ITO 24(2)1, MUMBAI V. NIRANJAN J WADIA, MUMBAI

ITA 2382/MUM/2013

• Counselvise Citation: 238219914 RSA 2013
• Duration Of Justice: 2 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 26-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGESH KAMATDR
• Assessee Lawyers: BHARAT K PATEL
• Keywords: Rule of consistency
• Section: 143(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.2382/MUM/2013 ASSESSMENT YEAR: 2008-09 THE INCOME TAX OFFICER- 24(2)(1), C-13, ROOM NO.606, 6 TH FLOOR BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051 / VS. SHRI NIRANJAN J. WADIA, 101, RISHIKESH APARTMENT, OPP. N. L. HIGH SCHOOL, S.V. ROAD, MALAD (W), MUMBAI-400064 ( / REVENUE) ( !' # /ASSESSEE) P.A. NO. AAAPW3734F / REVENUE BY SHRI YOGESH KAMAT-DR !' # / ASSESSEE BY SHRI BHARAT K. PATEL $ % & # ' / DATE OF HEARING : 01/07/2015 & # ' / DATE OF ORDER: 04/08/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 14/01/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED IN THIS APPEAL PERTAINS TO D ELETING SHRI NIRANJAN J. WADIA ITA NOS.2382/MUM/2013 2 THE ADDITION MADE BY THE ASSESSING OFFICER BY TREAT ING THE SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN ON PURCHASE AND SALE OF SHARES AND MUTUAL FUNDS AS BUS INESS INCOME AS THE MAIN ACTIVITY OF THE ASSESSEE IS IN DEALING IN SHARES/MUTUAL FUNDS WITH ENORMOUS VOLUME, MULTIPLIC ITY OF TRANSACTION IN REGULAR AND FREQUENT MANNER. 2. THE CRUX OF ARGUMENT ADVANCED BY SHRI YOGESH KAMAT, LD. DR, IS IDENTICAL TO THE GROUND RAISED BY CONTENDING THAT THE ASSESSEE WAS DOING SYSTEMATIC A CTIVITY WHILE DEALING IN SHARES/MUTUAL FUNDS HAVING ENORMOU S VOLUME. IT WAS CONTENDED THAT THE ASSESSEE WAS DOI NG THIS ACTIVITY IN A FREQUENT MANNER. ON THE OTHER HAND, S HRI BHARAT K PATEL, LD. COUNSEL FOR THE ASSESSEE, DEFEN DED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE STAND OF THE ASSESSING OFFICER AS WELL AS OF THE LD. DR IS THAT THE ASSESSEE WAS HAVING NUMBER OF SCRIPTS PURCHASE THOR OUGH PORTFOLIO MANAGEMENT SCHEME WITH FUND MANAGER, WHIC H IS BASED ON FREQUENCY AND VOLUME ETC. THE ASSESSING OF FICER CONCLUDED THAT THE ASSESSEE WAS REGULARLY ENTERING INTO PURCHASE AND SALE OF MUTUAL FUNDS HAVING HUGE TRANSACTION, THUS, HE TREATED THE ENTIRE GAIN AS BU SINESS OF THE ASSESSEE, WHEREAS THE STAND OF THE ASSESSEE IS THAT THE ASSESSEE IS RETIRED SENIOR CITIZEN AND WAS OPERATED FOR A BRAIN SURGERY. HIS INCOME WAS CONSISTING OF INTERE ST, DIVIDEND AND CAPITAL GAINS. THE ASSESSEE INVESTED H IS ENTIRE SHRI NIRANJAN J. WADIA ITA NOS.2382/MUM/2013 3 CAPITAL IN MUTUAL FUNDS, BONDS AND FDS ETC IN ORDER TO MAINTAIN HIS RETIRE LIFE. THE ASSESSEE INVESTED RS. 30 LAKHS IN ICICI PRUDENTIAL SCHEME, WHEREBY, INVESTMENT IN SHARES AND SECURITIES WERE HANDLED BY ICICI PRUDENTIAL. I T WAS ALSO CLAIMED THAT THE ASSESSEE NEVER TRADED IN REGU LAR BASIS IN SHARES/MUTUAL FUNDS/SECURITIES, ETC AND THEREFORE, RIGHTLY CLAIMED AS INVESTOR. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, WE NOTE THAT IN THE AU DITED FINANCIAL STATEMENT FROM PRUDENTIAL ICICI ASSET MANAGEMENT COMPANY WHICH SHOWED CLEARLY THAT DURING THE FINANCIAL YEAR 2007-08, THE ASSESSEE EARNED GAI NS OF RS.2,09,432/- AS SHORT TERM CAPITAL GAIN AND RS.9,97,834/- AS LONG TERM CAPITAL GAIN (TOTAL CAPI TAL GAIN RS.12,07,266/-). THE PERUSAL OF THE FACTS, CLEARLY REVEALS THAT ONLY MUTUAL FUNDS WERE DEALT WITH BY THE ASSES SEE DURING THE YEAR, WHEREAS, THE ASSESSING OFFICER MEN TIONED THAT THE ASSESSEE INDULGED IN MORE THAN 150 TIMES I N THE SHARES WHICH IS FACTUALLY INCORRECT. THE LD. COMMIS SIONER OF INCOME TAX (APPEALS) AS WELL AS THIS BENCH DULY EXAMINED THE BALANCE SHEET FOR THE YEAR ENDING 31 ST MARCH 2008, WHICH CLEARLY SHOWS THAT THE ASSESSEE WAS HOL DING THESE MUTUAL FUNDS ONLY AS INVESTMENT AND NOT AS ST OCK IN TRADE. IT IS NOT WORTHY THAT FOR THE AY 2007-08, T HE SHORT TERM CAPITAL GAIN, DECLARED BY THE ASSESSEE, WERE A CCEPTED SHRI NIRANJAN J. WADIA ITA NOS.2382/MUM/2013 4 VIDE ORDER U/S 143(3) OF THE ACT AND THERE IS NO CH ANGE IN THE FACTS AND CIRCUMSTANCES DURING THE RELEVANT PER IOD, THUS, WITHOUT BRINGING ANY ADVERSE MATERIAL, ON THE PRINCIPLE OF CONSISTENCY, NO U TURN IS EXPECTED FRO M THE ASSESSING OFFICER. SO FAR AS, ISSUE OF EXCLUSIVELY DEALING IN PURCHASE AND SALE OF MUTUAL FUND THROUGH PORTFOLIO MANAGER IS CONCERNED, WE ARE EXPECTED TO DECIDE WHE THER THE ASSESSEE WAS DOING BUSINESS ACTIVITY OR GAINS A RISING THEREFROM IS TO BE TREATED AS LTCG/STCG. WE ARE OF THE VIEW, IT DEPENDS UPON THE FACTS AND CIRCUMSTANCES O F EACH CASE AND THE PERIOD OF HOLDING. THE DECISION IN ITO VS RADHA BIRJU PATEL (ITA NO.5382/MUM/2009) COMES TO T HE RESCUE OF THE ASSESSEE. THE TRIBUNAL IN THAT CASE IN PARA 5 HELD THAT THE VERY NATURE OF PORTFOLIO MANAGEMENT S CHEME IS SUCH THAT THE INVESTMENTS MADE BY THE ASSESSEE A RE PROTECTED AND ENHANCED AND AS SUCH IT CANNOT BE SAI D THAT PORTFOLIO MANAGEMENT IS A SCHEME OF TRADING IN SHAR ES AND THUS BY NO STRETCH OF IMAGINATION, IT CAN BE SAID T HAT THE MAIN OBJECT OF HOLDING THE PORTFOLIO IS TO MAKE PRO FIT BY SALE OF SHARES. SO FAR AS THE ISSUE OF NUMBER OF TRANSA CTION IS CONCERNED IN THE COMPUTER BASED TRADING SYSTEM, IT IS SPLITTED UP, THUS, REQUIRES NO INTERFERENCE IN THE CONCLUSION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE DECISION IN VIMAL PRAVIN SHAH (HUF) VS DCIT (ITA NO.2124/MUM/08 AND 5639, 5640/MUM/09) ORDER DATED 18 TH JULY 2012 AND ASHA PARAKH VS ITAT PUNE (630/PN/2011) ORDER DATED 31 ST AUGUST 2012, APPORVA PATNI VS ACIT (ITA NOS. 192,193,239 AND 273 TO SHRI NIRANJAN J. WADIA ITA NOS.2382/MUM/2013 5 276/PUNE/2012) SUPPORTS THE CASE OF THE ASSESSEE. TOTALITY OF FACTS AND THE MATERIAL AVAILABLE ON REC ORD CLEARLY INDICATES THAT THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS CORRECT IN WHICH WE FIND NO INFIRMITY, THUS THE APPEAL OF THE REVENU E IS HAVING NO MERIT, THEREFORE, DISMISSED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 01/07/2015. SD/ - (RAJENDRA) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ % MUMBAI; ( DATED : 04/08/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 $ 1# ( *+ ) / THE CIT, MUMBAI. 4. 0 0 $ 1# / CIT(A)- , MUMBAI 5. 34 .# , 0 *+' * 5 , $ % / DR, ITAT, MUMBAI 6. 6! 7% / GUARD FILE. / BY ORDER, /3+# .# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ % / ITAT, MUMBAI SHRI NIRANJAN J. WADIA ITA NOS.2382/MUM/2013 6