DCIT, Circle - 33, Kolkata, Kolkata V. Shri Ashis Kr. Kataruka, Kolkata

ITA 1132/KOL/2011

• Counselvise Citation: 113223514 RSA 2011
• Duration Of Justice: 2 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 02-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUCHETA CHATTOPADHYAY
• Assessee Lawyers: RAVI TULSIYAN
• Keywords: Business income

Judgement Text

I.T.A. NO.: 1132/KOL./20 11 ASSESSMENT YEAR : 2008-200 9 PAGE 1 TO 5 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA CORAM : SHRI ABRAHAM P. GEORGE (ACCOUNTANT MEMBER) AND SHRI GEORGE MATHAN (JUDICIAL MEMBER) I.T.A. NO.: 1132/KOL./ 2011 ASSESSMENT YEAR : 2008-2009 DEPUTY COMMISSIONER OF INCOME TAX,,................ ..RESPONDENT CIRCLE-33, KOLKATA, 10B, MIDDLETON ROW, 3 RD FLOOR, KOLKATA-700 071 -VS.- SHRI ASHIS KR. KATARUKA, 10, LORD SINHA ROAD KOLKATA-700 071 [PAN : AGFPK 6807 Q] APPEARANCES BY: SMT. SUCHETA CHATTOPADHYAY, JCIT, SR. D.R, FOR THE DEPARTMENT SHRI RAVI TULSIYAN, ADVOCATE, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JANUARY 29, 2014 DATE OF PRONOUNCING THE ORDER : FEBRUARY 06, 2014 O R D E R PER ABRAHAM P. GEROGE : 1. IN THIS APPEAL FILED BY THE REVENUE, DIRECTED AG AINST AN ORDER DATED 02.06.2011 OF LD. COMMISSIONER OF INCOME TAX (APPEA LS)-XX, KOLKATA, ITS GRIEVANCE IS THAT LD. CIT(APPEALS) DIRECTED THE ASS ESSING OFFICER TO TREAT THE PROFIT ARISING TO THE ASSESSEE ON SHARE TRADING UNDER THE HEAD CAPITAL GAINS AGAINST BUSINESS INCOME. 2. FACTS APROPOS ARE THAT ASSESSEE ENGAGED IN SHARE S AND SECURITIES INVESTMENT AND DEALING IN FUTURES & OPTIONS, HAD FI LED HIS RETURN FOR THE IMPUGNED ASSESSMENT YEAR DECLARING INCOME OF RS.54, 96,493/-. ASSESSEE HAD INCOME FROM TRADING IN FUTURES & OPTIONS, AND L ONG-TERM AND SHORT- TERM CAPITAL GAINS ON SALE OF SHARES. INCOME FROM F UTURES & OPTIONS WERE SHOWN BY THE ASSESSEE AS INCOME FROM BUSINESS. ASSE SSING OFFICER FROM THE DETAILS OF SHARE TRANSACTIONS FURNISHED BY THE ASSESSEE REACHED AN I.T.A. NO.: 1132/KOL./20 11 ASSESSMENT YEAR : 2008-200 9 PAGE 1 TO 5 2 OPINION THAT ASSESSEE WAS INDULGING IN FREQUENT PUR CHASE AND SALE OF SHARES WHICH WERE ALL HELD FOR SHORT PERIODS. ASSES SING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN WHY CAPITAL GAINS SHOWN BY IT SHOULD NOT BE TREATED AS BUSINESS INCOME. REPLY OF THE ASSESSEE W AS THAT HE HAD PURCHASED SHARES FROM CAPITAL MARKET THROUGH AUTHOR IZED BROKERS FOR INVESTMENT PURPOSE ONLY. AS PER THE ASSESSEE, HE WA S NOT DOING TRADING ON A DAILY BASIS. ASSESSEE ALSO POINTED OUT THAT TH E STOCK OF SHARES WERE HELD UNDER THE HEAD INVESTMENT. 3. HOWEVER, ASSESSING OFFICER WAS NOT IMPRESSED BY THE ABOVE REPLY GIVEN BY THE ASSESSEE. ACCORDING TO HIM, ASSESSEE H AD SPECULATION PROFIT OF RS.11,83,165/- ON FUTURES & OPTIONS WHICH CLEA RLY PROVED THAT ASSESSEE WAS INDULGING IN TRANSACTIONS ON A DAILY B ASIS. AMOUNT DECLARED BY THE ASSESSEE AS SHORT-TERM CAPITAL GAINS WERE FR OM 710 TRANSACTIONS. PERIOD OF HOLDING OF SHARES WERE 30 TO 180 DAYS ONL Y. 84.65% OF THE SHARES ACQUIRED WERE SOLD WITHIN SIX MONTHS. VIS-A- VIS CLAIM OF LONG-TERM CAPITAL GAINS ASSESSING OFFICER NOTED THAT 25 TRANS ACTIONS WERE OF SHARES HELD LITTLE MORE THAN ONE YEAR, 36 TRANSACTIONS OF SHARES HELD LITTLE MORE THAN TWO YEARS, AND 10 TRANSACTIONS OF SHARES HELD LITTLE MORE THAN THREE YEARS. AS PER THE ASSESSING OFFICER, THERE WERE SUB STANTIAL BORROWINGS MADE BY THE ASSESSEE AND THIS ALSO PROVED THAT THE MOTIVE BEHIND PURCHASE AND SALE OF SHARES WAS ONLY TO MAKE PROFIT S. THUS HE CONCLUDED THAT ASSESSEE WAS A TRADER OF SHARES. HE TREATED TH E INCOME RETURNED BY ASSESSEE UNDER THE HEAD CAPITAL GAINS AS BUSINESS INCOME. 4. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE LD. C IT(APPEALS). ARGUMENT OF ASSESSEE WAS THAT IN THE ASSESSMENT DON E FOR ASSESSMENT YEAR 2006-06, SIMILAR GAINS ARISING OUT OF SALE OF INVESTMENT WERE ACCEPTED BY THE DEPARTMENT AS CAPITAL GAINS. ASSESS EE ALSO POINTED OUT THAT IN THE CASE OF HIS MOTHER SMT. SULOCHANA DEVI KATARUKA FOR THE VERY SAME ASSESSMENT YEAR, SAME ASSESSING OFFICER HAD AC CEPTED THE CLAIM OF CAPITAL GAINS. RELIANCE WAS ALSO PLACED ON A NUMBER OF DECISIONS INCLUDING I.T.A. NO.: 1132/KOL./20 11 ASSESSMENT YEAR : 2008-200 9 PAGE 1 TO 5 3 THAT OF HONBLE MUMBAI TRIBUNAL IN THE CASE OF GOPA L PUROHIT VS.- JCIT (2009) 20 DTR 99. AS PER THE ASSESSEE HE HAD SUFFIC IENT OWN FUNDS OF RS.4,72,66,505/- AND INVESTMENT IN SHARES CAME TO R S.4,51,70,167/- ONLY. THEREFORE, ACCORDING TO HIM, THE CONCLUSIONS REACHE D BY THE ASSESSING OFFICER WERE NOT BASED ON FACTS. 5. LD. CIT(APPEALS) WAS APPRECIATIVE THE ABOVE CONT ENTIONS. ACCORDING TO HIM, OUT OF THE TOTAL CAPITAL GAINS RETURNED BY THE ASSESSEE, SHORT-TERM CAPITAL GAINS CAME TO ONLY RS.14,08,238/-. THE BALA NCE CAPITAL GAINS OF RS.83,36,337/- WAS LONG-TERM IN NATURE. AS PER LD. CIT(APPEALS), ASSESSEE HAD INVESTED IN SHARES AND SECURITIES SINCE VERY MA NY YEARS AND WAS ALL ALONG SHOWING GAINS FROM SALE OF SUCH INVESTMENTS U NDER THE HEAD CAPITAL GAINS. LD. CIT(APPEALS) ALSO NOTED THAT C BDT VIDE CIRCULAR NO. 4 OF 2007 HAD ACCEPTED THAT AN ASSESSEE COULD HAVE DI FFERENT PORTFOLIOS FOR SHARES ACQUIRED BY IT. LD. CIT(APPEALS) THEREFORE R EVERSED THE TREATMENT MADE BY ASSESSING OFFICER AND HELD THAT SURPLUS ON SALE OF SHARES COULD ONLY BE CONSIDERED AS CAPITAL GAINS. STRONG RELIANC E WAS PLACED ON THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN TH E CASE OF DCIT VS.- RELIANCE TRADING ENTERPRISES LTD. (ITA NO. 944/KOL/ 2008). 6. NOW BEFORE US, LD. D.R. STRONGLY ASSAILING THE O RDER OF LD. CIT(APPEALS) SUBMITTED THAT ASSESSEE HAD INDULGED I N A LARGE NUMBER OF TRANSACTIONS IN SHARES. ASSESSEE WAS ALSO DOING TRA DING OF FUTURE & OPTIONS. JUST BECAUSE ASSEESSEE HAD CLASSIFIED THE WHOLE HOLDING OF SHARES UNDER THE HEAD INVESTMENT WOULD NOT MEAN THAT SUC H HOLDINGS PER SE WERE INVESTMENT. LARGE NUMBER OF TRANSACTIONS UNDER TAKEN BY ASSESSEE AND THE HUGE LOANS RAISED BY HIM WOULD GO TO SHOW T HAT HE WAS ONLY IN THE BUSINESS OF TRADING IN SHARES. AS PER LD. D.R. THE TREATMENT GIVEN BY ASSESSEE IN HIS BOOKS COULD NOT BE CONSIDERED AS A GUIDING CRITERIA FOR DECIDING ON THE NATURE OF TRANSACTIONS. IF THE ASSE SSEE WAS DOING FUTURE & OPTIONS TRADING THEN THE PRESUMPTION THAT CAN NORMA LLY BE TAKEN IS THAT IT WAS TRADING IN SHARES, ALSO AS A BUSINESS VENTUR E. THEREFORE, ACCORDING I.T.A. NO.: 1132/KOL./20 11 ASSESSMENT YEAR : 2008-200 9 PAGE 1 TO 5 4 TO HIM, LD. CIT(APPEALS) FELL IN ERROR IN REVERSING THE VIEW TAKEN BY THE ASSESSING OFFICER. 7. PER CONTRA, LD. D.R. SUPPORTED THE ORDER OF AUTH ORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT HOLDI NG OF ASSESSEE IN SHARES AND MUTUAL FUNDS WERE SHOWN, ALL ALONG AS INVESTMEN T. IT IS ALSO NOT DISPUTED THAT ASSESSEE HAD BEEN SHOWING IT SO SINCE LAST VERY MANY YEARS. IN NONE OF THE EARLIER YEARS ASSESSING OFFICER HAD DISTURBED THE CLAIM OF ASSESSEE THAT SURPLUS ARISING ON SALE OF SUCH SHARE S WAS TO BE TAXED UNDER THE HEAD CAPITAL GAINS. ASSESSING OFFICER THOUGHT IT FIT TO SHIFT HIS STAND FOR THE IMPUGNED ASSESSMENT YEAR ONLY. BREAK-UP OF THE CAPITAL GAINS CLAIMED BY ASSESSEE HAS BEEN MENTIONED BY THE ASSES SING OFFICER AS RS.83,36,337/- LONG-TERM AND RS.14,08,238/- SHORT-T ERM. IT IS CLEAR FROM THE ABOVE THAT ABOUT 85% OF THE HOLDINGS OF SHARES, SOLD BY ASSESSEE WERE OF LONG-TERM IN NATURE. IN OTHER WORDS, THE SHARES WHICH WERE SOLD COMPRISED IN A MAJOR PART, LONG-TERM HOLDINGS. HOLD ING PERIOD OF SUCH SHARES EXCEEDED WAS 1 TO 4 YEARS, AS MENTIONED BY T HE ASSESSING OFFICER HIMSELF AT PARA 4.5 OF HIS ORDER. IN OUR OPINION, T HIS WILL CLEARLY IMPLY THAT ASSESSEE WAS NOT INDULGING IN DAY-TO-DAY SHARE TRANSACTIONS. NO DOUBT, IT HAD SHOWN A SHORT-TERM CAPITAL GAINS OF R S.14,08,238/-, OF WHICH, 50% WERE OUT OF SALES MADE WITHIN FIRST MONT H OF PURCHASES. BUT CONSIDERING THE OVERALL PICTURE, WE ARE OF THE OPIN ION THAT THE TREATMENT GIVEN BY THE ASSESSEE CANNOT BE FAULTED. ASSESSEE H AD NEVER SHOWN THE SHARES HELD BY HIM AS STOCK-IN-TRADE. JUST BECAUSE ASSESSEE HAD INDULGED IN TRADING OF FUTURE & OPTIONS WHICH WOULD NOT MEAN THAT HE WAS ALSO TRADING IN SHARES AS A BUSINESS VENTURE. REVENUE HA S NOT BEEN ABLE TO SHOW THAT INTENTION OF ASSESSEE AT THE TIME OF PURC HASE OF SHARES WAS ONLY TO EARN PROFIT AS A BUSINESS VENTURE. TREATMENT GIV EN BY ASSESSEE IN RESPECT OF HIS HOLDING OF SHARES, IN HIS BOOKS OF A CCOUNTS COULD NOT HAVE BEEN BRUSHED ASIDE. WE ARE OF THE OPINION THAT LD. CIT(APPEALS) WAS JUSTIFIED IN CONSIDERING THAT THE SHIFT OF HEAD MAD E BY THE ASSESSING I.T.A. NO.: 1132/KOL./20 11 ASSESSMENT YEAR : 2008-200 9 PAGE 1 TO 5 5 OFFICER WAS PURELY BASED ON ASSUMPTIONS AND PRESUMP TIONS. AS NOTED BY LD. CIT(APPEALS), CBDT HAD VIDE ITS CIRCULAR NO. 4 OF 2007 CLEARLY ACCEPTED THE RIGHT OF AN ASSESSEE TO HAVE TWO PORTF OLIOS, ONE FOR INVESTMENT AND OTHER FOR TRADING. IN THESE CIRCUMST ANCES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A PPEALS). 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH DAY OF FEBRUARY, 2014. SD/- SD/- GEORGE MATHAN ABRAHAM P. GEORGE (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 6 TH DAY OF FEBRUARY, 2014 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT(APPEALS) (4) CIT (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.