GITANJALI GHATE, MUMBAI V. DCIT 9(3), MUMBAI

ITA 1904/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0921 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 28-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 26-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MAHAPATRA
• Keywords: Business income; Capital Gains
• Section: 2(22)(e)

Judgement Text

ITA NO.1904/MUM/2009 ASSESSMENT YEAR : 2006-07 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI G BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) AND SMT. ASHA VIJAY RAGHAVAN, (JUDICIAL MEMBER) ITA NO. 1904/MUM./2009 ASSESSMENT YEAR : 2006-07 DATE OF HEARING : 28.7.2010 GITANJALI GHATE ...... APPELLANT C-1304, KANTI APARTMENTS MOUNT MARY ROAD BANDRA (W), MUMBAI 400 050 PAN AACPG8925C VS. ASSESSING OFFICER .. RESPONDENT MUMBAI APPELLANT BY : SHRI VIJAY MEHTA RESPONDENT BY : SHRI S.K. MAHAPATRA O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE HAS CALLED I NTO QUESTION CORRECTNESS OF LD. CIT(A)S ORDER DATED 19 TH JANUARY 2009, FOR ASSESSMENT YEAR 2006-07. ITA NO.1904/MUM/2009 ASSESSMENT YEAR : 2006-07 PAGE 2 OF 5 2. IN GROUND NO.1, THE GRIEVANCE RAISED BY THE ASSESSE E, IS AS FOLLOWS:- 1. THE AUTHORITIES BELOW ERRED IN ADDING INCOME U/ S 2(22)(E) OF THE INCOME TAX ACT, 1961. 3. LEARNED COUNSEL FOR THE ASSESSEE DID NOT WISH TO PR ESS THIS GROUND BEFORE US AND, HENCE, THIS GROUND IS DISMISSED AS NOT PRESSED . 4. THE ONLY GROUND LEFT FOR OUR ADJUDICATION IS AS FOL LOWS:- 2. THE AUTHORITIES BELOW ERRED IN TREATING INCOME FROM SHORT TERM CAPITAL GAINS AS BUSINESS INCOME. 5. THE ASSESSING OFFICER, DURING THE COURSE OF SCRUTIN Y ASSESSMENT, ASSESSED SHORT TERM CAPITAL GAINS OF ` 44,47,448 DECLARED BY THE ASSESSEE AS BUSINESS INCOME FOR THE REASON THAT THE ASSESSEE HAS MADE FREQUENT TRANSACTIONS OF SOME OF THE SCRIPS DURING THE YEAR UNDER CONSIDERATION. 6. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD . CIT(A), BUT WITHOUT ANY SUCCESS. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY OBSERVING AS FOLLOWS:- 3.4 I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUB MISSION AS WELL AS THE A.OS CONTENTION. ON PERUSAL OF THE TRA NSACTION IN RESPECT OF PURCHASE AND SALE OF THE SCRIP (DETAILS AS PER PARA 7 OF THE ASSESSMENT ORDER), I FIND THAT THE APPELLANT HAS BEEN DOING THE DERIVATIVE TRANSACTION IN A SYSTEMATIC AN D ORGANIZED MANNER WITH THE OBJECT OF MAKING GAIN OR PROFIT THE RERFROM. IT MAY BE SEEN THAT MANY SHARES HAVE BEEN PURCHASED AN D SOLD ON THE SAME DATE. THUS, THE CONDUCT OF THE PARTY CLEAR LY SHOWS ITA NO.1904/MUM/2009 ASSESSMENT YEAR : 2006-07 PAGE 3 OF 5 THAT THE PURCHASE AND SALE OF THE SHARES WERE BEING DONE IN AN ORGANIZED MANNER WITH AN INTENTION TO EARN PROFIT. THE APPELLANTS CONTENTION THAT IT HAS BEEN SHOWN AS IN VESTMENT IN THE BALANCE SHEET IS NOT DETERMINATIVE AS HELD BY T HE HONBLE SC IN THE CASE OF KEDARNATH JUTE MANUFACTURING CO. LTD. VS CIT, 82 ITR 363 SC, STATE BANK OF INDIA VS CIT, 157 ITR 67 SC AND SUTLEJ COTTON MILLS LTD. VS CIT, 116 ITR 1 SC. THE HONBLE COURT HAS CLEARLY HELD THAT IT IS WELL SETTLED THAT THE W AY IN WHICH ENTRIES ARE MADE BY THE ASSESSEE IN ITS BOOKS OF AC COUNT IS NOT DETERMINATIVE. THE HONBLE SC IN THE CASE OF ORIENT TRADING CO. LTD. VS CIT, 224 ITR 371, HAS HELD THAT THE DIFFERE NCE BETWEEN THE PRICE OF THE SHARES OF THE OTHER COMPANY AND TH E NEW COMPANY ON THE DATE OF SUCH EXCHANGE WOULD CONSTITU TE BUSINESS INCOME AND IT HAS TO BE ASSESSED ACCORDING LY. SINCE THE FACTS OF THE APPELLANTS CASE ARE ENTIRELY DIFFEREN T THEREFORE THE CASE LAWS CITED BY THE APPELLANT ARE NOT APPLICABLE . THUS, CONSIDERING THE TOTALITY OF THE FACTS, I HOLD THAT THE INTENTION OF THE ASSESSEE IS TO EARN PROFIT FROM DERIVATIVE TRAN SACTION THEREFORE, IT HAS BEEN CORRECTLY TREATED AS BUSINESS INCOME AS AGAINST APPELLANTS CLAIM OF STCG. 7. BEING AGGRIEVED BY THE ORDER SO PASSED BY THE LD. C IT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 8. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERUS ED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION, WE FIND THAT THE LD. CIT (A) HAS GIVEN FINDING THAT THE ASSESSEE WAS DEALING IN DERIVATIVE TRANSACTION WHICH, ACCORDING TO THE ASSESSEE, IS FACTUALLY INCORRECT. THE SHORT QUESTIO N IS, WHETHER IN RESPECT OF TRANSACTIONS THROUGH A PORTFOLIO MANAGER, THE AS SESSEE CAN BE SAID TO BE IN SHARE TRADING MERELY BECAUSE SUCH A PROFESSIO NAL, MANAGING THE PORTFOLIO, HAS SHUFFLED THE PORTFOLIO. LET THAT ASP ECT BE EXAMINED BY THE LD. CIT(A) AFRESH. THE ASSESSEE IS AT LIBERTY TO RAISE SUCH FACTUAL AND LEGAL PLEAS AS THE ASSESSEE WOULD LIKE TO TAKE, AND CIT(A ) WILL DISPOSE OF THE SAME BY WAY OF A SPEAKING ORDER. ITA NO.1904/MUM/2009 ASSESSMENT YEAR : 2006-07 PAGE 4 OF 5 9. THUS, GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOS ES. 10. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN TERMS INDICATED ABOVE. PRONOUNCED IN TH E OPEN COURT TODAY ON 30 TH DAY OF JULY, 2010. SD/XX SD/XX (ASHA VIJAY RAGHAVAN) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 30 TH DAY OF JULY, 2010. COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX, MUMBAI 4. COMMISSIONER (APPEALS) , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, G BENCH, ITAT, MU MBAI 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR PRADEEP J. CHWODHURY INCOME TAX APPELLATE TRIBUNAL SR. PRIVATE SECRETARY MUMBAI BENCHES, M UMBAI ITA NO.1904/MUM/2009 ASSESSMENT YEAR : 2006-07 PAGE 5 OF 5 DATE INITIAL 1. DRAFT DICTATED ON 29.7.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 29.7.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 29.7.2010 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 29.7.2010 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 29.7.2010 SR.PS/PS 6. DATE OF PRONOUNCEMENT 30.7.2010 SR.PS 7. FILE SENT TO THE BENCH CLERK 30.7.2010 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER