TaxTMI 
TaxTMI 
2014 (2) TMI 890
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....72/- for the impugned assessment year. During the course of hearing, assessee was required to furnish details regarding its investments in Mutual Funds and computation of capital gains on sales effected. Assessee had disclosed in its computation of capital gains Rs.24,81,609/-. As per the Assessing Officer details submitted by the assessee on 13.08.2008 and subsequently on 04.09.2008 revealed substantial difference. In the first list purchases of Mutual Fund Units were shown at Rs.3 crores whereas in the second list the purchase was shown at Rs.7,28,00,000/-. Explanation was sought from the assessee on such differences and also seeking why the transactions resulting in surplus should not be considered as income from business. 4. In its reply assessee stated that the actual capital gain was worked out erroneously. As per the assessee against Rs.24,81,609/- shown in the return, the actual capital gains came to Rs.26,54,797/-. In other words, assessee offered a further sum of Rs.1,73,188/- under the head "Capital Gains". Assessing Officer was of the opinion that reply given by the assessee was not convincing. Assessing Officer based on AIR information on assessee's of Mutual Fund u....
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....pal MF 8,00,000 38. 08.12.2005 -do- 20,00,000 Disclosed 39. 30.06.2005 -do- 15,00,000 40. 11.11.2005 -do- 60,00,000 Total 8,90,77,133 Assessee was asked to explain as to why the undisclosed purchases should not be considered as business income. As per Assessing Officer, no further explanations whatsoever were offered by the assessee. Therefore, he held the undisclosed purchases totalling to Rs.3,75,95,906/- compiled from the above table as unexplained purchases and addition was made accordingly. 5. Assessing Officer also noted that assessee's transactions in shares and Mutual Funds were to earn profit and risks were taken, control exercised and management done skillfully to maximize its gain. Large numbers of transactions of buying and selling of shares of Units in Mutual Funds were there, and such systematic activity, as per the Assessing Officer, constituted a business. In this view of the matter, he held that the profit of Rs.28,27,982/- arising out of purchase and sale of Units in the Mutual Funds had to be considered under the head "income from business". According....
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.... per the Assessing Officer name of one scheme was not mentioned in the audited accounts. As per the Assessing Officer though the assessee mentioned the name of the scheme in the statement furnished before him as 'Prudential ICICI Floating Rate Fund' the purchase amount shown was only Rs.30 lakhs and therefore, closing balance ought have been Rs.30 lakhs and not Rs.27 lakhs. 9. Ld. CIT(Appeals) sought explanation from the assessee on discrepancies pointed out by the Assessing Officer in the remand report. Assessee there upon explained to the ld. CIT(Appeals) that Assessing Officer had not properly considered the statement of stock, purchase, sale, switch in/out and closing stock. The Bank statements were also not properly verified though these were filed before the Assessing Officer. As per the assessee each of the discrepancies pointed out by the Assessing Officer were explained by him to the Assessing Officer. Vis-a-vis the difference in the closing stock, explanation of the assessee was that Schedule 4 of the accounts gave the break-up in the closing stock and it tallied with the details filed by the assessee on 21.05.2009 before the Assessing Officer. There was only a typogra....
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....e arose on account of a simple typographical mistake. 12. Per contra, ld. AR submitted that every discrepancy pointed out in reconciliation statement stood explained by the assessee. As per ld. AR the Assessing Officer in the remand report could not point out any difference in purchases. On the other hand, he had tried to make out a different case. Even such newly made out discrepancies stood properly explained by the assessee. Ld. AR pointed out that there was no difference in stock and missing of a scheme name would not change the value of closing stock. 13. We have heard the rival submissions and perused the material available on record. Firstly it is necessary to find, whether the surplus arising to the assessee on account of purchases and sales of Mutual Fund Units is to be considered under the head "income from capital gains" or "income from business". Assessee had shown the surplus under the head "income from capital gains". Assessing Officer was of the opinion that this was to be considered as income from business only. There is no dispute that assessee had all along shown the units purchased by it under the head "investment". Assessee was engaged in the business of m....
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.... closing balance furnished by the assessee revealed certain new discrepancies listed by him as Annexure 'B'. These discrepancies are reproduced hereunder: - N.B. 1 vis-a-vis Sl. No.2 - Franklin India Flexi Cap Fund - As per detail filed on 21.05.2009 there is open in balance of investment for Rs.40,00,000/- in the respective fund and out of it the sale is shown for Rs.20,71,140/-. No closing balance is shown. It means either there is loss for Rs.19,28,860/- or suppression of closing balance but no such loss has been claimed in the return of income or in detail filed in course of hearing. It is also noted that no switch out/in is shown in the detail of switch and switch out filed in course of hearing for remand report. N.B. 2 vis-a-vis Sl. No. 6 - Similar to N.B. 1 out of opening balance of investment Rs.40,00,000/- in the respective fund sale for Rs.21,29,880/- is shown and in absence of any closing balance either there is loss for Rs.18,70,120/- or suppression of C.B. but no such loss is claimed. No such switch in/out is shown. N.B. 2 vis-a-vis Sl. No. 8 - Opening balance of investment is Rs.17,92,998/- and in absence of any purchase....
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....i.e. Rs.45,00,000 - Rs.16,42,257/- (Rs.28,57,743/- should have been shown as closing balance. N.B. 8 vis-a-vis Sl. No. 24, 44 & 45 - It shows purchase for Rs.50,00,000/- and sale for Rs.20,00,000/-. It means the closing stock should have been approximately Rs.30,00,000/- but no such closing stock is shown. It proves suppression of closing stock by Rs.30,00,000/- approximately. Switch in/out detail does not show any switch out from Reliance Floating Rate Fund - weekly dividend though there is switch out from Reliance Floating Rate Fund to Reliance Vision and Reliance Growth for Rs.30,00,000/- (Rs.15,00,000/- + Rs.15,00,000/-) and Rs.20,00,000/- respectively. Detail also shows sale of Rs.19,99,258/- of Reliance Growth and closing balance of Rs.30,00,000/- of Reliance Vision. N.B. 11 vis-a-vis Sl. No. 30 - It shows purchase for Rs.35,00,000/- during the year but in absence of sale it should be shown as closing balance but no closing balance is shown. N.B. 12 vis-a-vis Sl. No. 31- It shows purchase for Rs.50,00,000/- and in absence of sale it should be closing stock. N.B. 13 vis-a-vis Sl. No. 32 - It shows purchase for Rs.....
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....-7 : There was three switch out of Rs.15,00,000/- (5,00,000 x 3) to Prudential Emerging Star Fund which was mentioned in our switch in/out statement. N.B.-8 : There was two switch out of Rs.15,00,000/- each to Reliance Vision Fund, which was mentioned in our switch in/out statement. N.B.-11 : There was a sale for Rs.36,00,203.68 which was mentioned in sale statement as sl. No. 49.. N.B.-12 & 17 :There was a sale for Rs.7624295.97, which was mentioned in our sale statement as sl. No. 51. N.B.-13 : There was a switch out of Rs.10,00,000/- to Frankin Ind. Prime Fund on 02.01.2006, which was mentioned in our switch in/out statement. N.B.-14 : There was a switch out of Rs.10,00,000/- to HDFC Equity Fund on 02.01.2006 which was mentioned in our switch in/out statement. N.B.-15 : Yes. There was a loss for Rs.50/-. N.B.-16 : There was a sale for Rs.3522753.48/- which was mentioned in our sale statement as sl. No. 45. N.B.-18 : There was a switch out of Rs.15,00,000/- to HSBC Advantage Fund on 23.02.2006, which was mentioned in our switch in/out statement.  ....