Jalpa Keyur Shah, Ahmedabad V. The Dy.CIT.,Circle-7, Ahmedabad

ITA 1132/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1726 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-03-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 18-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Keywords: Business income; Salary income; Question of law; Speculation loss
• Section: 143(3); 234B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO. 1132/AHD/2011 / ASSESSMENT YEAR: 2006-07 SMT. JALPA KEYUR SHAH, 92, SATYAGRAH CHHAVANI, SECTOR-7, NR. RAMDEVNAGAR, SATELLITE ROAD, AHMEDABAD-07 PAN : ANCPS 7653 J VS. DCIT, CIRCLE-7, AHMEDABAD [ / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI TEJ SHAH, AR REVENUE BY : SHRI NARENDRA SINGH, SR. DR. ! '# / DATE OF HEARING : 10/03/2016 / DATE OF PRONOUNCEMENT: 02/05/2016 $%/ O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORDER O F LD. COMMISSIONER INCOME-TAX (APPEALS)-VI, AHMEDABAD, DATED 25.03.2011 PASSED FOR AS SESSMENT YEAR 2006-07. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN FACT AND IN LAW IN TREATIN G THE SHORT TERM CAPITAL GAIN OF SHARES HELD FOR THE PERIOD OF LESS THAN 30 DAYS AS BU SINESS INCOME AND DIRECTING THE ASSESSING OFFICER TO RECALCULATE THE INC OME FROM BUSINESS AND INCOME FROM SHORT TERM CAPITAL GAIN. 2. WITHOUT PREJUDICE TO THE GROUNDS RAISED ABOVE, IF THE PR OFIT ON SALE OF SHARES IS TREATED AS BUSINESS INCOME, THE ASSESSEE BE GRANTED REBATE U/ S88E OF THE ACT. 3. THE LD. CIT(A) ERRED IN FACT AND IN LAW IN NOT DECIDING G ROUND NO.10 RAISED BEFORE REGARDING THE CHARGING OF INTEREST U/S 234A, 234B & 234C AND ALSO GROUND NO.11 REGARDING LEVY OF PENALTY U/S 274 R.W.S. 271(1)(C) FOR C ONCEALMENT THE INCOME. 3. BRIEFLY STATED FACTS, AS CULLED OUT FROM THE RECORDS, ARE THAT THE ASSESSEE IS AN INDIVIDUAL, DERIVING INCOME FROM SALARY, BUSINESS, C APITAL GAIN AND OTHER ITA NO. 1132/AHD/2011 SMT JALPA KEYUR SHAH VS. DCIT AY : 2006-07 - 2 SOURCES. SHE FILED HER RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 22.12.2006 DECLARING TOTAL INCOME AT RS.11,17,110/- WHICH INCLUDES SHO RT TERM CAPITAL GAIN OF RS.8,78,437/- ARISING OUT OF CERTAIN INVESTMEN TS MADE BY HER DURING THE CURRENT AS WELL AS PRECEDING ASSESSMENT YEAR S. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 21.06.2007 WHICH WAS DULY SERVED UPON THE ASSESSEE ON 14.07.2007. THEREAFTER, A DETAILED QUESTIONNAIRE WAS GIVEN TO THE ASSESSEE AND T HE NECESSARY DETAILS IN RESPONSE TO THE SAID NOTICE WERE FURNISHED BY THE ASS ESSEE. SUBSEQUENTLY, THE LD. ASSESSING OFFICER FRAMED ASSESSMENT U/S 143(3) OF THE INCOME-TAX ACT, 1961 ON 28.11.2008 BY MAKING ADDITION OF RS.8,78,436/- TREATING THE SAME AS BUSINESS INCOME. 4. AGGRIEVED THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO F OLLOWING THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI SUGAM CHAND C. SHAH VS. ACIT IN ITA NO.3554/AHD/2008 FOR AY 2005-06 AND 1932/AHD/2009 FOR AY 2006-07, GRANTED PARTIAL RELIEF TO THE ASSESSEE HOLDING THAT THE SHARES HELD BY THE ASSESSEE FOR THE PERIOD MORE THAN 30 DAYS TO BE TREATED AS INVESTMENT RESULTING IN CAPITAL GAIN. AGGRIEVED THE ASSESSEE IS NOW IN APPEAL BEF ORE THE TRIBUNAL. 5. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE A SSESSEE HAS REGULARLY BEEN SHOWING SHORT TERM AND LONG TERM CAPIT AL GAINS FROM SALE OF SHARES AS WELL AS SPECULATION LOSS FROM TRANSACTIONS OF S HARES SINCE ASSESSMENT YEAR 2004-05 AND EVEN SHOWING THEM FOR THE FOLLOWING ASSES SMENT YEARS, I.E., AY 2007-08 ONWARDS. THE LD. AUTHORIZED REPRESENTATIVE SUBMI TTED THAT WHEREVER THERE IS A SPECULATION PROFIT/LOSS, THE SAME I S SHOWN UNDER THE HEAD SPECULATION BUSINESS AND WHEREVER THERE IS SHORT TER M CAPITAL GAIN OR LONG TERM CAPITAL GAIN, IT IS SHOWN UNDER THE HEAD CAPITAL GAI NS AND THE INTENTION OF THE APPELLANT WAS VERY CLEAR AND THE SAME GETS FURTHE R SUPPORTED BY THE INVESTMENT ACCOUNT SHOWN IN THE BALANCE-SHEET. FURTHER , CERTAIN INVESTMENTS WHICH WERE MADE DURING THE YEAR AND ALSO CONTINUED TO BE HELD WERE SHOWN IN ITA NO. 1132/AHD/2011 SMT JALPA KEYUR SHAH VS. DCIT AY : 2006-07 - 3 THE PERSONAL BALANCE-SHEET UNDER THE HEADING INVESTME NT AND THE SOURCE OF THE INVESTMENT IS OUT OF SELF OWNED CAPITAL AND NOT FR OM BORROWINGS. THE LD. AUTHORIZED REPRESENTATIVE FURTHER SUBMITTED THAT THE AS SESSEE MAINTAINED TWO SETS OF BOOKS OF ACCOUNTS, I.E., ONE FOR THE BUSINESS OF TRANSPORTATION AND SPECULATION INCOME AND THE OTHER SET OF BOOKS OF ACC OUNTS IN PERSONAL NAME ARE MAINTAINED WHERE INVESTMENTS IN SHARES HAVE BEEN SHOWN UNDER THE HEAD INVESTMENT AND GAIN/LOSS, IF ANY, HAS BEEN SHOWN UNDER TH E HEAD CAPITAL GAINS. THE LD. AUTHORIZED REPRESENTATIVE ALSO REFERRED TO THE CBDT CIRCULAR NO.4/2007 DATED 15.06.2007 THAT DEFINED VARIOUS PRINCIPLES MENTIONE D IN THE CIRCULAR AND ONE OF THE PRINCIPLES CLARIFIES THAT WHER E THE OBJECT OF THE INVESTMENT IN SHARES OF A COMPANY IS TO DERIVE INCOME BY WAY OF DIVIDEND ETC., THEN THE PROFITS ACCRUING BY CHANGE IN SUCH INVESTMEN T WILL YIELD CAPITAL GAIN AND NOT REVENUE RECEIPT. THE LD. AUTHORIZED REPRESENT ATIVE ALSO REFERRED AND RELIED UPON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF CIT (CENTRAL), KOLKATA VS. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. (P) L TD, REPORTED IN 82 ITR 586, AND ALSO ON THE DECISION OF CO-ORDINATE BENCH, BOMBAY, I N THE CASE OF ACIT VS. JAGDISH MASTER, HUF, REPORTED IN [2011] 12 TAXMANN.COM 456 (MUM.) . 6. ON THE CONTRARY, LD. DEPARTMENTAL REPRESENTATIVE SUPPO RTED THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MAT ERIAL ON RECORD. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL I S AGAINST THE ACTION OF THE LD. CIT(A) IN TREATING THE SHORT TERM CAPITAL GAIN OF SHARES HELD FOR THE PERIOD OF LESS THAN 30 DAYS AS BUSINESS INCOME AND DIRECTING T HE LD. ASSESSING OFFICER TO RECALCULATE THE INCOME FROM BUSINESS AND INCOME FR OM SHORT TERM CAPITAL GAIN. THERE IS NO DISPUTE ABOUT THE TAXABILITY OF GAIN FROM SALE OF SHARES HELD FOR MORE THAN 30 DAYS TO BE TREATED AS CAPITAL GAIN AND NOT BUSINESS INCOME AND THE DISPUTE GETS SYNCHRONIZED ONLY TOWARDS TAXABILITY O F GAIN OF SHARES HELD FOR LESS THAN 30 DAYS. WE FIND THAT THE ASSESSEE HAS RELIED UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF ASSOCIATED INDUSTRI AL DEVELOPMENT CO. (P) LTD. (SUPRA), WHEREIN THEIR LORDSHIPS HAS HELD AS UNDER:- ITA NO. 1132/AHD/2011 SMT JALPA KEYUR SHAH VS. DCIT AY : 2006-07 - 4 WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY OF INVESTM ENT OR FORMS PART OF THE STOCK-IN-TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDG E OF THE ASSESSEE WHO HOLDS THE SHARES AND HE SHOULD, IN NORMAL CIRCUMSTANCES, B E IN A POSITION TO PRODUCE EVIDENCE FROM HIS RECORDS AS TO WHETHER HE HAS MAIN TAINED ANY DISTINCTION BETWEEN THOSE SHARES WHICH ARE HIS STOCK-IN-TR ADE AND THOSE WHICH ARE HELD BY WAY OF INVESTMENT. APPLYING THIS DECISION ON THE ORDER OF THE LD. CIT( A), WE FIND THAT THE SAME HAS BEEN ACCEPTED TO A LARGE EXTENT AS THE LD. CIT(A) HAS NOT TREATED COMPLETE GAIN FROM TRANSACTIONS OF PURCHASE AND SALE OF SHARES AS BUSINESS INCOME, THEREBY ACCEPTING THE CONTENTION OF THE ASSES SEE AND RELYING ON ASSESSEES BOOKS OF ACCOUNTS OF TRADING TRANSACTIONS OF PURCHASE/SALES OF SHARES AS CAPITAL GAINS AND ONLY TO A LIMITED EXTENT HAS DECIDE D AGAINST THE ASSESSEE BY TREATING GAIN FROM PURCHASE AND SALES OF SHARES HELD FOR LESS THAN 30 DAYS AS BUSINESS INCOME. WE FURTHER FIND THAT THE CO-ORDINATE BENCH (BOMBAY) IN THE CASE OF JAGDISH MASTER, HUF (SUPRA) HAS DEALT WITH THE SIM ILAR ISSUE AND HAS HELD AS UNDER:- THE ISSUE TO BE DECIDED WAS AS TO WHETHER THE STCG ON TRANSAC TION OF PURCHASE AND SALE OF SHARES UNDERTAKEN BY THE ASSESSEE DURING THE PREVIOUS YEAR WAS TO BE ASSESSED UNDER THE HEAD OF 'INCOME FROM BUSINESS' AS CLA IMED BY THE REVENUE OR INCOME UNDER THE HEAD OF 'CAPITAL GAIN' AS CONTENDED BY THE ASSESSEE. BEFORE DEALING WITH THE FACTS OF THE CASE OF THE ASSESSEE, IT WAS NECESSARY TO BRIEFLY NARRATE THE PRINCIPLES APPLICABLE IN DECIDING THE ABOVE ISSUE AS LAID DOWN IN SEVERAL JUDICIAL PRONOUNCEMENTS:- (A) WHETHER A TRANSACTION OF SALE AND PURCHASE OF SHARES WERE TRADING TRANSACTIONS OR WHETHER THEY WERE IN THE NATURE OF INVEST MENTS IS MIXED QUESTION OF LAW AND FACT. (B) IT IS POSSIBLE FOR AN ASSESSEE TO BE BOTH AN INVE STOR AS WELL AS A DEALER IN SHARES. WHETHER A PARTICULAR HOLDING IS BY WAY OF INVESTMENT OR FORMED PART OF STOCK IN TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSES SEE AND IT IS FOR THE ASSESSEE TO PRODUCE EVIDENCE FROM HIS REC ORDS AS TO WHETHER HE MAINTAINED ANY DISTINCTION BETWEEN SHARES WHICH WERE HELD BY HI M AS INVESTMENTS AND THOSE HELD AS STOCK IN TRADE. (C) TREATMENT IN THE BOOKS BY AN ASSESSEE WILL NOT BE CONCLUSIVE. IF THE VOLUME AND FREQUENCY WITH WHICH TRANSACTIONS ARE CARRIED OUT, INDI CATE SYSTEMATIC AND ORGANIZED ACTIVITY WITH PROFIT MOTIVE, THEN IT WOULD BE A CASE OF BUSINESS PROFITS AND NOT CAPITAL GAIN. (D) PURCHASE WITHOUT AN INTENTION TO RESELL WHERE THEY ARE SOLD UNDER CHANGED CIRCUMSTANCES WOULD BE CAPITAL GAINS. PURCHASE WITH AN I NTENTION TO RESELL WOULD RENDER THE GAIN ON SALE OF SHARES AS BUSINESS PRO FIT DEPENDING ON THE ITA NO. 1132/AHD/2011 SMT JALPA KEYUR SHAH VS. DCIT AY : 2006-07 - 5 CIRCUMSTANCES OF THE CASE LIKE NATURE AND QUANTITY OF ARTICLE PURCHASED, NATURE OF THE OPERATION INVOLVED. (S) NO SINGLE FACT HAS ANY DECISIVE SIGNIFICANCE AND THE QUESTION MUST DEPEND UPON THE COLLECTIVE EFFECT OF ALL THE RELEVANT MATERIAL S BROUGHT ON RECORD. [PARA 5] THE ABOVE TESTS HAVE AGAIN BEEN REITERATED BY THE CBDT IN ITS CIRCULAR NO. 4/2007, DATED 15-4-2007. [PARA 6] FROM THE FACTS OF THE CASE, THE FOLLOWING CONCLUSIONS COULD BE AR RIVED AT. (A) SHARES OF ONLY 22 COMPANIES HAD BEEN BOUGHT AND SOLD BY T HE ASSESSEE DURING THE PREVIOUS YEAR. (B) THE VOLUME OF PURCHASE AND SALE OF THE ASSESSEE DURIN G THE PREVIOUS YEAR WAS RS. 3,71,91,088 AND RS. 10,39,07,885 RESPECTIVELY. THE VALUE OF INVES TMENT AS ON 31-3-2004 WAS RS. 3,51,50,411. (C) THE PURCHASE AND SALE OF SHARES WAS THE ONLY ACTIVITY OF THE ASSESSEE BECAUSE THE KARTA OF THE HUF WAS IN FULL TIME EMPLOYMENT. (D) THE PERIOD OF HOLDING WAS NOT VERY SHORT AND IT WAS REASON ABLE TO PRESUME THAT THE PURCHASE WAS MADE WITH AN INTENTION TO MAKE INVESTMENT. (E) THE SCALE OF ACTIVITY WAS NOT SUBSTANTIAL. , (F) THE TRANSACTIONS WERE NOT CONTINUOUS AND REGULAR BUT WERE SPORADIC. (G) BORROWED FUNDS HAD NOT BEEN USED FOR PURCHASE OF SHARES. (H) COMPOSITION OF LONG-TERM CAPITAL GAIN WAS SUBSTA NTIAL WITH A SUBSTANTIALLY LONG HOLDING PERIOD. (I) THE ASSESSEE HAD TREATED THE SHARES AS INVESTMENTS IN ITS BOO KS OF ACCOUNT. (J) THE REVENUE HAD DISPUTED THE CLAIM OF THE ASSESSEE ONLY IN RELEVANT THE ASSESSMENT YEAR. IN THE PAST AND SUBSEQUENT THE ASSESSM ENT YEARS THE CLAIM OF THE ASSESSEE HAD BEEN ACCEPTED. (K)EVEN THE HOLDING PERIOD OF SHARES WHICH GAVE RISE TO STCG WA S MORE THAN 30 DAYS IN THE MAJORITY OF THE SCRIPS. (L)ALL TRANSACTIONS WERE DELIVERY BASED TRANSACTIONS AND THE ASSESSEE DID NOT INDULGE IN TRANSACTIONS WITHOUT ACTUAL DELIVERY. [PARA 8] IN THE LIGHT OF THE FACTS AS IT PREVAILED IN THE CASE OF THE ASSESSEE, IT COULD NOT BE SAID THAT THE ASSESSEE WAS A TRADER IN SHARES. THE COMMISS IONER (APPEALS) ERRED IN TREATING THE ASSESSEE AS AN INVESTOR TRADER AND THIS CONCLUSION WAS PURELY BASED ON THE NUMBER OF DAYS FOR WHICH THE ASSESSEE HELD SHAR ES. THE FACT THAT THE ASSESSEE SOLD SHARES WITHIN 30 DAYS OF PURCHASE COULD NOT BE THE BASIS TO HOLD THAT VIS--VIS THOSE SHARES THE ASSESSEE DID TRADING. THE INTENTI ON OF THE ASSESSEE WAS TO HOLD SHARES AS INVESTMENTS AND THE CIRCUMSTANCES DID NOT JUSTIFY GIVING A DIFFERENT TREATMENT. THEREFORE, THE CAPITAL GAIN AS DEC LARED BY THE ASSESSEE WAS TO BE ACCEPTED. FOR THE REASONS GIVEN ABOVE, THE APPEAL OF THE ASSESSEE WAS TO BE ALLOWED AND THE APPEAL BY THE REVENUE WAS TO BE DISMISSED. [PARA 9] RESPECTFULLY FOLLOWING THE DECISION OF HONBLE APE X COURT IN THE CASE OF ASSOCIATED INDUSTRIAL DEVELOPMENT CO. (P) LTD. (SUPRA) AND THE DECISION OF CO- ITA NO. 1132/AHD/2011 SMT JALPA KEYUR SHAH VS. DCIT AY : 2006-07 - 6 ORDINATE BENCH IN THE CASE OF JAGDISH MASTER, HUF (SUPR A), WE ARE OF THE VIEW THAT, AS THE ASSESSEE HAS KEPT SEPARATE RECORDS OF INVESTM ENT IN SHARES AND THE SAME GETS CORROBORATED WITH THE SHORT TERM AND LONG TE RM CAPITAL GAINS FROM SALE OF SHARES SHOWN BY THE ASSESSEE, THERE REMAINS NO R EASON FOR DOING A SPECIAL TREATMENT FOR SHARES HELD FOR LESS THAN 30 DAYS AN D THEREFORE, THE CAPITAL GAIN AS DECLARED BY THE ASSESSEE SHOULD BE ACCEPTED. THUS , THE ASSESSEES APPEAL IS ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 2 ND MAY, 2016 AT AHMEDABAD. SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER AHMEDABAD; DATED, 2/5/2016 **BT $% ! &''( )$(*'/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ++ ' ,' / CONCERNED CIT 4. ,' ) ( / THE CIT(A)- 5. (/0 &'& , , 123 /DR,ITAT, AHMEDABAD, 6. 045 6 / GUARD FILE. $% / BY ORDER, TRUE COPY +1 (ASSTT.REGISTRAR) ITAT, AHMEDABAD 1. DATE OF DICTATION 18.04.2016.. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER : 18.04.2016 3. OTHER MEMBER .. 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S . 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT .. 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S . 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2/5/2016 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER