SHOBHANA J. CHANDRAMOULI, MUMBAI V. DCIT 9(3), MUMBAI

ITA 3427/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48728 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 09-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-05-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ASHIMA GUPTA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, E BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI V.DURGA RAO, JUDICIAL MEMBER I.T.A NO.3427/ MUM/2009 ASSESSMENT YEAR: 2006-07 SHOBHANA J CHANDRAMOULI, .. APPELLANT 602, 6 TH FLOOR, MIDTOWN, JAMED JAMSEDJI ROAD, MATUNGA, MUMBAI-19. PA NO.ADIPC 5735 H VS DCIT 9(3) ,. RESPONDEN T AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. APPEARANCES: HARIDAS BHATT, FOR THE APPELLANT ASHIMA GUPTA, FOR THE RESPONDENT O R D E R PER V. DURGA RAO, JM: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 27.4.2009 OF THE CIT(A)-IX, MUMBAI FOR THE ASSESSMENT YEAR 2006-0 7. 2. GROUND RAISED BY THE ASSESSEE READS AS UNDER:- THE LD CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWA NCE MADE BY THE AO IN RELATION TO THE SHORT TERM CAPITAL GAIN AMO UNTING TO ` .56,86,877 BY TREATING THE SAME AS THE BUSINESS INCOME U/S.73 OF THE INCOME TAX ACT, 1961. 3. FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN INDIVIDUAL, FILED HER RETURN OF INCOME DECLARING TOTAL INCOME AT ` .2,93,47,206. INITIALLY, IT WAS PROCESSED UNDER SECTIO N 143(1) AND SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTI NY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THE CD PROVIDED BY THE ASSESSEE SHOWS A TOTAL ENTRIES OF 11123 INVOLVING TOTAL PU RCHASE PRICE OF ` .20.20 I.T.A NO.3427/ MUM/2009 SHOBHANA J CHANDRAMOULI 2 CRORES AND TOTAL SALE PRICE OF ` .21.33 CRORES. TAKING INTO CONSIDERATION THE TOTAL VOLUME AND FREQUENCY OF TRANSACTION, THE AO OBSERVED THAT THE ASSESSEE IS A TRADER. HE FURTHER OBSERVED THAT FOR THE ASSESSMENT YEAR 2005-06 , IT WAS HELD THAT THE ACTIVITY OF THE ASSESSEE WAS A BUSINESS ACTIVITY AND THE C LAIM OF SHORT TERM CAPITAL GAIN WAS TREATED ACCORDINGLY. FOLLOWING THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2005-06, THE AO ASSESSED THE PROFIT AROSE FROM ASSESSEE S BUSINESS AS BUSINESS INCOME. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATT ER IN APPEAL BEFORE THE CIT(A). 4. THE CIT(A) FOLLOWING THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2005- 06 UPHELD THE ORDER OF THE ASSESSING OFFICER. ON BEIN G AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. AT THE TIME OF HEARING, LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE ASSESSEE IS A REGULAR INVESTOR AND NOT A TRADER. THE MAJ ORITY OF THE SHARES ARE HELD BY THE ASSESSEE FOR A LONGER PERIOD. THEREFORE, THE IN COME OF THE ASSESSEE HAS TO BE TAXED UNDER THE HEAD SHORT TERM CAPITAL GAIN AND N OT AS BUSINESS INCOME. THE VOLUME AND FREQUENCY OF TRANSACTION CANNOT BE CONSID ERED FOR THE PURPOSE OF TREATING THE ASSESSEE AS A TRADER. THE INTENTION OF TH E ASSESSEE HAS TO BE CONSIDERED. HE RELIED ON THE FOLLOWING DECISIONS:- 1) CIT VS. GOPAL PUROHIT, 228 CTR 582(BOM) 2) GOPAL PUROHIT V JCIT, 122 TTJ (MUMBAI) 87 3) CIT V. N.S.S. INVESTMENTS (P)LTD., 277 ITR 149(MAD) 6. LEARNED D.R., ON THE OTHER HAND, SUBMITTED THAT F OR THE ASSESSMENT YEAR 2005-06, THE AO AND THE CIT(A) HAVE ELABORATELY CON SIDERED THE FACTS OF THE CASE AND CAME TO THE CONCLUSION THAT THE ASSESSEE IS A TRADER . THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2005-06 IS FINAL AS NO APPEAL HAS BEE N FILED BY THE ASSESSEE AGAINST THAT ORDER. THEREFORE, AS THE FACTS ARE SIMIL AR TO THAT OF A.Y. 2005-06, IT CANNOT BE CONSIDERED THAT THE ASSESSEE IS AN INVESTOR. I.T.A NO.3427/ MUM/2009 SHOBHANA J CHANDRAMOULI 3 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PER USED THE RECORD OF THE CASE. IN THE PRESENT CASE, THE ASSESSEE HAS SHOWN INCOME OF ` .56,86,877 UNDER THE HEAD SHORT TERM CAPITAL GAIN. HOWEVER, THE ASSESSING OFFIC ER HAS TREATED THE SAME AS BUSINESS INCOME. ACCORDING TO THE ASSESSEE, THE TOTAL T RANSACTION CARRIED ON BY THE ASSESSEE IS 11123 INVOLVING TOTAL PURCHASE OF ` .20.20 CRORES AND SALE PRICE OF ` .21.33 CRORES. THE AO HAS GIVEN A FINDING THAT THE VOLUME A ND FREQUENCY OF TRANSACTIONS ARE MORE AND, THEREFORE, IT CANNOT BE CONSIDERED THE CLAIM OF THE ASSESSEE AS SHORT TERM CAPITAL GAIN AND BY FOLLOWING THE ASSESSEES OWN C ASE FOR A.Y. 2005-06, THE INCOME EARNED BY THE ASSESSEE WAS ASSESSED AS BUSINESS INCOME. THE CIT(A) UPHELD THE ORDER OF THE AO FOLLOWING THE ORDER OF THE CIT( A) FOR A.Y. 2005-06. IN THE ASSESSMENT YEAR 2005-06,THE CIT(A) HAS GIVEN A CATEGORIC AL FINDING THAT THE ASSESSEE HAS BEEN INVOLVING HERSELF IN SHARE TRADING ACTIV ITY AND IT CANNOT BE SAID THAT THE SHARES HAVE BEEN AS HELD INVESTMENT BUT THEY ARE CLEARLY IN THE NATURE OF STOCK IN TRADE. IN THE PRESENT CASE, EXCEPT STATING TH AT THE ASSESSEE IS AN INVESTOR, NO MATERIAL HAS BEEN BROUGHT TO OUR NOTICE THAT THE ASSESSE E IS NOT A TRADER BUT AN INVESTOR. LD COUNSEL FOR THE ASSESSEE HAS SUBMITTED THA T THE ASSESSEE IS CONTINUOUSLY EARNING CAPITAL GAINS BOTH SHORT TERM AND LONG TERM DUE TO MARKET BUOYANCY DURING FINANCIAL YEAR 2006-07 AND 2007-08. SHORT TERM GAIN WAS MORE VOLUMINOUS. IT IS A FACT THAT ASSESSEE IS RECEIVING SHORT TERM CAPITAL GAIN MORE THAN THE LONG TERM CAPITAL GAIN. RELIANCE PLACED BY LD COUNSEL FOR THE ASSESSEE ON CIRCULAR NO.4/2007 DT.15.06.2007 IS NOT APPLICABLE T O THE FACTS OF THE CASE. THE ASSESSEE IS BUYING HUGE SHARES AND SELLING THE SAME MORE FR EQUENTLY. IT SHOWS THAT THE ASSESSEE IS IN TRADING ACTIVITY. THE ASSESSEE ALSO IS UT ILIZING BORROWING FUNDS FOR THE PURPOSE OF BUYING AND SELLING OF THE SHARES. APART FROM THE ABOVE, THE ASSESSEE IS ALSO DOING SPECULATIVE BUSINESS. IN A.Y. 2005-06, THE CIT (A) UPHELD THE ORDER OF THE AO AND HELD THAT THE ASSESSEE IS A TRADER. AGAINST T HE ORDER OF THE CIT(A), NO APPEAL HAS BEEN FILED BY THE ASSESSEE. THEREFORE, THE O RDER OF THE CIT(A) HAS REACHED FINALITY. NO MATERIAL HAS BEEN BROUGHT TO OUR NOTICE THE FACTS IN THE YEAR UNDER CONSIDERATION ARE DIFFERENT FROM A.Y. 2005-06, SAVE AND EXCEPT FOR POINTING OUT THAT THERE IS A SLIGHT REDUCTION IN QUANTUM OF BO RROWING. WE MAY, IN THIS REGARD REFER TO THE FOLLOWING OBSERVATIONS MADE BY HONBLE S UPREME COURT IN THE CASE OF RADHASOAMI SATSANG V. COMMISSIONER OF INCOME-TAX (193 ITR 321): I.T.A NO.3427/ MUM/2009 SHOBHANA J CHANDRAMOULI 4 WE ARE AWARE OF THE FACT THAT, STRICTLY SPEAKING, RE S JUDICATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS. AGAIN, EACH ASSESSMENT YEAR BEING A UNIT, WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH T HE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO A LLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. 8. THE QUESTION AS TO WHETHER AN ASSESSEE IS A TRADER OR I NVESTOR IS ESSENTIALLY A QUESTION OF FACT WHICH PERMEATES FROM YEAR. ONCE ASSESSE E HAS ALLOWED THIS FACTUAL ISSUE HAVING BEEN SETTLED AS A TRADER IN SHARES, BY NOT CHALLENGING EARLIER YEARS POSITION IN APPEAL AND IN THE ABSENCE OF ANY MATERIAL DISTINGUISHING FACTS VIS--VIS EARLIER YEARS, THERE IS NO REASON TO DISTURB THESE FINDI NGS. IN ANY EVENT, LOOKING TO HUGE QUANTUM OF TRANSACTIONS AND BEARING IN MIND ENTI RETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT DOMINANT OBJECT OF THESE TRANSACT IONS WAS TRADING IN SHARES. 9. FOR THE REASONS SET OUT ABOVE, WE SEE NO REASONS TO D ISTURB THE CONCLUSIONS ARRIVED AT BY THE AUTHORITIES BELOW. WE CONFIRM THE SE FINDINGS AND DECLINE TO INTERFERE IN THE MATTER. 10. IN THE RESULT, APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARI NG ON 9 TH MAY 2011. SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER SD/- (V. DURGA RAO) JUDICIAL MEMBER MUMBAI, DATED 9 TH MAY, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),IX, MUMBAI 4. COMMISSIONER OF INCOME TAX, IX , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI