Shri Prakashkumar Hiralal Agarwal,HUF, Surat V. The ACIT.,Circle-2, Surat

ITA 1160/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63216 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 15-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A TIRKEY
• Assessee Lawyers: SURDNERA SONI
• Keywords: Business income; Transactions in derivatives
• Section: 143(3)

Judgement Text

ITA NO.1 160/AHD/2010 . ASSESSMENT Y EAR 2006-07 . 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENC H, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO.1160/AHD/2010 (ASSESSMENT YE AR: 2006-07) PRAKASHKUMAR H. AGARWAL, HUF 506, JAY RADHEY MARKET, RING ROAD, SURAT. (APPELLANT) VS. ASSISTANT COMMISSIONER OF INCOME TAX,CIRCLE-2, AAYAKAR BHAVAN, MAJURA GATE, SURAT. (RESPONDENT) PAN: AAEHP 9907P APPELLANT BY : SHRI SURDNERA SONI RESPONDENT BY : SHRI A. TIRKEY, SR. D.R. ( )/ ORDER DATE OF HEARING : 18- 10- 2012 DATE OF PRONOUNCEMENT : 14 -12-2012 PER: SHRI ANIL CHATURVEDI, A.M. BRIEF FACTS AS CALLED OUT FROM THE ORDERS OF AUTHO RITIES BELOW ARE AS UNDER:- ASSESSEE IS AN HUF FIRM HAVING INCOME FROM TEXTILE BUSINESS AND ALSO SHOWS CAPITAL GAINS ON SALE OF SHARES AND OTHE R INCOME. ASSESSEE FILED ITS RETURN OF INCOME ON15-12-2006 FOR ASSESSM ENT YEAR 2006-07 ITA NO.1 160/AHD/2010 . ASSESSMENT Y EAR 2006-07 . 2 DECLARING TOTAL INCOME OF RS.9,93,045/-.THE CASE WA S SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S.143(3) VIDE ORDER DATED 26- 11-2008 AND THE INCOME WAS DETERMINED AT RS.9,93,05 0/-. WHILE FRAMING ASSESSMENT THE A.O. CONSIDERED THE INCOME FROM SALE OF SHARES AS BUSINESS INCOME INSTEAD OF CAPITAL GAINS FOR WH ICH ASSESSEE IS NOW IN APPEAL BEFORE US. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O . OBSERVED THAT ASSESSEE HAS TRADED IN SHARES EITHER ON THE SAME DA Y OR WITHIN A VERY SHORT SPAN OF TIME AND THEREFORE IT WAS IN THE NATU RE OF BUSINESS. A.O. WAS OF THE VIEW THAT HAD THE INTENTION OF THE ASSESSEE BEING OF MAKING STEADY INVESTMENTS IN SHARES AND SECURITIES FOR THE PURPOS E OF EARNING REGULAR INCOME, THE ASSESSEE WOULD NOT HAVE INDULGED IN FRE QUENT PURCHASE AND SALE TRANSACTIONS OF SAME SCRIPS. HE WAS OF THE VIE W THAT THE FREQUENCY OF TRANSACTIONS CLEARLY INDICATES THE INTENTION OF DEA LING IN SHARES AND SECURITIES. HE ALSO NOTICED THAT LOSS INCURRED IN D ERIVATIVE TRADING WAS COMPUTED UNDER THE HEAD OF BUSINESS WHILE THE PROFI T ON SPECULATIVE TRANSACTION WAS CONSIDERED AS SHORT TERM CAPITAL GA INS. HE ACCORDINGLY CONSIDERED SHORT TERM CAPITAL GAINS (RS.7,57,268/-) AND LONG TERM CAPITAL(RS.7,285/-) AGGREGATING TO RS.7,64,553/- AS BUSINESS INCOME. AGGRIEVED WITH THE ORDER OF A.O. THE ASSESSEE CARRI ED THE MATTER BEFORE THE CIT (A). CIT (A) VIDE ORDER DATED 15-1-2010 UPHELD THE ORDER OF A.O. AGGRIEVED BY THE ORDER OF CIT (A), ASSESSEE IS NOW IN APPEAL BEFORE US. 3. BEFORE US THE LD. A.R. SUBMITTED THAT IN THE YEA R UNDER APPEAL THE ASSESSEE PURCHASED SHARES WORTH RS.21 LACS IN AROUN D 31 COMPANIES. ITA NO.1 160/AHD/2010 . ASSESSMENT Y EAR 2006-07 . 3 THE ASSESSEE RECEIVED DELIVERY OF ALMOST ALL THE SH ARES IN ITS DMAT ACCOUNT. THE INVESTMENTS AT THE END OF THE YEAR WER E SHOWN AS INVESTMENTS IN ITS BALANCE SHEET. HE FURTHER SUBM ITTED THAT THE ASSESSEE, RELYING ON THE CIRCULAR NO.4 DATED 15-6-2007, CONSI DERED THE LOSS ON F& O TRANSACTIONS UNDER THE HEAD OF BUSINESS INCOME. T HE ASSESSEE FURTHER SUBMITTED THAT IN A.Y. 2004-05 THE ASSESSEE HAD PUR CHASED SHARES OF MORE THAN RS.80 LACS AND HAD RETURNED LOSS AS CAPIT AL LOSS AND IN THE ASSESSMENT ORDER FRAMED U./S 143(3) THE SAME WAS AC CEPTED BY THE DEPARTMENT. HE PLACED ON RECORD THE COPY OF THE AS SESSMENT ORDER. HE FURTHER SUBMITTED THAT THE A.O. HAS WRONGLY HELD TH AT THE SHARES WERE MOSTLY TRADED EITHER ON THE SAME DAY OR WITHIN A VE RY SHORT. HE PLACED ON RECORD AT PAGE 30-31 OF THE PAPER BOOK THE LIST OF INVESTMENTS TO PROVE THAT THE MOST OF THE SCRIPS WERE HELD FOR A PERIOD OF MO RE THAN 30 DAYS. HE FURTHER RELIED ON THE DECISIONS IN THE CASE OF JANA K RANGWALA VS. ACIT (2007) 11 SOT (MUM.) 627,GOPAL PUROHIT (228 CTR 582 (BOM.) AND OTHER CASES. HE THUS URGED THAT THE PROFIT ON SALE OF SHA RES BE HELD AS CAPITAL GAINS. 4. ON THE OTHER HAND THE LD. D.R. SUPPORTED THE ORD ER OF A.O. AND CIT (A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSESSEE DURING THE YEAR UNDER REVIEW HAD ENTERED INTO TRANSACTIONS OF PURCH ASE AND SALE OF SHARES AND TREATED THE SAME UNDER THE HEAD OF CAPITAL GAIN S BUT THE A.O. CONSIDERED THE SAME AS BUSINESS INCOME. FROM, THE C OMPUTATION OF ITA NO.1 160/AHD/2010 . ASSESSMENT Y EAR 2006-07 . 4 INCOME FILED BY THE ASSESSEE IT IS SEEN THAT THE GR OSS TOTAL INCOME OF RS.10,93,045/- COMPRISES OF BUSINESS INCOME OF RS.2 ,38,882/- (AFTER SET OFF OF LOSS ON SALE OF SHARES ON F&O TRANSACTION OF RS. 79,864/-),INCOME FROM OTHER SOURCES OF RS.1,66,838/- AND NET SHORT CAPITA L GAINS (AFTER SET OFF OF SHORT TERM LOSS OF RS.69,943/-) WAS RS.6,87,325/-.T HUS OUT OF THE GROSS TOTAL; INCOME, THE SHARE TRANSACTIONS COMPRISES MOR E THAN 60% OF THE INCOME. PERUSAL OF THE CAPITAL ACCOUNT SUBMITTED AT PAGE-11 OF THE PAPER BOOK REVEALS THAT OUT OF THE TOTAL DIVIDEND OF RS.2 5,952/-, THE DIVIDENDS THAT THE ASSESSEE EARNED FROM SHARES OF COMPANIES WAS RS .6,450/- AND THE BALANCE RS.19,501/- WAS EARNED FROM INVESTMENTS IN MUTUAL FUNDS. FROM THE TRANSACTION STATEMENT ISSUED BY THE DEPOSITORY AND ATTACHED AT PAGE 32 TO 38 OF THE PAPER BOOK AND THE STATEMENT OF TRA NSACTIONS REVEALS THAT ASSESSEE HAS DEALT IN SHARES OF MORE THAN 31 COMPAN IES, IN SOME CASES (LIKE SHARES OF APTECH LTD., BEML LTD., EVERREADY L TD., GENUS OVERSEAS, PETRONET LNG LTD. ETC.), THE HOLDING PERIOD OF SHAR ES WERE LESS THAN 30 DAYS. THE LD. A. RS SUBMISSION IS THAT IN THE EA RLIER YEARS, THE ASSESSEE HAD TREATED THE PROFIT FROM SALE OF SHARES AS CAPIT AL GAINS AND FOR A.Y. 2004-05 IN THE ASSESSMENT FRAMED U/S. 143(3) THE PR OFIT ON SALE OF SHARES AS CAPITAL GAINS WAS ACCEPTED BY THE REVENUE. ON PE RUSAL OF THE COMPUTATION OF INCOME FOR A.Y. 2004-05 FILED AND PL ACED AT PAGE 18 OF THE PAPER BOOK IT IS SEEN THAT IN THAT YEAR THE ASSESSE E HAD NOT ENTERED INTO F & O TRANSACTIONS AND ALSO THE ASSESSEE HAD NOT EARN ED SHORT CAPITAL GAINS BUT HAD INCURRED CAPITAL LOSS. FURTHER, THE PERUSAL OF ASSESSMENT ORDER OF A.Y. 2004-05 PLACED AT PAGE 23 REVEALS THAT IN THE ASSESSMENT ORDER THERE IS NOT EVEN A WHISPER ABOUT THE TREATMENT GIVEN TO PROFITS ON SALE OF SHARES. IN VIEW OF THESE FACTS, WE FEEL THAT THE VIEW TAKEN BY THE A.O. IN A.Y. 2004- ITA NO.1 160/AHD/2010 . ASSESSMENT Y EAR 2006-07 . 5 05 CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CA SE. MOREOVER IT IS A SETTLED LAW THAT THE PRINCIPLES OF RES JUDICATA ARE NOT APPLICABLE TO INCOME TAX MATTER AND EACH ASSESSMENT YEAR HAS TO BE CONSI DERED INDEPENDENTLY. WE ARE ALSO OF THE VIEW THAT THE CASES LAWS RELIED UPON BY THE ASSESSEE ARE DISTINGUISHABLE ON FACTS AND CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE. THE LD. A.R. COULD NOT REBUT THE FIND INGS OF CIT (A) BY BRINGING ANY CONCRETE MATERIAL ON RECORD. 6. THUS CONSIDERING THE TOTALITY OF FACTS WE FIND N O REASON TO INTERFERE WITH THE ORDER OF CIT (A) AND THUS UPHOLD HIS ORDER ON THIS ISSUE. THUS THE APPEAL OF THE ASSESSEE IS DISMISSED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 14 - 12- 2012. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) II,SURAT. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDAB AD ITA NO.1 160/AHD/2010 . ASSESSMENT Y EAR 2006-07 . 6 1.DATE OF DICTATION 18 - 10 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 5/ 11/ 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 29 - 10-2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER