Anjana Devi Agarwal, Purulia V. A.C.I.T Cir - 3,Asansol, Asansol

ITA 1400/KOL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3171 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 20-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R M JAIN
• Keywords: Business income; Accommodation entries
• Section: 143(3)

Judgement Text

I.T.A. NO. 1400/KOL./2013 ASSESSMENT YEAR: 2005-2006 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 1400/KOL/ 2013 ASSESSMENT YEAR: 2005-2006 ANJANA DEVI AGARWAL,............................... ...........................APPELLANT PODDAR VILLA, RANCHI ROAD, PURULIA, WEST BENGAL-723 102 [PAN : ACHPA 1318 A] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,.............. ..............RESPONDENT CIRCLE-3, ASANSOL APPEARANCES BY: SHRI R.M. JAIN, ADVOCATE, FOR THE ASSESSEE SHRI TANUJ NIYOGI, JCIT, SR. D.R., FOR THE DEPARTME NT DATE OF CONCLUDING THE HEARING : JANUARY 05, 2016 DATE OF PRONOUNCING THE ORDER : FEBRUARY 10, 2016 O R D E R THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST TH E ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), ASANSOL DATED 18.03.2013 FOR THE ASSESSMENT YEAR 2005-06 AND THE SOLITARY ISSUE ARIS ING OUT OF THE SAME FOR MY CONSIDERATION IS WHETHER THE PROFIT OF RS.11 ,54,913/- CLAIMED TO HAVE BEEN EARNED BY THE ASSESSEE FROM THE SALE OF S HARES IS CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAINS OR PROFITS AND GAINS FROM THE BUSINESS OR PROFESSION. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L, WHO FILED HER RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION O N 19.07.2005 DECLARING TOTAL INCOME OF RS.12,79,200/-. IN THE SA ID RETURN, PROFIT FROM THE SALE OF SHARES AMOUNTING TO RS.11,54,913/- WAS DECLARED BY THE ASSESSEE AS SHORT-TERM CAPITAL GAIN LIABLE TO TAX A T A CONCESSIONAL RATE OF I.T.A. NO. 1400/KOL./2013 ASSESSMENT YEAR: 2005-2006 PAGE 2 OF 6 10%. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE RELEVANT TRANSACTIONS GIVING RISE TO THE SAID PROFIT WERE EX AMINED BY THE ASSESSING OFFICER AND ON SUCH EXAMINATION, HE FOUND THAT A PA RTICULAR MODUS OPERANDI WAS FOLLOWED BY THE ASSESSEE, WHICH RESULT ED IN UNPRECEDENTED PROFIT IN THE TRANSACTIONS OF SHARES IN CONNIVANCE WITH SOME BROKERS. AFTER DISCUSSING THIS MODUS OPERANDI IN DETAIL IN T HE ASSESSMENT ORDER AND ALSO AFTER REFERRING CERTAIN JUDICIAL PRONOUNCE MENTS, THE ASSESSING OFFICER HELD THAT THE ENTIRE TRANSACTIONS GIVING RI SE TO CAPITAL GAINS TO THE ASSESSEE WERE MERE ACCOMMODATION ENTRIES THROUGH WH ICH THE UNACCOUNTED MONEY OF THE ASSESSEE WAS CONVERTED INT O ACCOUNTED MONEY. HE, THEREFORE, HELD THAT THE ENTIRE SALE PROCEEDING S OF THE SHARES WERE CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE UNDE R THE HEAD INCOME FROM OTHER SOURCES. WITHOUT PREJUDICE TO THIS CONC LUSION DRAWN BY HIM, THE ASSESSING OFFICER ALSO HELD THAT THE RELEVANT S HARES HAVING BEEN PURCHASED BY THE ASSESSEE WITH THE SOLE INTENTION O F SELLING THE SAME FOR PROFIT AND NOT TO HOLD THE SAME TO ENJOY INCOME THE REON FOR SOMETIMES, THE PROFIT ARISING FROM SALE OF SUCH SHARES WAS CHA RGEABLE TO TAX IN THE HANDS OF THE ASSESSEE AS BUSINESS INCOME AND NOT CA PITAL GAINS. IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN O RDER DATED 22.11.2007, THE ASSESSING OFFICER, HOWEVER, FINALLY BROUGHT TO TAX THE AMOUNT OF PROFIT OF RS.11,54,913/- ARISING ON SALE OF SHARES IN THE HANDS OF THE ASSESSEE UNDER THE HEAD PROFITS AND GAINS O F BUSINESS OR PROFESSION. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEF ORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL THE MATERIAL AVAILABLE ON RECORD INCLUDING THE ORDER OF ASSESSMENT, THE LD. CIT(APPEALS) HELD THAT THE GENE RAL MODUS OPERANDI ADOPTED BY THE ASSESSEE IN RESPECT OF SHARE TRANSAC TIONS AS EXPLAINED BY THE ASSESSING OFFICER WAS ONLY A SUPPORTING MATERIA L. HE, THEREFORE, DISREGARDED THE SAME AND FOCUSSED ONLY ON THE CORE ISSUE AS TO WHETHER THE INCOME OF THE ASSESSEE FROM SHARE TRANSACTIONS WAS CHARGEABLE TO TAX I.T.A. NO. 1400/KOL./2013 ASSESSMENT YEAR: 2005-2006 PAGE 3 OF 6 IN HER HANDS AS BUSINESS INCOME OR SHORT-TERM CAPIT AL GAINS. IN THIS REGARD, HE RECORDED HIS FINDINGS/ OBSERVATIONS AS U NDER:- (I) THERE ARE NO TWO VIEWS POSSIBLE ON THE ISSUE AS SOUGHT TO BE CONTENDED ON BEHALF OF THE ASSESSEE. (II) BY MERE MEETING OF CONDITIONS IN SECTION 111(1 )(A) AND (B), THE INCOME DOES NOT BECOME CAPITAL GAINS AND THE DECIS ION WHETHER THE INCOME IS CAPITAL GAINS OR NOT IS TO BE MADE INDEPE NDENTLY. (III)THE RELEVANT TRANSACTIONS OF PURCHASE AND SALE OF SHARES IN A PRIVATE COMPANY WERE MADE BY THE ASSESSEE WITHIN A SHORT PERIOD INDICATING CLEARLY THAT IT WAS ADVENTURE IN THE NAT URE OF TRADE. (IV) THE INTENTION OF THE ASSESSEE BEHIND PURCHASE OF SHARES WAS TO SALE THE SAME FOR PROFIT AND NOT TO RETAIN FOR SOME PERIODS IN ORDER TO EARN DIVIDEND. 4. ON THE BASIS OF THE ABOVE FINDINGS/ OBSERVATIONS RECORDED BY HIM, THE LD. CIT(APPEALS) HELD THAT THE PROFIT ARISING F ROM THE RELEVANT TRANSACTIONS IN SHARES WAS CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE AS BUSINESS INCOME AND NOT SHORT-TERM CAPITAL GAINS . ACCORDINGLY, THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE WAS UP HELD BY HIM. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. I HAVE HEARD THE ARGUMENTS OF THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ALTHOUGH THE LD. D.R. HAS STRONGLY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW IN SU PPORT OF THE REVENUES CASE ON THE ISSUE UNDER CONSIDERATION, IT IS OBSERV ED THAT THE VARIOUS FINDINGS RECORDED BY THE ASSESSING OFFICER IN THE A SSESSMENT ORDER TO COME TO THE CONCLUSION THAT THE ENTIRE TRANSACTIONS OF SHARES GIVING RISE TO THE INCOME OF THE ASSESSEE WERE ACCOMMODATION EN TRIES, AND THEREFORE, THE ENTIRE SALE PROCEEDS OF SHARES WERE LIABLE TO B E TAXED IN THE HANDS OF I.T.A. NO. 1400/KOL./2013 ASSESSMENT YEAR: 2005-2006 PAGE 4 OF 6 THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOUR CES, WERE NOT FINALLY RELIED UPON BY THE ASSESSING OFFICER HIMSEL F AS ONLY THE NET PROFIT WAS BROUGHT TO TAX BY HIM IN THE HANDS OF THE ASSES SEE IN THE ASSESSMENT AND THAT TOO UNDER THE HEAD PROFITS AND GAINS OF B USINESS OR PROFESSION. THE LD. CIT(APPEALS), THEREFORE, DISREGARDED THESE FINDINGS RECORDED BY THE ASSESSING OFFICER AND DECIDED THE ISSUE AS TO W HETHER THE PROFIT FROM SHARE TRANSACTIONS CHARGEABLE TO TAX IN THE HANDS O F THE ASSESSEE AS BUSINESS INCOME OR SHORT-TERM CAPITAL GAINS, WHICH ACCORDING TO HIM, WAS THE CORE ISSUE INVOLVED IN THE CASE OF THE ASSESSEE . 6. IT IS BY NOW WELL-SETTLED THAT THE ISSUE AS TO W HETHER THE PROFIT ARISING FROM SHARE TRANSACTIONS IS CHARGEABLE TO TA X AS BUSINESS INCOME OR CAPITAL GAINS DEPENDS ON THE INTENTION OF THE ASSES SEE BEHIND PURCHASE OF SHARES AND SUCH INTENTION IS TO BE GATHERED FROM TH E CONDUCT OF THE ASSESSEE AS SEEN FROM THE FACTS AND CIRCUMSTANCES I NVOLVED IN EACH CASE. THERE ARE CERTAIN GUIDELINES LAID DOWN IN THIS REGA RD IN THE VARIOUS JUDICIAL PRONOUNCEMENTS AND EVEN CBDT HAS ALSO ISSU ED CIRCULARS OUTLINING SUCH GUIDELINES. IF THESE GUIDELINES ARE APPLIED TO THE FACTS ON THE PRESENT CASE AS EXPLAINED BY THE LD. COUNSEL FO R THE ASSESSEE FROM THE RELEVANT MATERIAL PLACED ON RECORD, I FIND MYSELF I N AGREEMENT WITH THE LD. COUNSEL FOR THE ASSESSEE THAT THE RELEVANT SHARES W ERE PURCHASED BY THE ASSESSEE AS AN INVESTOR AND THE PROFIT ARISING FROM SALE THEREOF, THEREFORE, IS CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE A S CAPITAL GAIN. FIRST OF ALL, THERE WERE ONLY SEVEN TRANSACTIONS IN SHARES E NTERED INTO BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION, THREE OF PURCHASE OF SHARES AND FOUR OF SALE OF SHARES. THE FREQUENCY OF SHARE TRANSACTIONS THUS WAS VERY LOW AND EVEN THE SHARES OF TOTAL THREE COMPANI ES PURCHASED BY THE ASSESSEE WERE HELD FOR A PERIOD OF ABOUT THREE MONT HS. MOREOVER, ALL THESE THREE COMPANIES WERE LISTED COMPANIES AND THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES WERE MADE BY THE ASSESS EE ON STOCK EXCHANGE THROUGH REGISTERED BROKERS. BESIDES THESE VERY LIMI TED SHARE TRANSACTIONS, THERE WERE NO OTHER TRANSACTIONS ENTE RED INTO BY THE ASSESSEE IN SHARES DURING THE YEAR UNDER CONSIDERAT ION. EVEN THE SHARE I.T.A. NO. 1400/KOL./2013 ASSESSMENT YEAR: 2005-2006 PAGE 5 OF 6 TRANSACTIONS MADE BY THE ASSESSEE IN THE EARLIER YE ARS WERE LIMITED AND WHATEVER PROFIT OR LOSS ARISING FROM SUCH TRANSACTI ONS WAS OFFERED BY THE ASSESSEE TO TAX UNDER THE HEAD CAPITAL GAINS, WHI CH WAS ACCEPTED BY THE DEPARTMENT. A PERUSAL OF THE RELEVANT BALANCE-SHEET OF THE ASSESSEE ALSO SHOWS THAT THE INVESTMENT IN SHARES WAS MADE BY THE ASSESSEE OUT OF HER OWN FUNDS AND THE ONLY SOURCE OF INCOME OF THE ASSE SSEE FOR THE YEAR UNDER CONSIDERATION WAS INTEREST FROM SMALL SAVINGS AS WELL AS LOAN GIVEN TO ONE COMPANY. THERE IS NOTHING IN THE RELEVANT FI NANCIAL STATEMENTS FILED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERAT ION TO INDICATE THAT ANY EXPENDITURE NECESSARY TO CARRY ON ANY BUSINESS ACTI VITY WAS INCURRED BY THE ASSESSEE. HAVING REGARD TO ALL THESE FACTS OF T HE CASE, I AM OF THE VIEW THAT THE RELEVANT SHARES WERE PURCHASED BY THE ASSE SSEE AS INVESTOR AND THE PROFIT ARISING FROM SALE THEREOF WAS CHARGEABLE TO TAX IN HER HANDS AS SHORT-TERM CAPITAL GAINS AND NOT BUSINESS INCOME. I N THAT VIEW OF THE MATTER, I SET ASIDE THE IMPUGNED ORDER OF THE LD. C IT(APPEALS) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO BRING TO TAX THE PROFIT OF THE ASSESSEE FROM SALE OF SHARES IN HER HANDS AS SHORT TERM CAPITAL GAIN. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 10, 2016. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 10 TH DAY OF FEBRUARY, 2016 COPIES TO : (1) ANJANA DEVI AGARWAL, PODDAR VILLA, RANCHI ROAD, PURULIA, WEST BENGAL-723 102 (2) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3, ASANSOL (3) COMMISSIONER OF INCOME-TAX (APPEALS), ASANSOL I.T.A. NO. 1400/KOL./2013 ASSESSMENT YEAR: 2005-2006 PAGE 6 OF 6 (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.