TaxTMI 
TaxTMI 
2016 (6) TMI 53
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....ssessment year 2006-07 and directed against the order dated 02/07/2012 of the Ld. Commissioner of Income-tax(Appeals)-XII, New Delhi, wherein he has deleted the penalty levied by the AO under section 271(1)(c) of the Act. In all the appeals connected matters are involved, therefore these appeals are heard together and disposed by this consolidated order. ITA No. 1946/Del/2012 for AY: 2007-08 2. First we take up the appeal in ITA No. 1946/Del/2012. The grounds of appeal raised by the assessee are as under: i. That in the facts and circumstances of the case and in law the order passed by Commissioner of Income Tax(Appeals)-XII, New Delhi, hereinafter referred as "CIT(A)", being perverse of the facts and against the principles of law, is void-abinitio and appellant company is entitled to be assessed at its returned income. ii. That in the facts and circumstances of the case and in law the learned Commissioner of Income Tax(Appeals) erred in upholding taxing of 'short term capital gain' under the head 'income from business and profession.' iii. That "without prejudice", the learned Commissioner of Income Tax(Appeals) erred in not allowing credit of Securities transaction tax unde....
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....ect of carry on the business of manufacturing and trading in all types of power control equipments, power generation equipments etc, however, due to non-availability of the adequate opportunities, the Board of Directors resolved under section 292 of the Companies Act to invest in the capital market during the financial year 2004-05 and, thereafter, the assessee company carried on the investment activity and declared the income under the head "income from capital gains". The investment in equity shares was reflected under the head 'investment' and valued at cost in the audited balance sheet of the company. However, during the financial year 2005-06 (i.e. assessment year 2006-07), the assessee company decided to commence the business of trading in equities. The assessee company maintained separate identifiable records of the equities in which the assessee traded and the equities in which the investment was made on long-term basis based on approval from Board of Directors. The learned AR further submitted that the investment was made out of self generated funds and capital and no money were borrowed for making investments. The learned AR also submitted that no credit of Security Trans....
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....tion of purchase and sale of securities resulting into short-term capital gain, the AR relied on the decision of the Tribunal, Delhi Bench in the case of DCIT Vs. Rajasthan Global Securities Ltd. in ITA No. 106/Del/2014 and judgment of the Hon'ble Delhi High Court in the case of CIT Vs. Amit Jain in ITA 517/2012. 7. On the contrary, the ld. DR relying on the orders of the authorities below submitted that in accordance to circular No. 4/2000 of the CBDT, the assessee was required to maintain two separate accounts, one for trading, another for investment, whereas the assessee was having only one Demat Account for all the transactions of the activity of purchase and sale of securities. She further submitted that whether particular transaction is in the nature of business or capital gain is decided on cumulative appreciation of all the factors like the volume, frequency and consistency of transactions, holding period, intention, funds utilized and entries in books of accounts etc. and not by the existence of one or two factors only. She further submitted that circular No. 6/2016 issued by the CBDT was specifically in respect of listed shares and securities held for more than 12 months....
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....purchase and sale of shares or other tradable capital assets, or capital gains on account of sale of such assets, has been spelt out and reiterated in a number of decisions. These include Raja Bahadur Visheshwar Singh v. CIT, (1961) 41 ITR 685 (SC); Commissioner of Income Tax, U.P v. Madan Gopal Radhey Lal, [1969] 73 ITR 652 (SC); Commissioner of Income Tax v Associated Industrial Development Company 82 ITR 586 (SC); P.M. Mohammed Meerakhan v. Commissioner of Income- tax, Kerala, 73 ITR 735 (S.C.) and Commissioner of Income Tax v NSS Investments Ltd 2007 (277) ITR 149 (Mad). It was in the light of these decisions that the CBDT Circular No. 4/2007, was issued, indicating the principles applicable in this regard. These criteria are: (1) Intention of the assessee at the time of purchase of the shares. This can be found out from the treatment given to the purchase in the assessee's books of account. (2) Did the assessee borrow money to purchase the shares, and paid interest for it. Money is generally borrowed to purchase goods for the purposes of trade and not for investing in an asset for retaining. (3) Volume and frequency of the purchases and sale/disposals. If purchase an....
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....tions. As underlined by us, that factor alone cannot be conclusive and would have to be weighed along with the totality of facts. An important detail which cannot be overlooked by the Court is that in all past periods and even subsequent periods, similar income reported by the assessee was accepted by the Revenue as short term capital gain. In fact for AY 2005-06, the scrutiny assessment under Section 143 (3) accepted the sum of Rs. 1.02 crores as short term capital gain. In the circumstances, it was all the more necessary for the Revenue to point to some unique feature or distinctive material to differentiate the assessee's activities for the subject assessment year, since they fundamentally remained the same and unchanged." 11. In the case of CIT Vs. D&M Components Ltd. (supra), the assessee disclosed long-term capital gain of Rs. 31,13,006/- and short-term capital gain of Rs. 26,82,115/- . The Assessing Officer having regard to the normal business activity of the assessee and pattern of sale and purchase of transaction, especially since no books were separately maintained for the purpose held both the long-term capital gain as well as short-term capital gain as business in....
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....ir Spinning Mills 27.05.2005 13.06.2005 Krishan Engineering 25.08.2005 30.08.2005 Krishan Engineering 26.08.2005 30.08.2005 Krishan Engineering 26.08.2005 06.09.2005 Krishan Engineering 26.08.2005 09.09.2005 Rajesh Exports 24.08.2005 16.09.2005 Rajesh Exports 24.08.2005 19.09.2005 Rajesh Exports 25.08.2005 19.09.2005 Rajesh Exports 16.09.2005 19.09.2005 P.B. Infra 28.11.2005 28.11.2005 P.B. Infra 28.11.2005 02.12.2005 9. Apart from the above significant aspect, the AO and the CIT (A) observed that the assessee had been purchasing and selling a large number of shares of a few companies. It was also held that the transactions involved large or substantial sums of money. The CIT (A) pertinently made the following observations: "...it is important to keep in mind that whenever any share is purchased with the intention of investment, it cannot be sold off within a very short span of time, since the share market is always fluctuating. Since in the present case, very frequent purchase and sale of shares have been done it indicates that the main intention of the appellant was to earn income out of these shares which have been....
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.... In the light of above decisions, we are required to examine existence of various factors, which on considering in holistic manner determine whether the nature of transactions of purchase and sale of securities falls in the category of profit and gains of business or capital gain. 13. As regards to the argument of the learned AR that long-term capital gain transactions have been accepted by the AO, whereas short-term capital gain transactions have not been accepted, we find from page 102 of the assessee's paper book that in case of long term capital gain the assessee transacted in 5 scrips only and the holding period was approximately 400 days. These shares were purchased in the financial year 2005-06 for long-term holding. We find from the records that no borrowed funds have been utilized for investment in these shares. In the circumstances, the Hon'ble High Court in the case of M/s. D & M Components Ltd. (supra) has also affirmed the transactions in the category of long-term capital gain and we do not find any error in accepting these transactions by the AO as long-term capital gain. In the case of M/s. D & M Components Ltd. (supra), the Hon'ble High Court has accepted the trans....
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....ansacted on 19/02/2007, 20/02/2007, 21/02/2007, 06/09/2006, 11/09/2006, 09/10/2006. Similarly, the scrip 'Karutri Company' has also been transacted many times during the year. The quantity of scrip transacted in each transaction is in thousands. The sale volume transacted under the head short-term gain is more than Rs. 12 crores. The assessee has sold total shares quantity of Rs. 3.51 Lacs. All these figures establish existence of the factor of volume, frequency and consistency of transactions. 18. We find that whenever any shares is purchased with the intention of investment, it cannot be sold within a short period as the market fluctuate because of many national and international events. In the present case, the frequent purchase and sales of the shares indicates that the intention of the assessee was to earn profit over a short period on the money means for manufacturing of power equipments, parked temporarily in the share market. 19. In the case of M/s D & M Components Ltd. (supra), the Hon'ble Court has referred to the Supreme Court decision in the case of P. Mohammed Meerakhan Vs. Commissioner of Income Tax, Kerala, 73 ITR 735 (SC), wherein it is held that there is no singl....
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....of Rs. 2,07,53,989/- shown under the head 'short-term capital gain' as income under the head 'profit and gains of business or profession'. 25. In respect of the above additions, the Assessing Officer after allowing opportunity of hearing, levied penalty under section 271(1)(C) of the Act of Rs. 46,57,200/-. On appeal, the CIT(A) allowed the appeal of the assessee deleting the penalty levied by the Assessing Officer. Aggrieved, the Revenue is in appeal before the Tribunal. 26. The learned DR relying on the order of the Assessing Officer argued for sustenance of the penalty levied by the Assessing Officer, on the other hand, the learned Authorized Representative of the assessee, relying on the order of the learned Commissioner of Income-tax(Appeals) submitted that assessee has not concealed income or furnished inaccurate particulars of income and the additions have been made merely on the change of opinion. 27. We have heard the rival submissions and perused the material on record. The learned Commissioner of Income-tax(Appeals) has allowed the appeal of the assessee with following observations: "FINDING Ground No. 1 & 4 are general in nature therefore needs no adjudication. G....
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....law cannot tantamount to furnishing inaccurate particulars. 2. BSEL INFRASTRUCTURE REALTY LTD VS. ASSISTANT COMMISSIONER OF INCOME TAX ITAT, MUMBAI "B" BENCH, ITA No. 6559/Mun/2011; Asstt Yr. 2007-08 (2012) 78 DTR (MUMBAI) (TRIB) 147 " ...The assessment order is not a final word in the penalty proceedings upon the pleas which can be taken as the penalty stage and howsoever relevant and good the findings in the assessment proceedings may be they are not conclusive so far as penalty proceedings are concerned. The matter has to be examined afresh and the AO cannot be solely guided with the findings given on the quantum side. The assessee even though does not give any additional evidence or produce any new material, he still may rely upon the existing material or explanation to prove that he is not guilty of concealment or furnishing of inaccurate particulars. The presumption raised by the Expln. 1 is a rebuttable presumption and it can be rebutted by giving an explanation that the assessee was in a bona fide belief in offering such income under the particular head. Rejection of an explanation cannot be considered as res judicata in the way of the assessee for the purpose of penalty....
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....in the returns. In view of the circumstances that the A.O. chose to treat the income under some other head could not characterized that the particulars reported in the return were inaccurate particulars." Keeping in view of the above facts and case laws cited above, the minimum penalty of Rs. 46,57,200/- imposed by the Assessing Officer is hereby deleted. In the result, the appeal is allowed." 28. In view of above, we are in agreement with the submission of the learned Authorized Representative that all the factual information in respect of transaction of purchase and sale of shares was duly provided to the AO and no part of income was concealed, nor furnished any inaccurate particulars of income by the assessee. We find that in same set of information the income assessed under the head 'profit and gains of business or profession' rather than under the head 'short-term capital gain'. The learned Commissioner of Income Tax(Appeals) relied on the case of Commissioner of Income Tax, Ahmedabad Vs. Reliance Petroproducts Private Limited, (2010) 189 taxmann 322 (SC). In our opinion, the findings of the learned Commissioner of Income-tax(Appeals) on the issue in dispute are well reasone....