DCIT 15(3), MUMBAI V. ANKIT VIJAY MITHANI, MUMBAI

ITA 3540/MUM/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6781 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 05-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P C MOURYA
• Keywords: Business income; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A : MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI R.K.PANDA, ACCOUNTANT MEMBER ITA. NO. 3540/MUM/2010 ASSESSMENT YEAR 2007-2008 DCIT, CIRCLE 15 (3) MUMBAI 400 007 VS. ANKIT VIJAY MITHANI MUMBAI 400 086 PAN AIYPM7738H (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI P.C. MOURYA FOR RESPONDENT : -NONE- ORDER PER D. MANMOHAN, V.P. 1. FOLLOWING GROUNDS WERE URGED BY THE REVENUE. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW, THE LEARNED CIT(A) HAS ERRED IN LAW AS WEL L AS ON THE FACTS IN ACCEPTING THE SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN RETURNED BY THE ASSESSEE AS AGAINST THE FINDING GIVEN BY THE A.O. T O BE TREATED AS BUSINESS INCOME BASED ON THE FACTS AVAILABLE ON RECORD, PARTICULARLY INVOLVING LARGER VOLUME OF TRANSACTIONS AND SMALLER PERIOD OF HOLDIN G THE SHARES ENTAILING TO THE TRADING IN SHARES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW, THE LEARNED CIT(A) HAS ALSO IGNORED THE LATEST DECISION OF F-BENCH OF ITAT, MUMBAI, IN THE CASE OF V.NAGESH VS. ACIT 21 (3), MUMBAI, ITA. NO. 5410/MUM/2008 DATED 24-9-2009 HAVING SIMILAR FACTS AND CIRCUMSTANCES OF THE INSTANT CASE WHICH HAS GOT BINDING FORCE. 2. WHEN THE CASE WAS LAST POSTED FOR HEARING, VIDE LETTER DATED 19-4-2011 ASSESSEE REQUESTED FOR ADJOURNMENT ON THE GROUND THAT HE INTENDS TO FILE A PAPER BOOK. THOUGH NONE A PPEARED FOR THE ASSESSEE, FRESH DATE WAS ANNOUNCED IN THE OPEN COUR T AND ACCORDINGLY CASE WAS FIXED FOR HEARING ON 27-6-2011 . AGAIN ASSESSEE 2 REQUESTED FOR ADJOURNMENT ON THE GROUND THAT THE IS SUE IS COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF CIT VS. GOPAL PUROHIT (ITA. NO. 1121 OF 2009 DATED 6-1-2010 ) AND ALSO SUBMITTED THAT THE ASSESSEE HAS UTILISED THE FUNDS IN SHARE INVESTMENTS AND EARNED SHORT TERM CAPITAL GAINS AND IN ORDER TO PROVE THE SAME HE REQUIRED SOME MORE TIME TO COMPILE A PA PER BOOK. EVEN ON THIS DATE NONE APPEARED ON BEHALF OF THE ASSESSE E. SINCE ON THE SAME REASON REQUEST OF THE ASSESSEE WAS ACCEDED TO ON THE EARLIER OCCASION, IN OUR OPINION ASSESSEE CANNOT BE SAID TO BE PREVENTED BY SUFFICIENT CAUSE FOR NON-FILING OF PAPER BOOK EVEN AFTER TWO MONTHS. WE, THEREFORE, PROCEEDED TO DISPOSE OF THE APPEAL E XPARTE, QUA THE ASSESSEE. 3. WE HAVE HEARD THE LEARNED DR AND CAREFULLY PERU SED THE RECORD. ADMITTEDLY, ASSESSEE IS ENGAGED IN THE PURC HASE AND SALE OF SHARES. IN RESPECT OF PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-2008 ASSESSEE EARNED AN AMOUNT OF RS.27,14,479 /- BY WAY OF SHORT TERM CAPITAL GAINS ON THE TRANSFER OF EQUITY SHARES. DURING THE SCRUTINY PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD VENTURED INTO TRADING AND THEREFORE, GAINS MADE BY HIM ON THE AFOREMENTIONED TRANSACTIONS ARE ASSESSABLE TO TAX U NDER THE HEAD PROFITS AND GAINS FROM BUSINESS. AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD, IN THIS REGA RD, THE ASSESSING OFFICER CONCLUDED THAT IN ORDER TO DECIDE AS TO WHE THER A PARTICULAR ACTIVITY IS A TRADING ACTIVITY OR AN INVESTMENT ACT IVITY HAS TO BE DECIDED ON THE PECULIAR FACTS AND CIRCUMSTANCES OF EACH CAS E. IN HIS OPINION THE ASSESSEES APPROACH IN THE INSTANT CASE WAS MOR E TOWARDS MAKING PROFIT RATHER THAN ENJOYING THE GAINS BY WAY OF LON G TERM/SHORT TERM CAPITAL GAINS. HE THUS BROUGHT TO TAX THE IMPUGNED AMOUNT UNDER THE HEAD BUSINESS INCOME. 4. ON AN APPEAL FILED BY THE ASSESSEE, LEARNED CIT (A) OBSERVED THAT THE TRANSACTIONS WERE DELIVERY BASED AND SHARES WERE DMATTED IN WHICH EVENT IT CANNOT BE ASSUMED THAT TH E ASSESSEE WAS 3 ENGAGED IN A TRADING ACTIVITY. FURTHER, IN THE IMME DIATELY PRECEDING YEAR TWO SEPARATE PORTFOLIOS WERE ACCEPTED AS HAVIN G BEEN HELD AS INVESTMENTS. HE THUS CONCLUDED THAT THE INCOME ON T RANSFER OF SHARES IS ASSESSABLE TO TAX UNDER THE HEAD CAPITAL GAINS . 5. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. THE CASE OF THE LEARNED DR IS THAT EACH YEAR HAS TO BE DECIDED INDE PENDENTLY, BY TAKING INTO CONSIDERATION THE FACTS AND CIRCUMSTANC ES OF EACH YEAR AND IN THIS REGARD RELIED UPON THE DECISION OF THE ITAT, F BENCH, MUMBAI IN THE CASE OF MR. V. NAGESH WHEREIN THE BEN CH DISTINGUISHED THE VIEW TAKEN IN THE CASE OF GOPAL PUROHIT TO HOLD THAT VARIOUS TESTS HAVE BEEN LAID DOWN AND IN EACH CASE IT HAS TO BE N OTICED AS TO WHETHER THE ASSESSEES INTENTION WAS TO HOLD SHARES AS AN INVESTOR OR AS TRADER. IT WAS FURTHER NOTICED THAT IN THE CASE OF AN INVESTMENT A PERSON USUALLY WATCHES THE MARKET OVER A LONGER P ERIOD OF TIME, EARNING OF DIVIDEND WOULD BE THE PRIMARY CONSIDERAT ION. IN THE CASE OF AN INVESTOR VOLUME OF TRANSACTION WOULD NOT BE VERY HIGH. LEARNED DR SUBMITTED THAT THE LEARNED CIT(A) HAS MERELY PROCEE DED ON THE FOOTING THAT IN THE EARLIER YEAR AS WELL AS IN THE SUBSEQUE NT YEAR TREATMENT OF CERTAIN SCRIP AS AN INVESTMENT WAS ACCEPTED BY THE TRIBUNAL OVERLOOKING THE FACT THAT EACH YEAR HAS TO BE INDEP ENDENTLY CONSIDERED. IN THE YEAR UNDER CONSIDERATION THE ASS ESSEE HAD EXPLORED THE SECONDARY MARKET INVOLVING A TURNOVER OF RS.2.9 6 CRORES. THE TRANSACTIONS INVOLVED THE SALE AND PURCHASE OF LARG E NUMBER OF COMPANIES. SINCE THESE ASPECTS WERE NOT PROPERLY AP PRECIATED BY THE LEARNED CIT(A), HE REQUESTED US TO RECONSIDER THE M ATTER IN ACCORDANCE WITH THE LAW. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED D.R. AND CAREFULLY PERUSED THE RECORD. AS COULD BE NOTIC ED FROM THE ORDER OF THE LEARNED CIT(A) THE PRIME ISSUE AS TO WHETHER THE INTENTION OF THE ASSESSEE WAS TO ENGAGE HIMSELF AS A TRADER OR AS AN INVESTOR WAS NOT PROPERLY ANALYSED. LEARNED CIT(A) MERELY PROCEE DED ON THE FOOTING THAT IF THE SHARES ARE DELIVERY BASED AND DMATTED I NCOME EARNED ON 4 SALE OF SUCH SHARES SHOULD ORDINARILY BE ASSESSED T O TAX UNDER THE HEAD CAPITAL GAINS PARTICULARLY WHEN IT WAS REFLE CTED IN THE BOOKS AS INVESTMENT. SINCE LEARNED CIT(A) HAS NOT TAKEN IN TO CONSIDERATION A HOLISTIC VIEW OF THE MATTER, IN THE LIGHT OF DECISI ON OF THE ITAT PLACED BEFORE US, WE SET ASIDE THE ISSUE TO THE FILE OF TH E CIT(A) WHO IS DIRECTED TO RECONSIDER THE MATTER IN ACCORDANCE WIT H LAW. 7. IT MAY NOT BE OUT OF PLACE TO STATE HERE THAT T HE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GOP AL PUROHIT WAS DULY CONSIDERED BY THE ITAT, MUMBAI BENCHES ON NUMB ER OF OCCASIONS AND BY APPLYING THE PRINCIPLES LAID DOWN THEREIN IT WAS HELD THAT EACH CASE HAS TO BE CONSIDERED ON THE TOUCHSTO NE OF THE PRINCIPLES LAID DOWN THEREIN AND MERELY BECAUSE ASS ESSEE RECORDED THE TRANSACTIONS AS INVESTMENT OR PURCHASED SHARES FROM OWN FUNDS SHOULD NOT LEAD TO A ONE-SIDED CONCLUSION THAT ASSE SSEE NEVER INTENDED TO CARRY ON THE BUSINESS OF PURCHASE AND S ALE OF SHARES. VOLUME OF TRANSACTIONS AND FREQUENCY OF TRANSACTION S IS ALSO AN IMPORTANT CRITERIA WHICH DESERVES TO BE TAKEN NOTE OF. WITH THESE OBSERVATIONS, THE ORDER PASSED BY THE LEARNED CIT(A ) IS SET ASIDE AND HE IS DIRECTED TO RECONSIDER THE MATTER AFRESH, AFT ER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS T REATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT, ON THIS THE 2 7 TH DAY OF JUNE, 2011. SD/- SD/- (R.K.PANDA) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATE 27 TH JUNE, 2011 VBP/- 5 COPY TO 1. DCIT, CIRCLE 15 (3), MATRU MANDIR, 1 ST FLOOR, TARDEO ROAD, MUMBAI 400 007 2. ANKIT VIJAY MITHANI, 201, TRIMURTI ARCADE, NEAR SARVODAYA HOSPITAL, LBS MARG, GHATKOPAR WEST, MUMBAI 40 0 086 PAN AIYPM7738H 3. CIT(A)-26, MUMBAI 4. CIT-15, MUMBAI. 5. DR A BENCH 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI.