SAFSET FORWARDERS P. LTD,MUMBAI vs. ITO 3(3)(2), MUMBAI

The sole issue raised in the grounds of appeal is against the confirmation of order of AO by the ld.CIT(A) wherein the income in respect of Short Term Capital Gains (STCG) on sale of equity shares on which STT was paid was taxed twice as the assessee has wrongly showed the income from business of 2 5222/Mum/2013 Rs.25,55,002/- instead of Rs.2,32,474/- by wrongly including the STCG of Rs.22,61,528/- in the profit and loss account and also showing Rs.22,61,528/- under the head capital gains (others) instead of under the head short term capital gain u/s 111A.

Facts in brief are that the assessee filed its return of income on 29.9.2008 declaring total income at Rs.48,16,530/- wrongly. The assessee strongly showed its income under the head business of Rs.25,55,002/- instead of Rs.2,93,474/- by wrongly including STCG on sale of equity shares covered by section 111A of the Act in the business income. Secondly, the assessee wrongly returned the income of STCG on sale of equity shares as short term capital gain (others) thereby taxing the said income at the rate of 30% instead of 10%. The return was processed under section 143(1) and a demand of Rs.14,13,410/- was raised vide order dated 23.7.2009. Thus, the assessee committed two mistakes inadvertently. First by showing the gain on transfer of equity shares under the head “Income from business” to the tune of Rs.22,61,528/- and secondly by showing STCG on transfer of equity shares which are covered u/s 111A of the Act and liable for tax at the rate of 10% under the head “STCG” from other assets thereby taxing the said STCG at the rate of 30% instead of 10%. Aggrieved by the order of AO, the assessee preferred an appeal before the ld.CIT(A). Thereafter the assessee wanted to file revision petition u/s 264 of the 3 5222/Mum/2013 Act to the Commissioner of Income Tax for revising the assessment on the ground that STCG has wrongly been assessed as income from business and also as STCG from other assets instead of STCG on sale of equity shares covered u/s 111A and accordingly moved an application before the ld.CIT for withdrawal of appeal. The ld.CIT(A) instead of allowing withdrawal of appeal dismissed the same by holding as under :

The ld. Counsel vehemently argued before us that this being mistake apparent from the face of record which has been brought to the notice of lower authorities that the income from STCG on sale of equity shares on which STT 4 5222/Mum/2013 paid was wrongly assessed under the head business income and also as short term capital gains from other assets thereby taxing the same income at the rate of 30% instead of STCG under the provisions of section 111A of the Act which is liable for taxation at the rate of 10%. The ld. Counsel further argued that the ld. CIT(A) instead directing the AO to correct the mistake apparent from record confirmed the action of the AO thereby treating the income of Rs.22,61,528/- being STCG on sale of equity shares on which the STT was duly paid at the rate of 30% two times. Firstly, by way of showing the same under the head “Income from business” and secondly, by showing the STCG from the other assets under head capital gain instead of showing the same as STCG on sale of shares under the provisions of section 111A. The ld. Counsel finally argued that this being the actual fact and mistake apparent on the face of record, both authorities below ignored this mistake and treated it as income and taxed which amounted to double tax which is against the scheme of Income Tax Act. The ld. Counsel finally prayed that the order of ld. CIT(A) be set aside and the AO be directed to assess the income of the assessee as under : A) Income from business : Rs.2,93,474/-; B) Income from short term capital gains u/s 111A : Rs.22.61,528/- The ld. Counsel further submitted that the AO be directed to tax the income of the assessee from business at the rate of 30% and income from capital gain on sale of shares at the rate of 10%.

On the contrary, the ld. DR objected to the submissions of the ld.AR and fairly agreed that the mistake committed by the assessee in filling the return two times and as a result the income was taxed at the rate of 30% whereas as a matter of fact, the income from business Rs.2,93,474/- was to be taxed at the rate of 30% and Rs.22,61,528/- was to be taxed at the rate of 10% being short term capital gain on sale of equity shares. However, the ld.DR disagreed with the submissions and submitted that the assessee has committed the mistakes on its own and therefore the benefit of rectification should not be allowed to the assessee as prayed by the ld. AR and strongly supported the orders of the authorities below.

We have carefully considered the rival contentions and perused the material placed before us including the orders of authorities below. We find that the assessee has income from business of Rs.2,93,474/- and the income from STCG from sale of equity shares which are covered under the provisions of section 111A amounting to Rs.22,61,528/-. However, at the time of filing the return, the amount of capital gains of Rs.22,61,528/- was wrongly included in the business income and thus the business income was showed at Rs.25,55,002/- instead of Rs.2,93,474/- thereby wrongly returned the income from STCG under the head income from the business and thus business income was overstated by Rs.22,61,528/-. Secondly, we also find that short tax gain on 6 5222/Mum/2013 sale of shares on which STT was paid which was liable for tax at the rate of 10% was wrongly shown under the head STCG (others), thereby offering the tax at the rate of 30%. Since the assessee has wrongly returned the income under the wrong heads and also at wrong rate of tax it is an apparent mistake on the face of record which should have been rectified by the authorities below upon being pointed out by the assessee. However, the submissions of the assessee did not find favour with the Income Tax Authorities and hence the matter is in appeal before us. It is a trite law that any income cannot be taxed twice and this amounts to double taxation of the same income which is not permissible under the Income Tax Act. We, therefore finding merits in the submissions of the ld.AR, set aside the order of ld.CIT(A) and direct the AO to assess the income from business at Rs.2,93,474/- and also the income from STCG on sale of shares of Rs.22,61,528/- under the head STCG under section 111A. We direct the AO to assess the STT at the rate of 10% as the STT was paid on the sale of shares.

In the result, appeal of the assessee is allowed.