TaxTMI 
TaxTMI 
2015 (9) TMI 1235
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....e Long Term Capital Gains claimed as 'Short Term Capital Gain' and setting off to the business loss claimed. AO, not satisfied with the above, further examined the details of computation of capital gains and found that assessee has purchased shares from June 2007 onwards (wrongly shown as June, 2008 in the assessment order). It was also noticed that assessee is having two demat accounts and 11,000 shares were shown to have been in the demat accounts maintained with M/s. North East Broking Services Ltd. These were sold on 02-05-2008 (again wrongly shown as 02-05-2011). Assessee also had another demat account in which 1,000 shares were with M/s. Networth Stock Broking Ltd., and these were sold on 10-07- 2008. Since shares were demat-ed on 20-03-2008 and 25-01-2008, assessee adopted the market price as on the date of demat as cost of acquisition while computing the capital gains. AO noted that assesseecompany adopted cost of these shares as on date of de-materialization for computing the capital gains which is incorrect. Since actual cost has to be adopted for computation of capital gain, in the absence of proper identification details regarding the exact portfolio numbers of shares w....
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....ssessee to choose between FIFO and LIFO methods. It was further felt that assessee has not even adopted LIFO method in its computation and the price adopted was stated to be average price of scrip as on date of de-materialization. AO has come to the conclusion that assessee being furnished wrong particulars of its income: i. When it claimed in the return of income that the capital gains are long term; ii. When it claimed in the return of income that the capital gains are exempt U/s. 10(38) of the Act; and finally iii. When the capital gains were computed at Rs. 6,04,090/- as against the correct capital gains of Rs. 31,68,275/-. Therefore, he held that assessee-company furnished inaccurate particulars of its income of capital gains on sale of shares for AY. 2009- 10 and accordingly, imposed penalty of Rs. 9,79,000/-. 4. Before the Ld. CIT(A), assessee submitted that assessee was not aware of the provisions of Section 45(2A) to adopt FIFO and admitted that it was an inadvertent mistake. Assessee relied on the decision of Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd., Vs. CIT [348 ITR 306 (SC)], wherein, the Hon'ble Supreme Court has held t....
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.... furnishing of inaccurate particulars, no information given in the Return was found to be incorrect or inaccurate. The words "inaccurate particulars" mean that the details supplied in the Return are not accurate, not exact or correct, not according to truth or erroneous. In the absence of a finding by the AO that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false, there would be no question of inviting penalty u/s 271(1)(c). (ii) The argument of the revenue that "submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income" is not correct. By no stretch of imagination can the making of an incorrect claim in law tantamount to furnishing inaccurate particulars. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. If the contention of the Revenue is accepted then in case of every Return where the claim made is not accepted by the AO for any reason, the assessee will invite penalty u/s 271(1)(c). That is clearly not the intendment of the Legislature". 9. Thus, as can be seen, a m....
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....visions of Section 45(2A) nor relied on the Board Circular, but examining the demat account noticed that shares were de-materialized on 20-03-2008). He also noticed that assessee was buying shares from NSC and BSC from 08-06-2007 onwards. Therefore, he has only proposed to assessee's AR that actual stock cost has to be adopted, for which AR has no objection. Even though AO noticed that assessee did not follow FIFO method, the invocation of Section 45(2A) and Board Circular as stated in the penalty order, is not at the time of assessment itself. 12. Even if AO, being the same officer, has considered Section 45(2A) and Circular 768 for the purpose of adopting a method, one has to examine whether that will apply to the shares which are purchased in physical form earlier. As far as stock of acquisition of physical shares is concerned, in view of the clear identity of the share numbers the shares can be identified and date of purchase can be identified with the shares which are submitted for transfer. Therefore, in the physical format, whether it is FIFO or LIFO, method is not a criteria as the physical shares which were sold can be identified and the cost of those assets could be asce....
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.... adoption on the basis of Board Circular is concerned, this does not apply to the single transfer of shares enblock. If assessee has de-materialized all the shares which it was holding (3,30,885 as per Balance Sheet as on 31-03-2009) then, if assessee was selling the shares in various phases or tranches, then adoption of FIFO method would become mandatory. In fact Board Circular vide para 5A has this clarification. "FIFO method will be applied only in respect of the dematerialized holdings because in case of sale of dematerialized securities, the securities held in physical form cannot be construed to have been sold as they continue to remain in possession of the investor and are identified separately". 15. Thus, AO's reliance on mandatory provisions of Section 45(2A) does not apply to the facts of this case. What assessee seems to have adopted as stated by the AO in the assessment order /penalty order itself, that assessee has adopted average price of scrip as on the date of de-materialization. Since assessee has more number of shares than sold that too in physical format, it could have adopted average cost method. This is one way of arriving at the average cost of shares sold....