The ITO, Ward-7(1), Ahmedabad V. Smt. Nirmaladevi M.Agrawal, Ahmedabad

ITA 2499/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57270 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 28-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR
• Keywords: Business income; Salary income; Rule of consistency

Judgement Text

ITA 2499 & CO 228/AHD/09 ASSESSMENT YEAR 2006-07. 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI A.M.) I.T.A. NO. 2 499 /AHD/2009 (ASSESSMENT YEAR: 2006-07) THE INCOME TAX OFFICER, WARD 7(1), PRATYAKSHA BHAVAN, PANJARA POLE, AMBAWADI, AHMEDABAD. (APPELLANT) VS. SMT. NIRMALADEVI M. AGRAWAL, 70, VASANT BAHAR COLONY, BOPAL, AHMEDABAD. (RESPONDENT) C.O. NO. 228/AHD/2009 ( ARISING OUT OF I.T.A. N O. 2499 /AHD/2009) (ASSESSMENT YEAR: 2006-07) SMT. NIRMALADEVI M. AGRAWAL, 70, VASANT BAHAR COLONY, BOPAL, AHMEDABAD. (APPELLANT) VS. THE INCOME TAX OFFICER, WARD 7(1), PRATYAKSHA BHAVAN, PANJARA POLE, AMBAWADI, AHMEDABAD. (RESPONDENT) PAN: AGMPA 5247P APPELLANT BY : SHRI RAHUL KUMAR, SR. D.R. RESPONDENT BY : SMT. URVASHI SHODHAN. ( )/ ORDER DATE OF HEARING : 5-3-2012 DATE OF PRONOUNCEMENT : 16-3-12 ITA 2499 & CO 228/AHD/09 ASSESSMENT YEAR 2006-07. 2 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE LD. CIT (A)- III, AHMEDABAD VIDE HIS ORDER NO. CIT(A)-III/80/CEN TRAL CIRCLE-2(2)/08-09 DATED 20-5-2009 FOR THE ASSESSMENT YEAR 2006-07. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL:- 1. THE LD. COMMISSIONER OF INCOME TAX (A)-III, AHME DABAD HAS ERRED IN LAW AND ON FACTS IN CONSIDERING THE RESULT OF SHARE TRANSACTION OF RS.10,31,802/- AS CAPITAL GAIN BY DELETING THE A DDITION MADE BY THE ASSESSING OFFICER WHO HAD TAXED THE SAME AS BUSINE SS INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME TAX (A)-III, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD . COMMISSIONER OF INCOME TAX (A)-III, AHMEDABAD MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT RETURN OF I NCOME WAS FILED BY THE ASSESSEE ON 31-12-2006 DECLARING TOTAL INCOME AT RS .3,42,922/-. THE SAID RETURN WAS PROCESSED U/S. 143(1) OF THE INCOME TAX ACT ON 22-5-2007 AND THE RETURNED INCOME WAS ACCEPTED. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT. IN ITS RETURN, THE ASSESSEE HA D DISCLOSED INTEREST INCOME AND INCOME FROM SHARE TRADING WHICH SHE TREATED AS CAPITAL GAINS. ON SCRUTINIZING THE DETAILS, THE ASSESSING OFFICER OBS ERVED THAT THE MAGNITUDE OF PURCHASE AND SALES RAN INTO LACS OF RUPEES AND THE NUMBER OF TRANSACTIONS WERE ALSO HUGE. THERE WAS CONTINUOUS SALES AND PURC HASE OF SHARES IN VARIOUS NAMES AND THIS ACTIVITY WAS CARRIED OUT FOR NUMBER OF YEARS. HE FURTHER ITA 2499 & CO 228/AHD/09 ASSESSMENT YEAR 2006-07. 3 OBSERVED THAT THE PROFIT ON PURCHASING AND SELLING THE SHARES WAS SEVERAL TIMES HIGHER THAN THE DIVIDEND INCOME EARNED BY THE ASSESSEE. THE SCRIPS PURCHASED AT THE TIME OF DIVIDEND DECLARATION WERE NOT SUPPORTED BY ANY ANALYSIS CARRIED OUT BY THE ASSESSEE. HE FURTHER O BSERVED THAT SALE PROCEEDINGS IN THE NAME OF ONE PERSON HAS BEEN DIST RIBUTED IN THE BANK ACCOUNTS OF OTHER PERSONS IN THE GROUP AND PURCHASE S IN NAME OF A PERSON HAVE ALSO BEEN MADE FROM FUNDS OF OTHER MEMBERS. H E FURTHER OBSERVED THAT THE ASSESSEE HAD CARRIED OUT SUBSTANTIAL TRANSACTIO NS IN SHARES THROUGH A PORTFOLIO MANAGER. THE ASSESSEE HAD ALSO DEDUCTED/R EDUCED THE INCOME BY CLAIMING THE FEES PAID TO PORTFOLIO MANAGER AMOUNTI NG TO RS. 2,01,396/-. FURTHER, IN THE COMPUTATION OF TOTAL INCOME, THE AS SESSEE HAD CLAIMED EXPENSES LIKE D-MAT DELIVERY CHARGES, STT, SERVICE TAX ETC., AND ON POINTING OUT THE SAME, IT WAS WITHDRAWN BY THE ASSESSEE. BASED ON T HE AFORESAID FACTS, THE ASSESSING OFFICER HELD THE ASSESSEE TO BE OF A TRAD ER OF SHARES AND THEREFORE, THE ACTIVITIES OF SHARE TRANSACTIONS TO BE IN THE N ATURE OF TRADING/ADVENTURE IN THE NATURE OF TRADE. ACCORDINGLY, HE TAXED THE PROF IT FROM SHARE TRANSACTIONS AMOUNTING TO RS.10,31,802/- AS BUSINESS INCOME IN STEAD OF CAPITAL GAINS. 4. AGGRIEVED BY THE ACTION OF THE ASSESSING OFFICER IN TREATING RS.10,31,802/- AS BUSINESS INCOME INSTEAD OF CAP ITAL GAINS, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). C IT (A) CONSIDERED THE FACTUAL POSITION/EXPLANATION/REBUTTAL FURNISHED BY THE APPELLANT IN RESPECT OF THE PREMISES ADOPTED BY THE ASSESSING OFFICER FOR R EACHING AT HIS CONCLUSION. ON THE BASIS OF SUBMISSIONS, CIT (A) HELD THAT THE ASSESSEE HAD INCOME FROM OTHER SOURCES AS WELL AND WAS NOT DEPENDENT ON THE PROFITS FROM SALE OF SHARES FOR LIVELIHOOD. THE TRANSACTIONS APPEARING IN ALL T HE BANK ACCOUNTS/D-MAT ACCOUNTS WERE SCRUTINIZED/ANALYZED BY THE SPECIAL A UDITOR IN EARLIER YEARS. HE ITA 2499 & CO 228/AHD/09 ASSESSMENT YEAR 2006-07. 4 OBSERVED THAT THE SALE/PURCHASE OF SECURITIES WAS A PPARENTLY AN INDEPENDENT ACTIVITY AND DID NOT FORM THE ONLY SOURCE OF SHARE TRADING. THE LOW RATIO BETWEEN PURCHASES AND SALES AND HOLDING, THE PURCHA SE OF LISTED SECURITIES OF INDEPENDENT COMPANIES AND NOT AS PROMOTERS, THE DEL IVERY BASED TRANSACTIONS AND THE ACTUAL PAYMENT/RECEIPTS AND NOT MERE BOOK E NTRIES, ABSENCE OF LACK OF INTRA DAY TRADING AND OF REPEATED TRANSACTIONS OF S OME SCRIPS ETC., WERE THE FACTORS BASED ON WHICH HE CONCLUDED THAT THE ASSESS EE WAS AN INVESTOR. THUS, AFTER CONSIDERING THE DETAILED SUBMISSIONS, FACTS O N RECORD, THE BOARDS CIRCULARS ETC., HE CONCLUDED THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THE APPELLANT AS A TRADER AND DIRECTED THE ASSESSIN G OFFICER TO TREAT THE APPELLANT AS AN INVESTOR AND TREAT THE PROFIT ON SA LE OF SHARES AS CAPITAL GAINS INSTEAD OF BUSINESS INCOME AND ACCORDINGLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDING OF THE LEARNED CIT (A). 6. THE LD. DR RELIED ON THE ORDERS OF AUTHORITIES B ELOW. THE LD. AR FOR THE ASSESSEE ON THE OTHER HAND STATED THAT THE QUES TION OF ASSESSEE BEING AN INVESTOR HAS ALREADY BEEN DECIDED BY THE TRIBUNAL V IDE DECISION DATED 26-7- 2011 IN ASSESSEES OWN CASE IN APPEAL NO.2156 TO 21 61/AHD/2008 FOR THE ASSESSMENT YEARS 1999-00 TO 2002-03 AND 2004-05 & 2 005-06 WHEREIN AT PARA 6 ON PAGE-12 IT HAS BEEN HELD AS UNDER:- 6..IT IS A SETTLED LAW THAT, TO DETERMINE WHETHER THE ASSESSEE IS A TRADER OR INVESTOR IN SHARES, NO SINGLE TEST IS CONCLUSIVE BUT CUMULATIVE EFFECT OF ALL THE FACTS ARE TO BE SEEN. IN THE CASE OF THE AS SESSEE, ONE FACT I.E. FREQUENT PURCHASE/SALE OF SHARES CAN BE SAID TO BE AGAINST THE ASSESSEE BUT ITA 2499 & CO 228/AHD/09 ASSESSMENT YEAR 2006-07. 5 ALL OTHER FACTS WHICH CAN BE SUMMARIZED AS UNDER AR E IN FAVOUR OF THE ASSESSEE: I) SHRI RAVINDRA AGRAWAL IS A QUALIFIED PROFESSIONAL B EING CHARTERED ACCOUNTANT, COMPAY SECRETARY AND COST ACCOUNTANT; II) SHRI AGRAWAL WAS FULL TIME DIRECTOR OF A PUBLIC LIM ITED COMPANY AT THE RELEVANT TIME, POSTED AT PORBANDAR, III) SHARES WERE ACQUIRED WITH OWN MONEY AND THERE WAS N O BORROWING BY SHRI RAVINDRA AGRAWAL OR ANY OTHER FAMILY MEM,BE R, IV) NO OFFICE OR ANY STAFF WAS MAINTAINED FOR LOOKING A FTER PURCHASE AND SALE OF SHARES; V) THERE WAS SUBSTANTIAL DIVIDEND INCOME; - VI) HIS SOURCE OF INCOME WAS INCOME FROM SALARY, CAPITA L GAIN, DIVIDEND AND INTEREST AND HE WAS NOT HAVING ANY BUSINESS INC OME; VII) IN THE ORIGINAL RETURN OF INCOME FURNISHED FROM TIM E TO TIME, INCOME FROM SALE OF SHARES WAS DISCLOSED UNDER THE HEAD CAPITAL GAIN AND WAS ACCEPTED BY REVENUE AS SUCH UNDER SECTION 143(1 ). WHEN TOTALITY OF ALL THE ABOVE FACTS ARE CONSIDERED , THE INFERENCE DRAWN BY THE CIT (A) THAT THE ASSESSEE IS AN INVESTOR IN SH ARES, APPEARS TO BE CORRECT. APART FROM THE ABOVE, ON THE PRINCIPLE OF CONSISTENCY ALSO ORDER OF THE CIT (A) ON THIS POINT DESERVES TO BE UPHELD BEC AUSE IN THE ORIGINAL RETURNS INCOME FROM SALE OF SHARES WAS DISCLOSED UN DER THE HEAD CAPITAL GAIN AND THE SAME WAS ACCEPTED BY THE REVENUE. ITA T, MUMBAI BENCH IN THE CASE OF GOPAL PUROHIT (SUPRA) HELD THAT THOU GH IN INCOME TAX PROCEEDINGS THE RULE OF RES JUDICATA DOES NOT APPLY BUT THERE SHOULD BE UNIFORMITY IN TREATMENT AND CONSISTENCY UNDER THE S AME FACTS AND CIRCUMSTANCES. THIS DECISION IS UPHELD BY THE HONB LE MUMBAI HIGH COURT IN CIT VS. GOPAL PUROHIT, 228 CTR 582 (BOM.). THESE DECISIONS WOULD BE SQUARELY APPLICABLE TO THE CASES OF THE AS SESSEE UNDER APPEAL BECAUSE IN THESE CASES NOT ONLY IN EARLIER YEAR BUT IN THE YEARS UNDER APPEAL ALSO IN ORIGINAL PROCEEDINGS TRANSACTION OF PURCHASE ADDITION SALE OF SHARES SHOWN AS CAPITAL GAIN WAS ACCEPTED BY THE REVENUE MERELY ITA 2499 & CO 228/AHD/09 ASSESSMENT YEAR 2006-07. 6 BECAUSE, THERE WAS SEARCH AT THE ASSESSEES PREMISE S, THE NATURE OF TRANSACTION WOULD NOT CHANGE. IN VIEW OF THE ABOVE, AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND VARIOUS JUDICIAL PRONOUNCEMENT REFERRED ABOVE, WE FIND NO JUSTIFICAT ION TO INTERFERE WITH THE ORDER OF THE CIT (A) ON THIS POINT. THE SAME IS UPHELD AND THE REVENUES APPEALS ARE DISMISSED. 7. IN THE LIGHT OF VIEW TAKEN BY THE TRIBUNAL IN TH EIR AFORESAID DECISION, ESPECIALLY WHEN THE REVENUE HAS NOT PLACED BEFORE U S ANY MATERIAL SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER NO R BROUGHT TO OUR NOTICE ANY CONTRARY DECISION, WE HAVE NO HESITATION IN UPH OLDING THE FINDINGS OF THE LD. CIT (A). THEREFORE, GROUND NO.1 OF THIS APP EAL IS DISMISSED. 7. WE FIND THAT THERE IS NO CHANGE IN THE FACTS IN THE CURRENT YEAR AS COMPARED TO THOSE OF EARLIER YEARS AND ACCORDINGLY THE ASSESSEES CASE IS COVERED BY THE DECISION OF THE CO-ORDINATE BENCH IN EARLIER YEARS. RESPECTFULLY FOLLOWING ABOVE DECISION OF THE CO-ORDINATE BENCH, IN ASSESSEES OWN CASE, WE DISMISS THE APPEAL FILED BY THE REVENUE. 8. AS REGARDS THE CROSS OBJECTION FILED BY THE ASSE SSEE BECAUSE IT IS CONSEQUENTIAL IN NATURE, THE ASSESSEE HAS NOT PRESS ED THE CROSS OBJECTION FILED AND HENCE THE SAME IS DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALSO DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 16 - 3 - 2012. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. ITA 2499 & CO 228/AHD/09 ASSESSMENT YEAR 2006-07. 7 S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-III, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 5 - 3 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 12 / 3 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 14 - 3 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 16 - 3 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 16 - 3 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 6 - 3 -2012.P 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..