SHRI. ANANDKUMAR R. GUPTA, MUMBAI V. ADDL.CIT RANGE 22(1),

ITA 1154/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49050 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 19-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: USHA N NAIR
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI VIJAY PAL RAO, JM ITA NO.1154/MUM/2009 : ASST.YEAR 2005-2006 SHRI ANANDKUMAR R.GUPTA C/O.NAVIN D.THAKKAR & CO. B-8, B WING SATYAM SHOPPING CENTRE M.G.ROAD, GHATKOPAR (EAST) MUMBAI 400 077. PAN : ADNPG8488J. VS. THE ADDL.COMMISSIONER OF INCOME-TAX RANGE 22(1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : JAYANT R.BHATT RESPONDENT BY : SMT.USHA N.NAIR O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASSE SSEE RAISES OUT OF THE OR DER PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX ON 23.12.2008 U/S.263 IN RELATION TO THE ASSESSMENT YEAR 2005-2006. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN DECLARING TOTAL INCOME OF RS.2,04,26,175 WHICH WAS PROCESSED U/S.143 (1) ON 18.01.2006. SUBSEQUENTLY THE CASE WAS REOPENED U/S.147 ON THE GROUND THAT SHORT TERM CAPITAL GAIN ON SALE AND PURCHASE OF SHARES AMOUNTING TO RS.54,20,575 HAD ESCAPED ASSESSMENT. THE ASSESSMENT WAS COMPLETED U/S.143(3) R.W.S. 147 ON 26.12.2007 BY BR INGING TO TAX THIS AMOUNT. THE LEARNED CIT, WHILE EXAMINING THE RECORDS OF THE ASSESSEE, OBSERVED THAT THE ASSESSEE HAD MADE 800 TRANSACTIO NS FOR THE PURCHASE OF SHARES OF MORE THAN 70 COMPANIES AND THE TOTAL VALUE OF TRANSACTIONS WAS MORE THAN RS.50 CRORES. HE ALSO NOTICED THAT THE ASSESSEE WAS DEALING IN SHARES FOR THE LAST 10 YEARS ON REGULA R BASIS. IN HIS OPINION THE AMOUNT OF RS.54.20 LAKHS SHOULD HAVE BEEN CONSIDERED AS `BUSINESS INCOME INSTEAD OF `SHORT TERM CAPITAL GAIN ASSE SSED BY THE ASSESSING OFFICER. HE, THEREFORE, SET ASIDE THE ASSESSMENT ORDER WITH THE DIRECTION TO THE ASSE SSING OFFICER TO DECIDE THIS ISSUE AFRESH AS PER LAW AFTER ALLOWING A RE ASONABLE OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. ITA NO.1154/MUM/2009 SHRI ANANDKUMAR R.GUPTA. 2 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS SEEN FROM THE ORDER PASSE D U/S.143(3) R.W.S. 147 THAT TH E ASSESSING OFFICER HELD PROFIT FROM SHARE TRANSACTIONS AS SHOR T TERM CAPITAL GAIN. IT IS OBVIOUS SO FOR THE REASON THAT THE CASE WAS REOPENED ONLY ON THIS PREMISE. IN HOLDING SO THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS AN EMPLOYEE OF MADURA COATS PRIVATE LIMITE D DERIVING TOTAL SALARY OF RS.28,37,660. APART FROM THAT THE ASSESSEE HAD ALSO DERIVED LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN BY I NVESTING HIS OWN SURPLUS FUNDS IN SHARES AND MUTUAL FUNDS. WHILE FRAMING THE ASSESSMENT THE AO OBSERVED THAT : DURING THE ASSESSMENT PROCEEDINGS ALL THE RELEVANT DETAILS REGARDING PURCHASE AND SALE OF SHARES, DEMAT ACCOUNT, BANK STATEMENTS WERE PRODUCED FOR NECESSARY VERIFICATION . IT IS ALSO OBSERVED THAT THE ASSESSEE FILED A LETT ER DATED 24.11.2007 WITH TH E A.O. FURNISHING INFORMATION CALLED FOR BY THE ASSESSING OFFICER. COPY OF THE LETTER IS AVAILABLE ON RECORD. IN PARA 4 OF THIS LETTER IT WAS MENTIONED THAT IN ASSESSMENT YEAR 2004- 2005, THAT IS THE IMMEDIATELY PRECEDING YEAR, ALSO THE ASSESS EE HAD FURNISHED ALL THE RELEVANT INFORMATION TO JUSTIFY THAT HE WAS AN INVESTOR IN SHARES AND HAD LONG TERM VIEW ON HOL DING OF SHARES. BASED ON SUCH INFORMATION THE ASSESSING OFFI CER ACCEPTED THE ASSESSEE AS AN INVESTOR AND ASSESSED THE INCOME UNDER THE HEAD CAPITAL GAIN. 4. FROM THE IM PUGNED ORDER, IT IS NOTICED THAT THE LEARNED CIT OPINED THAT SUCH TRANSACTIONS OUGHT TO HAVE BEEN CONSIDERED AS BUSINESS TRANSACTION IN STEAD OF INVESTMENT. IT IS MANIFEST THAT THE ASSE SSEES CONTENTION ABOUT THE HOLDI NG OF SHARES AS `INVESTMENT WAS ACCEPTED BY THE ASSESSING OFFICER AFTE R DUE APPLICATION OF MIND CONSIDERING THE RELEVANT DETAILS OF THE TRANSACTIONS IN SHARES AND ALSO THE FACT THAT IN THE IMMEDIATELY PRECEDING YEAR THE INCOME FRO M SHARES WAS ASSESSED UNDER TH E HEAD `CAPITAL GAIN. THE LEARNED CIT, ON THE SAME FACTS HAS TAKEN A DIFFERENT VIEW WHIC H IS NOT BASED ON ANY LEGAL FOUNDATION. THE QUESTION WHETHER THE SHARES ARE HELD AS STOCK IN TRADE OR INVESTMENT, IS PRIMARILY A QUESTION OF FACT. ITS ANSWER VARIES FROM CASE TO CASE AND FACTS TO FACTS. WHEN THE ASSESSING OFFICER, AFTER CONSID ERING ALL THE RELEVANT MATERIAL AS DISCUSSED ABOVE, HELD THE ASSESSEE AS INVESTOR IN SHARES, IN OUR CONSIDERED OPINION, THE LEARNED CIT WAS NOT JUSTIFIED, IN PROCEEDING U/S.263, TO ADOPT A CONTRARY VIEW SIMPLY BECAUSE HE DISAGREED WITH THE A.O. OUR VIEW IS FO RTIFIED BY THE JUDGEMENT OF TH E HONBLE JURISDICTIONAL HIGH ITA NO.1154/MUM/2009 SHRI ANANDKUMAR R.GUPTA. 3 COURT IN CIT VA. GABRIAL INDIA LTD. [(1993) 203 IT R 108 (BOM.)]. IN VIEW OF THESE FACTS WE SET ASIDE THE OR DER PASSED U/S.263. 5. BEFORE PARTING WITH THIS APPEAL IT IS RELEVANT TO MENTION TH AT PURSUANT TO THE IMPUGNED ORDER, THE ASSESSING OFFICER PASSED ASSESSMENT OR DER U/S.143(3) R.W.S. 263 ON 16.04.2009, A COPY OF WHICH IS AV AILABLE ON RECORD. IN THIS ORDER THE ASSESSING OFFICER HAS AGAIN HELD INCOME ARISING FROM THE SHARE TRAN SACTION AS FALLING UNDER THE HEAD `CAPITAL GAIN. 6. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 20 TH DAY OF MAY, 2011 . SD/- SD/- (VIJAY PAL RAO) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 20 TH MAY, 2011. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) XXII, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGI STRAR, ITAT, MUMBAI.