ACIT, Ahmednagar V. Shri Krishnalal Abbott, Ahmednagar

ITA 2228/PUN/2012

• Counselvise Citation: 222824514 RSA 2012
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 08-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: PRADEEP SAGAR
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER. ITA.NO.2228/PN/2012 (ASSESSMENT YEAR 2005-06) ACIT, AHMEDNAGAR CIRCLE, AHMEDNAGAR .. APPELLANT VS. SHRI KRISHNALAL ABBOTT, 13, ABBOTT MARG, CAMP, AHMEDNAGAR PAN NO.ACLPA3010D .. RESPONDENT ASSESSEE BY : SHRI PRADEEP SAGAR REVENUE BY : SHRI S.P. WALIMBE DATE OF HEARING : 24-02-2014 DATE OF PRONOUNCEMENT : 27-02-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 30-05-2012 OF THE CIT(A)-I, PUNE RELATING TO ASSESSMENT YEAR 2005-06. 2. THIS IS THE SECOND ROUND OF LITIGATION BEFORE TH E TRIBUNAL. IN THIS CASE, ORIGINAL ASSESSMENT WAS COMPLETED ON 26- 12-2007 U/S.143(3) WHEREIN THE INCOME FROM SALE OF INVESTME NTS, SHARES AND SECURITIES, WHICH WERE SHOWN UNDER THE HEAD LONG T ERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN AT RS.1,39,77,048 AND RS.20,75,459/- RESPECTIVELY, WERE TREATED AS BUSINESS INCOME BY TH E ASSESSING OFFICER. THE ASSESSEE PREFERRED AN APPEAL BEFORE T HE CIT(A) WHO VIDE ORDER DATED 14-10-2008 DISMISSED THE APPEAL FI LED BY THE ASSESSEE HOLDING THAT THE ASSESSEES ACTIVITY OF DE ALING IN 2 SHARES/MUTUAL FUND UNITS IS BUSINESS ACTIVITY BEING SYSTEMATIC AND CONDUCTED WITH A PROFIT MOTIVE. THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ORDER DAT ED 21-01-2011 SET-ASIDE THE MATTER TO THE FILE OF THE ASSESSING O FFICER TO DECIDE THE NATURE OF SHARE TRANSACTIONS IN THE CASE OF THE ASS ESSEE AS WELL AS THE OTHER GROUP CASES DENOVO AFTER APPLYING THE SIX TES TS LAID DOWN IN THE CASE OF SARANATH INFRASTRUCTURE PVT. LTD. WHICH FINDS PLACE IN THE DECISION OF BOMBAY BENCH OF THE TRIBUNAL IN THE CAS E OF GOPAL PUROHIT VS. JCIT. 2.1 THEREAFTER, THE ASSESSING OFFICER RE-EXAMINED T HE ISSUE IN THE LIGHT OF THE DIRECTIONS GIVEN BY THE TRIBUNAL. AFTE R CONSIDERING THE VARIOUS SUBMISSIONS FILED BY THE ASSESSEE FROM TIME TO TIME, THE ASSESSING OFFICER CONSIDERED THE INCOME OFFERED BY THE ASSESSEE UNDER THE HEAD LONG TERM CAPITAL GAIN AS CORRECT WHICH WAS INITIALLY TAXED AS BUSINESS INCOME. HOWEVER, REGARDING THE INCOME OFFERED UNDER SHORT TERM CAPITAL GAIN THE ASSESSING OFFIC ER TAXED THE SAME AS BUSINESS INCOME TREATING THE TRANSACTIONS AS TRADING AND NOT INVESTMENT. HE NOTED THAT THE SHORT TERM CAPITAL GAIN OF RS.20,75,459/- IS ON ACCOUNT OF 46 TRANSACTIONS AND ARISING OUT OF 13 SCRIPS. THE ASSESSING OFFICER ANALYSED THE PERIOD OF HOLDING OF THE ABOVE SCRIPS WHICH VARY FROM 1 MONTH TO 12 MONTHS. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE, THE ASSE SSING OFFICER NOTED THAT ON 23-11-2004 THE ASSESSEE HAD PURCHASED 1,00 ,000 SHARES OF BANK OF INDIA FOR A CONSIDERATION OF RS.74,31,624/- WHICH WAS SOLD IN THE MONTH OF MARCH 2005 FOR A CONSIDERATION OF R S.1,11,91,784/- 3 AND SHOWED THE SHORT TERM CAPITAL GAIN OF RS.18,00, 080/-. HE NOTED THAT ON 10-01-2005 THE ASSESSEE PURCHASED 20,000 SH ARES OF BANK OF INDIA WHICH WERE SOLD ON THE SAME DAY AND SHORT TER M CAPITAL GAIN OF RS.72,197/- WAS REPORTED. THEREFORE, THE TRANSACTI ONS RELATING TO BANK OF INDIA SHARES SHOW THAT THE ASSESSEE WAS PUR CHASING HUGE QUANTITY OF SHARES. HE OBSERVED IN ONE OF THE INST ANCES THAT THE ASSESSEE HAD SOLD SHARES WITHOUT TAKING DELIVERY OF SHARES. THEREFORE, HE WAS OF THE OPINION THAT THIS CANNOT B E REGARDED AS AN INVESTMENT. SIMILARLY, IN ANOTHER INSTANCE, THE AS SESSING OFFICER NOTED THAT ASSESSEE HAD PURCHASED 50,000 SHARES OF NTPC FOR A CONSIDERATION OF RS.35,52,143/- AND SOLD THE SAME F OR RS.36,57,799/- ON 16-11-2004. THE PERIOD OF HOLDING IS LESS THAN 1 MONTH. IN THE CASE OF VINDHYA DYECHEM, THE ASSESSEE PURCHASED 135 SHARES AND SOLD THE SAME ON THE SAME DAY, I.E. ON 18-10-2004 W ITHOUT TAKING DELIVERY OF SHARES. IN VIEW OF THE ABOVE, THE ASSE SSING OFFICER CAME TO THE CONCLUSION THAT THE INTENTION OF THE ASSESSE E WAS NOT AN INVESTMENT BUT TO REAP FRUITS AT AN OPPORTUNE TIME. THE BEHAVIOUR OF THE ASSESSEE ITSELF PROVES THAT HE WAS NOT THE INVE STOR BUT A TRADER. THEREFORE, HE TREATED THE SHORT TERM CAPITAL GAIN O F RS.20,75,459/- AS BUSINESS INCOME AND TAXED ACCORDINGLY. 3. IN APPEAL THE LD.CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER : 4.3 I HAVE CAREFULLY CONSIDERED AND PERUSED THE ASSESSM ENT ORDER AND APPELLANTS SUBMISSION ALONG WITH OTHER MATERIALS B ROUGHT ON RECORD. IT IS IMPORTANT TO BE NOTED THAT THE APPEAL RELATES TO AN ORDER PASSED U/S.143(3) R.W.S.254 OF THE INCOME TAX ACT AND T HEREFORE THE ASSESSING OFFICER IS LEGALLY DUTY BOUND TO RESTRICT HIS C ONSIDERATION WITHIN THE LIMITS AND THE DIRECTIONS GIVEN BY THE HON BLE ITAT, WHOSE ORDER IS BEING GIVEN EFFECT TO. AS PER HONBLE ITAT S DECISION, THE 4 ASSESSING OFFICER WAS TO DETERMINE THE INCOME OFFERED B Y THE APPELLANT UNDER THE HEAD CAPITAL GAIN IN VIEW OF SIX TESTS FORMULATED BY LUCKNOW BENCH OF ITAT IN THE CASE OF SARANATH INF RASTRUCTURE (P) LTD. IT IS NOTED FROM THE ASSESSMENT ORDER THAT THE ASSESSI NG OFFICER, EVEN AFTER ACCEPTING THE SIX PARAMETERS UNDER WHICH T HE ISSUE WAS TO BE DECIDED RESTRICTED HIS FINDING ONLY ON THE PARAMET ERS CONTAIN IN TEST NO.3 AND 4. THE ARGUMENTS MADE BY THE APPELLAN T THAT TEST NO. 6 IS NOT APPLICABLE IN THIS CASE AND TESTS NO. 1, 2 AND 5 ARE POSITIVE IN THE FACTS OF THIS CASE FOR HOLDING THE TRANSACTION ASSESSAB LE UNDER THE HEAD CAPITAL GAIN, WERE NEITHER DISCUSSED NOR TAKEN IN TO ACCOUNT FOR DECIDING THE ISSUE IN HAND. THEREFORE, THIS OBJECTION OF THE APPELLANT MADE IN APPEAL, HAS TO BE ACCEPTED IN THE FACTS OF T HIS CASE. EVEN IF, IT COULD BE HELD THAT THE CASE OF THE APPELLANT FAILS ON TEST NO. 3 AND 4, IT CANNOT BE HELD THAT THE TRANSACTION SHOULD BE ASSESSED AS BUSINESS, AS TEST NO. 1, 2, AND 5 ARE ALREADY POSITIVE. IT CAN F URTHER BE SEEN FROM THE SUBMISSIONS OF THE APPELLANT THAT THE EXPLANATIONS G IVEN BY THE APPELLANT ON THE NATURE AND FREQUENCY ETC WERE NOT PROPERLY APPRECIATED BY THE ASSESSING OFFICER. SINCE THE ASSESSING OFFICER WHILE PASSING AN ORDER IN COMPLIANCE TO THE DIRECTION S CONTAINED U/S 250(4) IS NOT FREE COMPLETELY TO FORM HIS OWN VIEW AS PER HIS UNDERSTANDING OF FACTS AND LAW, HE CANNOT GO BEYOND T HE DIRECTIONS GIVEN, WHETHER HE AGREES TO IT OR NOT. IN VIEW OF TH E ABOVE AND INCONSIDERATION OF THE FACTS BROUGHT ON RECORD BY THE APPELLANT IN RESPECT OF NATURE AND FREQUENCY OF TRANSACTIONS, THE P RAYER OF THE APPELLANT MADE IN THE SUBMISSIONS QUOTED ABOVE IS FOUND TO BE ACCEPTABLE IN THE FACTS OF THE CASE AND LAW. IN VIEW OF THE ABOVE RS.19,97,647/- IS DIRECTED TO BE ASSESSED UNDER THE HEAD STCG AND RS.77,822/- AS INCOME FROM SPECULATION BUSINESS. GROUNDS NO. 1 AND 2 ARE STATISTICALLY TREATED AS PARTLY ALLOWED. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LD.CIT(A) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD.CIT(A) GROSSLY ERRED IN DIRECTING THE ASSESSI NG OFFICER TO ASSESS A SUM OF RS.19,97,647/- UNDER THE HEAD OF STCG (SH ORT TERM CAPITAL GAIN) AND A SUM OF RS.77,822/- AS INCOME FROM SPECULATION BUSINESS INSTEAD OF CONFIRMING THE ORDER OF THE ASSESSING O FFICER WHO HAD ASSESSED THE CUMULATIVE SUM OF RS.20,75,449/- UNDER THE HEAD BUSINESS. 3. THE LD.CIT(A) GROSSLY EARED IN DECIDING AS ABOVE BY HOLDING THAT AS PER THE HON'BLE ITAT EARLIER ORDER DATED 21 ST JANUARY 2011, THE ASSESSING OFFICER WAS TO DETERMINE THE INCOME OFFERED B Y THE ASSESSEE UNDER THE HEAD CAPITAL GAIN IN VIEW OF SIX TESTS LAID DOWN BY THE LUCKNOW BENCH OF THE ITAT IN THE CASE OF SARNATH INFRASTRUCTURE (P) LTD AND THAT THE ASSESSING OFFICER, THEREFORE, WAS N OT FREE COMPLETELY TO FORM HIS OWN VIEW AND TO GO BEYOND TH E DIRECTIONS CONTAINED UNDER SECTION 250(4). 4. THE LD.CIT(A) GROSSLY ERRED IN FAILING TO APPRECI ATE THAT THE HON'BLE ITAT VIDE THEIR ORDER DATED 21 ST JANUARY 2011 HAD NOT GIVEN ANY SUCH CATEGORICAL DIRECTION AND , ON THE CONTRARY , 'SET ASIDE THE 5 MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECIDE T HE NATURE OF THE SHARE TRANSACTIONS IN THE PRESENT CASE AFRESH APPLYING T HE ABOVE TESTS LAID DOWN IN THE CASE OF SHARNATH INFRASTRUCTURE (P) LTD..........' 5. THE LD.CIT(A) GROSSLY ERRED IN ALLOWING THE ASSESSEES APPEAL BY ROUTINELY AND ERRONEOUS INTERPRETING THE EARLIER ORDER OF THE HONBLE TRIBUNAL AND IN NOT DECIDING THE APPEAL ON MERIT AFTER EXAMINING THE FACTS AND EVIDENCES BROUGHT OUT IN THE ASSESSMENT ORDER. 6. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LD.CIT(A) MAY BE VACAT ED AND THAT OF THE A.O. BE RESTORED. 7. THE APPELLANT CRAVE LEAVE TO ADD, ALTER OR AMEND ANY OR ALL THE GROUNDS OF APPEAL. 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE TRIBUNAL VIDE ORDER DATED 21-01-2011 HAD DECIDED TH E ISSUE IN CASE OF THE ASSESSEE ALONGWITH 3 OTHER FAMILY MEMBERS WH EREIN THE ISSUE WAS SET-ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR FRAMING THE ASSESSMENT DENOVO. FROM THE COPIES OF ASSESSMENT O RDER IN RESPECT OF THE OTHER 3 FAMILY MEMBERS FILED BY THE LD. COUN SEL FOR THE ASSESSEE, WE FIND THE ASSESSING OFFICER HAD ACCEPTE D THE SHORT TERM CAPITAL GAIN OF RS.21,60,807/- IN THE CASE OF SHRI SUNIL KRISHNALAL ABBOTT, RS.8,89,782/- IN THE CASE OF MRS. PARVESH KRISHNALAL ABBOTT, AND RS.11,07,598/- IN THE CASE OF SHRI SUDHIR KRISH NALAL ABBOTT. ONLY IN THE CASE OF THE ASSESSEE, THE ASSESSING OFF ICER HAS DEVIATED FROM HIS FINDINGS IN OTHER 3 CASES, PRESUMABLY BECA USE SOME SHARES WERE PURCHASED AND SOLD ON THE SAME DAY OR SOME SHA RES WERE SOLD WITHOUT TAKING DELIVERY. 6 5.1 IT HAS BEEN HELD BY THE VARIOUS JUDICIAL DECISI ONS INCLUDING THE DECISIONS OF THE COORDINATE BENCHES OF THE TRIBUNAL THAT TREATMENT OF INCOME FROM PURCHASE AND SALE OF SHARES AS BUSINES S INCOME OR AS CAPITAL GAIN DEPENDS ON THE FACTS OF EACH CASE. IN THE INSTANT CASE, WE FIND THE LD.CIT(A) HAS ALREADY CONSIDERED THE PR OFIT FROM SALE OF SHARES ON THE SAME DAY OR WITHOUT TAKING DELIVERY A S INCOME FROM SPECULATION BUSINESS TREATING RS.7,78,220/- AS IN COME FROM SPECULATION BUSINESS AND ONLY DIRECTED THE ASSESSI NG OFFICER TO TREAT RS.19,97,647/- AS SHORT TERM CAPITAL GAIN. 5.2 SINCE THE ASSESSING OFFICER IN THE INSTANT CASE HAS ACCEPTED THE PROFIT FROM PURCHASE AND SALE OF SHARES AS SHORT T ERM CAPITAL GAIN IN CASE OF 3 OTHER FAMILY MEMBERS, THEREFORE, FACTS BE ING SIMILAR IN THE CASE OF THE ASSESSEE, WE FIND NO REASON WHY THE ASS ESSING OFFICER SHOULD TAKE A DIFFERENT STAND IN CASE OF THE SHARES WHICH WERE HELD FOR A PERIOD OF LESS THAN ONE YEAR. IN THIS VIEW O F THE MATTER AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE LD.CIT( A) ON THIS ISSUE, WE FIND NO INFIRMITY IN HIS ORDER. ACCORDINGLY, TH E SAME IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON 27-02-2014. SD/- SD/- (R.S.PADVEKAR ) ( R.K. PAN DA ) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE, DATED 27 TH FEBRUARY 2014 7 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-I, PUNE 4. THE CIT-I, PUNE 5. THE DR B BENCH, PUNE. 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE