The ACIT,(OSD)Circle-10, Ahmedabad V. M/s. Tecee Investments, Ahmedabad

ITA 2866/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57316 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 15-10-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVETIA
• Keywords: Capital asset; Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.2866/AHD/2009 ASSESSMENT YEAR:2006-07 ASST. COMMISSIONER OF INCOME-TAX, (OSD), CIRCLE-10, AHMEDABAD V/S . M/S. TECEE INVESTMENTS, 702, SHIKHAR COMPLEX, MITHAKHALI SIX ROADS, NAVRANGPURA, AHMEDABAD PAN NOAABFT8706F (APPELLANT) .. (RESPONDENT) /BY APPELLANT SHRI VINOD TANWANI, SR-DR /BY RESPONDENT SHRI S.N.DIVETIA, AR /DATE OF HEARING 06-03-2012 /DATE OF PRONOUNCEMENT 23-03-2012 O R D E R PER KUL BHARAT, JUDICIAL MEMBER:- PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AG AINST THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XVI, AHMED ABAD DATED 03-08- 2008 FOR THE ASSESSMENT YEAR 2006-07. 2. THE BRIEF FACTS LEADING TO THE PRESENT APPEAL AR E AS UNDER:- THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHARE IN VESTMENT / TRADING AND HAVING SHORT TERM CAPITAL GAIN (STCG FOR SHORT) AND LONG TERM CAPITAL GAIN (LTCG FOR SHORT). THE CASE OF THE ASSESSEE WAS TAKE N UNDER SCRUTINY AND THE ASSESSMENT PROCEEDINGS WERE COMPLETED VIDE ORDER DA TED 22-12-2008. THE ITA NO.2866/AHD/2009 A.Y. 2006-07 ACIT,(OSD), CIR-10 ABD V. M/S TECEE INVESTMENTS PAGE 2 ASSESSING OFFICER TREATED THE SHARES AND SECURITIES ACQUIRED BY THE ASSESSEE- FIRM AS TRADING ASSETS AND ACCORDINGLY THE SURPLUS SHOWN AS STCG OF RS.13,99,030/- AND SHOWN AS LTCG OF RS.29,00,986/- ON SALE OF SHARES AND SECURITIES WAS TREATED AS BUSINESS INCOME OF THE AS SESSEE IN SHARES AND SECURITIES. 3. THE ASSESSEE FEELING AGGRIEVED BY THE AFOREMENTI ONED ACTION OF THE ASSESSING OFFICER PREFERRED AN APPEAL BEFORE LD. CI T(A) WHO ALLOWED THE APPEAL OF THE ASSESSEE. IN THIS BACKGROUND OF THE M ATTER THE REVENUE IS BEFORE US BY WAY OF PRESENT APPEAL RAISING THE FOLL OWING GROUNDS OF APPEAL FOR ADJUDICATION:- (1) THE LD. CIT(A) ERRED IN FACTS AND ON LAW IN TR EATING THE INCOME ARISING OUT OF PURCHASE & SALE OF SHARES AS CAPITAL GAIN INSTEAD OF BUSINESS INCOME. (2) THE LD. CIT(A) HAS FAILED TO ANALYZE THE FATS A ND GIVE ANY FINDING ON THE REASONS GIVEN BY A.O FOR TREATING THE CAPITAL G AIN ARISING ON PURCHASE & SALE OF SHARES AS BUSINESS INCOME AND NO T AS CAPITAL GAIN AS ADMITTED. (3) THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT EA CH A.Y IS INDEPENDENT AND THE FACT THAT CAPITAL GAIN ON PURCHASE AND SALE OF SHARES WAS ACCEPTED IN EARLIER A.Y DOES NOT PREVENT THE A.O FR OM TAKING CORRECT VIEW IN A.Y 2006-07 ON MERITS. (4) THE LD. CIT(A) HAS FAILED TO CONSIDER THE FACTS THAT THE ASSESSEE HAS DEALT WITH 143 SCRIPTS (SHARES) OR UNITS OF MUTUAL FUND AND THE NUMBER OF TRANSACTION IN EACH SCRIPT/UNIT VARIES FROM 2 TO 10. THUS THE NATURE AND MAGNITUDE OF THE ACTIVITY CLEARLY ESTABLISHES T HE FACT THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND NOT S INVESTMENT AS CLAIMED BY ASSESSEE. THE LD. CIT(A) DID NOT GOT THR OUGH RECORDS AND MERELY REPRODUCED THE ASSESSEES SUBMISSION. ITA NO.2866/AHD/2009 A.Y. 2006-07 ACIT,(OSD), CIR-10 ABD V. M/S TECEE INVESTMENTS PAGE 3 4. ALL THE GROUNDS RAISED BY THE REVENUE ARE INTER- CONNECTED. THEREFORE, WE FEEL IT APPROPRIATE TO DISPOSE THEM TOGETHER. LD . SENIOR DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUED THAT A BARE PERUSA L OF VOLUME AND FREQUENCY OF THE TRANSACTIONS AS MADE BY THE ASSESS EE DURING THE YEAR UNDER CONSIDERATION WOULD DEMONSTRATE THAT THE ASSESSEE I S NOT A MERE INVESTOR BUT IS A PRUDENT TRADER. HE FURTHER SUBMITTED THAT LD. CIT(A) FAILED TO APPRECIATE THAT EVERY ASSESSMENT YEAR IS AN INDEPENDENT YEAR A ND PRINCIPLE OF RES JUDICATE WOULD NOT APPLY TO THE ASSESSMENT PROCEEDI NGS. LD. DR FURTHER ARGUED THAT ASSESSING OFFICER HAS PASSED A REASONED ORDER AND LD. CIT(A) ERRONEOUSLY DID NOT APPRECIATE THE REASONING AND FA ILED TO CONSIDER THE JUDGMENTS AS RELIED BY THE ASSESSING OFFICER. LD. C IT(A) HAS TAKEN AN ERRONEOUS VIEWS THAT THE AO HAS NOT MAINTAINED AS W HY HE HAS TAKEN A DIFFERENT STAND FOR THE A.Y. 2006-07. LD LEARNED DE PARTMENTAL REPRESENTATIVE SUBMITTED THAT THE IMPUGNED ORDER IS CRYPTIC. ON TH E CONTRARY, LD. AR REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT( A) AND HAS ALSO FILED WRITTEN SUBMISSION. LD. AR ARGUED RIGHT FROM THE DA Y OF FORMATION OF THE ASSESSEE FIRM, THE SHARES AND SECURITIES HELD BY IT IS SHOWN AS INVESTMENT. THE OBJECT AND INTENTION OF THE ASSESSEE-FIRM IS IN VESTMENT BUT NOT TRADING FOR THE PURPOSE OF TRADING A SEPARATE FIRM IS FORMED. H E FURTHER SUBMITTED THAT THE ASSESSEES CASE IS ALSO COVERED BY RULE OF CONSISTE NCY. LD. AR SUBMITTED THAT THE VIEW TAKEN BY THE AO IS EX FACIE UNJUSTIFIED, A RBITRARY AND NOT TENABLE IN THE EYES OF LAW. LD. AR SUBMITTED THAT IT IS EVIDEN T FROM THE RECORDS THAT THE ASSESSEE-FIRM HAS BEEN MAINTAINING THE REGULAR BOOK S OF ACCOUNTS WHEREIN THE SHARES AND SECURITIES HAVE BEEN DISCLOSED AS IN VESTMENT IN BALANCE- SHEET, THE PERUSAL OF BALANCE-SHEET WOULD CLEARLY I NDICATE THAT OWN FUNDS HAVE BEEN UTILIZED FOR THE PURPOSE OF MAKING INVEST MENT IN SHARES AND SECURITIES. HE FURTHER SUBMITTED THAT THE AO HAS FA ILED TO APPRECIATE THAT THE INTENTION OF THE ASSESSEE IS TO HOLD THE SHARES AND SECURITIES AS INVESTMENT IS EVIDENT FROM THE PERIOD FOR WHICH SHARES AND SECURI TIES HELD AS ON 31-03- 2006. HE SUBMITTED THAT THE AO HAS ALSO FAILED TO A PPRECIATE THAT THE REPETITIVE TRANSACTIONS OF PURCHASE AND SALE OF SHARES AND SEC URITIES IN THE SAME SCRIPT ITA NO.2866/AHD/2009 A.Y. 2006-07 ACIT,(OSD), CIR-10 ABD V. M/S TECEE INVESTMENTS PAGE 4 ARE VERY LIMITED AND WHEN THE DESIRED QUANTITY IS N OT AVAILABLE OF THE GIVEN PRICE. LD. AR SUBMITTED THAT THE ASSESSEE-FIRM EVEN IN PAST HAS HELD THE SHARES AND SECURITIES AS INVESTMENT AND IN THE REGU LAR ASSESSMENT U/S 143(3) OF THE ACT, THE PROFIT HAS BEEN TREATED AS CAPITAL GAIN. HE FURTHER POINTED OUT THAT IT WILL BE NOTICED FROM THE BREAK UP OF THE PE RIOD OF HOLDING IN RESPECT OF SHARES AND SECURITIES SOLD AS STCG, THE GAIN IN RES PECT OF SHARES AND SECURITIES HELD FOR LESS THAN 3 MONTHS IS ONLY RS.6 ,45,570/-, WHEREAS SUCH GIVEN IN RESPECT OF SHARES AND SECURITIES HELD FOR LESS THAN 3 MONTHS IS ONLY RS.6,45,570/-. LD. AR VEHEMENTLY ARGUED THAT ALTERN ATIVELY IN SO FAR AS LTCG IS CONCERNED, THE TEST APPLIED BY AO COMPLETELY FAI LS AND THE SAME CANNOT BE TREATED AS STOCK-IN-TRADE. HE RELIED UPON THE ORDER OF LD. CIT(A). 5. WE HAVE PERUSED THE MATERIALS AVAILABLE ON RECOR D AND CONSIDERED THE SUBMISSIONS MADE BY THE LD. AR AND DEPARTMENTAL REP RESENTATIVE. IT IS TRANSPIRED FROM THE RECORD THAT THE ASSESSING OFFI CER DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE ORDER-SHEET NOTING DATE D 03-12-2008 ASKED THE ASSESSEE TO SHOW-CAUSE AS TO WHY, THE CAPITAL GAIN SHOULD NOT BE CONSIDERED AS BUSINESS INCOME. IN RESPONSE TO THIS SHOW-CAUSE, THE ASSESSEE FILED HIS VERSION SUBMITTING THEREIN THAT THE PURCHASE AND SA LE OF SHARES AND SECURITY HAS BEEN MADE OUT OF OWN FUNDS OF THE ASSESSEE, THE SHARE AND SECURITY HAS BEEN SHOWN AS INVESTMENT AND NOT AS A STOCK-IN-TRAD E IN THE BOOKS OF ACCOUNT, THE INTENTION OF THE ASSESSEE-FIRM IS TO H OLD THE SHARES BUT NOT TO DEAL IN THE SAME IN THE SHORT INTERVAL THEREBY EARNS PRO FITS. MOREOVER, THE ASSESSEE HAS BEEN HOLDING NUMBER OF SHARES FOR A PERIOD FOR MORE THAN ONE-TWO YEARS. THE ASSESSEE SUBMITTED THAT IT CANNOT BE NOTICED FR OM THE STATEMENT OF CAPITAL GAIN THAT THERE ARE REPETITIVE TRANSACTION OF PURCH ASE AND SALE IN THE SAME SCRIPT, THE PER CAPITA INVESTMENT IN SHARE AT THE E ND OF THE YEAR AND SALE DURING THE YEAR IS VERY SMALL. THE ASSESSEE RELIED UPON THE CBDT CIRCULAR NO.4/2007 DATED 15-06-2007 AND THE ASSESSEE REITERATED THAT THE ASSESSEE- FIRMS INTENTION IS NOT TO TRADE IN SHARE BUT IT IS THE INVESTMENT. THE AO WAS NOT CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSE E AND PROCEED TO TREAT THE ITA NO.2866/AHD/2009 A.Y. 2006-07 ACIT,(OSD), CIR-10 ABD V. M/S TECEE INVESTMENTS PAGE 5 CAPITAL GAIN AS BUSINESS INCOME. THE AO RELIED UPON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF MOHMED & COMPANY V. CIT (1977) 107 ITR 637 (GUJ), WHEREIN THE HONBLE HIGH COURT HAS O BSERVED THAT THE STOCK-IN- TRADE IS SOMETHING IN WHICH A TRADER OR A BUSINESSM AN DEALS WHEREAS HIS CAPITAL ASSET IS SOMETHING WITH WHICH HE DEALS. FUR THER, AO RELIED UPON THE JUDGMENT PASSED BY HONBLE SUPREME COURT IN THE CAS E OF CIT V. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. (P) LTD. (1971) 82 ITR 586 (SC), WHEREIN THE HONBLE APEX COURT HAS OBSERVED THAT MULTIPLICITY O F THE TRANSACTION OCCURRING SUCCESSFULLY OVER THE YEARS SUPPORTED THE DEPARTMEN TAL STAND THAT THE ASSESSEE HAS SEIZED TO BE AN INVESTOR AND HAD BECOM E A DEALER. HOWEVER, LD. CIT(A) WITHOUT CONSIDERING THE REASONING AND TH E CASE LAW CITED BY THE AO ALLOWED THE APPEAL HAS NOT DEMONSTRATED AS TO WHY H E IS TAKING A DIFFERENT STAND FROM OTHER YEARS. IT APPROPRIATE TO REPRODUCE THE RELEVANT CONTENTS OF THE IMPUGNED ORDER:- 3.2 RIGHT FROM THE DATE OF ITS INCEPTION, THE PROF IT ON SHARES IS BEING ASSESSED AS CAPITAL GAINS BY THE ASSESSING OFFICER TILL A.Y 2005-06. THE ASSESSING OFFICER HAS NOT MENTIONED ANY REASONS AS TO WHY HE HAS TAKEN DIFFERENT STAND IN A.Y 2006-07. IN FACT IN A. Y 2004-05 AND A.Y 2005-06 THE ASSESSMENT ORDER WAS PASSED U/S.143(3) AND THE PROFIT ON SALE OF SHARES WAS ASSESSED BY HIM AS CAPITAL GAINS . FURTHER THE APPELLANT HAS SHOWN LONG TERM CAPITAL GAIN OF RS.29 LACS APPROX. WHEREAS THE SHORT TERM CAPITAL GAIN IS OF RS.14 LAC S (APPROX). THIS SHOWS THAT THE APPELLANT HAS HELD MOST OF THE SHARE S FOR MORE THAN ONE YEAR. ONCE IN A.Y 2004-05 & 2005-06, THE ASSESSING OFFICER HAS HELD SUCH SHARES AS INVESTMENT WHICH ARE SOLD DURING THE YEAR TO CLAIM LONG TERM CAPITAL GAIN, THE PROFIT THEREON CANNOT BE TAX ED AS BUSINESS INCOME. FURTHER THE DEED OF PARTNERSHIP ALSO DOES N OT INDICATE THAT THE SHARES ARE PURCHASED BY THE APPELLANT FOR TRADING P URPOSES. I THEREFORE, AGREE WITH THE APPELLANT THAT PROFIT ON SALE OF SHA RES IS TO BE ASSESSED AS CAPITAL GAIN AS HAS BEEN DONE BY THE ASSESSING OFFICER IN EARLIER YEARS. FROM THE ABOVE IT IS EVIDENT LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE ON THE GROUND THAT ASSESSING OFFICER HAS NOT RECORDED THE REASON WHY HE HAS TAKEN A DIFFERENT VIEW IN RESPECT OF TREATING THE C APITAL GAIN AS BUSINESS INCOME FROM EARLIER YEARS. ITA NO.2866/AHD/2009 A.Y. 2006-07 ACIT,(OSD), CIR-10 ABD V. M/S TECEE INVESTMENTS PAGE 6 IT IS A SETTLED PROPOSITION OF LAW THAT RES JUDICAT A IS NOT APPLICABLE ON THE ASSESSMENT PROCEEDINGS. EVERY ASSESSMENT YEAR IS AN INDEPENDENT YEAR. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS RELIED UPON THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF ASSOCIATED INDUSTRIAL DEVELOPMENT CO (P) LTD. (SUPRA) IT WAS HELD THAT THE MULTIPLICITY OF TRANS ACTION OCCURRING SUCCESSFULLY FOR THE YEARS SUPPORTED THE STAND OF T HE REVENUE THAT THE ASSESSEE HAD SEIZED TO BE AN INVESTOR AND HAD BECOM E A DEALER. THE AO HAS ALSO CITED THE JUDGMENT OF HONBLE JURISDICTIONAL H IGH COURT IN THE CASE OF H. MOHMED & COMPANY V. CIT (1977) AS REPORTED IN 107 ITR 637 (GUJ). LD. CIT(A) HAS NOT PASSED THE SPEAKING ORDER ON AS WHY THE REASONING GIVEN BY AO IS NOT ACCEPTABLE IT IS ALSO EVIDENT FROM THE OR DER OF THE LD. CIT(A) THAT HE HAS NOT ADVERTED ANYTHING IN RESPECT OF APPLICABILI TY OF THE JUDGMENTS CITED BY ASSESSING OFFICER IN HIS ASSESSMENT ORDER AND ALSO WHY THE REASONING GIVEN BY ASSESSING OFFICER ARE NOT ACCEPTABLE. IN VIEW OF THIS MATTER, IT WOULD BE IN THE INTEREST OF JUSTICE IF THIS MATTER TO BE SENT B ACK TO THE FILE OF LD. CIT(A) FOR FRESH ADJUDICATION IN THE LIGHT OF THE JUDGMENT REL IED BY THE PARTIES. THEREFORE, THE IMPUGNED ORDER PASSED BY LD. CIT(A) IS SET ASID E AND THE MATTER IS REMITTED BACK TO LD. CIT(A) WITH A DIRECTION TO PAS S A SPEAKING ORDER, AS TO WHY THE REASONING GIVEN BY ASSESSING OFFICER IS NOT ACCEPTABLE AND THE JUDGMENTS CITED BY HIM ARE NOT APPLICABLE UNDER THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AFTER GIVING SUFFICIENT OPPORTU NITY OF HEARING TO BOTH THE SIDES. 6. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR STAT ISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 23/03 /2012 SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP -23/03/2012 '() * +, +, +, +, --. --. --. --. /. /. /. /. / COPY OF ORDER FORWARDED TO:- ITA NO.2866/AHD/2009 A.Y. 2006-07 ACIT,(OSD), CIR-10 ABD V. M/S TECEE INVESTMENTS PAGE 7 1. / APPELLANT 2. / RESPONDENT 3. )-1 + +2 / CONCERNED CIT 4. + +2- / CIT (A) 5. .56 ---1, + -1 , '() / DR, ITAT, AHMEDABAD 6. 69: ;< / GUARD FILE. BY ORDER/ +, , /TRUE COPY/ =/ ' > + -1 , '() *