VIMESH N ZAVERI, MUMBAI V. DCIT (OSD) 12, MUMBAI

ITA 1597/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9413 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 27-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBE
• Keywords: Business income; Salary income; Rule of consistency; Transactions in derivatives; Earning of tax free income; Assessment record
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BE NCH, MUMBAI , !' #$% , !& ! ' BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./I .T.A. NO. 1597/MUM/2013 ( ( ( ( ( / ASSESSMENT YEAR : 2008-09 SHRI VIMESH N. ZAVERI, 114, SUNFLOWER APARTMENTS, 99, CUFFE PARADE, MUMBAI-400 005 / VS. THE DCIT (OSD)-12, AAAYAKAR BHAVAN, MUMBAI-400 020 ) !& ./ * ./ PAN/GIR NO. : AAAPZ 0367P ( )+ / APPELLANT ) .. ( ,-)+ / RESPONDENT ) )+ . ! / APPELLANT BY: SHRI DR. K. SHIVARAM MS. NEELAM C. JADHAV ,-)+ / . ! / RESPONDENT BY: SHRI SACHCHIDANAND DUBE / 01& / DATE OF HEARING :18.02.2015 23( / 01& / DATE OF PRONOUNCEMENT :25.02.2015 !4 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST T HE ORDER OF THE LD. CIT(A)-23, MUMBAI DT. 03.12.2012 PERTAINING TO ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE HAS RAISED ONLY ONE GROUND OF APPEA L AND THREE ADDITIONAL GROUNDS OF APPEAL. THE FIRST GROUND REL ATES TO THE TREATMENT OF SHORT TERM CAPITAL GAIN AS BUSINESS INCOME. ITA NO. 1597/M/2013 2 3. THE ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM SALARY, HOUSE PROPERTY, BUSINESS INCOME AND INCOME FROM OTHER SOU RCES. THE RETURN OF INCOME WAS FILED ON 12.9.2008 AT TOTAL INCOME OF RS . 1,01,51,528/-. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY UNDER CA SS AND ACCORDINGLY STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE A SSESSEE. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN AN AMOUNT OF RS. 77,35,979/- AS SHORT TERM CAPITAL GAIN . THE ASSESSEE WAS ASKED TO FURNISH D ETAILS OF SHORT TERM CAPITAL GAIN. ON PERUSING THE DETAILS FILED BY THE ASSESSEE, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS ENGAGED IN H UGE VOLUMES OF TRANSACTIONS FOR BUYING AND SELLING OF SHARES AND S ECURITIES WITH HIGH FREQUENCY. THE AO ASKED THE ASSESSEE TO SHOW CAUSE WHY THE SHORT TERM CAPITAL GAIN SHOULD NOT BE TREATED AS BUSINESS INCO ME. THE ASSESSEE FILED A DETAILED REPLY DT. 25.11.2010. IT WAS EXPLAINED THAT THE ASSESSEE HAVE BEEN ENGAGED IN PURCHASE AND SALE OF SHARES FROM PA ST MANY YEARS MAINLY DEALINGS ARE DELIVERY BASED AND IN THE PAST THE AS SESSEE WAS NEVER TREATED AS A TRADER. THE ASSESSEE FURNISHED A COPY OF THE ASSESSMENT ORDER OF PREVIOUS ASSESSMENT YEAR TO SUBSTANTIATE HIS CLAIM THAT HE HAS BEEN ACCEPTED AS AN INVESTOR. 3.1. IT WAS FURTHER EXPLAINED THAT DURING THE YEAR, THE ASSESSEE HAD SOLD 10000 SHARES OF JAI CORP. LTD. WHICH WERE FROM THE OPENING BALANCE ALONGWITH 10000 SHARES WHICH WERE RECEIVED AS BONUS SHARES ON WHICH THE ASSESSEE EARNED SHORT TERM CAPITAL GAIN OF RS. 1,63,18,147/-. IT WAS FURTHER EXPLAINED THAT THE BORROWED FUNDS HAVE BEEN USED FOR TRANSACTION IN F&O SEGMENT. ITA NO. 1597/M/2013 3 3.2. THE EXPLANATION OF THE ASSESSEE DID NOT FIND A NY FAVOUR FROM THE AO WHO AFTER DISCUSSING CERTAIN JUDICIAL DISCUSSION S CONCLUDED BY HOLDING THE SHORT TERM CAPITAL GAIN AS BUSINESS INC OME OF THE ASSESSEE. 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REIT ERATED WHAT HAS BEEN SUBMITTED BEFORE THE AO. IT IS THE SAY OF THE LD. COUNSEL THAT OUT OF THE TOTAL SHORT TERM CAPITAL GAIN MORE THAN 50% HAS COME FROM ONLY ONE SCRIP I.E. JAI CORP LTD AND EVEN IN THE CASE OF M/S. JAI CORP LTD., THE SHARES WERE OPENING BALANCE OF 10000 SHARES WERE P URCHASED ON 4.1.2007 AND 10000 SHARES WERE RECEIVED AS BONUS. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL RELIED UPON THE DECISIO N IN THE CASE OF GOPAL PUROHIT 336 ITR 287(BOM) AND SHRI RAJESH C. SHAH IN ITA NO. 4135/M/2012. 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CONSIDERED THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT ON RECORD BEFORE US. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS BEEN SHOWING SHORT TERM CAPIT AL GAIN/ LONG TERM CAPITAL GAIN ON SALE OF SHARES SINCE PAST MANY YEAR S. IT IS ALSO NOT IN DISPUTE THAT IN ASSESSMENT YEAR 2004-05 I.E. PREVIO US TO THE YEAR UNDER CONSIDERATION AND IN ASSESSMENT YEAR 2010-11 I.E. S UBSEQUENT TO THE YEAR UNDER CONSIDERATION, THE DEPARTMENT HAS ACCEPTED TH E CLAIM OF THE ASSESSEE FOR SHORT TERM CAPITAL GAIN. THUS, IT IS CLEAR THAT PRIOR AS WELL AS SUBSEQUENT ASSESSMENT YEAR TO YEAR UNDER CONSID ERATION, THE AO HAS ITA NO. 1597/M/2013 4 ACCEPTED THE CLAIM OF THE ASSESSEE REGARDING SHORT TERM CAPITAL GAIN ARISING FROM SALE OF SHARES. THERE IS NOTHING ON R ECORD TO SHOW HOW THE FACTS ARE DIFFERENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION SO THAT THE RULE OF CONSISTENCY SHOULD NOT BE FOLLOWED. THE HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GOPAL PUROHIT (SUPRA) HAS EMPHASIZED THE PRINCIPLE OF CONSISTENCY. THE HONBLE HIGH COURT D EALING WITH SIMILAR ISSUE HELD THAT THERE SHOULD BE UNIFORMITY IN TREA TMENT AND CONSISTENCY WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL. A S INCOME FROM SALE OF SHARES HAS BEEN ACCEPTED AS SHORT TERM CAPITAL GAIN IN PRECEDING AND SUCCEEDING YEARS, IN OUR CONSIDERED OPINION, WE DO NOT FIND ANY REASON FOR DEPARTURE FOR THE CURRENT YEAR. CONSIDERING TH E FACTS OF THE CASE IN THE LIGHT OF THE JUDICIAL DECISION DISCUSSED HEREINABOV E, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO TREAT THE SH ORT TERM CAPITAL GAINS AS DECLARED BY THE ASSESSEE. GROUND NO. 1 IS ACCOR DINGLY ALLOWED. 8. THE FIRST ADDITIONAL GROUND RELATES TO THE CLAIM OF EXPENDITURE RELATING TO THE EARNING OF INCOME FROM SHORT TERM CAPITAL GAIN. 9. THE ASSESSEE PRAYS THAT INADVERTENTLY THESE EXPE NDITURE COULD NOT BE CLAIMED IN THE RETURN OF INCOME BUT THE DETAILS OF EXPENDITURE WERE VERY MUCH ON THE ASSESSMENT RECORD WHICH WERE FILED DURING THE ASSESSMENT PROCEEDINGS AND THEREFORE DOES NOT REQUI RE ANY FURTHER VERIFICATION OF THE EXPENDITURE. 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THI S CLAIM OF THE ASSESSEE. SINCE WE HAVE DIRECTED THE AO TO TREAT THE INCOME AS SHORT TERM CAPITAL GAIN. WE, THEREFORE, RESTORE THIS ISS UE TO THE FILE OF THE AO. THE AO IS DIRECTED TO EXAMINE/VERIFY THE DETAILS AN D ALLOW THE CLAIM AS ITA NO. 1597/M/2013 5 PER PROVISIONS OF SEC. 48 OF THE ACT. THE ADDITION AL GROUND NO. 1 IS THEREFORE ALLOWED FOR STATISTICAL PURPOSE. 11. THE SECOND ADDITIONAL GROUND RELATES TO THE CLA IM OF SET OF OFF CARRIED FORWARD ASSESSED BUSINESS LOSSES. THE ASS ESSEE PRAYS THAT IN AN EVENT THE INCOME FROM SHORT TERM CAPITAL GAIN IS TO BE ASSESSED AS BUSINESS INCOME THEN THE CARRIED FORWARD ASSESSED BUSINESS LOSSES MAY KINDLY BE ALLOWED TO BE SET OFF AGAINST SUCH ASSE SSED/ASSESSABLE BUSINESS INCOME. 12. AS WE HAVE DIRECTED THE AO TO TREAT THE SHORT T ERM CAPITAL GAIN AS SUCH, THIS CLAIM OF THE ASSESSEE DOES NOT ARISE. T HIS ADDITIONAL GROUND OF THE ASSESSEE IS DISMISSED. 13. THE THIRD ADDITIONAL GROUND RELATES TO THE DISA LLOWANCE MADE U/S. 14A R.W. RULE 8D OF THE ACT. 14. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT TH E AO HAS COMPUTED THE DISALLOWANCE BY CONSIDERING THE INTEREST PAYMEN T ON BORROWINGS. IT IS THE CLAIM OF THE ASSESSEE THAT THE INCOME SHOWN AS UNDER THE HEAD SHORT TERM CAPITAL GAIN WHICH IS VERY MUCH TAXABLE THOUGH AT SPECIAL RATE BUT CERTAINLY NOT AN EXEMPT INCOME. THEREFORE, THERE I S NO QUESTION OF ANY DISALLOWANCE ON EXPENDITURE FOR EARNING THIS INCOME TAXABLE INCOME. HOWEVER, WE FIND THAT THE ASSESSEE HAS ALSO EARNED DIVIDEND INCOME OF RS. 3,38,955/- AND FURTHER RULE 8D IS VERY MUCH AP PLICABLE FOR THE YEAR UNDER CONSIDERATION. 14.1. A PERUSAL OF THE DETAILS FILED BEFORE US SHOW S THAT THE ASSESSEE HAS COMPUTED THE DISALLOWANCE U/S. 14A R.W. RULE 8D AT RS. 49,190/-. HOWEVER, WE DO NOT FIND ANY MENTION OF ASSESSEES W ORKING OF ITA NO. 1597/M/2013 6 DISALLOWANCE IN THE ASSESSMENT ORDER NOR THE AO HAS GIVEN ANY FINDING OF ASSESSEES COMPUTATION OF DISALLOWANCE. THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE RESTORE THIS ISSUE TO THE FILE OF THE AO. THE AO IS DIRECTED TO VERIFY AND EXAMINE THE CLAIM OF DISA LLOWANCE MADE BY THE ASSESSEE DURING THE COURSE OF THE ASSESSMENT PROCEE DINGS AND DECIDE THE ISSUE AFRESH AS PER PROVISIONS OF LAW. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH FEBRUARY, 2015 SD/- SD/- (VIJAY PAL RAO ) (N.K. BILLAIYA) /JUDICIAL MEMBER !& / ACCOUNTANT MEMBER MUMBAI; 5 DATED : 25 TH FEBRUARY, 2015 . . ./ RJ , SR. PS !4 !4 !4 !4 / // / ,0 ,0 ,0 ,0 6!(0 6!(0 6!(0 6!(0 / COPY OF THE ORDER FORWARDED TO : 1. )+ / THE APPELLANT 2. ,-)+ / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- 4. 7 / CIT 5. 89 ,0 , , / DR, ITAT, MUMBAI 6. 9: / GUARD FILE. !4 !4 !4 !4 / BY ORDER, -0 ,0 //TRUE COPY// ; ;; ; / < < < < (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI