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2016 (5) TMI 1325
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....ssessees. 2. These captioned appeals are in respect of three different assessees namely Dipak J. Panchal, Devangi Dipak Panchal & Dipak Panchal (HUF). 3. The ld. counsel furnished a comprehensive chart in respect of each assessee and stated that the underline facts in the issues contained are identical in respect of all the assessees to which ld. D.R. fairly conceded. On this agreement/concession, we heard the submissions made by the representatives of both side at length and dispose of all these appeals by this common order for the sake of convenience and brevity. The impugned disputes arose because of a search operation conducted on 10.02.2006 at the residential/business premises of the assessees. Notices u/s. 153A(a) of the Act were issued and served upon the assessee in lieu of which returns were filed and the assessments were made u/s. 153A r.w.s. 143(3) of the Act. 4. The impugned disputes can be summarized as under:- (i) Assessments for assessment year 2000-01 to 2004-05 could not be made u/s. 153A of the Act as no incriminating material was found at the time of search to re-open the completed assessments. (ii) In respect of assessments which were ....
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....02-03 30/10/2002 143(1) 31/10/2003 352/Ahd/2011 & C.O. No.125/Ahd/11 2004-05 31/10/2004 143(1) 31/10/2005 353/Ahd/2011 & C.O. No. 126/Ahd/2011 2005-06 490 & 491/Ahd/2010 2006-07 Devangi Alias Rupa Dipak Panchal 138/Ahd/2011 2001-02 30/07/2001 143(1) 31/07/2002 139/Ahd/2011 2002-03 30/07/2002 143(1) 31/07/2006 140/Ahd/2011 2003-04 25/09/2003 143(1) 30/09/2004 141/Ahd/2011 2004-05 30/09/2004 143(1) 30/09/2005 492/Ahd/2010 2005-06 493/Ahd/2010 2006-07 768/Ahd/12 2007-08 Dipak J Panchal HUF 341/Ahd/2011 2004-05 30/09/2004 143(1) 30/09/2005 342 & 347/Ahd/2011 2005-06 ....
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...." 9. Now, the other issue which has to be decided is whether the time limit of issue of notice u/s. 143(2) if found expired can be construed as completed assessment. To this question, the answer is given by the Co-ordinate Bench of the Tribunal Delhi in the case of PACL India Ltd. in ITA no. 2637/Del/2010 and the same reads as under:- 7. After hearing both the sides on the issue and taking into consideration, records available the following facts emerges as undisputed. The regular return of income was filed on 2.12.2003 and the same was processed u/s 143(1)(a) of the Act. The time period for issuing notice u/s 143(2) of the IT Act for selecting case for security expired on 31.12.2004. The first search was conducted on the premises of assessee on 22.9.2005 and the 2nd search was conducted on 25.8.2006 and in both the searches, no incriminating material, document, unaccounted assets and bogus of accounts were found and seized relating to land development expenses debited in profit and loss account for the year. The both searches on assessee did not yield any incriminating material on the basis of which it can be said that assessee was indulgent in debiting bogus land deve....
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.... finality, assessment under section 153A read with section 143(3) and certain incriminating documents have been found indicating undisclosed income, the addition shall only be restricted to those documents or incriminating material, and clubbed only to the assessment framed originally, as the law does not permit the Assessing Officer to disturb issues already concluded. Where on the date of initiation of search under section 132 or requisition of books, no proceeding is pending, but in the search, material is found indicating incriminating material, the Assessing Officer embarks on a jurisdiction, wherein he has to club the two safe of incomes, the returned income and the unearthed income and arrive at the total income. 10. In the case of Kabul Chawla 380 ITR 573, the Hon'ble High Court has summarized the legal position as under:- 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(l) will have to be mandatorily issued to the person....
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....le High Court of Delhi has been followed by the Hon'ble High Court of Delhi in the case of Lata Jain in Income Tax Appeal No. 274 & 276 of 2016 wherein the Hon'ble High Court held as under:- 5. The short point involved is whether the ITAT was correct in concluding that there had to be incriminating material recovered during the search qua the Assessee in each of the years for the purposes of framing an assessment under Section 153 A of the Act? 6. It is not in dispute that in respect of the Respondent Assessee for the AYs in question the initial assessment proceedings took place under Section 143(3) of the Act. Thereafter they were sought to be reopened by issuing notice under Section 147 of the Act and re-assessment orders were passed under Section 147 read with Section 143(3) of the Act. During both the aforementioned proceedings the question whether the gold and silver utensils were the capital assets or personal effects of the Assessee was examined. They were held not to be the personal effects. 7. It has been noticed by the ITAT in the impugned order that for the A.Ys in question no incriminating material qua the Assessee was found. 8. In th....
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....Ys in question the initial assessment proceedings took place under Section 143(3) of the Act. Thereafter they were sought to be reopened by issuing notice under Section 147 of the Act and re-assessment orders were passed under Section 147 read with Section 143(3) of the Act. During both the aforementioned proceedings the question whether the gold and silver utensils were the capital assets or personal effects of the Assessee was examined. They were held not to be the personal effects. 7. It has been noticed by the ITAT in the impugned order that for the A.Ys. in question no incriminating material qua the Assessee was found. 8. In that view of the matter, and in light of the decision of this Court in CIT v. Kabul Chawla [2016] 380 ITR 573 (Delhi), the Court is of the view that the impugned order of the ITAT suffers from no legal infirmity and no substantial question of law arises for determination. 9. The appeals are dismissed. 15. Respectfully following the decisions of the Hon'ble High Courts mentioned elsewhere, we direct the A.O to delete the impugned additions made u/s. 153A of the Act for assessment years 2000-01 to 2004-05. The first issue is dec....
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.... unearthed as a result of a search under section 132 of the Income-tax Act, 1961, only. The documents found during the course of search were the records available with the assessee which could be relied upon by the assessee before the Department in the event his claim of having received the NRI gifts was called in question. The Tribunal returned a finding that there was no nexus between the addition amounting to Rs. 6,50,000 made by the Assessing Officer on behalf of said gifts and search under section 132 of the Income-tax Act, 1961. 7. At this juncture, it may be also relevant to notice another decision of this Court in the case CIT vs. Vishal Aggarwal [20061 283 ITR 326 wherein this Court noted, with approval, the observations of the Rajasthan High Court in CIT vs. Elegant Homes (P.) Ltd. [2003] 259 ITR 232 that in Chapter XIV-B of the Act, special provisions for assessment in search cases have been given and if any amount of income has not been taxed and during the course of search, if some undisclosed income is found on the basis of the material seized, that should be treated as undisclosed income. As per the scheme of special assessment under Chapter XIV-B, the asses....
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....1-02 130 11 141 10 131 2002-03 133 3 136 10 126 2003-04 132 3 135 35 100 2004-05 111 7 118 7 111 Total 628 36 664 75 589 DIPAK J PANCHAL % OF SCRIPS TRADED DURING YEAR TO TOTAL SCRIPS A.Y. No. of Scrips at opening of year No. of new Scrips purchased Total No. of Scrips No. of Scrips transacted during the year No. of Scrips not transacted during the year 2205-06 116 2 118 16 102 2006-07 111 4 115 26 89 Total 227 6 233 42 191 (iii) Chart showing percentage of No. of days transacted in stock exchange with total no. of working days of stock exchange. DIPAK J PANCHAL Calculation of % of No. of Days Transacted in Stock Exchange to Total No. of Working Days A.Y. No. of Days of Market ....
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....otal No. of Working Days A.Y. No. of Days of Market Purchase No. of Days of Market sale Total No. of Transacted Days Minimum Working Days on BSE & NSE % of Transacted Days to Working Days 2000-01 1 8 9 500 1.80 2001-02 1 2 3 500 0.60 2002-03 5 8 13 500 2.60 2003-04 2 8 10 500 2.00 2004-05 5 24 29 500 5.80 DEVANGI D PANCHAL Calculation of % of No. of Days Transacted in Stock Exchange to Total No. of Working Days A.Y. No. of Days of Market Purchase No. of Days of Market sale Total No. of Transacted Days Minimum Working Days on BSE & NSE % of Transacted Days to Working Days 2005-06 2 21 23 500 4.60 2006-07 1 26 27 500 5.40 2007-08 0 3 3 500 0.6 (3) (iii) Charts showing percentage of scripts traded during ye....
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....hase No. of Days of Market sale Total No. of Transacted Days Minimum Working Days on BSE & NSE % of Transacted Days to Working Days 2005-06 0 5 5 500 1.00 2006-07 1 16 17 500 3.40 2007-08 0 1 1 500 0.20 20. The dispute is regarding the nature of income on sale and purchase of shares by the assessee. The issue, whether the income from sale and purchase of shares in a particular case should be treated as capital gain or as business income has been a debatable issue and there are conflicting decisions of the Tribunal on this issue. Each case is therefore, to be based on its own factual situation. A perusal of the profit and loss account of the assessee shows that the assessee has separately shown Derivative profit, long term capital gains/short term capital gains on shares. In the balance sheet, the assessee has shown shares under the head 'investment'. These investment shares have been valued at cost. The Hon'ble Supreme Court in the case of CIT Associated Industrial Development Co Pvt. Ltd. ....
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....f capital gain or business income), CBDT realizing that major part of shares/securities transactions takes place in respect of the listed ones and with a view to reduce litigation and uncertainty in the matter, in partial modification to the aforesaid Circulars, further instructs that the Assessing Officers in holding whether the surplus generated from sale of listed shares or other securities would be treated as Capital Gain or Business Income, shall take into account the following- a) Where the assessee itself, irrespective of the period of holding the listed shares and securities, opts to treat them as stock-in-trade, the income arising from transfer of such shares/securities would be treated as its business income, b) In respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. However, this stand, once taken by the assessee in a particular Assessment Year, shall remain applicable in subsequent Assessment Years also and the taxpayers s....
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....hat this group would make multiple application in the IPOs of certain companies. The second reason assigned by the CIT(A) is that the assessee did not take any kind of security from these persons. We confronted the Id. DR to show any material possessed by the AO for buttressing this reasoning. We failed to find out the basis of recording this finding. If during the investigation carried out by the SEBI or the Income Tax Department it emerges out that there is a conspiracy between the assessee and Smt.Rupal Naresh Panchal and Sugandh Estate and Investment Pvt. Ltd. for acquiring the shares in this manner, then one can say that modus operandi was of a business nature. During the course of hearing, we have confronted the Id. DR to show us any evidence which can establish nexus between the assessee and Smt. Rupal Naresh Panchal and Sugandh Estate and Investment Pvt. Ltd. for acquiring the shares of five companies with this modus operandi. The Id. counsel for the assessee has emphasized that mode of acquisition would not be a factor to decide the nature of transaction. Under this alleged modus operandi at the most, the assessee could procure large number of shares, but can that would ch....
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....pesh C. Shah Vs. ACIT has already disagreed with the former bench marking. Thc hon'ble jurisdictional high court in (2012) 347 ITR 149 CIT vs. Niraj A. Surti holds that usage of borrowed funds in share transaction does not give the resultant profits colour of business income. The CIT(A) twin reasoning stands overruled accordingly. The short question that arises for our independent adjudication in these appeals is as to whether the assessee's income derived from sale of shares/mutual funds is to be treated as short term capital gains or business income. In our considered opinion, this is a perennial issue to be decided as per facts of each case. The hon'ble jurisdictional high court in case Tax Appeal No.77 of 2010 decided on 27.6.2012 CIT vs. Vaibhav J. Shah holds that the most important test for judging nature of profits arising from sale purchase of shares has to be based on volume, frequency, continuity and regularity of transactions withholding period, usage of borrowed funds, assessee's books maintained etc. It transpires that the assessee had chosen to invest interest and non interest bearing funds on share investments acquired at IPO stage in HNI category. Th....
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...., neither the frequency nor the borrowings nor the allegation of shares involved in the IPO scam hold any water. In the light of the judicial discussion hereinabove, considering the totality of the facts, in the light of the judicial decisions, we direct the A.O to treat the gains arising out of the sale of shares under the head capital gains be it short terms or long term as the case may be. 27. The third issue relates to the denial of the set off of losses on sale of shares. We are taking the facts in the case of Devangi Panchal. The losses in the shares can be understood by the following chart:- 2.17 The assessee has shown purchase and sale of shares of certain companies on which short term capital loss shown to have been incurred. The details are as under : Name of Shares Date of Total Date of Total Capital Company Acquired Acquisition Acq. Cost Sale Sale Value Gain/Loss TV TODAY 13740 20-01-2004 2431980.00 17-052004 1250340.00 -1181640.00 GA1L 88372 24-03-2004 16370913.00 ....
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....o Shri Deepak J. Panchal HUF of which the assessee is one of the coparceners. (iii) The transactions are off market transactions and therefore, the purchase and sale price are not verifiable. (iv) The dates of purchase and sale as mentioned in the books of accounts are not in conformity with the debit and credit entries made in the respective demat accounts. It proves that the delivery of shares has not been made on the date of pay-in and pay-out as fixed by the stock exchange. (v) The assessee is not able to prove that she has paid the purchase cost and/or received the sale proceeds immediately after the dates of pay-in and pay-out. (vi) Since the purchase and sale bills are prepared by the group concern, they are the self-serving documents and hence have no evidentiary value in the absence of any other corroborative evidence. Reliance is placed on the ratio laid down in the case of Durga Prasad More 82 ITR 540 (SC). On the facts and circumstances of the case, it is clearly established that the assessee has conveniently prepared the purchase bills on the dates when the price of share was high and sale bills when the price was low with predetermi....
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....ent, it is not necessary to make payments for every purchases and receive consideration for every sale. It is customary of such type of transaction to have a running account with the principal broker/intermediary and settle the accounts, debit or credit, at the end of a certain period. 30. Most importantly in similar transactions wherever there was gains, the A.O has accepted such gains as it is, therefore, we do not find any logic/reason in discarding the losses made by the assessee on sale of shares. The revenue cannot blow hot and cold in the same breath for similar transactions. 31. In our considered opinion, the losses on sale of shares deserve to be set off and we direct the A.O accordingly. 32. In the result, all these appeals of the Assessee relating to the assessment are allowed and those of the Revenue are dismissed. 33. Now coming to the appeals of the assessee filed in respect of the penalty levied u/s. 271(1)(c) of the Act in IT(SS)A Nos. 396 to 399/Ahd/2012 referred to elsewhere. Since, we have directed the A.O to treat the surplus on sale of shares under the head capital gains and since, we have directed the A.O to allow the set off of losses against the ....