NIRAV J. VAKHARIA, MUMBAI V. DCIT 24(2)/30(2), MUMBAI

ITA 2260/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8575 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 07-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Assessee Lawyers: R C JAIN
• Keywords: Business income; Salary income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI R P TOLANI, JUDICIAL MEMBER ITA NO.2260/MUM/2016 ASSESSMENT YEAR : 2010-11 NIRAV J VAKHARIA 101 INDRAPRASTHA-III JITENDRA ROAD, MALAD (E) MUMBAI 400 097 PAN AABPV7627B VS. DCIT 24(2)/30(2) MUMBAI (APPELLANT) RESPONDENT) ITA NO.2261/MUM/2016 ASSESSMENT YEAR : 2010-11 JESHMA S VAKHARIA 101 INDRAPRASTHA-III JITENDRA ROAD, MALAD (E) MUMBAI 400 097 PAN ADUPV9528K VS. DCIT 24(2)/30(2) , MUMBAI (APPELLANT) RESPONDENT) APPELLANTS BY : SHRI R C JAIN RESPONDENT BY : MS. BEENA SANTOSH DATE OF HEARING : 30.01.2017 DATE OF PRONOUNCEMENT : 03.02. 201 7 O R D E R PER R P TOLANI, JUDICIAL MEMBER THESE ARE APPEALS BY TWO DIFFERENT ASSESSEES BEING HUSBAND AND WIFE. THE GROUNDS OF APPEAL RAISED IN THE CASE OF NIRAV J VAKHARIA [ITA NO. 2260/MUM/2016] IS AS UNDER: ITA NO.2260 & 2261/MUM/2016 NIRAV J VAKHARIA & JESHMA S VAKHARIA 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) - 41, MUMBAI, ERRED IN CONFIRMING TH E ACTION OF THE LEARNED ASSESSING OFFICER TREATING THE ASSESSEES I NCOME OF RS.28,44,419/- FROM SALE OF SHARES AS BUSINESS INCO ME INSTEAD OF SHORT TERM CAPITAL GAIN AS CLAIMED BY THE ASSESSEE WITHOU T APPRECIATING THE NATURE OF TRANSACTIONS AND FACT THAT THE ASSESSEE H AS PURCHASED SHARES WITH THE INTENTION OF INVESTMENT AND NOT FOR THE PU RPOSE OF BUSINESS. THE DISALLOWANCE IN THE CASE OF JESHMA S VAKHARIA I N ITA NO.2261/MUM/2016 IS RS.26,20,832/-. 2. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDS TH AT THE ASSESSEE SHRI NIRAV J VAKHARIA, MAINTAINS REGULAR BOOKS OF ACCOUNT AND DE RIVES INCOME FROM SALARY, HOUSE PROPERTY, COMMISSION AND INVESTMENT IN SHARES. IN THE CASE OF THE ASSESSEE SMT JESHAM S VAKHARIA, SHE DERIVES INCOME FROM SALARY, CAPITAL GAINS AND OTHER SOURCES. THE INCOME FROM SALE OF SHARES HAS BEEN TREATED BY THE DEPARTMENT UNDER THE HEAD LONG TERM OR SHORT TERM CAPITAL GAIN AS APPLICABLE IN PAST MANY YEARS. HOWEVER, IN THE YEAR UNDER CONSIDERATION, THE AO ASKED THE DETA ILS ABOUT THE SHARE TRANSACTIONS, WHICH WERE DULY FURNISHED. THE AO TOOK ADVERSE INF ERENCE FROM THE FACT THAT FREQUENCY OF PURCHASE AND SALE OF SHARES INDICATED THAT THE ASSESSEE HAD PURCHASED SHARES WITH A MOTIVE TO EARN PROFIT IN SHORT PERIOD , THEREFORE, THE INCOME WAS TREATED AS BUSINESS INCOME INSTEAD OF SHORT TERM CA PITAL GAIN. AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL WHERE LEARNED CIT(A ) ALSO DID NOT APPRECIATED THAT IN BALANCE SHEET, THE ASSESSEE HAD CLAIMED INVESTME NT IN SHARES UNDER INVESTMENT PORTFOLIO AND NOT BUSINESS PORTFOLIO. IT IS CONTEN DED THAT CBDT HAS REPEATEDLY ISSUED CIRCULARS TO THE EFFECT THAT IF THE ASSESSEE S MAINTAIN INVESTMENT PORTFOLIO THEN INCOME CANNOT BE TREATED AS BUSINESS INCOME MERELY BECAUSE OF THE FREQUENCY OF TRANSACTIONS AND NUMBER OF SCRIPTS. RELIANCE IS PL ACED ON JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT [20 10] 188 TAXMAN 140 (BOM.), ITA NO.2260 & 2261/MUM/2016 NIRAV J VAKHARIA & JESHMA S VAKHARIA 3 WHICH TAKING INTO NOTICE OF CBDT CIRCULARS HAS HELD IN FAVOUR OF THE ASSESSEE. THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 3. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. THE FACT THAT THE ASSESSEES WERE MAINTAIN ING PROPER DETAILS AND HOLDING THE SHARES IN QUESTION UNDER INVESTMENT PORTFOLIO I S NOT DISPUTED, THE CBDT TIME AND AGAIN, BY WAY OF CIRCULARS, HAS CLARIFIED THAT IF THE ASSESSEES ARE MAINTAINING PROPER DETAILS ABOUT INVESTMENT PORTFOLIO THEN THE INCOME FROM THE SALE OF SUCH SHARES IS TO BE TAXED UNDER THE HEAD CAPITAL GAINS AND NOT BUSINESS INCOME, EVEN IF THE FREQUENCY OF TRANSACTION IS MORE. IN THESE CAS ES BY TAKING ADVERSE INFERENCE FROM THE FACT OF FREQUENCY OF TRANSACTIONS AND IGNO RING THE CBDT CIRCULARS THE INCOME HAS BEEN TREATED AS BUSINESS INCOME. IN MY CONSIDERED VIEW, THE ACTION OF AUTHORITIES BELOW IS NOT JUSTIFIED AS HONBLE BOMBA Y HIGH COURT HAS LAID DOWN A PROPOSITION TAKING NOTE OF THE CBDT CIRCULARS FAVOU R OF THE CASE OF THE ASSESSEES FACTS. IN THESE CIRCUMSTANCES, RESPECTFULLY FOLLOW ING THE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF GOPAL PUROHIT (SUPRA), THE ADDITIONS MAY BE DELETED. 6. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 03.02.2017. SD/- (R P TOLANI) J UDICIAL MEMBER MUMBAI, DATED : 03.02.2017. SA ITA NO.2260 & 2261/MUM/2016 NIRAV J VAKHARIA & JESHMA S VAKHARIA 4 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI