D.C.I.T. Cir-3, Asansol, Asansol V. Rajiv Dalmia, Burdwan

ITA 1247/KOL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2549 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 04-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 18-11-2009
• Court: TRIBUNAL
• Department Lawyers: PIYUSH KOLHE
• Assessee Lawyers: A K TULSYAN
• Keywords: Business income; Reasonable cause; Accommodation entries; Capital Gains

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH - B , KOLKATA ( ) BEFORE . . , , SHRI D.K.TYAGI, JUDICIAL MEMBER /AND . . , , SHRI B.C.MEENA, ACCOUNTANT MEMBER. / I.T.A.NO. 1247/KOL/2009 / ASSESSMENT YEAR 2005 - 06 DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 3, ASANSOL. - - - VERSUS - . RAJIV DALMIA, G.T.ROAD, SEARSOL RAJBARI, RANIGANJ, DIST. BURDWAN PAN ACTPD 4796 K ( / A PPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI PIYUSH KOLHE, DR / FOR THE RESPONDENT : / SHRI A.K.TULSYAN, AR / ORDER . . , , SHRI B.C.MEENA, ACCOUNTANT MEMBER. THE REVENUE HAS FILED THIS APPEAL AGAINST ORDER DT.25.2.2009 OF THE COMMISSIONER OF INCOME - TAX (APPEALS), ASANSOL FOR THE ASSESSMENT YEAR 2005 - 06. 2. THIS APPEAL HAS BEEN FILED BY THE REVENUE LATE BY 51 DAYS. THE DELAY HAS BEEN EXPLAINED BY THE REVENUE BY WAY OF FILING AN AFFIDAVIT. CONSIDERING THE AVERMENTS MADE THEREIN, WE FIND THAT THERE WAS REASONABLE CAUSE WHICH PREVENTED THE REVENUE TO FILE THE APPEAL IN TIME. THEREFORE, WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING. 3 . THE ONLY GROUND RAISED BY THE REVENUE READS AS UNDER : THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY ACCEPTING THE PROFIT EARNED BY ASSESSEE SHOULD BE TREATED AS SHORT TERM CAPITAL GAIN AND NOT TRADING INCOME . 4 . THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE HAD PURCHASED 800 0 SHARES OF G.R.INDUSTRIES AND FINANCE @ RS.6.40 PER SHARE ON 21.9.2004 THROUGH ASHOK KUMAR KAYAN BUT PAYMENT FOR THE ABOVE MENTIONED SHARES WERE MADE ON 20.11.04 I.E,. AFTER TWO MONTHS OUT OF WHICH 3500 SHARES WERE SOLD ON 22.2.2005 @ RS.155PER SHARE , 35 00 SHARES @ RS.151 PER SHARES SOLD ON 23.2.2005 AND 1000 SHARES @ RS.144 WERE SOLD ON 144 ALL THROUGH ASHISH STOCK BROKING PRIVATE LTD. THE ASSESSEE SHOWN THE GAIN OF RS.11,61,329 DERIVED ON SUCH TRANSACTIONS AS SHORT / I.T.A.NO.1247/KOL/2009 2 TERM CAPITAL GAIN. ALSO THE ASSESSEE H AD PURCHASED 2500 SHARES OF PSL FINANCE ON 10.4.2003 THROUGH V.K.SINGHANIA & CO., @ RS.10 AND SOLD THE SAME THROUGH SUNIL KEDIA @ RS.195.9 ON 10.2.2005 . FURTHER THE ASSESSEE HAD PURCHASED 2500 SHARES OF G.K.CONSULTANCY ON 11.6.2003 THROUGH V.K.SINGHANIA & CO., @ RS.5.10 PER SHARE AND SOLD THE SAME THROUGH ASHISH STOCK BROKING PRIVATE LTD., ON 9.3.2005 @ RS.220 PER SHARES. THE ASSESSEE DISCLOSED THE GAIN OF RS.9,99,962 DERIVED FROM TH ESE TRANSACTION AS LONG TERM CAPITAL GAIN. FOR THE REASONS DISCUSSED IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER CONCLUDED THAT THE ENTIRE TRANSACTION S I.E., RIGHT FROM THE PURCHASE TO THE SALE OF SHARES ARE PART OF ACCOMMODATION ENTRIES OBTAINED BY THE ASSESSEE THR OUGH THE ROUTE OF CAPITAL GAINS. HE FURTHER HELD THAT THE TRAN SACTION IS NOT A TRANSACTION OF AN INVESTMENT BUT AN ADVENTURE IN THE NATURE OF TRADE AND THAT THE SHARES WERE PURCHASED WITH THE SOLE INTENTION OF SELLING THEM AND NOT TO HOLDING THEM. THEREFORE, THE LEARNED ASSESSING OFFICER HELD THE ENTIRE INCOME LESS T HE COST PRICE BEFORE THE INDEXATION AS TAXABLE AS BUSINESS INCOME AND ACCORDINGLY ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). 5 . BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMITTED COMPLETE DETA ILS OF THE PURCHASES AND SALES, EVIDENCE SHOWING THAT ALL THE TRANSACTIONS OF PURCHASES AND SALES HAVE BEEN DONE BY ACCOUNT PAYEE CHEQUES, ALL CONTRACT NOTES IN RESPECT OF PURCHASES AND SALES OF SHARES, DEMAT ACCOUNT IN WHICH THE PURCHASES AND SALES OF SHA RES WAS RECORDED. IT WAS SUBMITTED THAT ALL THESE ABOVE DOCUMENTS WERE FILED BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER VERIFIED THE SAME. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER DULY VERIFIED THE TRANSACTIONS OF PURCHASES AND SALES BY CALLING INFORMATION FROM THE SHARE BROKERS U/S.133(6) OF THE I.T.ACT,1961 IN RESPECT OF ALL THE TRANSACTIONS OF PURCHASES AND SALES. THE CONCLUSIONS DEDUCED BY THE ASSESSING OFFICER ARE BASED ON SURMISES, CONJECTURES AND SUSPICIONS. THEREFORE, THE GAIN DERIVED OUT OF PURCHASES AND SALES OF SHARES IN QUESTION SHOULD BE TREATED AS CAPITAL GAIN AND NOT BUSINESS PROFIT. THE ASSESSEE REFERRED TO THE OFFICE MEMORANDUM DT.13.12.2005 ISSUED BY THE CBDT IN WHICH IT IS EXPLAINED THE CIRCUMSTANCES TO BE CONSIDERED BY THE AOS IN DETERMINING WHETHER A PERSON IS A TRADER IN STOCKS OR AN INVESTOR IN STOCKS. ALSO THE ASSESSEE REFERRED TO CBDT CIRCULAR NO.4/2007 DT.15.6.200, WHEREIN CERTAIN TESTS HAVE BEEN / I.T.A.NO.1247/KOL/2009 3 LAID DOWN FOR DISTINCTION BETWEEN SHARES HELD AS STOCK - IN - TRADE A ND SHARES HELD AS INVESTMENT. THE ASSESSEE SUBMITTED THAT HE EARNED INTEREST ON INVESTMENT, SALES OF SHARES WAS OCCASIONAL INDEPENDENT ACTIVITY; THAT PURCHASES WERE MADE OUT OF OWN FUNDS AND NOT BORROWED FUNDS; THAT THE TIME DEVOTED TO THE ACTIVITY OF PURC HASES AND SALES OF SHARES WAS INSIGNIFICANT; THAT IN THE BOOKS OF ACCOUNTS AND IN THE BALANCE SHEETS THE SHARES WERE HELD AS INVESTMENTS AND NOT STOCK - IN - TRADE AND THAT MONEY HAS BEEN ACTUALLY PAID AND RECEIVED FOR PURCHASES AND SALES AND THESE ARE NOT ONL Y BOOK ENTRIES. THEREFORE, THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE GAINS OF SALE OF SHARES SHOULD BE TREATED AS CAPITAL GAIN AND NOT BUSINESS PROFIT. THE LEARNED CIT(A) CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER. AFTER CONSIDERIN G THE FACTS OF THE CASE, SUBMISSIONS OF THE ASSESSEE, THE REMAND REPORT OF THE ASSESSING OFFICER AND ALSO VERIFYING ALL THE DETAILS SUBMITTED BY THE ASSESSEE AND CONSIDERING VARIOUS JUDICIAL DECISIONS, THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE HAS BEEN REGULARLY INVESTING IN THE SHARES SINCE ASSESSMENT YEARS 1995 - 96 TO 2005 - 06. AS REGARDS THE OBSERVATION OF THE ASSESSING OFFICER AHT SEBI HAS BANNED SOME STOCK BROKERS LISTED ON PAGE 4 OF HIS ORDER VIDE NOTIFICATION DT.30.9.2005, THE LEARNED CIT(A) FOUND THAT THE TRANSACTIONS ENTERED INTO WITH SUCH STOCK BROKERS MUCH BEFORE THE DATE OF BAN AND THEREFORE, IT DOES NOT AFFECT THE VALIDITY OF TRANSACTIONS DURING THE PERIOD WHEN BOTH THE SHARE BROKER COMPANIES WERE AUTHORISED TO TRANSACT. ACCORDINGLY, HE HELD T HAT THE TRANSACTIONS OF PURCHASES AND SALE OF THE SHARES ARE GENUINE AND BONAFIDE. APPLYING VARIOUS TESTS PRESCRIBED IN CBDT CIRCULARS AND CONSIDERING VARIOUS JUDICIAL DECISIONS ON THE ISSUE, THE LEARNED CIT(A) CONCLUDED THAT THE PROFIT EARNED BY HIM SHOU LD BE TREATED AS SHORT TERM CAPITAL GAINS AND NOT TRADING INCOME. THE CONCLUDING PARAGRAPH ON PAGE 34 - 35 OF THE ORDER OF THE LEARNED CIT(A) IS REPRODUCED AS UNDER : (10 ) APPLYING THE ABOVE CIRCULARS AND THE JUDICIAL DECISIONS AS RELIED UPON BY THE APP ELLANT, THE FOLLOWING FACTUAL POSITION EMERGE S : - 1) (I) THE ASSESSEE IS MAINLY EARNED HER INCOME FROM INTEREST FROM VARIOUS DEPOSITS. (II) THE PURCHASE OF SHARES IS ONLY WITH THE INTENTION OF MAKING LONG TERM APPRECIATION AND SOME OF THE SHARES HAVE BE EN HELD FOR MORE THAN TEN YEARS OR SO IN ITS INVESTMENT PORTFOLIO. / I.T.A.NO.1247/KOL/2009 4 (III) THERE IS NO REGULAR AND CONTINUOUS ACTIVITY OF BUYING AND SELLING OF SHARES. (IV) THE ASSESSEE HAS NOT RESORTED TO ANY BORROWINGS FOR THE PURPOSES OF INVESTMENT IN SHARES. (V) THE APPELLANT HAS ALSO SHOWN THE DIVIDEND INCOME ON THE INVESTMENTS OF SOME SHARES. (VI) IN ITS BALANCE SHEET, THE ASSESSEE HAS HELD THE SHARES AS INVESTMENTS AND IN THE COMPUTATION OF INCOME THE ASSESSEE HAS SHOWN THE GAINS/LOSSES UNDER THE HEAD CAPITAL GAIN S DURING THE YEAR IN QUESTION AS ALSO IN EARLIER & SUBSEQUENT YEARS. (VII) THE SHARE TRANSACTIONS ARE NOT OF SPECULATIVE NATURE. (VIII) THE APPELLANT HAS NOT CHANGED HIS MIND EVERY THIRD DAY. (IX) AO BROUGHT NO MATERIAL ON RECO R D TO SHOW THAT SHARES WER E PURCHASED BY THE APPELLANT TO EARN PROFIT. (X) THE SHARE TRANSACTIONS HAVE NOT BEEN EFFECTED WITH SISTER/RELATED CONCERNS BUT IN INDEPENDENT COMPANIES. (XI) THE TRANSACTIONS ARE NOT SIMPLY BOOK ENTRIES BUT THE MONEY HAS BEEN PAID & RECEIVED BY CHEQUES. IN THE LIGHT OF ABOVE REFERRED DISCUSSION, ON FACTS & IN LAW THE APPELLANT HAS PROVED THAT HE WAS AN INVESTOR IN SHARES AND ACCORDINGLY I AM INCLINED TO ACCEPT THE ARGUMENTS OF THE APPELLANT THAT THE PROFIT EARNED BY HIM SHOULD BE TREATED AS SHORT TERM CAPITAL GAINS AND NOT TRADING INCOME. AGGRIEVED, THE REVENUE IS IN APPEAL HERE BEFORE THE TRIBUNAL. 6 . WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LEARNED CIT(A) IN HIS ORDER D EALT WITH THE ISSUE IN GREAT DETAIL AFTER CONSIDERING THE DETAILS FURNISHED BY THE ASSESEE, CBDT CIRCULARS AND VARIOUS JUDICIAL DECISIONS AND CAME TO ULTIMATE CONCLUSION OF FACTS AS REPRODUCED IN THE FOREGOING PARAGRAPH. THE LEARNED DR SAVE AND EXCEPT REL YING ON THE ORDER OF THE ASSESSING OFFICER COULD NOT CONTROVERT SUCH FACTUAL FINDINGS AS RECORDED BY THE LEARNED CIT(A), BY BRING ANY MATERIAL EVIDENCE ON / I.T.A.NO.1247/KOL/2009 5 RECORD. THEREFORE, CONSIDERING SUCH UNCONTROVERTED FACTS RECORDED BY THE LEARNED CIT(A), WE ARE OF THE CONSIDERED VIEW THAT THE LEARNED CIT(A) IS PERFECTLY JUSTIFIED IN HOLDING THAT THE PROFIT EARNED BY THE ASSESSEE SHOULD BE TREATED AS SHORT TERM CAPITAL GAIN AND NOT TRADING INCOME. WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(A) BY MAKING IT AS PA RT OF OUR ORDER AND DISMISS THE APPEAL OF THE REVENUE. 7 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 25.6.2010 SD/ - SD/ - ( . . ) , (D.K.TYAGI), JUDICIAL MEMBER. ( . . ) , , (B.C.MEENA), ACCOUNTANT MEMBER. ( ) DATE : 25.06.2010 PRO NO UNCED IN OPEN COURT. SD/ - SD/ - (C.D.RAO) (D.K.TYAGI) AM J M - COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT : DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 3, ASANSOL. 2 / THE RESPONDENT - RAJIV DALMIA, G.T.ROAD, SEARSOL RAJBARI, RANIGANJ, DIST. BURDWAN 3. / THE CIT, 4. ( )/ THE CIT(A), 5. / DR, KOLKATA BENCH 6. GUARD FILE . / TRUE COPY , / BY ORDER , / DEPUTY REGISTRAR . ( /) H.K.PADHEE / SNR.PRIVATE SECRETARY. / I.T.A.NO.1247/KOL/2009 6