KAMLESH I. JAIN, MUMBAI V. ACIT 11(2), MUMBAI

CO 232/MUM/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1769 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 02-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 02-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 27-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.5279/MUM/2013 ASSESSMENT YEAR: 2010-11 ACIT-11(2), ROOM NO.479, 4 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. SHRI KAMLESH I. JAIN, 601 C, VIKAS PARK, LINK ROAD, MALAD (W), MUMBAI-400064 ( / REVENUE) ( ! ' /ASSESSEE) PAN. NO. ADCPJ3966D C.O. NO.232/MUM/2014 (ARISING OUT OF ITA NO.5279/MUM/2013) ASSESSMENT YEAR: 2010-11 SHRI KAMLESH I. JAIN, 601 C, VIKAS PARK, LINK ROAD, MALAD (W), MUMBAI-400064 / VS. ACIT-11(2), ROOM NO.479, 4 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( ! ' /ASSESSEE) ( / REVENUE) PAN. NO. ADCPJ3966D / REVENUE BY SHRI ASGHAR ZAIN ! ' / ASSESSEE BY SHRI S.C. TIWARI # $ % ' & / DATE OF HEARING : 02/12/2015 % ' & / DATE OF ORDER: 02/12/2015 KAMLESH I. JAIN ITA NO.5279/MUM/2013 & C.O. NO.232/MUM/2014 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 13/05/2013 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI AND THE ASSESSEE IS ALSO PREFERRED CROSS OBJ ECTION. 2 . FIRST, WE SHALL TAKE UP APPEAL OF THE REVENUE , WHEREIN, THE ONLY GROUND RAISED PERTAINS TO DIRECTI NG THE ASSESSING OFFICER TO TREAT THE INCOME FROM SHARE TR ADING AS SHORT TERM CAPITAL GAINS WITHOUT APPRECIATING THE C ONDUCT OF THE ASSESSEE AS A TRADER AND NOT AN INVESTOR. 2.1. DURING HEARING, THE LD. DR, SHRI ASGHAR ZAIN, DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER BY CONTENDING THAT THE ASSESSEE IS DOING SYSTEMATIC AC TIVITY OF TRADING IN SHARES, THEREFORE, IT IS THE BUSINESS IN COME OF THE ASSESSEE. ON THE OTHER HAND, THE LD. COUNSEL FOR TH E ASSESSEE, SHRI S.C. TIWARI, DEFENDED THE CONCLUSION ARRIVED A T IN THE IMPUGNED ORDER. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS PRACTICING AS A CHARTERED ACCOUNTANT DECLARED INCOME OF RS.1,61,366/- AS INCOME FROM OTH ER SOURCES, RS.1,96,622/- AS INCOME FROM BUSINESS AND PROFESSION AND SHORT TERM CAPITAL GAINS ON SALE OF SHARES AT RS.1,13,73,154/- (BEFORE SET OFF). THE LD. ASSESSIN G OFFICER WAS KAMLESH I. JAIN ITA NO.5279/MUM/2013 & C.O. NO.232/MUM/2014 3 OF THE VIEW THAT THE SHORT TERM CAPITAL GAIN, SHOWN BY THE ASSESSEE, IS MORE THAN 97% OF THE GROSS TOTAL INCOM E. THE ASSESSEE WAS ASKED AS TO WHY THE SAME SHOULD NOT BE TREATED AS INCOME FROM BUSINESS AGAINST THE CLAIM OF INVEST MENT. THE ASSESSEE RELIED UPON THE DECISION IN JANAK S. RANGW ALA VS ACIT (ITA NO.1168/MUM/2004), VESTA INVESTMENT AND TRADING COMPANY PVT. LTD. VS CIT (1999) 70 ITD 205 (CHD), CIT VS V.N.S.S. INVESTMENT PVT. LTD. 277 ITR 149 (M AD.) AND CONTENDED THAT IT IS AN INVESTMENT, THEREFORE, CANN OT BE TREATED AS BUSINESS INCOME. THE LD. ASSESSING OFFIC ER DID NOT FIND FAVOUR WITH THE SUBMISSIONS OF THE ASSESSEE AN D HE TREATED THE SAME AS BUSINESS INCOME 2.3. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INC OME TAX (APPEALS), THE SUBMISSIONS OF THE ASSESSEE, OBS ERVATION MADE IN THE ASSESSMENT ORDER AND THE CASE LAWS CITE D BY THE ASSESSEE WERE CONSIDERED ALONG WITH TREATMENT GIVEN IN DIFFERENT ASSESSMENT YEARS AND FURTHER FOLLOWING TH E DECISION OF THE TRIBUNAL IN GOPAL PUROHIT VS CIT (2009) 29 S OT 117 (MUM) WHICH WAS AFFIRMED BY HONBLE BOMBAY HIGH COU RT IN 228 CTR 582 (BOM.) AND FURTHER SLP AGAINST THAT DEC ISION WAS DISMISSED BY HONBLE APEX COURT (334 ITR 308)(S T.) GRANTED RELIEF TO THE ASSESSEE. THE REVENUE IS AGGR IEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. 2.4. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, KAMLESH I. JAIN ITA NO.5279/MUM/2013 & C.O. NO.232/MUM/2014 4 ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, UNDER THE FACTS AVAILAB LE ON RECORD, WE ARE EXPECTED TO ANALYZE THE DETAILS OF S TCG AND LTCG, EARNED BY THE ASSESSEE, DURING THE LAST THREE YEARS, WHICH ARE SUMMARIZED AS UNDER:- AS ST. YEAR STCG LTCG DIVIDEND EARNED 2007 - 08 3,51,223 48,70,488 3,11,947 2008 - 09 89,22,871 1,51,93,663 3,36,417 2009 - 10 (89,29,918) ----- 5,71,226 2010 - 11 1,15,94,368 11,88,692 6,38,421 2011 - 12 3,59,374 59,95,034 3,45,571 IF THE AFORESAID FACTUAL MATRIX, PROVIDED IN THE TA BLE IS ANALYZED, UNDISPUTEDLY, THE ASSESSEE HAS BEEN OFFER ING SHORT TERM CAPITAL GAIN (HEREINAFTER STCG) AND LONG TERM CAPITAL GAIN (HEREINAFTER LTCG) IN EARLIER ASSESSMENT YEARS AND THE INVESTMENT SO MADE WAS ACCEPTED BY THE DEPARTMENT A ND THE SAME WAS DULY SHOWN IN THE BALANCE SHEET OF THE ASS ESSEE, THUS, FROM THE ISSUE OF CONSISTENCY, THE ASSESSEE I S PRIMA- FACIE HAVING A GOOD CASE IN HIS FAVOUR. 2.4. SO FAR AS, IF THE ISSUE IS ANALYZED WITH THE OTHER ANGLE, AS EXPLAINED BY THE ASSESSEE, NEITHER ANY EM PLOYEE WAS EMPLOYED NOR ANY LOAN WAS TAKEN FOR PURCHASING THE SHARES. THE ASSESSEE HAS ACTED LIKE A PRUDENT PERSON IN MAK ING THE INVESTMENT IN SHARES AND EARNED THE DIVIDEND AND DU LY ACCEPTED BY THE DEPARTMENT. EVEN, IT IS NOT THE CAS E OF THE KAMLESH I. JAIN ITA NO.5279/MUM/2013 & C.O. NO.232/MUM/2014 5 DEPARTMENT, THAT ANY BORROWED MONEY WAS USED FOR MA KING THE INVESTMENT BY THE ASSESSEE. THUS, THE DECISION FROM TRIBUNAL IN GOPAL PUROHIT VS CIT (2009) 29 SOT 117 (MUM) WHICH WAS AFFIRMED BY HONBLE BOMBAY HIGH COURT IN 228 CTR 582 (BOM.) AND FURTHER SLP AGAINST THAT DECISIO N WAS DISMISSED BY HONBLE APEX COURT (334 ITR 308)(ST.) COMES TO THE RESCUE OF THE ASSESSEE. 2.5. IF THIS ISSUE IS ANALYZED WITH THE ANGLE OF S CRIPS AND FREQUENCY, WE NOTE THAT THE ASSESSEE PURCHASED AND SOLD ONLY 38 SCRIPS, WHICH COMES ON AN AVERAGE AT 3 SCRIPS PE R MONTH AND NO BORROWED FUNDS WERE UTILIZED, THE HOLDING PE RIOD IS 8 DAYS TO 362 DAYS IN RESPECT OF SHARES ON WHICH STCG WAS SHOWN, THUS, FROM THIS ANGLE ALSO THE ASSESSEE IS H AVING A GOOD CASE IN ITS FAVOUR. MORE SPECIFICALLY, WHEN TH E DEPARTMENT HAD BEEN ACCEPTING THE INVESTMENT IN EAR LIER YEARS FURTHER SUPPORTS THE CASE OF THE ASSESSEE. WE FURTHER NOTE THAT 29 SCRIPS WERE HELD FOR ONE AND HALF MONT H TO ELEVEN MONTH AND REMAINING NINE WERE HELD FOR LESS THAN ON E MONTH, THE SHARES LIKE ESCORTS LTD., RAYMOND LTD. WERE HEL D FOR MORE THAN ELEVEN MONTH. IT IS FURTHER NOTED THAT SOME OF THE SHARES ON WHICH SHORT TERM CAPITAL GAIN WAS SHOWN TO THE E XTENT OF RS.23.36 LAKH, EARNED BY THE ASSESSEE, WERE SHOWN A S INVESTMENT AS ON 31/03/2009 IN THE BALANCE SHEET OF THE ASSESSEE. IT IS FURTHER NOTED THAT THE SHARES WHIC H WERE HELD FOR LESS THAN 90 DAYS RESULTED INTO GAIN OF RS.21.8 0 LAKHS, WHEREAS, THE SHARES WHICH WAS HELD FOR MORE THAN 90 DAYS KAMLESH I. JAIN ITA NO.5279/MUM/2013 & C.O. NO.232/MUM/2014 6 HAS RESULTED IN SHORT TERM CAPITAL GAIN OF RS.94 LA KH, MEANING THEREBY, 81% SIGNIFICANT GAIN IS FROM SHARES, WHERE THE HOLDING PERIOD IS MORE THAN 4 TO 11 MONTH. IT IS FU RTHER NOTED THAT STCG OF RS.23.36 LAKHS, SHOWN BY THE ASSESSEE IS RESULTANT OF INVESTMENT SHOWN AS ON 31/03/2009 AND THE SAME WAS ACCEPTED IN SCRUTINY ASSESSMENT. THE TOTA LITY OF FACTS, CLEARLY INDICATES, IN THE LIGHT OF THE AFORE MENTIONED JUDICIAL PRONOUNCEMENTS, THAT THE ASSESSEE WAS RIGH TLY TREATED AS INVESTOR BY THE LD. FIRST APPELLATE AUTHORITY. IT IS FURTHER NOTED THAT THE ASSESSEE HIMSELF AS QUALIFIED CHARTE RED ACCOUNTANT AND MAINLY BUSY IN HIS WORK, HAS NOT CLA IMED ANY STAFF INVOLVED IN MAKING THE INVESTMENT, THUS, THE CBDT CIRCULAR NO.4 OF 2007 DATED 15/06/2007 FURTHER SUPP ORTS THE CASE OF THE ASSESSEE. 2.6. SO FAR AS, RELIANCE UPON THE DECISION IN THE CASE OF SMT. SADHANA NABERA VS ACIT (ITA NO.2586/MUM/2009) ORDER DATED 26/03/2010, BY THE LD. ASSESSING OFFICE R, IS CONCERNED, THE FACTS ARE TOTALLY DIFFERENT, WHEREIN , THE ASSESSEE CARRIED OUT FREQUENT TRANSACTION IN SHARES WITH BOR ROWED FUNDS AND PURCHASE AND SALE OF SHARES WAS THE ONLY ACTIVITY OF THE ASSESSEE, HOLDING PERIOD WAS VERY SHORT, IN THA T SITUATION DIFFERENT VIEW WAS TAKEN, THEREFORE, THAT CASE IS N OT APPLICABLE TO THE FACTS OF THE ASSESSEE. THE RATIO LAID DOWN I N MAHENDRA C. SHAH VS ADDL. CIT (ITA NO.6289/MUM/2008) ORDER D ATED 18/05/2011 FURTHER SUPPORTS THE CASE OF THE ASSESSE E. KAMLESH I. JAIN ITA NO.5279/MUM/2013 & C.O. NO.232/MUM/2014 7 2.7. WE FURTHER NOTE THAT WHILE FRAMING THE ASSESS MENT U/S 143(3) OF THE ACT FOR A.Y. 2009-10, THE CLAIM O F THE ASSESSEE, IDENTICALLY WAS ACCEPTED AS SHORT TERM CA PITAL LOSS OF RS.89.29 LAKH AND NO NEW FACTS WERE BROUGHT ON RECO RD BY THE ASSESSING OFFICER IN THE PRESENT ASSESSMENT YEAR, T HEREFORE, THE DEPARTMENT IS NOT EXPECTED TO DEVIATE FROM ITS OWN STAND. THE DIVIDEND EARNED ON SALE OF INVESTMENT CANNOT BE COMPARED WITH THE PROFIT. ADMITTEDLY, RES-JUDICATA STRICTLY NOT APPLY IN THE INCOME TAX PROCEEDINGS, AS EACH YEAR I S INDEPENDENT, BUT AT THE SAME TIME IT IS SETTLED PRI NCIPLE THAT ON THE SAME SET OF FACTS CONSISTENCY HAS TO BE FOLL OWED WHICH IS A FUNDAMENTAL JUDICIAL PRINCIPLE. IDENTICAL VIE W WAS EXPRESSED IN JANAK S. RANGWALA 11 SOT 627 (MUM.). RESPECTFULLY, FOLLOWING THE DECISION FROM HONBLE J URISDICTIONAL HIGH COURT IN GOPAL PUROHIT (SUPRA), WHEREIN, IT WA S HELD THAT, THERE BEING NO CHANGE IN THE MODUS OPERANDI OF THE ASSESSEE, THE BENEFIT CONFERRED ON SHORT TERM CAPITAL GAINS C ANNOT BE DENIED. IDENTICAL VIEW WAS EXPRESSED IN SHANTILAL M JAIN (ITA NO.2690/MUM/2010) ORDER DATED 27/04/2011. THUS, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN IN THE IMPUGNE D ORDER, CONSEQUENTLY, THE APPEAL OF THE REVENUE IS HAVING N O MERIT, THEREFORE, DISMISSED. 3. SO FAR AS, THE CROSS OBJECTION (232/MUM/2014) IS CONCERNED, THE LD. COUNSEL DID NOT PRESS THE SAME, THEREFORE, THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED AS NOT PRESSED. KAMLESH I. JAIN ITA NO.5279/MUM/2013 & C.O. NO.232/MUM/2014 8 FINALLY, THE APPEAL OF THE REVENUE AS WELL AS CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES, AT THE CONCLUSION OF THE HEARING ON 02/12/2015. SD/- SD/- ( RAJENDRA ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER # $ MUMBAI; ( DATED : 02/12/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 # 1' ( *+ ) / THE CIT, MUMBAI. 4. 0 0 # 1' / CIT(A)- , MUMBAI 5. 34 .' , 0 *+& * 5 , # $ / DR, ITAT, MUMBAI 6. 6 7$ / GUARD FILE. / BY ORDER, /3+' .' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI