TaxTMI 
TaxTMI 
2017 (1) TMI 776
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....securities is a business profit. 3. Briefly, the facts are that the assessee in the present case is a Hindu Un-divided Family (HUF) and derived his income from trading in shares and securities. The assessee is engaged in sales-purchase of securities and earned income thereon was offered to tax under the head "capital gains". However, AO treated the income from the sale-purchase of securities as "business income" on account of following reasons:- i) The dividend income in the year under consideration is negligible; ii) Frequency for sale-purchase and magnitude of transactions reflects activities of assessee as in the nature of business; iii) The manner in which transactions for sale-purchase was recorded in the books of account was sufficient to justify the same as business transactions. Finally, AO treated the activity of assessee as "business" and accordingly taxed the profit under the head "business income" 4. Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas it was submitted that assessee being "Karta" of HUF had no knowledge of share market. So the assessee being HUF cannot do business in shares. The assessee has consistently been offering the ....
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....hase of shares was substantial comparatively. 2. The magnitude, frequency of transaction and the period of holding of the securities justify the activities of the assessee in the nature of trade. Accordingly the activity of the assessee cannot be treated as in the nature of investment activity. However the learned CIT(A) dismissed the appeal of the assessee by confirming the order of AO by holding that the issue raised by the assessee is not arising out of the order of AO. At the outset we find that the learned CIT(A) has misunderstood the facts of case of the assessee as evident from the order of lower authorities. The issue raised by the assessee is very much arising out of the order of AO. On perusal of assessment order there was no issue for treating the income from share trading business as income from other sources as observed by the learned CIT(A). So we find that the learned CIT(A) has not adjudicated the issue raised by the assessee in the proper manner. However we find that the issue raised by the assessee is well settled. Therefore we are not inclined to restore the issue to learned CIT(A) for fresh adjudication to avoid further litigation. Hence we decided to proc....
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....lowed." We also find that the Hon'ble Calcutta High Court in the case of CIT vs Merlin Holding P Ltd reported in (2015) 375 ITR 118 (Cal) for the Asst Years 2005- 06 and 2006-07 had held as below:- "The frequency of transactions in shares alone cannot show that the intention of the investor was not to make an investment. The Legislature has not made any distinction on the basis-of frequency of transactions. The benefit of short - term capital gains can be availed of for any period of retention of shares up to 12 months. Although a ceiling has been provided, there is no indication as regards the floor, which can be as little as one day. The question essentially is a question of fact. The assessee was a certified non-banking financial concern. Its main activities were giving loans and taking loans and-investing in shares and securities. The Assessing Officer, for the assessment years 2005- 06 and 2006-07, opined that the activity which, according to the assessee, was on investment account amounted to business activity and, therefore, he treated the short- term capital gains of Rs. 1,01,00,000 as business income. The Commissioner (Appeals) held that the refusal on the part o....
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....ar ended on 31.03.2005. In view of the above, AO held that the transactions as bogus and accordingly he treated the same as income of assessee from undisclosed source. 9. Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas assessee submitted that the transactions for sale-purchase of share with RFSL was made through account payee cheques. The shares were sold after 13 months through on-line portal of Kolkata Stock Exchange without knowing details of buyer. Those transactions of purchase-sale are supported with the valid contract notes. The assessee further submitted that it cannot be penalized for non-filing of financial statement by ACPL. However Ld. CIT(A) after considering assessee's submission has disregarded the claim of assessee and upheld the order of AO by observing as under:- "... In this regard it is pertinent to mention here that the appellant Sri Surya Prakash Toshniwal (HUF) is run by Sri Sury Prakash Toshniwal broker and Sri Surya Prakash Toshniwal is Karta of the HUF therefore, the case law cited by him is not applicable as the facts of the case are different. In this case buying and selling both activity has been operated by Sri Surya Prakash Tos....
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....he shares were sold by the assessee after paying the Security Transaction Tax (STT). Similarly the purchase price of the shares and the sale price of the shares were reflecting on the Calcutta stock exchange as evident from page number 19 and 20 of the paper book. It is also not in dispute that the purchase and sale of the shares were routed through account payee cheques. The learned AR in support of his claim has also produced the contract notes for the purchase and sale of the shares which are placed on pages 12 and 13 of the paper book. However we find that in spite of having all the aforesaid information the lower authorities have held the long term capital gain as bogus and from undisclosed sources on the basis of certain facts as revealed under : 1. The assessee in the present case is a HUF and the transaction was routed for both purchase and sale of the shares through an individual broker who happened to be the Karta of assessee i.e. HUF. 2. The shares were sold to M/s Ahilaya Commercial Private Limited (for short ACPL) but the financial statements of the company were not filed to the stock exchange. The assessee also failed to furnish the necessary details of ACPL to ....
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....chase and sale of shares furnished-Payment and receipts were through account payee cheque-Identity of seller and purchaser not disputed-Claim for loss could not be disallowed on the mere ground that the assessee failed to produce the brokers for verification of the transaction-Finding of the Tribunal that the loss incurred by the assessee in the share dealings is genuine and is allowable was based on material and was not perverse-CIT vs. Carbo Industrial Holdings Ltd. (2000) 161 CTR (Cal) 282 : (2000) 244 ITR 422 (Cal) followed" Respectfully following the aforesaid judgments we find that the proposition laid down by the Hon'ble Courts are applicable to the instant case on hand. The addition was made by the lower authorities on several grounds as discussed above but on analysis of the facts we find that there was no fault on the part of the assessee. Therefore we are inclined to reverse the order of lower authorities. Hence this ground of appeal of the assessee is allowed. 12. Last issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of AO by disallowing the dividend income for Rs. 24,983/- from UTI master value fund wherein the amount of Rs....