SAGAR CONSTRUCTIONS, MUMBAI V. ADDL CIT RG 25(2), MUMBAI

ITA 4646/MUM/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9305 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 19-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 09-06-2011
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN
• Keywords: Unexplained cash credit; Business income; Transactions in derivatives; Earning of tax free income; Deemed dividend
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA, AM & SHRI SANJAY GARG , JM ITA NO. 4646 / MUM/20 1 1 ( ASSESSMENT YEAR : 2 00 8 - 09 ) SAGAR CONSTRUCTIONS, C - 402, GOKUL DIVINE, IRLA, S.V.ROAD, VILE PARLE (WEST) , MUMBAI - 56 VS. THE ADDL.CIT, RANGE - 25(2), MUMBAI PAN/GIR NO. : A A GFS 8539 N ( APPELLANT ) .. ( RESPONDENT ) AND ITA NO. 4711/ MUM/20 11 ( ASSESSMENT YEAR :2008 - 09 ) THE ADDL.CIT, RANGE - 25(2), MUMBAI VS. SAGAR CONSTRUCTIONS, C - 402, GOKUL DIVINE, IRLA, S.V.ROAD, VILE PARLE (WEST), MUMBAI - 56 PAN/GIR NO. : AAGFS 8539 N ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI VIMAL PUNMIYA /REVENUE BY : SHRI ASGHAR ZAIN DATE OF HEARING : 1 9 / 0 1 /201 5 DATE OF PRONOUNCEMENT : 11/03 /2015 O R D E R PER R.C.SHARMA ( A .M.) : TH ESE ARE THE CROSS APPEAL S FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) DATED 28 - 3 - 2011 FOR THE ASSES SMENT YEAR S 20 0 8 - 09 , IN THE MATTER OF ORDER PASSED U/S. 143(3) OF THE I.T.ACT . 2. THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO TREATMENT OF CAPITAL GAINS OFFERED, WHICH WAS TREATED BY THE AO AS BUSINESS INCOME. ITA NO S . 4646 &4711 /20 1 1 2 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND REC ORD PERUSED. FACTS IN BRIEF ARE THAT THE MAIN BUSINESS OF THE ASSESSEE IS BUILDING AND CONSTRUCTION ACTIVITY. THE ASSESSEE WAS ENGAGED IN DEVELOPING REAL ESTATE UPTO 31 - 3 - 2006. FROM THE ACCOUNTING YEAR 2006 - 07 , THE COMPANY STARTED INVESTMENT IN SHARES AND SECURITIES. THE PROFIT ON SPECULATION AS WELL AS F&O TRANSACTION WAS CONSIDERED AS BUSINESS INCOME, WHEREAS PROFIT FROM INVESTMENT IN SHARE AND SECURITIES WAS TREATED AS SHORT TERM AND LONG TERM DEPENDING ON THE PERIOD OF HOLDING. IN THE ASSESSMENT YEAR 2 007 - 08 , THE ASSESSEE HAD CLAIMED CAPITAL GAINS IN RESPECT OF PROFIT EARNED ON SALE OF SHARES WHICH WAS TREATED BY THE AO AS BUSINESS INCOME. IN AN APPEAL FILED BEFORE THE TRIBUNAL, THE TRIBUNAL VIDE ITS ORDER DATED 3 - 5 - 2013, DECIDED THE ISSUE IN FAVOUR OF ASSESSEE AND HELD THAT PROFIT EARNED ON SALE OF SHARES WAS LIABLE TO BE TAXED AS CAPITAL GAINS. 4. LD. AR SUBMITTED THAT FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, THEREFORE, THE CAPITAL GAINS OFFERED BY THE ASSESSEE SHOULD BE A CCEPTED AS LIABLE TO CAPITAL GAINS TAX. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE AO HAS TREATED CAPITAL GAINS AS BUSINESS INCOME ON THE PLEA OF FREQUENCY, REGULARITY AND VOLUME OF TRANSACTION. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO. FROM THE RECORD WE FOUND THAT ASSESSEE HAS DEALT IN FOLLOWING THREE TYPES OF SHARE TRANSACTION DURING THE YEAR : - I) SHARE TRADING ON FUTURE & OPTION BASIS. II) SHARE TRADING ON SPECULATION BUSINESS I.E. SELLING & BUYING OF SAME SCRIP T ON SAME DAY. III) SHARE TRADING ON SHORT TERM CAPITAL GAIN. THE DISPUTE IN THE PRESENT APPEAL RELATES ONLY TO THIRD TYPE OF TRANSACTION, PROFIT ON WHICH WAS OFFERED UNDER THE HEAD CAPITAL GAINS. IN SUPPORT OF THE ITA NO S . 4646 &4711 /20 1 1 3 PROPOSITION THAT INVESTMENT CAN BE LIABL E TO TAX ONLY UNDER THE HEAD CAPITAL GAINS, RELIANCE WAS PLACED IN THE CASE OF CIT VS. S . RAMAAMIRTHAM, (2008) 306 ITR 239 (MAD) . RELIANCE WAS ALSO PLACED ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF GOPAL PUROHIT, 122 TTJ 87 (MUM) , WHERE IN IT WAS HELD THAT PROFIT ARISING FROM SUCH TRANSACTION SHOULD NOT BE TREATED AS INCOME FROM BUSINESS AND PROFESSION. IT WAS FURTHER SUBMITTED BY LD.AR THAT THE TRIBUNAL HAS DEALT WITH EACH AND EVERY ASPECT OF TRANSACTION IN THE IMMEDIATELY PRECEDING ASS ESSMENT YEAR 2007 - 08 AND HELD AS UNDER : - 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. UNDISPUTEDLY, THE ASSESSEE IN ITS BOOKS OF ACCOUNT HAS SHOWN THE INVESTMENT IN THE SHARES UNDER THE HEAD INVES TMENT. THIS ACTIVITY OF THE ASSESSEE HAS BEEN STARTED IN THE PRESENT YEAR ONLY. INITIALLY THE ASSESSEE HAD PURCHASED CERTAIN SHARES AND SOLD THEM WITHIN A SHORT SPAN. THE REASON FOR THE SAME HAS BEEN STATED TO BE FALL IN THE STOCK MARKET. FOR PROVING SO A CHART HAS BEEN FILED, ACCORDING TO WHICH THERE WAS A FALL IN THE BSE INDEX. IT IS FOR THAT REASON THE ASSESSEE HAS SUFFERED LOSS IN THE INITIAL TRANSACTIONS. FROM THE SALE AND PURCHASE ENTERED INTO BY THE ASSESSEE IT HAS BEEN DESCRIBED THAT ON TH REE DAYS ASSESSEE HAS PURCHASED THOSE SHARES AND ON 10 DAYS THOSE SHARES WERE SOLD. A SUBSTANTIAL PORTION OF THE SHARES PURCHASED ARE UNSOLD AND ARE OUTSTANDING IN THE BALANCE SHEET UNDER THE HEAD INVESTMENT. FROM THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE IT CANNOT BE SAID THERE WAS A FREQUENT SALE AND PURCHASE OF SHARES. THE REASON OF SALE IS SUPPORTED BY FALL OF BSE INDEX. THUS ACCORDING TO FACTS AND CIRCUMSTANCES OF THE CASE, IT CANNOT BE SAID THAT ASSESSEE HAS ENTERED INTO ACTIVITY OF SA LE AND PURCHASE OF SHARES WITH A VIEW TO TRADE. 7.1 THOUGH THE AO IN THE ASSESSMENT ORDER HAS MENTIONED THAT ASSESSEE HAS UTILIZED BORROWED FUNDS, BUT DURING THE COURSE OF HEARING REFERENCE WAS MADE TO P&L ACCOUNT TO SHOW THAT ASSESSEE DOES NOT BEAR ANY INTEREST LIABILITY EXCEPT A PALTRY SUM DEBITED TO P&L ACCOUNT WHICH IS AN AMOUNT OF RS.18,541/ - , AND REPRESENTS INTEREST ON CASH/CREDIT ACCOUNT. SO FAR AS IT RELATES TO AMOUNT BORROWED BY THE PARTNERS IT WAS SHOWN BY LD. AR THAT ASSESSEE FIRM HAS CHA RGED INTEREST OF RS.3,10,215/ - FROM MR. BINAL S. KORADIA AND RS.65,429/ - FROM MRS. AMISHA VINAL KORADIA AT THE SAME TIME INTEREST OF RS. 2,13,318/ - HAS BEEN PAID BY ASSESSEE FIRM TO MR. BINAL S. KORADIA(HUF). THUS IT IS SEEN FROM THE ACCOUNTS OF TH E PARTNERS THAT INTEREST HAS BEEN CHARGED BY THE ASSESSEE WHERE THE PARTNERS WERE UTILIZING CAPITAL OF THE FIRM. ITA NO S . 4646 &4711 /20 1 1 4 SIMILARLY INTEREST IS PAID TO THE PARTNER WHERE FIRM HAS UTILIZED CAPITAL OF THE PARTNER. THUS, THERE IS NO IMPACT ON THE ACTIVITY OF THE A SSESSEE REGARDING SALE AND PURCHASE OF SHARES SO FAR AS IT RELATES TO AMOUNT BORROWED BY PARTNERS. IT IS ALSO OBSERVED BY THE A.O THAT PARTNERS HAVE BORROWED HUGE CAPITAL BUT HE HAS NOT BROUGHT ON RECORD ANY SINGLE INSTANCE TO SUBSTANTIATE SUCH OBSERVAT ION. ON THE CONTRARY FROM THE ACCOUNTS IT IS SEEN THAT THE INTEREST HAS BEEN CHARGED AND PAID TO THE PARTNERS ON THEIR CAPITAL AND THUS THE ASSESSEE FIRM HAS NOT PAID ANY INTEREST WHICH CAN BE SAID TO BE INCURRED FOR THE PURPOSE OF INVESTING IN THE ACT IVITY OF SALE AND PURCHASE OF SHARES. 7.2 MOREOVER, AS PER JUDICIAL DECISIONS A DISCRETION HAS BEEN PROVIDED TO THE ASSESSEE TO DIVIDE ITS ACTIVITY OF SALE AND PURCHASE OF SHARES INTO TWO CATEGORIES I.E. ONE FOR INVESTMENT IN THE SHARES GIVING RISE TO INCOME FROM CAPITAL GAIN AND THE SECOND IS TO DEAL IN THE SALE AND PURCHASE OF SHARES AS A TRADER. SUCH DISCRETION OF THE ASSESSEE HAS BEEN RECOGNIZED IN VARIOUS JUDICIAL PRONOUNCEMENTS WHICH HAVE BEEN RELIED UPON BY LD. AR AND HAVE BEEN DISCUSSED IN TH E ABOVE PART OF THIS ORDER. ACCORDING TO SUCH DISCRETION ASSESSEE HAS EXPRESSED ITS INTENTION TO ASSIGN SUCH ACTIVITY IN THE NATURE OF INVESTMENT. MERELY SOME ENTRIES OF SALE OF IMMEDIATE SHARES AFTER PURCHASE THEREOF CANNOT TURN DOWN THAT ACTIVITY FROM INVESTMENT INTO TRADE PARTICULARLY WHEN ASSESSEE HAS REASON TO SELL THE SHARES ON ACCOUNT OF FALL IN THE B.S.E INDEX. THIS POSITION ALSO HAS BEEN RECOGNIZED IN THE DECISIONS RELIED UPON BY LD. AR, WHEREIN IT HAS BEEN HELD THAT NO PRUDENT PERSON WHETHER HE IS A TRADER OR INVESTOR WOULD LIKE TO SEE THAT SUCH ACTIVITY WILL TURN OUT AS AN ACTIVITY OF LOSS OR EROSION IN INVESTMENT. 7.3 KEEPING IN VIEW THE ABOVE DISCUSSIONS AND FACTUAL POSITION, WE ARE OF THE OPINION THAT THE ACTIVITY OF SALE AND PUR CHASE OF SHARES ENTERED INTO BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION CANNOT BE HELD TO BE AN ACTIVITY GIVING RISE TO AN INCOME ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. THE INVESTMENT WAS MADE BY THE ASSESSEE IN THE ACTIVI TY OF SALE AND PURCHASE OF SHARE WAS WITH AN INTENTION TO INVEST AND SHARES UNSOLD HAVE BEEN SHOWN UNDER THE HEAD INVESTMENT. THE SALE AT THE SHORT PERIOD WAS SUPPORTED BY JUST CAUSE I.E. FALL IN PRICE OF SHARES. THEREFORE, WE REVERSE THE FINDING R ECORDED BY LD. CIT(A) AND HOLD THAT THE GAIN EARNED BY THE ASSESSEE WAS FROM SALE AND PURCHASE OF SHARES IS GAIN ASSESSABLE UNDER THE HEAD SHORT TERM CAPITAL GAIN. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS ALLOWED. 6. ON THE OTHER HAND, LD. DR RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT , 188 TAXMAN 140 (BOM) ; WALLFORT FINANCIAL SERVICES LTD., 41 SOT 200; MANMOHAK PROPERTIES P. LTD., 39 TAXMANN.COM 105; KORADIA CONSTRUCTION P. LTD., 39 TAXMANN.COM ITA NO S . 4646 &4711 /20 1 1 5 20; CIRCULAR NO. 4/2007, DATED 15 - 6 - 2007; KARAN R BAHL, 37 TAXMANN.COM 29; RAJAN R BAHL, 12 TAXMANN.COM 447; NASHIK CAPITAL FINANCIAL SERVICES LTD., 33 TAXMANN.COM 190, SHAH - LA INVESTMENT & FINANCIAL CONSULTANTS P. LTD., 2 SOT 371; MAFATLAL FABRICS LTD., 17 TAXMANN.COM 50; DEVJI NENSHI PALANI, 28 TAXMANN.COM 209; VEENA KARLA 37 TAXMANN.COM 208 AND MANOJ KUMAR SAMDARIA, 52 TAXMANN.COM 247 (SC) , AND CONTENDED THAT IN VIEW OF THESE DECISIONS, THE AO WAS JUSTIFIED IN TREATING THE GAINS OFFERED ON SA LE OF SHARES AS BUSINESS INCOME. IT WAS ARGUED BY LD. CITD R THAT THE DOMINANT JUDICIAL, ADMINISTRATIVE OPINION AND LEGAL POSITION IS THAT ALTHOUGH THERE IS NO BAR ON AN ASSESSEE FOR MAINTAINING TWO PORTFOLIOS, VIZ., AN INVESTMENT PORTF OLIO AND A TRADING PORTFOLIO. HOWEVER, WHILE A CCOUNTS IN RESPECT OF THE SAID ACTIVITIES / PORTF OLIOS SHOULD NOT ONLY BE SEPARATELY MAINTAINED, BUT, IN ADDITION A SYSTEMATIC CRITERIA NEEDS TO BE ADOPTED AND CONSISTENTLY APPLIED OR FOLLOWED TO BIFURCATE THE VARIOUS TRANSACTIONS INTO EACH OF THE PORTFOLI OS, AT THE VERY BEGINNING OF ENTERING OF THESE TRANSACTIONS AND NOT IN THE CASE OF THE ASSESSEE WHEN THE SALES STATEMENTS ARE RECEIVED. FURTHER, THE VERY BASIS OF THESE TRANSACTION ENTERED FOR PROFIT MOTIVE, ITS CONDUCT TO CARRY OUT SUCH TRANSACTIONS, SYST EMATIC, CONSISTENT, FREQUENT, VOLUMINOUS AND REPETITIVE NATURE OF THESE TRANSACTIONS COUPLED WITH SPECULATIVE AND DERIVATIVE TRANSACTIONS IN SIMILAR SHARES WITH SAME BROKERS UNDER SAME DEMAT ACCOUNTS FUNDED OUT OF BORROWED AND MARGIN FUNDING; ALL SHOWS THA T THESE ARE BUSINESS TRANSACTIONS AND NOT INVESTMENT TRANSACTIONS. IN THE CASE OF AN INVESTMENT ACTIVITY THE INTENTION TO ACQUIRE AND HOLD THE UNDERLYING SECURITIES SHOULD BE EVIDENT FROM THE UNDERLYING FACTS FROM THE ITA NO S . 4646 &4711 /20 1 1 6 VERY BEGINNING OF THE ENTRY OF SUCH TR ANSACTIONS AND THE SAME SHOULD BE ACCORDINGLY BROUGHT ON RECORDS. THESE TRANSACTIONS NEED TO BE SEPARATELY CONDUCTED OR CARRIED OUT IN ITS SEPARATE DEMAT ACCOUNTS, TRADING ACCOUNTS, NOT OUT OF SAME MARGIN FUNDING AVAILED WITH SAME BROKER USING THE SAME POO L ACCOUNT ETC. ETC. THE TRANSACTIONS SHOULD INVARIABLY BE BACKED BY ACTUAL/CONSTRUCTIVE DELIVERY OF SHARES, BUT THE SAME IS MISSING IN THE CASE OF THE ASSESSEE SO FAR AS SHARES TRADED THROUGH POOL ACCOUNTS OF THE VARIOUS BROKERS FINANCED OUT OF MARGIN FUND ING; IN FACT NO SUCH DEMAT ACCOUNTS OF THE BROKERS WITH THE SHARES BELONGING TO THE ASSESSEE CREDITED THEREIN WAS EVER PRODUCED BY THE ASSESSEE EITHER BEFORE THE AO OR BEFORE THE CIT(A). AND LASTLY, THE VERY FACT THAT THE ASSESS E E IS IN THE BUSINESS OF SPE CULATION AND TRADING IN SIMILAR SHARES WITH SAME DEMAT ACCOUNT, BROKER, MIXED FUNDS, HAVING MAINTAINED NO SEPARATE ACCOUNTS PROVE THAT IT IS ONLY IN SHARE TRADING BUSINESS DURING THE YEAR UNDER CONSIDERATION . 7. LD. AR SUBMITTED THAT MOST OF CASES CITED AB OVE BY LD. DR FAVOURS THE PLEA TAKEN BY THE ASSESSEE, WHICH HAVE ALSO BEEN UPHELD BY THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. IN RESPECT OF DECISION IN THE CASE OF GOPAL PUROHIT, LD. AR SUBMITTED THAT THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT SQUARELY APPLIES IN ASSESSEES CASE INSOFAR AS ASSESSEE HAS TWO SEPARATE PORTFOLIOS MAINTAINED AND ONLY DELIVERY BASED TRANSACTION WERE OFFERED FOR TAXATION UNDER THE HEAD INCOME FROM CAPITAL GAIN S. THE SAME ARE REF LECTED IN BOOKS OF ACCOUNT UNDER THE HEAD INVESTMENT ONLY. IN RESPECT OF WALLFORT FINANCIAL SERVICES LTD. (SUPRA) , LD. AR CONTENDED ITA NO S . 4646 &4711 /20 1 1 7 THAT FACTS ARE TOTALLY DIFFERENT INSOFAR AS SHARES WERE HELD BY ASSESSEE AS INVESTMENT WHEREAS IN THE AFORESAID CASE, SHAR ES WERE SHOWN AS STOCK - IN - TRADE, M OREOVER, ASSESSEE ITSELF HAS OFFERED GAIN AS BUSINESS INCOME IN THE PRECEDING YEAR. AS PER LD. AR THE CASE LAW RELIED BY THE LD. DR IN CASE OF MANMOHAK PROPERTIES P. LTD. (SUPRA) , THE ISSUE WAS RELATED TO VALIDITY OF ORDER PASSED BY CIT(A) U/S.263. HOWEVER, NO FINDING WAS GIVEN RELATING TO ASSESSMENT OF CAPITAL GAIN ON SALE OF SHARES, HENCE, SUCH CASE CANNOT BE RELIED IN ASSESSEES CASE. WITH RESPECT TO KORADIA CONSTRUCTION PVT. LTD. (SUPRA), LD. AR SUBMITTED THAT THIS DECI SION OF MUMBAI BENCH SUPPORTS THE CASE OF THE ASSESSEE INSOFAR AS THE FINDINGS GIVEN IN THE AFORESAID CASE EQUALLY APPLICABLE TO THE ASSESSEE SINCE THE GAIN ON SALE OF SHARES REFLECTED AS INVESTMENT WAS HELD TO BE LIABLE TO BE ASSESSED UNDER THE HEAD INC OME FROM CAPITAL GAINS. AS PER LD. AR EVEN THE CIRCULAR NO. 4/2007 DATED 15 - 6 - 2007 ALSO SUPPORTS THE CASE OF THE ASSESSEE SINCE THE ASSESSEE HAS OFFERED INCOME UNDER THE HEAD INCOME FROM CAPITAL GAINS ON SHARES WHICH ARE HELD AS INVESTMENT. IN CASE OF KARAN R BAHL (SUPRA) , LD. AR CONTENDED THAT NO FINDING WAS GIVEN AND SIMPLY THE CASE WAS REMITTED BACK TO THE FILE OF AO, HENCE, HAS NO RELEVANCE IN THE PRESENT APPEAL. IN CASE OF RAJAN R BAHL, THE MATTER WAS REMANDED BACK TO THE FILE OF THE AO AS THE ASSE SSEE HAD NOT FILED ANY DETAILS, WHEREAS IN THE INSTANT CASE, THE ASSESSEE HAS FILED ALL THE DETAILS, THEREFORE, RELIANCE OF AFORESAID CASE HAS NO RELEVANCE IN THE CASE OF ASSESSEE. WITH REGARD TO THE CASE OF NASHIK CAPITAL FINANCIAL SERVICES P. LTD. , THE L D. AR SUBMITTED THAT THIS CASE IS RELATED TO APPLICABILITY OF SECTION 73. HOWEVER, THE ASSESSEE IS A PARTNERSHIP FIRM, THEREFORE, THE ITA NO S . 4646 &4711 /20 1 1 8 AFORESAID CASE HAS NO RELEVANCE WITH THE PRESENT APPEAL. IN CASE OF SHAH - LA INVESTMENT & FINANCIAL CONSULTANTS P. LTD. (SU PRA), THE LD. AR SUBMITTED THAT THIS CASE IS EXCLUSIVELY SUPPORTS THE CASE OF THE ASSESSEE, THEREFORE, APPLYING THE SAME, THE GAIN IS LIABLE TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN. IN REGARD TO DECISION IN THE CASE OF MAFATLAL FABRICS P LTD., THE LD. AR SUBMITTED THAT THE FACTS IN THE AFORESAID CASE ARE TOTALLY DIFFERENT TO THE PRESENT CASE, THEREFORE THE FINDINGS GIVEN IN THE AFORESAID CASE ARE NOT APPLICABLE TO THE INSTANT CASE. LD. AR SUBMITTED THAT IN CASE OF DEVJI NENSHI PALANI (SUPRA); VEENA S. KARLA (SUPRA) AND IN THE CASE OF MANOJ KUMAR SAMDARIA, THE FACTS AND CIRCUMSTANCES WER E TOTALLY DIFFERENT TO THE FACTS OF THE PRESENT APPEAL, THEREFORE, THE FINDINGS GIVEN IN THE AFORESAID APPEALS HAVE NO RELEVANCE TO THE APPEAL OF THE ASSESSEE. 8. IT WAS FURTHER CONTENDED BY LD. AR THAT M ERELY BECAUSE ASSESSEE LIQUIDATES ITS INVESTMENT WITHIN SHORT SPAN OF TIME WHICH HAD GIVEN BETTER OVERALL EARNING TO ASSESSEE. I T WOULD NOT LEAD TO CONCLUSION THAT ASSESSEE HAD NO INTENTION TO KEEP ON FUNDS AS INVESTOR IN EQUITY SHARES, BUT WAS ACTUALLY INTENDED TO TRADE IN SHARE. FOR THIS PURPOSE RELIANCE WAS PLACED THE DECISION OF TRIBUNAL IN THE CASE OF DCIT V /S E - CAP PARTNERS [2014] 45 TAXMANN.COM 342 (MUMBAI - TRIB) AND MANISH KARWA V /S ACIT [2014] 45 TAXMANN.COM 351 (IND. TRIB ) . AS PER LD. AR THE TRIBUNAL HELD ASSESSEE AS INVESTOR IN EARLIER YEAR, THEREFORE, ASSESSEE HAS TO BE CONSIDERED AS INVESTOR IN SUBSEQUENT YEAR, FOR THIS PURPOSE RELIANCE WAS PLACED ON THE DECISION OF DCIT VS. KRA HOLDING & TRADING P. LTD. {201 2} 26 TAXMANN.COM 48(PUNE TRIB.). ITA NO S . 4646 &4711 /20 1 1 9 9 . IN VIEW OF THE ABOVE DISCUSSION AND AFTER GOING THROUGH THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, WHEREIN FACTS AND CIRCUMSTANCES WERE THE SAME, WE DIRECT THE AO T O TREAT THE PROFIT ON SALE OF SHARES AS SHORT TERM AND LONG TERM CAPITAL GAINS DEPENDING ON THE PERIOD OF HOLDING OF SHARES. WE DIRECT ACCORDINGLY. 10 . IN THE APPEAL OF THE REVENUE (I.E. ITA NO.4711/M/2011 ), THE REVENUE HAS TAKEN FOLLOWING GROUNDS : - 1.` ' ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) IS ERRED IN DELETING THE ADDITION OF RS .45,60,000 / - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNDISCLOSED SALE OF SHARES OF M/S.RAJESH EXPORTS LTD.,. 2. 'ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 76,13,675 / - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNDISCLOSED SALE OF SHARES OF M/ S. HINDUSTAN ORGANICS LTD. 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE ID.CIT(A) ERRED IN DELETING THE ADDITION OF RS .5,78,70,000 / - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEEMED DIVIDEND U/S.2(22)(E) OF THE I.T.ACT, 1961. 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE ID. CIT(A) ERRED IN DELETING THE ADDITION OF RS.13, 11,123 / - MADE BY THE ASSESSING OFFICER U/S.14A OF THE I.T.ACT. 1961.' 5. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE ID. CIT(A) ERRED IN DELETING THE ADDITION OF RS .56,54,598/ - MADE BY THE ASSESSING OFFICER AS UNEXPLAINED CASH CREDIT OF THE ASSESSEE U/S.68 OF THE I.T.ACT,1961 WITH REGARD TO SALE OF 25000 SCRIPTS OF M/S.KARUTURI.' 6. 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD.CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF TH E ASSESSING OFFICER BE RESTORED.' 11 . WITH REGARD TO ADDITION OF RS.45,60,000/ - ON ACCOUNT OF UNDISCLOSED SALE OF SHARES OF M/S RAJESH EXPORTS, WE FOUND THAT ADDITION WAS MADE BY THE AO ON MISCONCEPTION THAT ASSESSEE HAD PURCHASED 5000 SHARES OF M/S RAJES H EXPORT S , BUT NEITHER THESE SHARES WERE SOLD DURING THE YEAR ITA NO S . 4646 &4711 /20 1 1 10 NOR SHOWN IN THE CLOSING INVENTORY. THE CIT(A) HAS DELETED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS : - 4 .3.2 REGARDING SHARES OF M/S.RAJESH EXPORTS, THE A.O. NOTICED THAT THE APPELL ANT PURCHASED 5000 SHARES DURING THIS YEAR AND DID NOT ADMIT ANY SALE AND THERE WAS NO CLOSING STOCK. HE, THEREFORE, ASSUMED THAT THE APPELLANT SOLD 5000 SHARES OUTSIDE THE BOOKS OF ACCOUNTS. HE DID NOT ACCEPT THE EXPLANATION OF THE APPELLANT THAT THE SAME WAS SOLD THROUGH M/S. KORADIA CONSTRUCTION FOR RS.28,00,004/ - ON THE GROUND THAT NO EVIDENCE WAS FILED. HOWEVER AS CONTENDED BY THE REPRESENTATIVE, THE APPELLANT FILED A COPY OF ACCOUNT OF THE APPELLANT IN THE BOOKS OF ACCOUNTS OF M/S KORADIA CONSTRUCTION AS THE A.O. HIMSELF ACCEPTED IN PAGE 14 OF THE ASSESSMENT ORDER WHILE DEALING WITH THE ISSUE KARUTURI SHARES. AS SEEN FROM THE ABOVE ACCOUNT A SUM OF RS 28,00,004/ - IS CREDITED ON 22 - 1 - 08 BEING SALE PROCEEDS OF 5000 SHARES OF RAJESH EXPORTS. FURTHER AS P ER THE STATEMENT OF CAPITAL GAIN FILED ALONG WITH RETURN OF INCOME, SALE OF 5000 SHARES IS ADMITTED ON 22 - 1 - 08 AT RS.28,00,005/ - BY INCURRING LOSS OF RS 20,93,136/ - IN PAGE 4 OF THE ABOVE STATEMENT. THIS MEANS THAT THE APPELLANT HAS ALREADY ADMITTED THE SA LE OF 5000 SHARES IN THE CAPITAL GAIN WORKING AND, THEREFORE, THE ADDITION IS NOT JUSTIFIED AND THE SAME IS DELETED AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 12 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT TH E AO HAS MADE ADDITION OF RS. 45,60,000/ - BY ESTIMATING VALUE OF 5000 SHARES OF M/S RAJESH EXPORTS , WHICH AS PER AO WAS NEITHER SOLD NOR SHOWN IN THE CLOSING STOCK AT THE END OF THE YEAR. FROM THE RECORD WE FOUND THAT SHARES OF RAJESH EXPORTS WERE SOLD ON 2 2 - 1 - 2008 FOR AMOUNT OF RS.28,00,004.55 AND SAME HAS BEEN ACCOUNTED IN COMPUTATION OF TOTAL INCOME. HOWEVER, DUE TO WRONG BILLING CODE FILL BY BROKER BILL MEMO WAS ISSUED IN THE NAME OF KORADIA CONSTRUCTION. THEREFORE, THE SAME WAS TREATED AS SHARES SOLD BY KORADIA CONSTRUCTION ON BEHALF OF ASSESSEE , AND ACCORDINGLY ASSESSEE ACCOUNT WAS CREDITED BY THE KORADIA CONSTRUCTION. CONFIRMATION OF ACCOUNT BETWEEN KORADIA CONSTRUCTION AND ASSESSEE ALSO REFLECTS THAT THE SHARES WERE SOLD BY KORADIA CONSTRUCTION ON BEH ALF OF THE ASSESSEE . ITA NO S . 4646 &4711 /20 1 1 11 CONTRACT NOTE OF TRANSACTION ENCLOSED IN PAPER BOOK REFLECT THAT THE SHARES PURCHASED BY THE ASSESSEE WAS SOLD. THE CIT(A) HAD RECORD ED A FINDING TO THE EFFECT THAT ASSESSEE HAS SOLD 5000 SHARES OF RAJESH EXPORTS TO M/S KORADIA CONSTRU CTION PVT. LTD. AND SAME WAS POINTED OUT BY THE ASSESSEE IN THE DULLY FILLED UP ANNEXURE - A SUBMITTED ALONG WITH THE LETTER DATED 20 - 12 - 2010. AFTER RECORDING THE FINDING TO THE EFFECT THAT SALE PROCEEDS OF 5000 SHARES OF M/S RAJESH EXPORTS HAVE BEEN CREDITE D BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS ON 21 - 8 - 2008 I.E. BEFORE THE END OF THE FINANCIAL YEAR, THE CIT(A) HELD THAT THERE WAS NO ESCAPEMENT OF SALE PROCEEDS OF 5000 SHARES. THE FINDING RECORDED BY CIT(A) HAS NOT BEEN CONTROVERTED BY LD. DR. IT IS PERTI NENT TO MENTION HERE THAT NO GROUND HAS BEEN TAKEN BY THE REVENUE WITH REGARD TO VIOLATION OF RULE 46A BY THE CIT(A) IN RESPECT OF ANY ADDITIONAL DOCUMENTS CONSIDERED BY HIM WHILE DELETING THE ADDITION. ACCORDINGLY, THERE IS NO INFIRMITY IN THE ORDER OF CI T(A) DELETING ADDITION MADE ON ACCOUNT OF 5000 SHARES OF RAJESH EXPORTS. 13 . THE ADDITION MADE ON ACCOUNT OF UNDISCLOSED SHARES OF M/S HINDUSTAN ORGANIC CHEMICALS LTD. AMOUNTING TO RS.76,13,675/ - WAS DELETED BY THE CIT(A) AFTER HAVING FOLLOWING OBSERVATION S : - 4.3 REGARDING SHARES OF M/ S. HINDUSTAN ORGANICS CHEMICALS LTD. IT IS SEEN THAT THE APPELLANT HAS NOT MAINTAINED ANY OPENING STOCK. FURTHER HAS TAKEN THE PURCHASES DURING THE YEAR AS 22651 SHARES IN ANNEXURE - A WHICH THE ASSESSEE POINTED OUT THAT IT F ORMED PART OF T HE OPENING STOCK. ACTUALLY THE APPELLAN T HAD ONLY OPENING SOCK OF 4,88,978 SHARES WHICH WERE ENTIRE SOLD DU RI N G THIS YEAR. THE AO EVEN WHILE PREPARING ANNEXURE - A DID NOT ADOPT ANY OPENING STOCK BUT WHILE PASSING THE ASSESSMENT ORDER, HE TOOK THE OPENING STOCK AT 6,91,739/ - SHARES WITHOUT GIVING OPPORTUNITY TO THE APPELLANT. A PERUSAL OF THE OPENING STOCK STATEMENT FILED ALONG WITH THE RETURN FOR A.Y2007 - 08 READS AS UNDER : - NO. OF SHARES TOTAL SHARES AMOUNT(RS.) 14.2.07 217761 13, 573,212 28.2.07 217761 647,668 ITA NO S . 4646 &4711 /20 1 1 12 FROM THE ABOVE, IT COULD BE SEEN THAT THE APPELLANT ADMITTED PURCHASE OF 2,17,761 SHARES TWICE, ONCE ON 14 - 2 - 07 AND AGAIN ON 28 - 2 - 0 7 BUT THE VALUE OF SHARES IS DRASTICALLY DIFFERENT. THE VALUE OF SHARES P URCHA SED ON 14.2.07 IS 1,35,73,212 WHEREAS THE VALUE OF SHARES PURCHASED ON 28 - 2 - 07 WAS RS.6;47 ,6 68/ - . THIS CANNOT BE CORRECT. AS CONTENDED BY THE REPRESENTATIVE (HERE WAS A TYPING MISTAKE WHILE PREPARING T HE ABOVE STATEMENT AND INSTEAD OF 15000 SHARES PURCHAS ED FOR RS 6,47 , 668/ - ON 28 - 2 - 07 THE APPELLANT BY MISTAKE TYPED PREVIOUS FIGURE OF 217761 AND BASED ON THIS WRONG FIGURE, THE A . O . WORKED OUT THE UNDISCLOSED SALE WHICH IS NOT CORRECT. THE ABOVE EXPLANATION OF THE APPELLANT IS BO NAFIDE AND ACCEPTABLE.. I N ANY CASE THE A.O. OUGHT TO HAVE VERIFIED THE D EM AT STATEMENT WHICH W8.S SUBMIT TED BEFORE HIM WHICH WAS NOT DON E. IN THE CIRCUMSTANCES, THE A.O. IS DIRECTED TO DELETE THE ADDITION. 14 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ADDITION HAS BE EN DELETED BY THE CIT(A) AFTER OBSERVING THAT THERE WAS TYPOGRAPHICAL MISTAKE WITH REGARD TO PURCHASE OF SHARES OF HINDUSTAN ORGANICS ON 28 - 2 - 2007, WHICH WAS ACTUALLY 15 , 000 SHARES AND NOT 2 , 17 , 761 SHARES. SINCE THE ADDITION WAS MADE BY AO ONLY ON THE BASI S OF TYPOGRAPHICAL MISTAKE, WHICH HAS BEEN DETECTED BY CIT(A) AND AFTER CONSIDERING THE CORRECT NOS. OF SHARES PURCHASED ON 28 - 2 - 2007, THE CIT(A) RECORD ED HIS FINDING AT PARA 4.3 AND DELETED THE ADDITION , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE ADDITION MADE ON ACCOUNT OF SHARES OF M/S HINDUSTAN ORGANICS CHEMICALS LTD. 15 . THE ADDITION MADE ON ACCOUNT OF DEEMED DIVIDEND U/S.2(22)(E) WAS DELETED BY THE CIT(A) AFTER FOLLOWING THE ORDER OF ITAT SPECIAL BENCH IN THE CASE OF BHAUMIK COLOUR PAINT PVT. LTD. 118 ITD 1 AND JURISDICTIONAL HIGH COURT IN CASE OF UNIVERSAL MEDICARE PVT. LTD. 16 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ADDITION WAS MADE BY THE AO IN RESPECT OF LOAN TAKEN BY THE ASSESSEE FIRM FROM M/S ITA NO S . 4646 &4711 /20 1 1 13 KORADIA CONSTR UCTION PVT. LTD. THE CIT(A) HAS DELETED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS : - I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRESENTATIVE AND THE STAND TAKEN BY THE A. O . ADMITTEDLY, THE APPELLANT IS A PARTNERSHIP FIRM WHICH SHRI BA NIA KORAD IA AND S MT .AMISHA KORADIA WERE HAVING SHARE OF PROFIT OF 20% AND 40% RESPECTIVELY AND THEY WERE HAV I NG SHARE HOLDINGS IN M/S.KORADIA CONSTRUCTION PVT. LTD. TO THE EXTENT OF 49% AND 50% RESPECTIVELY. THUS, THE APPELLANT FIRM IS NOT A SHARE HOLDER IN M/S.KOR ADIA CONSTRUCTION PVT. LTD., THE A. O. TAXED DEEMED DIVIDEND U/S. 2(22)(E) ON THE GROUND THAT THE PARTNERS OF THE APPELLANT FIRM WERE HAVING SUBSTANTIAL SHARE HOLDING IN M/ S.K ORA DIA CONSTRUCTION PVT. LTD. FROM WHICH THE APPELLANT RECEIVED LOAN. THUS, THE APP ELLANT NOT BEING A SHARE HOLDER , DEEMED DIVIDEND CANNOT BE CONSIDERED IN THE HAND S OF T HE APPE LL ANT AS HELD BY THE MUMBAI SPECIAL BENCH TRIBUNAL IN THE CASE OF ACIT VS. M/S. BHAUMIK COLOUR PAINT PVT . LTD. , 118 ITD 1. .. .. FROM THE ABOVE, IT IS CLEAR THAT THE DEEMED DIVIDEND CAN BE TAXED ON LY IN T HE HANDS OF THE SHAREHOLDE R AND NOT IN THE HANDS OF NON - S HARE HOLDER I.E. T H E CONCERN. THE ABOVE VIEW OF THE HO N 'BLE MUMBAI TRIBUNAL HAS BEEN CONFIRMED BY THE HON'B LE MUMBAI HIGH COURT IN THE CAS E OF CIT VS. U NIVERS AL MEDICARE PVT. LTD. (3 TAXMANN.COM 61) IN ITA NO.2264 OF 2009 DATED 22.03.2010.IT WAS CLEARLY HELD BY THE HON'BLE MURN BAI HIGH COURT THAT PAYMENT EVEN ASSUMING THAT IT WAS A DIVIDEND, WOULD HAVE TO BE TAXED NOT IN THE HANDS OF THE ASSESSEE, BUT IN THE HANDS OF THE SHAREHOL D ER. IN VIEW OF THE DECISION OF THE JURISDICT IO NAL TRIBUNAL AND HIGH C OURT , I HOLD THAT THE ADVANCE RECEIVED BY THE APPELLANT FROM M/ S.KORA DIA CONSTRUCTION PVT. LTD. CANN OT BE TAXED U/S.2(22)(E) IN THE HANDS OF THE APPELLANT FIRM. AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 17 . WE HAVE CONSIDERED RIVAL CONTENTIONS. IT IS NOT DISPUTED THAT ASSESSEE IS NOT SHAREHOLDER OF M/S KORADIA CONSTRUCTION PVT. LTD, THEREFORE, THE AMOUNT OF LOAN RECEIVED BY THE ASSESSEE NOT IN THE CAPACITY OF SHAREHOLDER, IS NOT LIABLE TO BE TREATED AS DEEMED DIVIDEND U/S.2(22)(E) IN THE HANDS OF ASSESSEE FIRM IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE PVT. LTD., 3 TAXMANN.COM 61 . THE ISSUE IS ALSO SQUARELY COVERED BY THE DECISION OF ITAT SPECIAL ITA NO S . 4646 &4711 /20 1 1 14 BENCH IN THE CASE OF BHAUMIK COLOUR PAINT PVT. LTD., 118 ITD 1 . ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) FOR DELETING THE ADDITION MADE U/S.2(22)(E) OF THE ACT. 18 . THE AO ALSO DISALLOWED RS.13,11,123/ - U/S.14A. BY THE IMPUGNED ORDER, T HE CIT(A) DELETED THE SAME. 19 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE AO HAS MADE DISALLOWANCE OF RS.13,11,123/ - BY OBSERVING THAT ASSESSEE HAS EARNED DIVID END INCOME TO THE TUNE OF RS.1,35,630/ - AND INCURRED INTEREST EXPENDITURE OF RS.30,44,600/ - IN ITS FUTURE AND OPTIONS BUSINESS. THE AO COMPUTED DISALLOWANCE AT RS. 13,11,123/ - AS PER RULE 8D . WE FOUND THAT THE AO HAS APPLIED RULE 8D WHICH IS APPLICABLE IN T HE ASSESSMENT YEAR 2008 - 09 UNDER CONSIDERATION AND WORKED OUT DISALLOWANCE BY TAKING INTO ACCOUNT AVERAGE INVESTMENTS MADE IN SHARES WHICH HAVE EARNED DIVIDEND. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE, 328 ITR 81 , HELD THAT RULE 8 D IS APP LICABLE FROM A.Y.2008 - 09. THE CONTENTION OF LD. AR WAS THAT ASSESSEE HAS OFFERED TAXABLE INCOME IN RESPECT OF FUTURE AND OPTIONS BUSINESS, THEREFORE, INVESTMENT ATTRIBUTABLE TO SUCH SECURITIES ARE TO BE EXCLUDED FROM THE INVESTMENT TAKEN BY AO WHILE COMPU TING DISALLOWANCE UNDER RULE 8D. HIS FURTHER CONTENTION WAS THAT AS AGAINST DIVIDEND INCOME OF RS.1.35 LAKHS, THE ASSESSEE HAS OFFERED TAXABLE CAPITAL GAIN OF MORE THAN RS.1 CRORE, THEREFORE, SUITABLE ADJUSTMENT SHOULD BE MADE WHILE COMPUTING DISALLOWANCE UNDER RULE 8D. AS PER OUR CONSIDERED VIEW WHILE COMPUTING DISALLOWANCE UNDER RULE 8D ONLY THOSE INVESTMENTS WHICH ARE MADE FOR EARNING EXEMPT INCOME IS TO BE TAKEN INTO ACCOUNT AND OTHER INVESTMENTS WHICH FETCHES TAXABLE ITA NO S . 4646 &4711 /20 1 1 15 INCOME ARE TO BE EXCLUDED. KEEPING IN VIEW THE FACT THAT ASSESSEE HAS OFFERED TAXABLE INCOME IN RESPECT OF ITS INVESTMENT IN FUTURE AND OPTIONS BUSINESS AS WELL AS CAPITAL GAINS, WE RESTORE THE COMPUTATION OF DISALLOWANCE UNDER RULE 8D. WE DIRECT ACCORDINGLY. IN THE RESULT, GROUND OF THE RE VENUE IS ALLOWED FOR STATISTICAL PURPOSES. 20 . ON THE DISALLOWANCE OF RS.56,54,598/ - MADE BY THE AO ON ACCOUNT OF UNDISCLOSED INCOME UNDER THE HEAD OTHER SOURCES I.E. SALE OF SHARES, THE CIT(A) DELETED THE SAME AFTER HAVING FOLLOWING OBSERVATIONS : - 7. 3 I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRESENTATIVE AND THE STAND TAKEN BY THE AO. THE AO BASED ON THE CONTRACT NOTES SUBMITTED BY THE APPELLANT ADOPTED SALE OF 40,401 SHARES ON 13.7.2007. IT IS TRUE THAT AS PER THE CONTRACT NOTES THE APPELLANT SOLD 40,401 SHARES OF KML. HOWEVER, AS CONTENDED BY THE REPRESENTATIVE THIS INCLUDES 25,000 SHARES PURCHASED BY THE APPELLANTS SISTER CONCERN M/S KORADIA CONSTRUCTION PVT. LTD. IN THE EARLIER YEAR WHICH WAS LYING IN THEIR DEMAT ACCOUNT. ACTUALLY INSTEAD OF ISS UING CONTRACT MEMO IN THE NAME OF M/S KORADIA CONSTRUCTION PVT. LTD., THE BROKER ISSUED CONTRACT MEMO FOR SALE IN THE NAME OF THE APPELLANT ON 13.7.2007 FOR 25,000 SHARES. THE APPELLANT IMMEDIATELY TREATED THE SALE PROCEEDS OF 25,000 SHARES AS LOAN FROM M/ S KORADIA CONSTRUCTION PVT. LTD. AS SEEN FROM THE COPY OF LEDGER ACCOUNT AND SAME IS ACCEPTED BY THE AO. THIS MEANS THAT THE SHARES WERE HELD BY THE APPELLANTS SISTER CONCERN AND SOLD BY THEM. THE AO WRONGLY ASSUMED THAT THE APPELLANT ADMITTED SALES WITHO UT PURCHASES. A PERUSAL OF THE CAPITAL GAIN WORKING FILED BY THE APPELLANT ALONG WITH THE RETURN OF INCOME SHOWS THAT THE APPELLANT SOLD ONLY 15,401 SHARES ON 13.7.2007 AS PER PAGE 2 OF THE WORKING WHEREAS THE AO WRONGLY ADOPTED SALE OF 40,401 SHARES AS P ER THE CONTRACT NOTES. THE APPELLANT DULY EXPLAINED BEFORE THE A.O. THAT 25,000 SHARES WERE SOLD ON BEHALF OF SISTER CONCERN AND THE AMOUNT WAS TRANSFERRED TO THEM AS PER ACCOUNTS. THE ABOVE EXPLANATION IS ACCEPTABLE AND THERE IS NO CASE FOR ADDITION TOWAR DS UNDISCLOSED INCOME. IN THE CIRCUMSTANCES, THE ADDITION IS DELETED. 21 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE AO HAS MADE THE ADDITION ON THE PLEA THAT ASSESSEE HAS SOLD 25000 SHARES OF ITA NO S . 4646 &4711 /20 1 1 16 KAR U TURI COMMUNICATION ON BEHALF OF KORADIA CONS TRUCTION, WHICH IS REFLECTED IN THE LEDGER ACCOUNT. AS PER THE AO ASSESSEE COULD NOT PROVE THAT SAID SALE WAS ON BEHALF OF KORADIA CONSTRUCTION. FROM THE RECORD WE FOUND THAT DURING THE YEAR ASSESSEE HAS PURCHASED 15401 SHARES OF KARUTURI COMMUNICATION A ND SOLD THE SAME. M/S KORADIA CONSTRUCTION HAVE SHARES 25000 SHARES OF THE KARUTURI COMMUNICATION. WHEN THE ORDER FOR SALE OF SHARES ON 13.07.2007 WAS PLACED BY ASSESSEE FOR 15401 SHARES AND M/S KORADIA CONSTRUCTION (SISTER CONCERN ) PLACED ORDER FOR SALE O F 25000 SHARES TO KHANDWALA INTEGRATED FINANCIAL SERVICES LTD., WHO WAS COMMON BROKER FOR ASSESSEE AND SISTER CONCERN, BY MISTAKENLY BROKER ISSUED CONTRACT MEMO IN THE NAME OF ASSESSEE FOR SALE OF 40401 SHARES. AS THE AMOUNT OF SALE PROCEEDS OF 25,000 SHAR ES IS BELONG TO KORADIA CONSTRUCTION, THEREFORE, THE SAME WAS CREDITED TO THEIR ACCOUNT WHICH WAS REFLECTED IN CONFIRMATION OF ACCOUNT. AFTER CONSIDERING ALL THE SE FACTS OF THE CASE, THE CIT(A) VIDE PARA 7.3 HELD THAT ASSESSEE SOLD ONLY 15401 SHARE WHICH H AS ALSO BEEN OFFERED FOR TAX , AND 25000 SHARES BELONG ED TO M/S KORADIA CONSTRUCTION WHICH WAS CONFIRMED BY THEM. THEREFORE, ADDITION FOR SALE OF 25,000 SHARES CANNOT BE MADE IN THE HANDS OF ASSESSEE . THE FINDING RECORDED BY THE CIT(A) IS AS PER MATERI AL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) FOR DELETING THE ADDITION MADE WITH REGARD TO SALE OF 25000 SHARES OF KARUTURI COMMUNICATION LTD. 22 . IN THE RESULT, APPEAL OF THE ASSESSEE (I.E. ITA NO.4646/M/2011) I S ALLOWED AND APPEAL OF THE REVENUE (I.E. ITA NO.4711/M/2011) IS ALLOWED IN PART. ITA NO S . 4646 &4711 /20 1 1 17 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH MARCH . 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 11 / 0 3 /201 5 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MU MBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//