DCIT, New Delhi V. Shri Vibhu Goel, New Delhi

ITA 1191/DEL/2011

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4925 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 07-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHARAVAN GOTRU
• Keywords: Business income; Advance ruling; Cost of acquisition; Speculation loss; Revised return
• Section: 143(3); 142(1); 139(5); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 1 191 /DEL/201 1 A.Y. : 20 0 7 - 0 8 DCIT, CIRCLE 22(1), NEW DELHI ROOM NO. 238-B, 2 ND FLOOR, CR BUILDING, I.P. ESTATE, NEW DELHI VS. SH. VIBHU GOEL, C-156, EAST OF KAILASH, NEW DELHI 110 048 (PAN: AEOPG0241J) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. SHARAVAN GOTRU, SR. DR ASSESSEE BY : NONE ORDER PER H.S. SIDHU, JM THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 09/12/2010 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXIII, NEW DEL HI ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN DELETING THE ADDITION ARISING FROM TREATMENT OF CAPITA L 2 GAIN BY THE AO AS INCOME FROM BUSINESS AND PROFESSION AMOUNTING TO RS. 1,37,69,660/-. 2. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN ALLOWING THE SETOFF LOSSES O F RS. 58,75,272/- AS BUSINESS LOSS WHICH WAS THE SPECULATION LOSS AS CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND AN Y OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED HIS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR O N 31.10.2007 DECLARING A TOTAL INCOME OF RS. 1,37,69,660/-, WHIC H WAS DULY PROCESSED U/S. 143(1) OF THE INCOME TAX ACT, 1961 (HE REINAFTER REFERRED AS THE ACT). THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. NOTICE U/S. 143(2) OF THE ACT DATED 18.9 .2008 WAS ISSUED TO THE ASSESSEE AND DULY SERVED UPON HIM. THEREAFTE R, NOTICE U/S. 142(1) OF THE ACT ALONGWITH QUESTIONNAIRE WERE ALSO IS SUED ON 23.5.2009. IN RESPONSE THERETO, THE A.R. OF THE ASSE SSEE ATTENDED THE PROCEEDINGS AND FILED HIS WRITTEN REPLIES. THE A SSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF SHARES. DUR ING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS EARNED INCOME UNDER THE 3 HEAD INCOME FROM BUSINESS & PROFESSION AND INCOM E FROM OTHER SOURCES. AFTER PERUSAL OF DETAILS FILED IN RESPE CT OF CAPITAL GAINS, AO OBSERVED THAT THE ASSESSEE HAS BEEN DEALING IN LAR GE NUMBER OF SECURITIES. ALSO, THE TAX AUDIT REPORT SAYS THAT TRADING I N SHARES IS BUSINESS / PROFESSION. THUS, PRIMA FACIE IT WAS EV IDENT THAT THE ASSESSEE IS A TRADER IN SECURITIES. THE ASSESSEE WAS BOOKING A LOSS OF RS. 58,75,272/- IN THE SPECULATION BUSINESS, THE GAINS FROM TRANSACTIONS IN SHARES WERE SHOWN UNDER THE HEAD SHO RT TERM CAPITAL GAINS. AO VIDE ORDER SHEET DATED 22.9.2009, ASKED THE ASSESSEE TO SHOW CAUSE WHY INCOME FROM SHARE TRANSAC TIONS SHOULD NOT BE TREATED AS BUSINESS INCOME. IN RESPONSE TO TH E SAME, THE A.R. OF THE ASSESSEE FILED ITS REPLY, WHICH WAS CONS IDERED BY THE AO AND HE HELD THAT TRADING IN SHARES, SECURITIES, FUTUR E AND OPTIONS IS THE USUAL LINE OF BUSINESS ACTIVITY OF THE ASSESSEE. THEN THE PROCEEDS ARISING FROM THE SALE OF SHARES WOULD COME WITHIN THE AMBIT OF BUSINESS RECEIPTS. HENCE, HE TREATED THE RS. 1,37,69,661/- AS BUSINESS INCOME OF THE ASSESSEE AND TAXED AT 30% VIDE ORDER DATED 18.12.2009 PASSED U/S 143(3) OF THE ACT AND ASS ESSED THE INCOME OF THE ASSESSEE AT RS. 1,37,70,422/- AND ALL OWED SETOFF LOSSES OF RS. 58,75,272/- AS BUSINESS LOSS. 3. AGGRIEVED BY THE ASSESSMENT ORDER DATED 18.12.20 09, ASSESSEE FILED APPEAL BEFORE THE LD. FIRST APPELLATE A UTHORITY WHO 4 HAS ALLOWED THE APPEAL OF THE ASSESSEE VIDE ORDER DAT ED 09.12.2010. 4. LD. DR RELIED UPON THE ORDER OF THE AO AND REITERA TED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL AND REQ UESTED THAT THE APPEAL OF THE REVENUE MAY BE ALLOWED. 5. IN THIS CASE NOTICE OF HEARING WAS ISSUED TO THE ASSESSEE ON THE ADDRESS AS PER RECORD FOR 14.8.2017 BY RPAD AND IN RESPONSE TO THE SAME, NEITHER THE ASSESSEE NOR ITS AR APPEARE D NOR FILED ANY APPLICATION FOR ADJOURNMENT. THEREFORE, KEEPIN G IN VIEW FACTS AND CIRCUMSTANCES AS EXPLAINED ABOVE, WE ARE OF THE V IEW THAT ASSESSEE IS NOT INTERESTED TO PROSECUTE THE MATTER IN DI SPUTE AND NO USEFUL PURPOSE WOULD BE SERVED TO ISSUE NOTICE AGAIN AND AGAIN TO THE ASSESSEE. THEREFORE, WE ARE DECIDING THE REVENU ES APPEAL EXPARATE QUA ASSESSEE, AFTER HEARING THE LD. DR AND PE RUSING THE RECORDS. 6. WE HAVE HEARD THE LD. DR AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW ESPECIALLY THE ORDER OF THE LD. CIT(A ), WITH REGARD TO GROUND NO. 1, WE FIND THAT AO HAS TAXED THE INCOME AMOUNTING TO RS. 1,37,69,661/- FROM SALE OF SHARES UNDER THE HEAD 'INCOME FROM BUSINESS & PROFESSION' AS AGAINST 'INCOME FROM SHOR T TERM CAPITAL GAINS' REFLECTED BY THE ASSESSEE. ASSESSING OFFICER HAS MADE A 5 PRELIMINARY OBSERVATION IN HER ASSESSMENT WHILE DIS CUSSING THIS ISSUE THAT WHILE THE ASSESSEE WAS BOOKING A LOSS RS. 5 8,75,272/- IN THE SPECULATION BUSINESS, THE GAINS FROM THE TRANSAC TIONS IN SHARES WERE SHOWN UNDER THE HEAD 'SHORT TERM CAPITAL GAINS' . THE ASSESSING OFFICER HAS ALSO BROUGHT ON RECORD CIRCULA R NO.4 OF 107 DATED 15.6.2007 ISSUED BY CBDT, WHICH COVERS THE VARI OUS PARAMETERS TO DETERMINE WHETHER THE ACTIVITY OF TRADING OF SHARES IS TO BE TAXED UNDER THE HEAD 'INCOME FROM BUSINESS & PR OFESSION' OR 'SHORT TERM CAPITAL GAINS'. THE ASSESSING OFFICER HAS ALSO REFERRED TO THE AUTHORITY FOR ADVANCE RULING'S DECISION REPORT ED IN 288 ITR 641 ON THIS ISSUE.' THE ASSESSING OFFICER HAS FINALL Y DISCUSSED THE DECISION OF HON'BLE LUCKNOW BENCH OF THE ITAT IN SA RNATH INFRASTRUCTURE PVT. LTD. VS. ACIT 16 DTR (LUCKNOW)(T RIBUNAL) 97, WHEREIN ALL THE IMPORTANT JUDICIAL PRONOUNCEMENTS AT HA D BEEN LAID DOWN ON LEGAL PRINCIPLES TO DETERMINE THE NATURE OF TRANSACTIONS, SUCH AS RAJA BAHADUR VISHESHWARA SINGH (DECEASED) & OTHERS VS. CIT (1961) 41 ITR 685 (SC), CIT VS. ASSOCIATED INDU STRIAL DEVELOPMENT CO. LTD. (1071) 82 ITR 586 (SC), CIT VS. H. HOLCKLARSEN (1986) 160 ITR 67 (SC), FIDELITY NORTHSTA R FUND & OTHERS (2007) 288 ITR 641 (AAR) DALHOUSIE INVESTMENT TRUST CO. LTD. VS. CIT 68 ITR 486 (SC), MRS. SAROJINI RAJAH VS . CIT (1969) 71 ITR 504 (MAD), CIT VS. SATLEJ COTTON MILLS SUPPLY AG ENCY LTD. 6 (1975) 100 ITR 706 (SC). THE TRIBUNAL ALSO DELIBERA TED ON THE CBDT CIRCULAR NO.4 OF 2007 DATED 15.06.2007, WHICH HAS BE EN RELIED UPON BY THE ASSESSING OFFICER IN THE IMPUGNED ORDER. AFTER CONSIDERING ALMOST ALL JUDICIAL DECISION AND THE CBDT CIRCULAR' TH E TRIBUNAL CULLED OUT THE PRINCIPLES TO DETERMINE WHETHER TRANSAC TIONS IN QUESTION WERE IN THE NATURE OF TRADE OR IS MERELY FOR INVESTMENT PURPOSES. WE FURTHER FIND THAT THE ASSESSING OFFICER HAS FIRST DISCUSSED THAT THE OPENING STOCK WITH THE ASSESSEE WA S 91100 SHARES AMOUNTING TO RS. 42,57,794/- AND CLOSING STOC K OF 132704 SCRIPS AMOUNTING TO RS. 1,11,70,283/-. IT IS ALSO ME NTIONED THAT THE ASSESSEE MADE PURCHASES 16,86,32,063/- AND SALES OF RS. 17,67,32,895/-. THE AO HAS THUS CONCLUDED FROM THIS, THAT THE ASSESSEE HAD THE INTENTION TO TRADE TO EARN QUICK PROFITS AND THIS WAS ASSESSEE'S USUAL TRADE OR BUSINESS. SECONDLY, T HE ASSESSING OFFICER HAS HIGHLIGHTED THE FACT THAT THERE WAS NO LO NG TERM CAPITAL GAIN EARNED BY THE ASSESSEE AND ALL THE GAINS WERE SH ORT TERM CAPITAL GAINS COUPLED WITH THE FACT THAT ASSESSEE ONLY E ARNED DIVIDEND OF RS. 36,404/-. IT HAS BEEN CONCLUDED THAT THE ASSESSEE WAS PURELY DRIVEN PROFIT MOTIVE TO EARN QUICK PROFITS. THE ASSESSING OFFICER HAS ALSO HIGHLIGHTED-THAT VALUE OF TRANSACTION RUN INTO CRORES AND THE FREQUENCY WAS ALSO VERY HIGH. THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT THE ASSESSEE HAD ONLY RS. 5 LACS AS HIS CAPITAL 7 IN THE PRECEDING YEAR AND THEREFORE, IT WAS CLEAR TH AT INVESTMENT IN THE SHARES HAD BEEN MADE OUT OF BORROWED FUNDS. IT HA S ALSO BEEN HIGHLIGHTED BY THE ASSESSING OFFICER THAT SHARES OF SAME COMPANY WERE BOUGHT IN TRENCHES OF DIFFERENT DATES AND SOLD IN TRENCHES ON DIFFERENT DATES DEPENDING UPON THE MARKET VALUE OF T HE SCRIPS AND THIS REFLECTED THE PRUDENCE OF A BUSINESSMAN DEALING WITH HIS STOCK- IN-TRADE AND NOT THAT OF AN INVESTOR. IT HAS FURTHER BEE N OBSERVED THAT ASSESSEE HAD DEVOTED SUBSTANTIAL TIME TO DEALING I N SHARES. THE ASSESSING OFFICER HAS OBSERVED THAT THE SHARES HAS BE EN SHOWN AS INVESTMENT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, B UT THE SAME WERE NOT CONCLUSIVE IN DECIDING THIS ISSUE AND FOR TH IS THE ASSESSING OFFICER HAS RELIED ON THE JUDGMENT OF HON'BLE SUPREME COURT REPORTED IN 82 ITR 899. THE ASSESSING OFFICER FURTHER READS THAT FOR THE PURPOSE OF BUSINESS TRADING, NORMALLY SHARES AND SECURITIES THAT ARE EASILY MARKETABLE ARE PURCHASED AND THE ASSESSEE HAS ALSO GENERALLY DEALT IN SHARES OF BLUE CHIP COMPANIES. IN VIEW OF THE ABOVE DETAILED ANALYSIS, THE ASSESSING OFFICER PROCE EDED TO ASSESS THE GAINS FROM SHARE TRADING UNDER THE HEAD 'INCOME FR OM BUSINESS & PROFESSION'. BUT LD. CIT(A) HAS HELD THAT INTENT OF THE LEGISLATURE IS ABUNDANTLY CLEAR FROM THE PERUSAL OF THE EXPLANATOR Y NOTES AND AS SUCH THERE IS NO CASE TO TREAT THE INCOME OF THE ASS ESSEE SHOWN UNDER THE HEAD SHORT TERM CAPITAL GAINS AS INCOME FROM BUSINESS 8 & PROFESSION. WE FURTHER FIND THAT AS PER EXPLANAT ORY STATEMENT ISSUED WITH UNION BUDGET OF 2004 IN RESPECT OF FINANC E, (2) BILL, 2004, BY WHICH STT WAS LEVIED ON THE SALE AND PURCHA SE OF SHARES AND SECURITIES CARRIED OUT THROUGH STOCK EXCHANGE. THE SAID EXPLANATORY STATEMENT READS AS UNDER:- LEVY OF TRANSACTION TAX AND EXEMPTION/ CONCESSION ON CAPITAL GAIN FROM SECURITIES ENTERED IN A RECOGNIZED STOCK EXCHANGE UNDER THE EXISTING PROVISIONS OF INCOME TAX ACT, 19 61, THE PROFITS ARISING TO AN INVESTOR FROM THE TRANSFER OF SECURITIES ARE CHARGED TO TAX EITHER AS LONG TERM CAPIT AL GAIN OR SHORT TERM CAPITAL GAINS DEPENDING ON THE PE RIOD OF HOLDING OF THE SAID SECURITIES. SHORT TERM CAPIT AL GAINS ARISING FROM TRANSFER OF SECURITIES ARE TAXED AT THE APPLICABLE RATES. LONG TERM CAPITAL GAINS ARE TAXED @ 20%, AFTER ADJUSTING FOR INFLATION BY INDEXING THE COST OF ACQUISITION. FOR LISTED SECURITIES, THE TAXPAYER HAS AN OPTION TO PAY TAX ON LONG TERM CAPITAL GAIN @ 10% BUT WITHOUT INDEXATION. FOR FOREIGN INSTITUTIONAL INVESTOR S (FILS), THE LONG TERM CAPITAL GAIN AND SHORT TERM CA PITAL GAINS ARE TAXED AT THE RATE OF 10% (WITHOUT INDEXATION) AND 30% RESPECTIVELY. IN CASE OF A TRADER IN SECURITI ES, HOWEVER, THE GAINS ARE TAXED AS ANY OTHER NORMAL BUSINESS INCOME. WITH A VIEW TO SIMPLIFY THE TAX REGIME ON SECURITIES TRANSACTIONS, IT IS PROPOSED TO LEVY A TAX AT THE RATE OF 9 1.15 PER CENT. ON THE VALUE OF ALL THE TRANSACTIONS OF PURCHASE OF SECURITIES THAT TAKE PLACE IN A RECOGNIZE D STOCK EXCHANGE IN INDIA. THIS TAX SHALL BE COLLECTED BY THE STOCK EXCHANGE FROM THE PURCHASER OF SUCH SECURITIES AND PAID TO THE EXCHEQUER. THE PROVISIONS RELATING TO THE PROPOSED TAX ARE CONTAINED IN CHAPTER VII OF THE FIN ANCE (NO.2) BILL, 2004, AND SHALL TAKE EFFECT FROM THE DAT E THIS CHAPTER COMES INTO FORCE. FURTHER, IT IS PROPOSED TO INSERT CLAUSE (38) IN SECTIO N 10 OF INCOME TAX ACT, 1961, SO AS TO PROVIDE EXEMPTION FROM LONG TERM CAPITAL GAIN ARISING OUT OF SECURITIE S SOLD ON THE STOCK EXCHANGE. IT IS ALSO PROPOSED TO INSERT A NEW SECTION L11A AND AMEND SECTION 115AD OF INCOME TAX ACT, 1961, SO AS TO PROVIDE THAT SHORT TERM CAPI TAL GAINS ARISING FROM SALE OF SUCH SECURITIES TO AN INV ESTOR INCLUDING FIIS SHALL BE CHARGED AT THE RATE OF TEN PER CENT. THESE AMENDMENTS WILL TAKE EFFECT FROM 1ST APRIL, 2005 AND WILL, ACCORDINGLY, APPLY TO ASSESSMENT YEAR 2005 -06 AND SUBSEQUENT YEARS.' 6.1 THE INTENT OF THE LEGISLATURE IN THIS REGARD IS AB UNDANTLY CLEAR FROM THE PERUSAL OF EXPLANATORY NOTE REFERRED TO ABOVE AND AS SUCH THERE IS NO CASE TO TREAT THE INCOME OF THE APPELLANT S HOWN UNDER THE HEAD SHORT TERM CAPITAL GAIN AS 'INCOME FROM BUSI NESS & 10 PROFESSION', HENCE, WE UPHOLD THE DECISION OF THE LD. CIT(A) AND DISMISS THE GROUND NO. 1 RAISED BY THE REVENUE. 7. WITH REGARD TO GROUND NO. 2 RELATING TO ALLOWING BUSINESS LOSS OF RS. 58,75,272/- IS CONCERNED, WE FIND THAT THE AO WAS OF THE VIEW THAT ASSESSMENT PROCEEDINGS ARE NOT AN OPPORTUNITY TO MAKE ADDITIONAL / FRESH/ REVISED CLAIM FOR ANY BENEFIT/ DEDUCTION, WHICH WAS NOT THERE IN THE ORIGINAL RETURN. THE AO HAS R ELIED UPON THE JUDGEMENT OF THE HONBLE APEX COURT IN THE CASE OF GO ETZ INDIA LTD. VS. CIT 284 ITR 323. KEEPING IN VIEW OF THE FACTS AN D CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT MORE OR LESS THE FACT OF THESE CASE ARE IDENTICAL WITH THE CASE OF CIT VS. BHARAT ALLUMINIUM CO. LTD., WHEREIN THE HON'BLE JURISDICTION AL DELHI HIGH COURT HAS HELD THAT THE REVISED COMPUTATION OF INCOME COULD BE ACCEPTED EVEN AFTER THE TIME LIMIT TO FILE REVISED A S PRESCRIBED UNDER SECTION 139(5) OF THE ACT. THE JUDGMENT OF APEX COURT IN GOETZE INDIA LTD. RELIED BY THE ASSESSING OFFICER IS ON TO TALLY DIFFERENT FACTS AND RENDERED UNDER TOTALLY DIFFERENT CONTEXT AND THER EFORE, APPLYING THE SAME TO THE CASE OF THE ASSESSEE, WOULD NOT BE C ORRECT. WE ARE OF THE VIEW THAT RAISING A CLAIM BEFORE THE ASSESSIN G OFFICER OTHERWISE THAN BY FILING A REVISED RETURN WAS NEVER R AISED BEFORE THE HON'BLE APEX COURT IN THE GOETZE'S CASE NOR WAS IT EXA MINED OR ANSWERED BY THE HON'BLE SUPREME COURT. IN VIEW OF TH E ABOVE, THE 11 ASSESSING OFFICER'S DECISION IN REJECTING THE CLAIM OF THE ASSESSEE FOR SET OFF OF LOSS OF RS. 58,75,272/- IS INCORRECT, HEN CE, AFTER GOING THROUGH THE ORDERS PASSED BY THE REVENUE AUTHORITIES , WE ARE OF THE VIEW THAT LD. CIT(A) HAS PASSED A WELL REASONED O RDER WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, THEREFORE , WE AFFIRM THE IMPUGNED ORDER ON THE ISSUE IN DISPUTE INVOLVED IN GROUND NO. 2 AND ACCORDINGLY REJECT THE GROUND NO. 2 RAISED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/09/2017. SD/- SD/- (PRASHANT MAHARISHI) [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 01/09/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES