off against I O income disallowed in assessment order), which shows that the appellant was a habitual trader/speculator in shares. Looking at the aforesaid facts of the present case, I have no hesitation in holding that the intention of the appellant at the time of effecting the said transactions was not to earn dividend income or capital appreciation, but to indulge in adventure in the nature of trade. Hence, I uphold the action of the AO in treating the STCG of ₹ 1,39,91,448/- as Business Income. Therefore, Ground Nos. 3 4 are dismissed. 21. After carefully gone through the orders passed in the present case and considering the judgments cited by both the parties, we find that as per the facts of the case, the assessee was dealing in shares only with one company ie., Akruti City Ltd., with three share brokers i.e., Ashika Stock Broking Ltd., Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come was rightly taxed in the hands of the assessee u/s.56 of the Income Tax Act. Thus, we find no infirmity in the order passed by the ld. CIT(A) while deciding this ground. As no new facts are required to be brought on record, therefore, in our view, no interference is required in the order passed by the ld. CIT(A). Thus, we dismiss this ground raised by the assessee. 24. Ground No.1(c):- This ground raised by the assessee relates to challenging the order of CIT(A) in confirming the additions on account of alleged low withdrawals. This ground has been dismissed by the ld. CIT(A) in para 10 of his order. The operative portion is contained in para 10.1 to 10.3, the same are reproduced below:- 10.1. The AO has covered the issue in para 14 of the assessment order. The AO stated that the assessee stayed in Posh locality at Malabar Hill with four family members. The said withdrawal of the family is ₹ 4,12,444/- which is approximately ₹ 35.000.- per month. This withdrawal is too low for a family of four, including School/ College going children and staying in a posh locality of Malabar Hill. School/ College fees of two children itself would be ₹ 10,000/- per mo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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