Shri Alpesh Virchand Modi, Ahmedabad V. The Income tax Officer,Ward-8*4), Ahmedabad

ITA 2717/AHD/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5914 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 03-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RICHHA RASTOGI
• Assessee Lawyers: S N DIVATIA
• Keywords: Business income; Principle of natural justice

Judgement Text

, *,* IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER !# I.T.A. NO.2717/AHD/2011 ( / ASSESSMENT YEAR : 2008-09) SHRI ALPESH VIRCHAND MODI MANILAL & BROTHERS, MADHUPURA, AHMEDABAD. # VS. ITO, WARD 8(4), AHMEDABAD. $ # % & # PAN/GIR NO. : AAYPM 2313 G ( !$' / APPELLANT ) .. ( ($' # RESPONDENT ) !$') # APPELLANT BY : SHRI S.N. DIVATIA, AR ($'*) / RESPONDENT BY : MS. RICHHA RASTOGI, SR. DR + ,*-. / DATE OF HEARING 06/03/2017 /012*-. / DATE OF PRONOUNCEMENT 12/05/2017 3# O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-XIV, AHMEDABAD, DATED 16/09/2011 FOR THE ASSESSMENT YEAR (AY) 2008-09. 2. ASSESSEE HAS BEEN TAKEN FOLLOWING GROUNDS OF APP EALS: (I). THE ORDER PASSED U/S.250 ON 16.09.2011 FOR A.Y .2008-09 BY CIT(A)-XIV, AHMEDABAD UPHOLDING THE SHORT TERM CAPI TAL GAIN ON SALE OF SHARES AS BUSINESS INCOME AND DISALLOWAN CE OF ITA NO. 2717/AH D/2011 ALPESH VIRCHAND MODI VS.ITO ASST.YEAR 2008-09 - 2 - INTEREST OF RS.31,068/- MADE BY AO IS WHOLLY ILLEGA L, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. (II). THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE SUBMISS IONS MADE AND EVIDENCE PRODUCED BY THE APPELLANT WITH REGARD TO T HE IMPUGNED ADDITIONS. (III). THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AN D ON FACTS IN CONFIRMING THAT THE APPELLANT HAD INDULGED INTO TRA DING IN SHARES SO THAT PROFIT ARISING OUT OF SALE OF SHARES WAS BU SINESS INCOME INSTEAD OF STCG CLAIMED BY THE APPELLANT. (IV). THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THAT THE APP ELLANT WAS A TRADER AND NOT AN INVESTOR IN SHARES SO THAT STCG O N SALE OF SHARES WAS BUSINESS INCOME. (V). THE LD.CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF INTEREST EXPENSES OF RS.31,068/- MADE BY AO. (VI). THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AS WELL AS IN LAW, THE LD. CIT(A) OUGHT NOT TO HAVE UPHELD THE DISALLO WANCE OF INTEREST OF RS.31,068/- MADE BY AO. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE HAD SHOWN PROFIT OF RS.1,73,681/- OUT OF S HARE TRADING ACTIVITY, THE SAID PROFITS HOWEVER WAS REDUCED FROM THE INCOM E UNDER THE HEAD BUSINESS & PROFESSION, TREATING THE SAME AS INVES TMENT AND WAS OFFERED TO TAX UNDER THE HEAD SHORT TERM CAPITAL G AIN. ON PERUSAL OF THE DETAILS IT WAS SUBMITTED BY THE ASSESSEE, IT WA S SEEN THAT ASSESSEE ITA NO. 2717/AH D/2011 ALPESH VIRCHAND MODI VS.ITO ASST.YEAR 2008-09 - 3 - PURCHASED AND SOLD SHARES OF 35 DIFFERENT COMPANIES DURING THE YEAR & ASSESSEE TRANSACTED IN SUCH EQUITIES AS NUMBER OF T IMES DURING THE ENTIRE YEAR. ASSESSEES TRANSACTIONS IN SUCH PURCHASES & S ALE WERE ALMOST THROUGHOUT THE YEAR. THE DETAILS OF THE SHARE TRADI NG UNDERTAKEN BY THE ASSESSEE IS TABULATED BELOW FOR READY REFERENCE: STCG DURING THE A.Y. 2008-09 SL. NO. NAME OF SCRIPT NO. OF SHARE OF TRADED/ PURCHAS E IN IPO AMOUNT IN INVOLVED PROFIT/L OSS 1. BGR ENERGY 27 6720 2384 2. RNRL 750 72385 86255 3. IDFC 500 30165 11310 4. MEGHMANI ORGANICS 350 6650 2856 5. CENTRAL BANK OF INDIA 63 6426 1217 6. CIRCUIT SYSTEMS 395 13825 4594 7. CRAIN ENERGY PVT.LTD. 525 84000 10489 8. EIDEL WEISS LTD. 8 6600 0 9. FUTURA POLY LTD. 300 12228 0 10. G.V. FILMS LTD. 1000 12320 0 11. ICICI BANK LTD 108 96120 9561 12. IDEA CELLULAR LTD 1172 12900 9947 13. KOLTE PATIL DEVELOPERS 44 6380 1365 14. MAYTAS INFRA LTD. 180 6600 4070 15. MUDRA PORT LTD . 15 6600 8036 16. NOCIL LTD. 500 30999 0 17. NTPC LTD. 250 68785 0 18. OMAXE LTD . 26 8060 1727 19. POWERGRID COR. LTD. 786 88032 16826 20. PRECISION PIPE LTD. 45 6750 221 ITA NO. 2717/AH D/2011 ALPESH VIRCHAND MODI VS.ITO ASST.YEAR 2008-09 - 4 - 21. RELIANCE IND. LTD. 35 92536 2106 22. RELIANCE PETRO LTD. 100 26488 0 23. RELIANCE POWER LTD. 25 6880 0 24. TIME TECHOPLAST LTD. 24 7560 3487 25. UNITY INFRA PROJECTS LTD. 43 29025 1330 26. WIPRO LTD. 50 27452 464 27. EMPEE DISTILLERY LTD. (-) 2965 TOTAL 4221 604376 173486 3. AFTER GOING THROUGH THE CASE RECORDS AND THE NAT URE OF TRANSACTIONS AS A WHOLE THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY HIS ACTIVITY SHOULD NOT BE TREATED AS BUSINESS ACTIVITY INSTEAD IN INVESTMENT ACTIVITY AS SHOWN BY HIM. THE ASSESSEE VIDE ORDER SHEET DATED 2 0.09.2010 STATED THAT HE IS DIRECTOR IN A COMPANY AND WAS DRAWING SALARY EXCEEDING RS. 5 LACS AND SO PURCHASE AND SALES OF SHARES WAS NOT HIS MAI N ACTIVITY & SUCH PURCHASE WAS MADE WITH THE INTENTION TO HAVE LONG T ERN APPRECIATION AND FOR EARNING DIVIDEND. THE ASSESSEE STATED THAT THE INVESTMENTS WERE MADE FROM THE ASSESSEES OWN FUND. ASSESSEE ON THE BASIS OF HIS ABOVE SUBMISSION STATED THAT THE PROFIT ON SALE OF SHARES SHOULD BE TREATED AS CAPITAL GAIN AND NOT BUSINESS INCOME. 4. AGAINST THE SAID ADDITION ASSESSEE FILED FIRST A PPEAL BEFORE THE LEARNED CIT(A), WHO DISMISSED THE APPEAL OF THE ASS ESSEE. NOW APPEAL OF THE APPELLANT IS BEFORE US. 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER, IT IS UNDOUBTEDLY FACTS THAT APPELLANT IS AN INDIVIDUA L AND HAVE INCOME FROM ITA NO. 2717/AH D/2011 ALPESH VIRCHAND MODI VS.ITO ASST.YEAR 2008-09 - 5 - SALARY, SHARE INCOME FROM PARTNERSHIP FIRM AND INCO ME FROM OTHER SOURCES. HE HAD FILED HIS RETURN OF INCOME FOR ASSE SSMENT YEAR 2008-09 ON 29/09/2008 DECLARING LOSS OF RS.9,06,792/-. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE APPELLANT HAD SHOWN PROFIT OF RS.1,73,681/- IN RESPECT OF SHARE TRANSACTIONS WHICH WAS DECLARED IN THE RETURN AS SH ORT TERM CAPITAL GAINS. HOWEVER, THE AO TREATED THE SAME AS BUSINESS INCOME ON THE GROUND THAT THE APPELLANT HAD CARRIED OUT PURCHASE AND SALE OF SHARES IN A SYSTEMATIC AND ORGANIZED MANNER BY ACQUIRING THE SHARES IN IPO S WHICH WERE SOLD ON THE LISTING DAY AT PROFIT. 7. THE AO ALSO FOUND THAT THE APPELLANT HAD CLAIMED INTEREST OF RS.1,80,585/- ON THE BORROWINGS AMOUNTING TO RS.46. 50 LAKHS AS AGAINST WHICH THE INTEREST FREE ADVANCE TO THE RELATIVES WE RE RS.7 LAKHS. HENCE, INTEREST OF RS.31,068/- WAS DISALLOWED IN RESPECT O F THE SAID ADVANCE OF RS.7 LACS ON THE GROUND OF DIVERSION OF BORROWED FU NDS FOR NON-BUSINESS PURPOSES. 8. ON ACCOUNT OF FOREGOING OBSERVATION WE HOLD THAT APPELLANT IS AN INVESTOR, NOT A FULL TIME BUSINESS MAN OF SHARE TRA DING BECAUSE HE IS A DIRECTOR IN COMPANY AND DERIVES SALARY, GETTING INC OME FROM PARTNERSHIP FIRM AND INCOME FROM OTHER SOURCES. ITA NO. 2717/AH D/2011 ALPESH VIRCHAND MODI VS.ITO ASST.YEAR 2008-09 - 6 - 9. IN THE LIGHT OF THE ABOVE SUBMISSIONS WE ALLOW T HE APPEAL OF THE ASSESSEE. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 12 / 05 /201 7 SD/- SD/- ( ) 4 5 ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 12/05/2017 PRITI YADAV, SR. PS !'# $#! # COPY OF THE ORDER FORWARDED TO : 1. !$' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 67- + 8- / CONCERNED CIT 4. + 8- 4!5 / THE CIT(A)-XIV, AHMEDABAD. 5. 9:;-67 !.!672 ! / DR, ITAT, AHMEDABAD 6. ;<=, # GUARD FILE. % & / BY ORDER, (9-- //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY