ACIT-20(1), MUMBAI vs. 360 ONE CORE AGGRESSIVE , MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C”, MUMBAI BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No.9037/Mum/2025 (Assessment year: 2022-23)

ACIT-20(1), Mumbai vs 360 One Core Aggressive 305, 3rd floor, Piramal IIFL Centre Kamala City, Senapati Chambers Parel Mumbai- Bapat Marg Lower Parel (West), 400012 Mumbai-400013 PAN: AABTI8320A APPELLANT RESPONDENT Assessee by : Shri Pritesh Mehta Revenue by : Shri R.A. Dhyani-CIT DR & Shri V.S. Mahajan (Sr.DR) Date of hearing : 04/05/2026 Date of pronouncement : 07/05/2026 O R D E R Per: Anikesh Banerjee (JM): The instant appeal of the revenue filed against the order of the NFAC, Delhi [for brevity the “Ld. CIT(A)”], order passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act’) for Assessment Year 2022-23, date of order 21.10.2025. The impugned order emanated from the order of the Assessment Unit Income Tax Department (for brevity the ‘Ld. AO’) order passed under section 143(3) r.w.s. 144Bof the Act date of order 20.03.2024.

2 ITA No.9037/Mum/2025 360 ONE CORE AGGRESSIVE 2. The revenue has taken the following grounds: “1. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 4,26,22,154/-made by the Assessing Officer by treating as business income instead of capital gains. 2. I Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 10,14,83,640/ made by the Assessing Officer unit premium reserve under the head income from other sources. 3. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the Assessing Officer had correctly treated business income instead of capital gains in respect of transaction of shares/securities during the year under consideration as the assessee was in regular trading of shares and securities through market and off market. 4. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the Assessing Officer had correctly treated amount of Rs. 10,14,83,640/- as income from other source which was fount as credits under the head unit premium reserve as the assessee has not explained the said transaction as genuine despite of ample opportunities were given to the assessee during the assessment proceedings. 5. The appellant craves leave to add, amend, modify or withdraw any of the above grounds at the time of hearing.”

3 ITA No.9037/Mum/2025 360 ONE CORE AGGRESSIVE rejected the assessee’s computation and treated the amount of Rs.4,42,52,295/- as income from business. After deducting the business expenses Rs.16,30,141/- the taxable business income was computed amount of Rs.4,26,22,154/- which was added back with the total income. Further, the assessee has issued the units at premium. The Ld. AO found that the no valuation report was provided as on the date of issue of the units. The assessee has stated that units was based on the NAV on the date of issue but the Ld. AO rejected the assessee’s plea in absence of any evidence & the amount of Rs.10,14,83,640/- credited by the assessee under the head of “unit premium reserve” is treated as other income and added with the total income of the assessee. The aggrieved assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) deleted the addition and allowed the appeal of the assessee. Being aggrieved revenue filed an appeal before us.

4 ITA No.9037/Mum/2025 360 ONE CORE AGGRESSIVE assessee had failed to submit the valuation report as on the date of issue of the units. The assessee had stated units are issued on based on the NAV on the date of issue but there is no specific evidence was duly submitted. The Ld. DR invited our attention in impugned assessment order para 1 and 2 which are reproduced as below: “1. Treating as Business Income Assessee explain that there were no related party transactions, which cannot be accepted. The assessee has disclosed related party's transactions in the financial statements, which are promoters of the fund. They not only control the fund but also manage the fund's activity. Further, assessee failed to provide any supporting and details which can prove that the transactions were carried at the arms-length price. Further, assessee also failed to show that the TDS was deducted out of these expenses. Therefore, these expenses as stated above are not allowable. As discussed above, the income of the assessee is hereby added under the head business and profession after allowing the business expenditure instead of capital gain: Particulars Amount Gross Income from Business 4,42,52,295/- Less: Business Expenses 16,30,141/- Taxable Business Income 4,26,22,154/- Since the assessee has shown the business income as the Capital Gain and offered the same for taxation under the head short term and long term capital gain, the whole income shown under the capital gain i.e. Rs. 4,85,31,972/- is hereby withdrawn and hence treated as Nil. Addition of Rs. 4,26,22,154/- Penalty proceedings U/s 270A(9) of the Income Tax Act for Under reporting of income inconsequence to misreporting thereof. 2. Unit Premium Assessee has issued the units at premium while no valuation report (as per rules/income tax provisions) as on the date of issue of the units was provided. The assessee has stated that that units were issued based on the NAV on the date ofissued. Whereas he failed to give any example

5 ITA No.9037/Mum/2025 360 ONE CORE AGGRESSIVE how the NAV was derived. The premium received by the assessee is remains in doubt as assessee has invested in listed and non-listed shares/securities. Therefore, in absence of any documentary evidence about the determination of fair market value or NAV, the argument of the assessee is not acceptable. Therefore, In absence of the same Rs. 10,14,83,640/-credited by the assessee under the head Unit Premium Reserve is hereby added into the head "Other Income" of the Income Tax Act 1961. Addition of Rs. 10,14,83,640/- Penalty proceedings U/s 270A(9) of the Income Tax Act for Under reporting of income inconsequence to misreporting thereof. Therefore, since the assessee, despite numerous notices, has failed to provide the details and information necessary for verifying the income assessment, it is hereby made addition of Rs. 4,26,22,154/- as business income and Rs. 10,14,83,640/- as income from other sources of the Income Tax Act, 1961.”

6 ITA No.9037/Mum/2025 360 ONE CORE AGGRESSIVE Memorandum of respective Scheme / Total number of Units issued by the Scheme as on that date Also, the Beneficiaries are identifiable and are as per the Unit-holder register maintained by the Trustee Company providing details such as names, number of Units held, proportionate Beneficial Interest of each Beneficiary and such other details. 3. Under the Scheme, the Trustee Company shall distribute the income in proportion to 'Beneficial Interest per Unit of the Scheme and the Trustee Company shall have no discretion in making such distributions in any other manner or proportion. Such distributions shall also consider terms and conditions set out in respective contribution agreement(s) and private placement memorandum, governing the Scheme. 4. The Trustee Company shall have powers to recover, claw-back or require repayment of any distributions or redemptions already made to Beneficiaries, in order to meet any tax liability that may arise at a future date. The Trustee Company shall also have powers to seek such documentation including copy of tax returns, computations, details of taxes paid of the Beneficiaries at any stage, if such documents are required by any tax authorities in connection with tax assessments or inquiries of the Trust. 5. MIFL-One Core Solutions Aggressive' is an open ended scheme, which will serve as a privately pooled investment vehicle in the form of Alternative Investment Fund - Category III with an objective to pool investments from investors, for investing it in accordance with the defined investment objective and SEBI (Alternative Investment Fund) Regulations, 2012, for the benefits of the investors.”

7 ITA No.9037/Mum/2025 360 ONE CORE AGGRESSIVE further instructs that the Assessing Officers in holding whether the surplus generated from sale of listed shares or other securities would be treated as Capital Gain or Business Income, shall take into account the following- (a) Where the assessee itself, irrespective of the period of holding the listed shares and securities, opts to treat them as stock-in-trade, the income arising from transfer of such shares/securities would be treated as its business income, (b) In respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. However, this stand, once taken by the assessee in a particular Assessment Year, shall remain applicable in subsequent Assessment Years also and the taxpayers 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.”

8 ITA No.9037/Mum/2025 360 ONE CORE AGGRESSIVE

On the facts and circumstances of the case and in law, the Learned assessing officer has erred in not contesting submissions and explanations for each head of expense along with documentary evidence in support of the claim of deduction of expenses against business income. 12. The assessing officer has failed to appreciate that the assessed Income under the head of "Business Profit of Rs.7,48,76,422 .. (90786240 [returned income] - 42622154 (expenses dis allowed]-185312972 [capital gains] as per assessment order) is lower that The returned income offered for taxation by the appellant under the head of "Capital Gains of Rs.8,07,86,240/ 13. The assessing officer has erred in initiating penalty proceedings u/s 270A (9) in respect of the aforesaid addition Decision: I have carefully considered the submission/grounds of

9 ITA No.9037/Mum/2025 360 ONE CORE AGGRESSIVE appeal made by the appellant in appeal memo form (no. 35) and as above, the facts of the case as well as gone through the observation and findings of the AO's assessment order. It is observed from the case record that the Assessing Officer (AO) has held that the investment activity of the appellant is in the nature of business activities which have yielded business income and not capital gains and accordingly, the AO has held that the capital gains earned by the appellant from sale of investments aggregating to Rs 4,42,52,295/- is business income. While doing so the AO has disallowed expenses under multiple head of Rs. 3,58,26,408/- for lack of details of said expenditures without calling for the same from the appellant and without considering the submission of the appellant in this regard It is observed from the case record that the AO is unable to justifiably establish how he held the investment activity of the appellant is in the nature of business activities in as much as it is found the appellant has consistently shown in its return income that the gains earned by the appellant from sale of investments are by way of capital gains and not by any business for which the computation part of assessment year 2021-22 and A.Y 2022-23 are reproduced as under:

10 ITA No.9037/Mum/2025 360 ONE CORE AGGRESSIVE

11 ITA No.9037/Mum/2025 360 ONE CORE AGGRESSIVE

12 ITA No.9037/Mum/2025 360 ONE CORE AGGRESSIVE Apart from above it is observed that the AO himself has accepted capital gain income in the preceding year for which respective order is reproduced as under:

13 ITA No.9037/Mum/2025 360 ONE CORE AGGRESSIVE

In view of above I find infirmity in the order of the AO treating capital gain income as business income and disallowance of expenditures as stated above without any justified reason even after treating income under the head business income. Therefore, I hold that the above treatment of AO not being justified and not being made in accordance with law. Accordingly I find infirmity in the assessment order of the AO making computation of taxable business income being Rs. 4,26,22,154 not being made in accordance with law Therefore, I have no hesitation in holding that the impugned addition is not based on apropos consideration of facts and law and not justified for which the addition of Rs. 4,26,22,154/- made by the AO vide order dated 20-03- 2024 stand deleted. The grounds relating to this issue are allowed.”

14 ITA No.9037/Mum/2025 360 ONE CORE AGGRESSIVE which is mentioned in “Section VIII Determination of Net Asset Value of The Units” which is the part of the confidential private placement memorandum, annexed in APB pages 52 to 232. Further, a separate valuation committee is designated for the valuation. The Ld. AR contended that the said details was duly filed before the Ld. AO and the Ld. CIT(A). The Ld. CIT(A) had taken cognizance and mentioned in the impugned appellate order which is reproduced as below: “18. On the facts and in the circumstances of the case and in law, the Learned assessing officer failed to appreciate that in the course of assessment proceedings, the appellant has submitted details of the top 10 unit holders of the appellant as on 31 March 2022 including contribution agreement, KYC documents and statement of account it was submitted treat all units have been allotted to the unit holders at the prevailing Net Asset Value (NAV) on the date of investment As an example for explaining the accounting of unit capital and unit premium, in the course of assessment proceedings, the calculation of unit premium along with documentary evidence and statement of account was submitted for 1 unit holder Given below are the details of the top 10 unit holders of the appellant as on 31 March 2022 A units have been allotted to the unit holders at the prevailing Net Asset Value (NAV) on the date of investment Please find enclosed Statement of account of the said unit holders Given below are the details of the top 10 unit holders of the appellant as on 31 March 2022 A units have been allotted to the unit holders at the prevailing Net Asset Value (NAV) on the date of investment Please find enclosed Statement of account of the said unit holders:

In respect of the following unit-holders (on sample basis), please find enclosed statement of account, KYC documents and Contribution agreements In same were also submitted in the course of assessment proceedings. Similar documents are available for every unit-holder and can be submitted We are submitting the said details for the following unit-holders only in view of the voluminous nature of the documents.”

15 ITA No.9037/Mum/2025 360 ONE CORE AGGRESSIVE 9. The Ld. AR respectfully relied on the order of the Ld. CIT(A) and the relevant page 44 and 45 are reproduced as below: “Decision: I have considered the submission of the appellant and gone through the AO's observation & decision in assessment order and find that the appellant have claimed to have established the genuineness of transaction [Issue of Units to investors at Net Asset Value (NAV) on the date of investment] But I find from the assessment order that the AO has doubted genuineness of said transactions stating appellant being unable to submit any valuation report as on date of issue I find the AO while drawing of the above inference neither detect any infirmity regarding NAV stated by the appellant nor detect any specific defects in the submission made by the appellant in this regard nor able to justifiably establish how the amount credited in unit premium reserve could have been added with total income Accordingly I find infirmity in the assessment order of the AO making computation of income after addition of Rs. 10,14,83,640/- in as much as the same not being made in accordance with law Therefore, I have no hesitation in holding that the impugned addition is not based on apropos consideration of facts and law and not justified for which the addition of Rs. 10,14,83,640/-made by the AO vide order dated 20-03-2024 stand deleted The grounds relating to this issue are allowed. Conclusion: In view of discussion in preceding paragraphs appeal of the appellant is allowed.” 10. We have heard the rival submissions and perused the material available on record. On the issue of characterization of income from transactions in shares and securities, we find that the assessee, being a SEBI-registered Category III AIF, has consistently treated such transactions as giving rise to capital gains in earlier as well as subsequent assessment years, which position has also been accepted by the Department. The Ld. AO, without bringing any cogent material on record and without duly considering the binding guidance contained in CBDT Circular No. 6/2016 dated 29.02.2016, has sought to re-characterize the same as business income. In our considered view, the principle of consistency squarely applies, and no justifiable reason has been brought on record to deviate from the settled position. Accordingly, we find no infirmity in the order of the Ld. CIT(A) deleting the addition of Rs. 4,26,22,154/-.

16 ITA No.9037/Mum/2025 360 ONE CORE AGGRESSIVE 11. With regard to the addition on account of “unit premium reserve” amounting to Rs. 10,14,83,640/-, we observe that the assessee has duly demonstrated that the units were issued at the prevailing NAV and has substantiated the same with documentary evidence, including details of investors, KYC documents, contribution agreements, and the methodology for determination of NAV. The Ld. CIT(A), after appreciating these evidences, has rightly held that the Ld. AO has not pointed out any specific defect or infirmity in the valuation or genuineness of the transactions. In absence of any contrary material, the addition made by the Ld. AO is not sustainable. In view of the foregoing, we find no reason to interfere with the well-reasoned order of the Ld. CIT(A) on both the issues. Accordingly, the grounds raised by the revenue are dismissed.

17 ITA No.9037/Mum/2025 360 ONE CORE AGGRESSIVE 5. गाड�फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI