ASHOK JAIN (HUF), MUMBAI V. ACIT 15(2), MUMBAI

ITA 1090/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75576 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 15-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Business income; Cost of acquisition

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI SANJAY GARG, JM ./I.T.A. NO.1090/M/2012 ( / ASSESSMENT YEAR: 2007 - 2008 ) ASHOK JAIN (HUF), 45/12, 2 ND FLOOR, RAJKOTWALA BLDG, 1 ST CARPENTER STREET, MUMBAI 400 004. / VS. ACIT - 15(2), MUMBAI. ./ PAN : AAAHJ 0191 D ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI K. GOPAL & MR. JITENDRA SINGH / RESPONDENT BY : SHRI M.L. PERUMAL, DR / DATE OF HEARING : 21.1.2014 / DATE OF PRONOUNCEMENT : 19 .2.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 15.2.2012 IS AGAINST THE ORDER OF THE CIT (A) - 26, MUMBAI DATED 5.12.2011 FOR THE ASSESSMENT YEAR 2007 - 2008. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: THE LD CIT (A) ERRED IN UPHOLDING THE ORDER OF THE AO OF TREATING SHORT TERM CAPITAL GAIN OF RS. 28,33,400/ - AS BUSINESS INCOME AND TAXED ACCORDINGLY WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. AT THE OUTSET, SHRI K. GOPAL AND MR. J ITENDRA SINGH, LD COUNSELS FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE FURNISHED SHORT TERM CAPITAL GAINS OF SHARES AND MUTUAL FUNDS OF RS. 28,33,400/ - . DURING THE ASSESSMENT PROCEEDINGS, AO PROPOSED TO TREAT THE SAME AS BUSINESS INCOME. CONSIDERING T HE FACT THAT THE ASSESSEE DID NOT FILE ANY REPLY IN THIS REGARD, AO TREATED THE SAME AS BUSINESS 2 INCOME AND THUS THE TOTAL INCOME WAS DETERMINED AT RS.30,89,321/ - . MATTER TRAVELLED TO THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE F IRST APPELLATE AUTHORITY, IT WAS SUBMITTED THAT THE ADDITION MADE BY THE AO IS WITHOUT PROPER REASONS. ASSESSEE ALSO RELIED ON THE INTENTION AND THE ENTRIES IN THE BOOKS OF ACCOUNTS AS INVESTMENT FOR ENJOYING THE DIVIDEND INCOME. THE SAID SHARES WERE NO T CONSIDERED AS STOCK - IN - TRADE IN THE BOOKS OF ACCOUNTS. FOR THE PROPOSITION THAT THE SAID INCOME CONSTITUTES SHORT TERM CAPITAL GAINS, ASSESSEE RELIED ON VARIOUS DECISIONS. HOWEVER, THE CIT (A) DID NOT APPRECIATE THE SUBMISSIONS OF THE ASSESSEE AND REFE RRED THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT VS. CIT AND OTHER DECISIONS OF THE TRIBUNAL AND HELD THAT THE DECISION OF THE AO IS PROPER. WHILE UPHOLDING THE DECISION OF THE AO, CIT (A) RELIED ON VARIOUS REASONS GIVEN IN PARA 3.3 OF HIS ORDER WHICH ARE AS UNDER: 1) THE ASSESSEE IS ACTIVELY AND MAINLY INVOLVED IN LARGE SCALE TRANSACTIONS OF PURCHASE AND SALE OF SHARES AND SPECULATION IN SHARES ON REGULAR BASIS. 2) THE PAT HISTORY ALSO REVEALS THAT THE ASSESSEE DID NOT EARN DIVIDEND DURING THE EARLIER AYS 2004 - 2005, 2005 - 2006 AND 2006 - 2007 ALSO AND DURING THESE YEARS, IT HAD ONLY SPECULATION PROFIT IN SHARES, WHICH SHOWS THAT THE ASSESSEES MOTIVE AND INTENTION WAS NOT OF INVESTMENT BUT TRADING. 3) DURING THE CURRENT YEAR AL SO, ASSESSEE HAS NOT EARNED DIVIDEND INCOME. 4) THE PERIOD OF HOLDING OF SHARES IS OF ONLY 4 AND MONTHS. 5) THE ASSESSEE HAD PURCHASED LARGE QUANTITIES OF SHARES IN ONE GO AND SOLD THEM IN BULK LIKE A NORMAL WHOLESALE TRADER. 6) THE ASSESSEE DEALS IN SPECULATIVE TRANSACTIONS OF SHARES ON REGULAR BASIS SINCE LAST FEW YEARS. 7). FURTHER, THE TURNOVER IS VERY HIGH AS COMPARED TO THE SIZE OF INVESTMENT. 4.1. AGGRIEVED WITH THE SAME, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 5. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE SAID REASONS GIVEN BY THE CIT (A) AND MENTIONED THAT THEY ARE FACTUALLY INCORRECT. BRINGING OUR ATTENTION TO THE CONTENTS OF PAGE 5 OF THE PAPER BOOK, LD COUNSEL MENTIONED THAT THE ONLY SCRIP DEALT WITH DURING THE YEAR RELATES TO TANEJ AGRO; 31000 SHARES; DATE OF PURCHASE IS 24/07/2006 AND DATE OF SALE IS 8/12/2006; PURCHASE COST IS RS. 30.49 LAKHS AND SALE COST IS RS. 58.82 LAKHS. THIS IS 3 THE ONLY SOLI TARY TRANSACTION WHICH THE AO AND THE CIT (A) CONSIDERED AS A HUGE TURNOVER WITH A HIGH VOLUME, LARGE TRANSACTIONS ETC. 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT THIS IS A CASE OF SOLITARY PURCHASE AND SALE TRANSACTION, LOW TURNOVER AND THE VOLUME IS ONLY IN FEW LAKHS OF RUPEES. TH EREFORE, IN OUR VIEW THE PRINCIPLES LAID DOWN BY THE HIGHER JUDICIARY APPLY FOR DETERMINING THE PARTICULAR RECEIPTS CONSTITUTE A BUSINESS OR CAPITAL FIELDS SUGGEST HERE THAT THE CLAIM OF THE ASSESSEE IS IN ORDER. THEREFORE, THE ORDER OF THE CIT (A) REQUIR ES TO BE REVERSED AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED . 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONO UNCED IN THE OPEN COURT ON 1 9 T H FEBRUARY, 2014. S D / - S D / - (SANJAY GARG ) (D. KARUNAKARA RAO ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 1 9 .2.2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MU M B A I