Anju Gaggar, Hyd, Hyderabad V. ACIT, Circle-10(1), Hyd, Hyderabad

ITA 1270/HYD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2415 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 04-11-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALI
• Keywords: Business income; Source of fund
• Section: 143(3); 142(1)

Judgement Text

IT A NO 1270 OF 2015 ANJU GAGGAR HYDERABAD. PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1270/HYD/2015 (ASSESSMENT YEAR: 2008-09) SMT. ANJU GAGGAR HYDERABAD PAN: ADJPG 5923 C VS ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 10(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI MOHD. AFZAL FOR REVENUE : SMT. SUMAN MALI, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2008-09. IN T HIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF T HE LEARNED CIT (A)-VI, HYDERABAD, DATED 25.08.2015 CONFIRMING THE ASSESSMENT ORDER DATED 29.03.2014. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A N INDIVIDUAL, CARRYING ON THE BUSINESS OF TRADING IN SHARES AND DERIVING RENTAL INCOME, FILED HER RETURN OF INCOME ON 30.07.2008 DECLARING TOTAL INCOME OF RS.4,34,76,040. THE ASSES SMENT WAS COMPLETED U/S 143(3) ON 13.12.2010 BY TREATING THE INCOME OF RS.4,34,76,040 EARNED FROM PURCHASE AND SALE OF SHA RES AS BUSINESS INCOME AS AGAINST SHORT TERM CAPITAL GA IN DECLARED DATE OF HEARING: 20.12.2017 DATE OF PRONOUNCEMENT: 2 1 . 0 3 .2018 IT A NO 1270 OF 2015 ANJU GAGGAR HYDERABAD. PAGE 2 OF 8 BY THE ASSESSEE. THE ISSUE WAS CARRIED UP TO THE IT AT AND THE TRIBUNAL HAD RESTORED THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO RE-EXAMINE THE ISSUE. 3. CONSEQUENTLY, THE AO ISSUED NOTICES U/S 143(2) A ND 142(1) OF THE ACT TO THE ASSESSEE ASKING THE ASSESS EE TO FURNISH FULL AND COMPLETE FACTS AND THE DETAILS AND EVIDENC E IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL WITH RESPECT TO THE FREQUENCY AND VOLUME OF THE TRANSACTIONS, EXTENT OF LOANS USED FO R SHARE TRANSACTIONS, ENTRIES IN BOOKS AT THE TIME OF PURCH ASE, PERIOD OF HOLDINGS, PRACTICE FOLLOWED IN PRECEDING AND SUBSEQ UENT YEARS, COMPARABLE CASES, DELIVERY BASED OR OTHERWISE ETC., AND TO JUSTIFY HER CLAIM FOR CONCESSIONAL RATE OF TAXATION U/S 111 A OF THE ACT. IN REPLY THERETO, THE ASSESSEE SUBMITTED COPIES OF THE LEDGER A/C, BANK STATEMENTS, CONTRACT NOTES AND DE-MAT STATEMEN T FOR THE FINANCIAL YEAR 2007-08 AND A CHART SHOWING THE DETA ILS OF SHARES PURCHASED AND SOLD ALONG WITH THEIR HOLDING PERIOD. AFTER CONSIDERING THE DETAILS, THE AO OBSERVED THAT IN A. Y 2006-07, THE ASSESSEE HAD DECLARED SHORT TERM CAPITAL GAIN ON SA LE OF SHARES AND IN A.YS 2007-08, 2009-10 AND 2010-11, SHE HAD D ECLARED LONG TERM CAPITAL GAIN ON SALE OF SHARES. HE ALSO O BSERVED THAT DURING THE RELEVANT FINANCIAL YEAR, THE ASSESSEE HA D PURCHASED MAJORITY OF SHARES DURING THAT YEAR ITSELF AND THAT THE MAXIMUM PERIOD FOR WHICH ANY SHARES WERE HELD BY THE ASSESS EE IS 213 DAYS (IN THE CASE OF ARAVIND CHEMICALS) AND MINIMUM PERI OD IS 3 DAYS (IN THE CASE OF KILBURN CHEMICALS). THE AO ALSO OBS ERVED THAT THE ASSESSEE HAS PURCHASED THE SHARES OF CERTAIN COMPAN IES ON A DAILY BASIS AND HAS ALSO SOLD SOME SHARES ON DAILY BASIS TO EARN MAXIMUM PROFIT AND THEREFORE, SUCH TRANSACTIONS REV EAL PERIODIC IT A NO 1270 OF 2015 ANJU GAGGAR HYDERABAD. PAGE 3 OF 8 PATTERN IN SELECTING THE TIME OF ENTRY AND EXIST IN EACH SCRIP GIVING IT A FLAVOR OF TRADING IN SHARES. HE EXAMINED THE L EDGER A/C OF THE ASSESSEE TO VERIFY THE RECORDING OF SUCH TRANSACTIO NS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND NOTICED THAT THE SHA RE ACCOUNT IS RECORDED AS PROFIT (LOSS) ON SALE OF SHARES WHICH AFTER VARIOUS DEBITS (LOSSES) AND CREDITS (PROFITS), RECORDS A NE T PROFIT OF RS.4,34,79,816 IN THE SHARES ACCOUNT. HE ALSO OBSER VED FROM THE BOOKS OF ACCOUNT THAT THE ASSESSEE HAS BORROWED INT EREST FREE LOANS FROM M/S. INANI COMMODITIES & FINANCE LTD AMO UNTING TO RS.1.90 CRORES AS ON 9.4.2007, WHICH WAS IN TURN GI VEN TO M/S. INANI SECURITIES LTD FOR PURCHASE AND SALE OF SHARE S DURING THE YEAR AND THAT THE ASSESSEE HAS NOT ONLY RETURNED TH E LOAN AMOUNT ON 20.11.2017 BUT ALSO DEPOSITED RS.3.80 CRORES WIT H THE SAID COMPANY AS ON 20.11.2007 AND THEREFORE, THE ASSESSE E HAD A CREDIT BALANCE OF RS.1.80 CRORES WITH M/S. INANI CO MMODITIES AND FINANCE LTD WHICH IS SHOWN IN THE BALANCE SHEET AS LOANS AND ADVANCES GIVEN EARNED A PROFIT. THE AO ALSO NOTICED THAT THE ITAT, IN THE CASE OF SMT. GEETA DEVI GAGGAR (FAMILY MEMBE R OF THE ASSESSEE), HAS HELD THAT SUCH TRANSACTIONS CANNOT B E CONSIDERED AS INVESTMENTS IN SHARES; AND THAT IN THE CASE OF S MT. SUNITHA DEVI GAGGAR (FAMILY MEMBER OF THE ASSESSEE) ALSO, I T WAS HELD THAT THE TRANSACTIONS PARTAKE THE CHARACTER OF BUSINESS ACTIVITIES. THEREFORE, THE AO TREATED THE INCOME FROM SALE OF S HARES AS BUSINESS INCOME AND TAXED IT ACCORDINGLY. AGGRIEVED , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A), WHO CONFIRM ED THE ORDER OF THE AO AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. IT A NO 1270 OF 2015 ANJU GAGGAR HYDERABAD. PAGE 4 OF 8 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW, WHIL E THE LEARNED DR, SUPPORTED THE ORDERS OF THE AO AND THE CIT (A). 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS BEEN PURCH ASING AND SELLING THE SHARES FROM THE A.Y 2004-05 ONWARDS AND HAS BEEN RECORDING THEM AS INVESTMENT IN HER BOOKS OF ACCOUN T AND HAS BEEN REPORTING CAPITAL GAINS ON THE SALE OF SHARES, EITHER SHORT TERM OR LONG TERM AS THE CIRCUMSTANCES WARRANT. ACC ORDING TO THE ASSESSEE, THE ASSESSEE SHOULD BE CONSIDERED AS AN I NVESTOR AS SHE HAS BEEN CONSIDERED AS INVESTOR IN THE EARLIER AS W ELL AS SUBSEQUENT YEARS. FURTHER, IT WAS ALSO SUBMITTED TH AT THE INVESTMENTS ARE VALUED AT COST AND NOT AT COST ON M ARKET VALUE WHICHEVER IS HIGHER IS REQUIRED FOR VALUATION OF TH E STOCK-IN-TRADE AS PER ACCOUNTING STANDARD-13. IT IS ALSO SUBMITTED THAT ALL THE TRANSACTIONS OF THE PURCHASE OF SHARES ARE DELIVERY BASED AND THAT THE FREQUENCY OF THE TRANSACTION CANNOT BE THE ONLY BASIS FOR DETERMINING THE NATURE OF THE TRANSACTION AND THAT IT HAS TO BE DETERMINED ON THE TOTALITY OF THE FACTS AND CIRCUMS TANCES OF THE CASE. WITHOUT PREJUDICE TO THE ABOVE CONTENTIONS, I T WAS ALSO SUBMITTED THAT ONLY IN THE CASE OF 11 TRANSACTIONS WHERE THE SHARES WERE PURCHASED AND SOLD ON THE SAME DAY, THE ASSESSEE CAN BE CONSIDERED AS A TRADER AND NOT OTHERWISE. TH E ASSESSEE HAD RELIED UPON VARIOUS DECISIONS INCLUDING THE DEC ISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GO PAL PUROHIT REPORTED IN 336 ITR 287 AND VARIOUS OTHER DECISIONS OF THE TRIBUNAL IN SUPPORT OF HER CONTENTION. IT A NO 1270 OF 2015 ANJU GAGGAR HYDERABAD. PAGE 5 OF 8 6. WE FIND THAT THOUGH THE ASSESSEE HAS BEEN RECORD ING THE SHARES AS INVESTMENTS IN ITS BOOKS OF ACCOUNT A ND HAS BEEN OFFERING SHORT TERM/LONG TERM CAPITAL GAINS ON PURC HASE AND SALE THEREOF IN RESPECTIVE A.YS, THE ASSESSMENT U/S 143( 3) WAS DONE ONLY IN THE YEARS 2004-05 AND 2010-11. FOR ALL OTHE R YEARS, THE ASSESSMENTS WERE COMPLETED U/S 143(1) OF THE ACT. T HEREFORE, IT CANNOT BE SAID THAT THE REVENUE HAS BEEN ACCEPTING THE ASSESSEE TO BE AN INVESTOR IN ALL THE EARLIER AND SUBSEQUENT A.YS. THEREFORE, THE PRINCIPLE OF UNIFORMITY AND CONSISTENCY CANNOT STRICTLY BE APPLIED IN THE CASE OF THE ASSESSEE FOR THE RELEVAN T A.Y BEFORE US. 7. ON THE MERITS OF THE ISSUE, WE FIND THAT THE AO HAS VERIFIED THE TRANSACTIONS AND HAS CLEARLY BROUGHT O UT IN HIS ORDER THAT THE ASSESSEE HAS BEEN PURCHASING THE SHARES OF VARIOUS COMPANIES DURING THE RELEVANT A.Y AND HAS SOLD THEM WITHIN A SHORT SPAN OF DAYS AND THE AVERAGE PERIOD OF HOLDIN G OF SHARES IS ONLY 58 DAYS. EVEN THE ASSESSEE ADMITTED THAT SOME OF THE SHARES ARE BEING PURCHASED AND SOLD ON THE VERY SAME DAY A ND WITHOUT PREJUDICE TO HER CONTENTION THAT THEY ARE INVESTMEN TS, HAS ACCEPTED ONLY SUCH TRANSACTIONS CAN BE CONSIDERED A S TRADING IN SHARES. WE FIND THAT IN THE CASE OF SHRI GOPAL PURO HIT VS. JT. CIT, REPORTED IN (2009) 122 TTJ 0087 (MUM-TRIB.), THE CO ORDINATE BENCH OF THE TRIBUNAL AT MUMBAI HAD HELD THAT THE A SSESSEE CAN HAVE BOTH THE PORTFOLIOS OF INVESTMENTS AS WELL AS TRADING AND THE FREQUENCY OF THE TRANSACTIONS ALONE WILL NOT DETERM INE THE NATURE OF THE TRANSACTIONS TO BE TRADING. THIS DECISION HA S BEEN UPHELD BY THE HON'BLE BOMBAY HIGH COURT AS WELL AS THE HON 'BLE SUPREME COURT OF INDIA. IN FACT, THE TRIBUNAL IN TH E ASSESSEES OWN CASE HAD ALSO REFERRED THE MATTER BACK TO THE A O WITH A IT A NO 1270 OF 2015 ANJU GAGGAR HYDERABAD. PAGE 6 OF 8 DIRECTION TO CONSIDER THE MULTIPLE PARAMETERS SUCH AS INTENTION, PROFIT MOTIVE, THE TURNOVER, VOLUME, MAGNITUDE, FRE QUENCY, SOURCE OF FUNDS-OWN OR BORROWED, DAY-TRADING DELIVERY BASE D OR OTHERWISE ETC. FOR CONCLUDING WHETHER THE TRANSACTIONS WERE F OR INVESTMENT OR TRADING. THE ASSESSEE HAD STATED THAT ALL THE SH ARES ARE DELIVERY BASED AND THAT THEY HAVE BEEN VALUED AT COST AND NO T AT COST OR MARKET PRICE WHICHEVER IS HIGHER. THE AO HAS CONSID ERED ALL THE TRANSACTIONS TO BE OF TRADING ONLY. THE TRANSACTION S OF PURCHASE AND SALE OF SHARES DURING THE RELEVANT A.Y, WITHIN A SHORT SPAN OF TIME BY UTILIZING THE BORROWED BUT INTEREST FREE FU ND, BY THE ASSESSEE SHOULD BE CONSIDERED AS A TRADE. THEREFORE , IN OUR OPINION, THE ASSESSEE CAN BE CONSIDERED AS A TRADER ONLY. ALL THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR TH E ASSESSEE ARE TO BE THE EFFECT THAT WERE THE SHARES ARE HELD AS I NVESTMENT, THEN THE INCOME FROM SALE OF SUCH SHARES SHOULD BE CONSI DERED AS CAPITAL GAINS ONLY. THE COORDINATE BENCH OF THE TRI BUNAL IN THE CASE OF MS. GEETA DEVI GAGGAR VS. JCIT IN ITA NO.13 80/HYD/2010 AND SMT. SUNITA DEVI GAGGAR VS. ACIT IN ITA NO.910/ HYD/2011 HAVE CONSIDERED SIMILAR TRANSACTIONS AND HAS CONFIR MED THE FINDINGS OF THE AO AND THE CIT (A) THAT THE ASSESSE ES THEREIN WERE ENGAGED IN TRADING OF SHARES. THE RELEVANT PARAGRAP H IN THE CASE OF MS. GEETA DEVI GAGGAR (ITA NO.1380/HYD/2010) IS REPRODUCED HEREUNDER: 7. WE HAVE CONSIDERED THE ISSUE. EVEN THOUGH THE DEPARTMENT HAS ACCEPTED THE ASSESSEE'S INCOMES ON T HE GAINS FROM THE SHARES AS SHORT TERM CAPITAL GAIN IN EARLI ER YEAR AND ALSO IN LATER YEAR, THE FACTS IN THE IMPUGNED YEAR DO INDICATE THAT THE TRANSACTION CANNOT BE CONSIDERED AS INVEST MENT IN SHARES. THE ASSESSEE HAS OFFERED THE ENTIRE INCOME EARNED ON SHORT TERM CAPITAL GAINS TO THE EXTENT OF RS.35,35, 263/- UNDER THE HEAD 'INCOME FROM CAPITAL GAIN' AND SUB-HEAD 'S HORT- TERM CAPITAL GAIN'. HOWEVER, WHEN POINTED OUT ABOUT THE IT A NO 1270 OF 2015 ANJU GAGGAR HYDERABAD. PAGE 7 OF 8 TRANSACTIONS OF F & O, THE ASSESSEE ADMITTED THAT T HE AMOUNT OF RS.5,97,412/- CAN BE CONSIDERED AS BUSINESS, AS THERE IS NO DELIVERY OF THE SHARES. IT WAS FURTHER POINTED OUT THAT 24,900 SHARES OF CYBERMEDIA WERE PURCHASED AND SOLD ON THE SAME DAY. THE LEARNED COUNSEL ALSO ADMITTED TO THAT EXTE NT THAT THIS WAS ALSO CAN BE TREATED AS BUSINESS. HENCE, CA PITAL GAIN OF RS.3,75,107/- ALSO HAS BE TREATED AS BUSINESS IN COME. CONSIDERING THESE FACTS, WE ARE OF THE OPINION THAT REST OF THE TRANSACTIONS ALSO DO COME IN TRADING TRANSACTIONS. THERE CAN NOT A SITUATION WHERE PART OF TRANSACTION CAN BE TR EATED AS BUSINESS AND OTHER AS INVESTMENT. AS CAN BE SEEN FR OM THE DETAILS, ASSESSEE HAS INVESTED IN THE MONTHS OF JUL Y STARTING FROM 14.07.2005 TO 25.07.2005 IN VARIOUS SHARES AND SOLD THEM IMMEDIATELY IN THE NEXT 2-3 MONTHS. THE PERIOD OF HOLDING HAS NEVER EXCEEDED 150 DAYS. SO, IT CANNOT BE CONSIDERED THAT ASSESSEE'S INTENTION IS TO INVEST I N SHARES AS THERE IS LARGE TURNOVER WITHIN A SHORT PERIOD. NOT ONLY THAT THE ASSESSEE HAS EXITED THE SHARES OF 'INDUST METE' ON 01.09.2005 AND AGAIN PURCHASED SOME OF SHARES ON 05.09.2005 WHICH HAVE BEEN SOLD IMMEDIATELY IN THE SAME MONTH PARTLY AND LATER THE BALANCE. NOT ONLY IN THE ABOVE SHARE, EVEN IN THE CASE OF 'MULTI-ARC IN' ASSESSEE HAS PURCHASED LARGE NUMBER OF SHARES IN THE MONTH OF JU LY,05 BETWEEN 19 TH AND 25 TH , AND SOLD THEM BY MONTH OF AUGUST AND NOVEMBER '05 IN A SPAN OF 130 DAYS AND AGAIN PURCHA SED LARGE NUMBER OF SHARES ON 10.02.2006 TO BE SOLD AGA IN ON 21.03.2006. AS SEEN FROM THE DE-MAT STATEMENT, EXCE PT IN THE CASE OF SAKSOFT LIMITED (200 SHARES) THERE IS NO CL OSING BALANCE IN ANY OF THE SHARES PURCHASED. THESE INDIC ATE THAT THE INTENTION IS NOT TO MAKE INVESTMENTS FOR LONG P ERIODS. IN THESE CIRCUMSTANCES, WE AGREE WITH THE FINDINGS OF THE ASSESSING OFFICER AND CIT(A) THAT ASSESSEE'S TRANSA CTIONS ARE IN THE NATURE OF TRADE AND ACCORDINGLY, THE ORDERS OF THE AUTHORITIES ARE UPHELD. CONSEQUENTLY, ASSESSEE'S GR OUNDS ARE REJECTED. 8. SIMILARLY, IN THE CASE OF THE ASSESSEE BEFORE US ALSO, THE RELEVANT FINANCIAL YEAR IS 1.4.2007 TO 31.3.200 8. BEFORE 1.4.2007, THE SHARES PURCHASED BY THE ASSESSEE WERE OF ARAVIND CHEMICALS I.E. ON 23.3.2007 TO 26.3.2007, GVK POWER ON 30.03.2007, ZEE NEWS ON 30.03.2007, WHICH WERE SOLD ON 8.10.2007 TO 25.10.2007, ON 7.7.2007 AND ON 7.5.200 7 IT A NO 1270 OF 2015 ANJU GAGGAR HYDERABAD. PAGE 8 OF 8 RESPECTIVELY. THUS, THE HOLDING PERIOD OF ALL THE A BOVE SHARES IS 213, 99 AND 38 RESPECTIVELY. DURING THE RELEVANT FI NANCIAL YEAR, THERE WERE REPEATED PURCHASE OF SAME SCRIP AND SALE THEREOF IMMEDIATELY, ALMOST ON DAILY BASIS TO TAKE ADVANTAG E OF THE MARKET FLUCTUATIONS. THEREFORE, RESPECTFULLY FOLLOW ING THE DECISIONS OF THE COORDINATE BENCHES IN THE CASES OF GEETA DEVI GAGGAR AND SUNITHA DEVI GAGGAR, BOTH OF WHOM ARE AL SO FAMILY MEMBERS OF THE ASSESSEE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT (A). IN VIEW OF THE SAME, THE ASSESSEES APPEAL IS DISMISSED. 9. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST MARCH, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 21 ST MARCH 2018. VINODAN/SPS COPY TO: 1 SHRI MOHD. AFZAL, ADVOCATE, 11-5-465, SHERSONS R ESIDENCY, FLAT NO.402, CRIMINAL COURT ROAD, RED HILLS, HYDERABAD 5 00004 2 THE ACIT, CIRCLE 10(1) IT TOWERS, HYDERABAD 3 CIT (A) - VI HYDERABAD 4 PR. CIT 6, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER