ACIT 33(3), MUMBAI V. REKHA KHANDELWAL, MUMBAI

ITA 3257/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0661 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 04-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT SAMAIYA
• Keywords: Business income
• Section: 143(3); 148

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAMLAL NEGI, JUDICIAL MEMBER ./ I.T.A. NO. 3257 / MUM/ 2017 ( / ASSESSMENT YEAR : 2007 - 08 ACIT - 33(3), R.NO. 607, 6 TH FLOOR, C - 12, PRATYAKSHAKAR BHAVAN, BKC, BANDRA (E), MUMBAI 400051 / V. SMT. REKHA KHANDELWAL, A - 2703/04, OBERAI WOODS, GOREGOAN (E) 400057 ./ PAN :ABTPK 4148 D CO. NO.274/ MUM/2018 ARISING OUT OF ./ I.T.A. NO. 3257 / MUM/ 2017 ( / ASSESSMENT YEAR : 2007 - 08 SMT. REKHA KHANDELWAL, A - 2703/04, OBERAI WOODS, GOREGOAN (E) 400057 / V. ACIT - 33(3), R.NO. 607, 6 TH FLOOR, C - 12, PRATYAKSHAKAR BHAVAN, BKC, BANDRA (E), MUMBAI 400051 ./ PAN : ABTPK 4148 D ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY: SHRI. NISHANT SAMAIYA (DR) ASSESSEE BY: SHRI. NEELKANTH KHANDELWAL (AR) / DATE OF HEARING : 18.02 .2019 / DATE OF PRONOUNCEMENT : 10 .05.2019 / O R D E R PER RAMLAL NEGI, JM : THESE ARE THE APPEAL AND CROSS OBJECTION FILED BY THE REVENUE AND THE ASSESSEE RESPECT IVELY AGAINST THE ORDER DATED 27.0 2.2017 I.T.A. NO.3257/MUM/2017 CO. NO.274/MUM/2018 2 | P A G E PASSED BY THE COMMISS IONER OF INCOME TAX - APPEALS (CIT - A) , WHEREBY THE LD. CIT(A) HAS PARTLY ALLOW ED THE APPEAL FILED BY THE ASSESSEE AGA INST THE ASSE SSMENT ORDER DATED 30.02.2014 PASSED U/S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT (THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE A N INDIVIDUAL E NGAGED IN THE BUSINESS OF TRADING IN DERIVATIVES AND SHARES , F ILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF RS. 1,54,13,409 / - . THE ASSESSEE HAD SHOWN THE INCOME FROM BUSINESS , INCOME FROM CAPITAL GAIN AN D INCOME FROM OTHER SOURCES . THE ASSESSMENT WAS COMPLETED U/S. 14 3(3) R.W.S. 147 OF THE ACT, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 1,52,23,410/ - AFTER MAKING CERTAIN ADDITIONS. THE AO TREATED THE SHORT TERM CAPITAL GAIN CLAIMED BY THE ASSESSEE AS BUSINESS INCOME AND DETERMINED THE TOTAL INCOME OF THE ASSES SEE ACCORDINGLY. THE ASSESSEE CHALLENGE THE ASSESSMENT ORDER BEFORE THE LD. CIT(A). THE LD. CIT(A) AFTER HEARING THE ASSESSEE PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND REVERSE D THE FINDINGS OF THE AO REGARDING THE CLAIM OF THE ASSESSEE PERTAINING TO TH E SHORT TERM CAPITAL GAIN . A GAINST THE SAID FINDINGS OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE THE T RIBUNAL. 3 . THE REVENUE HAS CHALLENGE THE FINDINGS OF THE LD. CIT(A) ON THE FOLLOWING EFFECTIVE GROUNDS: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID.CIT(A) ERRED TO ACCEPT CLAIM OF SHORT TERM CAPITAL GAIN ON PROFIT AR IS ING FROM PURCHASE AND SALE OF SHARES INSTEAD OF BUSINESS INCOME TREATED BY AO WITHOUT APPRECIATING THE FACTS THAT ASSESSEE IS DEALING IN LARGE VOLUME OF SH ARES, MOST OF THE SHARES ARE BOUGHT AND SOLD WITHIN SHORT PERIOD, WHILE SOME ARE NOT SOLD DUE TO MARKET CONDITIONS AND THEIR HOLDING WITH ASSESSEE REMAINS BEYOND FEW DAYS, IT WILL NOT CHANGE THE NATURE OF TRANSACTIONS AND THE ASSESSEE IS VERY WELL ENGAGED IN THE I.T.A. NO.3257/MUM/2017 CO. NO.274/MUM/2018 3 | P A G E BUSINESS OF SHARE TRADING, WHICH DENOTES T HAT THE MOTIVE OF THE ASSESSES IS TO CARRY ON BUSINESS IN SHARES TO BOOK PROFIT RATHER THAN INVESTMENT IN SHARES. 4 . BEFORE US THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE FINDINGS OF THE AO ARE BASED ON THE DECISION OF THE ITAT RENDERED IN ASSESSEES OWN CASE IN ITA N O. 785/MUM/2009 FOR THE ASSESSMENT YEAR 2005 - 06 . I N THE SAID ASSESSMENT YEAR T HE AO HA D ASSESSED THE INCOME FROM TRADING OF SHARES AS BUSINESS INCOME AS AGAINST THE SHORT TERM CAP ITAL GAIN CLAIMED BY THE ASSESSEE. THE ASSESSMENT ORDER WAS CONFIRMED BY THE LD. CIT(A) AS WELL AS BY THE ITAT. DURING THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSEE FURNISHED BREAKUP OF EQUITY SHARES HELD BY IT AND FROM THE SAID DETAILS IT TRANSPIRED TH AT NEARLY 35% OF THE TOTAL HOLDING WAS BETWEEN 30 DAYS OR LESS THAN 30 DAYS. THE LD. DR FURTHER SUBMITTED THAT O N THE BASIS OF THE HOLDING PERIOD AND THE CONDUCT OF THE ASSESSEE IT CAN BE CONCLUDED THAT THE SHARES WERE PURCHASED AND SOLD TO REALISE MAXIMUM GAINS. THE ASSESSEE DID NOT EARN SUBSTANTIAL AMOUNT OF DIVIDENDS IN THE PAST AS WELL AS IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE LD. DR FURTHER SUBMITTED THAT SINCE THE AO HAS GIVEN HIS FINDINGS ON THE BASIS OF THE DECISION RENDERED BY THE ITAT MUMBAI IN THE CASE OF GOPAL PUROHIT VS. JCIT , T HE LD. CIT(A) SHOULD HAVE UPHELD THE FINDINGS OF THE AO. 5 . ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE RELYING ON THE APPELLATE ORDER PASSED BY THE LD . CIT(A) SUBMITTED THAT IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR THE ITAT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE ASSESSES OWN CASE. THE LD. COUNSEL FURTHER SUBMITTED THAT THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS OF THE CASE OF THE ASSESSEE PERTAINING TO THE AY 20 06 - 07. THE SHARES WERE PURCHASED OUT OF THE OWN FUNDS AND 60% OF THE PROFIT ON SALE OF SHARES WAS DERIVED FROM THE SHARE HELD FOR A PERIOD 30 TO 90 DAYS AND THERE BEING NO MATERIAL CHANGE AND DIVERSION IN TH E ACTIVITY OF THE ASSESSEE AS COMPARED TO THE EARLIER YEAR, THE AO I.T.A. NO.3257/MUM/2017 CO. NO.274/MUM/2018 4 | P A G E CANNOT TAKE DIFFERENT VIEW IN PRESENT ASSESSMENT YEAR. THE LD. COUNSEL SUBMITTED THAT IN THE LIGHT OF THE AFORESAID FACTS THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), HENCE THE APP EAL FILED BY THE REVENUE MAY BE DISMISSED. 6 . WE HAVE GONE THROUGH THE ORDERS PASSED BY THE AUTHORITIES BELOW IN THE LIGHT OF THE RIVAL SUBMISSIONS OF THE PARTIES. THE LD. CIT(A) HAS BASICALLY ALLOWED THE APPEAL OF THE ASSESSEE BY FOLLOWING DECISION OF THE COORDINATE B ENCH OF THE TRIBUNAL RENDERED IN ITA N O. 3523/MUM/2010 FOR AY 2006 - 07 . THE OPERATIVE PART OF THE ORDER OF THE LD. CIT(A) READS AS UNDER: - 6.2 I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMISSIONS OF THE APPELLANT AND THE STAND OF THE AO IN THE ASSESSMENT ORDER. IT IS NOTED THAT ON SIMILAR FACTS THIS ISSUE WAS RAISED IN THE IMMEDIATELY PRECEDING A.Y. 2006 - 07. THE MATTER TRAVELLED BEFORE CIT(A) . THE ISSUE WAS DECIDED IN FAVOUR OF THE APPELLANT BY MY PREDECESSOR WHO HAS ALLOWED THE CLAIM OF THE SHORT TERM CAPITAL GAIN OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF GOPAL PUROHIT REPORTED IN 29 SOT 117, WHICH HAS BEEN CONF IRMED BY THE HON'BLE JURISDICTIONAL HIGH COURT, AND HELD THAT THE DELIVERY BASED TRANSACTIONS ARE TO BE TREATED AS INVESTMENT AND INCOME THEREFROM IS TO BE TAXED AS SHORT TERM OR LONG TERM CAPITAL GAIN AND NOT BUSINESS INCOME AS HELD BY THE AO. THIS MATTER FURTHER TRAVELLED TO THE ITAT. THE HON'BLE MUMBAI TV BENCH ITAT IN ITS ORDER DT. 26 MARCH, 2013 IN ITA NO.3523/MUM/2010(ASST YEAR 2006 - 07) REKHA KHANDELWAL, MUMBAI VS DEPARTMENT OF INCOME TAX ON 12 FEBRUARY, 2010 AFTER CONSIDERING THE FULL FACTS OF THE CA SE, DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE AND UPHELD THE ORDER OF THE CIT(A). IT WAS HELD THAT THERE WAS NO JUSTIFICATION FOR ASSESSING THE SHORT TERM CAPITAL GAIN ADMITTED BY THE APPELLANT UNDER THE HEAD BUSINESS. IN VIEW OF THIS BINDING PRECEDENT AND FACTS OF THE CASE REMAINING SAME, THERE IS NO I.T.A. NO.3257/MUM/2017 CO. NO.274/MUM/2018 5 | P A G E CAUSE OF CHANGING THE HEAD OF INCOME DECLARED BY THE ASSESSEE FROM SHORT TERM CAPITAL GAIN TO BUSINESS INCOME. IN VIEW OF THIS DISCUSSION, THE ADDITION MADE BY THE AO CANNOT BE SUSTAINED IN APPEAL AND IS DI RECTED TO BE DELETED. ACCORDINGLY, THIS GROUND OF APPEAL IS ALLOWED. 7 . WE NOTICE THAT THE LD. CIT(A) HAS DECIDED TH IS ISSUE IN FAVOUR OF THE ASSESSEE ON THE BASIS OF THE DECISION OF THE COORDINATE B ENCH IN THE ASSESSES S OWN CASE FOR THE AY 2006 - 07. THE C OORDINATE B ENCH HAS DISCUSSED THE CASE OF GOPAL PUROHIT (SUPRA) AND DISTINGUISHED THE SAME FROM THE CASE OF THE ASSESSEE ON THE FACTS . THE AO HAS NOT POINTED OUT IN CHANGE OF FACTS IN THE PRESENT CASE. UNDER THESE CIRCUMSTANCES WE DO NOT FIND ANY REASON TO TAKE A VIEW DIFFERENT FROM THE VIEW TAKEN BY THE COORDINATE B ENCH IN THE ASSESSEE CASE FOR THE AY 2006 - 07. SINCE THE FINDINGS OF THE LD. CIT(A) ARE BASED ON THE FINDINGS OF THE COORDINATE B ENCH IN ASSESSEE CASE (SUPRA) WE UPHOLD THE FINDINGS OF THE LD. CIT(A) AND DISMISSED THE SOLE GROUND OF APPEAL OF THE REVENUE. CO NO. 274/MUM/2018 THE ASSESSEE HAS FILED THE CROSS OBJECTION ON THE FOLLOWING GROUNDS AS UNDER: - THE COMMISSIONER OF INCOME - TAX (APPEALS) - 45, MUMBAI ERRED IN UPHOLDING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME - TAX - 33(3), MUMBAI IN ISSUING NOTICE UNDER SECTION 148 OF THE ACT. THE APPELLANT CONTENDS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, T HE ISSUE OF NOTICE UNDER SECTION 148 IS WITHOUT JURISDICTION, BAD IN LAW AND HENCE, NEEDS TO BE QUASHED. 2 . THE ASSESSEE HAS CHALLENGE D THE ACTION OF THE AO IN ISSUING NOTICE U/S. 148 OF THE ACT, ON THE GROUND THAT THE NOTICE ISSUED U/S.148 OF THE ACT IS WITHOUT JURISDICTION AND BAD IN LAW. SINCE WE HAVE DISMISSED THE REVENUES APPEAL AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE , WE DO NOT CONSIDER IT NECESSARY TO DECIDE THE GROUNDS OF I.T.A. NO.3257/MUM/2017 CO. NO.274/MUM/2018 6 | P A G E CROSS OBJECTION FILED BY THE ASSESSEE CHALLENGING THE VALIDITY OF NOT ICE U/S . 148 OF THE ACT AT THIS STAGE. HENCE, WE DISMISS THE CROSS OBJECTION FILED BY THE ASSESSEE. IN THE RESULT THE REVENUES APPEAL AND ASSESSEES CROSS OBJECTION ARE DISMISSED. ORDER PR ONOUNCED IN THE OPEN COURT ON 10 .05.2019. 10 .05.2019 SD/ - SD/ - ( RAJESH KUMAR ) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 10 .05.2019 NISHANT VERMA SR. PRIVATE SECRETARY COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED, MUMBAI 4. THE CIT - CONCERNED, MUMBAI 5. THE DR BENCH, 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI