Smt. Sushilaben Hasmukhlal Jariwala, Surat V. The ACIT.,Circle-3, Surat

ITA 3494/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9688 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 30-09-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 22-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K TIWARI SRDR
• Assessee Lawyers: D K PARIKH
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI D. C. AGRAWAL, ACCOUNTANT MEMBER ITA NO.3494/AHD/2008 ASSESSMENT YEAR: 2005-06 DATE OF HEARING:30.9.10 DRAFTED:1.10.10 SMT. SUSHILABEN HASMUKHLAL JARIWALA 89M NEHRUNAGAR SOCIETY, ICHCHHANATH ROAD, SURAT PAN NO.ABOPJ2393J V/S . ACIT, CIRCLE-II, SURAT (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI D.K. PARIKH, AR RESPONDENT BY:- SHRI A.K. TIWARI, SR-DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-II, SURAT IN APPEAL NO.CAS/ II/425/2007-08 DATED 13- 08-2008. THE ASSESSMENT WAS FRAMED BY ACIT, CIRCLE- 3, SURAT U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) VIDE HIS ORDER DATED 28-12-2007 FOR ASSESSMENT YEAR 2005-06. 2. THE INTER-CONNECTED ISSUES IN THIS APPEAL OF ASS ESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF ASSESSING OFFICER IN ASSESSING SHORT TERM CAPITAL GAIN AT RS.6,80,245/- AND LONG TERM CA PITAL GAIN AT RS.4,26,899/- AS BUSINESS INCOME. THE ASSESSEE HAS RAISED THE CON TENTION THAT CIT(A) HAS ERRED IN CONFIRMING THE DENIAL OF BENEFIT OF PROVIS ION OF SECTION 10(38) OF THE ITA NO.3494/AHD/2008 A.Y. 2005-06 SMT. SUSHILABEN H JARIWALA V. ACIT CIR-II SRT P AGE 2 ACT WHILE COMPUTING LONG TERM CAPITAL GAIN ALTHOUGH STT HAS BEEN PAID. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE THREE GROUNDS :- 1. THAT CIT(A) ERRED IN LAW & FACTS IN CONFIRMING SHORT TERM CAPITAL GAIN INCOME OF RS.6,80,245/- 2. THAT THE CIT(A) ERRED IN CONFIRMING THE LONG TER M GAIN INCOME OF RS.4,26,899/-[RS.1,08,329 + RS.5,585 + RS.88,672 + RS.79,096 + RS.1,45,217(2,88,697 1,43,480) AS BUSINESS INCOME . 3. THAT THE CIT(A) ERRED IN DENYING THE BENEFIT OF PROVISION OF SECTION 10(38) ON LONG TERM CAPITAL GAIN INCOME OF RS.1,82, 098/- & RS.1,43,480/-. THOUGH S.T.T. HAS BEEN PAID ON ABOVE TRANSACTIONS. 3. THE BRIEF FACTS LEADING TO ABOVE ISSUE ARE THAT ASSESSEE IS AN INDIVIDUAL AND FILED HER RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 DECLARING TOTAL INCOME AT RS.13,29,772/- ON 29-08-2005 ALONG WITH I NCOME INCLUDES SHORT TERM CAPITAL GAIN (STCG FOR SHORT) AT RS.12,97,674/ -. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSING OFFICER AS SESSED SHORT TERM CAPITAL GAIN (STCG) AND LONG TERM CAPITAL GAIN (LTC G) AS BUSINESS INCOME OF THE ASSESSEE ON ACCOUNT OF INVESTMENT IN SHARES AND UNITS OUT OF HER OWN CAPITAL. BEFORE THE ASSESSING OFFICER AS WE LL AS THE CIT(A) IT WAS CONTENDED THAT THE ASSESSEE HAD MADE SALE AND PURCH ASE OF SHARE/UNITS FOR EARNING PROFITS AND SUCH PROFITS HAD BEEN DECLARED AS STCG AND LTCG. THE ASSESSEE SUBMITTED THAT IT WAS SPECIFICALLY CLARIFI ED THAT IT IS OTHERWISE ALSO ESTABLISHED ON RECORD THAT THE ASSESSEE WAS AN INVE STOR EVEN IN THE PAST AS WELL AS FOR THE YEAR UNDER APPEAL AND INVESTMENT WA S MADE OUT OF ASSESSEES OWN CAPITAL AND NOT A SINGLE RUPEE WAS EITHER EXPEN DED OR PAID AS INTEREST EXPENSES. THE ASSESSEE HAD MADE ABUNDANTLY CLEAR TH AT ENTIRE INVESTMENT WAS OUT OF HUGE CAPITAL AND NOT FROM ANY BORROWED F UNDS FROM BANK OR OTHER PARTIES. AS CAN BE SEEN FROM BALANCE SHEET, WHICH I S AT PAGE 30 AND 31 OF ASSESSEES PAPER BOOK ALL THE SHARES AND UNITS ARE SHOWN AS INVESTMENTS. FURTHER, IT CAN BE SEEN FROM PAGE-30 THAT THE ASSES SEES OWN CAPITAL IS TO THE ITA NO.3494/AHD/2008 A.Y. 2005-06 SMT. SUSHILABEN H JARIWALA V. ACIT CIR-II SRT P AGE 3 TUNE OF RS.4.56 CRORES AND THERE ARE NO BORROWED FU NDS. FURTHER, AS CAN BE SEEN FROM PAGE 29 OF ASSESSEES PAPER BOOK THAT THE RE IS ABSOLUTELY NOT A SINGLE RUPEE BY WAY OF EXPENDITURE ON INTEREST AND IN VIEW OF THESE FACTS, THE AUTHORITIES BELLOW HAVE FAILED TO APPLY THEIR MIND WHILE MAKING OBSERVATIONS THAT THERE WAS BORROWED CAPITAL FOR MAKING INVESTME NTS. 5. WE FIND FROM RECORD THAT THE ASSESSEE ALSO SUBM ITTED PAPER BOOK FROM WHERE AT PAGE 15 IT IS NOTICED THAT ASSESSEE HAD MA INTAINED BOTH THE PORTFOLIOS AND WHEN THESE SHARES WERE HELD FOR A PE RIOD OF 4-5 YEARS OR EVEN 10-12 YEARS, IT WAS ALWAYS TREATED AS INVESTMENTS O N LTCG BASIS AND IN RESPECT OF STCG THE INVESTMENT WAS REALIZED WHEN TH ERE WAS FAVOURABLE MARKET QUOTATION. WE FIND THAT IN RESPECT OF LTCG W HEN THE HOLDING PERIOD HAS BEEN MORE THAN 365 TO 376 DAYS THAT THE ENTIRE GAIN HAS BEEN TREATED AND CONFIRMED AS BUSINESS INCOME BY THE ASSESSING OFFIC ER AND THE CIT(A). WE FIND THAT THE ASSESSEE CONSISTENTLY HAD TREATED INV ESTMENT PORTFOLIO AS SEPARATE AND DISTINCT AND EVEN IN EXACTLY IDENTICAL SITUATION FOR ASSESSMENT YEAR 2004-05 IN THE SCRUTINY ASSESSMENT U/S.143(3) DATED 06-12-2006 THE INCOME FROM SHARE TRANSACTIONS HAS BEEN ACCEPTED AS CAPITAL GAIN. THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2004-05 IS PLA CED AT PAGE 22 AND 23 OF ASSESSEES PAPER BOOK, WHEREIN AT PARA-4 OF ASSE SSMENT ORDER AFTER VERIFICATION OF DETAILS OF PURCHASE AND SALE OF SHA RES AND DETAILS OF TRANSACTION WITH REGARD TO CAPITAL GAIN WAS ACCEPTED AS PER RET URN. THE DETAILED STATEMENT OF INCOME FOR ASSESSMENT YEAR 2004-05 IS AT PAGE 76 -90 OF ASSESSEES PAPER BOOK, WHEREIN ALSO EVEN WITH THE FREQUENCY OF TRANS ACTIONS, THE TRANSACTIONS WERE ON INVESTMENT ACCOUNT, STCG AND LTCG WERE ACCE PTED. WE ARE OF THE VIEW THAT EXACTLY ON THE SAME FACTS, THERE WAS NO J USTIFICATION FOR TAKING DIFFERENT VIEW TO TREAT THAT CAPITAL GAIN AS BUSINE SS INCOME FOR THE YEAR UNDER CONSIDERATION. HOWEVER, CIT(A) FAILED TO APPRECIAT E THE VARIOUS CASE LAWS ON CONSISTENCY, WHICH WEE BROUGHT TO HIS NOTICE, PARTI CULARLY THE DECISION OF THE SUPREME COURT IN THE CASE OF RADHASWAMI SATSANG V. CIT 100 CTR 367 (SC) 193 ITR 321 (SC) WHICH WAS BROUGHT TO HIS NOTICE AT PAGE 14 OF ASSESSEES ITA NO.3494/AHD/2008 A.Y. 2005-06 SMT. SUSHILABEN H JARIWALA V. ACIT CIR-II SRT P AGE 4 PAPER BOOK. HOWEVER, THE CIT(A) ERRED IN HOLDING TH AT THE ASSESSEE HAD TAKEN SUBSTANTIAL LOAN TO BUY THE SHARES AND INTEREST AT 15% WAS BORNE BY THE ASSESSEE AS THIS OBSERVATION IS WHOLLY INCORRECT AN D QUITE CONTRARY TO THE FACTS ON RECORD. WE FIND FROM PROFIT AND LOSS ACCOUNT AT PAGE 29 OF ASSESSEES PAPER BOOK THAT NOT A SINGLE RUPEE BY WAY OF INTERE ST HAS EVER BEEN EXPENDED OR PAID AND PARTICULARS OF PROFIT AND LOSS ACCOUNT ARE ALREADY THERE AT PAGE 28 AND STATEMENT OF INCOME AT PAGE 52-75 CLEARLY SHOWS THAT OUT OF THE VARIOUS EXPENSES MENTIONED AT PAGE 28 OF ASSESSEES PAPER B OOK. THE ASSESSEE HAS CLAIMED ONLY EXPENSES OF RS.35,546/- AND THAT TOO O NLY AGAINST OTHER INCOME OF SPECULATION, WHICH IS SEPARATELY KEPT IN THE POR TFOLIO. IN THIS REGARD, DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF CIT V. GOPAL PUROHIT 228 CTR 582 (BOM) WHICH IS PLACED AT PAGE 13-14 OF ASSESSEES P APER BOOK-II, WHEREIN THE HONBLE HIGH COURT HAS OBSERVED THAT THE TRIBUNAL W AS CORRECT IN HOLDING THAT THERE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSI STENCY WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL. UNDER THE ABOVE CIRCUM STANCES THE CAPITAL GAIN OFFERED OUGHT TO HAVE BEEN ACCEPTED INSTEAD OF TREA TING THE LTCG AS WELL AS STCG AS BUSINESS INCOME. WE FIND THAT CBDT CIRCULAR HAS LAID DOWN CRITERIA FOR ASSESSING SHARE INCOME AS LTCG AND STCG AND ALS O VARIOUS CASE LAW HAVE BEEN RELIED UPON PARTICULARLY IN THE CASE OF GOPAL PUROHIT (SUPRA) AND IN THE CASE OF NSS INVESTMENT 158 TAXMAN PAGE 38 (MAD). WE FIND THAT IN A SERIES OF CASES THE ISSUE HAS BEEN CONSIDERED BY VA RIOUS BENCHES OF TRIBUNAL OF MUMBAI AS WELL AS AHMEDABAD AND HONBLE COURTS H AVE TAKEN A VIEW THAT ONE CANNOT GO TO DECIDE MERELY ON THE BASIS OF FREQ UENCY OR VOLUME OF TRANSACTIONS IN THE CURRENT SCENARIO IN WHICH THE P ERSONS ARE INVESTING MORE AND MORE AS AN INVEST OR IN THE STOCK MARKET. MOST CRUCIAL IS THAT ASSESSEE HAS CONTINUOUSLY SHOWN INVESTMENT IN THE BALANCE SH EET WHICH IS MADE OUT OF HER OWN CAPITAL AND SHOWN GAIN ON SALE OF SHARES AS EITHER STCG OR LTCG EVEN FOR ASSESSMENT YEARS 2003-04 AND 2004-05 AND H ENCE WITHOUT THERE BEING ANY CHANGE IN THE FACTS A CONSISTENT VIEW NEE DS TO BE ADOPTED. THIS HAS BEEN SO HELD IN THE CASE OF GOPAL PUROHIT (SUPRA) ITA NO.3494/AHD/2008 A.Y. 2005-06 SMT. SUSHILABEN H JARIWALA V. ACIT CIR-II SRT P AGE 5 6. WE FURTHER FIND FROM THE FACTS THAT EVEN THE INC OME EARNED BY WAY OF CAPITAL GAIN ON UNITS OF UTI HAVE BEEN TREATED AS B USINESS INCOME THOUGH CIT HAS IN PARA 6.8 OF HIS APPELLATE ORDER OBSERVED THA T IF STT HAS BEEN PAID IN RESPECT OF LTCG ON UNITS, THE SAME SHOULD BE TREATE D AS EXEMPT. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO TREAT LTCG OF RS .1,82,098/- AND RS.2,88,697/- AS MENTIONED BY ASSESSING OFFICER AT PAGE 22 AT ITEM (VII) AND (IX) EXEMPT U/S.10(38). SIMILARLY, IN RESPECT OF ST CG ALSO IT IS DIRECTED THAT THE SAME SHOULD BE HELD TO BE STCG AS AGAINST BUSINESS INCOME. ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO TREAT THE CAPITAL G AIN DECLARED BY ASSESSEE IN HER RETURN OF INCOME AS IT IS, AND NO ADDITION IS R EQUIRED TO BE MADE BY MAKING DISALLOWANCE. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 08 /10/2010 SD/- SD/- (D.C.AGRAWAL) (MAHAVIR SIN GH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 08/10/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-II, SURAT 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD