M/s. Ascot Investments, New Delhi V. ACIT, New Delhi

CO 177/DEL/2014

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 1870 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 25-07-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Assessee Lawyers: ASHISH CHADHA
• Keywords: Business income; Business expenditure; Search and seizure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.4645/DEL./2013 (ASSESSMENT YEAR : 2009-10) ACIT, CENTRAL CIRCLE 25, VS. M/S. ASCOT INVESTMEN TS, NEW DELHI. 102, RATAN JYOTI BUILDING, 18, RAJENDRA PLACE, NEW DELHI 110 008. (PAN : AAMFA6159Q) CO NO.177/DEL/2014 (IN ITA NO.4645/DEL./2013) (ASSESSMENT YEAR : 2009-10) M/S. ASCOT INVESTMENTS, VS. ACIT, CENTRAL CIRCLE 25, 102, RATAN JYOTI BUILDING, NEW DELHI. 18, RAJENDRA PLACE, NEW DELHI 110 008. (PAN : AAMFA6159Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI VED JAIN, ADVOCATE & ASHISH C HADHA, CA REVENUE BY : SHRI S.K. JAIN, DR DATE OF HEARING : 14.12.2015 DATE OF PRONOUNCEMENT : 27.01.2015 O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : 2 ITA NO.4645/DEL/2013 CO NO.177/DEL/2014 THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJEC TION FILED BY THE ASSESSEE ARE AGAINST THE ORDER OF THE CIT (APPEALS) -I, NEW DELHI DATED 24.05.2013 FOR THE ASSESSMENT YEAR 2009-10. 2. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE JAKSONS GROUP OF CASES ON 10.02.2010, CONSEQUENT TO WHICH, NOTICE U/ S 153C WAS ISSUED TO THE ASSESSEE AND THE INCOME OF THE ASSESSEE WAS ASSESSE D VIDE ORDER DATED 16.12.2011 WHEREBY THE INCOME EARNED FROM THE INVES TMENTS MADE BY THE ASSESSEE WAS TREATED AS BUSINESS INCOME. ON APPEAL , THE LD. CIT (A), RELYING UPON VARIOUS JUDGMENTS IN FAVOUR OF THE ASSESSEE AS WELL AS CONSIDERING THE CBDT CIRCULAR DATED 15.06.2007, HAS ALLOWED THE APP EAL OF THE ASSESSEE. NOW, THE REVENUE IS IN APPEAL BEFORE US BY TAKING THE SO LITARY GROUND WHICH READ AS UNDER :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT (A) HAS ERRED IN DIRECTING TO CHARGE SHORT TERM CAPITAL LOS S OF RS.5,38,44,446/- AND LONG TERM CAPITAL LOSS OF RS.1 ,60,57,407/- UNDER THE HEAD CAPITAL GAIN AND NOT UNDER THE HEA D INCOME FROM BUSINESS / PROFESSION AS HAS BEEN DONE BY THE AO. 3. AT THE OUTSET OF THE HEARING, LD. AR FOR THE ASS ESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE IN ITA NO.4691/DEL/2011 DATE D 27.04.2015 FOR THE ASSESSMENT YEAR 2007-08. HE FURTHER SUBMITTED THAT THE FACTS OF THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION ARE IDENTICAL T O THE FACTS OF THE AFORESAID CASE RELIED UPON. HE ALSO SUBMITTED THAT ALL THE T RANSACTIONS ARE DELIVERY BASED 3 ITA NO.4645/DEL/2013 CO NO.177/DEL/2014 AND THE ASSESSEE HAS EARNED INCOME OF RS.36,59,199/ - AND THERE ARE NO BORROWED FUNDS AS IS EVIDENT FROM THE BALANCE SHEET AT PAGE 4 OF THE PAPER BOOK. THEREFORE, HE PLEADED TO UPHOLD THE ORDER OF THE LD . CIT (A). AT THE SAME TIME, HE DID NOT PRESS THE CROSS OBJECTION. 4. LD. DR COULD NOT CONTROVERT THE AFORESAID SUBMIS SIONS OF THE LD. AR. 5. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL ON RECORD. WE FIND THAT THIS ISSUE IS COVERED BY THE AFORESAID DE CISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2007- 08, IN WHICH ONE OF US IS A MEMBER TO THE SAID DECISION. THE RELEVANT PARAS OF THE AFORESAID DECISION ARE REPRODUCED BELOW :- 18. WE FIND THAT IN THE PRESENT CASE, ALL THE TRAN SACTIONS ARE DELIVERY BASED TRANSACTIONS ONLY. THE ASSESSEE ALSO EARNED DIVIDEN D TO THE TUNE OF RS.42,77,597.73 THEREON. IT IS ALSO NOTED THAT THE APPELLANT HAD NOT CLAIMED THE AMOUNT OF SIT PAID BY IT AS BUSINESS EXPENDITURE. 19. FURTHER, THE COURTS HAVE DECIDED THAT A PERSON CAN BE A TRADER AS WELL AS AN INVESTOR FOR SAME TYPES OF TRANSACTIONS DONE WIT H DIFFERENT MOTIVES. (I) RAM NARAIN SONS (P) LTD. V CIT AS REPORTED IN 4 11TR 534 (SC), (II) DWARKADAS KESARDEV MORARKA AS REPORTED IN 44 I TR 625 (SC), (III) CIT VS. MADAN GOPAL RADHEYLAL AS REPORTED IN 73 ITR 652 (SC) (IV) CIT V. ASSOCIATED DEVELOPMENT CO. LTD. AS REPO RTED IN 82 ITR 586 (SC). 20. THE ABOVE JUDGMENTS CLEARLY STATE THAT THE SAME PERSON CAN BE A TRADER AS WELL AS INVESTOR IN SHARES. 21. IN A RECENT DECISION OF LUCKNOW BENCH OF THE TR IBUNAL IN THE CASE OF SARMATH INFRASTRUCTURE (P) LTD. AS REPORTED IN 16 D TR (LUCKNOW) (TRIB) 97, A VIEW HAD BEEN TAKEN IN FAVOUR OF THE ASSESSEE AFTER FULLY CONSIDERING THE CBDT CIRCULAR AND THE FACTS & CIRCUMSTANCES OF THE CASE. THE FACTS OF THE PRESENT CASE ARE MORE OR LESS SAME AS IN THAT CASE, AND THEREFORE, THE RATIO OF THAT DECISION IS SQUARELY APPLICABLE TO THE PRESENT CASE. 22. IN VIEW OF THE ABOVE AND CONSIDERING THE INTENT ION OF THE PARTIES, THE FACT THAT THE MUTUAL FUNDS/SHARES HAVE BEEN SHOWN A S INVESTMENT AND NOT 4 ITA NO.4645/DEL/2013 CO NO.177/DEL/2014 CLOSING STOCK THAT THE CLOSING BALANCE HAVE BEEN VA LUED AT COST AND NOT AT 'COST OR MARKET VALUE WHICHEVER IS LOWER', THAT NO BORROW ED FUNDS HAVE BEEN USED ETC. THE INCOME FROM INVESTMENT MAY BE TREATED AS I NCOME FROM CAPITAL GAINS AND NOT AS INCOME FROM BUSINESS. 23. LD. CIT(A) HAS OBSERVED THAT THE AO HAS WRONGL Y STATED THAT THE ASSESSEE HAS TRADED IN DERIVATIVES WHICH CANNOT BE TREATED AS INVESTMENT. ON PERUSAL OF THE RECORDS, IT IS NOTICED THAT THE TRAN SACTIONS IN RESPECT OF DERIVATIVES ARE NOT PART OF THE SHORT TERM CAPITAL GAIN. THESE HAVE BEEN SEPARATELY QUANTIFIED AS BUSINESS TRANSACTIONS AND ON THIS ASPECT A LETTER DATED 4TH DECEMBER, 2009, HAS ALSO BEEN FILED WITH THE AS SESSING OFFICER CLARIFYING THIS POSITION. 24. THE ASSESSING OFFICER HAS REASONED THAT THE ASS ESSEE FIRM HAS EARNED INCENTIVE INCOME AND THIS INCENTIVE INCOME HAS TO B E ASSESSED AS BUSINESS INCOME AND THE OTHER INCOME SHALL ALSO BECOME BUSIN ESS INCOME. WE CONCUR WITH THE LD CIT(A) THAT THIS INTERPRETATION OF THE ASSESSING OFFICER IS INCORRECT. THE ASSESSEE HAVING MADE INVESTMENTS AND CONSEQUENT TO SUCH INVESTMENTS SOME INCENTIVE IS RECEIVED. TREATMENT OF THAT INCEN TIVE INCOME WILL NOT CHANGE THE NATURE OF THE INVESTMENTS. ON THE CONTRA RY, THIS RECEIPT OF INCENTIVE ITSELF CONFIRMS THE FACT THAT THIS ASSESSEE HAS EAR NED INCENTIVE CONSEQUENT TO INVESTMENTS BEING MADE, WHICH IS NORMALLY GIVEN TO THE INVESTOR. 25. AS REGARDS THE PORTFOLIO MANAGEMENT, IT IS OBSE RVED ON EXAMINATION OF THE FACTS AND RECORDS AND AS EXPLAINED ABOVE, THAT THE ASSESSEE HAS MADE INVESTMENTS THROUGH PORTFOLIO MANAGEMENT IN FIVE CA SES, AND OUT OF THESE FIVE CASES, THE ASSESSEE HAS SUFFERED LOSSES IN TWO CASE S TO THE EXTENT OF RS.21,65,551/- AND HAS MADE GAIN IN THREE CASES OF RS.36,04,177/- WITH THE RESULT THAT THE NET GAIN ON ACCOUNT OF PORTFOLIO MA NAGEMENT IS ONLY RS.14,38,626/- OUT OF THE TOTAL CAPITAL GAIN OF RS. L,76,03,580/-. THE INVESTMENT IN PORTFOLIO MANAGEMENT IS A COMMON FEATURE AND CAN NOT BE HELD TO BE A BUSINESS. 26. ANOTHER REASON OF THE ASSESSING OFFICER IS THAT ASSESSEE HAS PREPARED BOOKS OF ACCOUNT, PROFIT AND LOSS ACCOUNT AND BALAN CE SHEET AND HAS GOT THE SAME AUDITED. THERE IS NOTHING WRONG IN THIS. THE A SSESSEE BEING A LEGAL ENTITY IS REQUIRED TO MAINTAIN ITS BOOKS OF ACCOUNT AND GE T THE SAME AUDITED. THIS CANNOT BE A GROUND FOR THE ASSESSING OFFICER TO HOL D THAT THE ASSESSEE IS CARRYING ON BUSINESS. THE LD CIT(A) HAS RIGHTLY OBS ERVED THAT IF THE CONTENTION OF THE ASSESSING OFFICER IS ACCEPTED THEN PROBABLY IN EACH AND EVERY CASE WILL BE COVERED UNDER THE BUSINESS INCOME AND THERE WILL BE NO CASE FOR INVESTMENT. THE ASSESSING OFFICER IS WRONG IN ASSUM ING THAT FOR THE PURPOSE OF INVESTMENT, THE BOOKS OF ACCOUNT ARE NOT REQUIRED T O BE MAINTAINED OR ARE NOT REQUIRED TO BE AUDITED. 27. IN VIEW OF THE ABOVE DISCUSSION, AND AFTER CARE FUL CONSIDERATION OF VARIOUS CASE LAWS AND THE BOARD'S CIRCULAR ON THE S UBJECT REFERRED ABOVE, LD. CIT(A) HAS RIGHTLY HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN CHANGING THE TREATMENT OF INCOME OF APPELLANT FROM SHORT TERM' CAPITAL GAINS 5 ITA NO.4645/DEL/2013 CO NO.177/DEL/2014 TO INCOME FROM BUSINESS. THE ASSESSING OFFICER WAS ACCORDINGLY, DIRECTED TO TREAT THE INCOME OF RS.1,76,03,581/- DECLARED BY TH E ASSESSEE AS SHORT TERM CAPITAL GAINS ONLY AND NOT AS BUSINESS INCOME. IN T HE BACKGROUND OF THE AFORESAID DISCUSSIONS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), HENCE, WE UPHOLD THE SAME AND DISMISS THE ISSUE IN DISPUTE RAISED BY THE REVENUE. IN THE LIGHT OF THE CO-ORDINATE BENCH DECISION AND THE FACT THAT THE LD. DR COULD NOT CONTROVERT THE FACTS OF THE EARLIER YEAR VIS-- VIS THE RELEVANT YEAR UNDER CONSIDERATION; AND SINCE THE ISSUES ARE IDENTICAL A ND THERE IS NO CHANGE IN THE FACTS, WE, RESPECTFULLY FOLLOWING THE AFORESAID ORD ER OF THE EARLIER YEAR IN ASSESSEES OWN CASE, AND DISMISS THE APPEAL OF THE REVENUE. 6. SINCE THE LD. AR DID NOT PRESS THE CROSS OBJECTI ON, THE SAME IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS DAY OF 27 TH JANUARY,2016. SD/- SD/- (J.S. REDDY) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 27 TH DAY OF JANUARY, 2015 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-I, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.