The DCIT, Circle-3, Surat V. Shri Mulchandbhai Amin, Surat

ITA 2226/AHD/2011

• Counselvise Citation: 222620514 RSA 2011
• Duration Of Justice: 3 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 05-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: RASESH SHAH
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: S H RI G. D. AGRAWAL , VICE PRESIDENT AND SHR I RAJPAL YADAV , JUDICIAL MEMBER DCIT, CENTRAL CIRCLE 3, SURAT (APPELLANT) VS SHRI MULCHAND AMIN, 503, MEGHDHANUSH APARTMENT, SARELAWADI, GHOD - DOD ROAD, SURAT PAN: ABWPA7967M (RESPONDENT) REVENUE BY: SMT. SONIA KUMAR, SR. D.R. ASSESSEE BY: S HRI RASESH SHAH , A.R. DATE OF HEARING : 17 - 06 - 2 015 DATE OF PRONOUNCEMENT : 24 - 07 - 2 015 / ORDER P ER : RAJPAL YADAV , JUDICIAL MEMBER : - REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 22 ND JUNE, 2011 PA SSED FOR ASSESSMENT YEAR 2008 - 09 . I T A NO . 2226 / A HD/20 11 A SSESSMENT YEAR 200 8 - 09 I.T . A NO. 2226 /AHD/20 11 A.Y. 2008 - 09 PAGE NO DCIT VS. SHRI MULCHAND AMIN 2 2. THOUGH THE REVENUE HAS TAKEN THREE GROUNDS OF APPEAL BUT ITS GRIEVANCE REVOLVES AROUND A SINGLE ISSUE WHER EBY IT HAS PLEADED THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE PROFIT/GAINS EARNED ON THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES AND SECURITIES OF RS. 75, 0 5,935/ - AS LONG TERM CAPITAL GAIN IN STEAD OF TREATING THE SAME UNDER THE HEAD BUSINESS INCOME . 3. LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF ITAT PASSED IN ITA NO. 127/AHD/2009 AND IT A NO. 2076/AHD/2009 FOR ASSESSMENT YEAR 2005 - 06 AND 2006 - 07. HE PLACED ON RECORD THE COPIES OF THE TRIBUNAL S ORDERS. 4. THE BRIEF FACTS OF THE CARE ARE THAT ASSESSEE HAS FILED HIS RETURN OF INCOME ELECTRONICALLY ON 30 TH SEPTEMBER, 2008 DECLARING TOTAL I NCOME AT RS. 1,32,33,060/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE U/S. 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE ASSESSING OFFICER THAT ASSESSEE HAS SHOWN LONG TER M CAPITAL GAIN AND SHORT TERM CAPITAL GAIN OF RS. 75, 0 7,935/ - . THE LD. ASSESSING OFFICER HAS TREATED THE ACTIVITIES OF ASSESSEE OF PURCHASE AND SALES OF SHARES AS A BUSINESS INCOME. THE FINDING RECORDED BY THE ASSESSING OFFICER READS AS UNDER: - 4. ON P ERUSAL OF P & L ACCOUNT, IT IS SEEN THAT THE ASSESSEE EARNED LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN OF RS.75,05,935/ - . THE AR WAS REQUIRED TO SUBMIT THE EXPLANATION AS TO WHY THE SAME SHOULD NOT BE TREATED AS BUSINESS PROFIT. THE AR VIDE LETTER DTD. 19.11.2010 SUBMITTED THAT THE ADDITION MADE ON THE SAME ISSUE WAS RESTRICTED BY THE CIT(A) IN A.Y. 2007 - 08. THE ID. CIT(A) HELD THAT PROFIT EARNED IN RESPECT OF SHARES HELD FOR 30 DAYS OR LESS I.T . A NO. 2226 /AHD/20 11 A.Y. 2008 - 09 PAGE NO DCIT VS. SHRI MULCHAND AMIN 3 WILL BE TREATED AS BUSINESS PROFIT. BESIDES THIS THE AR S UBMITTED THE SAME ARGU MENTS WHICH ARE GIVEN IN A.Y. 2 007 - 08. 5. THE ARGUMENT OF THE AR ARE CONSIDERED BUT ARE NOT ACCEPTABLE. THE DECISION OF THE CIT(A) FOR A.Y. 2007 - 08 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND SECOND APPEAL TO ITAT HAS BEEN FILED. FO R THE REASONS STATED IN THE ASSESSMENT ORDER OF A.Y.2007 - 08 AND ON THE BASIS OF VARIOUS JUDICIAL PRONOUNCEMENTS MENTIONED IN THE ASSESSMENT ORDER FOR A.Y. 2007 - 08, THE AMOUNT OF RS.75,05,935/ - IS TREATED AS BUSINESS INCOME. 5. DISSATISFIED WITH THE ACTIO N OF ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS). LD. FIRST APPELLATE AUTHORITY AFTER FOLLOWING THE ORDER OF HIS PREDECESSOR IN ASSESSMENT YEAR 2007 - 08 AND THE ORDERS OF ITAT, AHMEDABAD SET ASIDE THE ACTI ON OF AS SESSING OFFICER AND DIRECTED HIM TO TREAT THE AS SESSEE AS AN INVESTOR AND ACCORDINGLY ASSESS THE GAINS FROM SALE OF SHARES AS A LONG TERM CAPITAL GAIN AS WELL AS SHORT TERM CAPITAL GAIN . THE FINDING OF THE COMMISSIONER OF INCOME TAX (APPEALS) READ S AS UNDER: 4.1. I HAVE DULY CONSIDERED THE ABOVE SUBMISSION OF THE APPELLANT AND FIND THAT FIRST GROUND OF APPEAL TAKEN BY THE APPELLANT IS IDENT ICAL TO THE GROUND OF APPEAL NO. 1 TAKEN IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR, I.E. A.Y. 2007 - 08 VIDE A PPEAL NO. CAS/II/403/09 - 10, WHICH HAS BEEN PARTLY ALLOWED BY THE UNDERSIGNED VIDE ORDER DTD. 13.09.2010. IN VIEW OF THE SAME, THE ISSUES INVOLVED IN THE INSTANT APPEAL ARE FOUND TO BE COVER ED BY THE ABOVE APPELLATE ORDER. I, THEREFORE, FOLLOWING THE ABOVE APPELLATE ORDER DTD. 13.09.2010 IN THE APPELLANT'S CASE IN A.Y. 2007 - 08, DIRECT THE ASSESSING OFFICER TO TREAT THE CAPITAL GAIN FROM SALE OF SHARES HELD FOR A PERIOD OF 1 YEAR OR MORE AS LONG TERM CAPITAL GAIN AND TO ASSESS THE SAME UNDER THAT HEAD. 4.2 IN SO FAR AS CAPITAL GAIN DECLARED BY THE APPELLANT UNDER THE HEAD SHORT TERM CAPITAL GAIN IS CONCERNED, I DIRECT THE ASSESSING OFFICER TO APPLY THE RATIO OF THE DECISION IN THE CASE OF SHRI SUGAMCHAND C SHAH, VIDE ITAT, AHMEDABAD BEN CH 'D' ORDER DTD. 29.01.2010 IN ITA NO. 3554/AHD/2008 AND 1932/AHD/2008, FOR THE PURPOSE OF DETERMINING THE SHORT TERM CAPITAL GAIN, I.E. THE SHARES WHICH ARE HELD FOR A MONTH AND MORE, BUT LESS THAN ONE YEAR SHOULD BE TREATED AS 'INVESTMEN T' AND ON THEIR SALE, PROFIT SHALL BE CHARGEABLE UNDER THE HEAD 'SHORT TERM CAPITAL I.T . A NO. 2226 /AHD/20 11 A.Y. 2008 - 09 PAGE NO DCIT VS. SHRI MULCHAND AMIN 4 GAIN', AND, WHERE SHARES ARE HELD FOR LESS THAN A MONTH, GAIN FROM SALE OF THESE SHARES SHOULD BE TREATED AS 'PROFIT FROM BUSINESS.' THE ABOVE DECISION OF 'D' BENCH OF THE ITAT, AHMEDABAD, IN THE CASE OF SHRI SUGAMCHAND C SHAH (SUPRA), HAS ALSO BEEN RECENTLY FOLLOWED BY THE ITAT, AHMEDABAD IN ANOTHER CASE OF SMT. DIPIKABEN MUKESHBHAI SARAIYA, SURAT IN A.Y. 2005 - 06 VIDE ORDER DTD. 25/3/11 IN ITA NO. 2669/AHD/2008. THE APPELLANT SHALL, ACCORDINGLY, FURNISH DETAILS OF ALL SUCH SCRIPS, VIZ. GAIN FROM SHARES WHICH HAVE BEEN HELD FOR A PERIOD OF LESS THAN 30 DAYS BEFORE THE ASSESSING OFFICER FOR GIVING EFFECT TO THIS ORDER. THE FIRST GROUND OF APPEAL IS, THEREFORE , PARTLY ALLOWED. 6. WITH THE ASSISTANCE OF LD. REPRESENTATIVES , WE HAVE GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT IN THIS ASSESSMENT YEAR, ASSESSING OFFICER HAS NOT INDEPENDENTLY DISCUSSED THE FACTS AND CIRCUMSTANCES EXHIBITING THE NUMBER OF TRAN SACTIONS OF PURCHASE AND SALES OF SHARES OF THE ASSESSEE. HE SIMPLY RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER IN ASSESSMENT YEAR 2007 - 08. WE FIND THAT IN ASSESSMENT YEAR 2005 - 06 UNDER SIMILAR CIRCUMSTANCES AN ADDITION OF RS. 68,87,173/ - WAS M ADE BY THE ASSESSING OFFICER. THE ASSESSEE IN THAT YEAR ALSO CLAIMED INVESTMENT IN SHARES AND DISCLOSED INCOME UNDER THE HEAD OF SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN. THE LD. ASSESSING OFFICER TREATED THE ASSESS EE AS TRADING IN SHARE AND AS SESS ED THE INCOME FROM PURCHASE AND SALES OF SHARES AS A BUSINESS INCOME. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONCUR RED WITH THE CONCLUSIONS OF THE ASSESSING OFFICER BUT THE ITAT IN ITA NO. 127/AHD/2009 VIDE ITS OR D ER DATED 13 - 05 - 2011 HELD THAT ASSESSEE IS AN INVESTOR AND NOT A TRADER IN SHARES. 7. IN ASSESSMENT YEAR 2006 - 07 AGAIN, THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS. 62,67,735/ - UNDER THE HEAD BUSINESS INCOME INSTEAD OF SHORT TERM CAPITAL GAIN DISCLOSED BY THE ASSESSEE. THE APPE AL TO THE COMMISSIONER OF INCOME TAX (APPEALS) DID NOT BRING ANY RELIEF TO THE ASSESSEE BUT THE TRIBUNAL HAS ACCEPTED THE CONTENTIONS OF THE ASSESSEE I.T . A NO. 2226 /AHD/20 11 A.Y. 2008 - 09 PAGE NO DCIT VS. SHRI MULCHAND AMIN 5 AND DIRECTED THE ASSESSING OFFICER TO TREAT THE PROFIT ON SALE OF SHARES AS SHORT TERM CAPITAL GAIN. THE ITAT HAS MADE AN ELABORATE DISCUSSION ON THE ISSUE AND REFERRED A LARGE NUMBER OF DECISIONS IN ORDER TO DETERMINE WHETHER THE TRANSACTIONS OF THE ASSESSEE WERE OF AN INVESTOR OR OF A TRADER. THE CONCLUSIONS DRAWN BY THE ITAT ON PAGE 21 OF THE ORDER ARE W ORTH TO NOTE. IT READS AS UNDER: - 5.12 IN VIEW OF THE FOREGOING, FOLLOWING THE VIEW TAKEN IN THE AFORESAID DECISIONS, IF WE ANALYSE THE TRANSACTIONS IN THE INSTANT CASE, WE FIND THAT THE ASSESSEE DISCLOSED INCOME FROM CAPITAL GAINS / DIVIDENDS IN EARLIE R YEARS AND THE SHARES HAVE ALL ALONG BEEN TREATED AS INVESTMENTS IN THE BOOKS OF ACCOUNT/BALANCE SHEETS. IN THESE CIRCUMSTANCES, WE, THEREFORE, DIRECT THE AO TO ACCEPT THE SHORT - T ERM CAPITAL GAIN AMOUNTING TO RS, 62,67,735/ - DECLARED BY THE ASSESSEE IN TH E RETURN OF INCOME. THEREFORE, GROUND NO.1 IN THE APPEAL IS ALLOWED. 6. AS REGARDS GROUND NO.1 IN THE APPEA L OF THE REVENUE, THE ID. CIT(A) POINTED OUT IN THE IMPUGNED ORDER THAT THE AO IGNORED THE FACT THAT THE RELEVANT SHARES HAD BEEN HELD BY THE ASSES SEE FOR A SUBSTANTIALLY LONGER PERIOD AND THE VARIOUS CRITERIA WHICH THE AO APPLIED THROUGHOUT THE ASSESSMENT ORDER I N TREATING THE SHARE TRANSACTIONS ALLEGEDLY GIVING RISE TO STCG AS INCOME FROM BUSINESS, COULD NOT BE APPLIED TO THE TRANSACTION IN SHARES WHICH HAD BEEN HELD FOR MUCH LONGER DURATIONS. IT WAS FURTHER OBSERVED BY THE ID. COMMISSIONER OF INCOME TAX( A) WHEN SH ARES ARE HELD FOR LONG TERM, TH E MOTIVE IS OBVIOUSLY TO INVEST A ND NOT TO DEAL AS IN A BUSINESS WHILE THE FREQUENCY OF THE TRANSACTIONS W AS ALSO MORE INFREQUENT AND SPACED OUT . ACCORDINGLY, THE ID. CLT( A) WHILE OBSERVING THAT THE SAID SHARES WHICH ARE HELD FOR INVESTMENT PURPOSES FOR LONG TERM, WOULD NOT REQUIRE INFRASTRUCTURE FOR TRANSACTING IN SHARES, CONCLUDED THAT THE LTCG CLAIMED BY T HE ASSESSEE COULD NOT IN ANY WAY BE TREATED AS INCOME FROM BUSINESS. THE ID. DR APPEARING BEFORE US DID NOT CONTROVERT THESE FINDINGS OF THE ID. CIT(A). IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THE REVENUE HAVE NOT BROUGHT TO OUR NOTICE ANY MATERIAL OR CONT RARY DECISION IN ORDER TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE ID. CIT(A). THEREFORE, GROUND NO.1 IN THE APPEAL OF THE REVENUE IS DISMISSED . I.T . A NO. 2226 /AHD/20 11 A.Y. 2008 - 09 PAGE NO DCIT VS. SHRI MULCHAND AMIN 6 8. THOUGH THE ASSESSMENT ORDER IS BASED UP ON THE OBSERVATION OF THE ASSESSING OFFICER RECORDED IN ASSESSMENT YEAR 2007 - 08 BUT IT IS DEMONSTRATED THAT THE STAND OF THE REVENUE IS IDENTICAL STARTING FROM ASSESSMENT YEAR 2005 - 06 TO THIS ASSESSMENT YEAR. THEREFORE, FOLLOWING THE ORDER OF THE ITAT IN ASSESSMENT YEAR 2005 - 06 AND 2006 - 07, WE ARE OF THE VIEW THAT LD. FIRST APPELLATE AUTHORITY HAS RIGHTLY APPRECIATED THE FACTS AND CIRCUMSTANCES AND NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). THIS APPEAL OF THE R EVENUE IS DEVOID OF ANY MERIT AND DISMISSED. ORDER PR ONOUNCED IN THE OPEN COURT ON 24 - 07 - 2015 SD/ - SD/ - ( G.D. AGRAWAL ) ( RAJPAL YADAV ) VICE PRESIDENT JUDICIAL MEMBER AHMEDA BAD : DATED 24 /07 /2015 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,