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TMI Blog2023 (2) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... igging the price by issuing the forged letter of SEBI, therefore, the entire long-term capital gain, claimed as exempt by the assessee from the transaction in shares of PSTL, is not genuine and thus added the same to the total income of the assessee. AO has based its order on the issue of treatment of long-term capital gain as business income . As per the assessee, he has two portfolios, (i) investment portfolio, and (ii) trading portfolio, and the shares of PSTL were always held under the investment portfolio. We find that the said fact is also evident from the relevant extracts of Schedule-4 to the balance sheet and profit and loss account, annexed to the impugned order, wherein PSTL is appearing under the head investment . From the details of the share transaction of PSTL scrip, on page 9 of the assessment order, it is evident that after purchasing the shares on 27/03/2006, the assessee held the shares for a period of more than 2 years before its sale in the year 2008. Further, nothing contrary has been brought on record to controvert the findings of the learned CIT(A) that these shares have been shown as an investment and the same were treated as an investment by the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital Gain. 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate the fact that the purchase and sale activity of the assessee in respect of shares of M/s. Pyramid Saimira seems to be no genuine and the SEBI passed the order against the company holding that the there was issue of price rigging in the said shares. 3. The brief facts of the case as emanating from the record are: The assessee is an individual engaged in the business of dealing in securities and investments. The assessee filed his return of income on 30/09/2009 declaring a total loss of Rs.4,70,83,126. The return of income filed by the assessee was selected for scrutiny and statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, it was observed that the assessee is engaged in the business of trading in shares and has shown a loss from trading in shares at Rs.4,74,61,406. The assessee has also disclosed a short-term capital loss of Rs.42,41,290. The assessee has claimed exemption under section 10(38) of the Act in respect of long-term capital gain of Rs.52,14,98,464. Dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness which needs to be taxed at maximum marginal rate. The AO further noted that the capital gain of Rs.53.37 crore in the scrip also includes sales of Rs.34.23 crore on 30,70,000 equity shares of PSTL transferred to CMD of PSTL and the entire transaction has been carried out only through book entries. The AO held that the transaction whereby the assessee earned a profit of Rs.34.23 crore and claimed the same as exempt is a colourable device and thus exemption under section 10(38) of the Act cannot be availed. The AO also noted that the assessee has sold and purchased the shares of PSTL at frequent intervals within a short span of time only with a view to earn a profit, which is not the characteristic of an investor. The AO further held that the shares of PSTL were used as security with the brokers in order to avail the loans for running the business and the other shares kept as security with the brokers at various points of time are held as stock in trade by the assessee. It was further held that PSTL has not announced a single dividend for shareholders throughout its history and the assessee was the single largest shareholder from the pre-IPO stage and was also a board member and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the business income of the assessee. 7. On the contrary, the learned Authorised Representative ( learned AR ) submitted that the order passed by the SEBI was challenged before Securities Appellate Tribunal, which dismissed the assessee s appeal and the matter is now pending before the Hon ble Supreme Court. The learned AR by referring to the extracts of the SEBI order, annexed with the impugned order, submitted that the SEBI has found the assessee to have earned an unlawful gain of Rs.32,50,882 only. The learned AR submitted that the alleged unlawful gain has been paid to the SEBI. By referring to the relevant schedule of balance sheets, annexed to the impugned order, the learned AR submitted that the shares of PSTL were held as an investment. The learned AR also placed reliance upon certain judicial pronouncements and CBDT circular No. 6 of 2016 dated 29/02/2016. It was further submitted that in the preceding assessment years, the same shares were treated as an investment and there is no change in facts this year. 8. We have considered the rival submissions and perused the material available on record. In this appeal, the grievance of the Revenue is against the rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee. On the other hand, in the present case, the AO only sought to tax the gains by treating the same as business income by considering various factors as noted above. Thus, the AO has based its order on the issue of treatment of long-term capital gain as business income . As per the assessee, he has two portfolios, (i) investment portfolio, and (ii) trading portfolio, and the shares of PSTL were always held under the investment portfolio. We find that the said fact is also evident from the relevant extracts of Schedule-4 to the balance sheet and profit and loss account, annexed to the impugned order, wherein PSTL is appearing under the head investment . Further, from the details of the share transaction of PSTL scrip, on page 9 of the assessment order, it is evident that after purchasing the shares on 27/03/2006, the assessee held the shares for a period of more than 2 years before its sale in the year 2008. Further, nothing contrary has been brought on record to controvert the findings of the learned CIT(A) that these shares have been shown as an investment and the same were treated as an investment by the Revenue, in the preceding years. On these facts and circum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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