DCIT, New Delhi V. Vimpy Investment Leasing & Finance Co. Ltd, New Delhi

ITA 2904/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4139 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 10-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 10-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAKAR
• Assessee Lawyers: S K GUPTA
• Keywords: Business income; Assessment record
• Section: 2

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH HNEW DELHI BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER ITA NO. 2904/DEL/2010 ASSTT.YEAR: 2007-08 DY.COMMISSIONER OF INCOME TAX, VS M/S WIMPY IN VESTMENT LEASING CIRCLE 17(1), NEW DELHI. & FINANCE COMPANY LT D., C 5/9, IST FLOOR, VASANT KUNJ, NEW DELHI-110002 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI J.P. CHANDRAKAR, SR. DR RESPONDENT BY: SHRI S.K. GUPTA, C A DATE OF HEARING: 10.12.2015 O R D E R PER C.M. GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST THE ORDER OF THE CIT(A)- XIV, NEW DELHI DATED 22.03.2010 IN APPEAL N O.214/2009-10 FOR AY 2007-08. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, LD. CIT(A) HAS ERRED IN HOLDING THAT ASSESSEE EARNED SH ORT TERM CAPITAL GAIN OUT OF SALE OF 40,000 SHARES OF SHREE PRECOATED STEELS PVT. LTD. AND NOT AS BUSINESS INCOME IGNORIN G THE FACT THAT SHARES WERE SOLD IN A SHORT TIME AND NO DEMAT STATEMENT WAS SUBMITTED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD. CIT(A) HAS ERRED IN HOLDING THAT ASSESSEE EARNED SH ORT TERM 2 CAPITAL GAIN OUT OF SALE OF 40,000 SHARES OF SHREE PRECOATED STEELS PVT. LTD. IGNORING THE FACT THAT THE ASSESSE E COMPANY WAS MAINLY ENGAGED IN THE TRADING OF SHARES IN THE FINANCIAL YEAR 2006-07 AND DID NOT CARRY OUT ITS BUSINESS OF FINANCING. THE ASSESSEE COMPANY EARNED ONLY RS.55,000/- AS INT EREST INCOME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD. CIT(A) HAS ERRED IN IGNORING THE FACT POINTED OUT B Y THE AO THAT THE INVESTMENT MADE IN THE 10,000 SHARES OF AJ MERA REALTY AND INFRA INDIA LTD. IN THE FINANCIAL YEAR 2 005-06 DOES APPEAR IN THE CONCERNED FINANCIAL STATEMENT OF THE ASSESSEE. ALSO THE PARTICULARS SUBMITTED BY THE ASSESSEE ABOU T THE DATE OF PURCHASE (28.3.2006) OF THE SAID SHARES DOES NOT MATCH WITH THE ASSESSEES CLAIM ABOUT THE PURCHASE OF M/S SHRE E PRECOATED STEEL LTD. SHARES STATED TO BE MADE ON 8. 2.2006 IN THE LIGHT OF THE ASSESSEES CLAIM THAT M/S SHREE PR ECOATED STEEL LTD. IS THE OLD NAME OF M/S AJMERA REALTY AND INFRA INDIA LTD. 3. BRIEFLY STATED, THE FACTS GIVING RISE TO THIS AP PEAL ARE THAT THE AO MADE CERTAIN ADDITIONS INCLUDING TWO IMPUGNED ADDITIONS IN THIS APPEAL VIZ. FIRST ADDITION PERTAINING TO SHORT TERM CAPITAL GAIN OF R S. 1,03,11,768/- ADDED TO THE TOTAL INCOME OF THE ASSESSEE WHICH WAS RECEIVED BY THE ASSESSEE AS CONSIDERATION ON SALE OF SHARES OF SHREE PRECOATED STEEL LTD. AND SECONDLY ADDITION OF RS.1,10,00,000 PERTAINING TO SALE OF 40 000 SHARES OF AJMERA REALTY AND INFRA INDIA LTD. IN APRIL 2006. THE AO ALSO MA DE CERTAIN OTHER ADDITIONS PERTAINING TO INCOME UNDER HOUSE PROPERTY AND INCOM E FROM TRANSACTION OF SHARES OF AJMERA REALTY LTD. AND FINALISED THE ASSE SSMENT AT RS.2,68,64,725/- AS AGAINST THE RETURNED INCOME OF RS.43,29,341. 4. BEING AGGRIEVED BY THE ABOVE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHICH WAS ALLOWED DELETING THE FIRST IMPUGNED 3 ADDITION OF RS.1,03,11,768 AND THE SECOND IMPUGNED ADDITION OF RS.1,10,00,000 MADE ON ACCOUNT OF SALE OF 40000 SHARES OF AJMERA R EALTY. THEREAFTER, THE AGGRIEVED REVENUE PREFERRED AN APPEAL BEFORE THE TR IBUNAL WHICH WAS DECIDED BY ITAT H BENCH, NEW DELHI AS ITA NO. 2904/D/2010 ORDER DATED 29.04.2011 AND APPEAL OF THE REVENUE WAS DISMISSED ON BOTH THE COUNTS UPHOLDING THE ORDER OF THE CIT(A) WHICH GRANTED REL IEF FOR THE ASSESSEE. 5. THE REVENUE FURTHER CARRIED OUT THE ISSUE TO THE HONBLE HIGH COURT OF DELHI IN ITA NO.1268 OF 2011. THE HONBLE HIGH COU RT NOTED THE CONCESSION MADE BEFORE THEIR LORDSHIPS BY THE LD. COUNSEL OF T HE ASSESSEE RESPONDENT AND SET ASIDE THE OPERATIVE PARA NO. 6 AND 7 OF THE ORD ER OF THE TRIBUNAL DATED 29.4.2011 (SUPRA) WITH A DIRECTION TO THE TRIBUNAL TO DECIDE THE APPEAL AFRESH. THE HONBLE HIGH COURT ALSO DIRECTED THAT THE TRIBU NAL WILL NOT BE INFLUENCED BY THEIR EARLIER DECISION OF THE HONBLE HIGH COURT WHICH HAS NOT EXPRESSED ANY OPINION ON THE MERITS OF THE CONTENTION RAISED BY T HE PARTIES, THEREFORE, WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AFRESH TO ADJUDIC ATE THE CASE AS PER DIRECTIONS OF HONBLE HIGH COURT OF DELHI DATED 7.12.2011 (SUP RA). GROUND NO. 1 & 2 OF THE REVENUE 6. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD, INTER ALIA ASSE SSMENT ORDER, IMPUGNED ORDER OF THE CIT(A), WRITTEN SYNOPSIS AND NOTES SUBMITTED BY THE LD. AR. 4 7. LD. DR SUBMITTED THAT THE CIT(A) HAS ERRED IN HO LDING THAT THE ASSESSEE EARNED SHORT TERM CAPITAL GAIN ON SALE OF 40000 SHA RES OF SHREE PRECOATED STEEL LTD. AND NOT AS BUSINESS INCOME, IGNORING THE FACT THAT SHARES WERE SOLD IN SHORT TIME AND NO DMAT STATEMENT WAS SUBMITTED. LD. DR F URTHER CONTENDED THAT THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE AS SESSEE EARNED SHORT TERM CAPITAL GAIN OUT OF SALE OF 40000 SHARES OF SHREE P RECOATED STEEL LTD. IGNORING THE FACT THAT THE ASSESSEE COMPANY WAS MAINLY ENGAG ED IN THE TRADING OF SHARES IN THE FINANCIAL YEAR 2006-07 AND DID NOT CARRY OUT ITS BUSINESS OF FINANCING, SPECIALLY IN THE PECULIAR CIRCUMSTANCES WHEN THE AS SESSEE COMPANY EARNED ONLY RS.55000 AS INTEREST INCOME DURING THE FINANCIAL PE RIOD UNDER CONSIDERATION. 8. SUPPORTING THE ASSESSMENT ORDER, LD. DR SUBMITTE D THAT THE AO RIGHTLY NOTED THAT THE ASSESSEE HAS NOT SUBMITTED ANY D-MAT STATEMENT SHOWING HOLDING OF SHARES OF SHREE PRECOATED STEEL LTD. AND THE PUR CHASE BILL DATED 8.2.2006 FOR THE SAME SHARES HAS NOT BEEN ISSUED IN THE PRESCRIB ED FORMAT. LD. DR FURTHER POINTED OUT THAT THE AO ALSO NOTED THAT STT CERTIFI CATE WAS ALSO NOT FILED TO PROVE AND SUPPORT THE GENUINENESS OF THE TRANSACTIO N AND THE INVESTMENT IN THE SHARES OF SHREE PRECOATED STEEL LTD. WAS NOT REFLEC TED IN THE FINANCIAL STATEMENT AS ON 1.4.2006. LD. DR VEHEMENTLY CONTENDED THAT W HEN AS PER FINANCIAL STATEMENT OF THE ASSESSEE, THE INVESTMENT IN SHARES OF SHREE PRECOATED STEEL LTD. NEITHER REFLECTED AS INVESTMENT NOR AS STOCK-IN-TRA DE, THEREFORE, THE AO WAS RIGHT IN HOLDING THAT THE ALLEGED TRANSACTION OF SALE AND PURCHASE OF SHARES WAS 5 BUSINESS IN NATURE CONDUCTED WITH THE INTENTION AND ALSO FOR THE PURPOSE OF EARNING PROFIT THEREFROM. THE DR FURTHER SUBMITTED THAT THE AO WAS JUSTIFIED IN MAKING ADDITION OF ENTIRE SALE CONSIDERATION AS THE BUSINESS INCOME OF THE ASSESSEE. LD. DR FINALLY PRAYED THAT THE IMPUGNED ORDER MAY BE SET ASIDE BY RESTORING THAT OF THE AO. 9. LD. AR FILED WRITTEN SYNOPSIS/SUBMISSIONS AND OT HER RELEVANT DOCUMENTS INCLUDING CHART GIVING BRIEF SUMMARY OF ISSUES RAIS ED BY THE AO, FINDINGS OF THE LD. CIT(A). LD. AR SUBMITTED THAT GROUND NO. 1 AND 2 OF THE REVENUE SEEK TO CHALLENGE THE ACTION OF THE CIT(A) OF ACCEPTING THE CONTENTION OF THE ASSESSEE COMPANY THAT THE PROFIT OF RS.43,11,768 WAS A SHORT TERM CAPITAL GAIN WHEREAS THE AO SOUGHT TO TREAT THE SAME AS BUSINESS INCOME. LD. AR SUPPORTING THE IMPUGNED ORDER SUBMITTED THAT THE CIT(A) HAS DISCUS SED THE ISSUE IN PARA 6.1 AT PAGE 4 OF THE IMPUGNED ORDER VIZ. SUMMARY OF THE SU BMISSIONS OF THE ASSESSEE WHEREIN IT HAS BEEN SPECIFICALLY EXPLAINED THAT THE SHARES WERE PURCHASED ON 8.2.2006, THE PAYMENT FOR PURCHASE WAS MADE BY CHEQ UE ON 1.3.2006 AND THE CHEQUE WAS CLEARED ON 22.3.2006 AND TRANSFER OF SHA RES IN THE DMAT ACCOUNT OF THE ASSESSEE WAS EFFECTED ON 28.3.2006. 10. LD. AR SUBMITTED THAT AT THE VERY OUTSET, THE I NTENTION OF THE ASSESSEE WAS TO MAKE INVESTMENT BUT ASSESSEE COMPANY HAS PURCHAS ED A FLAT ON 17.3.2006 FOR RS.1,01,00,000 AND THE COMPANY WAS UNDER OBLIGATION TO MAKE PAYMENT FOR THE SUBSTANTIAL PART OF PURCHASE CONSIDERATION IN THE F IRST QUARTER OF FY 2006-07. 6 THE AR HAS ALSO DRAWN OUR ATTENTION TOWARDS PARA 6 AT PAGE 7 OF THE ASSESSMENT ORDER AND SUBMITTED THAT THE ASSESSEE MADE SUBSTANT IAL PAYMENT ON 18.4.2006 AND 2.5.2006 WHICH SHOWS BONA FIDE NECESSITY OF SAL E OF SHARES WHICH WERE KEPT BY THE ASSESSEE AS INVESTMENT. 11. LD. AR FURTHER SUBMITTED THAT THE OBSERVATIONS OF THE AO THAT THE ASSESSEE HAD TWO DMAT ACCOUNTS DURING THE RELEVANT FINANCIAL YEAR IS WRONG AS THE ASSESSEE COMPANY HAD ONLY SINGLE DMAT ACCOUNT W ITH IL&FS BETWEEN THE FINANCIAL YEAR UNDER CONSIDERATION AND SECOND DMAT ACCOUNT WAS OPENED ON 29.1.2008 I.E. DURING AY 2008-09. LD. AR ALSO CONT ENDED THAT THE AO ALSO WRONGLY OBSERVED THAT THE ASSESSEE IS TRADING IN OT HER SHARES WHICH IS EVIDENT FROM DMAT ACCOUNT FILED BY THE ASSESSEE COMPANY AS THE ASSESSEE COMPANY HAD ENTERED INTO SOLITARY TRANSACTION OF SALE OF 40 000 SHARES OF SHREE PRECOATED STEEL LTD. AND HAS NOT DEALT IN ANY OTHER SHARES DU RING THE FINANCIAL YEAR UNDER CONSIDERATION. THE AR HAS FURTHER DRAWN OUR ATTENT ION TOWARDS ASSESSMENT ORDER AND SUBMITTED THAT THE OBSERVATIONS OF THE AO THAT THE ASSESSEE HAD SOLD 86,300 SHARES OF AJMERA REALTY IS ALSO WRONG AS THE SE SHARES CONTINUE TO APPEAR IN THE BALANCE SHEET OF THE PREVIOUS YEAR AS WELL A S OF THE CURRENT YEAR. LD. AR SUBMITTED THAT THE AO IGNORED THAT THE FACT THAT DU RING THE YEAR, THE SHARES WERE HANDED OVER TO THE BROKER AND NO OPPORTUNITY WAS A LLOWED FOR THE ASSESSEE BY THE AO TO CLARIFY THE ABOVE NOTED DOUBTS OF THE AO. LD. AR FURTHER POINTED OUT THAT THE ASSESSEE HAD ONLY INTEREST INCOME AND NO O THER INCOME EXCEPT FROM SALE 7 OF SHARES TRANSACTION DURING THE YEAR UNDER CONSIDE RATION WHICH IS IN DISPUTE IN THE PRESENT APPEAL. LD. AR ALSO MADE A SUBMISSION ON BEHALF OF THE ASSESSEE AT THE BAR THAT THE ASSESSEE HAS DEALT WITH ONLY ONE B ROKER AND WITH NO OTHER BROKER DURING THE YEAR UNDER CONSIDERATION. 12. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, AT THE OUTSET WE OBSERVE THAT THE CIT(A) GRANTED RELIEF FOR THE ASSESSEE WIT H FOLLOWING OBSERVATIONS AND FINDINGS:- I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE DETAILED WRITTEN SUBMISSIONS FILED BY THE AR IN THI S REGARD. 8.1 THE APPELLANT COMPANY HAD PURCHASED THE SHARES OF SHREE PRECOATED STEELS LTD. (40000 SHARES) FOR A TOTAL CO NSIDERATION OF RS. 60,00,000/-. THE PURCHASE OF THESE SHARES W AS MADE ON 08.02.2006. COPY OF THE SALE BILL ISSUED BY THE SEL LER M/ S OASIS TRADE CAPFIN PVT. LTD. IS PLACED IN THE PAPER BOOK AT PAGE 9 AND STATEMENT OF ACCOUNT OF THE SAID SELLER IS PLACED AT PAGE 10 OF THE PAPER BOOK. THE ASSESSING OFFICER, I N THE IMPUGNED ORDER, HAS RAISED DOUBTS ABOUT THE EXACT D ATE OF PURCHASE AT PARA 3.3.1 OF THE ORDER WHERE DIFFERENT DATES OF PURCHASE HAVE BEEN PROVIDED BY THE APPELLANT BY MIS TAKE BUT AS PER THE SALE BILL SUBMITTED DURING ASSESSMENT PR OCEEDINGS, THE CORRECT DATE IS 08.02.2006. THE PAYMENT FOR THE PURCHASE OF THESE SHARES WAS MADE THROUGH CHEQUE ON 01.03.20 06 WHICH IS EVIDENT FROM THE STATEMENT OF ACCOUNT PROVIDED BY THE ABOVE SELLER OF THE SHARES. THE CHEQUE IN QUESTION WAS EN CASHED ON 22.03.2006 AS HAS BEEN VERIFIED BY THE ASSESSING OF FICER HERSELF (AS MENTIONED IN PARA 3.3.2 OF THE ASSESSMENT ORDER ). THE PURCHASE PRICE OF THE SHARES WAS RS. 150/- PER SHAR E. 8.2 THE ABOVE SHARES WERE TRANSFERRED TO THE DEMAT ACCOUNT OF THE APPELLANT COMPANY MAINTAINED WITH IL & FS SECUR ITIES SERVICES LTD., RAHEJA VIHAR, PLOT 14 OF CHANDIVALI FARM ROAD, CHANDIVALI ANDHERI EAST, MUMBAI IN THE DEMAT ACCOUN T, CLIENT ID NO. 11217638 IN THE NAME OF THE COMPANY. THE SHA RES WERE 8 CREDITED IN THE DEMAT ACCOUNT ON 28.03.2006 AS PER THE COPY OF DEMAT ACCOUNT ISSUED BY IL & FS SECURITIES SERVICES LTD. 8.3 THE SHARES IN QUESTION WERE SOLD THROUGH M/S SA M GLOBAL SECURITIES LTD. FROM 11.04.2006 TO 21.04.2006 IN TH E F.Y. 2006-07 RELEVANT FOR A.Y. 2007-08. THE CONTRACT NOT ES ISSUED BY THE ABOVE BROKER WERE SUBMITTED TO THE ASSESSIN G OFFICER DURING ASSESSMENT PROCEEDINGS ALONGWITH THE LETTER DATED 19.12.2009. THE SHARES HAVE BEEN SOLD ONLINE THROUG H THE RECOGNIZED BROKER. THE TIME OF SALE TRANSACTION OF THE SHARES UNDER REFERENCE ALONGWITH ORDER NO. AND TRADE NO. I S ALSO MENTIONED ON THE CONTRACT NOTES AS REQUIRED UNDER S EBI RULES. ON PERUSAL OF THE CONTRACT NOTES, PLACED IN THE PAP ER BOOK, IT IS EVIDENT THAT THE BROKER TO WHOM SALE OF THE SHAR ES HAS BEEN MADE IS THE MEMBER OF THE RECOGNIZED STOCK EXCHANGE VIDE SEBI REGISTRATION NO. INB 011107332 AND INF 0112058 30. THE ABOVE BROKER HAS CHARGED STT ON THE SALE TRANSA CTIONS OF THE SHARES UNDER REFERENCE AS REQUIRED UNDER LAW. I T IS, THEREFORE, MISSTATEMENT BY THE ASSESSING OFFICER IN PARA 2.7 OF THE IMPUGNED ORDER THAT THE DEMAT STATEMENT SHOWING INVESTMENT OF THE SHREE PRECOATED STEELS LTD. WAS N OT SUBMITTED WHEREAS THE SAME WAS SUBMITTED THROUGH A LETTER DATED 16.12.2009 AND IN PARA 3.5 TO THE ASSESSING O FFICER HAS ALSO ACCEPTED THAT THE ASSESSEE IS MAINTAINING DEMA T ACCOUNT NO. 11217638 AND THE COPY OF THE DEMAT STATEMENT HA S BEEN FURNISHED BY THE ASSESSEE ALONGWITH LETTER DATED 17 .12.2009 PLACED IN THE PAPER BOOK AT PAGES 14-15. THE ASSESS ING OFFICER HERSELF HAS ACKNOWLEDGED SUBMISSION OF THE ABOVE NO TED LETTER IN THE PARA 3.5.2 OF THE IMPUGNED ORDER. 8.4 I HAVE VERIFIED THE BALANCE SHEET. THE INVESTME NT IN SHARES OF SHREE PRECOATED STEELS LIMITED WAS SHOWN IN LOAN AND ADVANCES BY MISTAKE. THE DETAILS OF SCHEDULE 8 ARE AS UNDER:- SCHEDULE 8: LOANS & ADVANCES AS ON 31 . 03 . 0 7 AS ON 31 . 03.06 SHARE APPLICATION 55000.00 55000 . 00 LS.O . E. LTD. 1000000.00 0.00 PULKIT PROJECTS LTD. 1000000.00 0.00 AGROY FINANCE LTD . 123000.00 0.00 ITL 542658.00 500000.00 G.D TRAEXIM 0.00 300000 . 00 USHA INTERNATIONAL 0.00 1100000.00 SHREE PRECOATED LTD. 0 . 00 600 0 0 0 0. 00 9 GYAN PRAKASH GUPTA 0.00 77000. 0 0 TDS 12342.0 0 0.0 0 273300 0 . 0 0 8032000 .0 0 9. AFTER CAREFUL CONSIDERATION OF THE FACTS BROUGHT ON RECORD, THE ASSESSEE HAS CLEARLY ESTABLISHED THE PURCHASE A ND SALE OF SHARES WHICH WAS DULY REFLECTED IN THE BOOKS OF ACC OUNT. HENCE, THERE IS NO CASE FOR TAXING SALE PROCEEDS OF RS. 1,03,11,768/- REALIZED ON SALES OF SHARES OF SHREE PRECOATED STEELS LIMITED AS UNEXPLAINED RECEIPTS. HENCE, THE ADDITION OF RS. 1,03,11,768/- IS DELETED. 13. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISS IONS AND CONCLUSION OF THE CIT(A), WE NOTE THAT THE AO MADE ADDITION OF ENTIRE SALE PROCEED OF RS.1,03,11,768 BY HOLDING THAT THE INVESTMENT IS RE FLECTED IN THE FINANCIAL STATEMENT OF THE ASSESSEE COMPANY AS ON 1.4.2006 AN D THE SAME NEITHER REFLECTED AS INVESTMENT NOR AS STOCK-IN-TRADE, HENCE, THE TRA NSACTION OF SALE AND PURCHASE OF SHARES WAS HELD TO BE BUSINESS IN NATURE CONDUCT ED WITH THE INTENTION AND PURPOSE OF EARNING THE PROFIT AND THE AO ADDED THE ENTIRE AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. THE AO HAS NOT DRAW N ANY CONCLUSION OR BROUGHT OUT ANY ADVERSE FACT AGAINST THE ASSESSEE C OMPANY THAT THE ASSESSEE COMPANY PURCHASED THESE SHARES FROM THE MONEY OUT O F FINANCIAL STATEMENT AND ACCOUNTS OF THE ASSESSEE. AT THE SAME TIME, WE OBSE RVE THAT THE CIT(A) GRANTED RELIEF FOR THE ASSESSEE AFTER VERIFYING THE BALANCE SHEET OF THE ASSESSEE WHEREIN INVESTMENT IN 40000 SHARES OF SHREE PRECOATED STEE L LTD. WAS BY MISTAKE SHOWN AS IN THE LIST OF LOAN AND ADVANCES AS PER SC HEDULE 8 ATTACHED TO THE FINANCIAL STATEMENT OF THE ASSESSEE FILED ALONG WIT H THE RETURN OF INCOME. LD. 10 DR FAIRLY SUBMITTED THAT THE ASSESSEE WAS ENTITLED FOR REDUCTION OF PURCHASE AMOUNT OUT OF SALE PROCEEDS RECEIVED ON SALE OF SHA RES AND ANY BALANCE AMOUNT COULD BE HELD AS INCOME OF THE ASSESSEE. UNDER THE SE FACTS AND CIRCUMSTANCES, WE ARE IN AGREEMENT WITH THE FINDINGS AND CONCLUSIO N OF THE CIT(A) THAT THE ASSESSEE COMPANY CLEARLY ESTABLISHED THE PURCHASE A ND SALE OF SHARES WHICH WAS DULY REFLECTED IN THE BOOKS OF ACCOUNTS. HENCE, EN TIRE SALE CONSIDERATION /PROCEEDS REALISED ON SALE OF SHARES OF SHREE PRECO ATED STEEL LTD. CANNOT BE TREATED AS UNEXPLAINED RECEIPTS. 14. COMING TO THE ISSUE OF SHORT TERM CAPITAL GAIN VS BUSINESS INCOME, WE OBSERVE THAT THE CIT(A) HAS TAKEN NOTE OF THE FACT THAT ONLY 40000 SHARES OF SHREE PRECOATED STEEL LTD. WERE SOLD AND THERE WAS NO SALE OF SHARES OF AJMERA REALTY AND THOSE SHARES WERE MERELY HANDED OVER TO THE BROKER FOR SECURITY ONLY AND THESE SHARES CONTINUE TO APPEAR IN THE BALANCE SHEET OF ASSESSEE ON 31.3.2007. FROM PARA NO. 25.1 AND 25.2 AT PAGE 16 OF THE IMPUGNED ORDER, WE NOTE THAT THE ISSUE OF SALE OF AJMERA REALTY LTD. H AS BEEN SET ASIDE TO THE FILE OF AO FOR LIMITED VERIFICATION IN THE LIGHT OF DOCUMEN TS FURNISHED BEFORE THE CIT(A) SUPPORTING THE FACT THAT THE SHARES WERE NOT SOLD BY THE BROKER FOR SECURITY AND THE SAME WERE APPEARING AS INVESTMENT AS ON 31.3.2007 IN THE BOOKS OF THE ASSESSEE. HENCE, WE MAY SAFELY CONCLU DE THAT THE OBSERVATIONS OF THE AO IN PARA 2.6 OF THE ASSESSMENT ORDER AS REASO NS RECORDED FOR TREATING THE CAPITAL GAINS EARNED BY THE ASSESSEE AS BUSINESS IN COME ARE NOT SUSTAINABLE AS 11 THE ASSESSEE COMPANY HAD ENTERED INTO SOLITARY TRAN SACTION OF SALE OF 40000 SHARES OF SHREE PRECOATED STEEL LTD. AND HAD NOT D EALT IN ANY OTHER SHARE DURING THE FINANCIAL YEAR UNDER CONSIDERATION. THE AO WAS NOT JUSTIFIED IN HOLDING THAT THE INCOME EARNED BY THE ASSESSEE FROM SOLITARY TRA NSACTION OF SALE OF 40000 SHARES OF SHREE PRECOATED STEEL LTD. WAS BUSINESS I NCOME OF THE ASSESSEE AS THE INTENTION OF THE ASSESSEE WAS TO MAKE INVESTMENT WH ICH WERE SHOWN BY MISTAKE IN THE LIST OF LOANS AND ADVANCES FILED ALONG WITH RETURN OF INCOME AND THE SAME VERY WELL FOUND PLACE IN THE ASSESSMENT RECORDS. W HEN THESE SHARES WERE NOT FOUND TO BE REFLECTED EITHER AS INVESTMENT OR AS ST OCK-IN-TRADE, THEN THE AO COULD HAVE ASKED THE ASSESSEE COMPANY TO EXPLAIN TH IS OMISSION BUT WITHOUT CONDUCTING SUCH EXERCISE, THE AO MADE ADDITION OF E NTIRE SALE PROCEED WRONGLY TREATING THE SAME AS BUSINESS INCOME OF THE ASSESSE E. 15. THE AO HAS NOT BROUGHT OUT ANY ADVERSE MATERIAL OR FACT TO SUPPORT HIS CONTENTION THAT THE ASSESSEE PURCHASED 40000 SHARES OF SHREE PRECOATED STEEL LTD. FOR RS. 60 LAKH DURING AY 2006-07 OUT OF BOOKS OF ACCOUNTS AND THE TRANSACTION OF SALE AND PURCHASE OF SHARES WAS BUSI NESS IN NATURE. PER CONTRA, AS PER FACTS AND CIRCUMSTANCES AS NOTED ABOVE, WE REAC H TO A CONCLUSION THAT THE ASSESSEE PURCHASED 40000 SHARES OF SHREE PRECOATED STEEL LTD. ON 8.2.2006 AND PAYMENT WAS MADE BY CHEQUE WHICH WAS CLEARED ON 22. 3.2006 AND SUBSEQUENTLY SHARES WERE TRANSFERRED TO THE DMAT AC COUNT OF THE ASSESSEE COMPANY ON 28.3.2006 AND THE INTENTION OF THE ASSES SEE COMPANY WAS TO MAKE 12 INVESTMENT AT THE TIME OF PURCHASE OF SHARES. WE A RE ALSO INCLINED TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE SHARES WERE SOL D UNDER OBLIGATION TO MAKE PAYMENT FOR THE SUBSTANTIAL PART OF PURCHASE CONSID ERATION OF A FLAT WHICH HAS ALSO BEEN NOTED BY THE AO IN PARA 6 AT PAGE 7 OF TH E ASSESSMENT ORDER. LD. DR HAS ALSO NOT DISPUTED THE FACT THAT THE ASSESSEE HA D ONLY ONE DMAT ACCOUNT DURING FY 2006-07 AND SECOND DMAT ACCOUNT WAS OPENE D ON 29.1.2008 DURING FY 2007-08. 16. ON THE BASIS OF FOREGOING DISCUSSION, WE HOLD T HAT THE ASSESSEE HAS SHOWN THE PURCHASE OF SHARES AS INVESTMENT IN THE BOOKS O F ACCOUNTS AND THE TRANSACTIONS WERE NOT MANY. FROM THE FINANCIAL STA TEMENT AND BOOKS OF ACCOUNTS OF THE ASSESSEE, IT CLEARLY REVEALS THAT T HE ASSESSEE DID NOT BORROW FUNDS TO PURCHASE THE SHARES AND NO RISK WAS TAKEN BY THE ASSESSEE LINKED WITH THE SHARE MARKET FLUCTUATION AS THE SHARES WERE ACTUALL Y PURCHASED BY WAY OF MAKING PAYMENT THROUGH CHEQUE AND THE SAME WERE DUL Y TRANSFERRED TO THE DMAT ACCOUNT OF THE ASSESSEE. THE ASSESSEE EXPLAIN ED THE REASONS FOR SELLING THE SHARES WITHIN A FEW DAYS FROM THE PURCHASE OF S HARES AND THE REASONS RESORTED BY THE AO FOR TREATING THE INCOME AS BUSIN ESS INCOME INSTEAD OF CAPITAL GAINS ARE NOT CONVINCING AND ACCEPTABLE. ON THE O THER HAND, THE CIT(A) WAS RIGHT AND QUITE JUSTIFIED IN TREATING THE INCOME ON SALE OF SHARES WHICH WAS ONLY TRANSACTION OF THE ASSESSEE DURING THE RELEVANT PER IOD, AS TAXABLE UNDER THE HEAD OF CAPITAL GAINS AS DECLARED BY THE ASSESSEE. 13 17. THEREFORE, AS PER OUR OBSERVATIONS AND CONCLUSI ONS AS NOTED ABOVE, WE ARE UNABLE TO SEE ANY AMBIGUITY, PERVERSITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE IMPUGNED ORDER AND, THEREFORE, GROUND NO. 1 & 2 OF THE REVENUE BEING DEVOID OF MERITS ARE DISMISSED. GROUND NO.3 18. APROPOS GROUND NO.3, WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON R ECORD PALED BEFORE US. LD. DR SUPPORTING THE ACTION OF THE AO SUBMITTED THAT T HE AO NOTED THAT THE ASSESSEE HAS PURCHASED 40000 SHARES OF AJMERA REALT Y AND INFRA INDIA LTD. ON 20.3.2006 BUT IN THE FINANCIAL STATEMENT, THERE WER E NEITHER SHARES AS INVESTMENT NOR AS STOCK AS ON 1.4.2006. THE DR HAS FURTHER DR AWN OUR ATTENTION TOWARDS PARA 5 AT PAGE 6 OF THE ASSESSMENT ORDER AND SUBMIT TED THAT THESE SHARES WERE SOLD DURING F.Y. 2006-07 IN APRIL 2006 THROUGH SAM GLOBAL SECURITIES LTD. AND THE TRANSACTION WAS NOT REFLECTED IN THE FINANCIAL STATEMENT OF AY 2007-08 NOR DISCLOSED IN THE COMPUTATION OF INCOME FOR TAXATION PURPOSES, THEREFORE, THE AO RIGHTLY ADDED THE SAME TO THE TOTAL INCOME OF THE A SSESSEE. 19. LD. DR VEHEMENTLY CONTENDED THAT THE CIT(A) GRA NTED RELIEF FOR THE ASSESSEE WITHOUT ANY COGENT AND JUSTIFIED REASON AN D, THEREFORE, THE IMPUGNED ORDER MAY BE SET ASIDE BY RESTORING THAT OF THE AO. 14 20. REPLYING TO THE ABOVE, LD. AR HAS DRAWN OUR ATT ENTION TOWARDS LETTER DATED 30.9.2009 ADDRESSED BY AJMERA REALTY AND INFR A INDIA LTD. TO THE MANAGER, NATIONAL STOCK EXCHANGE LIMITED AND SUBMIT TED THAT THE NAME OF SHREE PRECOATED STEEL LTD. WAS CHANGED INTO AJMERA REALTY AND INFRA INDIA LTD. AFTER PURCHASE OF SHARES BY THE ASSESSEE AND A T THE TIME OF SALE OF SHARES BY THE ASSESSEE COMPANY, THE NAME OF SHREE PRECOATED S TEEL LTD. WAS CHANGED INTO AJMERA REALTY AND INFRA INDIA LTD. AND THE SAME W AS SHOWN IN THE D-MAT STATEMENT OF THE ASSESSEE ABOVE WHICH CREATED CONFU SION AND DOUBT. LD. AR FURTHER SUBMITTED THAT NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO EXPLAIN THE ABOVE DISCREPANCY AND THE AO DID NOT CONSIDER THE B ALANCE SHEET OF THE ASSESSEE AS ON 31.3.2006 WHERE INVESTMENT IN SHARES SOLD WAS SHOWN IN THE OPENING BALANCE SHEET. LD. AR HAS ALSO DRAWN OUR ATTENTION TOWARDS ASSESSMENT ORDER DATED 31.12.2010 FOR AY 2006-07 AND SUBMITTED THAT THE ASSESSMENT ORDER FOR AY 2006-07 CLARIFIES THE DOUBTS ABOUT INVESTMENT OF ASSESSEE COMPANY IN SHREE PRECOATED STEEL LTD. WHICH WAS SHOWN IN THE BALANCE SHEET AS ON 31.3.2006 AND SUBSEQUENTLY THE SAME SHARES APPEARED IN THE DMAT A CCOUNT IN THE NAME OF AJMERA REALTY AND INFRA INDIA LTD. LD. AR HAS ALS O DRAWN OUR ATTENTION TOWARDS PARA 18 AT PAGE 14 AND PARA 20 AT PAGE 15 O F THE IMPUGNED ORDER AND SUBMITTED THAT THE ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS IN THIS REGARD WHICH WERE PROPERLY CONSIDERED BY THE FIRST APPELLA TE AUTHORITY AND RIGHTLY CONCLUDED THAT THE ASSESSEE HAS BROUGHT ON RECORD S UFFICIENT MATERIAL TO SHOW 15 THAT THE NAME OF THE COMPANY SHREE PRECOATED STEEL LTD. GOT CHANGED TO AJMERA REALTY AND INFRA INDIA LTD. 21. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, FROM THE IMPUGNED ORDER WE OBSERVE THAT THE CIT(A) GRANTED RELIEF FOR THE A SSESSEE WITH FOLLOWING CONCLUSION:- 20. AS ALREADY STATED, THE ASSESSEE HAS PURCHASED SHARES OF SHREE PRECOATED STEELS LIMITED. SINCE THE NAME OF THE COMPANY GOT CHANGED TO AJMERA REALTY & INFRA IN DIA LTD., AS ON THE DATE OF VERIFICATION, THE CONFUSION HAS A RISEN. THE AO CONCLUDED THAT INVESTMENT IN 40,000 SHARES OF AJMER A REALTY & INFRA INDIA LTD. IS NOT SHOWN IN BOOKS OF ACCOUNT S. THE ASSESSEE HAS BROUGHT ON RECORD MATERIAL TO SHOW THA T NAME OF COMPANY I.E. SHREE PRECOATED STEELS LTD. GOT CHANGE D TO AJMERA REALTY & INFRA INDIA LTD. IN VIEW OF MY FIND INGS GIVEN WHILE DECIDING GROUND NOS. 2 & 4 ARID IN THE LIGHT OF THE SUBMISSIONS OF THE AR, THE ADDITION IS NOT CALLED F OR. 22. ON SPECIFIC QUERY FROM THE BENCH, LD. DR HAS NO T DISPUTED THE FACT THAT THE NAME OF SHREE PRECOATED STEELS LTD. GOT CHANGE D TO AJMERA REALTY & INFRA INDIA LTD. AT THE TIME OF SALE OF SHARES BY THE ASS ESSEE COMPANY. IN THIS SITUATION, THE CONCLUSION OF THE AO WAS NOT CORRECT THAT THE TRANSACTIONS WERE NOT REFLECTED IN THE FINANCIAL STATEMENT OF THE ASS ESSEE COMPANY OF AY 2006-07 AND NOR THE SAME WERE DISCLOSED FOR THE PURPOSE OF COMPUTATION OF TAXATION BECAUSE THE ASSESSEE COMPANY INCLUDED THE AMOUNT OF RS. 43,11,768 TO ITS RETURNED INCOME AND WHEN THE NAME OF COMPANY HAS BE EN CHANGED AT THE TIME OF SALE OF SHARES, THEN IT CANNOT BE CONCLUDED THAT THE INVESTMENT IN 40000 SHARES OF AJMERA REALTY & INFRA INDIA LTD. WAS NOT SHOWN IN THE BOOKS OF 16 ACCOUNTS AND, HENCE, CONCLUSION OF THE AO MAKING AD DITION OF RS.1,10,00,000 WAS NOT ACCEPTABLE. ON THE OTHER HAND, THE CIT(A) RIGHTLY REACHED TO A LOGICAL CONCLUSION THAT FINDINGS OF THE AO WERE NOT JUST AN D PROPER AND IN VIEW OF FACTS AS NOTED ABOVE, THE ADDITION IN THIS REGARD WAS NOT SUSTAINABLE. HENCE GROUND NO. 3 OF THE REVENUE BEING DEVOID OF MERITS IS DISM ISSED. 23. IN THE RESULT, THE APPEAL OF REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.03.2015. SD/- SD/- (J.S. REDDY) (CHANDRAM OHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 3 RD MARCH 2015 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT. REGISTRAR