The ITO, Ward-3(1), JAMNAGAR V. Smt. Khyati Tulan Patel, JAMNAGAR

ITA 375/RJT/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4373 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-06-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 05-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: J C RANPURA
• Keywords: Gift; Business income; Speculative transactions
• Section: 143(3); 68; 10

Judgement Text

S , IN THE INCOME TAX APPELLATE TRIBU N AL; RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAVA, AM IT A NO . 375 / RJT/20 11 / ASSESSMENT YEAR : 20 0 8 - 0 9 ITO, WARD - 3 (1) , JAMNAGAR ( 0 / APPELLANT) VS. SMT KHYATI TULAN PATEL, SATYAM, P N MARG, OPP RELIANCE WEB WORLD, JAMNAGAR PAN : ANKPP 5710 B NR0 / RESPONDENT O / REVENUE BY SHRI K C MATHEWS, DR / ASSESSEE BY SHRI J C RANPURA, CA /DATE OF HEARING 11 . 0 6 .2013 / DATE OF PRONOUNCEMENT 26 . 07 . 2013 / ORDER . . [ , / T. K. SHARMA, J. M . : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER DATED 28 .0 7 .201 1 OF LD CIT (A) , JAMNAGAR FOR THE ASSESSMENT YEAR 200 8 - 0 9 . 2 . THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL. FOR THE ASSESSMENT YEAR UNDER APPEAL, SHE FILED RETURN OF INCOME ON 19 . 06 .200 8, DECLARING TOTAL INCOME OF RS. 4,22,110 / - . THE ASSESSING OFFICER FRAMED THE AS SESSMENT U/S 143(3) OF THE ACT ON 21 .1 0 .2010, WHEREIN THE ASSESSING OFFICER TREATED THE S HORT T ERM C APITAL LOSS (STCL ) FROM SALES OF SHARES AT RS.90,752/ - AND L ONG T ERM C APITAL G AIN (LTCG) OF RS.6,18,677/ - ON SALES OF SHARES AS BUSINESS INCOME. ON APPEAL, IN THE IMPUGNED ORDER, THE LD CIT(A) DIRECTED THE ASSESSING OFFICER TO TREAT THE SAME AS INCOME FROM STCG AND LTCG FOR THE DETAILED REASON GIVEN IN PAR AGRAPH 7 OF THE IMPUGNED ORDER, WHICH READS AS UNDER: - 7. I HAVE DULY CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND THE DISCUSSIONS MADE BYTE ASSESSING OFFICER IN THE ASSESSMENT ORDER. IT IS FOUND THAT APPELLANT IS NOT SHARE BROKER. IN EARLIER YEARS ALSO SHE HAS BEEN TREATED AS INVESTOR & SAME IS APPARENT FROM DETAILS FILED BY THE AR. IT IS NOTICED THAT SHARES HELD AS INVESTMENT ON BALANCE DATE IN A PARTICULAR F.Y. WERE SOLD NEXT YEAR & THERE APPEARS NO SALE OF SAME SHARES IN SAME YEAR. ON BALANCE SHEET DATE THE SHARES ARE SHOWN AS INVESTMENT AND SOME PART OF THE STCG HAD ARISEN OUT THE ITA NO. 375/RJT/2011 SMT KYATI TULAN PATEL 2 EARLIER INVES TMENT WHICH HAD BEEN ACCEPTED AS BEING ON INVESTMENT ACCOUNT. ONE PERSON CAN BOTH ACT AS INVESTOR & TRADER, ONLY CONDITION IS THAT SEPARATE ACCOUNTS SHOULD BE MAINTAINED. IT IS FOUND THAT APPELLANT HAS MAINTAINED SEPARATE DETAILS FOR THE SHARES HELD AS INV ESTMENT. THE MATTER IS WELL SUPPORTED BY THE CBDT IN ITS DRAFT INSTRUCTION NO.2005, INSTRUCTION NO.1827 DATED 31.08.1989 & CIRCULAR NO.4/207 DATED 15.06.2007. THE APPELLANT HAS MAINTAINED THE DISTINCTION BETWEEN SHARES HELD AS STOCK AND THOSE HELD AS INVES TMENTS IN ITS RECORDS. FURTHER IT IS NOTICED THAT ENTIRE SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN IS EARNED ON ACTUAL DELIVERY BASIS AND NONE OF THE TRANSACTION IS OF NATURE OF F & O OR OTHER SPECULATIVE TRANSACTIONS. IN THE CASE OF APPELLANT, TH ERE ARE NO SUBSTANTIAL TRANSACTIONS. THE HONBLE ITAT B BENCH, AHMEDABAD IN THE CASE OF H. C. SHAH VS. ACIT 37 DTR (ABAD) (TB) 345 HAS HELD THAT IF PURCHASE & SALE OF SHARES IS DONE IN LESS THAN 30 DAYS, THEN ONLY INCOME SO EARNED CAN BE TREATED AS INCO ME FROM BUSINESS & NOT OTHERWISE. INVESTMENTS ARE NOT SHOWN AS STOCK IN TRADE. EARNING OF DIVIDEND INCOME ALSO SHOWS THE INTENTION OF APPELLANT AS BEING INVESTOR AT CORE. RELIANCE IS ALSO PLACED ON DECISION RENDERED BY THE HONBLE ITAT BENCH RAJKOT IN T HE CASE OF SMT. PUSHPABEN H KOTECHA VS. DCIT 88 TTJ (2004) (RAJKOT) 384 & ALSO AFFIRMED LATER BY THE HONBLE ITAT BENCH RAJKOT IN THE CASE OF SHRI CHANDRAKANT KOTECHA IN ITA NO.121/RJT/06 DATED 25.07.2011. FROM THE ABOVE FACTS, IT IS CLEAR THAT AO HAS ARB ITRARY TREATED THE SAME AS INCOME OF BUSINESS. AO IS DIRECTED TO TREAT THE APPELLANT AS INVESTOR INSTEAD OF TRADER AND TAX THE INCOME OF THE APPELLANT AS INCOME FROM STCG & LTCG. THIS GROUND OF APPEAL IS ALLOWED. 3. APART FROM ABOVE, IN THE ASSESSMENT ORDER THE ASSESSING OFFICER TREATED THE GIFT OF RS.20,18,685/ - , WHICH WAS RECEIVED BY HER FROM HER NRE BROTHER NAMELY MR. VIREN PATEL - USA , AS BOGUS AND THEREFORE HELD THAT THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S 10 OF THE INCOME - TAX ACT, 1961. IN TH E IMPUGNED ORDER, THE LD CIT(A) TREATED THE GIFT OF RS.20,18,685/ - RECEIVED BY THE ASSE SSEE FROM HER REAL BROTHER AS EXPLAINED FOR THE DETAILED REASONS GIVEN IN PARAGRAPH 10 OF THE ORDER, WHICH READS AS UNDER: - 10. I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSION OF THE APPELLANT AND THE DISCUSSIONS MADE BY THE AO IN THE ASSESSMENT ORDER. ONCE APPELLANT HAS FURNISHED IDENTITY OF DONOR, IT HAS DISCHARGED THE INITIAL BURDEN WHICH LAY UPON HIM. IT APPEARS AO HAS PROCEEDED IN THE MATTER IN HASTE. HE HAS MADE THE ADDITION WITHOUT MAKING ANY FURTHER INQUIRY. IN A CASE OF GIFT/CASH CREDIT APPELLANT IS REQUIRED TO SATISFY THE THREE CONDITIONS I.E. IDENTITY OF CREDITOR AND GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS. IT IS ALSO A FACT THAT AO HAS NOT DOUB TED THE IDENTITY OF THE DONOR. THE SAID AMOUNTS HAD BEEN RECEIVED BY WAY OF CHEQUES FROM HER BROTHER WHICH IS ALSO NOT IN DISPUTE. THUS APPELLANT HAS SATISFIED TWO CONDITIONS I.E. IDENTITY OF CREDITOR AND GENUINENESS OF THE TRANSACTIONS. AS REGARDS CREDITW ORTHINESS, IT IS NOTICED THAT THE DONOR IS A WELL EDUCATED AND IS EMPLOYED IN A DECENT JOB IN USA. HE HAS MASTERS DEGREE IN COMPUTER SCIENCE AND ENGINEERING FROM THE PENNSYLVANIA STATE UNIVERSITY, USA AND CURRENTLY WORKING AS A TELECOM PROGRAMMER ANALYST . THE PURPOSE OF GIVING GIFT HAS BEEN ALSO EXPLAINED TO BE HELPING THE SISTER IN SETTLING IN INDIA. GIFTS WERE GIVEN BY SHRI VIREN PATEL, BROTHER OF THE APPELLANT FROM HIS EARNINGS IN USA & WERE GIVEN ITA NO. 375/RJT/2011 SMT KYATI TULAN PATEL 3 ON HER BIRTHDAYS OUT OF NATURAL LOVE AND AFFECTION AS HI S SISTER KYATI PATEL, THE APPELLANT WAS INTENDING TO SETTLE IN INDIA. ABOVE EXPLANATION CANNOT BE DOUBTED AS IT IS BUT NATURAL FOR A BROTHER TO HELP HER SISTER IN DISTRESS. AS SOURCE OF GIFT HAS ALSO BEEN FOUND EXPLAINED, THE CREDITWORTHINESS STANDS PROVED . THUS APPELLANT HAS BEEN ABLE TO SATISFY THE THREE CONDITIONS I.E. IDENTITY OF CREDITOR AND GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS HENCE ADDITION MADE BY THE AO DOES NOT STAND , SAME IS HEREBY ORDER TO BE DELETED. THIS GROUND OF APPEAL IS ALL OWED. 4 . AGGRIEVED BY THE ORDER OF LD CIT(A), THE R EVENUE IS NOW IN APPEAL BEFORE THIS TRIBUNAL ON THE FOLLOWING GROUNDS: - 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 90,752/ - BY TREATING SHORT TERM CAPITAL LOSS AND ADIT ION OF RS.6,18,677/ - BY TREATING LONG TERM CAPITAL GAIN FROM SALES OF SHARES AS BUSINESS INCOME OF THE ASSESSEE . 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.20,18,685/ - MADE ON ACCOUNT OF GIFT RECEIVED FROM NRI BROTHER. 5 . AT THE TIME OF HEARING BEFORE US, ON BEHALF OF REVENUE SHRI K C MATHEWS, LD DR APPEARED AND CONTENDED THAT THE ASSESSEE IS ENGAGED IN TRADING IN SHARES AND SECURITIES AND WRONGLY CLAIMED THE SHORT TERM CAPITAL GAIN / LONG TERM CAPITAL GAIN INSTEAD OF SHOW ING THE SAME AS PROFIT U/ S 28 OF THE INCOME - TAX ACT, 196. HE SUBMITTED THAT KEEPING IN VIEW THE PROFIT AND LOSS ACCOUNT AND TRADING ACCOUNT FILED BY THE ASSESSEE WITH THE RETURN OF INCOME, THE ASSESSING OFFICER RIGHTLY TREATED THE SAME AS BUSINESS INCOME ASSESSABLE U/S 28 OF THE INCOME - TAX ACT, 1961. WITH REGARD TO THE GIFT OF RS.20,18,685/ - RECEIVED BY THE ASSESSEE FROM HER REAL BROTHER, THE LD DR POINTED OUT THAT THE ASSESSEE HAS NOT PROVED THE IDENTITY PROOF OF HER BROTHER AND ALSO HAS NOT PRODUCED THE BANK STATEMENT OF DONOR, COPY OF PASSPORT & COPY OF DEMAND DRAFT TO PROVE THE GENUINENESS OF THE SAID GIFT ; THEREFORE THE ASSESSING OFFICER RIGHTLY TREATED THE GIFT AS UNDISCLOSED INCOME U/S 68 OF THE INCOME - TAX ACT, 1961. 6 . ON THE OTHER HAND, SHRI J C RANPURA, CA, APPEARED ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF LD CIT(A). THE LD COUNSEL OF THE ASSESSEE POINTED OUT THAT IN THE IMPUGNED ORDER LD CIT(A) HAS HELD THAT ONE PERSON CAN ACT AS INVESTOR AS ALSO TRADER AND ONLY CONDITION IS THAT SEPARATE ACCOUNTS SHOULD BE MAINTAINED FOR BOTH ACTIVITIES. THE LD COUNSEL OF THE ASSESSEE FURTHER POINTED OUT THAT THE ASSESSEE HAD FURNISHED ALL THE RELEVANT ITA NO. 375/RJT/2011 SMT KYATI TULAN PATEL 4 DETAILS AND FACTS THAT SHE WAS NOT SHARE BROKER AND HAS MAINTAINED SEPARATE DETAILS FOR TH E SHARES HELD AS INVESTMENT. HE FURTHER SUBMITTED THAT FROM THE COPY OF LIST OF SHARES HELD FOR MORE THAN ONE YEAR, IT IS CLEAR THAT ASSESSEE IS INVESTOR SINCE YEARS AND IS HOLDING SUBSTANTIAL INVESTMENTS. THE LD COUNSEL OF THE ASSESSEE ALSO RELIED UPON T HE FOLLOWING DECISIONS IN SUPPORT OF HIS SUBMISSIONS: - A . CIT V. GOPAL PUROHIT (2010) 228 CTR (BOM) 582 B . CIT V. NIRAJ AMIDHAR SURTI 238 CTR (GUJ) 294 C . SUGAMCHAND C SHAH V. ACIT 48 SOT 189 (AHMEDABAD) (URO) 7 . WITH REGARD TO GIFT RECEIVED FROM HER NRI BROTHER , MR. VIREN PATEL, USA; THE LD COUNSEL OF THE ASSESSEE POINTED OUT THAT THE ASSESSEE IS A LADY, A PROFESSIONAL ARCHITECT, RETURNED TO INDIA FOR INTENDED SETTLEMENT IN INDIA. THE BROTHER OF THE ASSESSEE IS AT USA AND HAVE HIS OWN INDEPENDENT SOURCE OF INCOM E . DURING THE YEAR UNDER REFERENCE, BROTHER OF THE ASSESSEE NAMELY MR. VIREN PATEL HAD GIFTED HER EQUIVALENT TO INDIAN RS.20,18,685/ - . AT THE TIME OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD SHOWN TO THE ASSESSING OFFICER THE FOLLOWING: - 1 ) COPY OF THE PAS SPORT OF THE DONOR BROTHER IN SUPPORT OF THE IDENTITY OF THE DONOR ; 2 ) COPIES OF THE BANK CERTIFICATES ALONG WITH THE CONFIRMATION IN SUPPORT OF THE GENUINE TRANSACTIONS; 3 ) COPIES OF THE DECLARATION BY BROTHER IN SUPPORT OF THE GIFT MADE BY HIM IN SUPPORT OF TH E CAPACITY OF THE DONOR; 4 ) THE ASSESSEE STATED THAT THE DONOR HAS CONFIRMED THE GIFT BY DECLARATION IN WRITING AND ASSESSEE PRESENTED VARIOUS DETAILS LIKE RECEIPT OF THE AMOUNT THROUGH BANK AS WELL AS PASSPORT ETC AT THE TIME OF HEARING. FROM THE AFORESAID DOCUMENTS, HE SUBMITTED THAT THE GENUINENESS OF THE GIFT IS PROVED. THE COUNSEL OF THE ASSESSEE ALSO POINTED OUT THAT THE ASSESSEE HAD ALSO FILED A LETTER DATED 20.07.2011 OF HER BROTHER MR. VIREN PATEL CONFIRMING THAT HE MADE GIFT IN QUESTION TO HER. THI S LETTER IS REPRODUCED BY LD CIT(A) IN THE IMPUGNED ORDER. TO SUM UP HE POINTED OUT THAT, A FTER CONSIDERING THE VARIOUS DOCUMENTS , THE LD CIT(A) HAS HELD THAT THE ASSESSEE HAD PROVED THE GENUINENESS OF THE GIFT RECEIVED BY HER FROM HER REAL BROTHER, THEREF ORE THE VIEW TAKEN BY THE LD CIT(A) BE UPHELD. ITA NO. 375/RJT/2011 SMT KYATI TULAN PATEL 5 8 . AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS WELL SETTLED LAW THAT THE ASSESSEE CAN HOLD SHARES AS INVESTOR AS WELL AS TRADER. IN THIS CASE, THE SHARES HELD AS INVESTMENT ON BALANCE - SHEET IN A PARTICULAR FINANCIAL YEAR WERE SOLD NEXT YEAR AND THERE APPEARS NO SALE OF NEW SHARES IN THIS YEAR. KEEPING IN VIEW THE FACTUAL MATRIX OF THE CASE, THE LD CIT(A) IS LEGALLY AND FACTUALLY CORRECT IN DIRECTIN G THE ASSESSING OFFICER TO TREAT THE ASSESSEE AS AN INVESTOR AND NOT A TRADER AND TAX THE INCOME OF THE ASSESSEE AS INCOME FROM STCG AND LTCG. WE THEREFORE DECLINE TO INTERFERE. GROUND NO. 1 IS REJECTED. 9 . WITH REGARD TO GIFT, WE ARE OF THE VIEW THAT TH E ASSESSING OFFICER , ON DOUBT AND SUSPICIOUS , TREATED THE GIFT OF RS.20,18,685/ - RECEIVED BY THE ASSESSEE FROM HER NRI BROTHER MR. VIREN PATEL, USA AS UNDISCLOSED U/S 68 OF THE INCOME - TAX ACT. MR. VIREN PATEL, WHO IS REAL BROTHER OF THE ASSESSEE HAS A M AST ERS DEGREE IN COMPUTER SCIENCE AND ENGINEERING FROM THE PENNSYLVANIA STATE UNIVERSITY, USA AND CURRENTLY WORKING AS A TELECOM PROGRAMMER ANALYST. HE HAS DISCLOSED THE PURPOSE OF GIFT TO HER SISTER, I.E. TO HELP HER IN SETTLING IN INDIA. KEEPING IN VIEW OF THE CONSPICUOUS FACTS OF THE CASE, WE ARE ALSO OF THE VIEW THAT THE SOURCE OF GIFT, CREDITWORTHINESS OF DONOR AND GENUINENESS OF THE TRANSACTIONS STAND EXPLAINED. WE ARE, THEREFORE, OF THE VIEW THAT THE LD CIT(A) IS LEGALLY AND FACTUALLY CORRECT IN TREA TING THE GIFT OF RS.20,18,685/ - RECEIVED FROM HER BROTHER AS EXPLAINED. GROUND NO.2 IS ALSO REJECTED. 10 . I N THE RESULT , THE APPEAL FILED BY THE REVENUE IS REJECTED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD/ - SD/ - ( D. K. SRIVASTAVA ) (T. K. SHARMA) M / ACCOUNTANT MEMBER O / JUDICIAL MEMBER / ORDER DATE 26 . 07 .2013 . /RAJKOT * BT ITA NO. 375/RJT/2011 SMT KYATI TULAN PATEL 6 O O / COPY OF ORDER FORWARDED TO: - 1 . 0 / APPELLANT - ITO, WARD - 3 (1), JAMNAGAR 2 . NR0 / RESPONDENT - SMT KHYATI TULAN PATEL, SATYAM, P N MARG, OPP RELIANCE WEB WORLD, JAMNAGAR 3 . S C / CONCERNED CIT , JAMNAGAR 4 . C - / CIT (A) , JAMNAGAR 5 . NS , S , / DR, ITAT, RAJKOT 6 . / GUARD FILE. / BY ORDER , TRUE COPY PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, RAJKOT