Jaswant Tember Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 2008/DEL/2012

• Counselvise Citation: 200820114 RSA 2012
• Duration Of Justice: 2 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 10-11-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 01-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SULEKHA VERMA
• Assessee Lawyers: V K NISHCHAL
• Keywords: Business income; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D, NEW DELHI) BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NOS. 2008 TO 2012/DEL/2012 ASSESSMENT YEARS : 2003-04 TO 2007-08 M/S. JASWANT TIMBER PVT. LTD., VS. ACIT, CC-14, (NOW ROCKET COMMODITIES PVT. LTD.,), NEW DELHI 1114, 11 TH FLOOR, NAURANG HOUSE, 21, K. G. MARG, NEW DELHI-110 001 GIR / PAN:AABCJ3274H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V K NISHCHAL, CA RESPONDENT BY : MS. SULEKHA VERMA, CIT DR ORDER PER BENCH: THESE ARE 5 APPEALS FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF LD. CIT(A) ALL DATED 06.03.2012. THE SAME ISSUES A RE INVOLVED IN THESE APPEALS AND THESE WERE HEARD TOGETHER THEREFORE, FO R THE SAKE OF CONVENIENCE, A COMMON AND CONSOLIDATED ORDER IS BEING PASSED. I N I.T.A.NO. 2008/DEL/2012, THE ONLY GROUND TAKEN BY THE ASSESSE E IS THE ACTION OF LD. CIT(A) BY WHICH HE HAD CONFIRMED THE ADDITION MADE BY THE A.O. BY TREATING THE PROFIT ON SALE OF SHARES AS BUSINESS I NCOME INSTEAD OF INCOME FROM CAPITAL GAIN AS DECLARED BY ASSESSEE. THE GRO UNDS TAKEN IN I.T.A.NOS.2009, 2010, 2011 AND 2012/DEL/2012 ARE SI MILAR WHEREIN THE ASSESSEE HAS TAKEN THE SIMILAR GROUND AS IN A.Y. 20 03-04 AND ONE ADDITIONAL GROUND HAS BEEN TAKEN IN THESE YEARS WHEREIN REVENU E HAS CHALLENGED THE 2 ITA NOS.2008-12/DEL/2012 ACTION OF LD. CIT(A) BY WHICH HE HAD UPHELD THE DIS ALLOWANCE MADE BY THE A.O. U/S 14A OF THE I. T. ACT, 1961. 2. ARGUING UPON THE 1 ST COMMON GROUND IN THIS GROUP OF APPEALS, THE LD. A.R. SUBMITTED THAT ASSESSEE HAD EARNED INCOME AS C APITAL GAIN WHEREAS LOWER AUTHORITIES HAVE ASSESSED THE SAME AS INCOME FROM BUSINESS ACTIVITIES. IT WAS ARGUED THAT IN THE BALANCE SHEET ALSO, THE A SSESSEE HAD CLASSIFIED THE INVESTMENT IN SHARES AS INVESTMENT AND, THEREFORE, THE A.O. SHOULD HAVE CONSIDERED THE INCOME FROM SUCH INVESTMENT AS INCOM E FROM CAPITAL GAIN. 3. LD. D.R. ON THE OTHER HAND INVITED OUR ATTENTION TO ASSESSMENT ORDER IN THESE YEARS AND SUBMITTED THAT THE ASSESSEE HAD ENT ERED INTO A NUMBER OF TRANSACTIONS RUNNING INTO CRORES OF RUPEES AND THER E WERE FREQUENT TRANSACTIONS AND ALSO SUBMITTED THAT LD. CIT(A) HAS NOTED IN HIS ORDER THAT ORIGINALLY IN THE RETURN FILED U/S 139, THE ASSESSE E HAD CLASSIFIED THE INCOME FROM SALE OF SHARES AS BUSINESS INCOME ONLY AND IT WAS ONLY DURING RETURN FILED U/S 153C, THAT THE ASSESSEE CLAIMED THE INCOM E AS INCOME FORM CAPITAL GAIN. IT WAS FURTHER ARGUED THAT IN I.T.A. NOS. 20 11 AND 2012/DEL/2012, THE GROUNDS RAISED BY THE ASSESSEE REGARDING INCOME FRO M BUSINESS OR CAPITAL GAIN DOES NOT ARISE AT ALL FROM THE ORDER OF THE A. O. OR CIT(A) AND THE ASSESSEE HAS MECHANICALLY TAKEN THE ISSUES IN THESE YEARS WITHOUT GOING THROUGH THE ORDER OF LD. CIT(A). 4. ARGUING UPON SECOND GROUND OF APPEALS REGARDING DISALLOWANCE U/S 14A, LD. A.R. SUBMITTED THAT EARNING OF DIVIDEND IN COME WAS NOT THE INTENTION OF THE ASSESSEE AND DIVIDEND WAS RECEIVED INCIDENTALLY AND THERE WAS NO EXPENDITURE INCURRED BY THE ASSESSEE FOR EAR NING THE EXEMPT INCOME. MOREOVER, IT WAS SUBMITTED THAT RULE 8D HAD NO APPL ICATION UP TO A.Y. 2007-08. 3 ITA NOS.2008-12/DEL/2012 5. LD. D.R. ON THE OTHER HAND SUBMITTED THAT IN I.T .A. NO. 2008 TO 2011/DEL/2012, LD. CIT(A) HAD ONLY REMANDED THE ISS UE BACK TO THE OFFICE OF A.O. FOR RE-ADJUDICATION ON THE BASIS OF SOME RE ASONABLE ESTIMATE. THEREFORE, THERE IS NO GRIEVANCE CAUSED TO THE ASSE SSEE. AS REGARDS I.T.A.NO. 2012/DEL/2012, LD. D.R. SUBMITTED THAT BE FORE THE A.O., THE ASSESSEE ITSELF HAD AGREED FOR DISALLOWANCE OF RS.7 6,190/- AND OUR ATTENTION WAS INVITED TO PAGE 7 OF LD. CIT(A)S ORDER WHEREIN LD. CIT(A) HAS NOTED THAT ASSESSEE ITSELF HAD WORKED OUT DISALLOWANCE U/ S 14A TO THE EXTENT OF RS.76,190/-. THEREFORE, RELYING UPON CASE LAW OF S TERLING MACHINE TOOLS PVT. LTD. 123 ITR 181, LD. D.R. SUBMITTED THAT SINC E THE ASSESSEE ITSELF HAD AGREED FOR THE DISALLOWANCE, THERE WAS NO SCOPE FOR APPEAL. 6. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. WE FIND THAT LD. CIT(A) HAS UPHELD THE TREATMENT OF INCOME FROM SALE OF SHARES AS BUSINESS INCOME BY HOLDING S IMILAR FINDINGS IN EACH YEAR EXCEPT IN I.T.A.NO. 2011 AND 2012/DEL/2012, WH ERE THIS ISSUE HAS NOT ARISEN AT ALL. FOR THE SAKE OF CONVENIENCE, WE REP RODUCE, LD. CIT(A)S FINDING FOR A.Y.S 2003-04, 2004-05 AND 2005-06, WH ICH ARE AS UNDER: 2003-04: 4.3 I HAVE CAREFULLY CONSIDERED THE VIEWS OF THE A SSESSING OFFICER AND -THE SUBMISSIONS MADE BY THE APPELLANT ON THIS ISSUE. THE FOLLOWING FACTS ARE CULLED OUT FROM THE RECORDS WHI CH ARE RELEVANT TO DECIDE WHETHER THE SUBJECT INCOME IS CAPITAL GAINS OR BUSINESS INCOME:- I. IN THE ORIGINAL RETURN FILED ON 30.05.2003 VIDE ACKNOWLEDGMENT NO. 553, THE APPELLANT ITSELF TREATED THE TRANSACTI ON AS BUSINESS INCOME AND HAD CLAIMED NET BUSINESS RS4,07,198/-. II. IN THE BOOKS OF ACCOUNTS, INCLUDING THE PROFIT & LOSS ACCOUNT PREPARED AS PART OF FINAL ACCOUNTS, THE RECEIPTS FR OM THE SAID TRANSACTIONS ARE TREATED AS TRADING RECEIPTS AND AL L EXPENSES ARE CLAIMED AGAINST IT. 4 ITA NOS.2008-12/DEL/2012 III. THE A.O. HAS RECORDED THAT THE APPELLANT HAS DIVERSIFIED PORTFOLIO OF SHARES AND SECURITIES AND HAS DEALT IN AS MANY AS 71 SCRIPS. A.O. HAS NOTED THAT THERE IS VERY HIGH FREQ UENCY OF TRANSACTION. IV. THE MAGNITUDE OF TRANSACTIONS IS ALSO HIGH AND SHARES WORTH RS.3,23,43,941/- HAVE BEEN SOLD DURING THE FINANCI AL YEAR. WEIGHING THE ABOVE FACTORS IN TOTALITY, IT IS HELD THAT THE A.0. WAS JUSTIFIED IN TREATING THE TRADING DONE BY THE APPELLANT AS BUSINESS ACTIVITY. GROUND NO. 4 IS ACCORDINGLY DISM ISSED. 2004-05: I HAVE CAREFULLY CONSIDERED THE VIEWS OF THE ASSESS ING OFFICER AND THE SUBMISSIONS MADE BY THE APPELLANT ON THIS ISSUE. TH E FOLLOWING FACTS ARE CULLED OUT FROM THE' RECORDS WHICH ARE RELEVANT TO DECIDE WHETHER THE SUBJECT INCOME IS CAPITAL GAINS OR BUSINESS INC OME: I. IN THE ORIGINAL RETURN FILED ON 25.10.2004, THE APPELLANT HAS ITSELF TREATED THE TRANSACTION AS BUSINESS INCOME A ND HAD CLAIMED NET BUSINESS LOSS OF RS.4,08,980/-. II. IN THE BOOKS OF ACCOUNTS, INCLUDING THE PROFIT & LOSS ACCOUNT PREPARED AS PART OF FINAL ACCOUNTS, THE RECEIPTS FR OM THE SAID TRANSACTIONS ARE TREATED AS TRADING RECEIPTS AND AL L EXPENSES ARE CLAIMED AGAINST IT. III. THE A.0. HAS RECORDED THAT THE APPELLANT HAS DIVERSIFIED PORTFOLIO OF SHARES AND SECURITIES AND HAS DEALT IN AS MANY AS 26 SCRIPS. A.O. HAS NOTED THAT THERE IS VERY HIGH FREQ UENCY OF TRANSACTION. IV. THE MAGNITUDE OF TRANSACTIONS IS ALSO HIGH AND SHARES WORTH RS. 7,72,94,829/- HAVE BEEN SOLD DURING THE FINANCI AL YEAR. WEIGHING THE ABOVE FACTORS IN TOTALITY, IT IS HELD THAT THE A.O. WAS JUSTIFIED IN TREATING THE SHARE TRADING DONE BY THE APPELLANT AS BUSINESS ACTIVITY. GROUND NO.4 IS ACCORDINGLY DISMI SSED. 2005-06: 'I HAVE CAREFULLY CONSIDERED THE VIEWS OF THE ASSES SING- 'OFFICER AND THE SUBMISSIONS MADE BY THE APPELLANT ON THIS ISSUE . THE FOLLOWING FACTS ARE CULLED OUT FROM THE RECORD WHICH ARE RELE VANT TO DECIDE WHETHER THE SUBJECT INCOME IS CAPITAL GAINS OR BUSI NESS INCOME:- I. IN THE BOOKS OF ACCOUNTS, INCLUDING THE PROFIT & LOSS ACCOUNT .PREPARED AS PART OF FINAL ACCOUNT. THE RECEIPTS FR OM THE SAID TRANSACTIONS ARE TREATED AS TRADING RECEIPTS AND AL L EXPENSES ARE CLAIMED AGAINST IT. THE OUTSTANDING ON ACCOUNT OF T RADING OF SHARES ARE TREATED AS TRADE DEBTORS. 5 ITA NOS.2008-12/DEL/2012 II. THE A.O, HAS RECORDED THAT HE APPELLANT HAS DIV ERSIFIED PORTFOLIO OF SHARES AND SECURITIES AND HAS DEALT IN AS MANY AS 1 14 SCRIPS. A.O. HAS NOTED THAT THERE IS VERY' HIGH FREQUENCY OF TRANSAC TION. III. THE MAGNITUDE OF TRANSACTIONS IS ALSO HIGH. WEIGHING THE ABOVE FACTORS IN TOTALITY, IT IS HELD THAT A.O. WAS JUSTIFIED IN TREATING THE SHARE TRADING DONE BY APP ELLANT AS BUSINESS ACTIVITY. GROUND NO.4 IS ACCORDINGLY DISMISSED. 6.1 WE FIND THAT LD. CIT(A) HAS RIGHTLY DECIDED THE ISSUE AND WE DO NOT FIND ANY INFIRMITY IN THE SAME, THEREFORE, THIS GRO UND OF APPEAL IN THREE YEARS FROM A.Y. 2003-04 TO 2005-06 ARE DISMISSED. 7. IN A.YS. 2006-07 AND 2007-08, THIS ISSUE DOES NO T ARISE AT ALL FROM THE ORDER OF LD. CIT(A), THEREFORE, SAME ARE DISMISSED . 8. IN VIEW OF ABOVE, APPEAL IN I.T.A.NO. 2008/DEL/2 012 IS DISMISSED WHEREAS GROUNDS NO.1-3 IN I.T.A.NOS. 2009 AND 2010/ DEL/2012 ARE DISMISSED. GROUNDS NO.1-3 IN I.T.A.NOS. 2011 AND 2 012/DEL/2012 ARE DISMISSED AS NOT ARISING OUT OF LD. CIT(A)S ORDER. 8. AS REGARDS THE ISSUE OF DISALLOWANCE U/S 14A, WE FIND THAT LD. CIT(A) HAS REMANDED THE ISSUE BACK TO THE OFFICE OF A.O. F OR READJUDICATION IN I.T.A.NOS. 2008 TO 2011/DEL/2012 WITH A DIRECTION T O THE A.O. TO RECALCULATE THE DISALLOWANCE WITH WHICH WE DO NOT FIND ANY INFI RMITY AND WE UPHOLD THE ORDER OF LD. CIT(A) TO THIS EXTENT. IN I.T.A.NO. 2012/DEL/2012, WE FIND THAT THE ASSESSEE ITSELF HAD AGREED FOR DISALLOWANC E U/S 14A TO THE EXTENT OF RS.76,190/- AS IS EVIDENT FROM REPLY OF ASSESSEE RE PRODUCED BY A.O. AT PAGE 2 OF HIS ORDER AND LD. CIT(A) HAS CONFIRMED THE DIS ALLOWANCE ONLY FOR THIS AMOUNT THEREFORE, NO GRIEVANCE IS ARISING TO ASSESS EE IN THIS RESPECT ALSO AND THEREFORE, GROUND OF DISALLOWANCE U/S 14A IN A.Y. 2 007-08 IS ALSO DISMISSED. 6 ITA NOS.2008-12/DEL/2012 9. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES, THE AP PEALS FILED BY THE ASSESSEE ARE DISMISSED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH NOV., 2014. SD./- SD./- ( H. S. SIDHU) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 14 TH NOV., 2014 SP COPY FORWARDED TO:- THE APPELLANT THE RESPONDENT THE CIT THE CIT (A)-, NEW DELHI. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER