KIRTI S. PARIKH HUF, MUMBAI V. ITO WD 16(2)(1), MUMBAI

ITA 339/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2761 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 15-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 11-01-2013
• Court: TRIBUNAL
• Department Lawyers: A RAMCHANDRAN LD
• Assessee Lawyers: CHETAN I SHAH CA LD
• Keywords: Business income; Speculation loss
• Section: 143(3)

Judgement Text

ITA NO . 339 /MUM/201 3 - SHRI KIRTI S PARIKH HUF - A - JM 1 IN THE INCOME TAX APPELLATE TRIBUNAL , A BENCH: MUMBAI BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SRI RA M IT KOCHAR, AM I.T.A NO . 339 / MUM/201 3 A.Y 200 7 - 08 KIRTI S. PARIKH HUF V S. I.T.O, WARD 16(2)(1), MUMBAI PAN : A AA HK4477R ( APP ELLANT /ASSESSEE ) ( RESPONDENT /DEPARTMENT ) FOR THE APPELLANT/ ASSESSEE : SHRI CHETAN I. SHAH , CA LD.AR FOR THE RESPONDENT/ DEPARTMENT: SHRI A.RAMCHANDRAN, LD. SR.DR DATE OF HEARING: 2 8 - 06 - 2016 DATE OF PRONOUNCEMENT : 08 - 0 7 - 2016 ORDER SHRI MAHAV IR SINGH, JUDICIAL MEMBER : TH IS APPEAL OF ASSESSEE IS ARISING OUT OF ORDER OF C IT(A) IN A PPEAL NO. CIT(A) - 6/IT - 13/2012 - 13 DATED 2 2 - 11 - 2012 . ASSESSMENT WAS FRAMED BY ITO - 16(2)(1), MUMBAI FOR THE ASSESSMENT YEAR 200 7 - 08 U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 16 - 12 - 2009 . 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF THE CIT(A) CONFIRMING THE ACTION OF THE AO IN TREATING THE SHORT TERM CAPITAL GAIN DECLARED BY THE ASSESS EE AS BUSINESS INCOME. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND: - THE APPELLANT AVERS THAT THE LEARNED C.I.T (A) VI, MUMBAI HAS ERRED IN UPHOLDING THE STAND TAKEN BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER PASSED U/S. 143(3) OF THE I.T ACT 1961 OF TREATING THE S.T.C.G OF RS.8,69,476/ - AS BUSINESS INCOME. THE APPELLANT FURTHER AVERS THAT THE SHORT TERM CAPITAL GAINS (S.T.C.G) OF RS.8,69,476/ - SHOULD HAVE BEEN CONSIDERED AS S.T.C.G AND NOT AS BUSINESS INCOME AND IF IT WAS TO BE SO TREATED AS BUSINESS INCOME, THEN THE SPECULATION LOSS OF RS.28,36,099/ - AS DECLARED IN THE RETURN OF INCOME SHOULD ALSO HAVE BEEN CONSIDERED AS BUSINESS LOSS AND NOT AS SPECULATION. 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE IS EARNING HIS INCOME FROM C APITAL GAINS AND INCOME FROM OTHER SOURCES. DURING THE ASSESSMENT PROCEEDINGS THE AO ITA NO . 339 /MUM/201 3 - SHRI KIRTI S PARIKH HUF - A - JM 2 NOTICED THAT THE ASSESSEE HAS DISCLOSED SHORT TERM CAPITAL GAIN ON SALE OF SHARES OF RS. 8,69,476/ - . ACCORDING TO THE AO , THE ASSESSEE HAS DEALT WITH SHARES RANGING INTO 55 TRANSACTIONS AND FREQUENCY OF PURCHASE AND SALE OF SHARES IS LARGE. TAKING THE FREQUENCY AND VOLUME OF TRANSACTIONS, THE AO TREATED THE SHORT TERM CAPITAL GAIN DECLARED BY ASSESSEE AS BUSINESS INCOME. 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), WHO ALSO CONFIRMED THIS ACTION OF THE AO BY GIVING REASON THAT THE SALE AND PURCHASE OF SHARES ARE WITH FREQUENCY AND LARGE VOLUME AND ALSO THE ASSESSEE HAS TAKEN LOAN FROM PARTIES FOR INVESTING IN THE BUSINESS ACTIVITY OF SHARES. ACCORDING TO THE CIT(A), CONTINUOUS AND SYSTEMATIC EXERCISE OF ACTIVITY WITH THE PROFIT MOTIVE CONSTITUTES BUSINESS. ACCORDINGLY, HE TREATED THE TRANSACTION IS ARISING OUT OF PURCHASE AND SALE OF SHARES AS BUSINESS INCOME. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCE S OF THE CASE. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE HAS FILED THE PAPER BOOK CONSISTING OF PAGES 1A TO 6D . THE ASSESSEE FILED THE DETAILS OF TRANS ACTIONS OF SHORT TERM CAPITAL GAIN AT PAGE 1D OF THE ASSESSEES PAPER BOOK, WHEREIN COMPLETE DETAILS I.E THE DATE OF PURCHASE, DATE OF SALE, VALUE OF PURCHASE AND VALUE OF SALE, GAIN/LOSS INCURRED, IS DEPICTED . THE LD. COUNSEL FOR THE ASSESSEE TOOK US THR OUGH PAGE 1D OF THE ASSESSEES PAPER BOOK AND STATED THAT THE ASSESSEE HAS TAKEN PHYSICAL DELIVERY OF SHARES AND KEPT THE SHARES IN THE D - MAT ACCOUNT IN ALL THE TRANSACTIONS. HE STATED THAT THE DIFFERENCE BETWEEN THE DAYS OF SALES A ND PURCHASE IS RANGING ONE MONTH TO SIX MONTHS . ACCORDING TO HIM, THE ASSESSEE IS AN INVESTOR BECAUSE IN THE BALANCE SHEET HE HAS GIVEN THE STATEMENT OF THESE SHARES AS INVESTOR AND KEPT THE SAME IN THE INVESTMENT PORTFOLIO AND NOT IN CURRENT ACCOUNT. THE LD. COUNSEL FOR THE AS SESSEE ALSO DREW OUR ATTENTION TO PAGE 1 H & 1 T OF ASSESSEES PAPER BOOK, WHEREIN P & L ACCOUNT, BALANCE SHEET AND CAPITAL ACCOUNT ARE ENCLOSED. THE LD. COUNSEL FOR THE ASSESSEE ALSO STATED THAT THE AO HIMSELF HAS STATED THE SHORT TERM CAPITAL LOSS ARISIN G OUT OF SALE OF SHARES IS SHORT TERM ITA NO . 339 /MUM/201 3 - SHRI KIRTI S PARIKH HUF - A - JM 3 CAPITAL LOSS EXACTLY AS SHORT TERM ON THE SAME TRANSACTION. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, THE DEPARTMENT CANNOT ADOPT THE DOUBLE STANDARD FOR THE SAME TRANSACTION. HENCE, HE URGED THE BENCH TO TREAT TH E INCOME OF ASSESSEE AS SHORT TERM CAPITAL GAIN AND NOT THE BUSINESS INCOME. O N THE OTHER HAND, THE LD.SR.DR HAS RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 6 . WE HAVE GONE INTO THE FACTS IN - ENTIRETY, P ARTICULARLY, THE TRANSACTIONS OF SHORT TERM CAPIT AL GAIN, DETAILS OF WHICH IS AVAILABLE AT PAGE 1D OF THE PAPER BOOK . WE FURTHER NOTICED THAT THE ASSESSEE FACTUALLY HAS TAKEN DELIVERY OF SHARES AND KEPT THEM IN D - MAT ACCOUNT. EVEN OTHERWISE FROM THE BALANCE SHE E T ALSO IT IS CLEAR THAT THE TRANSACTIONS AR E RECORDED AS INVESTMENT AND NOT IN THE TRADE PORTFOLIO . THE ASSESSEE HAS ALSO DISCLOSED THE SHORT TERM CAPITAL LOSS, WHICH WAS ACCEPTED BY THE DEPARTMENT AND ALSO LONG TERM CAPITAL GAIN. IN VIEW OF THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT PROF IT ARISING OUT OF ASSESSEES TRANSACTION ON SALE AND PURCHASE OF SHARES IS CAPITAL GAINS AND NOT BUSINESS INCOME WHETHER IT IS SHORT TERM OR LONG TERM TRANSACTION AS THE CASE MAY BE. HENCE, WE ALLOW THE APPEAL OF THE ASSESSEE. 7 . IN THE RESULT, THE AP PEAL OF THE ASSESSEE IS ALLOWED AS STATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 08 . 0 7 .2016 DATED : 08 - 07 - 2016 *PP /SR.P.S. SD/ - RAMIT KOCHAR ACCOUNTANT MEMBER SD/ - MAHAVIR SINGH JUDICIAL MEMBER ITA NO . 339 /MUM/201 3 - SHRI KIRTI S PARIKH HUF - A - JM 4 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT /ASSESSEE: SHRI KIRTI S PARIKH HUF C/O M/S. H.C SHAH & CO, CHARTERED ACCOUNTANTS, 37 - B YUSUF BUILDING, 4 TH FL ., V.N ROAD, FORT, MUMBAI - 23. 2 RESPONDENT : THE I.T.O WARD 16(2)(1), MUMBAI. 3 . THE CIT, 4 . THE CIT(A), MUMBAI 5 . DR, MUMBAI BENCHES, MUMBAI TRUE COPY, BY ORDER, / ASSTT. REGISTR AR