The ITO, Ward-7(4), Ahmedabad V. Shri Bankim Jayantilal Shah, Ahmedabad

ITA 1839/AHD/2010

• Counselvise Citation: 183920514 RSA 2010
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 28-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P M MEHTA
• Keywords: Capital asset; Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI D.K.TYAGI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 1839/AHD/2010 ASSESSMENT YEAR :2007-08 ITO, WD.7(4), AHMEDABAD V/S . BANKIM JAYANTILAL SHAH, HUF 7-B, JEEVAN SMRUTI SOCIETY, NARANPURA, AHMEDABAD. PAN NO. AALHS 4406 F (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI K. MADHUSUDAN, SR.D.R. /BY RESPONDENT SHRI P.M. MEHTA, A.R. /DATE OF HEARING 1 7 .0 5 .2012 /DATE OF PRONOUNCEMENT 25.05.2012 O R D E R PER : D.K.TYAGI, JUDICIAL MEMBER THIS IS A REVENUES APPEAL DIRECTED AGAINST THE OR DER OF LD. CIT (A)-XI, AHMEDABAD, DATED 26.03.2010 FOR ASSESSMENT YEAR 200 7-08. 2. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEA L:- 1. THE LD. COMMISSIONER OF INCOME TAX (A)-XI, AHME DABAD HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION MADE OF RS. 18,43,342/- ON ACCOUNT OF STCG TREATED AS BUSINESS INCOME OF THE A SSESSEE. ITA NO. 1839/AHD/2010 A.Y.2007-08 PAGE 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME TAX (A)-XI AHMEDABAD OUGHT T O HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A)-XI AHMEDABAD MAY BE SET ASIDE AND TH AT OF THE ASSESSING OFFICER BE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT WHEN FINALI ZING THE ASSESSMENT, THE ASSESSING OFFICER ASSESSED THE LONG TURN CAPITAL GA IN SHOWN BY THE ASSESSEE AS BUSINESS INCOME. WHILE DOING SO, THE ASSESSING OFFICER HAS OBSERVED AS UNDER:- A) THE ASSESSEE IS DOING THIS ACTIVITY OF SALE AND PURCHASE IN SHARES AND SECURITIES SINCE LONG TIME. HE IS DOING THIS A CTIVITY REGULARLY AND CONTINUOUSLY WHICH DECLARES THE NATURE OF THIS ACTI VITY AS TRADING WITH A MOTIVE TO EARN PROFIT FORM THE SAME. THE ACTIVITY WHICH IS CONTINUOUS/REGULAR-YEAR TO YEAR WITH A PROFIT EARNI NG MOTIVE IS CALLED AS BUSINESS. B) THE MAIN SOURCE OF INCOME OF THE ASSESSEE IS EAR NED OUT OF SALE & PURCHASE OF SHARES AND SECURITIES AS LIKE A TRADE R. HE IS EARNING THE INCOME DURING THE YEAR FROM THE LIMITED NUMBER OF T RANSACTIONS AND SCRIP BUT IT IS IN HIGH VOLUME AND HE CLAIMS THE IN COME EXEMPTED AS LTCG OR PAYS LOWER RATE OF TAX AT THE RATE OF 10% O N STCG AS THE CAME MAY BE. ITA NO. 1839/AHD/2010 A.Y.2007-08 PAGE 3 C) THE ASSESSEE HAS PURCHASED AND SOLD MANY SCRIPS AMOUNTING TO HUGE VOLUME, WHICH DECLARES THE TRADING ADVENTURES TO EARN HIGH PROFIT. D) THE ASSESSEE HAS EMPLOYED, THE BORROWED FUNDS WH ICH REVEALS THE TRADING INTENTION. THE INVESTMENT WITH BORROWE D FUND WHETHER INTEREST BEARING OR INTEREST FREE CANNOT BE JUSTIFI ED AS INVESTMENT OF THE ASSESSEE AS CAPITAL ASSET WHICH QUALIFIES FOR CAPIT AL GAINS. E) HE HAS ALSO SOLD SOME SHARES RESULTING IN NEGLIG IBLE PROFIT OR EVEN IN LOSS WITHOUT EARNING ANY DIVIDENDS. THE DIVIDEN D INCOME IS VERY LOW IN COMPARISON TO LTCG & STCG IF THE ASSESSEE IS AN INVESTOR, THEN HIS DIVIDEND INCOME WILL BE HIGHER. F) IT IS SEEN THAT THE ASSESSEE HAS HELD THE SHARES FOR SHORT PERIODS INCLUDING SOME TRANSACTIONS ON VERY SAME DAY AS PUR CHASED AND SOLD. MORE OVER HE HAS ALSO DONE INTRA-DAY TRADING ACTIVI TY OF SHARES WHICH CONFIRMS HIS BUSINESS ACTIVITIES WITH MOTIVE OF EAR NING PROFIT. 4. LD. CIT (A) WHILE GIVING RELIEF TO THE ASSESSEE HAS OBSERVED AS UNDER:- 6. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A .R. OF THE APPEALLANT AND THE OBSERVATIONS OF THE ASSESSING OF FICER IN THE ASSESSMENT ORDER. THE SHARES ARE HELD FOR FAIRLY LO NG PERIOD. THE FACTS OF THE CASE ARE SIMILAR TO THOSE IN THE IMMEDIATELY PRECEDING A.Y.2006- 07. 6.1 KEEPING IN VIEW THE FACTS OF THE CASE,CIT(A)S DECISION IN APPELLANTS OWN CASE FOR A.Y. 2006-07 AND THE TRIBU NALS DECISION, REFERRED TO ABOVE, FOR EARLIER YEARS IN THE CASE OF FAMILY MEMBERS OF THE ITA NO. 1839/AHD/2010 A.Y.2007-08 PAGE 4 APPELLANT, I HOLD THAT THE APPELLANT CANNOT BE SAID TO HAVE BEEN TRADING IN SHARES. A.O. IS DIRECTED TO ACCEPT AND ASSESS T HE IMPUGNED AMOUNT AS RETURNED BY THE APPELLANT UNDER THE HEAD LONG TE RM CAPITAL GAINS. THIS GROUND OF APPEAL IS ALLOWED. 5. AGGRIEVED BY THIS ORDER OF LD. CIT(A), THE REVEN UE, IN APPEAL, IS BEFORE US. AT THE TIME OF HEARING, AT THE OUTSET, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS NOW COVERED IN FAVOUR O F THE ASSESSEE AND AGAINST THE REVENUE BY THE ORDER OF THE TRIBUNAL IN ASSESSE ES OWN CASE FOR THE ASSESSMENT YEAR 2006-07. LD. D.R. DID NOT OBJECT T O THIS SUBMISSION OF THE ASSESSEE. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORDS, WE FIND THAT LD. CIT(A) WHILE GIVING RELIEF TO THE ASSESSEE HAS PLAC ED RELIANCE ON THE EARLIER ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEA R 2006-07. SINCE, THE SAME HAD BEEN UPHELD BY THE TRIBUNAL VIDE ORDER DAT ED 02.07.2010 IN I.T.A. NO. 2873-2874/AHD/2008 BY OBSERVING AS UNDER: WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAV OUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE TRIBUNALS DECISION IN OTHER ASSESSES OF GROUP CASES (SUPRA). WE FURTHER FIND T HAT IN THIS CASE ALSO, ASSESSEE HAVE TAKEN DELIVERY OF SHARE AND THERE IS NO MATERIAL TO SHOW THAT SHARES WERE SOLD WITHOUT TAKING DELIVERY AND E ARNED PROFIT ON SPECULATION BASIS. WE FURTHER FIND THAT THE ASSESS EE HAS BORROWED FUNDS FOR INVESTMENT IN THE SHARES BUT INTEREST PAI D HAS NOT BEEN CLAIMED AS DEDUCTION. THIS CLEARLY ESTABLISHES THA T THE INTENTION OF THE ITA NO. 1839/AHD/2010 A.Y.2007-08 PAGE 5 ASSESSEE WAS TO MAKE INVESTMENT AND NOT TO DEAL AS TRADER. ONE MORE FACT WAS POINTED OUT BY LD. COUNSEL FOR ASSESSEE TH AT EVEN THE STT HAS NOT BEEN CLAIMED IN THE COMPUTATION OF CAPITAL GAIN S. WE GAIN FURTHER FIND THAT THE NUMBER OF TRANSACTIONS AND NUMBER OF SCRIPTS ENTERED INTO BY THE ASSESSEE ARE NOT MUCH ENOUGH AND NOT ENOUGH AND NOT REPETITIVE. ACCORDINGLY, RELYING ON THE TRIBUNALS DECISION IN OTHER ASSESSES OF GROUP CASES (SUPRA), WE DISMISS THESE A PPEALS OF THE REVENUE. 6. FOLLOWING THE SAME, THE ORDER PASSED BY LD. CIT( A), IS UPHELD. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A. MOHAN ALANKAMONY) ( D.K. TYAGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , ITA NO. 1839/AHD/2010 A.Y.2007-08 PAGE 6 12( ; STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 17.05.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 21 .05.2012 4) DATE OF CORRECTION XXXX 5) DATE OF FURTHER CORRECTION XXXX 6) DATE OF INITIAL SIGN BY MEMBERS 25.05.2012 7) ORDER UPLOADED ON 25.05.2012 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 25.05.2012