Venkatesh Sharma, Raichur V. Earlier ITO Ward - 1, Raichur

ITA 1057/BANG/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8603 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 10-07-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: H N KHINCHA
• Keywords: Capital asset; Difference of opinion; Change of opinion
• Section: 263

Judgement Text

ITA.1057/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'A', BENGALURU BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. S. JAYARAMAN, ACCOUNTANT MEMBER I.T.A NO.1057/BANG/2015 (ASSESSMENT YEAR : 2010-11) SHRI. VENKATESH SHARMA, SUNRISE APARTMENTS, FLAT NO.303, NEAR VIJAYA BANK MAIN BRANCH, RAICHUR 584 102 .. APPELLANT PAN : BHDPS4392E V. INCOME TAX OFFICER, WARD -4, RAICHUR .. RESPONDENT ASSESSEE BY : SHRI. H. N. KHINCHA, CA REVENUE BY : SHRI. G. R. REDDY, CIT-DR-I HEARD ON : 18.10.2016 PRONOUNCED ON : 25.01.2017 O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER PASSED U/S.263 BY THE CIT, GULBARGA, DT.05.02.2015, FOR THE ASSESS MENT YEAR 2010-11. 02. SHRI. VENKATESH SHARMA, THE ASSESSEE , IS INVO LVED IN PURCHASE AND SALE OF SHARES OF VARIOUS COMPANIES, H AS SHOWN INCOME FROM BOTH SPECULATION BUSINESSES & LONG TER M CAPITAL GAINS AND CLAIMED BENEFIT UNDER SEC. 10(33). ON PER USAL OF RECORDS ITA.1057/BANG/2015 PAGE - 2 AND THE STATEMENT OF ACCOUNTS, THE CIT FOUND THAT T HE ASSESSMENT ORDER PASSED FOR THIS A Y ON 12-03-2013 DETERMINI NG THE TOTAL INCOME AT RS. 5,66,360/- IS ERRONEOUS, INTER AILA, BRIEFLY FOR THE REASONS SET OUT BELOW: FROM THE DETAILS FILED OF PURCHASE AND SALE OF SHAR ES, IT IS SEEN THAT MOST OF THE SHARES WERE HELD FOR LESS THAN 36 MONTHS AS DETAILED BELOW, WHICH WERE CLAIMED AS LONG TERM CAP ITAL GAINS: FROM THE ABOVE, IT WILL BE SEEN THAT THE ASSESSEE HAD OPENING STOCK OF SHARES OF SHILPA MEDICATE NUMBERI NG 60250 . DURING THE YEAR, HE PURCHASED ADDITIONAL SHARES OF THIS CO. NUMBERING IN ALL 1544 AND SOLD THEM ALONG WITH THE OPENING STOCK OF 60250 SHARES. AT THE END OF THE YEAR, HE IS LEFT WITH 39120 SHARES. HE CLAIMED THE GAINS MADE FROM THESE SALE AS LONG TERM CAPITAL GAINS. THE ASSESSEE WANTED TO TAKE ADVANTAG E OF 60250 SHARES HELD AT THE BEGINNING OF THE YEAR AND SHOWE D THEM AS LONG TERM CAPITAL GAIN, ON THE CONTRARY, HE HAD PU RCHASED 1544 SHARES AND SOLD THEM IN THE SAME YEAR. THEREFO RE, THE SALE ITA.1057/BANG/2015 PAGE - 3 OF ASSET, IE 1544 SHARES, IS CLEARLY A SHORT TERM C APITAL ASSET AS PER SEC. 2(42A). THEREFORE, THE ENTIRE INCOME CLAIMED O F RS. 44,76,676/- AS EXEMPT U/S. 10(38) ON THE PLEA THAT IT IS A LONG TERM CAPITAL GAIN IS FALSE AND HAS TO BE WITHDRAWN. IT MAY BE NOTED HERE THAT THE ASSESSEE IS AN EMPLOYEE OF SHIL PA MEDICARE CENTRE RAICHUR, AND HE HAS BEEN INVOLVED IN PURCH ASE AND SALE OF SHARES OF THIS CONCERN AS WELL AS VARIOUS OTHER COM PANIES ON REGULAR BASIS AND CLAIMING EXEMPTIONS EVERY YEAR. THUS, IT IS VERY MUCH CLEAR THAT WHAT THE ASSESSEE IS DOING IS PURCHASING AND SELLING THE SHARES, ON REGULAR BASIS , AND THEREFORE IT IS A CA SE OF BUSINESS, THE SHARES ARE HELD AS STOCK IN TRADE AND NOT AS AN INVESTMENT SO AS TO TREAT IT AS LONG TERM CAPITAL ASSET . THIS VIEW GETS SUPPORT FROM VARIOUS ASPECTS FOUND ON PERUSAL OF CA SE RECORDS VIZ. 1. THE ASSESSEE HAS FILED BALANCE SHEET AS ON 31-03-20 10 WHEREIN IT IS FOUND THAT THE VALUE OF SHARES HELD A S ON 31-03-2010 OF RS. 11,98,207/- IS SHOWN AS CLOSING STOCK AND NO T AS INVESTMENTS IN CAPITAL ASSET. IF IT WERE REALLY LON G TERM ASSETS, THE SAME SHOULD HAVE BEEN SHOWN SEPARATELY BUT THE ASSE SSEE HAS CLUBBED THE SAME UNDER HIS SPECULATIVE BUSINESS AS SHOWN BELOW : 2. THE ASSESSEE FILED AUDIT REPORT U/S.44AB OF THE ACT AND AS PER CLAUSE 8 OF THE SAID REPORT IN FORM 3CD IT I S SHOWN THAT HE IS 'TRADING - OTHERS-0204' AND AS PER CLAUSE 12(A) OF THE SAME, HE STATES THAT CLOSING STOCK IS VALUED AT LO WER OF COST OR MARKET RATE. ITA.1057/BANG/2015 PAGE - 4 3. THE ASSESSEE FILED AUDIT REPORT U/S.44AB OF THE ACT AND AS PER CLAUSE 8 OF THE SAID REPORT INFORM 3CD IT IS SHOWN THAT HE IS 'TRADING - OTHERS-0204' AND AS PER CLAUSE 12(A) OF THE SAME HE STATES THAT CLOSING STOCK IS VALUED AT LOWE R OF COST OR MARKET RATE. 4. IF THE INCOME EARNED IS A LONG TERM CAPITAL GAIN, THEN THERE WAS-NO NEED FOR THE ASSESSEE TO GET HIS ACCOUNTS AU DITED U/S. 44AB BECAUSE AS PER P&L ACCOUNT, THE ASSESSEE HAS CLAIMED BUSINESS LOSS OF RS. 1,65,974/- WHICH IS MA DE UP OF I. EXPENSES SHOWN IN P&L ACCOUNT RS. 51,806/- II. DIVIDENT RS. 27,300/- AND III. INTEREST PAID OF RS. 86,868/-. IN VIEW OF THE ABOVE, IT IS VERY MUCH CLEAR THAT TH E ASSESSEE HAS BEEN INVOLVED IN PURCHASE AND SALE OF SHARES ON REGULAR BASIS AND DOES NOT HOLD THEM AS AN INVESTME NT. THE SHARES ARE HELD AS STOCK IN-TRADE AND AS A RESULT, THE INCOME EARNED THERE- ON HAS TO BE BROUGHT TO TAX AS BUSINE SS INCOME. THE PRINCIPLES LAID DOWN BY KARNATAKA HIGH COURT IN THE CASE OF CIT VS ARAVIND PRAKASH MALPANI, BANGALORE, IN ITA N O. 113, OF 2006, DATED 04-01-2011 ARE KEPT IN VIEW. THEREFO RE, THERE IS NO HESITATION TO COME TO AN INESCAPABLE CONCLUSION THAT THE ASSESSMENT ORDER PASSED HAS BEEN ERRONEOUS IN SO FA R AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE AND AS S UCH, THE SAID ORDER IS SET ASIDE WITH A DIRECTION TO REFRAME THE ASSESSMENT ORDER SUITABLY AFTER COLLECTING ALL THE DETAILS. AGGRIEVED, THE ASSESSEE FILED THIS APPEAL WITH THE FOLLOWING GROUNDS: ITA.1057/BANG/2015 PAGE - 5 ITA.1057/BANG/2015 PAGE - 6 03. THERE IS DELAY IN FILING THE APPEAL. THE ASSESS EE PLEADED THAT HE WAS UNDER A BONAFIDE IMPRESSION THAT ONCE THE ASSESSME NT IS REFRAMED IN PURSUANCE OF THE DIRECTIONS U/S 263, THEN ONLY THE NEXT COURSE OF ACTION WOULD BEGIN BUT ON DUE ADVISE , HE MADE DUE ARRANGE MENT FOR FILING THE APPEAL AND PLEADED TO CONDONE THE DELAY. WE HAVE CO NSIDERED THE PLEA AND CONDONED THE DELAY. 04. THE AR SUBMITTED THAT THE AO RAISED A SPECIFIC QUERY, ON THE IMPUGNED ISSUES BY HIS LETTER DT 13.12.2012, CONSID ERED THE EXPLANATION AND PASSED THE ASSESSMENT ORDER. THERE IS NO ERROR IN THE ORDER, THE CONDITION PRECEDENT FOR ISSUE OF NOTICE U/S 263 IS ABSENT, THE ORDER PASSED U/S 263 IS MERE CHANGE OF OPINION AND IT IS BEYOND THE SCOPE AND HENCE IT SHOULD BE QUASHED. PER CONTRA, THE DR SUBMITTED THA T IT IS SEEN FROM THE ASSESSMENT ORDER AND THE ORDER U/S 263 THAT THE A SSESSEE HAS NOT FILED ANY REPLY TO THE IMPUGNED QUERY, NOR THE AO CONSIDE RED THEM NOR THE ASSESSEE BROUGHT SUCH REPLY TO THE CS IT ATTENTI ON . FROM THE FACTS SET OUT IN THE ORDER U/S 263 , IT IS CLEAR THAT ALL THE ING REDIENTS REQUIRED U/S 263 ARE FULFILLED AND HENCE THE ORDER PASSED U/S 263 BE SUS TAINED. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GONE THROUGH R ELEVANT ORDERS. IT IS CLEAR THAT THE AO HAS NOT EXAMINED THE FACTUAL AND LEGAL ASPECTS OF THE IMPUGNED ISSUE AND PASSED THE ASSESSMENT ORDER AND HENCE THE ORDER ITA.1057/BANG/2015 PAGE - 7 PASSED U/S 263 IS WELL WITHIN THE SCOPE OF SECTI ON 263. THE ASSESSEES APPEAL IS DISMISSED. 05. IN THE RESULT, THE ASSESSEES APPEAL IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH DAY OF JANUARY , 2017. SD/- SD/- (SUNIL KUMAR YADAV) (S. JAYARAMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME TAX 4. THE COMMISSIONER OF INCOME TAX (A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR