Sh. Ashok Kumar Khetrapal, New Delhi V. JCIT, New Delhi

ITA 3289/DEL/2015

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 2743 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 25-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Assessee Lawyers: DR RAKESH GUPTA
• Keywords: Capital asset; Business income; Principle of natural justice
• Section: 14A

Judgement Text

1 ITA NO. 3289/DEL/2015 IN THE INCOME TAX APPELLA TE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT ME MBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 3289/DEL/2 015 (A.Y 2010-11) ASHOK KUMAR KHETRAPAL C/O. M/S. RRA TAX INDIA, D-28, SOUTH EXTENSION, PART-1 NEW DELHI AAJPK4284F (APPELLANT) VS JCIT RANGE-2 GHAZIABAD (RESPONDENT) APPELLANT BY DR. RAKESH GUPTA, ADV RESPONDENT BY SMT. NAINA SOIN KAPIL, SR. DR. ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 30/03/2015 PASSED BY CIT (A) XIII, NEW DELHI FOR ASSESSMENT YEAR 2010-11. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- '1. THAT HAVING REGARDS TO FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE LD. AO IN TREATING THE INCOME OF RS.6,98,161/- AS BUSINESS INCOME INSTEAD OF SHORT TERM CAPITAL GAIN AS CLAIMED BY THE ASSESSEE THAT TOO BY RECORDING IN CORRECT FACTS AND FINDINGS AND WITHOUT CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE. 2. THAT HAVING REGARDS TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. C1T(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACT ION OF THE LD. AO IN DATE OF HEARING 11.10.2018 DATE OF PRONOUNCEMENT 15.10.2018 2 ITA NO. 3289/DEL/2015 DISALLOWING OF RS.8,000/- U/S 14A OF INCOME TAX ACT , 1961. 3. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITIONS/DISALLOWANCE AND PASSING T HE IMPUGNED ASSESSMENT ORDER BEING CONTRARY TO LAW AND FACTS AN D WITHOUT PROVIDING ADEQUATE OPPORTUNITY OF HEARING AND WITHOUT CONSIDE RING THE PRINCIPLES OF NATURAL JUSTICE AND THE SAME IS NOT SUSTAINABLE ON VARIOUS LEGAL AND FACTUAL GROUNDS. 4. THAT HAVING REGARDS TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT REVERSING THE ACTION OF THE LD. AO IN CHARGING INTEREST U/S 234A, 234B, 234C AND 234D OF THE INCOME TAX ACT, 1961. 3. THE ASSESSEE IS IN THE BUSINESS OF ADVERTISEME NT AND PUBLICITY UNDER THE NAME OF M/S INFOTAINMENT MEDIA NETWORK. THE ASSESS EE ALSO ENTERED INTO VARIOUS TRANSACTIONS OF SHARES VIZ. SALE PURCHASE O F SHARES, FUTURE OPTION AND DERIVATIVE TRANSACTION. THE ASSESSEE IS ALSO WORKI NG PARTNER IN M/S PASHUPATI NATH JEE TOURS & TRAVELS. DURING THE PRESENT ASSES SMENT YEAR, THE ASSESSEE FILED RETURN OF INCOME ELECTRONICALLY DATED 11/10/2 010 DECLARING TOTAL INCOME OF RS.1,43,44,290/-, AS PER ITR FILED BY THE ASSESS EE. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE CLAIMED A SET OFF SPECUL ATION LOSS OF RS.69,28,855/- PERTAINING TO ASSESSMENT YEAR 2009-10. THE SAME WA S DISALLOWED BY THE ASSESSING OFFICER TO THE EXTENT OF RS.2,16,946/-. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAS SHOWN SHORT TERM CAP ITAL GAIN OF RS.6,98,161/- ON ACCOUNT OF SALE OF SHARES IN HIS ITR AS PER THE AUDIT REPORT FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010-11. THE ASSESSIN G OFFICER FURTHER OBSERVED THAT THE STATEMENT OF PARTICULARS AT SERIAL NO. 8(A ) OF FORM 3CD REVEALS THAT THE ASSESSEE IS INTO BUSINESS OF SALE/PURCHASE OF SHARE S. AFTER GOING THROUGH THE REPLY OF THE ASSESSEE THE ASSESSING OFFICER MADE DI SALLOWANCE OF RS.6,98,161/- AND TREATED THE SAME AS BUSINESS INCOME OF THE ASSE SSEE. THE ASSESSING OFFICER ALSO ADDED RS. 3,31,544/- IN RESPECT OF CRE DIT CARD EXPENSES AS WELL AS MADE DISALLOWANCE OF RS.8,000/- IN RESPECT OF SECTI ON 14A OF THE INCOME TAX ACT, 1961. 3 ITA NO. 3289/DEL/2015 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL O F THE ASSESSEE. 5. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS TWO P ORTFOLIO, I.E. AN INVESTMENT PORTFOLIO COMPRISING OF SECURITIES WHICH ARE TO BE TREATED AS CAPITAL ASSETS AND TRADING PORTFOLIO COMPRISING STOCK IN TR ADE WHICH IS TO BE TREATED AS TRADING ASSETS. WHEN AN ASSESSEE HAS TWO PORTFOLIO, THE ASSESSEE MAY HAVE INCOME UNDER BOTH THE HEADS I.E. CAPITAL GAIN AND B USINESS INCOME. THE LD. AR FURTHER SUBMITS THAT THE ASSESSEE IS PUTTING ALL TH OSE SHARES IN THE PORTFOLIO WHERE THE SHARES ARE BEING ACQUIRED BY TAKING DELIV ERY AND MAKING FULL PAYMENT WHEREAS IN THOSE CASES WHERE FULL PAYMENT I S NOT MADE AND DELIVERY IS NOT TAKEN , THOSE SHARES ARE PUT IN TRADING PORTFOLIO. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS HIMSELF ACCEPTED THE FACT THAT THE ASSESSEE HAS TAKEN PHYSICAL DELIVERY OF THE SHARES, WHICH FURTHER PROV ES THAT THE INTENTION OF THE ASSESSEE WAS TO HOLD THESE SHARES FOR INVESTMENT PURPOSES AND NOT F OR TRADING PURPOSES. ON THE OTHER HAND THE ASSESSING OFFICER HAS CONSIDE RED THE SAME AS BOOK ENTRIES. THUS, THE ASSESSING OFFICER HAS CONTR ADICTED THE REVENUES STAND. THE LD. AR POINTED OUT THAT INVESTMENT WAS MADE BUT THE SAME HAD TO BE SOLD QUICKLY AS THE MARKETS WERE SWINGING AND THERE WAS FEAR OF LOSSES. MOREOVER, THE LAW ITSELF PERMITS THE SHARES TO BE HELD FOR LESS THAN 12 MONTHS FOR GIVING RISE TO SHORT TERM CAPITAL GAIN. THUS, SHARES SOLD WITHIN A PERIOD OF 12 MONTHS MAY NOT BE VIEWED OTHERWISE THAN AS SALE OF INVESTM ENT BECAUSE IF IT IS TAKEN THAT SHARES SOLD WITHIN A PERIOD OF 12 MONTHS WOULD GIVE RISE TO BUSINESS PROFITS, IT WOULD MAKE THE PROVISION OF SHORT TERM GAIN ON SHARES AS REDUNDANT AND COMPLETELY MEANINGLESS. THE LD. AR SUBMITTED TH AT THE SECURITY TRANSACTION TAX (STT) IS PAID WHEN THE TRANSACTIONS IN SHARES ARE ROUTED THROUGH STOCK EXCHANGE, WHEREAS THE ASSESSEE HAD UN DERTAKEN PHYSICAL PURCHASE AND SALE OF ITS SHARES. THE LD. AR SUBMIT TED THAT THE DIVIDEND INCOME RECEIVED DURING THE IMPUGNED YEAR BUT THE SA ME HAS BEEN EARNED ON INVESTMENTS MADE DURING ASSESSMENT YEAR 2006-07. TH E ASSESSEE HAS NOT SOLD 4 ITA NO. 3289/DEL/2015 ANY OF HIS LONG TERM INVESTMENTS DURING THE IMPUGNE D YEAR. THE LD. AR ALSO RELIED UPON THE DECISION OF THE TRIBUNAL IN THE ASS ESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 & 2007-08 WHEREIN THIS ISSU E HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. 7. AS REGARDS GROUND NO. 2, THE LD. AR SUBMITTED TH AT THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING OF RS. 8,000/- U/S 14A OF THE INCOME TAX ACT, 1961. 8. AS REGARDS GROUND NO.4, THE LD. AR SUBMITTED THA T THE SAME IS CONSEQUENTIAL. 9. THE LD. DR SUBMITTED THAT THE CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT NO STT WAS PAID BY THE ASSESSEE. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CIT(A) HELD AS UNDER:- 6.3 THE REASONS GIVEN BY THE AO AND THE SUBMISS ION OF THE APPELLANT ARE CONSIDERED. IT IS NOT IN DISPUTE THAT THE APPEL LANT IS IN THE SAME BUSINESS EVEN IN THE PRECEDING YEARS AS WELL. IT IS OBSERVED FROM THE DETAILS BROUGHT ON RECORD THAT ASSESSEE PURCHASED 50000 SHARES OF MBL INFRASTRUCTURE LIMITED ON 13.1.2010 FOR A TOTAL CONSIDERATION OF RS.1,04,4 8,220/-, AND SOLD THE SAME FOR RS.1,11,73,409/-, AND CLAIMED TO HAVE PAID STT AMOUNTING TO RS. 27,028/- ON THESE SHARES (PB 21), AND THUS EARNED A SHORT TERM CAPITAL GAIN OF RS 6,98,161/-. ON THE CONTRARY, IN THE WRITTEN S UBMISSIONS FILED, APPELLANT HAS CONFIRMED THAT NO STT IS PAID. THUS, THERE ARE TWO DIFFERENT STATEMENTS OF THE APPELLANT IN THIS REGARD. PAYMENT OF STT ON THE SE SHARES IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCES. FURTHERMORE, NEITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOR AT THE STAGE OF APPELLAT E PROCEEDINGS, APPELLANT SUBMITTED ANY EVIDENCE TO JUSTIFY THAT ANY STT HAS BEEN PAID ON THESE SHARES, AND THESE SHARES WERE ROUTED THROUGH ANY ST OCK EXCHANGE. NO CONTRACT NOTES IN THIS REGARD WERE FILED BY THE APP ELLANT EITHER BEFORE THE AO 5 ITA NO. 3289/DEL/2015 DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR EVEN BEFORE ME. THEREFORE, THE OBSERVATIONS MADE BY THE AO IN HIS ORDER THAT A SSESSEE HAS HIMSELF CONTENDED THAT THE TRANSACTION IN SHARES WAS NOT RO UTED THROUGH HIS DEMAT ACCOUNT AND THAT THESE SHARES WERE PHYSICALLY HELD BY THE BROKER ONLY CANNOT BE OVERLOOKED AND IGNORED. NOTHING SPECIFIC IS BROU GHT ON RECORD BY THE APPELLANT TO ESTABLISH THAT ANY SPECIFIC PAYMENT WA S MADE FOR THESE SHARES PURCHASED, AND AMOUNT RECEIVED ON SALE OF SUCH SHAR ES. THUS, IN FACT ASSESSEE HAS FAILED TO ESTABLISH AS TO HOW THESE SH ARES FORM PART OF HIS INVESTMENT PORTFOLIO AND WERE NOT FOR TRADING PURPO SE ONLY. MERELY BECAUSE, ASSESSEES CLAIM IN THE PREVIOUS YEARS IS CONSIDERE D FOR SOME SHARES HELD AND SOLD, AND PROFIT OR LOSS ON SUCH SHARES IS CON SIDERED AS SHORT TERM CAPITAL LOSS OR GAIN CANNOT BE APPLIED IN THE ASSES SMENT YEAR UNDER CONSIDERATION AS WELL IN THE ABSENCE OF BRINGING-ON RECORD SUCH EVIDENCES TO ESTABLISH THE NATURE OF INVESTMENTS MADE IN SUCH SH ARES. EVERY YEAR IS AN INDEPENDENT ASSESSMENT YEAR, AND RULE OF RES-JUDICA TA CANNOT BE APPLIED. THESE SHARES WERE SOLD BY THE ASSESSEE AFTER KEEPIN G THE SAME FOR 15 TO 38 DAYS I.E. FOR A VERY SHORT PERIOD. NO DOUBT THAT AS SESSEE IS MAINTAINING TWO PORTFOLIOS I.E. ONE FOR INVESTMENT PURPOSE AND OTHE R FOR TRADING. I HAVE ALSO EXAMINED THE CASE LAWS REFERRED BY THE APPELLANT IN THE WRITTEN SUBMISSIONS FILED BUT IN THE ABSENCE OF ABOVE EVIDENCES BROUGHT ON RECORDS, THE FACTS OF THE CASE OF THE ASSESSEE AND THOSE CASES CANNOT BE COMP ARED. DURING THE COURSE OF APPELLATE * PROCEEDINGS LD. AR ALSO REFERRED ME TO ORDER PASSED BY LD. CIT(A) FOR AY 2007-08 AND AY 2008-09, (REFER PB 30- 43), BUT I FIND THAT THESE ORDERS DO NOT HELP THE ASSESSEE FOR THE REASONS DI SCUSSED SUPRA. IN VIEW OF THIS, I DO NOT FIND ANY REASON TO DIFFER FROM THE O BSERVATIONS MADE BY THE A.O IN HIS ORDER. ACCORDINGLY, THIS GROUND OF APPEAL I S DECIDED AGAINST THE ASSESSEE. IT IS PERTINENT TO NOTE THAT THOUGH, THE ASSESSEE H AS RELIED UPON THE EARLIER ASSESSMENT YEAR IN ASSESSEES OWN CASE, FROM THE PE RUSAL OF THE ORDER OF THE CIT(A) AS WELL AS OF THE ASSESSING OFFICER IT WAS F OUND THAT THE RELEVANT 6 ITA NO. 3289/DEL/2015 EVIDENCES WAS NOT VERIFIED RELATING TO THE PAYMENT OF STT IN THE PRESENT ASSESSMENT YEAR. THE LD. AR ALSO SUBMITTED DURING THE HEARING THAT THE SAME WILL BE PRODUCED BEFORE THE AUTHORITIES, IF THE MAT TER IS REMANDED BACK. THEREFORE, IN THE INTEREST OF JUSTICE, IT WILL BE A PPROPRIATE TO REMAND BACK THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER AFRESH. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWING PRINCI PALS OF NATURAL JUSTICE. THEREFORE, GROUND NO. 1 IS PARTLY ALLOWED FOR STATI STICAL PURPOSE. 11. AS REGARDS GROUND NO.2, THE ASSESSING OFFICER AS WELL AS THE CIT(A) HAS PROPERLY MADE DISALLOWANCE AND CONFIRMED THE SAME U/S 14A. THEREFORE, GROUND NO.2 IS DISMISSED. 12. AS REGARDS, GROUND NO.3, THE SAME IS GENERAL I N NATURE, HENCE, DISMISSED. 13. AS REGARDS, GROUND NO.4, THE SAME IS CONSEQUEN TIAL. THEREFORE, THERE IS NO NEED TO ADJUDICATE THIS GROUND AT THIS STAGE. 14. IN RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH OCTOBER, 2018 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 15/10/2018 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT 7 ITA NO. 3289/DEL/2015 ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 11 .10.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12.10.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS .10.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT .10.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .10.2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER