DCIT, New Delhi V. M/s G.S. Controls (P) Ltd., New Delhi

ITA 1560/DEL/2010

• Counselvise Citation: 156020114 RSA 2010
• Duration Of Justice: 4 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 03-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P DASKANUNJNA
• Keywords: Business income; Question of law
• Section: 131

Judgement Text

1 ITA 1560/DEL/2010 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI KUL BHARAT : JUDICIAL MEMBER ITA NO. 1560/DEL/2010 A.Y. 2006-07 DCIT, CIRCLE 12(1), VS. G.S. CONTROLS (P) LTD., NEW DELHI. F-1/7, KRISHNA NAGAR, NEW DELHI. PAN: AAACG 0368 G ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI P. DAS KANUNJNA SR. DR RESPONDENT BY : SHRI VED JAIN ADV. SMT. RANO JAIN CA SHRI VENKTESH CHAURASIA CA DATE OF HEARING : 03-03-2015 DATE OF ORDER : 13-03-2015. O R D E R PER S.V. MEHROTRA, A.M:- THIS APPEAL, PREFERRED BY THE DEPARTMENT, IS DIREC TED AGAINST THE ORDER DATED 22-01-2010, PASSED BY THE CIT(APPEALS)-XV, N EW DELHI IN APPEAL NO. 587/08-09, RELATING TO A.Y. 2006-07. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE COMPAN Y WAS INCORPORATED TO CARRY ON THE BUSINESS OF MANUFACTURING, PROCESSING ETC. THE ASSESSEE HAD FIELD ITS RETURN OF INCOME DECLARING INCOME AT RS. 29,48,340/-. THE ASSESSEE HAD DECLARED SHORT TERM PROFIT ON SHARES AMOUNTING TO RS. 30,05,599/-, WHICH 2 ITA 1560/DEL/2010 HAD BEEN CLAIMED AS SHORT TERM CAPITAL GAIN. THE AO TREATED THIS AS BUSINESS INCOME AND FURTHER MADE AN ADDITION OF RS. 80 LACS ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION MONEY. 3. LD. CIT(A) PARTLY ALLOWED THE ASSESSEES APPEAL. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A), THE DEPARTMENT IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE CIT(A) IS WRONG, PERVERSE, ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASI DE. 2. ON THE FACTS AND CIRCUMSTANCES, WHETHER LD. CIT( A) WAS JUSTIFIED ON FACTS OF THE CASE AND IN LAW IN DELETI NG THE ADDITION OF RS. 80,00,000/- MADE ON ACCOUNT OF UNEXPLAINED S HARE APPLICATION MONEY IGNORING THE FACT THAT THE ASSESS EE HAS FAILED TO DISCHARGE ITS ONUS OF PROVIDING IDENTITY, CREDIT WORTHINESS AND TRANSACTION MADE BY THE ASSESSEE OF THE SAID AM OUNT. 3. ON THE FACTS AND CIRCUMSTANCES, WHETHER LD. CIT( A) WAS JUSTIFIED ON FACTS OF THE CASE AND IN LAW IN TREATI NG THE PROFIT OF RS. 30,05,599/- DERIVED FROM SHARE TRADING AS SHORT TERM CAPITAL GAIN WHEREBY THE AO HAS RIGHTLY TREATED THE SAME AS THE BUSINESS INCOME OF THE ASSESSEE. 4. THE APPELLANT CRAVES TO LEAVE, TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HE ARING. GROUND NO. 1 IS GENERAL IN NATURE AND REQUIRES NO A DJUDICATION. 4. BRIEF FACTS APROPOS GROUND NO. 2 ARE THAT IN COU RSE OF ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAD INTRODUCED SHARE APPLICATION MONEY AMOUNTING TO RS. 2,40,00,000/-, INCLUDING SHA RE PREMIUM OF RS. 2,16,00,000/- FROM AS MANY AS 26 CONCERNS. THE ASSE SSEE HAD FURNISHED A LIST 3 ITA 1560/DEL/2010 OF SUCH CONCERNS ALONG WITH COPY OF SHARE APPLICATI ON FORMS. THE AO REQUIRED THE ASSESSEE TO PRODUCE THE DIRECTORS OF T HE FOLLOWING COMPANIES, INTER ALIA, OBSERVING THAT THEY WERE KNOWN ENTRY PR OVIDERS, ALONG WITH ID PROOF OF THOSE WHO HAD ALLEGEDLY INVESTED THE AMOUN T. NAME OF THE COMPANY AMOUNT 1. PARTICULAR MANAGEMENT FINLEASE (I) PVT. LTD. RS. 30 ,00,000 2. SRI NIWAS LEASING & FINANCE LTD. RS. 30,00,000 3. GANGA INFIN (P) LTD. RS. 10,00,000 4. SWETU STONE (P) LTD. RS. 10,00,000 RS. 80,00,000 5. THE ASSESSEE IN ITS REPLY POINTED OUT THAT ALL T HE DETAILS ALONG WITH PAN OF THE COMPANIES HAD ALREADY BEEN FURNISHED. TH E AO, HOWEVER, OBSERVED THAT ASSESSEE HAD NOT PRODUCED THE DIRECTO RS OF THE COMPANY AND, THEREFORE, TAKING NOTE OF THE FACT THAT THE ALLEGED COMPANIES WERE KNOWN ENTRY PROVIDERS OBSERVED THAT GENUINENESS OF THE TR ANSACTIONS HAD NOT BEEN PROVED AND THE ASSESSEE HAD FAILED TO DISCHARGE ITS ONUS IN THIS REGARD. HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT (1995) 214 ITR 801 (SC) AND CIT VS. T. MOHA N KALA 291 ITR 278 (SC), WHEREIN IT HAS BEEN HELD THAT STRONG CIRCUMST ANTIAL EVIDENCE IS GOOD ENOUGH TO INDICATE THAT ASSESSEE HAD NOT DISCHARGED ITS ONUS OF IDENTITY, CREDITWORTHINESS AND TRANSACTION. HE, THEREFORE, MA DE AN ADDITION OF RS. 80,00,000/- U/S 68. 6. BEFORE LD. CIT(A) THE ASSESSEE HAD POINTED OUT T HAT IT HAD PRODUCED THE FOLLOWING DETAILS WITH REGARD TO EVERY TRANSACT ION RELATING TO THE RECEIPT OF SHARE CAPITAL/ APPLICATION MONEY. I. THE COPY OF LEDGER ACCOUNT OF SHARE APPLICATION IN THE BOOKS OF ASSESSEE. 4 ITA 1560/DEL/2010 II. THE COPY OF BANK STATEMENT ALONG WITH THE COPY OF CHEQUES THROUGH WHICH THE MONEY WAS RECEIVED. III. COPY OF LEDGER ACCOUNT OF SHARE CAPITAL I.E. IN WHICH THE MONEY WAS TRANSFERRED AFTER ALLOTMENT. IV. COPY OF BALANCE SHEET AND PROFIT & LOSS A/C DE PICTING THE SAME. V. COPY OF ANNUAL RETURN FILED WITH REGISTRAR OF CO MPANIES WHICH INCLUDED LIST OF SHARE HOLDERS I.E. OLD AS WE LL AS NEW. VI. COPY OF FORM NO.2 I.E. RETURN OF ALLOTMENT OF SHARES ALONG WITH THE LIST OF NEW SHAREHOLDERS WHICH WAS F ILED AND REGISTERED WITH REGISTRAR OF COMPANIES. THE APPELLANT HAS ALSO OBTAINED THE FOLLOWING DOCU MENTS FROM THE CONCERNED PARTIES TO PROVE THEIR IDENTITY AND G ENUINENESS OF THE TRANSACTION WHICH WAS SUBMITTED BEFORE THE ID. AO VIA POST. A) ACKNOWLEDGEMENT OF RETURN OF INCOME. B) BALANCE SHEET & PROFIT AND LOSS A/C C) AFFIDAVIT FROM THE DIRECTORS D) CONFIRMATION E) PAN DETAILS 7. THE ASSESSEE HAD FURTHER SUBMITTED THAT SINCE AS SESSEE HAD FILED ALL THE DETAILS IT WAS FOR THE AO TO CONDUCT SOME INQUIRY T O SUPPORT HIS CLAIM WITH REGARD TO A TRANSACTION BEING INGENUINE, BEING NAME S/ ADDRESSES/ PAN DETAILS/ TAX RETURNS OF CREDITORS HAD BEEN PRODUCED BEFORE HIM. IF THE ASSESSEE WAS NOT ABLE TO PRODUCE ANY OF THE CREDITOR, THE AO WAS REQUIRED TO ISSUE NOTICE U/S 131 OF THE ACT AND CALL THE CONCERNED P ARTIES FOR EXAMINATION. THE ASSESSEE RELIED ON VARIOUS DECISIONS NOTED IN T HE SUBMISSIONS MADE BEFORE LD. CIT(A) AND SUBMITTED THAT AO CANNOT DRAW ADVERSE INFERENCE IN CASES WHERE HE HAS NOT ISSUED NOTICE U/S 131 OR HAD NOT MADE ANY INQUIRY. AS REGARDS CREDITWORTHINESS, IT WAS SUBMITTED THAT THE FACT THAT ALL THE PARTIES WERE CARRYING ON BUSINESS WAS NOT IN DOUBT; ALL WER E MAINTAINING REGULAR 5 ITA 1560/DEL/2010 BOOKS OF A/C AS WELL AS BANK ACCOUNT. THE MONEY HAD COME TO THE ASSESSEES ACCOUNT FROM REGULAR BANK ACCOUNT OF BOTH THE COMPA NIES. ALL THESE TRANSACTIONS WERE PART OF THE REGULAR BUSINESS ACTI VITIES OF ALL COMPANIES. 8. LD. CIT(A) DELETED THE ADDITION, INTER ALIA, OBS ERVING AS UNDER: THE AO HAS NO WHERE PROVED THAT DOCUMENTS IN SUPPO RT OF THE IDENTITY OF THE PARTIES HAVE NOT BEEN PLACED ON REC ORD AND THEY WERE FORGED DOCUMENTS. THE AO ALSO HAS NOT BROUGHT ANY EVIDENCE ON RECORD REGARDING THE FACTS THAT THE SHA RE APPLICANTS WERE NOT CREDITWORTHY OR GENUINE, DESPITE THE FACT THAT THEIR PAN AND COPIES OF I.T. RETURNS WERE SUBMITTED BY TH E APPELLANT. IN VIEW OF THE DISCUSSION MADE ABOVE THE ADDITION O F RS. 80 LAKH IS DELETED. HOWEVER, THE AO IS FREE TO TAKE APPROPR IATE ACTION AS MAY BE PERMISSIBLE UNDER THE LAW IN THE CASE OF VARIOUS SHARE HOLDERS ALLEGED TO BE ENTRY PROVIDERS. 9. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 10. LD. DR REFERRED TO PARA 5 OF AOS ORDER AND POI NTED OUT THAT SINCE THE SHARE APPLICATION MONEY WAS RECEIVED FROM KNOWN ENT RY PROVIDERS, THEREFORE, AO INFERRED THAT GENUINENESS OF THE TRAN SACTIONS HAD NOT BEEN PROVED. HE SUBMITTED THAT LD. CIT(A)S FINDING IS E NTIRELY ON DIFFERENT FOOTING. 11. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASS ESSEE HAD SUBMITTED ALL THE DETAILS AND EVIDENCES TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE SHARE APPLICANTS AND GENUINENESS OF TRANSACTION. AO HAD NOT COMMENTED UPON THESE EVIDENCES OR GAVE ANY ADVERSE FINDING AB OUT THE DOCUMENTS SUBMITTED BY ASSESSEE. AO DID NOT CARRY OUT ANY INV ESTIGATION AFTER THE ASSESSEE HAD SUBMITTED DETAILS ABOUT THE SHARE APPL ICANTS. HE SUBMITTED THAT 6 ITA 1560/DEL/2010 IT IS NOT ALSO THE CASE THAT THE SHARE HOLDER COMPA NY WERE NOT AVAILABLE OR NOTICE/ SUMMONS ISSUED HAD COME BACK. HE RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. VIC TOR ELECTRODES LTD. 329 ITR 271 TO SUBMIT THAT MERELY BECAUSE ASSESSEE COMP ANY FAILED TO PRODUCE THE DIRECTORS OF THE SHARE HOLDER COMPANIES, CANNOT BE A GROUND FOR MAKING THE ADDITION IN RESPECT OF SHARE CAPITAL. HE, INTE R ALIA, RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. FAIR INVEST LTD. 2012(12) TMI 170-DELHI HIGH COURT. LD. COUNSEL SUBM ITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HONBLE DELHI H IGH COURT IN THE CASE OF CIT VS. GOEL SONS GOLDEN ESTATE PVT. LTD. (ITA NO. 212/2012 DATED 11-4- 2012), WHEREIN IT HAS BEEN, INTER ALIA, HELD THAT W HERE AO FAILS TO CONDUCT NECESSARY INQUIRIES, VERIFICATION AND DEAL WITH THE MATTER IN DEPTH AFTER THE AFFIDAVIT/ CONFIRMATION ALONG WITH BANK ACCOUNTS WE RE FILED, THEN THE ASSESSMENT ORDER CANNOT BE SUSTAINED. 12. LD. COUNSEL FURTHER SUBMITTED THAT THE DECISION IN THE CASE OF CIT VS. NOVA PROMOTERS AND 342 ITR 169 (DEL.) IS NOT APPLI CABLE TO THE FACTS OF THE CASE AS IN PARA 39 OF THE SAID JUDGMENT THE HONBLE DELHI HIGH COURT HAS OBSERVED AS UNDER: '39. THE CASE OF ORISSA CORPORATION (1986) 159 ITR EXEMPLIFIES THE CATEGORY OF CASES WHERE NO ACTION I S TAKEN BY THE ASSESSING OFFICER TO VERIFY OR CONDUCT AN ENQUI RY INTO THE PARTICULARS ABOUT THE CREDITORS FURNISHED BY THE AS SESSEE, INCLUDING THEIR INCOME-TAX FILE NUMBERS. IN THE SAM E CATEGORY FALL CASES DECIDED BY THIS COURT IN DOLPHIN CANPACK (2006) 283 ITR 190, CIT V MAKHNI AND TYAGI P. LTD. (2004) 267 ITR 433, CIT V ANTARTICA INVESTMENT P. LTD. (2003) 262 ITR 4 93 AND CIT V ACHAL INVESTMENT LTD. (2004) 268 ITR 211. TO PUT IT SIMPLY, IN THESE CASES THE DECISION WAS BASED ON THE FUNDAMENT AL RULE OF 7 ITA 1560/DEL/2010 LAW THAT EVIDENCE OR MATERIAL ADDUCED BY THE ASSESS EE CANNOT BE THROWN OUT WITHOUT ANY ENQUIRY. THE RATIO DOES N OT EXTEND BEYOND THAT. THE BOUNDARIES OF THE RATIO CANNOT BE, AND SHOULD NOT BE, WIDENED TO INCLUDE THEREIN CASES WHERE THER E EXISTS MATERIAL TO IMPLICATE THE ASSESSEE IN A COLLUSIVE A RRANGEMENT WITH PERSONS WHO ARE SELF- CONFESSED 'ACCOMMODATION ENTRY PROVIDERS'. 13. LD. COUNSEL FURTHER POINTED OUT THAT SIMILAR VI EW HAS BEEN TAKEN IN THE CASE OF CIT VS. FAIR INVEST LTD. ITA NO. 232/2012 DATED 22-11-2012 BY HONBLE DELHI HIGH COURT AND ALSO IN FOLLOWING CASE S: - CANERON CONCRETE INDUSTRY P LTD. VS. ACIT (ITA NO. 4114/DEL/11 DATED 3-5-2013); - CIT VS. GOEL SONS GOLDEN ESTATE P LTD. (ITA NO. 212 /2012 DATED 11- 4-2012 (DEL.); - CIT VS. GANGESHWARI METAL PVT. LTD. (ITA NO. 597/20 12 DATED 21-1- 2013); - ACIT VS. PANCHANAN INTERNATIONAL P LTD. (ITA NO. 50 /D/2011 DATED 23-11-2012); - CIT VS. EXPO GLOBAL INDUSTRIAL LTD. (ITA NO. 1257/2 011 DATED 20-7- 2012). 14. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND PE RUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. THE AO HAD MADE ADDIT ION OF RS. 80 LACS OUT OF THE TOTAL SHARE APPLICATION MONEY AMOUNTING TO RS. 2,40,00,000/-. THUS, REST OF THE AMOUNT HAD BEEN ACCEPTED BY AO. FROM T HE ASSESSMENT ORDER IT IS EVIDENT THAT AO HAS MERELY RELIED ON GENERAL IN FORMATION REGARDING THE IMPUGNED 4 COMPANIES IN RESPECT OF WHICH ADDITION W AS MADE AS THEY WERE KNOWN ENTRY PROVIDERS. THE AO HAS POINTED OUT THAT DETAILS WERE PROVIDED BY THESE COMPANIES BUT SINCE THE DIRECTORS OF THESE COMPANIES WERE NOT PRODUCED, HE MADE THE ADDITION. NO INQUIRIES WERE C ONDUCTED BY AO TO FIND OUT THE GENUINENESS OF THE TRANSACTIONS AND CREDITW ORTHINESS OF THE 8 ITA 1560/DEL/2010 COMPANIES WHO HAD APPLIED FOR THE SHARE APPLICATION MONEY IN THE ASSESSEE COMPANY. WE FIND CONSIDERABLE MERIT IN THE ARGUMENT OF LD. COUNSEL FOR THE ASSESSEE THAT MERELY BECAUSE THE DIRECTORS WERE NOT PRODUCED THE ADDITION COULD NOT BE MADE IN VIEW OF THE DECISION OF HONBL E DELHI HIGH COURT IN THE CASE OF VICTOR ELECTRODES LTD. (SUPRA) AND ALS O IN THE CASE OF NOVA PROMOTERS (SUPRA) ALSO HONBLE DELHI HIGH COURT HAD CLEARLY DISTINGUISHED BETWEEN THE CASES WHERE AO HAD CARRIED OUT DETAILED INQUIRY AND THEN ARRIVED AT A FINDING REGARDING ACCOMMODATION ENTRIE S AND THOSE CASES WHERE AO DID NOT CARRY OUT ANY INQUIRY AND MERELY MADE AD DITION ON GENERAL BASIS. THE INQUIRY FOR ARRIVING AT A PROPER CONCLUSION IS A SINE QUA NON AND THAT CANNOT BE DISPENSED WITH BY MAKING GENERAL OBSERVAT IONS. WE FIND THAT THE DECISION IN THE CASE OF GOEL SONS GOLDEN ESTATE P. LTD. IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE, WHEREI N IN PARAS 2 & 3 IT HAS BEEN OBSERVED AS UNDER: 2. LEARNED COUNSEL FOR THE APPELLANT SUBMITS THAT THE ORDER PASSED BY THE TRIBUNAL IS PERVERSE AND IN FACT ONE S.H. MALLICK HAD GIVEN A STATEMENT, WHICH IS RE-PRODUCED IN THE ASSESSMENT ORDER SAYING THAT HE HAD PROVIDED ACCOMMODATION ENT RIES AND THE SAID STATEMENT CONCLUSIVELY PROVES THAT SHARE M ONEY OF' 30,00,000/- ALLEGEDLY RECEIVED BY THE RESPONDENT-AS SESSEE FROM 5 COMPANIES ARE SHAM AND BOGUS TRANSACTIONS . 3. WE HAVE EXAMINED THE SAID CONTENTION AND FIND TH AT THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S HAS FILED CONFIRMATION LETTERS FROM THE COMPANIES, THEIR PAN NUMBER, COPY OF BANK STATEMENTS, AFFIDAVITS AND BALANCE SHE ET. THEREAFTER THE ASSESSING OFFICER HAD ASKED THE ASSE SSEE TO PRODUCE THE SAID DIRECTORS/ PARTIES. ASSESSEE EXPRE SSED ITS INABILITY TO PRODUCE THEM. THE ASSESSING OFFICER DI D NOT CONSEQUENT THERETO CONDUCT ANY INQUIRY AND CLOSED T HE PROCEEDINGS. THIS IS A CASE WHERE THE ASSESSING OFF ICER HAS FAILED TO CONDUCT NECESSARY INQUIRY, VERIFICATION A ND DEAL WITH THE MATTER IN DEPTH SPECIALLY AFTER THE AFFIDAVIT/ CONFIRMATION 9 ITA 1560/DEL/2010 ALONG WITH THE BANK STATEMENTS ETC. WERE FILED. IN CASE THE ASSESSING OFFICER HAD CONDUCTED THE SAID ENQUIRIES AND INVESTIGATION PROBABLY THE CHALLENGE MADE BY THE RE VENUE WOULD BE JUSTIFIED. IN THE ABSENCE OF THESE INQUIRI ES AND NON- VERIFICATION OF THE DETAILS AT THE TIME OF ASSESSME NT PROCEEDINGS, THE FACTUAL FINDINGS RECORDED BY THE ASSESSING OFFI CER WERE INCOMPLETE AND SPARSE. THE IMPUGNED ORDER PASSED CA NNOT BE TREATED AND REGARDED AS PERVERSE. THE APPEAL IS DIS MISSED AS NO SUBSTANTIAL QUESTION OF LAW ARISES. 15. IN VIEW OF ABOVE, THIS GROUND IS DISMISSED. 16. GROUND NO. 3: BRIEF FACTS APROPOS GROUND NO. 3 ARE THAT ASSESSEE HAD DECLARED SHORT TERM PROFIT ON SHARES AMOUNTING TO RS. 30,05,599/-, WHICH HAD BEEN CLAIMED AS SHORT TERM CAPITAL GAIN. THE AO TAKING NOTE OF THE FACT THAT THE BUSINESS OF THE ASSESSEE WAS BASICALLY TRA DING IN SHARES, REQUIRED THE ASSESSEE TO EXPLAIN THAT WHEN THE ONLY ACTIVITY CA RRIED OUT BY THE ASSESSEE WAS PURCHASE AND SALE OF SHARES, WHY THE INCOME EAR NED THEREFROM SHOULD NOT BE CONSIDERED AS BUSINESS INCOME INSTEAD OF INC OME FROM CAPITAL GAINS. THE AO HAS OBSERVED THAT ASSESSEE DID NOT FILE ANY REPLY AND, THEREFORE, CONCLUDED THAT SHORT TERM CAPITAL GAIN WAS TO BE AS SESSED AS BUSINESS INCOME. 17. LD. CIT(A) DID NOT ACCEPT THE AOS PLEA FOR THE FOLLOWING REASONS: (A) THE ASSESSEE COMPANY HAD DISTINCT PORTFOLIO OF SHAR ES UNDER THE CATEGORY OF INVESTMENTS. (B) IT IS THE PREROGATIVE ON THE PART OF THE COMPANY AS TO WHETHER THE COMPANY WOULD EARN INCOME UNDER THE HEAD CAPITAL G AINS OR BUSINESS INCOME ON SALE OF SHARES. 10 ITA 1560/DEL/2010 (C) DURING THE LAST FEW YEARS THE ASSESSEE COMPANY HAD FOLLOWED THE SAME PRACTICE OF HOLDING CERTAIN SHARES UNDER THE H EAD INVESTMENT AND SOME SHARES AS STOCK IN TRADE. (D) ASSESSEE HAD EARNED CAPITAL GAINS ON DELIVERY BASED TRANSACTIONS. (E) DIVIDEND HAD ALSO BEEN RECEIVED ON SOME OF THE SHAR ES. (F) THE ASSESSEE HAD NOT CLAIMED STT AS BUSINESS EXPEND ITURE. (G) COPY OF RESOLUTION OF BOARD OF DIRECTORS REGARDING MAKING INVESTMENT IN IPO HAD ALSO BEEN SUBMITTED. 18. HE RELIED ON THE DECISION OF HONBLE BOMBAY HIG H COURT IN THE CASE OF CIT VS. GOPAL PUROHIT ITA NO. 1121 OF 2009. 19. LD. DR SUBMITTED THAT ASSESSEE DID NOT FILE ANY REPLY BEFORE THE AO. 20. LD. COUNSEL FOR THE ASSESSEE REFERRED TO PAGES 23 TO 25 OF THE PB WHEREIN THE ASSESSEES REPLY BEFORE AO IS CONTAINE D. HE SUBMITTED THAT AFTER CONSIDERING THE ASSESSEES REPLY LD. CIT(A) ALLOWED THE ASSESSEES CLAIM. HE REFERRED TO PAGE 13 OF THE PB WHEREIN THE P&L A/C I S CONTAINED AND POINTED OUT THAT IN THE COMPUTATION OF INCOME, ASSESSEE HAD SHOWN SHORT TERM PROFIT ON SHARES OF RS. 30,05,598.98. 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HA VE PERUSED THE RECORD OF THE CASE. THE AO HAS CATEGORICALLY OBSERVED THAT ASSESSEE HAD NOT GIVEN ANY REPLY. HOWEVER, AT PAGE 23 OF THE PB, THE ASSES SEE REFERS TO THE REPLY FILED BY IT BEFORE THE AO. WE FIND THAT BEFORE LD. CIT(A) THE ASSESSEE HAD ADVANCED DETAILED SUBMISSIONS, BUT THERE IS NO REFE RENCE TO THE REPLY FILED BEFORE AO DATED 15-7-2008. LD. CIT(A) HAS ALSO NOT RECORDED ANY FINDING ON THIS ASPECT. THEREFORE, WE RESTORE THIS ISSUE TO THE FILE OF AO TO DECIDE THE 11 ITA 1560/DEL/2010 ISSUE DE NOVO AFTER CONSIDERING THE ASSESSEES SUBM ISSIONS. GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 22. IN THE RESULT DEPARTMENTS APPEAL STANDS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 13-03-2015. SD/- SD/- (KUL BHARAT ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 13-03-2015. MP: C OPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR