DCIT 4(1), MUMBAI V. TAPAN J MEHTA, MUMBAI

ITA 3189/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2480 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2016
• Appeal Filed By: Department
• Bench Allotted: E
• Next Hearing Date: 04-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 25-04-2013
• Court: TRIBUNAL
• Keywords: Business income; Wrong claim; Sham transactions

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER I.T.A. NO.3189/M/2013 (ASSESSMENT YEAR: 2009 - 2010 ) DCIT - 4(1), 6 TH FLOOR, R.NO.640, AAYAKAR BHAVAN, MUMBAI 20. / VS. SHRI TAPAN J MEHTA, E - 305, 3 RD FLOOR, SIMLA HOUSE, 51, NEPEANSEA ROAD, MUMBAI. ./ PAN : AEHPM2396E ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI JAYESH DADIA / RESPONDENT BY : SHRI NITIN WAGHMODE, DR / DATE OF HEARING : 25 .10.2016 / DATE OF PRONOUNCEMENT : 25 .10.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 25.4.2013 IS AGAINST THE ORDER OF THE CIT (A) - 8, MUMBAI DATED 22.2.2013 FOR THE ASSESSMENT YEAR 2009 - 2010. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO OF RS. 60,57,182/ - TREATING BUSINESS LOSS AS SHORT TERM CAPITAL LOSS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE IMPUGNED ORDER OF THE LD CIT (A) IS CONTRARY TO LAW AND CONSEQUENTLY MERITS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE ONLY ISSUE RAISED IN THIS APPEAL RELATES TO DELETION OF ADDITION OF RS. 60,57,182/ - TREATING THE BUSINESS LOSS AS SHORT TERM CAPITAL LOSS. BRIEFING THE RE LEVANT FACTS, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE, FOR THE FIRST TIME, ENTERED INTO TRANSACTIONS RELATING TO PURCHASE AND SALE OF SHARES AND THEY WERE SHOWN AS STOCK - IN - TRADE IN THE BOOKS OF ACCOUNTS. IN THE PROCESS, ASSESSEE EARNED LO SS AND THE SAME WAS SHOWN AS BUSINESS LOSS. IN THE ASSESSMENT, AO TREATED THE SAME AS SHORT TERM CAPITAL LOSS. HOWEVER, IN THE FIRST APPELLATE PROCEEDINGS, CIT (A) CONSIDERED THE FACTS OF THE CASE, THE ENTRIES IN THE BOOKS OF ACCOUNT, THE CIRCULAR 2 NO.4 O F 2007 OF CBDT AND ALSO APPRECIATED THE OTHER ASPECTS OF HOLDING PERIOD, NUMBER OF TRANSACTIONS ETC AND GRANTED RELIEF TO THE ASSESSEE. CIT (A) RELIED HEAVILY ON THE ORDER OF THE TRIBUNAL IN THE CASE OF SMT. HARSHA N. MEHTA VS. DCIT (2011) 43 SOT 332 (MUM BAI) FOR THE PROPOSITION THAT THE FREQUENCY, HOLDING PERIOD / NUMBER OF SCRIPS, VOLUME, BEING LESS, CANNOT BE TREATED AS SHORT TERM CAPITAL GAINS. PARAS 2.3(C) TO 2.3(E) OF THE CIT (A) ARE RELEVANT IN THIS REGARD. ACCORDINGLY, CIT (A) GRANTED RELIEF TO TH E ASSESSEE. 3. BEFORE US, LD DR FOR THE REVENUE RELIED HEAVILY ON THE ORDER OF THE AO AND MENTIONED THAT THE ORDER OF THE CIT (A) REQUIRES REVERSAL. 4. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ABOVE REFERRED FACTS OF THE CASE, NUMBER OF TRANSACTIONS, VOLUME, TURNOVER, NUMBER OF SCRIPS, HOLDING PERIOD ETC AND DEMONSTRATED THAT THE ORDER OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. HE ALSO SUBMITTED THAT IN THE SUBSEQUENT ASSESSMENT YEARS THERE IS NO CHANGE IN THE CLAIM OF THE ASSESSEE AND THE AO ACCEPTED THE CLAIM WITHOUT ANY ADDITIONS. FURTHER, BRINGING OUR ATTENTION TO THE BOARD CIRCULAR NO.6 OF 2016, DATED 29.2.2016, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED AS PER THE PARA 3(A) OF THE SAID CIRCULAR, AO IS NOT PERMITTED TO CHANGE THE HEAD OF INCOME FROM BUSINESS INCOME TO THE CAPITAL GAINS UNLESS THERE IS ANY MATERIAL TO CONTRIBUTE AGAINST THE CLAIM OF THE ASSESSEE. ACCORDING TO PARA 4 OF THE SAID CIRCULAR, ONLY BOGUS CLAIMS OR SHAM TRANSACTIONS ALONE ARE EXEMPTED FROM THE RULE MENTIONED IN PARA 3(A) OF THE SAID CIRCULAR 6/2016 (SUPRA). 5. ON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDER OF THE CIT (A) IN GENERAL AND PARA 2.3 OF HIS ORDER IN PARTICULAR, WE FIND, THE ORDER OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. FOR THE SAKE COMPLETENESS OF THIS ORDER THE SAID PARA 2.3(E) IS EXTRACTED AS UNDER: - 2.3(E) THEREFORE, IN THE PRESENT CASE, THE APPELLANT HAS SHOWN SHARE TRANSACTION AS BUSINES S AND ALSO CLAIMED THE LOSS INCURRED IN SHARE TRADING TRANSACTIONS AS BUSINESS LOSS. THE AO IS NOT CORRECT IN COMING TO A CONCLUSION THAT LOSS OF RS. 60,57,182/ - IS SHORT TERM CAPITAL LOSS AND NOT BUSINESS LOSS PARTICULARLY WHEN HIGH FREQUENCY AND VOLUMINO US TRANSACTIONS WITH LOW HOLDING PERIOD IS THERE. IN VIEW OF THIS THE ADDITION MADE BY THE AO IS ACCORDINGLY DELETED. 6. IN OUR VIEW, THE CIT (A) CAME TO THE ABOVE CONCLUSION RELYING ON THE COORDINATE BENCH DECISION IN THE CASE OF SMT. HARSHA N. MEHTA (SUPRA). FURTHER, WE 3 HAVE PERUSED THE PARA 3(A) OF THE BOARD CIRCULAR NO.6/2016 (SUPRA) AND FIND THE RELEVANT LINES READ AS UNDER: - 3(A) WHERE THE ASSESSEE ITSELF, IRRESPECTIVE OF THE PERIOD OF HOLDING THE LISTED SHARES AND SECURITIES, OPTS TO TREAT THEM AS STOCK - IN - TRADE, THE INCOME ARISING FROM TRANSFER OF SUCH SHARES / SECURITIES WOULD BE TREATED AS ITS BUSINESS INCOME. 7. FROM THE ABOVE, IT IS EVIDENT THAT IN CASE WHERE THE ASSESSEE OPTS CERTAIN TRANSACTIONS OF PURCHASE AND SALE OF SHARES IN THE BOOKS OF ACCOUNT AS STOCK - IN - TRADE, BUSINESS INCOME CONSTITUTES APPROPRIATE HEAD OF INCOME IN SUCH CASES. AO IS NOT ACCEPTED TO CHANGE THE HEAD OF INCOME FROM FROM BUSINESS INCOME TO THE CAPITAL GAINS UNLESS THE CONDITIONS SPECIFIED IN PARA 4 OF THE SAID CIRCULAR (SUPRA) IE BOGUS CLAIMS OR SHAM TRANSACTIONS / QUESTIONABLE TRANSACTIONS ARE INVOLVED. CONSIDERING THE ABOVE, WE A RE OF THE OPINION, THE ORDER OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25TH OCTOBER, 2016. S D / - S D / - ( AMARJIT SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 25 .10.2016 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// 4 / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI