DCIT 16(3), MUMBAI V. CHHAYA D. PARIKH, MUMBAI

ITA 346/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2872 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 13-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B V JHAVERI
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.346/MUM/2012 ASSESSMENT YEAR: 2008-09 ACIT- 16(3), MATRU MANDIR, 2 ND FLOOR, R.NO. 206, TARDEO ROAD, MUMBAI-400007 VS. SMT. CHHAYA D. PARIKH, 1808, PANCHRATNA, OPERA HOUSE, MUMBAI-400004 PAN: AAGPP2633Q (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SATYAPAL KUMAR (DR) ASSESSEE BY SHRI B.V.JHAVERI DATE OF HEARING : 18.08.2015 DATE OF PRONOUNCEMENT : 28.10.2015 O R D E R PER PAWAN SINGH, JM: 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-827 MUMBAI DATED 20.11.2011 IN RESPECT OF ASSESSMENT YEAR (AY) 2008-09 ON THE FOLLOWING GROUNDS OF APPEAL: 1'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN TREATING THE TRANSACTION OF PURCHASE AND SALE OF SHARES AS STCG INSTEAD OF BUSINESS INCOME. 2 ITA NO. 346/M/12 SMT. CHHAYA D. PARIKH 1. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORE D. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED HIS RETURN OF INCOME ON 25.07.2008 DECLARING TOTAL INCOME OF RS . 1,02,47,191/-. THE RETURN OF ASSESSEE WAS SELECTED FOR SCRUTINY AND AFTER GIVING AN OPPORTUNI TY OF HEARING, THE AO MADE AN ADDITION OF RS . 1,03,41,565/- ON ACCOUNT OF SHORT TERM CAPITAL GA IN (STCG) BY TREATING AS BUSINESS INCOME AND FURTHER ADDED ` . 6911/- AS A STCG FROM MUTUAL FUND IN ITS ORDER DATED 23.12.2010. THE ASSESSMENT ORDER WAS CHALLENGED BEFORE THE CIT(A) CHALLENGING THE ADDITION OF ` . 1,03,41,565/- FOR TREATING AS BUSINESS INCOME INSTEAD OF STCG AND SAME WAS DELETED BY THE CIT(A) IN THE ORDER DATED 19.10.2011 AGAINST WHICH THE PRESENT APPEAL IS FILE D. 3. WE HAVE HEARD THE DEPARTMENTAL REPRESENTATIVE (D R) OF THE REVENUE AND AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. LD. DR RELIED UPON THE ORDER OF AO AND V EHEMENTLY ARGUED THAT THE ORDER PASSED BY THE AO IS REASONED ONE, ON THE OTHE R HAND, THE LD. AR OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE HAS BEEN INVE STING CONSISTENTLY IN SHARES AND THE INVESTMENT MADE THEREIN HAS BEEN SHOWN AS I NVESTMENT AND NOT AS STOCK- IN-TRADE AND FURTHER ARGUED THAT SUBSTANTIAL QUANTU M OF FRAMEWORK OUT OF THE SHARES HELD FOR MORE THAN 6 & 9 MONTHS AND MORE THA N 99% OF STCG OUT OF ` . 103.42 LAKHS ARE ONLY FROM THREE SCRIPTS NAMELY RNR L, WALCHAND INDUSTRIES AND RELIANCE ENERGY AND THE AVERAGE HOLDING DURATION IS ABOUT 7 TO 9 MONTHS. 4. LD. CIT(A) WHILE DEALING WITH THE GROUND HAS OBS ERVED AS UNDER: 7.1 THE APPELLANT HAS BEEN AN INVESTOR IN SHARES AL L ALONG. OVER THE YEARS SHE HAS CONSISTENTLY TREATED THE ENTIRE INVESTMENT IN SHARES AS IN 3 ITA NO. 346/M/12 SMT. CHHAYA D. PARIKH INVESTMENT AND NOT AS STOCK-IN-TRADE. THE INCOM E FROM TRANSFER OF SHARES WAS ALWAYS OFFERED TO TAX AS CAPITAL GAIN. S HARES HELD AS INVESTMENTS WERE VALUED AT COST AND NO MARK TO MARK ET LOSS WAS PROVIDED FOR. THE PORTFOLIO HELD BY THE APPELLANT OVER THE Y EARS WHEN CONSIDERED IN THE LIGHT OF NO. OF SCRIPS HELD/PURCHASED/SOLD AND THE CORRESPONDING NO. OF TRANSACTIONS, INVESTMENT BEING MADE FROM OWN FUNDS AND THE FACT OF RECEIVING DIVIDEND OVER THE YEARS ETC., AS CAN BE S EEN FROM TABLE NO.1 ABOVE WOULD UNDOUBTEDLY ESTABLISH THE APPELLANT AS AN INVESTOR AND NOT A TRADER. 7.2 TRANSACTIONS WERE NOT ENTERED INTO CONTINUOUSLY AND REGULARLY THROUGHOUT THE YEAR. THE APPELLANT HAS PURCHASED 11 8 SCRIPS AND SOLD 100 SCRIPS INVOLVING ABOUT 247 TRANSACTIONS IN ALL, FOR THE ENTIRE YEAR. BY NO STRETCH OF IMAGINATION, THIS CAN BE CONSIDERED AS H IGH VOLUME WHEN VIEWED IN THE BACKGROUND OF THE DAILY TRANSACTIONS CARRIED OUT IN BSE/NSE. THE ABSENCE OF REGULAR TRANSACTIONS IN SHARES CLEAR LY HIGHLIGHTS THAT THE TRANSACTIONS WERE NOT ENTERED INTO FREQUENTLY, CONT INUOUSLY AND REGULARLY BY THE APPELLANT. FURTHER, SUBSTANTIAL AMOUNT OF SH ORT TERM CAPITAL GAINS WERE EARNED ON SHARES HELD FOR MORE THAN 6 MONTHS A ND SUCH GAINS ACCRUED ON SALE 3 SCRIPS. THUS GOING BY THE HOLDING PERIOD AND ALSO THE NUMBER OF SCRIPS TRADED. IT CANNOT BE HELD THAT THE APPELLANT IS INVOLVED IN A REGULAR BUSINESS HAVING A HIGH VOLUME OF TRADE. F URTHER, THE APPELLANT HAS NOT RESORTED TO CHURNING OF SHARES OR REPETITIV E TRANSACTIONS OF THE SAME COMPANY THAT COULD HAVE OTHERWISE RESULTED IN INCREASED TRANSACTIONS. 7.3 THE STAND OF THE APPELLANT AS AN INVESTOR HAS B EEN ACCEPTED BY THE A.O. IN THE EARLIER YEARS UNDER SECTION 143(3). APP ARENTLY THE FACTS OF THE CASE ARE SIMILAR IN ALL THE AYS AND NO FRESH MATERI AL HAS BEEN BROUGHT ON RECORD BY THE AO. AT PRESENT. IN FACT, 88% OF STCG RESULTED FROM SHARES HELD IN OPENING INVESTMENT AND WERE SOLD WITH A WEI GHTED AVERAGE HOLDING PERIOD OF 8 MONTHS AND ABOVE. CONSEQUENTLY, GAINS A RISING FROM SHARES PURCHASED IN EARLIER YEARS AND TREATED AS INVESTMEN TS CANNOT BE SUDDENLY CONSIDERED AS BUSINESS INCOME IN THE YEAR OF SALE. IN SUCH CIRCUMSTANCES, THERE IS NO REASON FOR THE A.O. TO TREAT THE INVEST MENT INSHARES BY THE APPELLANT AS TRADING IN SHARES FOR A.Y.2008-09. THE UNIFORMITY IN TREATMENT AND CONSISTENCY UNDER THE SAME FACTS AND CIRCUMSTAN CES IS ONE OF THE FUNDAMENTALS OF THE JUDICIAL PRINCIPLES WHICH CANNO T BE BRUSHED ASIDE WITHOUT PROPER REASON. 7.4 THE APPELLANT USED HER OWN SURPLUS FUNDS FOR IN VESTING IN SHARES. SHE HAS NEITHER BORROWED ANY MONEY FROM EXTERNAL SOURCE S NOR PAID INTEREST THEREON FOR THIS PURPOSE. WHATEVER INTEREST PAID BY THE APPELLANT WAS NOT CLAIMED AS EXPENDITURE IN ANY OF THE YEARS. 8. HAVING REGARD TO THE FACTS NOTED AT PARAS 7 TO 7 .4 ABOVE, THERE IS A SUBSTANTIAL COMPLIANCE ON THE PART OF THE APPELLANT IN TERMS OF INSTRUCTION NO. 1827 DATED 31 ST AUGUST 1989 AND DRAFT INSTRUCTION DATED 16TH MAY 2006 OF THE CENTRAL BOARD OF DIRECT TAXES IN RESPEC T OF TESTS LAID DOWN THEREIN TO DISTINGUISH BETWEEN SHARES HELD AS STOCK -IN-TRADE AND SHARES HELD AS INVESTMENT THAT THE APPELLANT'S CASE FALLS IN THE CATEGORY OF INVESTOR IN RESPECT OF THE CAPITAL GAINS INCOME OFF ERED TO TAX. 4 ITA NO. 346/M/12 SMT. CHHAYA D. PARIKH 9.THAT APART THERE ARE A PLETHORA OF DECISIONS BY T HE VARIOUS BENCHES OF HON. HIGH COURTS AND ITAT HOLDING THE ISSUE IN FAVO UR OF APPELLANT INVOLVING SIMILAR FACTS, AND FOR THE SAKE OF BREVIT Y, EVEN THOUGH THEY ARE TAKEN INTO CONSIDERATION FOR ARRIVING AT THE CONCLU SION THAT THE APPELLANT, IS AN INVESTOR, THE SAME ARE NOT REPRODUCED. HOWEVER T O NAME A FEW JANAK S. RANGWALLA VS. ACIT (11 SOT 627), CIT VS. GOPAL P UROHIT 228 CTR 582 (BOM.)(2010), CIT VS. ROHIT ANAND (2010) 327 ITR 44 5(DEL),DCIT VS. SMK SHARES & STOCK BROKING PVT. LTD. ITA NO. 799/MU M/2009,VINOD K. NEVATIA ITA NO. 6556/MUM/2009 & 181/MUM/2010 AND NA ISHADH V. VACHHARAJANI ITA NO. 6429/MUM/2009. 10. IN VIEW OF THE DETAILED DISCUSSION OF THE FACTS AND CONSIDERING THE LEGAL POSITION THE BACK GROUND OF THE AMENDED PROVISIONS ON TAXATION OF CAPITAL GAINS ON SALE OF SHARES, I HOLD THAT THE INCOME FRO M SHORT TERM CAPITAL GAINS OFFERED TO TAX BY THE APPELLANT REQUIRE NO DI STURBANCE AND CANNOT BE TREATED AS BUSINESS INCOME. ACCORDINGLY, THE APPEAL IS ALLOWED IN FAVOUR OF THE APPELLANT ON THIS ISSUE. 5. THE LD. AR OF THE ASSESSEE HAS DRAWN OUR ATTENT ION TO PAGE 9 OF THE PAPER BOOK WHICH DETAILS HAS BEEN SHOWN AS STCG OF SHARE HOLDING DURING THE ACCOUNTING YEAR 2007-08 OF ASSESSEE WHEREIN AN AMOUNT OF ` . 1,03,41,565/- HAS BEEN SHOWN AS STCG. 6. THE AO HAS NOT DISPUTED THE PERIOD OF HOLDING OF THE ABOVE MENTIONED/ REFERRED SHARE AND THE NUMBER OF TRANSACTION, THE A PPELLANT HAD PURCHASED 111 SCRIPTS INVOLVING 247 TRANSACTIONS IN ALL FOR INDIA N COMPANIES WHICH CANNOT BE CONSIDERED AS HIGH VOLUME, THUS IT CANNOT BE CONSID ERED AS THE ASSESSEE WAS HAVING A HIGH VOLUME TRADE OF SHARE. THE AO HAS ACC EPTED THE ASSESSEE AS AN INVESTOR; HENCE THE AO HAS NO REASON TO TREAT THE I NVESTMENT OF ASSESSEE AS A TRADING. 7. IN VIEW OF THE ABOVE, THE ORDER PASSED BY THE CI T(A) IS REASONED ONE AND DOES NOT REQUIRE ANY INTERFERENCE, HENCE, THE APPEA L FILED BY THE REVENUE IS DISMISSED. AS A RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. 5 ITA NO. 346/M/12 SMT. CHHAYA D. PARIKH ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY 28 TH OF OCTOBER, 2015. SD/- SD/- (R.C.SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 28.10.2015 SHARWAN P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// BY ORDER DY/ASSTT.REGISTRAR, ITAT, MUMBAI.