ASST.C.I.T., RG.5(3), MUMBAI V. M/S. STOREWELL CREDITS & CAPITAL PVT.LTD., MUMBAI

ITA 2956/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1304 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 16-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 01-05-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Assessee Lawyers: H P MAHAJANI
• Keywords: Set aside; Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, E, MUMBAI BEFORE S/SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 2956 AND 2957/MUM/2008 (ASSESSMENT YEAR: 2004-05 AND 2005-06) ACIT RANGE 5(3), ROOM NO.573, 5 TH FL, AAYAKAR BHAVAN M K ROAD MUMBAI-400020 .APPELLANT V/S STOREWELL CREDITS AND CAPITAL PVT.LTD., KEJRIWAL HOUSE, 7N GAMADIA ROAD, MUMBAI-400026 PAN:AADCS9571Q RESPONDENT APPELLANT BY : SHRI NAVEEN GUPTA RESPONDENT BY : SHRI H P MAHAJANI O R D E R PER VIJAY PAL RAO,JM THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST T HE TWO SEPARATE ORDERS DATED 28.03.2008 OF CIT(A)-V, MUMBAI FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06. SINCE THESE APPEALS PERTAIN TO THE SAME ASSESSEE AND THE GROU NDS OF APPEAL RAISED IN THESE TWO APPEALS ARE COMMON THE REFORE, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD T OGETHER AND ARE BEING DECIDED BY THIS CONSOLIDATED ORDER. ITA NO. 2956 AND 2957/MUM/2008 (ASSESSMENT YEAR: 2004-05 AND 2005-06 2 2. THE REVENUE HAS RAISED THE ONLY EFFECTIVE COMM ON GROUND IN THESE APPEALS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO RECOMPUTE THE CAPITAL GAIN ON THE IMPUGNED SALE OF SHARES HELD BY THE ASSESSEE AS LONG TERM INVESTMENT AND ASSESS IT UNDER THE HEAD CAPITAL GAINS MERELY BECAUSE THE ASSESSEE IS SHOWING SHARES AND DEBENTURES AS INVESTMENT IN THE BOOKS OF ACCOUNTS 3. FACTS LEADING TO THIS ISSUE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED CO. AND ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES. THE PROFIT EARNED FROM PURCHA SE AND SALE OF THE SHARES WAS OFFERED BY THE ASSESSEE TO TAX AS SHORT TERM CAPITAL GAIN FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. THE AO NOTICED THAT THE SCALE OF AC TIVITIES OF SALES AND PURCHASE OF SHARES OF THE ASSESSEE WAS SU BSTANTIAL AND FREQUENT AND THEREFORE THE AO ASKED THE ASSESS EE TO EXPLAIN AS TO WHY THE SAID ACTIVITIES OF DEALING I N SHARES SHOULD NOT BE TREATED AS BUSINESS. AFTER CONSIDERIN G ALL THE DETAILS REGARDING THE FREQUENCY OF PURCHASE AND SAL ES OF SHARES, QUANTITY THEREOF AND THE DIVIDEND RECEIVED BY THE ASSESSEE, THE AO ARRIVED AT A CONCLUSION THAT THE A SSESSEE HAS CARRIED OUT THE ACTIVITIES IN ORGANIZED COMME RCIAL WAY WHICH IS HAVING ALL NECESSARY ATTRIBUTES OF BUSINES S INCOME OF THE ASSESSEE. 4. ON APPEAL, THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE VIDE IMPUGNED ORDER. ITA NO. 2956 AND 2957/MUM/2008 (ASSESSMENT YEAR: 2004-05 AND 2005-06 3 5. BEFORE US, THE LEARNED DR SUBMITTED THAT IT IS CLEAR FROM THE DETAILS OF PURCHASE AND SALES AS MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE WAS DOING THE AC TIVITIES OF PURCHASE AND SALE IN A SYSTEMATIC AND ORGANIZED MAN NER WHICH IS CONTINUOUS AND REGULAR. THEREFORE, THE L EARNED DR CONTENDED THAT THE ACTIVITIES OF THE ASSESSEE OF P URCHASING AND SELLING OF THE SHARES WAS NOT AN INVESTMENT BU T IT WAS A REGULAR BUSINESS. HE HAS POINTED OUT THAT THE ASS ESSEE WAS HAVING ONLY RS.1 LAKH PAID UP SHARE CAPITAL. WHERE AS THE ASSESSEE HAS BORROWED A SUM OF RS.26,95,00,000/- F OR DEALING IN THE SHARE ACTIVITIES. HE HAS HEAVILY R ELIED UPON THE ORDER OF THE AO. 6. ON THE OTHER HAND, THE LEARNED AR HAS SUBMITTED THAT WHEN THE ASSESSEE HAS TREATED THE TRANSACTIONS AS I NVESTMENT IN ITS BOOKS OF ACCOUNT, THEN THE INTENTION OF THE ASSESSEE WAS CLEAR AND CANNOT BE DOUBTED. HE HAS RELIED UPON THE DECISION OF THIS TRIBUNAL IN THE CASE OF GOPAL PUROHIT WHICH IS CONFIRMED BY THE HON. JURISDICTIONAL HIGH COURT I N INCOME TAX APPEAL NO.1121 OF 2009 ORDER DATED 06.01.2010. 7. AFTER CONSIDERING THE RIVAL CONTENTIONS AND CARE FUL PERUSAL OF THE RECORD AND PARTICULARLY THE IMPUGNED ORDER, WE FIND THAT THE CIT(A) HAS NOT DISCUSSED THE ISSUE IN DETAILED AND EVEN THE CIT(A) DID NOT WISH TO CONSIDER ANY CA SE LAW AS WELL AS THE OTHER RELEVANT MATERIAL WHILE PASSING T HE IMPUGNED ITA NO. 2956 AND 2957/MUM/2008 (ASSESSMENT YEAR: 2004-05 AND 2005-06 4 ORDER. THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASS ESSEE ONLY ON THE GROUND THAT THE INTENTION OF THE ASSESSEE WA S CLEAR AS THE SHARES BEING HELD AS INVESTMENT. WE FURTHER N OTE THAT THE CIT(A) HAS REPRODUCED THE SUBMISSIONS OF THE AR OF THE ASSESSEE IN MORE THAN 23 PAGES IN THE IMPUGNED ORDE R FOR THE ASSESSMENT YEAR 2005-06 AND HAS CONCLUDED HIS FINDI NG WITHOUT DISCUSSING ANY CASE LAW REFERRED AND RELIED UPON BY THE ASSESSEE AND OTHER FACTS WHICH DISCUSSED BY THE AO IN THE ASSESSMENT ORDER AND COUNTERED BY THE ASSESSEE IN ITS SUBMISSIONS. THE CIT(A) HAS DECIDED THE ISSUE VIDE PARAGRAPH NO.3.3 OF THE IMPUGNED ORDER FOR THE ASSESSMENT YEA R 2005-06 AS UNDER : 3.3 I HAVE GONE THROUGH THE ARGUMENTS AND SUBMISSIONS OF THE LD. AR OF THE APPELLANT AS WELL AS THE CONTENTS OF THE IMPUGNED ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE COPIES OF BALANCE SHEET S FOR THE YEARS ENDED ON 31.3.2003 AND 31.03.2005 WHEREIN THE FIGURES FOR 31.03.2002, 31.03.2003, 31.03.2004 AND 31.03.2005 ARE AVAILABLE ALONG WITH TREATMENT OF THE IMPUGNED SHARES. SCHEDULE V IN THE BALANCE SHEET MAKES IT CLEAR THAT THE IMPUGNED SHARES AND DEBENTURES ARE SHOWN AS LONG TERM INVESTMENTS AT COST IN TANDEM WITH THE GUIDELINES OF THE INDIAN INSTITUTE OF CHARTERED ACCOUNTANTS. THU S, IT IS NOT CORRECT TO SAY THAT THE INTENTION OF THE APPELLANT IS UNCLEAR AS TO WHAT TREATMENT OF THESE IMPUGNED SHARES SHOULD BE GIVEN. ONCE THE INTENTIO N IS CLEAR ON THE UNDISPUTED DOCUMENTS, THE FACTS OF SHARES BEING HELD AS AN INVESTMENT BECOMES APPARENT. IN SUCH A CLEAR CUT CASE, I DO NOT FIND ANY NEED TO GO FOR ANY CASE LAW AS IT IS WELL SETTLED T HAT THE NATURE OF AN ITEM AS TO WHETHER IT IS INVESTMEN T OR IT IS STOCK-IN-TRADE, IS TO BE DERIVED ONLY FROM TH E INTENTION OF THE ASSESSEE. HENCE , THE ACTION OF TH E LD. AO IS FOUND CLEARLY UNWARRANTED ON THE FACTS AN D CIRCUMSTANCES OF THE INSTANT CASE AS DISCUSSED ABOV E THAT CAN NOT BE UPHELD. THE LD. AO IS DIRECTED T O ITA NO. 2956 AND 2957/MUM/2008 (ASSESSMENT YEAR: 2004-05 AND 2005-06 5 RECOMPUTE THE CAPITAL GAINS ON THE IMPUGNED SALE OF SHARES HELD BY THE APPELLANT AS LONG TERM INVESTMEN T AND ASSESS IT UNDER THE HEAD CAPITAL GAINS. THE APPEAL IS ALLOWED ON THIS GROUND 8. FOR THE ASSESSMENT YEAR 2004-05 THE CIT(A) FOLLO WED THE ORDER FOR THE ASSESSMENT YEAR 2005-06. FROM THE ABOVE ORDER OF THE CIT(A), IT IS CLEAR THAT THE CIT(A) DID NOT CONSIDER THE FACTS AND CIRCUMSTANCES POINTED OUT BY THE AO IN THE ASSESSMENT ORDER AS WELL AS THE VARIOUS CASE LA WS RELIED UPON BY THE ASSESSEE. THUS THE IMPUGNED ORDER IS N ON- SPEAKING AND CRYPTIC ORDER AND LIABLE TO BE SET ASI DE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) A ND REMAND THE MATTER TO HIS FILE FOR FRESH ADJUDICATION ON TH E ISSUE AND FOR PASSING SPEAKING ORDER AFTER CONSIDERING ALL THE RE LEVANT FACTS AND LAW ON THE POINT. HE IS ALSO DIRECTED TO GIVE F AIR AND SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. 9. IN THE RESULT, APPEALS OF THE REVENUE ARE ALLOWE D FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON ______ (PRAMOD KUMAR) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMB ER MUMBAI, DATED JUNE 2010 SRL:17610 ITA NO. 2956 AND 2957/MUM/2008 (ASSESSMENT YEAR: 2004-05 AND 2005-06 6 COPY TO: 1. ACIT RANGE 5(3), ROOM NO.573, 5 TH FL, AAYAKAR BHAVAN M K ROAD MUMBAI-400020 2. STOREWELL CREDITS AND CAPITAL PVT.LTD., KEJRIWAL HOUSE, 7N,GAMADIA ROAD, MUMBAI-400026 3 ACIT RANGE 5(3), MUMBAI. 4.CIT MC -V, MUMBAI 5 CIT(A)-V, MUMBAI. 6. DR E BENCH BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI DATE INITIALS 1. DRAFT DICTATED ON 16.6.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 17.6.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER VP 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM 5. APPROVED DRAFT COMES TO THE SR. PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS ITA NO. 2956 AND 2957/MUM/2008 (ASSESSMENT YEAR: 2004-05 AND 2005-06 7 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER