Shri Echolac Finvest Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-4(1), Ahmedabad

ITA 2341/AHD/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9554 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 12-01-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 18-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Business income
• Section: 142(1); 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD . . , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.2340/AHD/2012 FOR THE A.Y. 2005-06 ./ I.T.A. NO.2341/AHD/2012 FOR THE A.Y. 2006-07 ./ I.T.A. NO.180/AHD/2013 FOR THE A.Y. 2007-08 ./ I.T.A. NO.948/AHD/2013 FOR THE A.Y. 2008-09 ECHOLAC FINVEST PVT. LTD. 44/D, SHARNAM 12, PRAHLADNAGAR, VEJALPUR, AHMEDABAD 380051 / VS. THE INCOME-TAX OFFICER, WARD 4(1) AHMEDABD ./ ./ PAN/GIR NO. : AAACE 3446 R ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : MS. URVASHI SHODHAN, A.R. / RESPONDENT BY : SHRI PRAVIN KUMAR, SR. D.R. / DATE OF HEARING 12/01/2017 / DATE OF PRONOUNCEMENT 31/01/2017 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THESE FOUR APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(APPEALS)-VII/XXI, AHMEDABAD, DATED 27/08/2012, 27/08/2012, 03/12/2012 & 08/01/2013 FOR THE ASSESSMENT YEAR (AY) 2005-06, 2006- 07, 2007-2008 & 2008-09. 2. FIRST WE TAKE UP THE ASSESSEES APPEAL IN ITA NO.2340/AHD/2012 FOR THE A.Y.2005-06. THE ASSESSEE HAS TAKEN FOLLOWING GROUND OF APPEAL:- ITA NO.2340, 2341/AHD/2012 ITA NO.180, 948/AHD/2013 ECHOLAC FINVEST PVT. LTD. VS. INCOME-TAX OFFICER - 2 - (I). LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN PASSING AN APPELLATE ORDER FOR A.Y.2005-06 ON 27/08/2012. (II). THE LD. CIT(A) HAS ERRED IN CONFIRMING THE REASSESSMENT PROCEEDING U/S.147 OF THE I.T. ACT. ALTHOUGH REASONS RECORDED BY THE LD. A.O. WERE NOT VALID. (III). THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.28,51,267/- (NET) BY CONSIDERING INCOME FROM SALE OF INVESTMENT IN SHARES & SECRURITIES AS BUSINESS INCOME. (IV). THE LD. CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS.4,460/- U/S.14A OF THE I.T. ACT. 3. THE FACT OF THE CASE IS IN THIS CASE RETURN OF INCOME WAS FILED ON 24/10/2005 DECLARING TOTAL INCOME OF RS.40,81,250/-. THE RETURN WAS DULY PROCESSED U/S. 143(1) OF THE I.T. ACT, 1961. THEREAFTER, THE CASE WAS REOPENED U/S.147 OF THE I.T. ACT, AND A NOTICE U/S.148 OF THE I.T. ACT, WAS ISSUED ON 07/09/2010. IN RESPONSE TO THE SAID NOTICE ASSESSEE VIDE ITS LETTER DATED 02/10/2010, REQUESTED THAT THE RETURN OF INCOME FILED ON 24/10/2005 FILED IN RESPONSE TO NOTICE U/S. 148 OF THE I.T. ACT, AND ALSO SOUGHT FOR REASONS RECORDED FOR REOPENING THE ASSESSMENT. THE REASON RECORDED FOR REOPENING ASSESSMENT WAS GIVEN TO THE ASSESSEE. THE ASSESSEE OBJECTED TO THE REOPENING OF THE ASSESSMENT VIDE ITS LETTER DATED 30/08/2011, WHICH WERE RECEIVED BY THE ASSESSING OFFICER ON 02/09/2011 AND SAME WAS ALSO INTIMATED TO THE ASSESSEE ON 16/09/2011. 4. THEREAFTER, NOTICES U/S. 143(2) AND 142(1) OF THE I.T. ACT, WERE ISSUED AND DULY SERVED UPON THE ASSESSEE. IN RESPONSE TO THE NOTICE A.R. ATTENDED FROM TIME TO TIME AND FURNISHED THE DETAILS AS CALLED FOR. ITA NO.2340, 2341/AHD/2012 ITA NO.180, 948/AHD/2013 ECHOLAC FINVEST PVT. LTD. VS. INCOME-TAX OFFICER - 3 - 5. THE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING AND INVESTMENT IN SHARES AND SECURITIES AND FINANCING. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE DERIVES INCOME FROM PURCHASE AND SALE OF SHARE AND MUTUAL FUND, BROKERAGE, DIVIDEND, INTEREST ETC. THE ASSESSEE HAS ALSO SHOWN SHORT TERM CAPITAL GAIN OF RS.40,81,252/- ON SALE OF SHARE AND MUTUAL FUND. AFTER SCRUTINY OF VARIOUS SUBMISSIONS AND DETAILS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON EXAMINATION OF RETURN OF INCOME THE FOLLOWING ISSUES HAVE EMERGED FOR DISCUSSION/DISALLOWANCE: 6. SHARE/UNIT TRANSACTIONS: ON VERIFICATION OF THE P & L ACCOUNT IT REVEALED THAT THE ASSESSEE HAS SHOWN PROFIT ON SALE OF INVESTMENT OF RS.40,81,252/- AND THE SAME HAS BEEN OFFERED AS SHORT TERM CAPITAL GAINS FOR TAXATION. FROM THE NATURE OF TRANSACTION ENTERED INTO BY THE ASSESSEE IT IS FOUND THAT THE INCOME OF THE ASSESSEE OF RS.40,81,252/- CANNOT BE TREATED AS PROFIT ON SALE OF INVESTMENT BUT IT IS TO BE TREATED AS BUSINESS INCOME. 7. IN THIS REGARD A SHOW CAUSE ISSUE NOTICE WAS ISSUED TO THE ASSESSEE AND IN COMPLIANCE WITH THE SAID NOTICE, ASSESSEE REPLIED AS FOLLOWING DISTINCTION BETWEEN INVESTMENT INCOME AND BUSINESS INCOME: AS PER CIRCULAR SAID CIRCULAR SHARES ARE VERY MUCH HELD AS INVESTMENTS AND NOT AS SHOCK IN TRADE AND SECONDLY IT ALSO HAS BEEN CLARIFIED THAT BOTH INVESTMENT PORTFOLIO AND TRADING ACTIVITIES ARE POSSIBLE TO BE CARRIED OUT BY THE ASSESSEE. ITA NO.2340, 2341/AHD/2012 ITA NO.180, 948/AHD/2013 ECHOLAC FINVEST PVT. LTD. VS. INCOME-TAX OFFICER - 4 - AS FAR AS INSTRUCTION NO.1827 DTD. 31/08/1989 IS CONCERNED, THE SAID INSTRUCTION DEALS WITH SOME JUDGMENTS OF SUPREME COURT AND HIGH COURT. THE SAID RATIO ARE DISCUSSED IN BRIEF HEREUNDER: THE ASSESSEE HAS ALSO RELIED UPON SOME DECISIONS WHICH ARE AS UNDER: (I) G. VENKATASWAMI NAIDU & CO. CIT 35 ITR 594 (SC) (II) H. MOHMAD & CO. VS. CIT 107 ITR 637 (GUJ) (III) SARDAR INDRASINGH & SONS LTD. VS. CIT 24 ITR 415 (SC) (IV) SBH VS. CIT 151 ITR 703(AP) (V) KARAMCHAND THAPER & BROTHERS PVT. LTD. VS. CIT 83 ITR 899 (SC) 8. BUT LD. A.O. WAS NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AND MADE ADDITION OF RS.28,51,267/- AND SAME WAS TREATED AS BUSINESS INCOME. 9. GROUND NO.4 WITH REGARD TO CONFIRMING DISALLOWANCE OF RS.4,460/- U/S.14A OF THE I.T. ACT HAS NOT BEEN PRESSED BY THE LD. A.R. ON ACCOUNT OF SMALLNESS OF AMOUNT. 10. IN SUPPORT OF ITS CONTENTION LD. A.R. CITED SEVERAL JUDGMENT INCLUDING CO-ORDINATING BENCH ORDERS IN ITA NO.3214/AHD/2009 WITH CO NO.3/AHD/2010 AND ITAS 3180, 3295, 3296/AHD/2010, IN THESE CASES IT IS HELD THAT HONBLE ITAT DECIDED THAT IN THESE CASES FILE REVEALS THAT THE ASSESSEE IN VAIBHAV SHAH CASE HAD ENTERED INTO 64 SALE TRANSACTION IN 27 SCRIPS AND 17 SALE TRANSACTIONS IN 11 SCRIPS IN TWO CONSECUTIVE ASSESSMENT YEARS WHICH HAD BEEN HELD TO HAVE RESULTED IN CAPITAL GAINS INSTEAD OF BUSINESS INCOME. A CO-ORDINATE BENCH IN IDENTICAL CASE OF HITESH DOSHI 46 SOT 336 (MUM.) HELD THAT WHEN AN ASSESSEE MAINTAINS SIMILAR NUMBER OF COMPANIES AND ONLY NUMBER OF SHARES THEREIN INCREASE OR DECREASE, ITA NO.2340, 2341/AHD/2012 ITA NO.180, 948/AHD/2013 ECHOLAC FINVEST PVT. LTD. VS. INCOME-TAX OFFICER - 5 - HE IS ONLY A PRUDENT INVESTOR. WE TAKE INTO ACCOUNT ALL THE ABOVE STATED FACTS, CIRCUMSTANCES AND CASE LAW QUOTED HEREINABOVE TO HOLD THAT THE ASSESSEE IS AN INVESTOR NOT ENGAGED IN THE BUSINESS OF SALE PURCHASE OF SHARES AND MUTUAL FUNDS. THE QUESTION IS ACCORDINGLY DECIDED AGAINST THE REVENUE BOTH ASSESSMENT YEARS. THE A.O. IS DIRECTED TO TREAT HER INCOME FROM SALE OF SHARES AND MUTUAL FUNDS IN THE TWO ASSESSMENT YEARS AS SHORT TERM CAPITAL GAINS AND MATTER DECIDED IN FAVOUR OF THE ASSESSEE. 11. SO FAR AS RE-OPENING OF ASSESSMENT IS CONCERNED, WE CONFIRMED THAT A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S.143(3) OF THE ACT, THE AO WAS WELL WITHIN HIS RIGHT IN RE-OPENING THE ASSESSMENT ON THE GROUND. THE A.O. HAS COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. THEREFORE, THE JUDGMENT OF APEX COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. 320 ITR 561 IS NOT APPLICABLE IN THE INSTANT CASE. THE NOTICE HAS ALSO BEEN ISSUED WITHIN THE PRESCRIBED TIME. THEREFORE, WE UPHOLD THE VALIDITY OF REOPENING OF THE ASSESSMENT U/S.147 AND NOTICE U/S.148 OF THE ACT. THESE GROUNDS OF APPEAL CHALLENGING THE VALIDITY OF THE REASSESSMENT ARE THUS DISMISSED. 12. IN THE RESULT A.O. DIRECTED TO DELETE THE ADDITION OF RS.28,51,267 AS ASSESSEE IS ENTITLED FOR SHORT TERM/ LONG TERM CAPITAL GAINS AND THIS AMOUNT IS NOT OF HIS BUSINESS INCOME. 13. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO.2340/AHD/2012 FOR THE A.Y.2005-06 IS ALLOWED. ITA NO.2340, 2341/AHD/2012 ITA NO.180, 948/AHD/2013 ECHOLAC FINVEST PVT. LTD. VS. INCOME-TAX OFFICER - 6 - 14. NOW WE TAKE UP THE ASSESSEES APPEAL IN ITA NO. 2341/AHD/2012 FOR ASSESSMENT YEAR 2006-07. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- (I) THE LD.CIT(A)-VII, AHMEDABAD HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN PASSING AN APPELLATE ORDER FOR A.Y. 2006-07 ON 27/08/2012. (II) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE REASSESSMENT PROCEEDING U/S.147 OF THE I.T. ACT., ALTHOUGH REASONS RECORDED BY THE LD.A.O. WERE NOT VALID. (III) THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.20,35,425/- BEING SHORT TERM CAPITAL GAIN AND RS.35,03,583/- BEING LONG TERM CAPITAL GAIN BY CONSIDERING INCOME FROM SALE OF INVESTMENT IN SHARES & SECURITIES AS BUSINESS INCOME. 15. SO FAR AS GROUND NOS WE DONT WANT TO REPEAT THE FACTS OF THE CASE. THE CASE HAS BEEN ALREADY DISCUSSED IN APPEAL NO.2340 AND REACH IN THEREOF AND GROUND NO.2 IS NOT TENABLE IN THE EYES OF LAW AND SO FAR CONFIRMING THE ADDITION OF RS.20,35,425/- BEING SHORT TERM CAPITAL GAIN AND RS.35,03,583/- LONG TERM CAPITAL GAIN CONSIDERING SALE OF INVESTMENT IN SHARE AS BUSINESS INCOME ALREADY IN THIS EARLIER APPEAL IN THE SAME INCOME NOT A BUSINESS INCOME AND SAME TO BE TREATED AS LONG TERM CAPITAL GAIN AND AS SHORT TERM CAPITAL GAIN. 16. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO.2341/AHD/2012 FOR THE A.Y.2006-07 IS ALLOWED. ITA NO.2340, 2341/AHD/2012 ITA NO.180, 948/AHD/2013 ECHOLAC FINVEST PVT. LTD. VS. INCOME-TAX OFFICER - 7 - 17. NOW WE TAKE UP THE ASSESSEES APPEAL IN ITA NO. 180/AHD/2013 FOR ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- (I) THE LD.CIT(A)-XXI, AHMEDABAD HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN PASSING AN APPELLATE ORDER FOR A.Y. 2007-08 ON 03/12/2012. (II) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.7,04,898/- BEING SHORT CAPITAL GAIN AND RS.48,34,320/-BEING LONG TERM CAPITAL GAIN ON SALE OF INVESTMENT IN SHARES & SECURITIES AS BUSINESS INCOME. 18. AS WE HEARD IN TWO EARLIER APPEAL AND IN GROUND NO.2 CONFIRMING OF ADDITION OF RS.7,04,898/- AND RS.48,34,320/- BEING LONG TERM CAPITAL GAIN ON SALE OF INVESTMENT IN SHARES & SECURITIES. AS WE HEARD IN EARLIER TWO CONNECTING APPEAL, SAME NOT A BUSINESS INCOME AND THESE TO BE TREATED AS SHORT TERM AND LONG TERM CAPITAL GAIN INCOME AND RS.7,04,898/- TO BE CONSIDERED AS SHORT TERM CAPITAL GAIN AND RS.48,34,320/- TO BE CONSIDERED AS LONG TERM CAPITAL GAIN AND A.O. HAS DIRECTED TO THE EFFECT OF THE SAME. 19. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO.180/AHD/2013 FOR THE A.Y.2007-08 IS ALLOWED. 20. NOW WE TAKE UP THE ASSESSEES APPEAL IN ITA NO. 948/AHD/2013 FOR ASSESSMENT YEAR 2008-09. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- ITA NO.2340, 2341/AHD/2012 ITA NO.180, 948/AHD/2013 ECHOLAC FINVEST PVT. LTD. VS. INCOME-TAX OFFICER - 8 - (I) THE LD.CIT(A)-VII, AHMEDABAD HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN PASSING AN APPELLATE ORDER FOR A.Y. 2008-09 ON 08/01/2013. (II) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.3,97,522/- BEING SHORT CAPITAL GAIN AND RS.1,84,214/-BEING LONG TERM CAPITAL GAIN ON SALE OF INVESTMENT IN SHARES & SECURITIES AS BUSINESS INCOME. 21. AS WE DECIDED IN THREE EARLIER CONNECTING APPEALS, WE HOLD THAT ADDITION OF INCOME OF RS.3,97,522/- BEING SHORT TERM CAPITAL GAIN AND RS.1,84,214/- WILL BE TREATED AS LONG TERM CAPITAL GAIN ON SALE OF INVESTMENT IN SHARES & SECURITIES. AS A RESULT, ASSESSEES APPEAL IS ALLOWED. 22. IN THE RESULT, ALL FOUR APPEALS ARE ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 31/01/2017 SD/- SD/- . . ( ) ( ) ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 31/01/2017 PRITI YADAV, SR.P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-VIII/XXI 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY