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TMI Blog2016 (5) TMI 1543X X X X Extracts X X X X X X X X Extracts X X X X ..... short term capital gain When we look up to the assessment order, we observe that ld. Assessing Officer has not dealt with the issue relating to interest expenditure nor has he co-related specifically the borrowings of funds with the impugned purchase transaction for buying of equity shares of SGLPP We are of the view that the order of ld. Assessing Officer is cryptic to the extent that proper verification of books of account was not made before making observation that the assessee is deemed to have taken borrowed funds for entering into the transactions of purchase/sales of shares shown in the short term capital gain and further ld. Assessing Officer has also not gone through the books of account to see as to whether assessee has maintained separate demat account which can prove the very intention of the assessee at the time of purchase of shares that they are intended to be held as investment and surplus or deficient, if any, arising in future will be shown as capital gain. - Appeal allowed for statistical purposes. - IT(SS)A Nos.56 Ahd/2010, IT(SS)A Nos.57/Ahd/2010, IT(SS)A Nos.58/Ahd/2010 - - - Dated:- 19-5-2016 - Shri Shailendra Yadav, JM, AND Shri Manish Borad, AM. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on examining the transactions leading to this short term capital gain ld. Assessing Officer observed that the same has arisen from purchase/sale of shares of one company namely SGL PP wherein during the year assessee purchased 4,09,355 shares of SGL PP on a single day i.e. 10.4.2006 and another 1435 shares on 4..5.2006 and all these shares were sold during the year itself and gain was shown under short term capital gain. Ld. Assessing Officer was of the view that as the assessee is mainly dealing with in shares and short term capital gain of ₹ 78,93,389/- has been shown just to avoid higher income-tax and assessee did not have enough funds but has borrowed from outsiders by paying substantial interest and the initiation intention at the time of buying the shares was of business in nature and accordingly assessed the income by treating ₹ 78,93,389/- as business income and without making any other addition income was assessed at ₹ 2,88,37,110/-. Aggrieved, assessee went in appeal before ld. CIT(A) and got relief as the ld. CIT(A) held that the ld. Assessing Officer has wrongly treated the disclosed short term capital gain as business income by just applying holi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss income. Even otherwise the number of transactions are related to investment are few and has compared to the magnitude of volume of business transactions conducted by the appellant. The AO himself has also accepted the fact that the appellant is investor in the nature of business mentioned at in the .assessment order. 6. The contentions/ decisions cited/details on record were carefully considered. The AO has treated the short term capital gains as being income from business by observing that the said profit/gain has been earned on purchase-sale of shares of SGL PP. The assessee has purchased 4,09,355 shares on a single day i.e. 10-4-2006 and another 1435 shares on 4-5-2006. The assessee has sold all the shares on various dates and earned profit. Total number of transactions of purchase is only two and of sale is fourteen. Obviously, the assessee does not have his own funds but has borrowed funds from outsiders on which substantial interest has been paid. Other than the shares of 'SGL PP. the assessee has also dealt in other shares on a large scale and total turnover of share trading business is ₹ 63,03,86,378. The assessee has also shown closing stock of other share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income filed. (3) Subsequently, in response to notice u/s 153A dated 01-08- 2008 the assessee filed the return of income on 30-09-2008 declaring the total income of ₹ 65,21,290/- The primary reason for the modification in income was that the assessee had paid/received interest from various parties from whom loans had been received/givcn. This interest was not booked by the assessee in the books of accounts so maintained on the basis of which the return of income was filed. However, subsequent to the filing of the original return of income, the aforesaid fact was noticed and the income was duly modified. This fact was also cross verified from the contra accounts of the corresponding parties with whom such loans/advances transactions had taken place. Accordingly appropriate adjustments with respect to the interest paid/received were made in the computation of income filed along with the return of income. The other reason for the modification of income was the treatment of shares held as investment and the resultant short term capital gain thereof been treated as business income. However, at this stage it may be brought to your kind attention that the shares whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r under appeal assessee disclosed short term capital gains from sale of equity shares of SGLPP Co. and the issue in this appeal originated due to this reason that as M/s Charmi Investment is carrying on business of purchase/sale of shares, funds have been borrowed and repaid and interest of ₹ 1,15,20,343/- has been shown in the audited profit and loss account and looking to the fact that huge sum of ₹ 78,93,389/- was earned from sale of single scrip even when assessee has been dealing in many scrips as a businessman and was able to earn only ₹ 30,55,321/- from total turnover of ₹ 63.04 crores as against short term capital gain of ₹ 78.93 lacs from sale value of ₹ 1.99 crores raised question in the mind of ld. Assessing Officer that this transaction showing short term capital gain at ₹ 78,93,389/- was just to pay income-tax @ 10% u/s 111A of the Act rather than paying income-tax at general rate i.e. 30%. 11. We further find that there are lots of judicial pronouncements and decisions wherein it has been held that assessee can earn income from investment and simultaneously can carry on share trading business thereby showing income from cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computation of total income and there also stands filed in the Paper Book detailed working of interest income in Charmi Investment depicting the mistakes made in accounting the interest expenses in the original return and the correct position at the time of filing revised return. By going through these submissions, when we look up to the assessment order, we observe that ld. Assessing Officer has not dealt with the issue relating to interest expenditure nor has he co-related specifically the borrowings of funds with the impugned purchase transaction for buying of equity shares of SGLPP. 14. Therefore, looking to the totality of the facts and circumstances of the case, we are of the view that the order of ld. Assessing Officer is cryptic to the extent that proper verification of books of account was not made before making observation that the assessee is deemed to have taken borrowed funds for entering into the transactions of purchase/sales of shares shown in the short term capital gain and further ld. Assessing Officer has also not gone through the books of account to see as to whether assessee has maintained separate demat account which can prove the very intention of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions of ₹ 27,62,917/- as capital gain as against treating the same as Business income 18. We observe from the assessment order that ld. Assessing Officer has treated the short term capital gain disclosed by assessee arising out of shares purchased during the assessment year 2007-08 and the capital gain disclosed in Asst. Year 2008-09 was only of shares remaining unsold and the gain from sale of these shares have been shown as short term capital gain in this year. Certainly the fate of this appeal will heavily depend on the fresh assessment order to be passed by ld. Assessing Officer for Asst. Year 2007-08 which we have decided in IT(SS)A No.57/Ahd/2010 and therefore, if the ld. Assessing Officer observes in his fresh assessment order post Tribunal order for Asst. year 2007-08 that the capital gain from sale of shares shown by assessee to be taxed as business income then the same decision will apply to Asst. Year 2008-09 also. Therefore, the issue arising in this appeal is also set aside to the file of ld. Assessing Officer. This appeal is also allowed for statistical purposes. 19. In the result, all the three appeals filed by Revenue are allowed for statistical pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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