Mrs. Barkha Vikas Pincha, Nagpur V. Asstt. Commissioner of .Income Tax,Circle-I, Nagpur

ITA 191/NAG/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9588 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 24-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR MILIND BHUSARI
• Assessee Lawyers: A C BAWANE; M MANI
• Keywords: Capital asset; Business income; Revision of order; Salary income; Opportunity of being heard; Earning of tax free income; Assessment record; Tax effect
• Section: 143(3); 14A; 263; 28

Judgement Text

I.T.A. NO. 191/NAG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D. T. GARASIA, HONBLE JUDICIAL MEMBER I.T.A. NO.191/NAG/10 ASSESSMENT YEAR: 2007-2008 MRS. BARKHA VIKAS PINCHA, VS. C.I.T.-I, D-1, RAJKAMAL COMPLEX, NAGPUR. PANCHASHEEL SQUARE, DHANTOLI, NAGPUR. PAN:ACGPP3300C (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI M. MANI & A. C. BAWANE, ADVOCATE REVENUE BY : DR. MILIND BHUSARI, CIT, D. R. DATE OF HEARING : 15/10/2012 DATE OF PRONOUNCEMENT : 21/12/2012 ORDER PER D. T. GARASIA: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT-I, NAGPUR DATED 04/11/2009 PASSED U/S 263 OF THE I.T. ACT. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE ID. CIT-I, NAGPUR ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE INCOME-TAX ACT, 1961 AND HENCE HIS ORDER PASSED UNDER SECTION 263 OF THE IT. ACT IS BAD, INVALID AND ILLEGAL AND THE SAME DESERVES TO BE QUASHED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE ID. CIT-I, NAGPUR ERRED IN HOLDING THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THEREBY SETTING ASIDE THE I.T.A. NO. 191/NAG/2010 2 CASE TO THE ASSESSING OFFICER FOR FRESH ASSESSMENT WHICH IS UNJUSTIFIED, UNWARRANTED AND UNCALLED FOR. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE ID. CIT-I, NAGPUR ERRED IN SETTING ASIDE THE ASSESSMENT ORDER ON THE POINTS MENTIONED BY HIM IN THE NOTICE U/S 263 AND DIRECTING THE AO TO RECONSIDER THE ADMISSIBILITY OF THE CLAIMS OF THE ASSESSEE, WHEN, IN FACT, THE ORDER U/S 143(3) IS PASSED AFTER DUE ENQUIRY/EXAMINATION, VERIFICATION OF BOOKS OF ACCOUNT, BANK STATEMENT, SHARE DETAILS, D-MAT ACCOUNT AND EXPLANATION/SUBMISSION OF THE ASSESSEE TO THE QUERIES RAISED BY THE AO. THE SAME FACTS CANNOT LEAD THE ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AS HELD BY THE CIT-I, NAGPUR. HENCE THE ORDER OF THE AO PASSED UNDER SECTION 143(3) OF THE ACT DESERVES TO BE RESTORED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE ID. CIT (A) CANNOT SET ASIDE THE ASSESSMENT ORDER ON THE GROUNDS WHERE NO NOTICE WAS ISSUED TO THE ASSESSEE U/S. 263 OF THE ACT THEREBY RESULTING INTO DENIAL OF OPPORTUNITY OF BEING HEARD. 2. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF MANUFACTURING OF CHLORINATED PARAFFIN WAX AND OTHER CHEMICALS. SHE HAS ALSO EARNED INCOME WAREHOUSE ACTIVITIES. THE ASSESSEE HAS FILED THE RETURN OF INCOME ON 29/10/2007 DECLARING TOTAL INCOME OF RS.9,74,640/-, WHICH COMPRISED OF SALARY INCOME, DIVIDEND AND INTEREST INCOME, CAPITAL GAINS ON SALE OF SHARES, BUSINESS INCOME ON ACCOUNT OF WAREHOUSING ACTIVITIES AND INCOME FROM OTHER SOURCES. THE SUPPORTING PAPERS IN RESPECT OF THE INCOME DECLARED BY THE ASSESSEE WERE FILED ALONG WITH THE RETURN OF INCOME. THE RETURN WAS PROCESSED U/S 143(1) ON 16/01/2009. THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER ISSUED NOTICE U/S 143(2) OF THE ACT ON 19/09/2008, 30/04/2009 AND RAISED VARIOUS QUERIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AFTER DUE ENQUIRY AND EXAMINATION OF THE DOCUMENTS, THE ASSESSMENT ORDER U/S 143(3) WAS PASSED ACCEPTING THE RETURN OF I.T.A. NO. 191/NAG/2010 3 INCOME. THE CIT HAS VERIFIED THE RECORDS AND FOUND THAT THE ASSESSMENT MADE BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR SAME IS PREJUDICIAL TO THE INTEREST OF REVENUE AND ASSESSING OFFICER HAS COMMITTED FOLLOWING MISTAKES: (I) EXPENDITURE INCURRED ON EXEMPT INCOME BEING DIVIDEND OF RS.1,60,523/- AND INTEREST OF RS.2,58,107/- HAS NOT BEEN CONSIDERED FOR DISALLOWANCE U/S 14A. (II) APPLICABILITY OF CBDT CIRCULAR NO. 4/2007 HAS NOT BEEN CONSIDERED IN ORDER TO TREAT INCOME FROM SHORT TERM/ LONG TERM CAPITAL GAINS AS BUSINESS INCOME. (III) APPLICABILITY OF PROVISIONS OF SECTION 94(7) HAS NOT BEEN CONSIDERED. (IV) THE RENT INCOME FROM WAREHOUSES SHOULD HAVE BEEN TREATED AS INCOME FROM HOUSE PROPERTY AND NOT AS BUSINESS INCOME. 3. THE CIT HAS GIVEN SHOW CAUSE NOTICE AND AFTER GIVING SHOW CAUSE NOTICE HE HAS PASSED THE ORDER AS UNDER: 13. I HAVE CONSIDERED THE AFORESAID SUBMISSIONS, IT IS FOUND FROM THE RECORDS THAT A.O. HAS NEITHER EXAMINED THE ISSUE NOR RECORDED HIS FINDINGS AND SATISFACTION THAT THE ASSESSEE'S CLAIM IN THIS REGARD WAS CORRECT AND IN ACCORDANCE WITH THE PROVISIONS OF THE LAW. THIS ISSUE IS A HIGHLY DEBATABLE ONE. THERE MAY NOT BE ANY STANDARD RULE WHETHER THE PROFIT /LOSS DERIVED FROM THE PURCHASE AND SALE OF THE SHARES WILL BE CHARGEABLE TO TAX AS CAPITAL GAIN OR AS BUSINESS INCOME. THE FOLLOWING FACTORS AND PRINCIPLE HAVE TO BE CONSIDERED IN TOTALITY IN ORDER TO ARRIVE AT THE EXACT NATURE OF THE TRANSACTIONS AND TO DETERMINE THE CHARACTER OF THE INCOME DERIVED FROM PURCHASE AND SALE OF THE SHARES . (I) MOTIVE FOR THE PURCHASE OF SALE AS PERCEIVED AT THE TIME OF SALE. (II) FREQUENCY OF TRANSACTIONS AND THE LENGTH OF PERIOD OF HOLDING OF THE SHARES. (III) BACKGROUND OF THE INVESTORS, (IV) CIRCUMSTANCES RESPONSIBLE FOR SALE OF SHARES, (V) ACQUISITION OF SHARES FROM PRIMARY MARKET OR SECONDARY MARKET. (VI) INFRASTRUCTURE EMPLOYED FOR THE SHARE TRANSACTIONS. I.T.A. NO. 191/NAG/2010 4 14. THE RECORDS INDICATE THAT THE A.O. HAS NOT APPLIED ANY OF THESE TESTS TO THE ACTIVITIES OF PURCHASE AND SALE OF THE SHARES BY THE ASSESSEE. I HAVE ALSO EXAMINED THE ASSESSMENT RECORDS OF THE ASSESSEE AS WELL AS MR. VIKAS PINCHA, THE HUSBAND OF THE ASSESSEE FROM A.YR. 2006-07 TO 2008-09. IT IS OBSERVED THEREFROM THAT THE TRANSACTIONS OF PURCHASE AND SALE OF THE SHARES ARE ENTERED INTO BY MR. VIKAS PINCHA JOINTLY ON HIS BEHALF AS WELL AS ON BEHALF OF MRS. BARKHA PINCHA, THE ASSESSEE . THE INCOME/LOSS FROM THE SALES AND DIVIDEND IS DIVIDED AMONGST THEM JOINTLY ON EQUAL BASIS I.E. 50:50. IT IS THUS FOUND THAT MR. VIKAS PINCHA AND MRS. BARKHA PINCHA ARE DOING THE TRADING IN THE SHARES ON JOINT BASIS AND NOT ON INDIVIDUAL BASIS. THE D-MAT ACCOUNT MAINTAINED ARE ALSO COMMON AND INCOMING/OUTGOING FUNDS ARE ALSO INTERNALLY ADJUSTED FOR TRADING IN THE SHARES. THUS, PRIMA FACIE IT IS FOUND TO BE A JOINT VENTURE BUSINESS CARRIED ON BY THE AOP OF MR. VIKAS PINCHA AND MRS. BARKHA PINCHA. THE A.O. HAS NOT LOOKED INTO THIS ASPECT AT THE ASSESSMENT STAGE. 15. DETAILS OF THE SHORT TERM AND LONG TERM CAPITAL GAIN DISCLOSED BY THE ASSESSEE IN THE AY 2006-07 TO 2-008-09 ARE AS UNDER: ASST.YEAR SHORT TERM CAPITAL GAIN RS. LONG TERM CAPITAL GAIN RS. 2006-07 1,76,779/- 13,35,646/- 2007-08 89,769/- 7,13,042/- 2008-09 74,161/- 41,01,918/- FROM THE ASSESSMENT RECORDS, IT IS FURTHER, OBSERVED THAT DURING THE ASST. YEAR 2007-08, THEY HAVE ENTERED INTO 32 TRANSACTIONS OF THE SALE VALUE OF RS.29.16 LACS OUT OF WHICH THE LONG TERM CAPITAL GAIN OF RS.14.26 LACS IS DERIVED JOINTLY. THEY HAVE ALSO ENTERED INTO 147 TRANSACTIONS OF PURCHASE AND SALE OF SHARES OF THE SALE VALUE OF RS.73.98 LACS OUT OF WHICH THE PROFIT OF RS.1.79 LACS IS DERIVED. OUT OF 147 TRANSACTIONS, .THE 83 TRANSACTIONS HAVE RESULTED INTO LOSS AND 64 TRANSACTIONS HAVE RESULTED INTO PROFIT . THE NET PROFIT EARNED IS OF RS.1.79 LACS. (THE ASSESSEE WAS REQUESTED TO FURNISH THE AGEWISE ANALYSIS I.T.A. NO. 191/NAG/2010 5 OF THESE SHARE TRANSACTIONS. BUT THE SAME HAS NOT BEEN FILED BY THE ASSESSEE). FROM THE RECORDS OF A.YR.2006-07, IT IS FURTHER OBSERVED THAT THEY HAVE ENTERED INTO 87 TRANSACTIONS OF PURCHASE AND SALE OF SHARES DURING THE YEAR OF THE SALE VALUE OF RS.38.35 LACS WHICH HAS RESULTED INTO PROFIT OF RS. 1.76 LACS. THEY HAVE ALSO ENTERED INTO 59 TRANSACTIONS OF SALE OF SHARES OF THE SALE VALUE OF RS.59.45 LACS WHICH HAS RESULTED INTO PROFIT OF RS.13.35 LACS. IT IS THUS, FOUND FROM THE AVAILABLE RECORDS FOR THE AY 2006-07 AND 2007-08 THAT THEY ARE REGULARLY AND SYSTEMATICALLY ENGAGED/DEALING IN THE PURCHASE AND SALE OF THE SHARES. DURING THE COURSE OF THE HEARING, A SUMMARY OF THE OPENING STOCK OF SHARE, PURCHASES DURING THE YEAR, SALES DURING THE YEAR AND CLOSING STOCK HAS BEEN OBTAINED. THE SAME IS APPENDED TO THIS ORDER ALONG WITH THE DETAILS OF THE SHORT TERM AND LONG TERM CAPITAL GAIN AS ANNEXURE-1 TO 6. THE FREQUENCY AND MAGNITUDE OF THE TRANSACTIONS RECORDED THEREIN ITSELF INDICATE THAT THEY ARE ENGAGED IN THE PURCHASE AND SALE OF SHARES WITH A PROFIT MOTIVE AND NOT FOR THE PURPOSE OF THE INVESTMENT. 16. I N THE LIGHT OF THE FACTS DISCUSSED IN THE PRECEDING PARAGRAPHS, IT CAN BE INFERRED THAT TRANSACTIONS IN SHARES ENTERED INTO BY THE ASSESSEE CANNOT BE TREATED AS INVESTMENT IN SHARES AND ACCORDINGLY THE RESULTANT INCOME/LOSS ARISING OUT OF THEM CANNOT BE TREATED AS INCOME/LOSS UNDER THE HEAD CAPITAL GAIN. ON THE CONTRARY THE TRANSACTIONS IN SHARES MADE BY THE ASSESSEE HAVE TO BE TREATED AS TRADING IN SHARES. SINCE THE ACTIVITY IN SHARES CARRIED OUT BY THE ASSESSEE IS AKIN TO BUSINESS ACTIVITY OR ADVENTURE IN THE NATURE OF TRADE, THE INCOME EARNED OUT OF IT BY THE ASSESSEE HAS TO BE TREATED AS BUSINESS INCOME AS AGAINST INCOME FROM CAPITAL GAINS CLAIMED BY THE ASSESSEE. 17. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE APEX COURT IN THE CASE OF RAJA BAHADUR VISHESHWARA SINGH [DECEASED ] & ORS. VS. CIT [41 ITR 685] WHERE THE SUPREME COURT HELD THAT WHEN THE MAGNITUDE OF PURCHASE AND SALE, AND THE RATIO BETWEEN PURCHASES AND SALES AND HOLDING INDICATES THAT THE ASSESSEE IS DEALING IN SHARES AS BUSINESS, THEN THE INCOME FROM SUCH ACTIVITY HAS TO BE TAXED AS BUSINESS INCOME. I.T.A. NO. 191/NAG/2010 6 18. THE INTENTION TO SELL AT THE VERY THRESHOLD, WHICH IS NOT OFFSET BY OTHER FACTORS IS CONCLUSIVE. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE APEX COURT IN THE CASE OF G. VENKATASWAMI NAIDU & CO. V. CIT [1959] 35 ITR 594 [SC] WHERE THE SUPREME COURT HELD THAT IN CASES, WHERE PURCHASE HAS BEEN MADE SOLELY AND EXCLUSIVELY WITH INTENTION TO RESELL AT A PROFIT AND PURCHASER HAS NO INTENTION OF HOLDING PROPERLY FOR HIMSELF OR OTHERWISE ENJOYING OR USING IT, PRESENCE OF SUCH AN INTENTION IS A RELEVANT FACTOR AND UNLESS IT IS OFFSET BY PRESENCE OF OTHER FACTORS, IT WOULD RAISE A STRONG PRESUMPTION THAT TRANSACTION IS AN ADVENTURE IN THE NATURE OF TRADE. 19. THIS VIEW FINDS FULL SUPPORT FROM THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF M/S DALHOUSIE INVESTMENT TRUST CO. LTD. VS. CIT(1968) 68 ITR 486 (SC). FURTHER, RELIANCE IS PLACED ON THE DECISION OF THE LD. LTAT AHMEDABAD BENCH IN THE CASE OF DCIT VS. DEEPABEN A. SHA 100 TTJ (AHD.) 1065, WHEREIN IT IS HELD THAT WHETHER OR NOT THE ASSESSEE CARRIES ON A BUSINESS IN A PARTICULAR COMMODITY CAN BE INFERRED FROM THE FREQUENCY CONTINUITY AND HOLDING PERIOD OF THE SCRIPTS AS WELL AS THE MOTIVE INVOLVED. THE RATIO LAID DOWN BY THE AFORESAID DECISION IS SQUARELY APPLICABLE IN THE CASE UNDER CONSIDERATION SINCE THE HOLDING PERIOD IS RATHER SHORT AS DEMONSTRATED ABOVE AND ALSO, THERE IS ENOUGH FREQUENCY OF TRANSACTIONS. MOST IMPORTANTLY, THE CIRCUMSTANCES INDICATE THAT THE MOTIVE OF THE ASSESSEE IS TO GAIN, PROFIT BY CARRYING OUT A SYSTEMATIC ACTIVITY OF PURCHASE AND SALE OF SHARES WITH A CLOSE WATCH ON THE MARKET SITUATION. THERE IS NO M OTIVE APPARENT OF HOLDING THE SHARES AS ASSETS. THEREFORE, THE GAIN DERIVED OUT OF SUCH ACTIVITY CANNOT BE CHARGED UNDER CAPITAL GAINS. 20. THE FACT THAT THE AUTHORITIES DID NOT IN SPITE OF TRANSACTIONS , TREAT THE ASSESSEE AS A SHARE DEALER IN THE PRECEDING YEAR CANNOT IN ANY WAY OPERATE AS 'RES JUDICATA' TO PRECLUDE THE AUTHORITIES FROM HOLDING THAT HIS TRANSACTIONS THIS YEAR AMOUNTED TO DEALINGS [NEW JEHANGIR VAKIL MILL LTD. VS. CIT (1963) 49 ITR [SC] 137). 21. IN THIS BACKGROUND OF THE FACTS AND VARIOUS JUDICIAL PRONOUNCEMENTS, IT WAS INCUMBENT UPON THE AO TO INVESTIGATE AND GIVE A FINDING WHETHER THE SALE AND PURCHASE OF THE SHARES DONE BY I.T.A. NO. 191/NAG/2010 7 THE ASSESSEE WAS ON TRADING ACCOUNT OR INVESTMENT ACCOUNT. HOWEVER, THIS ISSUE HAS REMAINED TO BE EXAMINED BY THE A.O. AT THE ASSESSMENT STAGE AND ASSESSEE'S CLAIM HAS BEEN ACCEPTED WITHOUT GIVING ANY FINDINGS ON THE ISSUE INVOLVED. 22. THE ABOVE FACTS INDICATE THAT THE ISSUE WHETHER THE PROFIT DERIVED ON PURCHASE AND SALE OF SHARES WAS BUSINESS INCOME CHARGEABLE TO TAX AT NORMAL RATE OR TAXABLE AS LONG TERM CAPITAL GAIN/SHORT TERM CAPITAL GAIN AT NIL / 10% OF THE TAX .RATE HAS NOT BEEN LOOKED INTO/ENQUIRED BY THE AO IN ACCORDANCE WITH THE GUIDELINES ISSUED BY THE CBDT VIDE CIRCULAR NO. 4 OF 2007 REPRODUCED ABOVE. THE ASSESSMENT COMPLETED BY THE A.O. IS THEREFORE ERRONEOUS AND PREJUDICE TO THE INTEREST OF THE REVENUE. III) APPLICABILITY OF PROVISIONS OF SECTION 94(7) :- 23. T HE ASSESSEE HAS SUBMITTED VIDE LETTER DT. 02.12.2009 THAT THERE WERE NO DIVIDEND STRIPPING TRANSACTIONS. IT IS EVIDENT FROM THE RECORDS THAT THE A.O. HAS NOT VERIFIED THIS FACT. TO THIS EXTENT, THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IV) TAXATION OF RENTAL INCOME U/S 22 OF THE I.T. ACT, 1961 24. THE ASSESSEE HAS STATED VIDE LETTER DATED 02.12.2009 THAT THE INCOME CHARGEABLE TO TAX U/S 22 FROM THE GODOWN RENT WORKED OUT AT RS.2,54,790/- WHEREAS IT WAS OFFERED TO TAX U/S 28 AT RS.2,42,350/-. THUS, THERE WAS NEGLIGIBLE TAX EFFECT. THE FACT REMAINS THAT THE A.O. HAS NOT EXAMINED THE APPLICABILITY OF SECTION 22 VIS-A-VIS SECTION 28 IN RESPECT OF THE RENTAL INCOME DERIVED. THE A.O. HAS ALSO NOT EXAMINED THE ADMISSIBILITY OF THE EXPENDITURE CLAIMED OF RS.1,21,631/- . THESE DETAILS ARE FIRST TIME FILED BEFORE ME DURING THE COURSE OF THE PROCEEDINGS U/S 263 AS UNDER. MAINTENANCE CHARGES LOKMAT BHAWAN ASSOCIATION (DT.13/07/2-006) 5589.00 LOKMAT BHAWAN ASSOCIATION (DT.06/12/2006) 10303.00 I.T.A. NO. 191/NAG/2010 8 LOKMAT BHAWAN ASSOCIATION (DT.23/05/2006) 10303.00 26,195.00 LEGAL FEES 5,000.00 SECURITIES EXP. (THAKUR APPTS. & WADI WAREHOUSE) 66,436.00 SALARY FOR RECOVERY OF MAINTENANCE CHARGES 24,000.00 1,21,631.00 25. THE GENUINENESS OF ABOVE EXPENSES AND ADMISSIBILITY THEREOF ALSO REQUIRED VERIFICATION AT THE A.O'S END. TO THIS EXTENT, THE ORDER OF THE A.O IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 26. FOR THE REASONS ASSIGNED AS ABOVE, THE ASSESSMENT COMPLETED BY THE AO IS HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IN AS MUCH AS THE AO HAS NOT MADE DUE ENQUIRIES AND GIVEN HIS FINDINGS IN THE ASST. ORDER ON ADMISSIBILITY OF THE CLAIMS OF THE ASSESSEE ON THE ISSUES DISCUSSED IN THE PRECEDING PARAGRAPHS. IN VIEW OF THESE FACTS, THE ASSESSMENT COMPLETED BY THE ASSESSING OFFICER VIDE ORDER U/S 143(3) DATED 29.05.2009 IS HEREBY SET ASIDE ON THESE LIMITED ISSUES AS DISCUSSED ABOVE. THE ASSESSING OFFICER IS DIRECTED TO COMPLETE THE SET ASIDE ASSESSMENT ON THESE LIMITED ISSUES IN ACCORDANCE WITH LAW AND AFTER ALLOWING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 4. THE LEARNED A. R. SUBMITTED THAT THE ASSESSEE HAS INVESTED THE SURPLUS FUND IN EQUITY SHARES OF LISTED COMPANY. THE ASSESSEE IS AN INVESTOR AND NOT DEALING IN SHARES. SHE HAS NEVER TREATED THE SHARES AS STOCK IN TRADE AND SHE IS TREATING HER INVESTMENTS IN SHARES AS CAPITAL ASSET AND NOT AS STOCK IN TRADE OF BUSINESS, HENCE, THE CAPITAL GAIN DERIVED ON PURCHASE AND SALE OF SHARES WAS OFFERED TO TAX BY THE ASSESSEE AS INCOME FROM CAPITAL GAIN AND NOT AS BUSINESS INCOME. AFTER DUE EXAMINATION OF THE DETAILS FURNISHED BY THE ASSESSEE, ON VERIFICATION OF DOCUMENTS FILED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND APPLYING HIS MIND, THE ASSESSING OFFICER HAS ACCEPTED THE CAPITAL GAIN DISCLOSED BY THE ASSESSEE. THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE FOR EARNING THIS INCOME, THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY ACCEPTED THE CLAIM OF EXEMPTED INCOME OF RS.1,60,523/- BEING DIVIDEND AND INTEREST OF RS.2,58,107/-. THEREFORE, THERE WAS NO QUESTION OF ANY DISALLOWANCE OF EXPENSES U/S 14A OF THE I.T. ACT. THE RULE 8D(2) OF I.T.A. NO. 191/NAG/2010 9 THE I.T. RULES IN RESPECT OF DISALLOWANCE TO BE MADE U/S 14A OF THE I.T. ACT IS NOT APPLICABLE FOR THE ASSESSMENT YEAR 2007-2008 SINCE THE SAID RULE WAS INSERTED WITH EFFECT FROM 24/03/2008. THE LEARNED A. R. SUBMITTED THAT THE ASSESSING OFFICER HAS DULY VERIFIED THE APPLICABILITY OF THE CIRCULAR NO. 4 OF 2007. THE ASSESSEE HAS ALREADY EXPLAINED TO THE ASSESSING OFFICER IN REPLY TO HIS QUERY DURING THE COURSE OF ASSESSMENT PROCEEDINGS REGARDING TREATING OF INCOME FROM INVESTMENT IN SHARES AS INCOME FROM BUSINESS AND PROFESSION AND THE SAME IS EVIDENCED FROM THE EXPLANATION OF THE ASSESSEE GIVEN TO THE SAID QUERY OF THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS ALSO VERIFIED THE APPLICABILITY OF PROVISIONS OF SECTION 94(7) OF THE ACT. THE ASSESSEE HAS SHOWN THE INCOME FROM WAREHOUSING ACTIVITIES. IF THE INCOME OF THE WAREHOUSE IS TREATED AS INCOME FROM HOUSE PROPERTY, THE TAX EFFECT WILL BE NEGLIGIBLE AND NO PREJUDICE WILL BE CAUSED TO THE INTEREST OF THE REVENUE. THE ASSESSEE RELIED UPON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. LEISURE WEAR EXPORTS LTD. [2010] 46 DTR (DEL) 97 AND SUBMITTED THAT CITS ORDER IS NOT TENABLE IN LAW AND THERE IS NO REQUIREMENT TO SET ASIDE THE ISSUES. 5. ON THE OTHER HAND, LEARNED D. R. RELIED UPON THE ORDER OF CIT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER, WHICH READS AS UNDER: THE ASSESSEE FILED ITS RETURN ON 29/10/2007 DECLARING A TOTAL INCOME OF RS.9,74,640/-. THIS WAS PROCESSED U/S 143(1) ON 16/01/2009. THE CASE WAS SELECTED FOR SCRUTINY. NOTICE U/S 143(2) WAS ISSUED. IN RESPONSE TO THE HEARING NOTICE SHRI CHETAN MALVIYA, C. A. AND SHRI PADMAKAR KATKAMWAR, ACCOUNTANT, COUNSEL FOR THE ASSESSEE APPEARED FROM TIME TO TIJME. DETAILS CALLED FOR WERE FURNISHED. BOOKS OF ACCOUNT PRODUCED WERE EXAMINED. 2. ASSESSEE DERIVES INCOME FROM WAREHOUSING BUSINESS AND INCOME FROM HOUSE PROPERTY. 3. AFTER DISCUSSING THE CASE WITH ASSESSEES REPRESENTATIVE, THE ASSESSMENT IS COMPLETED BY ACCEPTING THE INCOME RETURNED. I.T.A. NO. 191/NAG/2010 10 INCOME RETURNED RS.9,74,640/- 4. ASSESSED U/S 143(3). CALCULATE INCOME TAX AND INTEREST CHARGEABLE AS PER THE PROVISIONS OF THE ACT AND ISSUE DEMAND NOTICE/CHALLAN ACCORDINGLY. 6.1 WE HAVE GONE THROUGH THE ASSESSMENT ORDER AND FIND THAT THE ASSESSING OFFICER HAS ACCEPTED THE RETURN FILED BY THE ASSESSEE WITHOUT PROPER INVESTIGATION OF THE FACTS OF THIS CASE. IN ASSESSMENT ORDER THE ASSESSING OFFICER HAS NOT DISCUSSED ANY ISSUE IN DETAIL AND ACCEPTED THE CLAIM OF THE ASSESSEE. WE FIND THAT THE CIT, IN HIS ORDER, HAS VERIFIED THE RECORDS AND FOUND THAT THE ASSESSING OFFICER HAS NEITHER EXAMINED THE ISSUE NOR RECORDED HIS FINDING AND SATISFACTION THAT THE ASSESSEES CLAIM WAS CORRECT AND IN ACCORDANCE WITH THE PROVISIONS OF LAW. THE PURCHASE AND SALE OF SHARES WERE CHARGEABLE AS CAPITAL GAIN OR BUSINESS INCOME, REQUIRES DETAILED ENQUIRY AND DETAILED INVESTIGATION. THE ASSESSING OFFICER SHOULD MAKE ALL THE ENQUIRY AND DETERMINE EACH AND EVERY TRANSACTION OF THE SAME AND HE HAS TO DECIDE THE ISSUE WHILE CONSIDERING THE MOTIVE FOR PURCHASE AND SALE OF SHARE, FREQUENCY OF TRANSACTION AND LENGTH OF HOLDING THE SHARE, BACKGROUND OF THE INVESTOR, CIRCUMSTANCES RESPONSIBLE FOR SALE OF SHARES, ACQUISITION OF SHARES FROM PRIMARY MARKET OR SECONDARY MARKET HAS TO BE VERIFIED BY THE ASSESSING OFFICER. THE CIT HAS VERIFIED THE RECORD AND HAS FOUND THAT ASSESSEE AS WELL AS MR. VIKAS PINCHA, HUSBAND OF THE ASSESSEE, FROM ASSESSMENT YEAR 2006-2007 TO 2008-2009 WERE PURCHASING AND SELLING THE SHARES IN THE JOINT NAME AND MR. VIKAS PINCHA WAS WORKING ON BEHALF OF MRS. BARKHA PINCHA. THE INCOME OR LOSS FROM THE SALES AND DIVIDEND IS DIVIDED AMONGST THEM JOINTLY ON EQUAL BASIS. THE D-MAT ACCOUNT MAINTAINED ARE COMMON AND INCOMING/OUTGOING FUNDS ARE ALSO INTERNALLY ADJUSTED FOR TRADING IN THE SHARES. THEREFORE, IT IS FOUND TO BE A JOINT VENTURE BUSINESS CARRIED ON BY MR. VIKAS PINCHA AND MRS. BARKHA PINCHA. THE ASSESSING OFFICER HAS NOT VERIFIED THE DETAILS. THE CIT HAS ALSO VERIFIED THE SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN. FROM THE 32 TRANSACTIONS CARRIED BY THE ASSESSEE, IT IS CLEAR THAT THEY HAVE BEEN CARRIED OUT JOINTLY. THE ASSESSEE HAS ALSO CARRIED OUT 147 TRANSACTIONS OF PURCHASE AND SALE OF SHARES. THE SALE VALUE OF THE SHARES WAS RS.73.98 LAKHS, I.T.A. NO. 191/NAG/2010 11 THEREFORE, ALL THESE TRANSACTIONS REQUIRE INVESTIGATION. THE CIT HAS ALSO VERIFIED THE FREQUENCY AND MAGNITUDE OF TRANSACTIONS RECORDED IN THE OPENING STOCK OF SHARES PURCHASED DURING THE YEAR AND SALES MADE DURING THE YEAR AS CLOSING STOCK. THEREFORE, THE ASSESSING OFFICER SHOULD MAKE A DETAILED ENQUIRY. WE ARE OF THE VIEW THAT THIS REQUIRES INVESTIGATION AND CIT IS JUSTIFIED IN RESTORING THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER. 6.2 WE FIND THAT THE ASSESSING OFFICER HAS NOT APPLIED APPLICABILITY OF PROVISIONS OF SECTION 94(7), THEREFORE, THAT ORDER IS ALSO JUSTIFIED. 7. IN THE THIRD ISSUE, THE CIT HAS STATED THAT INCOME FROM GODOWN RENT WAS WORKED OUT AT RS.2,54,790/- WHEREAS OFFERED TO TAX U/S 28 AT RS.2,42,350/-. THUS, THERE WAS NEGLIGIBLE TAX EFFECT BUT THE FACT REMAINS THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE APPLICABILITY OF SECTION 28 IN RESPECT OF RENTAL INCOME. THE ASSESSING OFFICER HAS NOT EXAMINED THE ADMISSIBILITY OF EXPENDITURE CLAIMED OF RS.1,21,631/-. THEREFORE, WE ARE OF THE VIEW THAT THIS ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 8. WE FIND THAT THIS ORDER IS SQUARELY COVERED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAMPYARI DEVI SARAOGI VS. COMMISSIONER OF INCOME- TAX 67 ITR 84 (SC) WHEREIN IT IS HELD THAT WHEN THE ORDER IS PASSED BY THE ASSESSING OFFICER WITHOUT MAKING ANY ENQUIRY AND IN DUE HASTE, THE POWER U/S 263 BY CIT WOULD BE APPROPRIATE AND ASSESSEE MAY NOT IN ANY WAY SUFFER ON THAT COUNT AS THE ASSESSEE WILL HAVE FULL OPPORTUNITY BEFORE THE ASSESSING OFFICER TO PUT HIS CASE. WE ALSO FIND SUPPORT FROM THE DECISION OF GEE VEE ENTERPRISES VS. ADDITIONAL COMMISSIONER OF INCOME TAX, DELHI I, AND OTHERS 99 ITR 375 WHEREIN IT IS HELD THAT THE ASSESSING OFFICER SHOULD MAKE FURTHER ENQUIRY BEFORE ACCEPTING THE STATEMENT MADE BY THE ASSESSEE IN HIS RETURN. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE SUPREME COURT, WE DISMISS THE APPEAL OF THE ASSESSEE. 8.1 DURING THE COURSE OF HEARING, LEARNED A. R. RELIED UPON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. LEISURE WEAR EXPORT LTD. [2012] 341 ITR 166 I.T.A. NO. 191/NAG/2010 12 (DEL). WE FIND THAT IN THAT CASE IT IS HELD THAT IF DUE TO AN ERRONEOUS ORDER OF ASSESSING OFFICER THE REVENUE IS LOSING THE TAX LAWFULLY PAYABLE BY THE PERSON, IT WOULD BE CERTAINLY PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE POWER OF REVISION IS NOT MEANT TO BE EXERCISED FOR PURPOSE OF DIRECTING THE ASSESSING OFFICER TO HOLD ANOTHER INVESTIGATION WITHOUT DESCRIBING AS TO HOW THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS BUT IN THE INSTANT CASE THE FACTS ARE ENTIRELY DIFFERENT. THEREFORE, THIS JUDGMENT IS NOT APPLICABLE TO THE FACTS OF THIS CASE. IN RESPECT OF SECTION 14A, THE LEARNED A. R. HAS RELIED UPON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT 328 ITR 81 (BOM) BUT WHETHER THIS JUDGMENT IS APPLICABLE TO THE FACTS OF THIS CASE, REQUIRES INVESTIGATION. THEREFORE, WHEN THE MATTER IS RESTORED TO THE ASSESSING OFFICER, THE ASSESSING OFFICER WILL DECIDE THIS ISSUE AS PER LAW. 9. IN THE RESULT, THE APPEAL IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 21/12/2012) SD/- SD/- ( P. K. BANSAL ) ( D. T. GARASIA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21/12/2012 *CL SINGH COPY FORWARDED TO THE: 1. APPELLANT. 2. RESPONDENT. 3. CIT (A) 4. CIT 5. DR. ASSISTANT REGISTRAR