The ITO, Ward-2(1)(3), Ahmedabad V. Lalwani Lease Lease Finance Ltd., Ahmedabad

ITA 2395/AHD/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1163 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 12-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALA PHILIPS
• Keywords: Business income; Date of conversion
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, & MANISH BORAD, A M. ITA NO.2395/AHD/2015 ASST. YEAR: 2007-08 INCOME-TAX OFFICER, WARD-2(1)(3), AHMEDABAD. VS LALWANI LEASE FINANCE LTD., 57, NEW CLOTH MARKET, RAIPUR, AHMEDABAD. (APPELLANT) (RESPONDENT) PA NO.AAACL 3549A APPELLANT BY SHRI LALA PHILIPS, SR. DR RESPONDENT BY NONE DATE OF HEARING: 16/11/2015 DATE OF PRONOUNCEMENT: __/__/2015 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER. THIS APPEAL OF REVENUE IS DIRECTED AGAINST THE ORD ER OF CIT(A)- 2, AHMEDABAD DATED 13.5.2015 IN APPEAL NO.CIT(A)-2/ ITO WD- 4(3)/124/13-14 FOR ASST. YEAR 2007-08. ASSESSMENT WAS FRAMED UNDER SECTION 143(3) R.W.S. 254 OF THE INCOME-TAX A CT, 1961 (IN SHORT THE ACT). FOLLOWING GROUNDS HAVE BEEN RAISED BY TH E REVENUE IN THIS APPEAL:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN TREATING THE GAIN ARISING OUT OF SHARES AS LONG TERM CAPITAL GAIN, WI THOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. ITA NO.2395/AHD/2015 ASST. YEAR 2007-08 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 4. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER OR AD D A NEW GROUND, WHICH MAY BE NECESSARY. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E RETURN OF INCOME WAS FILED ON 20/10/2007 THROUGH ELECTRONIC MEDIA (E -FILE) DECLARING LOSS OF RS.(-) 35,13,609/-. THE ASSESSMENT WAS COMP LETED U/S 143(3) ON 9/12/2009 DETERMINING TOTAL LOSS OF RS.(-) 1,22, 822/- IN WHICH THE INCOME FROM FUTURE & OPTION TRANSACTION IN SHARES W AS CONSIDERED AS BUSINESS INCOME. AGAINST THIS TREATMENT THE ASSESSE E PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ACTI ON OF THE AO IN TREATING THE FUTURE & OPTION TRANSACTION AS BUSINES S TRANSACTION. THE ASSESSEE CARRIED THE MATTER BEFORE THE TRIBUNAL. TH E TRIBUNAL SET ASIDE THE ASSESSMENT VIDE ITA NO.3253/AHD/2011 VIDE ORDER DATED 31/10/2012 WITH A DIRECTION THAT THE ASSESSEE HAS T O SUBMIT DETAILS BEFORE THE ASSESSING OFFICER REGARDING THE DATE OF CONVERSION OF THE SHARES HELD AS INVESTMENT INTO STOCK IN TRADE AND W HAT WAS THE MARKET VALUE OF THOSE SHARES ON THE DATE OF CONVERS ION. IN THE SET ASIDE PROCEEDINGS, THE ASSESSEE WAS ASKED BY THE AS SESSING OFFICER TO FURNISH THE DETAILS OF CONVERSION OF SHARES. THE ASSESSEE SUBMITTED THE SAME AND AFTER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE, THE ASSESSING OFFICER DETERMINED THE LOSS AT RS.(-) 1,22,822/-. ITA NO.2395/AHD/2015 ASST. YEAR 2007-08 3 3. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE T HE CIT(A) WHO PARTLY ALLOWED THE APPEAL OF ASSESSEE. 4. BEING AGGRIEVED, THE REVENUE IS NOW IN APPEAL BE FORE THE TRIBUNAL. THE LD. DR SUPPORTED THE ORDER OF ASSESSI NG OFFICER AND SUBMITTED THAT LD. CIT(A) HAS WRONGLY ALLOWED THE C LAIM OF ASSESSEE WITHOUT APPRECIATING THE FACTS. HENCE HIS ORDER MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THAT E XTENT. 5. ON THE OTHER HAND THE LD. AR SUPPORTED THE ORDER OF LD. CIT(A) AND SUBMITTED THAT LD. CIT(A) HAS RIGHTLY APPRECIAT ED THE FACTS OF THE CASE AND DECIDED THE ISSUE. THE ORDER OF CIT(A) BE UPHELD. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE MATERIAL ON RECORD. THE ISSUE BEFORE US TO BE EXAMI NED THAT THE GAIN ARISING FROM THE TRANSACTION WHEREIN ASSESSEE HAS C ONVERTED THE INVESTMENT HELD SINCE 1995 TO STOCK IN TRADE AND TH EREAFTER SOLD THE SAME IN THE OPEN MARKET THEN WHETHER THE ASSESSEE I S ELIGIBLE TO CLAIM THE GAIN AS LONG TERM CAPITAL GAIN ARISING FR OM THE TRANSACTIONS OF CONVERSION OF INVESTMENT INTO STOCK IN TRADE. TH E ASSESSEE HAS SHOWN THAT INVESTMENT WAS CONVERTED ON 21.5.2006 AN D THE SALE OF STOCK WAS MADE ON 22.5.2006. FROM THE PERUSAL OF OR DERS OF LOWER AUTHORITIES IT IS UNDOUBTED THAT THE APPELLANT IS S HOWING THE SHARES (WHICH HAVE BEEN SOLD IN THE YEAR UNDER APPEAL) AS INVESTMENT SINCE LAST MANY YEARS AND THE AUDITED FINANCIAL STATEMENT S ALSO SHOW THAT THE APPELLANT HAS SEPARATE PORTFOLIOS FOR INVESTMEN T AS WELL AS TRADING ITA NO.2395/AHD/2015 ASST. YEAR 2007-08 4 STOCK. DURING THE YEAR UNDER APPEAL SOME OF THE SHA RES WHICH WERE HELD AS INVESTMENT WERE SOLD DURING THE YEAR. HOWEV ER, THE ASSESSING OFFICER WANTED TO TREAT THE TRANSACTION A S BUSINESS INCOME BUT ACTUALLY THE ASSESSEE HAS SOLD THE EQUITY SHARE S HELD UNDER INVESTMENT THROUGH ITS NORMAL BUSINESS ACCOUNT WHIC H IS USUALLY USED FOR THE CARRYING ON TRANSACTIONS OF TRADING OF SHAR ES AND THIS WAS THE MAIN REASON FOR THE LITIGATION. THE ASSESSING OFFIC ER HAS NOWHERE CONTROVERTED TO THIS FACT THAT ASSESSEE WAS MAINTAI NING SEPARATE PORTFOLIOS OF INVESTMENT AND TRADING ACCOUNT AND TH E SHARES IN QUESTIONS WERE FORMING PART OF THE INVESTMENT ACCOU NT. THE CIT(A) HAS DEALT WITH THE ISSUE IN DETAIL AND HAS OBSERVED AS UNDER :- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE , THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE APPELLANT HAS SOLD CERTAIN SHARES DURING THE YE AR. IT IS CLAIMED BY THE APPELLANT THAT BEFORE SELLING THE SA ME IN THE STOCK MARKET THE SHARES, WHICH WERE SHOWN BY IT AS INVESTMENT IN THE BALANCE SHEET/BOOKS OF ACCOUNTS, WERE CONVER TED INTO STOCK IN TRADE. THEREFORE, THE PROFITS ON SALE OF S HARES ON THE DATE OF CONVERSION SHOULD BE TAKEN AS LONG TERM CAP ITAL GAIN. THE ASSESSMENT WHICH WAS MADE IN THE FIRST ROUND OF PROCEEDINGS WENT UP TO HONOURABLE ITAT, AHMEDABAD A S THE CIT(A) DISMISSED THE APPEAL OF THE APPELLANT TREATI NG THE SALE OF SHARES AS INCOME FROM BUSINESS. HONNOURABLE ITAT HA S SET ASIDE THE MATTER TO DECIDE THE ISSUE AFTER VERIFYIN G THE EVIDENCES AND TREATING THE GAIN UPTO THE DATE OF CO NVERSION OF SHARES AS CAPITAL GAIN AND ANY SUBSEQUENT PROFIT AS BUSINESS PROFIT. DURING THE COURSE OF SET ASIDE PROCEEDINGS, IT HAS BEEN POINTED OUT BY THE AO THAT THE APPELLANT COULD NOT GIVE ANY SATISFACTORY EVIDENCE AS IN ONE BREATH THE APPELLANT IS STATING THAT NO PROFIT ITA NO.2395/AHD/2015 ASST. YEAR 2007-08 5 ON CONVERSION SHARES WAS MADE AND ON THE NEXT BREAT H IT IS STATING THAT GAIN IS A LONG TERM CAPITAL GAIN. ON A CAREFUL CONSIDERATION OF ENTIRE FACTS OF THE CASE, IT IS NOTED FROM THE PERUSAL OF VARIOUS DETAILS FURNISHED BY TH E APPELLANT AND IN THE COURSE OF APPELLATE PROCEEDINGS THAT THE APPELLANT IS SHOWING THE SHARES WHICH HAVE BEEN SOLD IN THE YEAR AS INVESTMENT SINCE EARLIER YEARS. THE APPELLANT HAS P RODUCED COPIES OF AUDITED ACCOUNTS AND BALANCE SHEET IN WHI CH THE APPELLANT HAS SEPARATE PORTFOLIOS FOR INVESTMENT AN D THE TRADING STOCK. THE SHARES THAT HAVE BEEN SOLD DURING THE YE AR WERE NOT OF THE INVESTMENT PORTFOLIO AND WERE BEING HELD BY THE APPELLANT SINCE LAST 3-4 YEARS. THE APPELLANT HAS ALSO PRODUC ED BEFORE ME THE BOOKS OF ACCOUNTS FOR THE YEAR. A PERUSAL OF ALL THE DETAILS FILED BY THE APPELLANT SHOW THAT THE CLAIM OF THE APPELLANT THAT IT HAS CONVERTED THE STOCK HELD AS I NVESTMENT INTO STOCK IN TRADE IS NOT CORRECT. THE ENTRIES PASSED I N THE BOOKS OF ACCOUNTS SHOW OVERWRITING WHICH CLEARLY REVEAL THAT THE APPELLANT HAS NOT CONVERTED SHARES INTO STOCK IN TR ADE. THE AR OF THE APPELLANT SHRI RATHI ALSO ACCEPTED THE SAME FACT DURING THE COURSE OF APPELLATE PROCEEDINGS THAT THE SHARES WERE NOT CONVERTED INTO STOCK IN TRADE. THE APPELLANT HAS AL SO PRODUCED BEFORE ME BALANCE SHEET OF THE SUBSEQUENT YEAR IN W HICH THE REMAINING SHARES HAVE ALSO BEEN SHOWN AS INVESTMENT S. THE APPELLANT HAD EQUITY SHARES OF RS.15,87,600/- OUT O F WHICH THE SHARES OF 12,62,280/- WERE SOLD DURING THE YEAR AND BALANCE SHARE OF 3,25,320/- ARE CARRIED FORWARD IN THE SUBS EQUENT BALANCE SHEET AS INVESTMENT. THE CLAIM OF THE APPEL LANT THAT IT HAS CONVERTED THE SHARES IN THE BOOKS OF ACCOUNTS I NTO STOCK IN TRADE IS NOT BORNE OUT BY THE BOOKS OF ACCOUNTS PRO DUCED BEFORE ME AND ALSO THERE IS A CONTRADICTION BETWEEN THE STATEMENT OF THE APPELLANT AND THE BOOKS OF ACCOUNT S. THEREFORE, THE GAIN ARISING OUT OF THE SHARES HAS T O BE TREATED AS LONG TERM CAPITAL GAIN AS THE APPELLANT HAS BEEN CONSISTENTLY SHOWING IT AS INVESTMENT IN THE BOOKS OF ACCOUNTS. THE SHARES HAVE BEEN HELD BY IT FOR A LONG PERIOD SINCE LAST T O 3 YEARS AS THE BALANCE SHEET FOR THE YEAR 2004-05 ALSO SHOW TH E SIMILAR SHARE AS APPEARING AS INVESTMENT IN SCHEDULE F. CON SIDERING THESE FACTS AND CIRCUMSTANCES THE GAIN ARISING FROM SALE OF ITA NO.2395/AHD/2015 ASST. YEAR 2007-08 6 SHARES SHOULD BE TREATED AS LONG TERM CAPITAL GAIN. THE APPEAL IS DECIDED ACCORDINGLY. FROM THE ABOVE DISCUSSION IT IS AMPLY CLEAR THAT AP PELLANT HAS PRODUCED ALL NECESSARY DETAILS AND SUPPORTING TO PR OVE THAT THE APPELLANT HAD INVESTED IN EQUITY SHARES OF RS.15,87 ,600/- AND OUT OF THIS INVESTMENT EQUITY SHARES OF RS.12,62,280/- WER E SOLD DURING THE YEAR AND BALANCE INVESTMENT OF RS.3,25,320/- WAS CA RRIED FORWARD AS INVESTMENT IN SUBSEQUENT YEARS. THERE IS ACTUALLY N O CONVERSION OF STOCK IN TRADE WHICH CAN BE INFERRED UPON FROM THE BOOKS OF ACCOUNT. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF CIT(A) AND UPHOLD THE SAME. THE GROUND RAISED BY TH E REVENUE IS DISMISSED. 7. OTHER GROUNDS ARE OF GENERAL NATURE, WHICH DO NO T REQUIRE ANY ADJUDICATION. 8. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/11/2015 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 20/11/2015 MAHATA/- ITA NO.2395/AHD/2015 ASST. YEAR 2007-08 7 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 16/11/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 16/11/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 20/11/2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: