R.S.Shukla, Lucknow V. ITO, Ward-1(2)(2), Dehradun

ITA 30/DDN/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1356 (ITAT-DEHRADUN)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 22-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Speculative transactions; Set aside
• Section: 44AD

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL [DEHRADUN BENCH] BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO 30 / DDN/2019 A Y 2015 - 16 APPELLANT RESPONDENT R S SHUKLA K - 145 ASHIYANA COLONY KANPUR ROAD LUCKNOW PAN AGBPS5333B VS. THE INCOME TAX OFFICER WARD - 1 (2) (2) DEHRADUN ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: - 28/02/2020 DATE OF ORDER: - 1 3 / 0 5 / 2 0 2 0 O R D E R PER PRASHANT MAHARISHI, A.M.: 01 THIS APPEAL IS FILED BY THE ASSESSEE, AN INDIVIDUAL FOR ASSESSMENT YEAR 2015 16 AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) , DEHRADUN DATED 15/03/2019 . ASSESSEE PREFERRED APPEAL BEFORE HIM AGAINST 2 THE ORDER OF THE INCOME TAX OFFICER WARD - 1 (2) (2) , DEHRA DUN PASSED U/S 143 (3) OF THE ACT ON 6/12/2017. 02 BRIEFLY STATED THE FACTS FACT SHOWS THAT ASSESSEE IS A RETIRED PRINCIPAL AND SETTLED IN LUCKNOW. HE FURTHER RETURN OF INCOME ON 2/8/2016 DECLARING TOTAL INCOME OF 9 1630/ . THE CASE OF THE ASSESSEE WA S SELECTED FOR SCRUTINY UNDER THE LIMITED SCRUTINY MODEL TO EXAMINE THE LARGE VALUE OF SALE OF DERIVATIVES IN A RECOGNISED STOCK EXCHANGE REPORTED IN SECURITIES TRANSACTION TAX RETURN AND NO BUSINESS INCOME AS DECLARED BY THE ASSESSEE. ACCORDING TO THE RET URN OF INCOME THE ASSESSEE HAS DISCLOSED INCOME FROM OTHER SOURCES OF 1 01631/ AND CLAIM DEDUCTION UNDER CHAPTER VI A OF 1 LAKH. THE ASSESSEE WAS ISSUED NECESSARY NOTICES AND AS PER ONLINE INFORMATION IT WAS FOUND THAT ASSESSEE HAS ENTERED INTO A TRAN SACTION VALUE OF 7 660260 AND SECURITY TRANSACTION TAX THEREON IS OF 1 302 PAID BY THE ASSESSEE. THEREFORE THE ASSESSEE WAS ISSUED THE SHOW CAUSE NOTICE ON 16/10/2017 IN THE END AFTER ANALYSING ALL THE TRANSACTION THE ASSESSING OFFICER CAME TO CONCLUSI ON THAT ASSESSEE HAS ENTERED INTO A TOTAL TURNOVER OF RS. 408119005/ AND APPLYING THE PROVISIONS OF SECTION 44AD REDEEMED PROFIT SHOULD BE 3273520/ . ACCORDINGLY THE TOTAL ADDITION OF 3 273520/ WAS MADE INTO THE TOTAL INCOME OF THE ASSESSEE IN ASSESSME NT UNDER SECTION 143 (3 THREE) OF THE INCOME TAX ACT WAS PASSED ON 6/12/2017 DETERMINING TOTAL INCOME OF THE ASSESSEE AT 3 275151/ AGAIN THE RETURNED INCOME OF 9 1630/ . 3 03 THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LEARNED CIT A. ASSESSEE SUBMITTED B EFORE THE LEARNED CIT A THAT THE WORKING OF THE TURNOVER MADE BY THE LEARNED ASSESSING OFFICER IS INCORRECT AS THE TURNOVER OF THE ASSESSEE WITH RESPECT TO THE DERIVATIVES AND SPECULATIVE TRANSACTIONS WERE ONLY TO THE TUNE OF 6 385255 WHEN ALL THE POSI TIVE AND NEGATIVE FIGURES ARE TAKEN INTO ACCOUNT IN THIS REGARD. HE FURTHER SUBMITTED THAT THE AO COULD NOT HAVE APPLIED THE RATE OF 8% OF THE TOTAL TURNOVER APPLYING THE PROVISIONS OF SECTION 44AD OF THE INCOME TAX ACT. THE LEARNED CIT A HELD THAT BOTH THE NEGATIVE AND POSITIVE FIGURES ARE REQUIRED TO BE SET OFF AGAINST EACH OTHER AND THEN ONLY THE PROFIT PERCENTAGE OF 8% SHOULD BE APPLIED. WITH RESPECT TO THE OTHER SHARE TRANSACTION WHICH ARE OTHER THAN SPECULATIVE TRANSACTION HE DIRECTED THE LEARNED AS SESSING OFFICER TO APPLY THE PROFIT RATE OF 6%. THUS HE PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 04 ASSESSEE AGGRIEVED WITH THE ORDER OF THE LEARNED CIT CAPITAL HAS PREFERRED THIS APPEAL BEFORE US. HOWEVER DESPITE NOTICE ISSUED TO THE ASSESSEE NONE APPEAR ED ON REFER BEHALF OF THE ASSESSEE AND THEREFORE THE ISSUE IS DECIDED ON THE MERITS OF THE CASE AS PER INFORMATION AVAILABLE ON RECORD. 05 THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 06 WE HAVE CAREFULLY CONS IDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. ADMITTEDLY ASSESSEE HAS MADE SUBMISSION THAT HE HAS UNDERTAKEN 4 INVESTMENT TRADING IN HIS PERSONAL CAPACITY AND FOR THE PURPOSE OF INVESTMENT AND BY NO STRETCH OF IMAGINATION CAN THIS ACTIVITY BE DEEMED TO BE A BUSINESS INCOME. HE FURTHER STATED THAT THE ABOUT TRANSACTION SQUARELY FALLS INTO THE DEFINITION OF SHORT - TERM CAPITAL GAIN AND ASSESSEE HAS SUFFERED A LOSS OF RS. 43614 WHICH WAS NOT CLAIMED IN THE RETURN OF INCOME. THE LEA RNED ASSESSING OFFICER WITHOUT ANY REASON HAS IMPUTED THE INVESTMENT OF 25 LAKHS IN THE BUSINESS OF THE SECURITIES AND MADE THE ABOVE ADDITION. IN FACT THE ASSESSEE HAS TRANSACTED THROUGH A STOCK EXCHANGE WHERE THE COMPLETE DETAILS WOULD BE AVAILABLE ABO UT THE AMOUNT OF PAYMENTS MADE BY THE ASSESSEE TO THE BROKER AS WELL AS THE AMOUNT OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE. IF THE ASSESSEE HAS ENTERED INTO A TRANSACTION FOR PURCHASE AND SALE OF SHARES AFTER TAKING DELIVERY OF THOSE SHARES THE NATURA LLY THEY SHOULD FALL INTO THE DEFINITION OF THE CAPITAL ASSET AS CLAIMED BY THE ASSESSEE. IN FACT THE LEARNED CIT A HAS SET ASIDE THE WHOLE ISSUE BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR THE DETERMINATION OF THE PROFIT ON SALE OF SHARES AT T HE RATE OF 6% AND TO COMPUTE THE PROFIT ON TRANSACTIONS OF DERIVATIVE BY TAKING NET OF THE FIGURES AND THEN DETERMINE THE PROFIT RATE AT THE RATE OF 8%. WE DO NOT FIND ANY MERIT IN THE ORDER OF THE LEARNED CIT A IN DIRECTING THE ASSESSING OFFICER TO DETE RMINE THE PROFIT THE RATE OF 6% ON TRANSACTION OF SALE OF SHARES AND 8% ON SALE OF DERIVATIVES. IN VIEW OF THIS, WE SET ASIDE THE ONE ISSUE BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER TO 5 DETERMINE THE TRANSACTION OF PROFITS AND GAINS ON SALE OF SHARE S AS CAPITAL GAIN AND ALSO THE PROFITS ON THE DERIVATIVES AS BUSINESS INCOME OF THE ASSESSEE IF ASSESSEE HAS EARNED ANY PROFIT THEREON. THE ASSESSEE IS DIRECTED TO SUBMIT THE COMPLETE DETAILS BEFORE THE ASSESSING OFFICER ABOUT THE PROFIT OR LOSS EARNED BY THE ASSESSEE ON EACH OF THE TRANSACTIONS OF SALE OF SHARES AND DERIVATIVES. ON EXAMINATION OF SUCH DETAILS, THE AO MAY DETERMINE THE CORRECT INCOME OF THE ASSESSEE. WE ALSO DO NOT APPROVE ABOUT ADDITION MADE BY THE LEARNED ASSESSING OFFICER OF 25 LAKHS AS INVESTMENT MADE BY THE ASSESSEE WITHOUT POINTING OUT ANY PROOF OF SUCH INVESTMENT MADE. ACCORDINGLY APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES 07 IN THE RESULT, AP PEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE OPEN COURT ON 1 3 / 0 5 / 2 0 2 0 - S D / - - S D / - (SUDHANSHU SRIVASTAVA) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 3 / 0 5 / 2 0 2 0 COPY FORWARDED TO 1 . APPELLANTS; 2 . RESPONDENTS; 3 . CIT; 4 . CIT (APPEALS) 5 . DR: ITAT 6 ASSISTANT REGISTRAR ITAT,