The ITO, Ward-7(4), Ahmedabad V. Shri Vaibhav J. Shah,HUF, Ahmedabad

ITA 2229/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 72856 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 01-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVE DI, A.M.) I.T. A. NO. 2229/AHD/2010 (ASSESSMENT YEAR:2007-08) ITO, WARD. 7(4), AHMEDABAD V/S SHRI VAIBHAV J SHAH-HUF PREMJYOT BUNGLOW 7/B, JIVAN SMRUTI SOC., MIRAMBIKA SHOOL ROAD, NARANPURA AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAIHS 4410E APPELLANT BY : SHRI O.P. BATHEJA, SR. D.R . RESPONDENT BY : SHRI S.N. SOPARKAR, A.R. ( )/ ORDER DATE OF HEARING : 31-12-2013 DATE OF PRONOUNCEMENT : 10-01-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-XI, AHMEDABAD DATED 23.04.2010 FOR A.Y. 2007-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI AL ON RECORD ARE AS UNDER. 3. ASSESSEE IS AN HUF WHO FILED ITS RETURN OF INCOM E FOR A.Y. 2007-08 ON 30.07.2007 DECLARING TOTAL INCOME OF RS. 5,97,230/- . THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAM ED UNDER SECTION 143(3) VIDE ORDER DATED 30.12.2009 AND THE TOTAL INCOME WA S DETERMINED AT RS. ITA NO 2229/AHD/2 010 . A.Y. 2007- 08 2 2,03,27,310/-. AGGRIEVED BY THE ORDER OF A.O., ASSE SSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 23.04.2010 P ARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER O F CIT(A) THE REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWIN G EFFECTIVE GROUND:- 1. THE LD. COMMISSIONER OF INCOME TAX(A)-XI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITIONS OF RS. 1,97,97,753/- MADE BY THE A.O. ON ACCOUNT OF TREATING THESE SUMS AS BEING INCOME FROM BUSINESS INSTEAD OF INCOME FRO M CAPITAL GAINS AS SHOWN BY THE ASSESSEE. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O . NOTICED THAT ASSESSEE HAS DECLARED SHORT TERM CAPITAL GAIN OF RS. 5,97,23 4/- AND LONG TERM CAPITAL GAIN OF RS. 1,97,97,753/-. A.O. WAS OF THE VIEW THA T ASSESSEE WAS DOING THE ACTIVITY OF PURCHASE AND SALE OF SHARES AND SECURIT IES SINCE LONG AND SINCE THE ACTIVITY WAS REGULAR AND CONTINUOUS IN NATURE AND T HEREFORE THE ACTIVITY OF THE ASSESSEE TO TRADE IN SHARES WAS WITH A MOTIVE TO EA RN PROFITS. HE ALSO NOTICED THAT THE MAIN SOURCE OF INCOME OF THE ASSES SEE WAS OUT OF PROFITS FROM SALE AND PURCHASE OF SHARES. HE ALSO NOTED TH AT THOUGH THE ASSESSEE HAD ENTERED INTO LIMITED NUMBER OF TRANSACTIONS AND SCRIPS BUT THE VOLUME WAS HIGH, THE DIVIDEND INCOME EARNED BY THE ASSESSE E WAS VERY LOW IN COMPARISON TO THE CAPITAL GAINS SHOWN BY THE ASSESS EE, ASSESSEE HAD HELD THE SHARES FOR SHORT PERIOD AND IN SOME CASES THE A SSESSEE HAD DONE INTRA DAY TRADING IN SHARES. HE THEREFORE CONSIDERED THE INCOME DECLARED BY THE ASSESSEE FROM SALE OF SHARES AS CAPITAL GAINS TO BE BUSINESS INCOME AND ASSESSED IT AS INCOME FROM BUSINESS. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DECIDED THE APPEAL IN F AVOUR OF THE ASSESSEE BY HOLDING AS UNDER:- 7. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A. R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESS MENT ORDER. THE FACTS OF THE CASE ARE SIMILAR TO THOSE IN THE IMMEDIATELY PRECEDING A.Y. 2006-07. KEEPING IN VIEW THE FACTS OF THE CASE, CIT(A)S DECISION IN APPELLANTS OWN CASE FOR A.Y. 2006-07 AND THE TRIBUNALS DECISION, REFERRED TO ABOVE, FOR EARLIER YEARS IN T HE CASES OF FAMILY MEMBERS OF THE APPELLANT (INCLUDING APPELLANT), I HOLD THAT THE AP PELLANT CANNOT BE SAID TO HAVE BEEN ITA NO 2229/AHD/2 010 . A.Y. 2007- 08 3 TRADING IN SHARES. A.O. IS DIRECTED TO ACCEPT AND A SSESS THE IMPUGNED AMOUNT AS RETURNED BY THE APPELLANT UNDER HEADS-LONG TERM CAP ITAL GAINS AND SHORT TERM CAPITAL GAINS. THIS GROUND OF APPEAL IS ALLOWED. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, THE LD. D.R. POINTED TO THE VARIOUS F INDINGS OF A.O. AND SUBMITTED THAT CONSIDERING THE FINDINGS OF A.O. THE A.O. WAS FULLY JUSTIFIED IN HOLDING THE INCOME FROM TRADING OF SHARES TO BE BUSINESS INCOM E AS AGAINST THE CAPITAL GAIN CONSIDERED BY THE ASSESSEE. HE FURTHER SUBMIT TED THAT CIT(A) HAS NOT CORRECTLY APPRECIATED THE FACTS. HE THEREFORE SUPPO RTED THE ORDER OF A.O. 7. THE LD. A.R. ON THE OTHER HAND POINTED TO THE DE TAILS OF CAPITAL GAINS WHICH WERE PLACED AT PAGE 29 OF THE PAPER BOOK. FROM THE DETAILS HE POINTED OUT THAT AS FAR AS SHORT TERM CAPITAL GAINS ARE CONCERN ED, THE SAME IS NOT DISPUTED BY THE REVENUE. WITH RESPECT TO THE NET LONG TERM C APITAL GAINS OF RS. 1,97,97,753/-, HE POINTED OUT THAT ASSESSEE HAD EAR NED GAIN OF RS. 2,00,65,452/- ON SALE OF SHARES OF GODREJ INDUSTRIE S LTD. THE SHARES OF GODREJ INDUSTRIES LTD. WERE ACQUIRED BY ASSESSEE ON 1.03.2 005. ON 02.09.2006 THE COMPANY HAD SUB DIVIDED THE SHARES AND ASSESSEE GOT FURTHER 1,54,140 SHARES. DURING THE YEAR ASSESSEE, HAD SOLD 1,25,000 SHARES LEAVING A BALANCE OF 59,968 SHARES AS ON 31 ST MARCH, 2007. THE LD. A.R. THEREFORE SUBMITTED THAT THE ASSESSEE HAD EARNED PROFIT FROM SALE OF SHARES WHICH WERE ACQUIRED IN EARLIER YEARS AND THERE WAS NO PURCHASE OR SALE OF SHARES IN THAT SCRIP. HE FURTHER SUBMITTED THAT THE HOLDING IN THE SHARES OF GODREJ INDUSTRIES LTD. HAS BEEN ACCEPTED BY THE REVENUE AS INVESTMENT IN EARLIER YEARS. WITH RESPECT TO THE LOSS INCURRED BY THE ASSESSEE ON SAL E OF SHARES OF IND SWIFT LTD, HE POINTED OUT THAT 10,000 SHARES WERE ACQUIRE D BY THE ASSESSEE ON 11.01.2005 AND THE SAME WERE SOLD DURING THE YEAR A ND ON ITS SALE ASSESSEE INCURRED A LOSS OF RS. 2,67,699/-. HE FURTHER SUBMI TTED THAT IN THESE SHARES ASSESSEE HAD NOT MADE ANY PURCHASE OR SALE OF SHARE S DURING THE YEAR. HE THEREFORE SUBMITTED THAT THE FINDING OF THE A.O. TH AT THE ASSESSEE HAS ITA NO 2229/AHD/2 010 . A.Y. 2007- 08 4 INDULGED IN FREQUENT PURCHASE AND SALE OF SHARES IS FACTUALLY INCORRECT. HE FURTHER SUBMITTED THAT WHEN THE SHARES HAVE BEEN AC QUIRED BY ASSESSEE MORE THAN 1 YEAR BACK, THERE WERE NO TRANSACTIONS O F PURCHASE/SALE OF HOUSE SHARES AND THE INVESTMENT IN THOSE SHARES HAS BEEN ACCEPTED BY REVENUE AS INVESTMENT, THE ORDER OF THE A.O. IN TREATING THE P ROFIT AS BUSINESS INCOME WAS NOT CORRECT AND THEREFORE CIT(A) WAS JUSTIFIED IN SETTING IT ASIDE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON THE BASIS OF THE CHART SUBMITTED BY THE ASSESSEE AN D PLACED ON RECORD IN THE PAPER BOOK, WE FIND THAT ASSESSEE HAD EARNED A NET LONG TERM CAPITAL GAIN OF RS. 1,97,97,753/- WHICH COMPRISED OF GAIN ON SALE O F SHARES OF GODREJ INDUSTRIES AMOUNTING TO RS. 2,65,00,452/- AND LOSS OF RS. 2,67,699/- ON SALE OF SHARES OF IND SWIFT LTD. FROM THE DETAILS PLACED ON RECORD IT IS SEEN THAT THE AFORESAID SHARES WERE ACQUIRED BY THE ASSESSEE IN I MMEDIATELY PRECEDING FINANCIAL YEAR AND ITS HOLDING WAS IN EXCESS OF 1 Y EAR AND IN THESE SHARES, THE ASSESSEE HAS NOT ENTERED INTO ANY TRANSACTION OF PU RCHASE OR SALE OTHER THAN THE IMPUGNED SALE ON WHICH IT HAS EARNED CAPITAL GA IN/LOSS. FROM THE CHART FURNISHED BY THE ASSESSEE, IT IS ALSO SEEN THAT ASS ESSEE HAD EARNED NET SHORT TERM CAPITAL GAIN OF RS. 5,05,951/- WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT AND IS NOT DISPUTED BY REVENUE DEPARTMEN T. FROM THE DETAILS PLACED ON RECORD IT IS SEEN THAT IN THE SCRIPS OF G ODREJ IND. LTD. AND IND. SWIFT LTD, THE ASSESSEE HAS NOT ENTERED INTO ANY TRANSACT ION OF PURCHASE AND SALE EXCEPT THE IMPUGNED SALE. BEFORE US, IT HAS BEEN S UBMITTED THAT IN IMMEDIATELY PRECEDING YEAR, THE HOLDING OF THE AFOR ESAID COMPANIES WAS ACCEPTED AS INVESTMENT BY THE REVENUE. NOTHING HA S BEEN BROUGHT ON RECORD BY REVENUE TO CONTROVERT THE SUBMISSIONS OF THE ASSESSEE. WE FURTHER FIND THAT THE A.OS FINDING THAT ASSESSEE HAS ENTER ED INTO FREQUENT TRANSACTION OF PURCHASE AND SALE OF SHARES ON WHICH ASSESSEE HA S EARNED LONG TERM CAPITAL GAINS IS NOT BORNE OUT BY MATERIAL ON RECOR D. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDE R OF CIT(A) AND THUS THIS GROUND OF THE REVENUE IS DISMISSED. ITA NO 2229/AHD/2 010 . A.Y. 2007- 08 5 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 10 - 01- 2014. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT ,AHMEDABAD