The Jt.CIT.,(OSD)Circle-5, Ahmedabad V. Smt. Nita M.Patel, Ahmedabad

ITA 3296/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94336 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 29-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DINESH SINGH
• Keywords: Business income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI S.S. GOD ARA, J.M. ) I.T. A. NO.3128 & 3296 /AHD/2011 (ASSESSMENT YEAR: 2008-09) SMT. NITA M. PATEL PROP: OF NEW ERA ENTERPRISE, 7, GADHVI SOCIETY, NR. ISHITA TOWER, NAVRANGPURA, AHMEDABAD V/S THE D.C.I.T., CIRCLE-5, AHMEDABAD (APPELLANT) (RESPONDENT) THE JT. COMMISSIONER OF INCOME TAX (OSD), CIRCLE- 5, AHMEDABAD V/S SMT. NITA M. PATEL PROP: OF NEW ERA ENTERPRISE, 7, GADHVI SOCIETY, NR. ISHITA TOWER, NAVRANGPURA, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAFPP 1187N APPELLANT BY : SHRI ASEEM L. THAKKAR, A.R . RESPONDENT BY : SHRI DINESH SINGH, SR. D.R. ( )/ ORDER DATE OF HEARING : 02-09-2015 DATE OF PRONOUNCEMENT : 04 -09-2015 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THESE 2 APPEALS, OF WHICH 1 IS FILED BY THE ASSESSE E AND THE OTHER IS FILED BY THE REVENUE, ARE AGAINST THE ORDER OF CIT(A)-XI, AH MEDABAD DATED 19.10.2011 FOR A.Y. 2008-09. ITA NO 3128 & 3296/AHD/2011 . A.Y. 2008-09 2 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS AN INDIVIDUAL STATED TO BE DERIVING INC OME FROM SALARY, BUSINESS, CAPITAL GAINS AND OTHER SOURCES. ASSESSEE FILED HE R RETURN OF INCOME FOR A.Y. A.Y. 2008-09 ON 06.10.2008 DECLARING TOTAL INCOME O F RS. 3,31,270/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE A SSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 01.11.2010 AN D THE TOTAL INCOME WAS DETERMINED AT RS. 47,52,420/-. AGGRIEVED BY THE ORD ER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 19.10.2011 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED B Y THE AFORESAID ORDER OF LD. CIT(A), ASSESSEE AND REVENUE ARE NOW IN APPEAL BEF ORE US. THE GROUNDS RAISED BY THE REVENUE READS AS UNDER:- 1. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,56,530/- AND RS.36,47 ,693/-AND DIRECTING THE A.O. TO TREAT THE IMPUGNED AMOUNTS AS SHORT TERM CA PITAL GAIN AND LONG TERM CAPITAL GAIN, AND NOT AS 'BUSINESS INCOME' . 4. ON THE OTHER HAND THE GROUNDS RAISED BY THE ASSESSE E READS AS UNDER:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.6,79,793/- MADE BY THE ASSES SING OFFICER U/S.14A OF THE I.T. ACT, 1961 WE FIRST TAKE UP REVENUES APPEAL (IN ITA NO. 3296/ AHD/2011). 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD SHOWN INCOME OF RS. 1,56,530/- AS SHORT TERM CAPIT AL GAINS AND RS. 36,47,693/- AS LONG TERM CAPITAL GAINS FROM THE A CTIVITIES OF PURCHASE AND SALE OF SHARES. ON THE BASIS OF DETAILS FURNISHED B Y ASSESSEE, A.O CONCLUDED ITA NO 3128 & 3296/AHD/2011 . A.Y. 2008-09 3 THAT ASSESSEE WAS INDULGING IN FREQUENT BUYING AND SELLING OF SHARES ON A VERY LARGE SCALE CONTINUOUSLY DURING THE YEAR AND T HE PURPOSE OF BUYING AND SELLING THE SHARES WAS TO EARN THE PROFIT. HE ACCOR DINGLY CONSIDERED THE PROFIT ON SALE OF SHARE AS BUSINESS INCOME AS AGAINST C APITAL GAINS CONSIDERED BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF A.O., AS SESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO DELETED THE ADDITION BY HOLDI NG AS UNDER:- 3.3 IT IS SEEN THAT IN THE YEAR 2005-06 AND 2007-08 , THE ID, CIT(A) HAD GIVEN RELIEF TO THE APPELLANT ON THE SAME SET OF FACTS. F OR THE SAKE OF BREVITY, OBSERVATIONS MADE IN A.Y. 2007-08 IN APPEAL NO. CIT (A)-XI/959/9-10 DATED 19-11 -2010 ARE REPRODUCED AS UNDER: '4.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A.R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE AS SESSMENT ORDER. I FIND SUFFICIENT FORCE IN THE ARGUMENTS OF THE APPELLANT. SHE HAS BE EN ABLE TO MEET THE OBSERVATIONS OF THE A.O. POINT BY POINT. THE FACTS OF THE APPELLANT MAINTAINING SEPARATE SETS OF BOOKS - FOR TRADING IN SHARES AND FOR INVESTMENT IN SHARES; HER INVESTING OWN FUNDS FOR THE PURPOSE; RECEIPT OF DIV IDEND INCOME OF RS. 28,25,193/- DURING THE YEAR AND HER NOT SELLING EVE N A SINGLE SHARE WITHIN 30 DAYS OF ITS PURCHASE WEIGH IN APPELLANT'S FAVOUR. T HE CASE LAWS RELIEF ON BY THE A.O. ARE DISTINGUISHABLE ON FACTS. I AM OF THE CONS IDERED VIEW THAT NO ADVERSE INFERENCE CAN BE DRAWN FROM THE FACTS OF APPELLANT BEING THE NIECE OF THE FOUNDER OF RELIANCE GROUP AND HER DEALING PRIMARILY IN THE SHARES OF RELIANCE GROUP OF COMPANIES. THUS, GIVEN THE FACTS OF THE CASE, THE C ASE LAWS RELIED ON BY THE APPELLANT AND FOLLOWING MY DECISION IN APPELLANT'S CASE FOR THE IMMEDIATELY PRECEDING A.Y, 2006-07 VIDE ORDER DATED 18-11-2010 IN APPEAL NO. CIT(A)- XI/702/08-09, I HOLD THAT THE A.O. IS NOT JUSTIFIED IN TREATING THE LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS AS BUSINESS INCO ME. HE IS DIRECTED TO TREAT THEM AS STCG AND LTCG AS RETURNED BY THE APPELLANT. THUS, THESE GROUNDS OF APPEAL ARE ALLOWED.' 3,4 RESPECTFULLY FOLLOWING THE ABOVE SAID DECISION AND AFTER CONSIDERING THE FACTS OF THE CASE, I AM OF THE FIRM VIEW THAT INCOME DECL ARED BY THE APPELLANT SHOULD BE ITA NO 3128 & 3296/AHD/2011 . A.Y. 2008-09 4 TAXED AS SHORT TERM CAPITAL GAIN. IN ADDITION TO TH E ABOVE DECISIONS, I ALSO RELY ON THE FOLLOWING FACTS IN THE CASE OF APPELLANT: (1)APPELLANT HAS REGULARLY DECLARED THE INCOME FROM THE SALES OF SHARES UNDER THE HEADS SHORT TERM CAPITAL GAIN AND LONG TERM CAP ITAL GAIN. THE DECLARATION OF INVESTMENTS IS FORMALIZED IN THE RETURN OF INCOME O F EARLIER YEARS, THIS IS A CLEAR PROOF THAT SHARES ARE PURCHASED FOR INVESTMENT PURPOSE. (2) INVESTMENT HAS NOT BEEN MADE OUT OF BORROWED FU NDS. (3) THE APPELLANT HAS TRADED ONLY IN THE SHARES OF RELIANCE GROUP OF COMPANIES. (4) THE NO. OF TRANSACTIONS ARE SMALL. (5) ALL THE SHARE TRANSACTED WERE REGISTERED IN THE NAME OF THE APPELLANT. THUS AS PER THE RATIO OF DECISION OF GOPAL PUROHIT V/S. JCI T (2009) 29 SOT MUMBAI, SHE WILL BE TREATED AS INVESTOR IN RESPECT OF THESE INV ESTMENTS. 3.5 WITH THESE OBSERVATIONS, I DIRECT THE A.O. TO A SSESS INCOME DECLARED BY THE APPELLANT AS SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN AS THE CASE MAY BE. THESE GROUNDS OF APPEALS ARE ALLOWED. 6. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REV ENUE IS NOW IN APPEAL BEFORE US. 7. BEFORE US, THE LD. D.R. SUPPORTED THE ORDER OF A.O. HE ALSO PLACED RELIANCE ON THE DECISION IN THE CASE OF MANOJKUMAR SAMDARIA VS. CIT REPORTED IN 2014 52 TAXMAN.COM 247 (SC). ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A) AND FURT HER SUBMITTED THAT ASSESSEE HAD INDULGED IN SELLING OF SHARES ONLY ON 20 DAYS IN A YEAR AND THE INVESTMENTS WERE IN 14 TO 15 SCRIPS. WITH RESPECT T O THE SHARES ON WHICH LONG TERM CAPITAL GAINS HAS BEEN CONSIDERED BY ASSE SSEE IT WAS SUBMITTED THAT THOSE SHARES WERE PREDOMINANTLY ACQUIRED IN A. Y 04-05 & 05-06 AND FOR A.Y. 04-05 ON IDENTICAL FACTS WHEN THE MATTER WAS C ARRIED BY REVENUE TO HIGH COURT, THE HONBLE HIGH COURT DISMISSED THE AP PEAL OF THE REVENUE IN ITA NO 3128 & 3296/AHD/2011 . A.Y. 2008-09 5 TAX APPEAL NO. 71 OF 2013 ORDER DATED 19.08.2013. H E ALSO PLACED ON RECORD THE COPY OF THE AFORESAID ORDER. WITH RESPEC T TO THE SHARES ON WHICH ASSESSEE HAD CLAIMED THE GAINS TO BE OF SHORT TERM HE SUBMITTED THAT THE SHARES WERE PURCHASED FROM OCTOBER 2006 TO JULY 200 7 AND THE SHARES HAVE BEEN HELD FOR NEARLY 7 MONTHS. HE FURTHER SUBMITTED THAT THE FACTS OF THE CASE IN THE YEAR ARE IDENTICAL TO THAT OF EARLIER YEARS AND IN VIEW OF THE DECISION OF HONBLE HIGH COURT NO INTERFERENCE TO THE ORDER BY LD. CIT(A) IS CALLED FOR. THE LD. A.R. FURTHER SUBMITTED THAT THE FACTS OF TH E CASE IN THE CASE OF MANOJKUMAR SAMDARIA (SUPRA) RELIED UPON BY LD. D.R. ARE DISTINGUISHABLE ON FACTS IN VIEW OF THE FACT THAT IN THAT CASE IT WAS NOTICED THAT ASSESSEE HAD ENGAGED IN THE ACTIVITY OF SALE AND PURCHASE OF SHA RES ON DAY TO DAY BASIS AND THE TRANSACTIONS WERE HUGE. HE THEREFORE SUBMIT TED THAT THE RATIO OF THE AFORESAID APEX COURT RELIED UPON BY LD. D.R. WOULD NOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE THUS SUPPORTED THE OR DER OF LD. CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND WHILE HOLDING THE GAINS ON SALE OF SHARES TO B E CAPITAL GAINS, LD. CIT(A) HAS GIVEN A FINDING THAT THE FACTS OF THE CASE IN T HE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF A.Y. 05-06 & 07-08 AND FURTHER DURING THE YEAR UNDER APPEAL THE NUMBER OF TRANSACTIONS ARE SMALL, THE SH ARES WERE PURCHASED FOR INVESTMENT PURPOSE AND WERE NOT MADE OUT TO BORROWE D FUNDS. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL TO CONTROVERT THE FINDINGS OF LD. CIT(A). WE FURTHER FIND THAT AGAINST THE ORDER OF T RIBUNAL, THE MATTER WAS CARRIED BY REVENUE BEFORE HONBLE HIGH COURT AND TH E APPEAL OF REVENUE WAS DISMISSED BY THE HONBLE GUJARAT HIGH COURT. WE FURTHER FIND THAT THE FACTS OF THE CASE RELIED UPON BY LD. D.R. ARE DISTI NGUISHABLE AND NOT APPLICABLE TO THE PRESENT FACTS. IN VIEW OF THE AFO RESAID FACTS, WE FIND NO ITA NO 3128 & 3296/AHD/2011 . A.Y. 2008-09 6 REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AN D THUS THE GROUND OF REVENUE IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. WE NOW TAKE UP ASSESSEES APPEAL IN ITA NO. 3128/ AHD/2011 10. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT ASSESSEE HAD SHOWN HUGE INVESTMENT OF RS. 14.03 CRORE BUT HA D DISALLOWED ONLY RS. 72,389/- U/S. 14A OF THE ACT. A.O WAS OF THE VIEW T HAT THE DISALLOWANCE MADE BY THE ASSESSEE WAS NOT IN ACCORDANCE WITH RUL E 8D. HE THEREFORE WORKED OUT THE DISALLOWANCE U/S. 14A AT RS. 7,52,12 8/- AND AFTER GIVING THE CREDIT OF RS. 72,389/- THAT WAS SUO MOTU DISALLOWED BY ASSESSEE, DISALLOWED RS. 6,79,739/-. AGGRIEVED BY THE ORDER OF A.O., AS SESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO UPHELD THE ORDER OF A.O BY HO LDING AS UNDER:- 5.2 I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO N. IT IS SEEN THAT PROVISIONS OF SECTION 14A(3) WAS INSERTED W.E.F. 1-4-2007. TO MAK E DISALLOWANCE MORE SCIENTIFIC PROVISIONS OF RULE 8D WAS INSERTED W.E.F . 1-4-2008. THE CASES RELIED UPON BY THE ID. A.R. ARE OLD CASES AND THESE CASES DOES NOT TAKE INTO ACCOUNT THE AMENDMENT AS MENTIONED ABOVE. IN VIEW OF THESE FACTS THE RELIANCE PLACED BY THE ASSESSEE ON THESE CASES IS NOT GOING TO HELP HIS CASE. 5.3 DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS MADE VERY GENERAL SUBMISSION. THE APPELLANT HAS FAILED TO PROVE WITH DOCUMENTARY EVIDENCES THAT BORROWED MONEY WAS NOT UTILIZED FOR THE PURPOSE OF INVESTMENT IN STOCK/MUTUAL FUNDS. THE ASSESSEE'S SUBMISSION THAT IT HAS NOT IN CURRED ANY EXPENDITURE IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IS NOT ACCEPTED IN VIEW OF THE PROVISIONS OF SECTIO N 14A(3) OF THE IT. ACT. AS PER THE PROVISIONS OF SECTION 14A(3) OF THE IT. ACT, TH E PROVISIONS OF SECTION 14A(2) ITA NO 3128 & 3296/AHD/2011 . A.Y. 2008-09 7 ALSO APPLY IN RELATION TO A CASE WHERE ASSESSEE CLA IMS THAT NO EXPENDITURE BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NO T FORM PART OF THE INCOME UNDER THIS ACT. THE APPELLANT IS ALSO CLAIMING THAT NO EXPENDITURE BEEN INCURRED IN INVESTING IN SHARES/UNITS. IN SUCH A CASE, THE A .O. IS SUPPOSED TO MAKE NECESSARY DISALLOWANCE AS PER THE PROVISIONS OF SEC TION 14A(2) R.W.R. 8D OF THE IT. RULES1962. THE A.O. HAS FOLLOWED THE SAME PROCE DURE AND ACCORDINGLY APPLICATION OF RULE 8D IS UPHELD. DURING THE APPELL ATE PROCEEDINGS, THE APPELLANT HAS NOT CHALLENGED COMPUTATION OF DISALLOWANCE. I H AVE ALSO GONE THROUGH THE COMPUTATION MADE BY THE A.O. AND THE SAME IS AS PER THE PROVISIONS OF RULE 8D OF IT. RULE,1962. IN VIEW OF THIS, DISALLOWANCE OF RS. 6,79,739/- MADE BY THE A.O. U/S. 14A IS CONFIRMED. THIS GROUND OF APPEAL IS DIS MISSED. 11. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), ASS ESSEE IS NOW IN APPEAL BEFORE US. 12. BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A). THE LD. D.R. ON THE OTHER HAND SUPPORTED TH E ORDER OF LD. CIT(A). 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE UPHOLDING THE DISALLOWAN CE U/S. 14A MADE BY A.O, HAS GIVEN A FINDING THAT DURING THE APPELLATE PROCEEDINGS, ASSESSEE HAD NOT CHALLENGED THE COMPUTATION OF DISALLOWANCE AND THE DISALLOWANCE MADE BY THE A.O WAS AS PER PROVISIONS OF SECTION 14A REA D WITH RULE 8D OF I.T. RULES, 1962. BEFORE US, LD. A.R. HAS NOT BROUGHT AN Y MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF LD. CIT(A) AND THEREFORE WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). IN THE RESU LT THIS GROUND OF ASSESSEE IS DISMISSED. 14. THUS THE APPEAL OF ASSESSEE IS DISMISSED. ITA NO 3128 & 3296/AHD/2011 . A.Y. 2008-09 8 15. IN THE RESULT, THE APPEALS OF REVENUE AS WELL AS AS SESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 04 - 09 - 2015. SD/- SD/- (S.S. GODARA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD