DCIT, Ludhiana V. Sh. Vikas Joshi, Ludhiana

ITA 1280/CHANDI/2010

• Counselvise Citation: 128021514 RSA 2010
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 11-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILESH GUPTA
• Assessee Lawyers: ATUL GOYAL
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A, CHANDIGARH BEFORE MS SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1280/CHD/2010 ASSESSMENT YEAR: 2005-06 D.C.I.T. C-VII, LUDHIANA V. SHRI VIKAS JOSHI S/O SHRI MAHAVIR PARSHAD JOSHI 4 TH FLOOR ORBIT TOWER, KAILASH CINEMA ROAD LUDHIANA ABOPJ 4676 Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AKHILESH GUPTA RESPONDENT BY: SHRI ATUL GOYAL DATE OF HEARING: 7.8.2012 DATE OF PRONOUNCEMENT: 9.8.2012 ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF C IT(A)-II, LUDHIANA DATED 8.9.2010 RELATING TO ASSESSMENT YEAR 2005-06 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT , 1961. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND IN THIS APPEAL:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)- II, LUDHIANA HAS ERRED IN DIRECTING THE ASSESSING O FFICER TO TREAT THE INCOME FROM SHORT TERM CAPITAL GAINS AND LONG T ERM CAPITAL GAINS AND NOT TO TREAT THE SAME AS BUSINESS SPECULA TION INCOME. 3 THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS IN RELATION TO TREATMENT OF THE PROFITS FROM SHORT TERM CAPITAL GA INS AND LONG TERM CAPITAL GAINS SHOWN BY THE ASSESSEE UNDER THE HEAD INCOME FROM CAPITAL GAIN, ASSESSED AS INCOME FROM BUSINESS BY THE ASSE SSING OFFICER. THE CIT(A) ACCEPTED THE PLEA OF THE ASSESSEE AND HENCE THE PRESENT APPEAL BY THE REVENUE. 2 4. SHRI AKHILESH GUPTA APPEARED FOR THE REVENUE AND SHRI ATUL GOYAL APPEARED FOR THE ASSESSEE AND PUT FORWARD THEIR CON TENTIONS. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE DURING YEAR UNDER CONSIDERATION HAD FURNIS HED RETURN OF INCOME DECLARING INCOME OF RS. 7,50,587/-. IN THE SAID RET URN OF INCOME THE ASSESSEE HAD DECLARED INCOME FROM CAPITAL GAINS AT RS. 4,69,522/-. THE BREAK UP OF THE SAID INCOME FROM CAPITAL GAINS IS I NCORPORATED AT PAGE 2 OF THE ASSESSMENT ORDER. THE ASSESSEE HAD CLAIMED LONG TERM CAPITAL GAINS AS EXEMPT AT RS. 10,08,563/-. THE ASSESSEE HAS AL SO DECLARED SHORT TERM CAPITAL GAINS @ 10% (STT PAID) AT RS. 4,,37,298/- I N ADDITION TO INCOME FROM PRUDENTIAL ICICI @ 10% AT RS. 91,433/- AND AFT ER CLAIMING EXPENSES OF RS. 54,165/-, NET INCOME FROM CAPITAL GAIN WAS D ECLARED AT RS. 4,69,522/-. IN ADDITION THE ASSESSEE HAD DECLARED INCOME FROM SPECULATION BUSINESS AT RS. 2,81,065/- AND MINOR IN COME FROM OTHER SOURCES. THE ASSESSEE HAD DECLARED PROFIT FROM SPE CULATION ACTIVITIES AS HIS BUSINESS INCOME WHILE SHARES BOUGHT AND SOLD TH ROUGH DEMAT ACCOUNT WERE DECLARED AS INCOME FROM SHORT TERM CAPITAL GAI NS AND LONG TERM CAPITAL GAINS. THE ASSESSING OFFICER WAS OF THE VI EW THAT AS THE ASSESSEE HAD ENTERED INTO A NUMBER OF TRANSACTIONS FOR SALE/ PURCHASE OF SHARES RUNNING INTO LAKHS OF RUPEES, THE CONDUCT INDICATED A SYSTEMATIC AND REGULAR ACTIVITY BEING CARRIED ON BY THE ASSESSEE W ITH A VIEW TO EARN PROFIT. THE ASSESSEE IN THE AUDIT REPORT, FURNISHED IN FORM NO. 3 CD HAD DECLARED NATURE OF THE BUSINESS AS STOCK AND SHARE SPECULATION. THE ASSESSING OFFICER IN VIEW THEREOF, WAS OF THE VIEW THAT THE INCOME OF THE ASSESSEE WAS TO BE TREATED AS INCOME FROM BUSINESS OF DEALING IN SHARES AND NOT SHORT TERM CAPITAL GAINS AND LONG TERM CAPI TAL GAINS AS SHOWN BY THE ASSESSEE. THE INCOME OF THE ASSESSEE WAS COMPU TED AT RS. 17,59,150/- AS AGAINST DECLARED INCOME OF RS. 7,50,587/-. 3 6. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE OBS ERVING THAT THE ASSESSEE WAS HAVING BOTH SAVING PORTFOLIO AND INVES TMENT PORTFOLIO WHEREIN INCOME FROM TRADING WAS SEPARATELY SHOWN AS BUSINESS INCOME AND INCOME FROM INVESTMENT WAS SHOWN AS CAPITAL GAI N. THE SAID FACTOR OF HOLDING SHARES AS INVESTMENT WAS BEING FOLLOWED BY THE ASSESSEE FOR THE PAST SEVERAL YEARS. CONSEQUENTLY THE ASSESSING OFFICER WAS DIRECTED TO TREAT THE SAID INCOME FROM SHORT TERM CAPITAL GA INS AND LONG TERM CAPITAL GAINS AND NOT AS INCOME FROM BUSINESS. 7. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD ENTERED INTO 17 TRANSACTIONS OF SALE AND PURCHASE OF SHARES INVO LVING FIVE SECURITIES. THE DETAILS OF THE SHARES SOLD BY THE ASSESSEE ALON G WITH THE DATE OF PURCHASE, QUANTITY AND PURCHASE AMOUNT ARE AS UNDER :- PURCHASE SALE PARTICULARS DATE QTY AMOUNT DATE QTY AMOUNT PROFI T CHAMBAL FERT 3.12.2003 1000 13790.00 23.11.2004 100 0 24450.00 10660.00 UNION BANK 21.5.2003 1000 26600.00 12.1.2004 1000 9 8450.00 71850.00 UNION BANK 8.8.2003 500 18860.00 12.2.2004 500 522 00.00 33340.00 UNION BANK 8.8.2003 1000 18860.00 12.2.2004 1000 52 200.00 33340.00 UNION BANK 8.8.2003 11000 37720.00 12.9.2004 11000 104925.00 67205.00 CHAMBAL FERT 21.5.2003 1000 162585.00 12.12.2004 10 00 274350.00 111765.00 HIND MOTORS 19.9.2003 1000 18820.00 28.12.2004 1000 20950.00 2130.00 CHAMBAL FERT 28.6.2003 85506.85 28.12.2004 150300.00 64793.15 SYNDICATE BANK 11.4.2003 1000 36870.00 1.11.2005 1000 58725.00 218 55.00 SYNDICATE BANK 11.4.2003 4000 120640.00 1.11.2005 4000 236700.00 1 16060.00 CHAMBAL FERT 28.6.2003 1500 23320.00 2.1.2005 1500 45450.00 22130.00 CHAMBAL FERT 28.6.2003 3000 46640.00 2.3.2005 3000 102900.00 56260.00 4 SYNDICATE BANK 11.4.2003 2500 75400.00 3.3.2005 2500 155725.00 803 25.00 SYNDICATE BANK 11.4.2003 2500 75400.00 3.4.2005 2500 152730.00 773 30.00 1040641.85 2049205.0 0 1008563.15 A PERUSAL OF THE CHART REFLECTS THAT THE ASSESSEE H AD MADE SAID PURCHASES OF SHARES OF INDIAN COMPANIES IN THE PRECEDING YEAR S WHICH REFLECT THE INVESTMENT BY THE ASSESSEE FROM YEAR TO YEAR. THE LD. AR FOR THE ASSESSEE DREW OUR CONTENTION TO BALANCE SHEET AS ON 31.3.200 4 PLACED AT PAGE 15 OF PAPER BOOK ALONG WITH THE LIST OF INVESTMENT AS ON 31.3.2004 DECLARED AT RS. 28,99,152/- PLACED AT PAGE 16 OF THE PAPER BOOK . THE SAID SHARES SOLD BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAVE BEEN REFLECTED AS INVESTMENT BY THE ASSESSEE AS ON 31.3.2004 AND HAVE BEEN CARRY FORWARD AS OPENING INVESTMENT AS ON 1.4.2004. THE SAID DEC LARATION OF THE ASSESSEE HAS NOT BEEN DISTURBED BY THE REVENUE AUTH ORITIES. WHAT THE ASSESSEE HAS SOLD DURING THE YEAR UNDER CONSIDERATI ON IS HIS OPENING INVESTMENT IN SHARES OF INDIAN COMPANIES. IT IS AN ESTABLISHED PRINCIPLE OF LAW THAT WHERE STAND OF THE ASSESSEE HAS BEEN ACCEP TED IN THE EARLIER YEARS, THE SAME CANNOT BE DISTURBED UNLESS AND UNTI L CERTAIN EVIDENCES TO THE CONTRARY ARE FOUND. IN THE FACTS AND CIRCUMSTA NCES OF THE PRESENT CASE THE ASSESSING OFFICER HAS FAILED TO BRING ANY EVIDE NCE TO DISENTITLE THE ASSESSEE FROM HIS CLAIM OF INVESTMENT IN THE SHARES OF INDIAN COMPANIES. ADMITTEDLY THE ASSESSEE IS CARRYING ON THE BUSINESS OF SALE AND PURCHASE OF SHARES AGAINST WHICH NO DELIVERY HAS BEEN TAKEN BY THE ASSESSEE AND THE PROFITS FROM THE SAME HAVE BEEN DECLARED AS INCOME FROM SPECULATION BUSINESS, BUT IN RESPECT OF ITS INVESTMENT IN SHARE S THROUGH ITS DEMAT ACCOUNT, THE SAID INVESTMENT HELD BY THE ASSESSEE A ND PROFITS ARISING ON ITS SALE HAS TO BE ASSESSED AS INCOME FROM CAPITAL GAIN S EITHER AS SHORT TERM OR LONG TERM DEPENDING UPON THE PERIOD OF HOLDING. THE ASSESSEE HAS ALSO 5 PLACED ON RECORD BALANCE SHEET AS ON 31.3.2005 IN W HICH IT HAD DECLARED INVESTMENT IN SHARES AT RS. 75,76,903/- ALONG WITH LIST OF INVESTMENTS PLACED AT PAGES 13 & 14 OF THE PAPER BOOK. THE ASS ESSEE HAS NOT DECLARED ANY STOCK IN TRADE OF THE SHARES. THE SHARES TREAT ED AS BUSINESS INCOME WERE PURCHASED AND SOLD DURING THE YEAR ITSELF WITH OUT TAKING DELIVERY AND HENCE INCOME DECLARED AS INCOME FROM SPECULATION DU RING THE YEAR, WHICH HAS BEEN ASSESSED AS SUCH IN THE HANDS OF THE ASSES SEE. SIMILARLY INVESTMENTS SOLD IN THE EARLIER YEARS HAVE BEEN ASS ESSED AS INCOME FROM CAPITAL GAINS IN THE HANDS OF THE ASSESSEE IN THE E ARLIER YEARS. IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE WHERE THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD MADE TOTAL 17 TRANSACTIONS INVOLVING FIVE SECURITIES IN TOTAL, WE FIND NO MERI T IN THE ORDER OF THE ASSESSING OFFICER IN TREATING THE SAME AS SYSTEMATI C AND REGULAR ACTIVITY OF EARNING PROFIT. UPHOLDING THE ORDER OF THE LD. CIT(A) WHERE THE ASSESSEE HAS SOLD PART OF HIS PORTFOLIO AS INVESTME NT AND DECLARED INVESTMENT FROM YEAR TO YEAR, THE PROFIT ARISING ON SALE OF SUCH INVESTMENT IS INCLUDIBLE AS INCOME FROM CAPITAL GAINS IN THE H ANDS OF THE ASSESSEE. THE GROUND OF APPEAL RAISED BY THE REVENUE IS DISMI SSED. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9TH D AY OF AUGUST, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 9 TH AUGUST, 2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 6