DCIT, Circle - 55, Kolkata, Kolkata V. Smt. Chameli Devi, Kolkata

ITA 1934/KOL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75097 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 22-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 12-10-2010
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3)

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 1934/KOL/2010 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2007-08 DEPUTY COMMISSIONER OF INCOME-TAX, VS. SMT. CHAMEL I DEVI CIRCLE-55, KOLKATA. (PAN: AGHPD8572F) (,- /APPELLANT ) (./,-/ RESPONDENT ) & & & & & / I.T.A NO. 1935/KOL/2010 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2007-08 DEPUTY COMMISSIONER OF INCOME-TAX, VS. SHRI BAJRAN G LAL CHOWDHURY CIRCLE-55, KOLKATA. (PAN: AFUPC6447A) (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 04.03.2014 DATE OF PRONOUNCEMENT: 13.03.2014 FOR THE APPELLANT: SHRI SANJAY MUKHERJEE, JCIT, SR. DR FOR THE RESPONDENT: SHRI SUBHAS AGARWAL, ADVOCAT E $0 / ORDER PER SHRI MAHAVIR SINGH, JM: BOTH THESE APPEALS BY REVENUE ARE ARISING OUT OF SE PARATE ORDERS OF CIT(A)-XXXII, KOLKATA IN APPEAL NO. 98 & 97/CIT(A)-XXXII/09-10/CI R-50/KOL DATED 23.06.2010. ASSESSMENTS WERE FRAMED BY DCIT, CIRCLE-50, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2007-08 VIDE HIS SEPARTE ORDERS DATED 23.12.2009. AS THE FACTS AND CIRCUMSTANCES OF THE CASE ARE EXACTLY IDENTICAL IN BOTH THE CASES AND GROUND IS ALSO EXACTLY IDENTICALLY WORDED, WE D ISPOSE OF BOTH THE APPEALS BY THIS COMMON ORDER BY TAKING THE FACTS FROM ITA NO. 1935/KOL/201 0. 2. THE ONLY COMMON ISSUE IN THESE TWO APPEALS OF RE VENUE IS AGAINST THE ORDER OF CIT(A) TREATING THE INCOME DECLARED BY THE ASSESSEE AS CAP ITAL GAINS AS AGAINST THE ASSESSMENT MADE BY AO AS BUSINESS INCOME. FOR THIS, WE REPRODUCE THE GROUND FROM ITA NO. 1935/KOL/2010 AS UNDER: THE ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN ON PURCHASE AND SALE OF SHARES BUT IN THE ASSESSMENT IT IS TREATED AS BUSINESS INCOME. T HE LD. CIT(A) HAS TREATED THIS TRANSACTION AS SHORT TERM CAPITAL GAIN AS IT IS DEL IVERY BASED. BUT IT IS SEEN THAT THE 2 ITA NOS.1934-1935/K/2010 SMT. CHAMELI DEVI & SHRI BAJRANG LAL CHOWDHURY , AY:2007-08 TRANSACTIONS WERE MADE INSTANT PROFIT ONLY NOT EARN ED DIVIDEND SINCE THESE TRANSACTIONS WERE EXECUTED BY BORROWING FUNDS AND WITHIN SHORT SPAN OF TIME. IT APPEARS THAT THE ASSESSEE HAS BOOKED THE SHARE AND TO TAKE DELIVERY OF THE SAME JUST PRIOR TO SELLING THE SAME TO EARN PROFIT. THE CHARACTER OF TRANSACTION CANNOT BE DETERMINED SOLELY ON THE APPLICATION OF ANY ABSTRACT RULE, PRINCIPLE OR TEST BUT MUST DEPEND UPON ALL THE FACTS AND CIRCUMSTANCES OF THE CASE. CONSIDERING THE FAC T AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS ERRED TO TREAT THE TRANSACTION AS SHO RT TERM CAPITAL GAIN. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS DISC LOSED SHORT TERM CAPITAL GAINS FROM SALE OF SHARES IN HIS RETURN OF INCOME AT RS.54,34,626/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE HOLDING PERIOD FOR THESE SHAR ES BY THE ASSESSEE IS VERY SHORT I.E. BETWEEN 4 AND 5 MONTHS AND ACCORDINGLY, HE CONCLUDED THAT T HESE WERE PURCHASED WITH A MOTIVE OF MAKING PROFIT ONLY AND HENCE, HE TREATED THE TRANSA CTIONS AS INCOME IN THE NATURE OF ADVENTURE IN TRADE AND, THEREFORE, TREATED THE SAME AS BUSINE SS INCOME INSTEAD OF SHORT TERM CAPITAL GAINS CLAIMED BY THE ASSESSEE. AGGRIEVED, ASSESSEE PREFE RRED APPEAL BEFORE CIT(A), WHO DELETED THE ADDITION BY OBSERVING AT PAGE 5 OF HIS APPELLATE OR DER AS UNDER: HOWEVER, THE FACTS OF THE CASE INDICATE TO THE CON TRARY. THERE WERE ONLY THREE (3) TRANSACTIONS OF PURCHASE OF SHARES BY THE ASSESSEE DURING THE YEAR. ONLY THOSE WERE SOLD BY THE ASSESSEE DURING THE YEAR. IT IS FURTHER OBS ERVED THAT OUT OF THE THREE TRANSACTIONS OF PURCHASE ONLY ONE TRANSACTION, I.E. PURCHASE OF SHA RES OF UFLEX INDUSTRIES LTD., WAS FROM SECONDARY MARKET AND THE BALANCE TWO PURCHASES, OF THE SHARES OF IDEA CELLULAR LTD. AND OF PFC LTD., WAS THROUGH INITIAL PUBLIC OFFER (IPO) . THE SHARES OF UFLEX INDUSTRIES LTD. WERE SOLD BY WAY OF EIGHT TRANSACTIONS AND THOSE OF IDEA CELLULAR LTD. AND OF PFC LTD. WERE SOLD BY WAY OF SINGLE TRANSACTIONS ONLY. SUCH A NUMBER OF TRANSACTION, IN MY VIEW, CANNOT BE CALLED VOLUMINOUS OR OF HIGH MAGNITUDE. EARNING DIVIDEND CANNOT BE SAID TO BE THE LONE MOTI VE IF THE ASSESSEE HAS TO MAKE INVESTMENT IN SHARES. IF THAT WERE SO THEN THERE W ILL NOT BE ANY SHORT TERM CAPITAL GAIN IN CASE OF SHARE TRANSACTIONS SINCE DIVIDENDS ARE DECL ARED BY COMPANIES, GENERALLY ONCE IN A YEAR. NORMALLY ANY INVESTMENT IS MADE WITH AN ULT IMATE VIEW TO REAP GAINS FROM THE APPRECIATION IN THE VALUE OF AN ASSET, SHARES IN T HE INSTANT CASE. THE INSTANCES ARE NOT RARE THAT AN INVESTOR LIQUIDATES HIS INVESTMENTS WH ERE THE APPRECIATION IN THE VALUE REACHES HIS EXPECTATIONS, EVEN IF SUCH APPLICATION TAKEN PLACE IN A SHORT PERIOD. JUST BECAUSE AN ASSET IS HELD AND SOLD WITHIN A SHORT PE RIOD, IT WILL NOT CHANGE THE CHARACTER OF THE TRANSACTIONS. FROM THE PERUSAL OF THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE IT IS OBSERVED THAT NO PURCHASE OR SALE OF SHARES IS REFLECTED THEREIN. TH IS DISPLAYS THE INTENTION OF THE ASSESSEE THAT THE SHARES PURCHASED BY HIM, WHERE DELIVERY WA S TAKEN BY HIM, WERE HELD AS INVESTMENT AND NOT AS STOCK IN TRADE. IF THE ASSESS EE WERE A DEALER IN SHARES THEN THE PURCHASE AND SALE OF SHARES WOULD HAVE BEEN ROUTED THROUGH THE PROFIT AND LOSS ACCOUNT. IT IS EXPLAINED THAT THE APPELLANT HAS BEEN CONSIST ENTLY FOLLOWING THE SYSTEM OF TREATING PROFIT FROM TRANSACTION IN SHARES, SETTLED WITHOUT TAKING THE DE1IVERY, AS BUSNESS INCOME AND THAT INVOLVING THE SHARES WHEREVER DELIVERY IS TAKEN AND GIVEN AS CAPITAL GAIN AND THAT IS BECAUSE AS PER THE PROVISIONS OF SECTION 43 (5) OF THE ACT EVEN THE INCOME FROM SPECULATIVE TRANSACTIONS IS TO BE DISCLOSED UNDER T HE HEAD BUSINESS INCOM. IT IS FOR THIS REASON THAT THE APPELLANT HAD DISCLOSED THE PROFIT FROM SPECULATIVE TRANSACTIONS IN SHARES WAS DISCLOSED AS BUSINESS INCOME IN EARLIER YEARS. 3 ITA NOS.1934-1935/K/2010 SMT. CHAMELI DEVI & SHRI BAJRANG LAL CHOWDHURY , AY:2007-08 IN THE INSTANT CASE THERE IS NO DISPUTE THAT THE SH ARES ON WHICH CAPITAL GAIN AROSE WERE THE SHARES WHERE DELIVERY WAS DULY CREDITED IN THE APPELLANTS DEMAT ACCOUNT AND WHEREVER THERE WAS SALE SAME WAS DEBITED OUT FROM T HE DEMAT ACCOUNT. IN LIGHT OF THE ABOVE DISCUSSION AND ON THE FACTS O F THE CASE, IN MY VIEW, PROFIT/GAIN EARNED BY THE ASSESSEE FROM DELIVERY BASED PURCHASE AND SALE OF SHARES IS TO BE ASSESSED AS CAPITAL GAIN. THE A.O. IS DIRECTED TO ASSESS THE SAME ACCORDINGLY. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 4. WE FIND THAT THE ASSESSEE HAS PURCHASED SHARES O F UFLEX INDUSTRIES LTD. IN JULY, 2006 BUT DELIVERY OF THE SAME WAS TAKEN IN DECEMBER, 2006 BE CAUSE OF DISPUTE FOR PAYMENT. SECONDLY, THE HOLDING PERIOD OF UFLEX INDUSTRIES LTD. IS ABOU T 8-9 MONTHS AND THESE SHARES ARE KEPT IN INVESTMENT ACCOUNT. THE SHARES OF UFLEX INDUSTRIES LTD. WERE SOLD IN SPLITTED 8 TRANSACTIONS. FURTHER, THE ASSESSEE PURCHASED IDEA CELLULAR LTD. AND PFC LTD. THROUGH INITIAL PUBLIC OFFICER (IPO) AND WAS RETAINED FOR 2 TO 3 MONTHS AND THESE WERE ALSO TAKEN IN INVESTMENT ACCOUNT AND THE INTENTION OF THE ASSESSEE WAS TO MAKE INVESTMEN T FOR SHORTER PERIOD OR LONGER PERIOD. EVEN THE ASSESSEE HAS NOT CARRIED OUT VOLUMINOUS TRANSAC TIONS THERE ARE VERY FEW. IN SUCH CIRCUMSTANCES IT CANNOT BE HELD THAT THE ASSESSEE I S IN THE BUSINESS OF SHARE TRADING AND THESE TRANSACTIONS CAN NEVER BE HELD TO BE BUSINESS OF TH E ASSESSEE. WE CONFIRM THE ORDER OF CIT(A) AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 5. EXACTLY IDENTICAL ARE THE FACTS IN ITA NO. 1934/ K/2010 IN THE CASE OF CHEMALI DEVI, HENCE TAKING A CONSISTENT VIEW, WE ALSO DISMISS THI S REVENUES APPEAL. 6. IN THE RESULT, APPEALS OF REVENUE ARE DISMISSED. 7. ORDER IS PRONOUNCED IN THE OPEN COURT ON 13.03.2 014. SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13TH MARCH, 2014 12 '3' 4 JD.(SR.P.S.) 4 ITA NOS.1934-1935/K/2010 SMT. CHAMELI DEVI & SHRI BAJRANG LAL CHOWDHURY , AY:2007-08 $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT- DCIT, CIRCLE-55, KOLKATA 2 ./,- / RESPONDENT SMT. CHAMELI DEVI & SHRI BAJRANG LAL CHOWDHURY, P- 337, BLOCK-A, LAKE TOWN, KOLKATA-700 089. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .