Smt. Sonia Uppal, Chandigarh V. DCIT, Chandigarh

ITA 175/CHANDI/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2344 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 13-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 175/CHD/2013 ASSESSMENT YEAR: 2006-07 SMT.SONIA UPPAL, V DCIT, CC-I, C/O LAKSHMI ENERGY & FOODS, CHANDIGARH. SCO 18-19, CHANDIGARH. PAN: AAKPU-0079M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUDHIR SEHGAL RESPONDENT : SHRI AMARVEER SINGH DATE OF HEARING : 09.04.2013 DATE OF PRONOUNCEMENT : 11.04.2013 ORDER PER HARI OM MARATHA,JM THIS APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 IS DIRECTED AGAINST THE ORDER OF LD. CIT(AP PEALS) DATED 18.12.2012. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SEARCH & SEIZURE OPERATION U/S 132(1) OF THE INCOME-TAX ACT, 1961 ( 'THE ACT' FOR SHORT) WAS CONDUCTED IN THE CASE OF M /S LAKSHMI ENERGY & FOODS LTD. GROUP OF CASES ON 12.02.2009. DURING THE SEARCH, CERTAIN INCRIMINATING DOCUMENTS/EVIDENC E WERE FOUND AND SEIZED. IN RESPONSE TO NOTICE ISSUED U/S 153A, THE ASSESSEE FILED A RETURN OF INCOME ON 29.03.2010 DEC LARING TOTAL INCOME OF RS.67,41,485/-.THE ASSESSMENT WAS C OMPLETED ON 31.12.2010 (WRONGLY MENTIONED BY THE CIT(A) AS 30.10.2008) AT A TOTAL INCOME OF RS.68,41,490/- BY TREATING 2 THE SHORT TERM CAPITAL GAINS CLAIMED BY THE ASSESSE E AS INCOME FROM ADVENTURE IN THE NATURE OF TRADE. THE ASSESSEE HAS DISCLOSED SHORT TERM CAPITAL GAINS (STCG) AT RS.67,41,488/- WHICH HAS BEEN TREATED BY THE REVENU E AS INCOME FROM ADVENTURE IN THE NATURE OF TRADE. THE FACTS, APROPOS THIS ISSUE ARE THAT THE ASSESSEE PURCHASED SHARES OF LAKSHMI ENERGY & FOODS LTD., IN WHICH HER HUSBAND W AS ONE OF THE PROMOTERS/DIRECTORS. THE TOTAL SHARE-HO LDING OF THE FAMILY WAS AROUND 47% OF THE TOTAL CAPITAL BASE . IN ORDER TO INCREASE THE FAMILY HOLDING, SOME MEMBERS OF THE FAMILY PURCHASED MORE SHARES OF THIS COMPANY. IN T HE MEANTIME, THE RATES OF SHARES SHOOT-UP AND THE ASSE SSEE DECIDED TO SELL/ENCASH PART OF THE SHARE-HOLDINGS W ITH A VIEW TO REPAY THE LOAN TAKEN. AS PER THE ASSESSEE, SHE NEVER INTENDED TO DEAL IN THE SHARES BUT THE DECISION TO SELL WAS TAKEN TO REPAY THE LOANS ONLY. THE ASSESSEE SOLD A PART OF THE SHARES AND RETAINED BACK THE SHARES VALUED AT RS.99,10,797/- WITH HER. IN THIS BACKGROUND, THE A SSESSEE HAS CONTENDED THAT THE SALE OF SHARES BY HER WOULD AMOUNT TO GAIN SHORT TERM CAPITAL. SHE FURTHER CLARIFIED THAT THE SALE OF SHARES WAS INTENDED TO BOOST CAPITAL AND NO T OTHERWISE. SHE STATED THAT EVEN IF SOME LOAN AMOUNT WAS INVESTED IN ACQUIRING THE SHARES, IT WOULD NOT CHAN GE THE CHARACTER OF THE INCOME. IT WAS ARGUED THAT WHEN, ONCE, AN INCOME IS ASSESSABLE UNDER A SPECIFIED HEAD, THE FA CT THAT THE INVESTMENT WAS NOT FLOWED FROM LOANS, WOULD NOT CHANGE THE COMPLEXION OF THE INCOME. AFTER SUBMITTING VAR IOUS PROPOSITIONS, WHICH ARE REQUIRED TO PROVE THAT THE ASSESSEE 3 INTENDED TO DO BUSINESS IN SHARES, THE ASSESSEE HAS TRIED TO PROVE THAT IT IS THE INCOME FROM SHORT TERM CAPITAL GAINS, BUT THE AO WAS NOT AGREEABLE AND AFTER GIVING VARIO US REASONS, HAS COME TO A CONCLUSION THAT THE ASSESSEE HAS INDULGED IN BULK PURCHASE OF SHARES IN WHICH HER HU SBAND IS PROMOTER/DIRECTOR AND THAT THE LOANS WERE TAKEN IN BUYING THE SHARES AND PART OF THE SHARES WAS SOLD CONSEQUENT UPON SPURT IN PRICES AND THE LOAN WAS AL SO REPAID. THIS INCOME HAS TO BE TREATED AS BUSINESS INCOME. WHEN THE ASSESSEE WENT IN APPEAL, LD. CIT(APPEALS), IN ADDITION TO REITERATING THE REASONS TAKEN BY THE AO , HAS ALSO OBSERVED THAT EVEN A SINGLE TRANSACTION CAN CONSTIT UTE A BUSINESS AS DEFINED IN SECTION 2(3) OF THE ACT AND IT IS NOT ESSENTIAL THAT THERE SHOULD BE A SERIES OF TRANSACT IONS, BOTH OF PURCHASE AND OF SALE OF SHARES TO CONSTITUTE TRA DE OR BUSINESS. ACCORDINGLY, HE HAS CONFIRMED THE ACTION OF THE AO. 3. NOW, THE ASSESSEE IS FURTHER AGGRIEVED AND HAS R AISED THE FOLLOWING GROUND BEFORE US : THAT THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN TRE ATING SHORT TERM CAPITAL GAINS AS AN ADVENTURE IN THE NAT URE OF TRADE. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE CAREFUL LY PERUSED THE ENTIRE RECORD. WE HAVE CONSIDERED VARI OUS REASONS WHICH HAVE BEEN GIVEN BY LD. AR, EVEN GIVEN BEFORE LD. CIT(APPEALS) AND WHICH ARE ENUMERATED AT PAGE N O.3 OF HIS ORDER AND THE EXISTENCE OF WHICH WOULD PROVE TH AT THE IMPUGNED INCOME CANNOT BE TREATED AS BUSINESS INCOM E. WE 4 FIND FROM THE TOTALITY OF FACTS AND CIRCUMSTANCES O F THE CASE THAT THIS INCOME CANNOT BE TREATED AS ASSESSEE'S BU SINESS INCOME FROM ADVENTURE IN THE NATURE OF TRADE, BECAU SE THIS IS AN INVESTMENT IN SHARES AND SALE OF SOME OF THE SHARES IN ORDER TO REPAY THE LOAN IN THE CONDITION WHEN THE P RICE OF SHARES HAS QUICKLY RISEN. ANY INCOME DERIVED FROM THE SALE OF SHARES HAS TO BE TREATED EITHER LONG TERM CAPITA L GAIN OR SHORT TERM CAPITAL GAIN SUBJECT TO HOLDING OF THE S HARES. IN THIS CASE, THIS INCOME HAS TO BE TREATED AS SHORT T ERM CAPITAL GAIN AND NOT AS A BUSINESS INCOME. THE FOL LOWING REASONS WHICH WE ARE EXTRACTING FROM PAGE NO.3 OF CIT(APPEALS)S ORDER ARE ALSO RELEVANT FOR THIS CON SIDERATION. WE EXTRACT THESE REASONS VERBATIM HEREINAFTER AS UN DER : I. THAT THE ASSESSEE IS NOT A BUSINESS PERSON AND SHE HARDLY EVER INDULGED IN ANY PURCHASE OR SALE OF SHARES IN THE PAST. SHE HAS NO KNOWLEDGE OF THE SHARE MARKET OR EQUITIE S THAT ATE TRADED IN IT. II. THE MAJORITY OF THE SHARES PURCHASED WERE OF THE GR OUP COMPANIES ONLY, INDICATING THE LACK OF INTENTION TO DEAL IN THE SHARES. III. OUT OF THE TOTAL SHARES PURCHASED, ONLY A PART WERE SOLD BECAUSE OF AN UNEXPECTED SPURT IN PRICES AND THE RE MAINING WERE RETAINED. IV. PART SHARES WERE SOLD TO TRY AND REPAY THE LOAN AT THE EARLIEST AS THE APPELLANT WAS A PERSON OF LIMITED M EANS AND DID NOT WISH TO CARRY A LIABILITY FOR LONG. V. BUYING BULK SHARES FOR INCREASING STAKE IN GROUP COMPANIES BY RAISING SOFT LOANS DOES NOT INDICATE I NTENT TO DEAL IN SHARES. 5 VI. THE SHARES WERE HELD FOR A SUFFICIENTLY LONG PERIOD OF TIME FOR THEM TO QUALIFY AS INVESTMENTS. VII. THE SHARES PURCHASED WERE ONLY OF ONE COMPANY WHICH WAS PREDOMINANTLY FAMILY OWNED. VIII. THE PROFIT EARNED ON SALE OF PART SHARES WAS ONLY INCIDENTAL. IX. ENGAGING A BROKER FOR PURCHASE AND SALE OF THE SHAR ES CANNOT BE VITAL FOR DETERMINING THE NATURE OF THE R ECEIPT AS FOR MAKING THE INVESTMENTS, THE SERVICES OF BROKERS ARE ALWAYS AVAILED. X. CONDUCT OF THE ASSESSEE AND HER INTENTION IS ALSO O NE OF THE RELEVANT FACTORS THOUGH NOT THE SALE TEST. 5. KEEPING IN VIEW ALL THE ABOVE REASONS AND THE OT HERS, WHICH WE HAVE MENTIONED IN THE FORMER PART OF THIS ORDER, WE CAN SAFELY CONCLUDE THAT THIS IS NOT AN INCOME F ROM ADVENTURE IN THE NATURE OF TRADE BUT IT IS ONLY A S HORT TERM CAPITAL GAIN DERIVED BY THE ASSESSEE. ACCORDINGLY, WE ALLOW THE APPEAL OF THE ASSESSEE AND ORDER TO DELETE THE IMPUGNED ADDITION. 6. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH APRIL,2013. SD/- SD/- (N.K.SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11 TH APRIL,2013. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH