The ITO, Ward-8(1), Ahmedabad V. Shri Vimal Ramniklal Ambani, Ahmedabad

ITA 2442/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8587 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 03-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO. 2442/AHD/2014 (ASSESSMENT YEAR: 2011-12) INCOME TAX OFFICER, WARD-8(1), AHMEDABAD APPE LLANT VS. VIMAL RAMNIKLAL AMBANI PROP. AMAR ENTERPRISE, VIMAL HOUSE, NEAR ISHITA TOWER, NAVRANGPURA, AHMEDABAD 380009 RESPONDENT PAN: AADPA7562Q /BY REVENUE : SHRI PRASOON KABRA, SR. D.R. /BY ASSESSEE : NONE /DATE OF HEARING : 06.09.2017 /DATE OF PRONOUNCEMENT : 14.09.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2011-12 A RISES AGAINST THE CIT(A)-XIV, AHMEDABADS ORDER DATED 19.06.2014, IN CASE NO. CIT(A)- XIV/8(1)337/2013-14, REVERSING ASSESSING OFFICERS ACTION TREATING ASSESSEES LONG AND SHORT TERM CAPITAL GAINS OF RS. 50,37,074/- AND ITA NO. 2442/AHD/14 (ITO VS. VIMAL R. AMBANI) A.Y. 2011-12 - 2 - RS.35,569/-; RESPECTIVELY AS HIS BUSINESS INCOME, I N PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. CASE CALLED TWICE. NONE APPEARS AT ASSESSEES B EHEST DESPITE SERVICE OF RPAD NOTICE DATED 31.07.2017. HE IS ACCORDINGLY PR OCEEDED EX PARTE. 3. WE NOW ADVERT TO THE RELEVANT FACTS PERTAINING T O THE ABOVE SOLE ISSUE. THIS ASSESSEE IS AN INDIVIDUAL STATED TO BE BOTH IN VESTOR AS WELL AS A TRADER IN SHARES, SECURITIES, MUTUAL FUNDS ETC. HE CLAIMED T HE ABOVE GAINS DERIVED FROM SALES OF SUCH INVESTMENTS TO BE LONG TERM AND SHORT TERM CAPITAL GAINS. THE ASSESSING OFFICER SOUGHT TO TREAT THE SAME AS HIS B USINESS INCOME. ASSESSEE FILED HIS REPLY DATED 13.12.2013 INTER ALIA PLEADIN G THEREIN THAT HE HAD BEEN MAINTAINING SEPARATE PORTFOLIO QUA INVESTMENTS AND TRADED SHARES AS PER BOARDS CIRCULAR NO. 4/2007 DATED 15.06.2007. HIS CASE WAS THAT THE CORRESPONDING LONG TERM CAPITAL GAINS AMOUNT IN QUE STION HEREINABOVE SUFFICIENTLY INDICATED THAT THERE WAS NO INTENTION OF ADVENTURE IN THE NATURE OF TRADE EMBEDDED THEREIN. THE ASSESSEE WOULD PLEAD T HAT SHORT TERM CAPITAL GAINS FIGURE WAS VERY MEAGER. ALL OF HIS SHARE TRA NSACTIONS WERE DELIVERY BASED. HE FURTHER REFERRED TO HIS EARLIER ASSESSME NT YEARS WHEREIN HE HAD SUCCEEDED ON THE VERY ISSUE BEFORE THE CIT(A). ALL THIS FAILED TO CONVINCE UPON THE ASSESSING AUTHORITY. IT FRAMED A TABULATI ON CHART INDICATING THE ASSESSEE TO HAVE SOLD 88,959 SHARES IN 43 TRANSACTI ONS SPREAD THROUGHOUT THE RELEVANT PREVIOUS YEAR FOLLOWED BY PURCHASE OF 26,0 50 SHARES IN 24 TRANSACTIONS. HIS CASE WAS ACCORDINGLY THAT THE SA ID FIGURES ALONGWITH THE IMPUGNED LONG AND SHORT TERM CAPITAL GAINS WAS SUFF ICIENT TO INDICATE THAT THE ASSESSEES INTENTION FROM THE VERY BEGINNING WAS TO BE A TRADER THEREIN. HE FURTHER DECLINED ASSESSEES EXPLANATION OF HAVING T WO SEPARATE PORTFOLIOS TO CONCLUDE THAT THE SAME WAS NO MORE THE DECISIVE FAC TOR SINCE THE ABOVE FACTS HAD PROVED HIS INTENTION OF MAXIMIZING PROFITS FROM SHARE TRANSACTION ITA NO. 2442/AHD/14 (ITO VS. VIMAL R. AMBANI) A.Y. 2011-12 - 3 - BUSINESS. THE ASSESSING OFFICER ALSO REFERRED TO T HE CIT(A)S FINDINGS IN ASSESSMENT YEARS 2006-07 & 2008-09 GOING IN ASSESSE ES FAVOUR WHEREIN THE REVENUE HAS PREFERRED ITS APPEALS ITA NOS. 2362/AHD /2010 & 244/AHD/2011. HE ACCORDINGLY TREATED ASSESSEES AB OVE LONG AND SHORT TERM CAPITAL GAINS INVOLVING NET AMOUNT OF RS.50,72,643/ - TO BE ASSESSEES BUSINESS PROFIT. 4. THE ASSESSEE PREFERRED APPEAL. THE CIT(A) ACCEP TS ITS CASE AS UNDER: 5.2 GROUND NO. 2 IS IN DESCRIPTIVE MANNER AND AGAI NST THE A.O'S TREATMENT OF CONSIDERING SHORT TERM CAPITAL GAIN OF RS. 35,569/- AND LONG TERM CAPITAL GAIN OF RS. 50,37,074/- AS BUSINESS INCOME. IT IS CONTENDED BY APPELLANT THAT A.O. PRESUMED THAT BORROWED FUNDS WERE UTILIZED BY A PPELLANT FOR SHARE & SECURITIES PURCHASES IN HIGH FREQUENCY WITHOUT APPRECIATING TH E FACTS AND CONSISTENT POLICY FOLLOWED BY APPELLANT OVER THE YEAR. IT IS CONTEN DED THAT APPELLANT SINCE MANY YEARS FOLLOWED THE PROCEDURE OF KEEPING TWO SEPARAT E PORTFOLIO I.E. ONE FOR INVESTMENT AND ANOTHER FOR BUSINESS. IT IS ALSO SUB MITTED AND CONTENDED THAT FOR THE SHARE TRADING BUSINESS IN THE NAME OF PROP, CONCERN M/S AMAR ENTERPRISE, ALL THE PURCHASES FROM SHARE BROKERS ARE IN THE NAME OF PRO P, CONCERN AND SEPARATE DEMAT ACCOUNT FOR THE SAME IS MAINTAINED. FOR THE I NVESTMENT PORTFOLIO THE BROKERS NOTE AND BILL ARE IN THE INDIVIDUAL NAME AND FOR TH IS ANOTHER DEMAT ACCOUNT IS MAINTAINED. THE APPELLANT CONTENDED THAT SALE PROCE EDS OF THE INVESTMENT ARE UTILIZED FOR FURTHER INVESTMENT AND BORROWED FUNDS WERE NOT UTILIZED. THE APPELLANT CONTENDED THAT A.O. OVERLOOKED THE FACT THAT IN EAR LIER YEARS SIMILAR TREATMENT BY A.O. WERE REJECTED IN APPEAL PROCEEDINGS AFFIRMING APPELLANT'S CONTENTION AND PROCEDURE FOLLOWED FOR SHARE TRADING AS WELL AS INV ESTMENT. THE APPELLANT HIGHLIGHTED THE FACT THAT IN EARLIER YEARS THE APPE LLANT RECEIVED AN INVESTMENT PORTFOLIO ON ACCOUNT OF HIS LATE MOTHER WILL AND PA RTIAL PARTITION OF HIS FATHER'S HUF WHICH CANNOT BE HELD AS INVESTMENT THROUGH BORR OWED FUNDS. THE APPELLANT FURTHER SUBMITTED THAT AS FAR AS LONG TERM CAPITAL GAIN ARE CONCERNED, THE AV. HOLDING PERIOD IS MORE THAN 41 MONTHS. THE APPELLAN T IN HIS SUBMISSION ANALYZED A.O.'S CONTENTION TO REFLECT THE SAME IS NOT BASED ON FACTS AND EARLIER YEARS RECORD OF APPELLANT. APPELLANT RELIED ON VARIOUS CASE LAWS TO SUBSTANTIATE HIS CONTENTION INCLUDING THE RATIO OF APPEAL ORDER IN HIS OWN CASE FOR A.Y. 06-07, 08-09, 09-10 AND A.Y. 10-11. I AM INCLINED WITH APPELLANT THAT AS PER SETTLED LE GAL PROPOSITION AND BOARD CIRCULAR NO. 4/2007 DT. 15/06/07, THE APPELLANT IS ALLOWED TO MAINTAIN TWO SEPARATE PORTFOLIO TO CONDUCT BOTH SHARE TRADING ACTIVATES A S WELL AS INVESTMENT ACTIVITIES. I AM ALSO INCLINED WITH HIM THAT OVER THE YEARS APPEL LANT FOLLOWED CONSISTENT ACCOUNTING THROUGH TWO SEPARATE DEMAT ACCOUNT IN TH E NAME OF HIS PROP, CONCERN IN THE NAME OF M/S AMAR ENTERPRISE AS WELL AS IN HI S OWN INDIVIDUAL NAME TO DEMARKET CLEARLY SUCH ACTIVITIES. THE A.O. FAILED T O BRING ON RECORD ANY DIFFERENT FACTS THAN THAT OF EARLIER YEARS IN WHICH APPELLANT 'S CASE WERE SUBJECTED TO SCRUTINY ITA NO. 2442/AHD/14 (ITO VS. VIMAL R. AMBANI) A.Y. 2011-12 - 4 - AND SUCH TREATMENT OF CONSIDERING LTCG AND OR STCG AS BUSINESS-WERE ALLOWED IN FAVOUR OF APPELLANT AND ALLOWED TO BE CONSIDERED AS STCG AND LTCG. I AM ALSO INCLINED WITH APPELLANT THAT RATIO OF VARIOUS CASE LAWS RELIED ON BY HIM IN THIS REGARDS ARE SQUARELY APPLICABLE IN THE FACTS & CIRC UMSTANCES OF THE APPELLANT'S CASE. FURTHER IN APPELLANT'S OWN CASE OF EARLIER YE ARS ON SIMILAR FACTS AND SAME ISSUE, SUCH ADDITIONS WERE DIRECTED TO BE DELETED. IN THE ABSENCE OF ANY CHANGE OF FACTS, THE PRINCIPLES OF CONSISTENCY ARE REQUIRED T O BE UPHELD AS PER ESTABLISHED LEGAL PROPOSITION. LD. C.I.T.(A)-I, AHMEDABAD IN AP PELLANT'S OWN CASE OF A.Y. 2010-11 IN APPEAL NO. CIT(A)-1/WD.8(1 )/284/2013-14 VIDE ORDER DT. 25/10/13 FOLLOWING THE RATIO OF EARLIER YEAR ORDERS (LD. CIT (A) ORDER 24/05/2012 FOR A.Y. 09-10 IN APPEAL NO. CIT(A)/XIV/WD. 8(1)/243/2011-12 ) HELD THAT 'THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS OF THE A.Y. 09-10. I AGREE WITH THE FINDINGS OF CIT(A) XIV, AHMEDABAD. IN VIEW OF THE ABOVE, THE A.O'S NOT JUSTIFIED IN TREATING THE LONG TERM CAPITAL GAINS A ND SHORT TERM CAPITAL GAINS AS BUSINESS INCOME.' IT IS THEREFORE CONSIDERING NO CHANGE OF FACTS & CO NTENTION, THE A.O'S TREATMENT OF LTCG & STCG AS BUSINESS INCOME IS NOT JUSTIFIED. THE A.O. IS DIRECTED TO TREAT THEM AS REFLECTED BY APPELLANT. T HIS GROUND IS THEREFORE ALLOWED. 5. HEARD LEARNED DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTING ASSESSING OFFICERS ACTION IN QUESTION ADDING ASSES SEES SHARE PROFIT AS BUSINESS INCOME THAN THAT DECLARED AS LONG AND SHOR T TERM CAPITAL GAINS. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS ALREADY SUCCEE DED ON THE VERY ISSUE BEFORE THE CIT(A) IN ASSESSMENT YEARS 2006-07 & 2008-09. THE ASSESSING OFFICER HIMSELF IS VERY FAIR IN NOT POINTING OUT ANY DISTIN CTION ON FACTS. WE SOUGHT TO KNOW ABOUT FINAL OUTCOME OF THE SAID CASES. CASE R ECORDS INDICATE THAT A CO- ORDINATE BENCH IN ITS ORDER DATED 07.09.2016 HAS AL READY UPHELD THE CIT(A)S IDENTICAL ACTION REVERSING ASSESSING OFFICERS FIND INGS TREATING SIMILAR PROFITS AS BUSINESS INCOME. WE FURTHER NOTICE THAT THE ASS ESSEES SHARE TRANSACTIONS IN THE IMPUGNED ASSESSMENT YEAR ARE VERY MEAGER SO AS TO BE TREATED AS AN ADVENTURE IN THE NATURE OF TRADE. HE HAS SOLD THE ABOVESTATED SHARES IN LESS THAN 15 ENTITIES ON 43 OCCASIONS IN THE RELEVANT AC COUNTING PERIOD. MOST OF THE RELEVANT TRANSACTIONS ARE EXECUTED IN LATTER HA LF OF THE YEAR. SAME APPEARS TO BE THE CASE WITH HIS PURCHASE TRANSACTIONS NUMBE RING 24 IN VERY FEW SCRIPS. THIS IS NOT THE REVENUES CASE THAT ASSESSEES BOOK S MAINTAINED ANYWAY ITA NO. 2442/AHD/14 (ITO VS. VIMAL R. AMBANI) A.Y. 2011-12 - 5 - TREAT THE SAME AS STOCK IN TRADE OR THAT THE ASSESS EE EMPLOYED ANY BORROWED FUNDS IN THE ABOVE PURCHASE INSTANCES. WE THEREFORE ADOPT CONSISTENCY IN THE INSTANT CASE TO AFFIRM THE CIT(A)S FINDINGS UNDER CHALLENGE. 6. THIS REVENUES APPEAL IS ACCORDINGLY DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE DAY OF SEPTEMBER, 2017.] ( AMARJIT SINGH ) ( S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL M EMBER AHMEDABAD: DATED /09/2017 S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0