ACIT 16(2), MUMBAI V. SHILPA SACHIN MORAKHIA, MUMBAI

ITA 3359/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4328 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 09-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M M UTTURE
• Assessee Lawyers: SHILPA SACHIN MORAKHIAAR
• Keywords: Business income

Judgement Text

, ,, , INCOME TAX APPELLATE TRIBUNAL,MUMBAI- E,BENCH , ,, , , ,, , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & SANDEEP GOSAIN,JUDICIAL MEMBER /.ITA NO.3359/MUM/2014 , /ASSESSMENT YEAR-2010-11 ASSTT. CIT-16(2) 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI-400 007. V/S. SMT. SHILPA SACHIN MORAKHIA 1 ST FLOOR, SHAKUNNTAL, 10, MANAV MANDIR ROAD WALKESHWAR, MUMBAI-400 006. PAN NO. AACPM 4120 D ( / ASSESSEE ) ( / RESPONDENT) /ASSESSEE BY :SMT. SHILPA SACHIN MORAKHIA-AR / REVENUE BY :SH. M.M. UTTURE -(DR) / DATE OF HEARING : 0 4 - 11 -2015 / DATE OF PRONOUNCEMENT :01.01.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT.24.02.2014, OF THE CIT(A)- 27 THE AO HAS FILED THE PRESENT APPEAL. ASSESSEE,AN INDIVIDUAL, DERIVES INCOME FROM BUSINES S, CAPITAL GAINS AND OTHER SOURCES.SHE FILED HER RETURN OF INCOME ON 25.9.2010 DECLARING T OTAL INCOME OF RS.4.73 LACS.THE AO COMPLETED THE ASSESSMENT U/S. 143 (3) ON 5.3.2013 DETERMINING INCOME OF THE ASSESSEE AT RS.68,49,820/-. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT TREATING THE SALE OF SHARES.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD SHOW N SHORT TERM CAPITAL GAIN (STCG) OF RS.70.75 LACS AND LONG TERM CAPITAL GAIN (LTCG) OF RS.4.73 LACS. VIDE HIS ORDER SHEET NOTING DT.14.12.2012 ,HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY STCG SHOULD NOT BE TAXED AS BUSINESS INCOME.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE THE AO REFERRED TO THE CASE OF LAXMINARAYAN RAMGOPAL (25 ITR 449) ;BHARAT DEVEL OPMENT PVT. LTD.(4 TAXMAN 58); AND HELD THAT THE ASSESSEE WAS HAVING A SYSTEMATIC AND REGULAR COURSE OF SHARE TRANSACTION ACTIVITY, THAT THERE WAS A CONTINUITY OF SHARE TRAN SACTION ACTIVITY OVER A PERIOD OF TIME, THAT THERE WAS A CLEAR PROFIT MOTIVE IN THE TRANSACTIONS UNDERTAKEN BY THE ASSESSEE, THAT THE QUANTITY OF SHARES TRANSACTED AND THE QUANTUM OF SH ARES INVOLVED WAS VERY HUGE,THAT THE ASSESSEES HOLDING PERIOD OF SHARES IN SOME OF THE CASES WERE LESS THAN EVEN A MONTH, THAT THE DIVIDEND EARNED BY THE ASSESSEE WAS VERY SMALL, THA T THERE WAS HIGH FREQUENCY AND REPETITION OF THE PURCHASE AND SALE TRANSACTIONS, THAT THE SHA RES HELD BY THE ASSESSEE COULD NOT BE TAKEN AS INVESTMENT. HE REFERRED TO THE CIRCULARS ISSUED BY THE CBDT AND FINALLY HELD THAT STCG OF RS.70.75 LACS, HAD TO BE TAXED UNDER THE HEAD BUSIN ESS INCOME. 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER AND THE ASSESSMENT PROCEEDINGS THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPE LLATE AUTHORITY (FAA). BEFORE HIM, IT WAS HELD THAT SHE HAD BEEN A REGULAR INVESTOR IN SHARES OVER A PERIOD OF TIME, THAT AO WAS TREATING THE LOSS ON SHARES UNDER THE HEAD CAPITAL GAINS AND GAINS UNDER THE HEAD BUSINESS PROFIT, THAT IN EARLIER YEARS THE THEN FAA HAD PARTLY ALLOWED TH E APPEAL OF THE ASSESSEE . 3359/M/14 2 4. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ASSESSMENT ORDER THE FAA REFERRED TO THE ORDER OF HIS PREDECESSOR FOR THE AY 08-09 . IN THAT ORDER THE THEN FAA HELD THAT THE INCOME EARNED ON ACCOUNT OF CHURNING OF THE SHARES WAS ABOUT 45% OF THE STCG, THAT AS PER THE CBDTS GUIDELINES A PERSON CAN HOLD BOTH THE IN VESTMENT AND BUSINESS PORTFOLIOS, THAT THE PROFIT AVAILABLE TO THE ASSESSEE ON SCRIPS ON CHUR NING COULD BE ASSESSED AS BUSINESS INCOME, THAT THE REST COULD BE CONTINUED TO BE TREATED AS S TCG.FOLLOWING THE ORDER OF HIS PREDECESSOR, THE FAA HELD THAT DURING THE YEAR UNDER CONSIDERATI ON 43.9% OF THE PROFITS WERE BY WAY OF CHURNING OF SHARES, THAT ONLY THAT PORTION OF INCOM E SHOULD BE ASSESSED AS BUSINESS INCOME.FINALLY, HE HELD THAT 43.9% OF THE TOTAL DIS ALLOWANCE I.E. RS.31.05 LACS WAS TO BE TREATED AS ASSESSEES BUSINESS INCOME. 5. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE (DR) RELI ED UPON THE ORDER OF THE AO. HOWEVER, THE ASSESSEE SUPPORTED THE ORDER OF THE FAA. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US .WE FIND THAT WHILE COMPLETING THE ASSESSMENT,THE AO HAS DELIBERATED UP ON MANY A CASE LAWS AND HAS DISCUSSED THE THEORY OF BUSINESS/INVESTMENT, THAT HE HAD GIVE N DETAILS OF HOLDING PERIOD OF SHARES W.R.T. EIGHT STEPS, THAT HE HAS NOT MENTIONED THE FACTS LI KE INVESTMENT MADE BY THE ASSESSEE, NUMBER OF TRANSACTIONS UNDERTAKEN BY HER, BORROWING OF FUN DS FOR MAKING INVESTMENTS ETC.IN OUR OPINION TO DECIDE THE ISSUE AS TO WHETHER AN ASSESS EE IS AN INVESTOR OR A TRADER, HIS INTENTION HAS TO BE LOOKED INTO.SURROUNDING CIRCUMSTANCES HEL P TO DECIDE INTENTION OF THE ASSESSEE AND FOR THAT, FACTS HAVE TO BE MENTIONED AND NOT THE TH EORY.THE AO HAS INSTEAD OF BRINGING FACTS ON RECORD DEVOTED MUCH OF ENERGY IN EXPLAINING THE THEORY.THE FAA HAS FOUND THAT 43.9% OF THE SHARE TRANSACTIONS COULD NOT BE TERMED AS INVES TMENT ACTIVITY.THE DR WAS NOT ABLE TO CONTROVERT THE FINDING OF THE FACT RECORDED BY THE FAA.IT IS A WELL SETTLED POSITION THAT THE ASSESSEE CAN DEAL IN BOTH THE CAPACITY I.E. A TRAD ER AND AN INVESTOR AS FAR AS SHARE TRANSACTIONS ARE CONCERNED. THEREFORE, WE HOLD THAT THE ORDER OF THE FAA DOES NOT NEED ANY INTERFERENCE FROM OUR SIDE.CONFIRMING HIS ORDER, WE DECIDE THE E FFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT ,APPEAL FILED BY THE AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST JANUARY, 2016. 01 , 2016 SD/- SD/- ( /SANDEEP GOSAIN ) ( / RAJENDRA ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER MUMBAI, DATE: 01.01.2016 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.