Shri Upendrabhai Chandrakantbhai Shah, Bhavnagar V. The ACIT.,Circle-1, Bhavnagar

ITA 205/AHD/2010

• Counselvise Citation: 20520514 RSA 2010
• Duration Of Justice: 5 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 21-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: AMIT OZA
• Keywords: Business income
• Section: 6; 2; 143(3)

Judgement Text

ITA NO . 205 /AHD/ 20 1 0 ASSESSMENT YEAR S : 2 0 0 6 - 07 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S.S. GODARA JM] ITA NO. 205 / AHD / 2 0 1 0 ASSESSMENT YEAR: 20 0 6 - 07 UPENDRABHAI CHANDRAKANTBHAI SHAH ....... .. . ..... APPELLANT PLOT NO.895/G, BEHIND KAMA L FLATS, LAL BAHADUR SHASTRI MARG, BHAVNAGAR. [PAN A IHPS 9958 C ] VS. ASSTT. COMMISSIONER OF INCOME TAX .... .................. .... .. RESPONDENT CIRCLE - 1 , BHAVNAGAR . APPEARANCES BY: AMIT OZA FOR THE A PPELLANT SONIA K U MAR FOR THE RE SPONDENT DATE OF CONCLUDING THE HEARING : JUNE 30 TH , 201 5 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 29 TH , 2015 O R D E R PER PRAMOD KUMAR AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 14 TH OCTOBER, 2009 PASSED BY THE LD . CIT(A) IN THE MAT T ER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR 200 6 - 07 . EVEN THOUGH THE ASSESSEE HAS RAISED AS MANY A S FIVE GROUNDS OF APPEAL, SHORT GRIEVANCE OF THE ASSESSEE IS THA T THE LEARNED CIT ( A ) , ON THE FACTS A ND IN THE CIRCUMSTANCES OF THIS CASE, HAS ERRED IN TREATING THE SHORT TERM CAPITAL GAINS OF RS.24,95,215/ - AS BUSINESS INCOME OF THE ASSESSEE. ITA NO . 205 /AHD/ 20 1 0 ASSESSMENT YEAR S : 2 0 0 6 - 07 PAGE 2 OF 4 2. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE APPELLANT BEFORE US I S A FORMER BANK EMPLOYEE WHO IS INVESTING IN SHARES SINCE LONG. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS ENTERED INTO A NUMBER OF TRANSACTIONS, RESULTING IN PURCHASES OF SHARES WORTH RS.1,82,02,823/ - WHICH WERE SOLD FOR RS.2,06,98,038/ - FETCHING THE ASSESSEE GAINS OF RS.24,95,215/ - . THE ASSESSEE DEALT IN 26 SCRIPS, THE HOLDING PERIOD VARIED BETWEEN 1 TO 27 DAYS AND PURCHASES VALUE OF SCRIPS RANGED FROM RS.2 LAKHS TO RS.18 LAKHS. WHEN THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SHOW CAUSE A S TO WHY THESE GAINS NOT BE TREATED A S BUSINESS INCOME, IT WAS SUBMITTED BY THE ASSESSEE THAT HE WAS NOT ENGAGED IN ANY BUSINESS , THAT HE DID NOT BORROW ANY FUNDS FOR THE S E PURCHASE S AND THESE ACTIVITIES WERE CA RRIED OUT BY HIS OWN RETIREMENT FUNDS , THAT HIS INTENTION WAS TO HOLD TH E SHARES FOR LONG BUT HE BOOKED THE PROFITS IN THESE CASES BY SELLING THE SHARES WITHIN SHORT TIME A ND THAT HIS AVERAGE HOLDING PERIOD IS 76 DAYS . THE ASSESSING OFFICER NOTED THAT IT I S AMPLY CLEAR THAT THE ASSESSEE S OBJECTIVE FOR PURCHASE OF SHARES OF COMPANIES IS NOT TO DERIVE INCOME BY WAY OF DIVIDEND ETC. BUT ENTERING INTO TRANSACTIONS WITH THE MOTIVE OF EARNING PROFITS FROM THESE TRAN SACTIONS . IT WAS ALSO NO T ED THAT THE ASSESS EE HAS NOT MAINTAINED SEPARATE PORTFOLIOS FOR TRADING A ND INVESTMENTS . WITH THESE OBSERVATIONS, AND PARTICULARLY TAKING NOTE OF THE FREQUENCY OF TRANSACTION , THE ASSESSING OFFICER PROCEEDED TO TREAT THE GAINS ON SALE OF SHARES AS BUSINESS PROFITS . AGGRIE VE D , ASSESSEE CARRIED THE M A TTER IN APPEAL BEFORE THE LD . CIT(A) BUT WITHOUT ANY SUCCESS. LEARNED CIT(A) CONFIRMED T HE ACTION OF THE ASSESSING OFFICER A ND, WHILE DOING SO, OBSERVED AS FOLLOWS : - 3. I HAVE CAREFULLY GONE THROUGH THE FACTS OF THE CASE, A ND WRITTEN SUBMISSION MADE BY THE LD . COUNSEL WITH CA S E LAW. IN THIS CASE, DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LEARNED COUNSEL OF THE APPELLANT COULD NOT CLARIFY T HE POSITION OF TOTAL PURCHASES AND SALES DURING THE YEAR, POSITION OF BALANCE SHEE T AND CAPITAL ACCOUNT, POSITION OF THE APPELLANT S ACTIVITIES IN PURCHASE AND SALE OF SHARES IN ITA NO . 205 /AHD/ 20 1 0 ASSESSMENT YEAR S : 2 0 0 6 - 07 PAGE 3 OF 4 SUBSEQUENT ASSESSMENT YEARS AND THE PERCENTAGE OF HIS INVESTMENT IN SHARES AND SECURITIES COMPARED TO HIS TOTAL CAPITAL. SINCE THESE FACTORS GO TO THE ROUTE CA USE FOR DECIDING THE NATURE OF TRANSACTIONS, IT WAS THE DUTY OF THE APPELLANT TO FURNISH THE SAID REQUIRED DETAILS AND CLARIFY T HE POSITION WITH REGARD TO TRANSACTIONS IN SHARES AND SECURITIES. THE ASSESSING OFFICER, IN ANNEXURE A TO THE ASSESSMENT ORDE R PASSED IN THE CASE OF THE APPELLANT HAS SHOWN THE NATURE OF TRANSACTIONS MADE BY THE APPELLANT IN PURCHASE AND SALE OF SHARES. IT IS NOTICED FROM THE SAME THAT THERE IS A CLEAR MOTIVE OF THE APPELLANT TO TRADE IN SHARES BECAUSE THE SHARES HAVE BEEN PURC HASED ON ONE DATE AND JUST WITHIN TWO OR THREE DAYS THE SAME HAVE BEEN SOLD WHICH CONFIRMED THAT THERE WAS A CLEAR MOTIVE TO TRADE IN SHARES AND MAKE MAXIMUM PROFIT FROM THE SAME . THIS ANNEXURE REVE A LS THE PROFIT A ND S ALE OF SHARES MADE IN THE MONTHS OF A PRIL & MAY 2005, BUT INTENTION OF APPELLANT, MAGNITUDE OF TRANSACTIONS, NATURE OF INVESTMENT, LENGTH OF OWNERSHIP - HOLDING , FREQUENCY OF TRANSACTIONS, CLEARLY REVEALS THAT THE APPELLANT IS NOT AN INVESTOR BUT IS A TRADER IN SHAR E. ALSO, IN THIS CASE, IT HA S NOT BEEN CLARIFIED A S TO WHETHER THE A PPELLANT IS HAVING THE SHARES A S HIS INVESTMENT. OVER - ALL CONDUCT OF THE APPELLANT SEEN FROM ALL ANGLES AND WITH DIFFERENT TESTS LE A DS TO THE CONCLUSION THAT DURING THE YEAR WHAT HAS BEEN GAINED BY THE APPELLANT FRO M PURCHASE AND SALE OF SHARES IS THE BUSINESS INCOME OF THE APPELLANT FROM TRADING OF THE SHARES. HENCE, THE ASSESSING OFFICER S ACTION IN TREATING THE GAIN FROM THE TRANSACTION AS BUSINESS INCOME IS HELD TO BE JUSTIFIED. THIS GROUND, THEREFORE, IS HEREB Y DISMISSED. 3. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 5. WE FIND THAT THE A SSESSEE IS RETIRED PUBLIC SECTOR SERVANT WHO HAS BEEN CONSISTENTLY INVESTING IN SHARES AND, IN THE PARTICULAR YEAR BEFORE US, SHARE MARKET W A S ON THE UPSWING. IT WAS IN THESE CIRCUMSTANCES TH A T HE BOOKED PROFITS ON APPRECIATION IN SOME CASES. INCIDE NTALLY, THERE WAS NOT A SINGLE CASE OF LOSS ON SALE. A S FOR T HE MOTIVATION OF MAKING PROFIT ON SALE, SINCE THERE WAS NO DIVIDEND INCOME, THE ASSESSING OFFICER S STAND IS TOTALL Y DEVOID OF ANY MERITS INASMUCH AS JUST BECAUSE SOMEONE IS LOOKING FOR CAPITAL APPRECIATION, WHICH IS INVARIABLY THE CASE IN ALL INVESTMENT DECISIONS, IT DOES NOT CEASE TO BE AN INVESTMENT. THERE ARE NO BORRO WED FUNDS IN THIS CASE AT ALL. ITA NO . 205 /AHD/ 20 1 0 ASSESSMENT YEAR S : 2 0 0 6 - 07 PAGE 4 OF 4 THE FACT THAT THE ASSESSEE HAS BOOKED PROFITS IN QUITE A FEW CASES, BY SELLING THE SHARES ON A PPRECIATION VALUE, CANNOT BE PUT AGAINST THE ASSESSEE AS HE HAS BEEN A LL ALONG AN INVESTOR . ON THE PECULIAR FACTS OF THIS CASE, IN OUR CONSIDERED VIEW, THERE IS NO GOOD A ND LEGALLY SUSTAINABLE REASON TO REJECT THE CLAIM OF THE ASSESSEE THAT THE GAINS ARE SHORT T ERM CAPITAL GAINS A ND THAT IT IS NOT A CASE OF TRADING IN SHARES. THIS IS, IN OUR UNDERSTANDING , MORE OF A CASE OF AN INVESTOR WHO YIELDED TO QUICK AND SHORT TERM GINS RATHER THAN HOLDING ON TO THE S HARES ON LONG TERM B A SIS. HAVING HELD SO, WE MAK E IT CLEAR THAT THE CONCLUSIONS SO ARRIVED AT ARE ON PECULIAR FACTS OF THE C A SE IN ENTIRE T Y, AND NO GENERALISATIONS NEED NOT BE DRAWN FROM THE CONCLUSIONS. 6. FOR THE REASONS SET OUT ABOVE, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSE SSING O FFIC E R TO TREAT GAINS, ON SALE OF THE SHARES IN QUESTION, AS SHORT TERM CAPITAL GAINS. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 7 . IN THE RESULT, T HE APPEAL IS ALLOWED . P RONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF SEPTEMBER, 2015. SD/ - SD/ - S.S. GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD , THE 29 TH DAY OF SEPTEMBER , 201 5 PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CO MMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD