Appeal details
Counselvise Citation
370419914 RSA 2013
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 1 month(s) 14 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-06-2014
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
SMC
Next Hearing Date
10-06-2014
Assessment Year
2006-2007
Appeal Filed On
10-05-2013
Judgement Text
, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, SMC MUMBAI .., BEFORE SHRI I.P.BANSAL, JUDICIAL MEMBER ITA NO.3704/MUM/2013 : ASST.YEAR 2006-07 DR. (MRS) ASHA HEMANT SHAH, NEELA UPENDRA MODI, 23, PURNIMA APTS., OPP. REKHA BLDG., 43, RIDGE ROAD, WALKESHWAR, MUMBAI 400 006. PAN: AAPPS 3386Q THE INCOME TAX OFFIER 11(2)-1 AAYKAR BHAVAN, M.KARVE ROAD, MUMBAI 400 020. ( ! / // / APPELLANT) # # # # / VS. ( $% !/ RESPONDENT) ! & ' & ' & ' & ' /APPELLANT BY :SHRI . VALLABH GOKHALE $% ! & ' & ' & ' & ' /RESPONDENT BY : SHRI. B.YADAGIRI # & ()* / / / / DATE OF HEARING : 24.06.2014 +,- & ()* / DATE OF PRONOUNCEMENT : 24.06.2014 . . . . / / / / O R D E R PER I.P.BANSAL (JM) : THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-3, MUMBAI DATED 31/05/2011 FOR ASSESSMENT YEAR 2006-07. THE GROUNDS OF APPEAL READ AS UNDER: THE GROUNDS SET OUT HEREUNDER ARE WITHOUT PREJUDICE TO ONE ANOTHER: 1. TREATMENT OF INCOME FROM SALE OF SHARES AS BUSIN ESS INCOME INSTEAD OF CAPITAL GAINS (A) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) - 3 (CIT(A)) ERRED IN CONFIRMING THE ACTION OF THE INCOME TAX OFFICER-11(2)(1), MUMB AI (AO) OF TREATING THE INCOME OF RS 36,775/- ARISING FROM SALE OF SHARES HELD FOR SHORT TERM, OUT OF TOTAL SHORT TERM CAPITAL GAINS OF RS. 2,44,550 COMPUTED BY THE APPELLANT, AS INCOME FROM SPECULATIVE TRANSACTION. (B) THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTI ON OF THE AO OF TREATING THE INCOME OF RS. 2,08,775 ARISING FROM SALE OF SHARES HELD FOR S HORT TERM, OUT OF TOTAL SHORT TERM CAPITAL GAINS OF RS. 2,44,550 COMPUTED BY THE APPEL LANT, AS BUSINESS INCOME. ITA NO.3704/MUM/2013 : ASST.YEAR 2006-07 2 (C) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT (A) ERRED IN IGNORING THE APPELLANTS CONTENTION THAT THE EXPENSES (INCLUDING SECURITIES TRANSACTION TAX) INCURRED IN RESPECT OF PURCHASE AND SALE OF SHARES TO BE ALLOWED AS A DEDU CTION WHILE TREATING INCOME THEREFROM AS BUSINESS INCOME. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE AO OF INVOKING THE PROVISIONS OF SECTIONS 44AA AND 44AB OF THE ACT IN ORDER TO LE VY PENALTY IGNORING THE APPELLANTS SUBMISSIONS THAT PROFITS AND GAINS FROM BUSINESS OR PROFESSION FOR THE RELEVANT ASSESSMENT YEAR DOES NOT EXCEED THE SPECIFIED THRES HOLD. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MODIFY OR DELETE ANY OF THE GROUNDS TAKEN IN APPEAL. 2. APART FROM INCOME SHOWN UNDER THE HEAD PROFIT A ND GAINS FROM BUSINESS OR PROFESSION AMOUNTING TO RS.36,641/-, THE ASSESSEE RETURNED SHORT TERM CAPITAL GAIN OF RS. 2,45,550/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE INCOME SHOWN UNDER THE HEAD SHORT TERM CAPITAL GAIN HAD ARISEN TO ASSESSEE FROM SALE AND PURCHASE OF SHARES. THE PURCHASE AND SALE OF THE SHARES BY THE ASSESSEE WERE TO THE TUNE OF RS.68,47,116/- AND RS. 71,33,098/- RESPECTIVELY. IT WAS ALSO NOTICED THAT NUMBER OF SALE TRANSACTIONS WERE 58 AND PERIOD OF HOLDING IN NINE INSTANCES WAS LESS THAN ONE DAY. THE BALANCE 37 TR ANSACTIONS THE PERIOD OF HOLDING WAS WITHIN A MONTH AND IN FIVE TRANSACTIONS THE SAL ES WERE EFFECTED NEXT DAY. ON THESE FACTS, LD. AO RELYING UPON CIRCULAR OF BOARD DATED 15/6/2007 AND ALSO CERTAIN JUDICIAL PRONOUNCEMENTS HAS ARRIVED AT A CO NCLUSION THAT THE TRANSACTIONS OF SALE AND PURCHASE OF SHARES ENTERED INTO BY THE ASS ESSEE WERE IN THE NATURE OF BUSINESS. HE, THEREFORE, DISCARDED THE CLAIM OF THE ASSESSEE REGARDING LEVIABILITY OF SHORT TERM CAPITAL GAIN ON A SUM OF RS.36,775/- WH ICH ITSELF WAS SHOWN AS SPECULATIVE INCOME BY THE ASSESSEE AND BALANCE AMO UNT OF RS.2,35,126/- WAS ADDED TO THE INCOME OF THE ASSESSEE UNDER THE HEAD BUSINESS OR PROFESSION. 3. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE LD. C IT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IT WAS OBSERVED BY LD. CIT(A) THAT THE ASSESSEE HAD BORROWED FUNDS OF RS.30.00 LACS FROM HER HUSBAND TO BE INVESTED IN SHARES TRANSACTED DURING THE YEAR. IT WAS ALSO OBSERVED T HAT ASSESSEE HAS CARRIED OUT INTRA-DAY SHARE TRANSACTIONS ON NINE OCCASIONS DURI NG THE YEAR AND ALSO EARNED SPECULATIVE PROFIT OF RS.36,775/-. THUS, LD. CIT(A) HAS ARRIVED AT A CONCLUSION THAT ALL THESE TRANSACTIONS WERE IN THE NATURE OF BUSINE SS AS THERE WAS A MOTIVE TO EARN PROFIT. WHILE UPHOLDING THE ACTION OF AO, LD. CI T(A) ALSO KEPT INTO CONSIDERATION THE FACT THAT THE PERIOD OF HOLDING OF THE SHARES WAS ALSO VERY LESS. ACCORDINGLY, LD. CIT(A) HAS UPHOLD THE ACTION A.O. AGAINST THE DIRECTION OF AO TO INITIATE PENALTY ITA NO.3704/MUM/2013 : ASST.YEAR 2006-07 3 UNDER SECTION 271A AND 271B OF INCOME TAX ACT, 1961 (THE ACT) ON ACCOUNT OF CONTRAVENTIONS OF SECTION 44AA & 44AB OF THE ACT, LD. CIT(A) HAS HELD THAT SINCE SHARE TRANSACTIONS OF THE ASSESSEE WERE IN THE NATU RE OF BUSINESS AND TURNOVER EXCEEDED PRESCRIBED LIMIT, PROVISIONS OF SECTION 44 AA & 44AB WERE APPLICABLE. 3.1 AGAINST SUCH ORDER OF LD. CIT(A) THE ASSESSEE I S AGGRIEVED, HENCE, HAS RAISED AFOREMENTIONED GROUNDS OF APPEAL. 4. AT THE TIME OF HEARING LD. AR SUBMITTED THAT SO FAR AS IT RELATES TO GRIEVANCE OF THE ASSESSEE WITH REGARD TO GROUND NO.1(A), THE ASS ESSEE HAS NOTHING TO SAY MORE. AS THIS GROUND WAS NOT SERIOUSLY CONTESTED BY LD . AR, GROUND NO.1 IS DISMISSED. 5. APROPOS GROUND NO.1(B), IT WAS SUBMITTED BY LD. AR THAT ASSESSEE HAS ALSO EARNED LONG TERM CAPITAL GAIN ON SIMILAR TRANSACTIO NS, WHICH WAS TO THE TUNE OF RS.26,351/-. HE IN THIS REGARD REFERRED TO THE CO MPUTATION OF INCOME PLACED AT PAGE 3 & 4 OF THE PAPER BOOK. IT WAS SUBMITTED T HAT IT IS NOT PERMISSIBLE TO A.O TO GIVE DIFFERENT TREATMENT TO THE TRANSACTIONS WHICH ARE SIMILAR IN NATURE. LD. A.O HAS ACCEPTED THE CLAIM OF THE ASSESSEE REGARDING SI MILAR TRANSACTION OF SALE AND PURCHASE OF SHARES UPON WHICH ASSESSEE HAS EARNED L ONG TERM CAPITAL GAIN AND DISCARDED THE CLAIM IN RESPECT OF TRANSACTIONS WHI CH HAVE GIVEN RISE TO SHORT TERM CAPITAL GAIN. IN THIS REGARD LD. AR REFERRED TO TH E DECISION OF MUMBAI ITAT IN THE CASE OF DCIT VS. SMT. MONICA BIMAL SHAH, 16 TAXMANN .COM 164 (MUM), WHEREIN IT WAS HELD THAT WHEN DEPARTMENT HAD ACCEPTED THAT SO ME OF SHARES WERE PURCHASED AND HELD BY ASSESSEE AS INVESTMENT WHILE ACCEPTIN G DECISION OF COMMISSIONER (APPEALS) ALLOWING CLAIM OF THE ASSESSEE FOR LONG T ERM CAPITAL GAIN ARISING FROM SALE THEREOF, THERE WAS NO JUSTIFICATION FOR THEM TO CON TEND THAT ASSESSEE HAD PURCHASED AND HELD OTHER SHARES AS STOCK- IN- TRADE MERELY BE CAUSE THEY WERE SOLD WITHIN A PERIOD OF ONE YEAR ESPECIALLY WHEN OTHER FACTS RELE VANT THERETO WERE ALMOST SIMILAR. THEREFORE, HE PLEADED THAT THE RATIO OF AFOREMENTI ONED DECISIONS WILL BE SQUARELY APPLICABLE AND THE SALE AND PURCHASE OF SHARES GIV ING RISE TO SHORT TERM CAPITAL GAIN CANNOT BE TREATED TO BE THE TRANSACTIONS GIVING RI SE TO INCOME UNDER THE HEAD BUSINESS OR PROFESSION. LD. AR ALSO REFERRED TO THE FOLLOWING DECISION TO RAISE SIMILAR PROPOSITION: (1) CIT VS. GOPAL PUROHIT 188 TAXMAN 140 (BOM) ITA NO.3704/MUM/2013 : ASST.YEAR 2006-07 4 (2) NARENDRA GEHLAUT VS. JCIT, 21 TAXMANN.CO. 82 ( DELHI) (3) ITA NO.6656/MUM/2009 & 181/MUM/2010 IN THE CASE OF VINOD K. NEVATIA, ORDER DATED 3/12/2010. 6. ON THE OTHER HAND, LD. DR SUBMITTED THAT AO AS W ELL AS LD. CIT(A) BOTH HAVE NARRATED THE FACTS OF THE CASE. HE SUBMITTED THA T SEEING THE VOLUME OF TRANSACTIONS AND INTRA-DAY TRADING DONE BY THE ASSESSEE, LD. CIT (A) WAS RIGHT IN HOLDING THAT THE TRANSACTIONS HAVE GIVEN RISE TO INCOME FROM BUSINES S. HE SUBMITTED THAT ASSESSEE ALSO BORROWED FUNDS TO MAKE INVESTMENT IN THE SHARE S FROM HER HUSBAND AND THUS, THE TRANSACTIONS WERE DONE WITH A MOTIVE TO EARN PR OFIT. 7. IN THE REJOINDER IT WAS SUBMITTED BY LD. AR THAT THOUGH THERE IS A BORROWING FROM THE HUSBAND OF THE ASSESSEE BUT THE BORROWING DID NOT CARRY ANY INTEREST AND THE BORROWING WAS INTEREST FREE. 8. I HAVE HEARD BOTH THE PARTIES AND THEIR CONTENTI ONS HAVE CAREFULLY BEEN CONSIDERED. THE TRANSACTIONS ENTERED INTO BY THE A SSESSEE HAVE BEEN SUMMARIZED IN THE SHAPE OF A CHART, COPY OF WHICH IS PLACED AT PAGE 37 AND 38 OF THE PAPER BOOK. THE ASSESSEE HAS ALSO SUBMITTED THE SUMMARY OF THE TRANSACTIONS , PARTICULARS OF WHICH ARE AS UNDER: S.NO. PARTICULARS UNITS. 1. TOTAL NO. OF TRANSACTIONS DURING THE YEAR 59 2. AVERAGE TRANSACTIONS PER MONTH 4.92 3. NO OF SCRIPS TRADED DURING THE YEAR 48 4. NO. OF SCRIPS WHERE THERE WAS MORE THAN 1 TRANSA CTION DURING THE YEAR 9 5. AVERAGE HOLDING PERIOD (EXCLUDING INTRA DAY TRAN SACTIONS ( IN DAYS) 22.375 6. AVERAGE HOLDING PERIOD (INCLUDING LTCG) (IN DAYS ) 29.37 7. NO. OF INTRA DAY TRANSACTIONS 9 8. NO. OF TRANSACTIONS WHERE SCRIP WAS HELD FOR LES S THAN 30 DAYS 41 9. NO. OF TRANSACTION WHERE SCRIP WAS HELD FOR MORE THAN 30 DAYS 9 10. TOTAL SHORT TERM CAPITAL GAINS OTHER THAN INTRA DAY TRANSACTION (IN RS.) SO FAR AS IT RELATES TO NINE TRANSACTIONS WHICH HA VE GIVEN RISE TO INCOME OF RS.36,775/- ( THE ISSUE RAISED IN GROUND NNO.1(A)), THE ISSUE HAS NOT BEEN SERIOUSLY CONTESTED BY THE ASSESSEE. THEREFORE, THE DISPUTE REMAINS ONLY WITH RESPECT TO THE TRANSACTIONS WHICH HAVE GIVEN RISE TO INCOME AMOUN TING TO RS.2,08,775.66. KEEPING IN VIEW THE FACTS OF THE CASE AS BROUGHT OU T IN THE AFOREMENTIONED CHART, I ITA NO.3704/MUM/2013 : ASST.YEAR 2006-07 5 AM OF THE OPINION THAT THE TRANSACTIONS ENTERED INT O BY THE ASSESSEE CANNOT BE TREATED TO BE TRANSACTIONS GIVING RISE TO INCOME U NDER THE HEAD PROFIT AND GAINS FROM BUSINESS OR PROFESSION. THE SHARES HAVE BEE N SHOWN UNDER THE HEAD INVESTMENT. THE DEPARTMENT HAS ACCEPTED LONG TER M CAPITAL GAIN SHOWN BY THE ASSESSEE IN RESPECT OF SIMILAR TRANSACTIONS GIVING RISE TO INCOME UNDER THE HEAD CAPITAL GAIN. THEREFORE, KEEPING IN VIEW THE ENTI RETY OF THESE FACTS, I AM OF THE OPINION THAT GAIN EARNED BY THE ASSESSEE FROM TRAN SACTIONS OF SHARES UPON WHICH ASSESSEE HAS EARNED GAIN OF RS.2,08,775/- (AS PER C OMPUTATION IN THE CHART) CANNOT BE ASSESSED AS INCOME UNDER THE HEAD PROFIT AND GA INS OF BUSINESS OR PROFESSION. THEREFORE, GROUND NO.1(B) IS DECIDED IN FAVOUR OF T HE ASSESSEE. 9. SO FAR AS IT RELATES TO GRIEVANCE EXPRESSED IN GROUND NO.1(C), IT WAS SUBMITTED BY LD. AR THAT THIS GROUND IS AN ALTERNATE GROUND A ND IF GROUND NO.1(B) IS DECIDED IN FAVOUR OF THE ASSESSEE THEN GROUND NO.1(C) WILL BE COME INFRUCTUOUS. ACCORDINGLY, GROUND NO.1(C) IS DISMISSED HAVING BECOME INFRUCTUO US. 10. SO FAR AS IT RELATES TO GRIEVANCE EXPRESSED IN GROUND NO.2, I OBSERVE THAT LD. CIT(A) WAS NOT RIGHT IN HOLDING THAT PROVISIONS OF SECTION 44AA & 44AB OF THE ACT WERE APPLICABLE, AS SUCH DECISION BY LD. CIT(A) WILL BE PREMATURE A S THE SAME WILL BE REQUIRED TO BE ADJUDICATED ONLY AT THE TIME OF LEVY OF PENALTY UN DER SECTION 271A & 271B OF THE ACT, WHICH STAGE IN THE ASSESSMENT ORDER IS PREMATURE. THERE FORE, I VACATE THOSE FINDINGS OF LD. CIT(A) AND HOLD THAT QUESTION REGARDING VIOLATION OF THE P ROVISIONS OF SECTION 44AA AND 44AB OF THE ACT WHICH ENTAIL LEVIABILITY OR OTHERWISE OF PE NALTY UNDER SECTION 271A & 271B OF THE ACT CAN BE EXAMINED ONLY DURING THE COURSE OF IMPOSITIO N OF PENALTIES UNDER SECTION 271A & 271B. THEREFORE, THIS GROUND IS DISPOSED OF ACCORD INGLY AND WILL BE CONSIDERED TO BE ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH JUNE, 2014. . & +,- /#0 24/06/2014 , & 6 SD/- (I.P.BANSAL) / JUDICIAL MEMBER MUMBAI; /# DATED : 24 TH JUNE, 2014. ITA NO.3704/MUM/2013 : ASST.YEAR 2006-07 6 VM. . & $(7 87-( . & $(7 87-( . & $(7 87-( . & $(7 87-(/ COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. $% ! / THE RESPONDENT. 3. 9() / THE CIT, MUMBAI. 4. 9 / CIT(A)-13, MUMBAI 5. 7<6 $(# , , / DR, ITAT, MUMBAI 6. 6= > / GUARD FILE. .# .# .# .# / BY ORDER, %7( $( //TRUE COPY// ? ?? ?/ // /@ A @ A @ A @ A (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI
Mehul