TaxTMI 
TaxTMI 
2018 (10) TMI 69
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the aforesaid amount of Rs. 7,92,00,000 was received as gift by the appellant from his mother out of natural love and affection which was exempt under section 56(vi) of the Act. 1.2. That the CIT(A) erred on facts and in law in alleging, merely on the basis of conjectures and surmises, that the appellant had channelized his own funds in the guise of the above gift received from the donor. 1.3. That on the facts and in the circumstances of the case, the CIT(A) erred in law in concluding that the appellant could not discharge the onus of proof cast under section 69 of the Act, thereby failing to appreciate that the appellant had duly furnished requisite evidence to prove the genuineness of the transaction of the gift received as well as creditworthiness/ source of the donor out of which the above gift was made. 1.4. That on the facts and in the circumstances of the case, the CIT(A) failed to appreciate that gift received from donor, being otherwise exempt under section56(vi), the same could not have been brought to tax by invoking provisions of section 69 of the Act. 2. That the CIT(A) erred on facts and in law in upholding the levy of interest u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Rs. 7.92 crores received by the assessee from his mother. Thereafter, the CIT passed order u/s. 263 on 17.02.2011 setting aside the original assessment order and directed the AO to reexamine the major issues involved in the case. The assessee challenged the order u/s. 263 before the ITAT where the appeal stood dismissed on 29.01.2014. Against this order of Tribunal, the Hon'ble High Court has admitted the appeal of the assessee in ITA No. 351/2014 vide orer dated 13.11.2014. The AO completed the assessment u/s. 143(3)/263 of the Act on 19.12.2011 and treated the capital gain shown by the assessee as profit and gains of business and profession and calculated profit on sale of Mawana Sugars Ltd. shares as under : Sale consideration of 5094124 Mawana Shares Rs.65,94,94,608/- Sale consideration of 700000 Mawana Shares Rs.8.43.92.000/- Rs.74,38,86,608/- Less: i. Cost of purchase of 5094124 Mawana Shares Rs.6,83,22,581/- ii. Cost of purchase of 21000 Mawana Shares Rs. 17,69,129/- iii. Cost of purchase of 679000 Mawana Shares Since received in gift) (Nil Profit on sale of Mawana Shar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; 31.01.2006 215000 27422133 27561 10.02.2006 580000 75418357 75690 17.02.2006 800000 102835504 103200 20.02.2006 843648 103567926 103937 31.03.2006 300000 36169356 36300 Total 5094124 68322581 5094124 659494608 662476 591172027 Short term capital gain Annexure-C Name of the share Nos Rate per unit Cost price Date of acquisition Date of transfer/sale Sale value per unit (Rs.) Full value of consideration Capital gain / (loss) Mawana Sugars Ltd. 11000 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs Ltd. of Rs. 10/- each fully paid up of Rs. 10/- each fully paid up 3077500 35061352 3077500 21910382 13150970 Balance amounts is In books is on account of short adjustment of cost. This has no impact on taxable income 11000 equity share purchase on for Rs. 8,22,185/- and 10000 equity shares purchase on for Rs. 948006/- payment from HSBC Ltd. Purchased from market 21000 1770191 21000 1770191 Mawana Sugars Ltd. for Rs. 10/- each fully paid up of Rs. 10/- each partly paid up @ Rs. 6.50 per share 1716624 1216742 1716624 6008184 1716624 18134926 Call money paid @ Rs. 3.50 per share on 1716624 partly paid up share of MSL Ltd. on 24.08.2005 from HSBC Ltd. New Delhi Mawana Sugars Ltd. of Rs. 10/- each fully paid up of Rs. 10/- each 300000 2100000 3231464 300000 679000 142100 0 323146 4 Gift from Enterprise Trust Gift from Mrs. Raula Shriram (Mother) Siel Ltd. of Rs. 10/- each fully paid up purchase from the market 1000 34417 &n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of shares of Mawana Sugar as business income and made addition on profit on sale of shares at Rs. 67,37,94,898/-. 8. The AO further observed that the assessee had received gift of Rs. 7.92 crores from his mother Mrs. Roula Shriram apart from gift of equity shares of Mawana Sugar Ltd. worth Rs. 32,31,464/-. In this regard, the findings of the AO are as under : 10. The submission of the assessee is considered in light of the facts of the case and evidences furnished in support of genuineness of transaction and creditworthiness of the donor. At the outset, the claim of assessee that the said gift was accepted by the AO while passing the assessment order on 08.12.2008, I would like to re-iterate that the said order stands set aside vide order of CIT dated 17.02.2011 passed U/s 263 of the Income-tax Act, 1961 and the issue of gift is to be examined afresh. In view of this, the claim of assessee about acceptance of the gift by my predecessor is rejected. I, therefore, concentrate on the strength of evidences furnished by assessee in support of genuineness of the transaction stated to be gift of Rs. 7,92,00,000/- and creditworthiness of the donor i.e. Ms. Roula Shriram. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d copy of Certificate of Foreign Inward Remittance which gives the details of beneficiary, remittance and also particular of remitter including his residential address & remitting bank. Even the gift deed and also the certificate signed by Ms. Roula Shriram, the donor does not state or give detail about the bank A/c from which the said remittance is stated to be made. In the bank statement of the assessee and also the telegraphic transfer credit advice issued by Hong Kong Shanghai Bank, the detail of remitter has been mentioned as CAMPBELL HOOPER. This again does not give any details about the bank account from which the said amount has been transferred/remitted to assessee. 13. As far as the creditworthiness of the donor is concerned, no document have been submitted by assessee to prove that Ms. Roula Shriram is a man of means. Ms. Roula Shriram is holding Indian Passport and also assessed to tax under PAN AACPS3802N. The details of assessable income returned by Ms. Roula Shriram for the relevant A.Y. 2006-07 were retrieved from the departmental data which gives the following details of total income as per the return filed by her in form 2D in Ward 32(2), New Delhi. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. (See Parimisetti Seetharamamma [1965] at page 536). But, in view of section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such a case there is, prima facie, evidence against the assessee, viz., the receipt of money, and if he fails to rebut it the said evidence being unrebutted, can be used against him by holding that it was a receipt of an income nature. While considering the explanation of the assessee the Department cannot, however, act unreasonably. (See Sreelekha Banerjee's case [1963] 49 ITR (SC) 112 at page 120). In the instant case, the amount is credited in the capital account in the books of the appellant. The appellant has offered her explanation about the said receipts being her winnings from races. The said explanation has been considered in the tight of the sworn statement of the appellant dated January 6,1973, and other material on record. The Income- tax Officer and t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....other hand, the ld. DR submitted a small written synopsis which reads as under : "In addition to oral arguments, which may be made at the time of hearing, the Revenue wishes to submit as under : 1. The assessee is the son of Shri Siddhrath Shriram, MD of Mawana Sugars Ltd. He has been Director of Siel Holdings Ltd, since 24.4.2007. He has been a Director of Siel Ltd earlier. It needs to be mentioned that Siel Ltd is the earlier name of Mawana Sugar Ltd. 2. The appeal against the order u/s 263, in pursuance to which the assessment order in this round was passed, was dismissed by Hon'ble ITAT vide order dated 29.01.2014, in ITA 1649/Del/2011. 3. During the relevant assessment year, the assessee claimed LTCG exempt u/s 10(38) of Rs. 59, 11,72,027/- and STCG [taxable at concessional rate) of Rs. 8,26,22,871/-. The LTCG is in respect of 50,94,124 shares of Mawana Sugar Ltd costing just Rs. 683,22,581/-. The sale value is Rs. 65;94,94,608/-. The purchase date of shares was from 30.1.2003 to 4.8.2004. The STCG is also in respect of the 7,00,000 shares of Mawana Sugar Ltd, the cost price being Rs. 17,69,129/- and sale price being Rs. 84,39,2000/-. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....very frequently, volume and magnitude was very high and he earned only a meagre amount of dividend, income arising from sales of shares was assessable as business income. 2 Manoj Kumar Samdaria Vs CIT (f20141 52 taxmann.com 247 (SC)/f20151 228 Taxman 63 (SC) (Copy Enclosed) where Hon ble Supreme Court dismissed SLP against High Court's ruling that where assessee was selling shares very frequently, volume and magnitude was very high and he earned only a meagre amount of dividend income arising from sale of shares was assessable as business income 3. Sadhana Nabera vs ACIT (ITA No.2586/Mum/2009) (Copy Enclosed} where Hon'ble Mumbai High Court held that Sale & purchase of shares is business income. A copy of Circular No.4 of 2007 on the issue is also enclosed In the above case: (i) Volume of transactions was high - Shares worth Rs. 69.85 crores purchased during the year & shares worth Rs. 6.28 crores sold during the year (ii) Number of transactions was high (iii) Period of holding was low - From October 2003 to March 2006 (iv) It was not disclosed in Wealth Tax Returns (v) Dividend received is not mentioned. I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al gains" as declared by the appellant. The CIT, thereafter invoked the jurisdiction under section 263 of the IT Act and set aside the original assessment to assess the case denovo to re-examine the major issues. Thereafter vide order dated 29.12.2011, the Assessing Officer changed the character of the profit earned on sale of the above shares from 'capital gains' to 'business income' on the ground that such shares constituted 'stock-in-trade' and not an investment' as declared by the appellant. On perusal of material on record, it is noted that the appellant was holding the shares of M/s. Mawana Sugars Ltd. since 2003 and had also purchased certain shares of the same company in June, October and November 2005. Hence it is evident that the appellant did not indulge in frequent and regular transactions pertaining to the sale purchase of shares, but was holding for a considerable period of time. These shares which were held by the appellant since 2003 were sold after a period of more than 2 years and 6 months respectively. From this, it is evident that the appellant did not indulge in regular and requent sale of shares. This fact also draws its support from the charts furnished b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a capital asset or a business asset. The appellant also referred to several judicial precedents culled out of CBDT Circular no. 4 of 2007 dated 15.06.2007. The judgment of Bombay High Court in the case of CIT Vs. Gopal Purohit 336 ITR 287 against which the Hon'ble Supreme Court has dismissed the departmental SLP supports the contention of the appellant. The appellant has also cited the judgment of Delhi High Court in case of Rohit Anand reported in 132 ITR 445 and also CIT Vs. Vinay Mittal ITA 1172 page 26. The jurisdictional High Court in the case of Vinay Mittal, has held that it is the matter of 'intention' of the appellant which determines whether the shares purchased by him is to be treated as investment or business stock-in-trade. "Whether a person dealing with shares has made an investment or has treated them as stock-in-trade, has been the subject matter of considerable debate. It is a matter of intention of the assessee, which has to be gathered from his conduct and surrounding circumstances. Various parameter/criteria have been elucidated and explained. A pragmatic and common sense approach has to be adopted, when we determine and decide the question always ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd, once taken by the assessee in a particular Assessment Year, shall remain applicable in subsequent Assessment Years also and the taxpayers shall not be allowed to adopt a different/contrary stand in this regard in subsequent years; - (c) In all other cases, the nature of transaction (i.e. whether the same is in the nature of capital gain or business income) shall continue to be decided keeping in view the aforesaid Circulars issued by the CBDT. 4. It is, however, clarified that the above shall not apply in respect of such transactions in shares/securities where the genuineness of the transaction itself is questionable, such as bogus claims- of Long Term Capital Gain/Short Term Capital Loss or any other sham transactions. 5. It is reiterated that the above principles have been formulated with the sole objective of reducing litigation and maintaining consistency in approach on the issue of treatment of income derived from transfer of shares and securities. All the relevant provisions of the Act shall continue to apply on the transactions involving transfer of shares and securities. It is clear from the bill cum contract note submitted by the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce. 3) The bank statement of the appellant showed that an amount of Rs. 7.92 crore was credited in his account. The narration against this entry dated 10.11.2005, was in cash WID 076855 PET 313489313 Campbell Hooper Gift from mother. It only revealed a telegraphic transfer but not source. 10.1 On perusal of the material on record, I find that the appellant has not furnished any evidence pertaining to the funds of the donor, Smt. Roula Shriram. Despite of specific requirement the appellant failed to furnish the copy of the bank account of Smt. Roula Shriram from where the gift was given to the appellant. The appellant did not furnish a copy of the inward remittance giving the particulars of the remitter, residential address of the remitter, details of the beneficiary etc. The details of the remitter was mentioned as Campbell Hooper, in the telegraphic transfer advice. Campbell Hooper seems to be an intermediary. 10.2 The appellant did not file any document to substantiate the creditworthiness of Smt. Roula Shriram. The Assessing Officer also mentioned that Ms. Roula Shriram is holding an Indian passport and assessed to tax under PAN AACPS3802W. The Assessi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ores has been deposited. The assessee was unable to justify that the alleged gift came from his mother's account and she was capable to advance such huge money as gift to the assessee so as to consider the deposit as gift. 15. In the written synopsis submitted by the ld. AR, it is stated that earlier also the assessee had received gift from his mother which has been accepted by the Revenue. But this contention of the assessee is not acceptable in the present case because the principle of re judicata is not applicable in the Income-tax Proceedings and each assessment year is a separate unit. In the impugned order, the Assessing Officer has doubted the creditworthiness of the donor and it was not proved beyond doubt as to from where, the impugned amount of gift was remitted to the assessee. The AR of the assessee has not rebutted the objections raised by the Assessing Officer in this regard. The AR also objected that the impugned addition can neither be made u/s. 68 or section 69. The Assessing Officer observed that the amount of Rs. 7.92 crores has been credited into the bank account maintained by the assessee. In general, the bank maintains ledger accounts of his customers. Sect....