SANDIP Y. SHAH, MUMBAI V. D.C.I.T.10(2), MUMBAI

ITA 1762/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83581 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 20-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 03-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUM BAI .. , , BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 1762/MUM/2011 ( / ASSESSMENT YEAR: 2008-09) SANDIP Y. SHAH 96/B, HIRAK SOCIETY, IRLA, S. V. ROAD, VILE PARLE (W), MUMBAI-400 056 / VS. DY. CIT-10(2) MUMBAI ./! ./PAN/GIR NO. AAKPS 6736 M ( ' /APPELLANT ) : ( #$ ' / RESPONDENT ) ' % & / APPELLANT BY : SHRI HIRO RAI #$ ' % & / RESPONDENT BY : SHRI TUSHAR DHAWAL SINGH ' ()* % +, / DATE OF HEARING : 20.08.2014 DATE OF ORDER : 22.08.2014 - / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-22, MUMBAI (CIT(A) FOR SH ORT) DATED 28.01.2011, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A. Y.) 2008-09 VIDE ORDER DATED 15.11.2010. 2. THE APPEAL RAISES TWO ISSUES, PER ITS SIX GROUND S, WHICH WE SHALL TAKE UP IN SERIATIM. THE FIRST THREE GROUNDS ARE IN RESPECT OF THE FIRST ISSUE, I.E., THE TREATMENT OF THE GAIN ARISING TO THE ASSESSEE ON THE PURCHASE AND SA LE OF SHARES AS WELL AS MUTUAL FUND UNITS, AS BUSINESS INCOME, I.E., AS AGAINST SHORT T ERM CAPITAL GAIN (STCG) RETURNED BY THE ASSESSEE. 2 ITA NO. 1762/MUM/2011 (A.Y. 2008-09) SANDIP Y. SHAH VS. DY. CIT 3. BEFORE US, THE ASSESSEES CASE WAS THAT THE SAID ISSUE IS PRINCIPALLY COVERED BY THE ORDER BY THE TRIBUNAL IN ITS CASE FOR THE PRECEDING YEARS, ADDUCING COPIES OF THE ORDERS FOR A.Y. 2005-06 (IN ITA NO. 5478/MUM/2008 DATED 05.02. 2010) AND A.Y. 2006-07 (IN ITA NO. 6163/MUM/2009 DATED 06.08.2010) IN ITS CASE (CO PY ON RECORD). FOR BOTH THE YEARS, THE TRIBUNAL HAS SET ASIDE THE MATTER BACK TO THE F ILE OF THE FIRST APPELLATE AUTHORITY TO EXAMINE THE MATTER AFRESH. A SIMILAR DIRECTION WAS PRAYED FOR BEING ADOPTED FOR THE CURRENT YEAR AS WELL. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) WOULD, ON THE OTHER HAND, CONTEND THAT THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO THE PROCEEDINGS UNDER THE ACT . THE ORDERS BY THE APPELLATE AUTHORITIES ARE FAIRLY EXHAUSTIVE, AND MADE ON THE BASIS OF APPRECIATION OF AND IN THE CONSPECTUS OF THE FACTS OF THE CASE. NO CASE FOR REMAND OR RESTORATION BACK IS, THEREFORE, MADE OUT. THE LD. AUTHORIZED REPRESENTATIVE (AR), ON BEING QU ERIED BY THE BENCH AS TO THE RESULT OF THE SET ASIDE BY THE TRIBUNAL FOR THE SAI D TWO YEARS AFORE-REFERRED, WOULD SUBMIT THAT ORDERS HAVE SINCE BEEN PASSED ALLOWING PARTIAL RELIEF TO THE ASSESSEE BY THE FIRST APPELLATE AUTHORITY. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WITHOUT DOUBT, THE ORDERS BY THE AUTHORITIES BELOW ARE EXHAUSTIVE, DIS CUSSING AND MEETING THE VARIOUS CONTENTIONS RAISED BY THE ASSESSEE. TRUE, THE PRIMA RY DETERMINANT AS TO WHETHER THE ASSESSEE IS ACTING AS A TRADER OR INVESTOR IS THE I NTENT OR THE MOTIVE WITH WHICH THE PURCHASES HAVE BEEN MADE, EVEN AS ARGUED BY THE ASS ESSEE BEFORE THE REVENUE. HOWEVER, HOW IS THE INTENT TO BE DISCERNED, IF NOT BY THE CO NDUCT, PARTICULARLY WHERE IT MANIFESTS IN REGULAR AND SYSTEMATIC BEHAVIOR ? IN FACT, THIS IS PARTICULARLY SO IN VIEW OF THE DEALING IN SHARES HAVING GAINED GROUND IN THE RECENT TIMES WIT H THE BOOM IN THE ECONOMY, EVEN AS ARGUED BY THE ASSESSEE ITSELF PER ITS WRITTEN SUBMI SSIONS DATED 27.01.2011 BEFORE THE LD. CIT(A). NO CASE ON MERITS HAS BEEN MADE OUT BEFORE US. IN FACT, THE TRIBUNAL ITSELF FOR THE YEARS FOR WHICH ITS ORDERS ARE BEING RELIED UPON B EFORE US HAS CLARIFIED THAT THERE IS NO BAR FOR AN INVESTOR TO BE ALSO A TRADER OR FOR AN I NVESTOR TO BECOME A TRADER, OR ALSO ACT AS A 3 ITA NO. 1762/MUM/2011 (A.Y. 2008-09) SANDIP Y. SHAH VS. DY. CIT TRADER, IN A SUBSEQUENT YEAR. IT MAY, TOWARD THIS E ND, BE RELEVANT TO REPRODUCE THE OBSERVATIONS BY THE TRIBUNAL IN THE ASSESSEES APPE AL FOR AY 2005-06 (SUPRA), ALSO REPRODUCED PER ITS SUBSEQUENT ORDER FOR AY 2006-07 (SUPRA), PASSED, FOLLOWING THE FORMER: 4. WE HAVE HEARD BOTH SIDES AND PERUSED MATERIAL ON RECORD. THE CIT(APPEALS) FAILED TO CONSIDER THE DATE OF BUYING AND SELLING OF SHARES AND GAVE A FINDING THAT THE INTENTION OF THE ASSESSEE I S ONLY TO INVEST IN SHARES/MUTUAL FUNDS. TO DECIDE WHETHER THE ASSESSEE IS AN INVESTOR OR TRADER, APART FROM VARIOUS OTHER FACTORS, THE DATE OF BUYING AND SELLING OF SHARES IS VERY IMPORTANT. ON THE BASIS OF THE TRANS ACTIONS ONE CANNOT COME TO A CONCLUSION THAT THE ASSESSEE IS EITHER AN INVE STOR OR A TRADER. THE ASSESSEE MAY BE AN INVESTOR IN EARLIER YEAR BUT IN SUBSEQUENT YEAR HE MAY BE A TRADER ALSO. THEREFORE, INTENTION IN THE EARLI ER YEAR AS AN INVESTOR CANNOT BE CONSIDERED IN SUBSEQUENT YEAR AND IT MAY BE VICE VERSA. THEREFORE, IN THE INTERESTS OF JUSTICE, WE SET ASID E THE ORDER OF THE CIT(APPEALS) AND DIRECT HIM TO DECIDE THE ISSUE IN ACCORDANCE WITH LAW KEEPING IN MIND THE ABOVE OBSERVATION. NEEDLESS TO SAY THE ASSESSEE MUST BE GIVEN AN OPPORTUNITY OF BEING HEARD TO THE ASSES SEE. THE LAW IN THE MATTER IS WELL-SETTLED, AND THE MATT ER IS ESSENTIALLY FACTUAL, TOWARD WHICH WE HAVE NOTICED THE ASSESSEE TO HAVE NOT MADE ANY CASE BEFORE US. IN FACT, THE ASSESSEE PER ITS CONTENTIONS ITSELF RELIES ON CIRCU LAR 4 OF 2007 DATED 15.06.2007 ISSUED BY THE BOARD, WHICH CAPSULES THE GIST OF THE LAW IN TH E MATTER. ALSO, THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO THE PROCEEDINGS UNDER THE ACT . SO, HOWEVER, THE MATTER HAVING BEEN REMANDED TO THE FILE OF THE FIRST APPEL LATE AUTHORITY FOR THE PRECEDING YEARS, WHEREIN THE ASSESSEE CLAIMS TO HAVE BEEN ALLOWED PA RTIAL RELIEF, WE ONLY CONSIDER IT FIT AND PROPER, IF ONLY FOR CONSISTENCY IN THE APPROACH OF THE REVENUE, TO RESTORE THE MATTER BACK TO THE FILE OF THE FIRST APPELLATE AUTHORITY TO ALL OW THE ASSESSEE AN OPPORTUNITY TO STATE ITS CASE IN THE MATTER AND DETERMINE THE ISSUE AFRESH P ER A SPEAKING ORDER. WE DECIDE ACCORDINGLY. 5. GROUND NOS. 4 TO 6 AGITATE THE SECOND ISSUE, I.E ., THE DISALLOWANCE U/S.14A, EFFECTED AT RS.2,49,951/-, AS AGAINST RS.48,810/- D ISALLOWED SUO MOTU BY THE ASSESSEE. THE DISALLOWANCE BY THE REVENUE HAS BEEN IN TERMS O F RULE 8D, MANDATORY W.E.F. AY 2008-09, THE CURRENT YEAR. THE ASSESSEES CASE BEFO RE US (THROUGH THE LD. AR) WAS THAT 4 ITA NO. 1762/MUM/2011 (A.Y. 2008-09) SANDIP Y. SHAH VS. DY. CIT THERE HAS BEEN AN ERROR IN COMPUTING THE DISALLOWAN CE U/S.14A IN-AS-MUCH AS CERTAIN LOSS/ES HAS BEEN TREATED AS EXPENDITURE. FURTHER, T HE DISALLOWANCE AS EFFECTED EXCEEDS THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE, I.E., R S.1.85 LACS, AND WHICH COULD NOT BE. WE OBSERVE THE ASSESSEE TO HAVE RAISED THESE CONTENTIO NS BEFORE THE LD. CIT(A) AS WELL, WHICH, HOWEVER, THOUGH RECORDED, HAS NOT BEEN MET B Y HIM. UNDER THE CIRCUMSTANCES, WE HAVING ALREADY RESTORED THE ISSUE # 1 TO THE FILE OF THE LD. CIT(A), ONLY CONSIDER IT FIT AND PROPER TO REST ORE THIS ISSUE AS WELL. WE MAY CLARIFY THAT THE ONUS, HOWEVER, TO PROVE ITS CLAIM/S QUA FACTS SHALL BE ON THE ASSESSEE; RULE 8D BEING MANDATORY FOR THE CURRENT YEAR, AND WHICH POS ITION IS UNDISPUTED. THE LD. CIT(A) SHALL DISPOSE THE ASSESSEES OBJECTIONS PER A SPEAK ING ORDER. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL ALLOWED FOR STATISTICAL PURPOSES. ./+0 (12.+ % 3% 456 7 ) 8 + % + 9: ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 20, 20 14 AT THE CONCLUSION OF THE HEARING. SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ' * MUMBAI; ;( DATED : 22.08.2014 ).(. ./ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #$ ' / THE RESPONDENT 3. ' <+ ( ) / THE CIT(A) 4. ' <+ / CIT - CONCERNED 5. ?)@A #+(B1 , , B1/ , ' * / DR, ITAT, MUMBAI 6. AC2 D* / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , ' * / ITAT, MUMBAI