JIGNASHA D. SHAH, MUMBAI V. ITO 13(1)(2), MUMBAI

ITA 1375/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75832 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 17-02-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 18-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S D SRIVASTAVA
• Assessee Lawyers: C N VAZE
• Keywords: Business income
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I , MUMBAI BEFORE SHRI D. KARUNAKARA RAO , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 1375/M/2010 ASSESSMENT YEAR: 2004 - 05 S MT. JIGNASHA D. SHAH, R.NO.23, 3 RD FLOOR, SHRINATHJI BUILD ING, 95 , NARAYAN DHURU STREET, MUMBAI 400 003 PAN: AAOPS5511N VS. COMMISSIONER OF INCOME TAX, CITY 13, ROOM NO.416, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C.N. VAZE, A.R. REVENUE BY : SHRI S.D. SRIVASTAVA, D.R. DATE OF HEARING : 17.02. 201 4 DATE OF PRONOUNCEMENT : 19.03.2014 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGA INST THE ORDER OF THE COMMISSIONER OF INCOME TAX [(HEREINAFTER REFERRED TO AS CIT] DATED 23.10.08 PASSED UNDER SECTION 263 OF THE INCOME TAX ACT (HEREINAFTER REFERRED TO AS THE ACT). 2. EARLIER THE PRESENT APPEAL WAS DISMISSED BY THE TRIBUNAL VIDE ORD ER DATED 20.01.12 BEING BARRED BY LIMITATION. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE HONBLE BOMBAY HIGH COURT AGAINST THE ORDER OF THE TRIBUNAL DATED 20.01.12. THE HONBLE HIGH COURT VIDE ORDER DATED 21.03.13 CONDONED THE DELAY IN FILING THE APPEAL BEFORE THE TRIBUNAL AND DIRECTED THE TRIBUNAL TO DECIDE THE MATTER ON MERITS. ACCORDINGLY, THE APPEAL WAS RESTORED TO ITS ITA NO. 1375/M/2010 SHRI JIGNASHA D. SHAH 2 ORIGINAL POSITION AND THE MATTER WAS HEARD ON MERITS ON 17.02.14 AND THE SAME IS DISPOSED OF WITH THIS ORDER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE , AN INDIVIDUAL , FILED HER RETURN OF INCOME ADMITTING COMMISSION INCOME AS WELL AS CAPITAL GAINS. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS AO) ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS.8,48,380/ - UNDER SECTI ON 143(3) OF THE ACT. THE CIT INVOKING HIS POWERS UNDER SECTION 263 OF THE ACT REOPENED THE ASSESSMENT. HE OBSERVED THAT THE AO WHILE ASSESSING THE INCOME OF THE ASSES SEE HAS DISALLOWED THE BANK CHARGES TO THE EXTENT OF RS.13,048/ - AS ATTRIBUTABLE TO SHA RE TRADING ACTIVITIES. HE FURTHER OBSERVED THAT THOUGH THE AO HAD COME TO CONCLUSION THAT THE ASSESSEE HAD SHARE TRADING ACTIVITY D URING THE RELEVANT YEAR, YET, WHILE ASSESSING THE INCOME , HE OMITTED TO COMPUTE THE INCOME FROM SHARE TRADING ACTIVITY. THE ASSESSEE EXPLAINED BEFORE HIM THAT S HE WAS NOT TRADING IN SHARES RATHER THE SHARES WERE HELD FOR INVESTMENT PURPOSES. THE OBSERVATION OF THE AO THAT THE ASSESSEE WAS ENGAGED IN SHARE TRADING ACTIVITY WAS JUST A CLERICAL MISTAKE. THE AO SHOULD HAVE WRITT EN THE WORDS INVESTMENT IN SHARES. MERELY BECAUSE A CLERICAL MISTAKE WAS COMMITTED BY THE AO IN WRITING THE WORD TRADING IN SHARES , INSTEAD OFF INVESTMENT IN SHARES WOULD NOT MEAN THAT THE AO HAD COMMITTED AN ERROR WHILE COMPUTING THE INCOME OF THE ASSESSEE WHICH WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE CIT , HOWEVER, DID NOT AGREE WITH THE SUBMISSION OF THE ASSESSEE AND THEREAFTER HE ANALYSED THE FREQUENCY OF SALE AND PURCHASE OF SHARES, BRIEF SCRIPTS ETC. AND CAME TO THE CONCLUSION THAT THE ASSESSEE HAD BEEN ENGAGED IN SHARE TRADING ACTIVITY AND AS SUCH THE INCOME FROM SUCH ACTIVITY SHOULD NOT BE ASSESSED AS CAPITAL GAINS BUT AS BUSINESS INCOME OF THE ASSESSEE. AGGRIEVED FROM THE ORDER OF THE COMMISSIONER PASSED UNDER SECTION 263 OF THE ACT, THE ASSESSEE PREFERRED APPEAL BEFORE THIS TRIBUNAL. ITA NO. 1375/M/2010 SHRI JIGNASHA D. SHAH 3 4. BEFORE US, THE LD. A.R. OF THE ASSESSEE SUBMITTED THAT THE AO HAD ASSESSED THE INCOME AFTER DULY VERIFYING THE VARIOUS DOCUMENTS, ACCOUNTS AND STATEMENTS ETC. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAD FURNISHED BANK ACCOUNTS, STATEMENT OF CAPITAL GAINS, SUPPORTINGS IN RESPECT OF SHORT TERM CAPITAL LOSS, COPIES OF D - MAT STATEMENTS ETC. THE AO DISALLOWED A PART OF BANK CHARGES AGAINST BUSINESS INCOME SINCE ACCORDING TO HIM A PART OF THE BANK CHARGES WAS TOWARDS EARNING INCOME FROM CAPITAL GAINS. HOWEVER, THERE WERE CERTAIN DRAFTING ERRORS IN THE ASSESSMENT ORDER WHEREBY THE AO MENTIONED SHARE TRADING TRANSACTIONS INSTEAD OF PURCHASE AND SALE OF INVESTMENTS . HE THUS SUBMITTED THAT IN VOKING OF SECTION 263 OF THE ACT BY THE CIT, IN THE CASE OF ASSESSEE , WAS WRONG AND ILLEGAL. ON THE OTHER HAND, THE LD. D.R. RELIED UPON THE FINDINGS OF THE CIT. 5. WE HAVE CONSIDERED THE RESPECTIVE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES AND ALSO HAVE GONE THROUGH THE RECORDS. A PERUSAL OF THE ASSESSMENT ORDER DATED 07.03.07 REVEALS THAT THE REQUIRED DETAILS SUCH AS BAN K ACCOUNTS, STATEMENT OF CAPITAL GAINS, SUPPORTINGS IN RESPECT OF SHORT TERM CAPITAL LOSS I.E. RETURN OF INCOME FOR ASSE SSMENT YEAR 2001 - 02 AND 2004 - 05, COPIES OF D - MAT STATEMENTS, CONFIRMATION OF LOANS ETC. WERE FURNISHED BY THE ASSESSEE AS PER THE REQUIREMENT OF THE AO. THE AO AFTER PROPER VERIFICATION OF THE DOCUMENTS PLACED BEFORE HIM HAD PASSED THE ASSESSMENT ORDER. EVEN THE AO HAD DISALLOWED 50% OF THE BANK CHARGES CLAIMED BY THE ASSESSEE ON ACCOUNT OF EXPENDITURE INCURRED FOR THE PURPOSE OF INVESTMENT IN SHARES. THEREAFTER THE AO ASSESSED THE INCOME OF THE ASSESSEE UNDER SEPARATE HEAD S I.E. INCOME FROM HOUSES PROPE RTY, CAPITAL GAINS, INCOME FROM BUSINESS AND INCOME FROM OTHER SOURCES. THE LD. A.R. OF THE ASSESSEE ALSO INVITED OU R ATTENTION TO THE NOTICE DATED 14.11.06 ISSUED BY THE AO TO THE ASSESSEE CALLING FOR INTER ALIA DETAILS OF SHORT TERM CAPITAL GAIN/LONG TE RM CAPITAL GAINS WITH DOCUMENTARY PROOF OF ITA NO. 1375/M/2010 SHRI JIGNASHA D. SHAH 4 PURCHASE/SALE. HE FURTHER INVITED OUR ATTENTION TO THE REPLY FILED BY THE ASSESSEE IN RESPONSE TO THE SAID NOTICE SHOWING THAT THE SCRIPT - WISE DETAILS AS WELL AS COPIES OF D - MAT STATEMENTS WERE FURNISHED BY THE A SSESSEE TO THE AO. THE ISSUE RELATING TO THE TREATMENT OF INCOME EARNED FROM SALE OF SHARES ETC. IS A HIGHLY DEBATABLE ISSUE AND IT DEPENDS UPON THE FACTS OF EACH CASE AS TO WHETHER SUCH INCOME IS TO BE ASSESSED AS CAPITAL GAINS OR BUSINESS INCOME. THE AS SESSMENT ORDER WAS PASSED BY THE AO AFTER DUE APPLICATION OF MI ND TREATING SUCH INCOME AS CAPITAL GAINS. THE VIEW TAKEN BY THE AO WAS ONE OF THE POSSIBLE AND PERMISSIBLE VIEW S IN THE EYES OF LAW AND CANNOT BE SAID TO BE ERRONEOUS OR PREJUDICIAL TO THE INT EREST OF THE REVE NUE. EVEN IF THE LD. CIT WAS HAVING DIFFERENT OPINION ON THE ISSUE THAT BY ITSELF IS NOT ENOUGH TO MAKE THE ASSESSMENT ORDER ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE . UNDER SUCH CIRCUMSTANCES THE ORDER OF THE CIT PASSED UND ER SECTION 263 OF THE ACT IN THIS CASE IS NOT SUSTAINABLE AND THE SAME IS ACCORDINGLY SET ASIDE AND THAT OF AO IS HEREBY RESTORED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.03. 20 1 4 . SD/ - SD/ - ( D. KARUNAKARA RAO ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 19.03. 201 4 . * KISHORE COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI ITA NO. 1375/M/2010 SHRI JIGNASHA D. SHAH 5 THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.