The ACIT, Circle-6, Surat V. Shri Manish Sumatilal Shah, Surat

ITA 1665/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1849 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 25-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 20-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: J P SHAH
• Keywords: Business income

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA K. YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO. 1665/AHD/2011 / ASSESSMENT YEAR: 2008-09 ACIT, CIRCLE-6, SURAT .. APPELLANT VS SHRI MANISH SUMATILAL SHAH, 6/1940-42, VARDAN APARTMENT, DALAGIA MOHOLLO, MAHIDHARPURA, SURAT .. RESPONDENT PAN : ADRPS 1088 E REVENUE BY : SMT. SONIA KUMAR, SR.DR ASSESSEE(S) BY : SHRI J.P. SHAH, AR / DATE OF HEARING 25/02/2016 /DATE OF PRONOUNCEMENT 05/04/2016 / O R D E R PER SHAILENDRA K. YADAV, JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, SUR AT DATED 24.03.2011 FOR ASSESSMENT YEAR 2008-09, ON THE FOLL OWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE HONBLE CIT(A) HAS ERRED IN DELETING THE ENTIRE ADDITION MADE ON ACCOUNT OF CONVERSION OF SHORT TER M CAPITAL GAIN IN TO BUSINESS INCOME OF RS.1,96,23,56 7/-. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A), SURAT OUGHT TO HAVE UPHELD THE ORDE R OF THE ASSESSING OFFICER. ITA NO. 1665/AHD/2011 ACIT VS. SHRI MANISH SUMATILAL SHAH AY 2008-09 - 2 - 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A)- IV, SURAT MAY BE SET ASIDE AND THAT OF THE ASSESSIN G OFFICER RESTORED. 2. THE ISSUE BEFORE US IS WITH REGARD TO THE DELETI ON OF ADDITION MADE ON ACCOUNT OF CONVERSION OF SHORT TER M CAPITAL GAIN INTO BUSINESS INCOME OF RS.1,96,23,567/-, WHIC H WAS DECLARED BY THE ASSESSEE ON SALE OF LISTED EQUITY S HARES AS BUSINESS INCOME. 2.1 IN THIS CASE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT TH E ASSESSEE HAS BEEN ENGAGED IN THE ACTIVITY OF PURCHASE AND SA LE OF SHARES IN A REGULAR AND FREQUENT MANNER, BUT HAS SHOWN THE INCOME FROM SUCH ACTIVITY AS 'CAPITAL GAINS'. KEEPING IN V IEW THE VOLUME, FREQUENCY AND THE NATURE OF SHARE SALE-PURC HASE TRANSACTIONS OF THE ASSESSEE, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE WAS ENGAGED IN THE 'BUSIN ESS' OF SHARE SALE & PURCHASE, RATHER THAN DEALING IN THE S HARES AS 'INVESTMENTS'. THE ASSESSEE MADE CERTAIN SUBMISSIO NS IN THIS REGARD BEFORE THE ASSESSING OFFICER, BUT REJECTING THE SAME, THE ASSESSING OFFICER MADE ADDITION OF RS.1,96,23,567/- ON ACCOUNT OF CONVERSION OF SHORT TERM CAPITAL GAINS INTO BUSINESS INCOME. 2.2 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) GRANTED RELIEF TO THE ASSESSEE BY FOLLOWING THE DECISION OF HIS PREDECESSOR IN ASSESSEES OWN CASE FOR ASSESSMENT Y EARS 2006- ITA NO. 1665/AHD/2011 ACIT VS. SHRI MANISH SUMATILAL SHAH AY 2008-09 - 3 - 07 AND 2007-08. THE AFORESAID ORDER OF THE CIT(A) HAS BEEN OPPOSED BY THE REVENUE INTER ALIA SUBMITTING THAT THE CIT(A) HAS ERRED IN DELETING THE ENTIRE ADDITION MADE ON A CCOUNT OF CONVERSION OF SHORT TERM CAPITAL GAIN INTO BUSINESS INCOME OF RS.1,96,23,567/-; ACCORDINGLY, THE SR. DEPARTMENTAL REPRESENTATIVE PLEADED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, LD. AUTHORIZED REPRESENTATIVE SUPPORTED THE O RDER OF THE CIT(A) AND BROUGHT OUR NOTICE TO THE DECISION OF CO -ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A SSESSMENT YEAR 2007-08 IN ITA NO.1834/AHD/2010, WHEREIN THE T RIBUNAL HAS DECIDED SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER:- 2. LEARNED REPRESENTATIVES FAIRLY AGREE, EVEN AS L EARNED DEPARTMENTAL REPRESENTATIVE RELIES UPON THE STAND O F THE ASSESSING OFFICER NONETHELESS, THAT THE ISSUE IN AP PEAL IS NOW COVERED, IN FAVOUR OF THE ASSESSEE, BY A CO-ORD INATE BENCH'S DECISION IN ASSESSEE'S OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. VIDE THIS DE CISION DATED 21ST OCTOBER, 2011, THE TRIBUNAL HAS, INTER A LIA, OBSERVED AS FOLLOWS :- '6. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PARTIES AND RECORDS PERUSED. THE ADMITTED FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DIRECTOR OF THE COMPANY AND INVOLVED IN THE BUSINESS OF THE COMPANY FOR WHICH THE ASSESSEE DERIVES ANNUAL SALARY OF RS.60 LAKHS. THE CIT(A), AFTER DETAILED DISCUSSION ON EACH AND EVERY ASPECTS, FOUND THAT THE ACTIVITY OF INVESTMENT IN CAPITAL MARKET BY THE ASSESSEE IS NEITHER ALLIED NOR INCIDENTAL TO THE USUAL TRADE OF THE ASSESSEE OF EXPORT OF DIAMONDS. THE ASSESSEE DOES NOT HAVE ANY INFRASTRUCTURE IN THE FORM OF OFFICE, EMPLOYEES, COMPUTER SYSTEMS, BOLT, ONLINE TRADING ACTIVITIES, ETC. SO AS TO CARRY ON THE BUSINESS OF ITA NO. 1665/AHD/2011 ACIT VS. SHRI MANISH SUMATILAL SHAH AY 2008-09 - 4 - TRADING IN SHARES AND INVESTMENT. THE CIT(A) HAS AL SO EXAMINED THE ISSUE FROM THE ANGLE OF HOLDING OF THE SHARES AND NOTED THAT AVERAGE PERIOD OF PURCHASE AND SALE OF SHARES IN CASE OF THE ASSESSEE IS 134 DAYS WHEREAS THE AVERAGE PERIOD OF HOLDING OF SHARE S AS AT THE YEAR END IS 220 DAYS, WHICH CLEARLY LEAD TO AN INFERENCE THAT THE ASSESSEE IS AN INVESTOR. THE CIT(A) HAS ALSO NOTED THAT THE ASSESSEE, AT THE YEA R END, IN HIS BALANCE-SHEET, SHARE INVESTMENT HAS BEE N SHOWN AS INVESTMENT AND NOT AS STOCK-IN-TRADE. THE CIT(A) ALSO EXAMINED THE ISSUE IN THE LIGHT OF PARAMETERS LAID DOWN BY THE CBDT IN ITS CIRCULAR NO.4/2007 DATED 15.06.2007 AND FOUND THAT THE PURCHASE AND SALE OF SHARES IS NOT USUAL TRADE OR BUSINESS OF THE ASSESSEE NOR IT IS INCIDENTAL TO BUSINESS OF EXPORT OF DIAMONDS. THE CIT(A) ALSO CONSIDERED THE DECISION DATED 30.11.2007 OF THE ITA T, MUMBAI'}' BENCH IN THE CASE OF M/S. J.M. SHARE & STOCK BROKERS LTD. VS. JCIT. THE LD. CIT(A), AT PA GE 4 OF HIS ORDER, CONSIDERED THE ASSESSEE'S SUBMISSIONS IN RESPECT OF THE HOLDING OF THE SHARES BY THE ASSESSE E. THE CIT(A) HAS ALSO CONSIDERED THE ASSESSEE'S SUBMISSION THAT THE ASSESSEE HAS CONSEQUENTLY FOLLOWING THE SAME TREATMENT OF TREATING PROFIT ON SALE OF SHARES AS SHORT TERM CAPITAL GAINS. THE CIT(A) H AS ALSO CONSIDERED THE ASSESSEE'S SUBMISSION WHICH HE HAS SUMMARIZED AT PAGE 7, OBJECT AND MOTIVE OF THE ASSESSEE IN DEALING IN SHARES, MAINTENANCE OF BOOKS OF ACCOUNTS, FUND INVESTMENT IN PURCHASE OF SHARES AND INFRASTRUCTURES, ETC. IN THE LIGHT OF THE ITAT ORDER DATED 28.01.2011 IN CASE OF SHRI RAVINDRA M. AGRAWAL IN ITA NOS. 1725 TO 2167 OF 2008, A COPY OF WHICH HAS BEEN PLACED BY THE ASSESSEE IN THE PAPER BOOK, WE FIND THAT THE ORDER OF THE CIT(A) IS IN CONSONANCE WITH THE ORDER OF THE ITAT IN CASE OF SH RI RAVINDRA M. AGRAWAL (SUPRA). THEREFORE, WE FIND THA T THE CIT(A) HAS RIGHTLY HELD THAT THE INCOME OF THE ASSESSEE ON SALE OF LISTED EQUITY SHARES IS TAXABLE UNDER THE ITA NO. 1934-AHD-09 5 HEAD 'SHORT TERM CAPITAL GAIN' AND DOES NOT AMOUNT TO BUSINESS. THE REVENUE DID NOT POINT OUT ANY CONTRARY MATERIALS OR EVIDENCE AGAINST THE FINDING OF THE CIT(A). IN THE LIGHT OF THE FACT, THE ORDER OF THE CIT(A) IS CONFIRMED.' ITA NO. 1665/AHD/2011 ACIT VS. SHRI MANISH SUMATILAL SHAH AY 2008-09 - 5 - 3. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE CO-ORDINATE BENCH. 4. RESPECTFULLY FOLLOWING THE TRIBUNALS DECISION DATE D 21 ST OCTOBER, 2011, IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, WE APPROVE T HE ORDER OF THE LD. CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE CIT (A) WHO HAS RIGHTLY DELETED THE ADDITION MADE ON ACCOUNT OF CON VERSION OF SHORT TERM CAPITAL GAIN INTO BUSINESS INCOME OF RS.1,96,23,567/-. THUS, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THIS APPEAL FILED BY THE REVENUE. 3. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 5TH OF APRIL, 2016 AT AHMEDABAD. SD/- SD/- ( MANISH BORAD ) ACCOUNTANT MEMBER (SHAILENDRA K . YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 05/04/2016 *BT / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT. 3. && ' / CONCERNED CIT 4. ' ( ) / THE CIT(A), 5. ()* $++ , , / DR, ITAT, AHMEDABAD 6. *, / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) ! ' , / ITAT, AHMEDABAD