The ACIT, Circle-3, Surat V. Shri Rajendrabhai Sugamchand Shah, Surat

ITA 1937/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94354 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 04-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILAS SHINDE
• Keywords: Business income; Earning of tax free income
• Section: 143(3); 14A; 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: S H RI G. D. AGRAWAL , VICE PRESIDENT AND SHR I S. S. GODARA , JUDICIAL MEMBER ACIT, CIRCLE - 3, SURAT (APPELLANT) VS SHRI RAJENDRABHAI SUGAMCHAND SHAH, L/H OF LATE SHRI SUGAMCHAND CHIM ANLAL SHAH, 204, VIJAY CHAM B E RS, BHAGATALAO SURAT PAN: AKQPS3606J (RESPONDENT) REVENUE BY : S H RI VILAS SHINDE , SR. D . R. ASSESSEE BY: NONE DATE OF HEARING : 17 - 08 - 2 015 DATE OF PRONOUNCEMENT : 26 - 08 - 2 015 / ORDER P ER : S. S. GODARA , JUDICIAL M EMBER : - THIS REVENUE S APPEAL FOR A.Y. 200 8 - 09 , AR ISES FROM ORDER OF THE CIT(A) - II, SURAT DATED 31 - 05 - 2011 IN APPEAL NO. CAS - II/178/2010 - I T A NO . 1937 / A HD/20 11 A SSESSMENT YEAR 200 8 - 09 I.T.A NO. 1937 /AHD/20 11 A.Y. 2008 - 09 PAGE NO ACIT VS. SHRI RAJENDRABHAI SUGAMCHAND SHAH 2 11/79 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE REVENUE S SOLE S UBSTANTIVE GROUND CHALLENGES THE CIT(A) S ORDER PARTLY ACCEPTING ASSESSEE S CONTENTION IN DIRECTING THE ASSESSING OFFICER TO TREAT HIS SHARE PROFITS OF RS. 1,86,88,639/ - I.E. LONG TERM CAPITAL GAINS OF RS. 1,06,96,159/ - AND SHORT TERM CAPITAL GAINS OF RS. 79,92,480/ - , AS BUSINESS INCOME IN CASE OF SHARES HELD FOR LESS THAN 30 DAYS AND CAPITAL GAINS HEAVING HOLDING PERIOD MORE THAN THAT. THE ASSESSING AUTHORITY HAD TREATED ALL PROFITS AS BUSINESS INCOME. 3. FACTS OF THE CASE ARE IN A NARROW COMPASS. THE RESPONDENT HEREIN IS A LEGAL REPRESENTATIVE OF THE DECEASED ASSESSE SHRI. SUGAMCHAND CHIMANLAL SHAH. THE SAID ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SECURITIES. HE DECLARED THE IMPUGNED LONG AND SHORT TERM CAPITAL GAINS. THE AS SESSING OFFICER IN ASSESSMENT ORDER DATED 03 - 1 2 - 2010 REJECTED HIS EXPLANATION IN TUNE WITH HIS ORDERS PASSED IN PRECEDING ASSESSMENT YEARS AND TREATED THE ABOVE STATED CAPITAL GAINS AS BUSINESS INCOME. 4. THE ASSESSEE FILED APPEAL. THE COMMISSIONER OF INCOME TAX(A) HAS PARTLY ACCEPTED HIS CONTENTIONS AS UNDER: - 2. THE ISSUE INVOLVED IN THE FIRST GROUND OF APPEAL RELATES TO TAXABILIT Y OF LONG TERM CAPITAL GAIN OF RS. 1.06/ - CRORE AND SHORT TERM CAPITAL GAIN OF RS. 79. 92/ - LAC, AS BUSINESS PROFIT UNDER THE HEAD BUSINESS INCOME. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, I.T.A NO. 1937 /AHD/20 11 A.Y. 2008 - 09 PAGE NO ACIT VS. SHRI RAJENDRABHAI SUGAMCHAND SHAH 3 THE APPELLANT SUBMITTED THAT TREATMENT GIVEN TO THE LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS DECLARED IN THE A.Y. 2005 - 06 & A.Y. 2006 - 07, AS BUSINESS INCOME, HAS BEEN DEC IDED BY THE ITAT, WHEREIN LONG TERM CAPITAL GAIN HAS BEEN HELD TAXABLE UNDER THE HEAD OF 'LONG TERM CAPITAL GAIN' AND THE SHORT TERM CAPITAL GAIN HAS BEEN HELD TO BE DIVIDED INTO TWO PARTS, FIRST WHERE SHORT TERM GAIN IS FROM SALE OF SHARES HELD FOR A PERI OD OF LESS THAN 30 DAYS, WHICH IS TO BE TAXED AS 'BUSINESS PROFIT', AND, SECOND WHERE SHORT TERM CAPITAL GAIN IS FROM SALE OF SHARES HELD FOR A PERIOD OF 30 DAYS OR MORE, BUT LESS THAN 1 YEAR, WHICH HAS TO BE TAXED AS 'SHORT TERM CAPITAL GAIN'. THE APPELLA NT ALSO SUBMITTED THAT ON THE BASIS OF ABOVE ORDER OF THE ITAT, HIS APPEAL IN A.Y. 2007 - 08 HAS ALSO BEEN DECIDED BY THE CIT(A). THE ASSESSING OFFICER DID NOT ACCEPT THE ABOVE SUBMISSION OF THE APPELLANT ON THE GROUND THAT ITAT'S ORDER AND CIT (A)'S ORDER H AVE NOT BEEN ACCEPTED BY THE DEPARTMENT. HE, THEREFORE, ASSESSED THE ENTIRE AMOUNT OF RS. 1.06 CRORE OF LONG TE RM CAPITAL GAIN AND RS. 79. 92/ - LAC OF SHORT TERM CAPITAL GAIN AS BUSINESS INCOME OF THE APPELLANT. THE SECOND GROUND OF APPEAL IS AGAINST DIS ALLOWANCE RS. 4,24, 252/ - FROM EXPENSES UNDER THE HEAD SALARY, TELEPHONE AND VEHICLE, MADE ON THE GROUND THAT IN THE P & L ACCOUNT, THE APPELLANT HAS CRED ITED LONG TERM CAPITAL GAIN OF RS. 1.06 CRORE AND DIVIDEND OF RS. 20,00,000/ - HAS BEEN CLAIMED EXEMPT U/S. 14A OF THE ACT, THEREFORE, EXPENSES RELATING TO THE EXEMPT INCOME IS NOT ALLOWABLE, ESPECIALLY SALARY WHICH IS MAINLY ATTRIBUTABLE TO EXEMPT INCOME. 3. THE APPELLANT'S WRITTEN SUBMISSION DATED 13 - 05 - 2011, ON THE ABOVE GROUN D OF APPEAL IS, AS UNDER: 1. ' E - RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 30.09.2008 DECLARING TOTAL INCOME 'OF RS. 7 7,78,290/ - . ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SECURITIES, EARNED PROFIT FROM IT AND ALSO INCOME FROM RENTAL HOUSE PROPERTY, SHORT - TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN AND INCOME FROM OTHER SOURCES ETC. ADDITION OF RS. 1,86,88,639/ - ON ACCOUNT OF CAPITAL GAIN TREATED A S BUSINESS INCOME: 2. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAI N ON SALE OF SHARES OF RS. 79,92,480/ - AND LONG TERM CAPITAL GAIN ON SALE OF SHARES OF RS. 1,06,96, 159/ - .THE ASSESSEE WAS REQUIRED TO SUBMIT THE EXPLANATION AS TO WHY THE SAME SHOULD NOT BE TREATED AS I.T.A NO. 1937 /AHD/20 11 A.Y. 2008 - 09 PAGE NO ACIT VS. SHRI RAJENDRABHAI SUGAMCHAND SHAH 4 BUSINESS PROFIT. ASSESSEE VIDE LETTER DATED 18.11.2010 FILED A REPLY, THE RELEVANT PORTION OF WHICH IS REPRODUCED AT PARA NO. 4 OF THE ASSESSMENT ORDER [PAGE NO. 2]. HOWEVER, ASSESSING OFFICER WAS NOT SATISFIED WITH THE ASSESSEE 'S REPLY AND THEREFORE AS PER HIS FINDINGS GIVEN AT PARA NO. 5 OF THE ASSESSMENT ORDER [PAGE NO. 2], MADE THE ADDITION OF RS. 7,86,88,639/ - (RS. 79,92,480/ - + RS. 1, 06,96,1 59/ - ) BY TREATING THE SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN AS BUSINESS INCOME. 3. IN THE COURSE OF APPELLATE PROCEEDINGS, IT IS SUBMITTED THAT ASSE SSING OFFICER IS NOT JUSTIFIED IN TREATING INCOME FROM CAPITAL GAINS AS BUSINESS INCOME. IT IS PERTINENT TO POINT OUT AT THE OUTSET THAT THE ISSUE INVOLVED FOR THE YEAR UNDER CONSIDERATION STANDS COVERED BY THE DECISION OF HONOURABLE ITAT DATED 29/01/2010 IN ASSESSEE'S OWN CASE FOR IMMEDIATELY TWO PRECEDING YEARS. IT MAY BE NOTED THAT SIMILAR ISSUE ALSO AROSE IN THE IMMEDIATELY THREE PRECEDING ASSESSMENT YEARS VIZ. A.Y 2.005 - 06, 2006 - 07 & 2007 - 08 & IN THE SAID THREE YEARS; THE INCOME FROM CAPITAL GAINS SHOW N BY ASSESSEE WAS TREATED AS BUSINESS INCOME BY ASSESSING OFFICER ON THE BASIS OF SIMILAR OBSERVATIONS AS MADE IN THE ASSESSMENT ORDER FOR THE YEAR UNDER CONSIDERATION. IN THE PRECEDING YEARS, ASSESSEE CHALLENGED THE ADDITION BEFORE LEARNED CIT(A) & THE AP PEAL OF ASSESSEE WAS PARTLY ALLOWED BY ACCEPTING THE LONG TERM CAPITAL GAINS SHOWN BY ASSESSEE AS CAPITAL GAINS INSTEAD OF BUSINESS INCOME AS TREATED BY ASSESSING OFFICER. AGAINST THE SAID ORDER, BOTH ASSESSEE AND DEPARTMENT FILED APPEAL BEFORE HONOURABLE ITAT & THE ISSUE HAS BEEN DECIDED BY ABOVE REFERRED ORDER. IN THE SAID ORDER, THE HONOURABLE ITAT HAS DISCUSSED THE ISSUE AT LENGTH & THE DECISION OF LEARNED CIT(A) AS REGARDS INCOME FROM LONG TERM CAPITAL GAINS WAS UPHELD AND AS REGARDS THE INCOME FROM SH ORT TERM CAPITAL GAINS SHOWN BY ASSESSEE, THE HONOURABLE ITAT HELD THAT WHERE SHARES ARE HELD FOR LESS THAN A MONTH, GAIN ON THEM SHOULD BE TREATED AS PROFIT FROM BUSINESS AND WHERE SHARES ARE HELD FOR MORE THAN A MONTH, THEY SHOULD BE TREATED AS INVESTMEN T AND ON THEIR SALE SHORT TERM CAPITAL GAINS SHOULD BE CHARGED. AS THERE IS NO DIFFERENCE IN THE FACTS FOR THE YEAR UNDER CONSIDERATION AND AS ABOVE DECISION HAS BEEN GIVEN IN APPELLANT'S OWN CASE BY HONOURABLE ITAT, IT IS PRAYED THAT ABOVE RATIO OF HONOURABLE ITAT MAY KINDLY BE APPLIED FOR I.T.A NO. 1937 /AHD/20 11 A.Y. 2008 - 09 PAGE NO ACIT VS. SHRI RAJENDRABHAI SUGAMCHAND SHAH 5 THE YEAR UNDER CONSIDERATION. IN THE IMMEDIATELY PRECEDING YEAR, YOUR HONOUR HAS ALSO PASSED THE ORDER ACCEPTING ABOVE PLEA OF APPELLANT. 4. IN VIEW OF THE ABOVE AND DETAILED SUBMISSIONS MADE DU RING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE LETTER DATED 18/11/2010 WHICH IS REPRODUCED IN PARA 4 OF ASSESSMENT ORDER & ALSO IN VIEW OF DETAILED SUBMISSIONS MADE IN APPELLATE PROCEEDINGS FOR THE IMMEDIATELY PRECEDING THREE YEARS, THE ACTION OF ASSESSING OFFICER IN TREATING THE INCOME FROM CAPITAL GAINS AS BUSINESS INCOME MAY KINDLY BE DELETED. YOUR HONOUR IS THEREFORE REQUESTED TO KINDLY ACCEPT THE PLEA O F ASSESSEE. X X X X X X X X X X X X X X X X X X 4. DECISION 4.1 I HAVE DULY CONSIDERED THE ABOVE SUBMISSION, OF THE APPELLANT AND FIND THAT THE ISSUE INVOLVED IN THE FIRST GROUND OF APPEAL IS COVERED BY MY APPELLATE ORDER, IN THE CASE OF THE APPELLANT IN THE A.Y. 2007 - 08, WHEREIN, I HAVE APPLIED THE DECISION OF THE ITAT, DATED 29 - 01 - 2010 IN APPELLANT'S CASE IN THE A.YS, 2005 - 06 & 2006 - 07. I, THEREFORE, FOLLOWING THE APPELLATE ORDER PASSED BY ME IN THE CASE OF THE APPELLANT IN A.Y. 2007 - 08 DIRECT THE ASSESSING O FFICER TO ASSESS THE AMOUNT OF RS. 1,06,96,159/ - DECLARED BY THE APPELLA NT AS LONG TERM CAPITAL GAIN UNDER THE HEAD OF 'LONG TERM CAPITAL GAIN'. IN SO FAR AS THE SHORT TERM CAPITAL GAIN IS CONCERNED, I DIRECT THE ASSESSING OFFICER THAT SHORT TERM CAPITAL GAIN ARISING OUT OF SALE OF SHARES HELD FOR A PERIOD OF LESS THAN 30 DAYS IS TO BE ASSESSED UNDER THE HEAD 'BUSINESS INCOME' AND THE SHORT TERM CAPITAL GAIN ARISING OUT OF SALE OF SHARES HELD FOR A PERIOD OF 30 DAYS AND MORE BUT LESS THAN 1 YEAR IS TO BE ASSESSED UNDER THE HEAD 'SHORT TERM CAPITAL GAIN'. THE FIRST GROUND OF APP EAL IS, THEREFORE, PARTLY ALLO WED WITH THE ABOVE DIRECTIONS. 5. WE HAVE HEARD THE REVENUE AND PERUSED THE CASE FIL E. NONE HAS COME PRESENT AT ASSESSEE S BEHEST DESPITE SERVICE OF NOTICE. I.T.A NO. 1937 /AHD/20 11 A.Y. 2008 - 09 PAGE NO ACIT VS. SHRI RAJENDRABHAI SUGAMCHAND SHAH 6 WE PROCEED EX - PARTE. IT TRANSPIRES THAT THE COMMISSIONER OF IN COME TAX(A) H AS FOLLOWED THE TRIBUNAL S ORDER IN DECEASED ASSESSEE S OWN CASE RELATING TO PRECEDING ASSESSMENT YEARS IN DIRECTING THE ASSESSING OFFICER TO TREAT PROFITS ARISING FROM SHARES HELD LESS THAN 30 DAYS ONLY AS BUSINESS INCOME AND EXCEEDING THE SA ID PERIOD TO BE CAPITAL GAINS. THERE IS NO DISTINCTION ON FACTS FORTHCOMING. THE REVENUE MERELY PLEADS THAT ITS APPEAL U/S. 260A OF THE ACT IS PENDI NG BEFORE THE HON BLE HIGH C OURT. WE DO NOT SEE THE SAME TO BE A PLAUSIBLE EXPLANATION FOR ADOPTING A DIF FERENT VIEW. MORE SO, WHEN THE SAME HAS ARISEN IN ASSESSEE S OWN CASE IN PRECEDING ASSESSMENT YEARS WITHOUT THESE BEING ANY CHANGE IN FACTS AND CIRCUMSTANCES . WE ADOPT CONSISTENCY IN THESE FACTS AND REJECT THE REVENUE S SOLE SUBSTANTIVE GROUND. 6. THIS REVENUE S APPEAL IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 26 - 08 - 2015 SD/ - SD/ - ( G.D. AGRAWAL ) ( S. S. GODARA ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD : DATED 26 /08 /2015 A K / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD I.T.A NO. 1937 /AHD/20 11 A.Y. 2008 - 09 PAGE NO ACIT VS. SHRI RAJENDRABHAI SUGAMCHAND SHAH 7 6. GUARD FILE. BY ORDER/ , / ,