DCIT, Circle - 40, Kolkata, Kolkata V. Shri Bharat Lal Agarwal, Kolkata

ITA 1150/KOL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59590 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 06-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M KATARUKA
• Assessee Lawyers: S K ROY
• Keywords: Business income
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND , ! . '# . ) [BEFORE SRI MAHAVIR SINGH, JM & SHRI C. D. RAO, AM] $ $ $ $ / I.T.A NO. 1150/KOL/2011 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR : 2008-09 DEPUTY COMMISSIONER OF INCOME-TAX, VS. SHRI BHARAT LAL AGARWAL CIRCLE-40, KOLKATA. (PAN:ACWPA 0304 R) (*+ /APPELLANT ) (,-*+/ RESPONDENT ) DATE OF HEARING: 23.01.2012 DATE OF PRONOUNCEMENT: 23.01.2012 FOR THE ASSESSEE: SHRI S. K. ROY FOR THE REVENUE: SMT. M. KATARUKA . / ORDER PER MAHAVIR SINGH, JM ( , , , , ) THIS APPEAL BY REVENUE IS ARISING OUT OF THE ORDER OF CIT(A)-XII, KOLKATA IN APPEAL NO.216/CIT(A)-XII/CIR-40/10-11 VIDE DATED 06.06.201 1. ASSESSMENT WAS FRAMED BY ACIT, CIR-40, KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2008-09 VIDE HIS ORDER DATED 31 .12.2010. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN TREATING THE INCOME OF ASSESSEE AS CAPITAL GAINS INSTEAD OF BUSI NESS INCOME HELD BY ASSESSING OFFICER. FOR THIS, REVENUE HAS RAISED FOLLOWING THREE EFFECTIVE GROUNDS: I) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) IS NOT JUSTIFIED IN HOLDING THAT THE TREATMENT OF SHORT TERM CAPITAL G AINS AS BUSINESS INCOME BY THE A.O. WAS INCORRECT. II) THAT WHILE DECIDING THE ISSUE, THE LD. CIT(A) D ISREGARDED THE FINDINGS OF THE ASSESSING OFFICER THAT SUBSTANTIAL VOLUME OF TRANSACTIONS IN SHARES RESULTING IN PROFIT TO THE ASSESSEE BE TREATED AS HIS BUSINESS INCOME AND NOT AS SHORT TERM CAPITAL GAINS. III) THAT DIVIDEND INCOME ARISING TO THE ASSESSEE D URING THE YEAR IS ONLY RS.84352.79 WHEREAS NET INCOME FROM SHORT TERM GAIN ON SHARES I S ARRIVED AT RS.31,07,482.67. THIS ALSO ESTABLISH THAT THE NATURE OF TRANSACTION IN SH ARES CLAIMED AS SHORT TERM CAPITAL GAINS IS BUSINESS INCOME, RATHER THAN INCOME ARISI NG OUT OF INVESTMENT. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEF FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND FILED HIS RETURN OF INCOME FOR THE RELEVANT 2 ITA 1150/K/2011 SHRI BHARAT LAL AGARWAL A.Y.2008-09 ASSESSMENT YEAR 2008-09 ON 19.09.2008 AND ASSESSEE S CASE WAS SELECTED FOR SCRUTINY ASSESSMENT BY ISSUING NOTICES U/S. 143(2) R.W.S. 14 2(1) OF THE ACT. ASSESSEE PRODUCED COMPLETE BOOKS OF ACCOUNT, BANK STATEMENT, BILLS AND VOUCHER S AND REQUISITIONED DETAILS FROM TIME TO TIME. THE ASSESSING OFFICER DURING THE COURSE OF A SSESSMENT PROCEEDINGS NOTICED THAT ASSESSEE CLAIMED SHORT TERM CAPITAL GAINS ON SALE OF SHARES IN HIS COMPUTATION OF INCOME AT RS.31,07,483/-. THE ASSESSING OFFICER NOTICING NUM BER OF TRANSACTIONS, FREQUENCY, NATURE AND QUANTITY OF PURCHASE AND SALES TREATED THE SHORT TE RM CAPITAL GAINS AS BUSINESS INCOME. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF ASSESSEE BY GIVING FOLLOWING FINDING IN PARA 4 OF HIS APPELLATE ORDER: 4. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT. GROUNDS NOS. 1 TO 3 ARE AGAINST THE ACTION OF THE ASSESSING OFFICER TO TREA T THE SHORT TERM CAPITAL GAINS OF RS.3107483/- AS BUSINESS INCOME SOLELY ON THE REASO N THAT THAT MAJOR PORTION OF THE ASSESSEES INCOME CONSISTS OF CAPITAL GAINS. THE LE ARNED A/R FILED PAPER BOOK AND WRITTEN SUBMISSION AND EXPLAINED THAT THE ASSESSEE WAS A FU LL TIME PARTNER IN M/S. NEW HARYANA TRANSPORT COMPANY AND WAS DERIVING INCOME AND REMUN ERATION FROM THE PARTNERSHIP FIRM WHICH WAS ASSESSED AS BUSINESS INCOME. THE ASSESSEE WAS HAVING A CAPITAL OF RS 2 CRORES AND INVESTMENT IN SHARES STOOD AT RS.64 LAKHS. HE W AS NOT HAVING ANY BORROWED FUNDS. THE A/R FROM THE CHART AND COMPARATIVE STATEMENT PR OVIDED IN THE PAPER BOOK POINTED OUT SINCE LAST TEN ASSESSMENT YEARS THE ASSESSEE WAS NO T HAVING ANY BORROWED FUNDS AND ALL OF THE INVESTMENTS MADE WAS DIRECTLY OUT OF OWN FUNDS A CHARACTER WHICH POINTS THAT THE ASSESSEE WAS NOT A TRADER. COMPARATIVE STATEMENT OF LAST TEN YEARS WAS POINTED OUT MADE FOR THE EXPENSES CLAIMED WHEREIN IT WAS THERE WAS N IL EXPENSES CLAIMED ALL THROUGHOUT. LASTLY IT WAS SUBMITTED THAT THE SHARES WERE SINCE LAST TEN ASSESSMENT YEARS WERE HELD AS INVESTMENTS AND INCOME ASSESSED AS CAPITAL GAINS AN D THAT IT WAS NEVER THE INTENTION OF THE APPELLANT TO TRADE IN SHARES. THE SUPREME COURT IN THE CASE KARAM CHAND THAPAR & BROS VS CIT REPORTED IN 82 ITR 899 HAS STATED THAT THERE IS NO GENERAL PRINCIPLES FOR DECIDING THE NATURE OF INCOME. EACH CASE HAS TO BE JUDGED ON ITS OWN MERITS AND CONCLUS ION HAS TO BE ARRIVED AT AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE. THE SUPREME COURT IN THE CASE OF CIT VS ASSOCIATED INDUSTRIAL DEVELOPMEN T CO LTD. REPORTED IN 82 ITR 586 (SC) HAS HELD THAT WHETHER THE ASSESSEE TREATS SHARES A S STOCK IN TRADE OR INVESTMENTS IS WITHIN ASSESSEES KNOWLEDGE AND IT IS FOR HIM TO PROVE THE SAME. IN CIT VS HOLCK LARSEN 160 ITR 67 (SC) IT WAS HELD FOR DETERMINATION OF INCOME WHETHER IT CONSTITUTED BUSINESS OR NOT IT WAS IMPORTANT TO LOOK AT THE MOTIVE. IT WAS PUT FORTH AS THE REAL QUESTION AS LORD REID SAID WAS NOT WHETHER THE TRANSACTION OF BUYING AND SELLING OF SHARES LACKS THE ELEMENT OF TRADING, BUT WHETHER THE LATTER STAGES OF THE WHOLE OPERATION SHOWS THAT THE 1ST STEP THE PURCHASE OF SHARES WAS NOT TAKEN AS OR IN THE COURS E OF BUSINESS. THE DETAILS OF THE CAPITAL GAINS HAVE BEEN FURNISHED BY THE APPELLANT. I HAVE PERUSED THE DETAILS. THE SHARES OF THE APPELLANT HAVE ALWAYS BEEN HELD AS INVESTMEN TS AND NOT DISTURBED BY THE DEPARTMENT. THERE IS NO BORROWED FUNDS FOR MAKING I NVESTMENTS AND THE ENTIRE INVESTMENTS HAVE BEEN MADE OUT OF OWN CAPITAL. THER E ARE NO EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT OR CLAIMED BY THE ASSESSEE AGAINST THE CAPITAL GAINS OF BUSINESS INCOME. THE APPELLANT IS A FULL TIME PARTNER AND DR AWING REMUNERATION. ALL THESE FACTORS POINT TO THE FACT THAT THE INTENTION OF THE APPELLA NT IS NOT TO DEAL IN SHARES. I AM CONVINCED WITH THE ARGUMENTS PUT FORTH BY THE LEARNED COUNSEL THAT THE SOLE FACTOR THAT THE ASSESSEE IS MAJORITY OF THE INCOME AS CAPITAL GAINS CANNOT B E CONSIDERED TO JUDGE THE ACTUAL NATURE OF THE INCOME. THE SHORT TERM CAPITAL GAINS DETAILS HAVE BEEN SUBMITTED BY THE ASSESSEE THE NEITHER THE FREQUENCY NOR THE MAGNITUDE NOR THE VOL UME OF THE TRANSACTION SUGGEST THAT 3 ITA 1150/K/2011 SHRI BHARAT LAL AGARWAL A.Y.2008-09 THERE IS INVOLVEMENT OF TRADING AND ASSESSEE IS DOI NG BUSINESS OF PURCHASE AND SALE OF SHARES. I AGREE WITH THE LEARNED COUNSEL ON THE POI NT THAT THE LEGISLATURE HAS NOT REVOKED THE PROVISIONS OF TAXATION OF SHORT TERM CAPITAL GA INS SO AS TO BRING INTO PURVIEW ALL TRANSACTIONS OF SHORT TERM IN NATURE. IN THE CASE O F BHARAT KUMVERJI KENIA VS ADDI. CIT 130 TTJ 86 (MUM) IT HAS BEEN HELD THAT THE FREQUENC Y OF THE TRANSACTION CANNOT BE PER SE DECISIVE FOR DETERMINING WHETHER IT IS BUSINESS INC OME. IT WAS HELD THAT THE SHARES WERE REFLECTED AS INVESTMENT WHICH WERE OUT OF ASSESSEE S OWN CAPITAL AND THEREFORE IT WAS NOT BUSINESS. IN THE CASE OF MANAGEMENT STRUCTURE & SYS TEMS P LTD. 41 DTR 426 IT WAS HELD THAT THE INTENTION OF THE ASSESSEE IS NOT READ FROM THE MIND BUT IS REFLECTED FROM THE CONDUCT. AS THE ASSESSEE HAD NOT BORROWED FUNDS AND THE SHARES WERE HELD AS INVESTMENTS IT WAS HELD THAT CANNOT BE CONSIDERED AS BUSINESS I NCOME. IN THE CASE OF CIT VS GOPAL PUROHIT 228 CTR 582 (BORN) IT WAS HELD IRRESPECTIVE OF THE VOLUME AND FREQUENCY OF THE TRANSACTION ON THE BASIS OF THE PRINCIPLES OF CONSI STENCY IT WAS TO BE HELD AS CAPITAL GAINS. IN THE CASE OF DCIT VS M/S. ETERNA STEEL & INVESTME NTS PVT. LTD. ITA NO.817/KOL/2010 ON SIMILAR CIRCUMSTANCES HAS HELD INCOME TO BE CAPITAL GAINS AND NOT BUSINESS INCOME. 4. WE FIND THAT THE ASSESSEE IS DERIVING INCOME FRO M BUSINESS OF NEW HARYANA TRANSPORT CO., CAPITAL GAINS AND INCOME FROM OTHER SOURCES. THE ASSESSEE IN HIS BALANCE SHEET HAS DECLARED SHARES AND DEBENTURES UNDER THE HEAD INVES TMENT AND THERE IS NO SHARE IN CLOSING STOCK. THE ASSESSEE IS NOT IN THE BUSINESS OF DEALI NG IN SHARES OR BROKER OF SHARES. HE IS CARRYING ON TRANSPORT BUSINESS UNDER THE PARTNERSHIP FIRM M/ S. NEW HARYANA TRANSPORT CO. FROM THE BALANCE SHEETS OF THE YEARS 2005-06 AND 2006-07, IT IS CLEAR THAT THESE SHARES WERE HELD AS INVESTMENT AND ASSESSEE NEVER TRADED IN SHARES. IT WAS THE CONTENTION OF THE ASSESSEE THAT FROM BEGINNING THE ASSESSEE IS TREATING THESE SHARES UND ER THE HEAD CAPITAL GAINS I.E. LONG TERM AS WELL AS SHORT TERM, AS THE CASE MAY BE, AND HE NEVER DEA LT WITH THE BUSINESS OF SHARES. WE FIND THAT THE ASSESSEE IS ENGAGED IN TWO DIFFERENT TYPES OF T RANSACTION VIZ., INVESTMENT IN SHARES AS LONG TERM HOLDING AND AS SHORT TERM HOLDING. IN EVERY C ASE, THE ASSESSEE HAS ADOPTED THE TRANSACTIONS DELIVERY BASED AND TREATED THIS AS INVESTMENT AND P ROFIT DISCLOSED IS TREATED AS SHORT TERM OR LONG TERM GAINS DEPENDING ON THE PERIOD OF HOLDING OF SHARES. WE FIND NO INFIRMITY, IN VIEW OF THE GIVEN FACTS AND CIRCUMSTANCES, IN THE ORDER OF CIT(A), HENCE, WE CONFIRM THE ORDER OF CIT(A) AND THIS ISSUE OF REVENUES APPEAL IS DISMIS SED. 5. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 6. ORDER PRONOUNCED IN OPEN COURT. SD/- SD/- . '# '#'# '# . ! , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( #! #! #! #!) )) ) DATED : 23RD JANUARY, 2012 /0 %12 3 JD.(SR.P.S.) 4 ITA 1150/K/2011 SHRI BHARAT LAL AGARWAL A.Y.2008-09 . 4 ,5 6 5'7- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT DCIT, CIRCLE-40, KOLKATA 2 ,-*+ / RESPONDENT, SHRI BHARAT LAL AGARWAL, P-5, CIT ROA D, SCHEME-VIM, KOLKATA-700 054. 3 . .% ( )/ THE CIT(A), KOLKATA 4. .% / CIT, KOLKATA 5 . >? ,% / DR, KOLKATA BENCHES, KOLKATA -5 ,/ TRUE COPY, .%@/ BY ORDER, 2 /ASSTT. REGISTRAR .