SHIVRAM KRISHNAN IYER, MUMBAI V. ADDL CIT 24(3), MUMBAI

ITA 3776/MUM/2013

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9728 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 01-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 13-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: M SUBRAMANIYAM
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH, JM I.T.A. NO. 3776/MUM/2013 ( ASSESSMENT YEAR: 2008 - 09 ) SHRI SHIVRAM KRISHNAN IYER FLAT NO. 103, SARGAM BLDG., NEAR RAM MANDIR, SITARAM ROAD, B ANGUR NAGAR, GOREGAON (WEST), MUMBAI - 400 062 VS. ADD. CIT 24(3), C - 10, 5 TH FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400 051 PAN/GIR NO. AADPI 1500 L ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI M. SUBRAMANIYAM RESPONDENT BY : SHRI V. JUSTIN DATE OF HEARING : 19.07.2018 DATE OF PRONOUNCEMENT : 12.09 .2018 O R D E R PER S HAMIM YAHYA, A. M.: THIS A PPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 15.0 2.2013 AND PERTAINS TO THE A SSESSMENT YEAR 2008 - 09. 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEAL) 34, [CIT(A) FOR SHORT] ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN TREATING SHORT TERM CAPITAL G AINS DECLARED BY THE APPELLANT AS INCOME FROM BUSINESS OR PROFESSION. 2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT CLEARLY HELD TWO DIFFERENT PORTFOLIOS FOR TRADE AND INVESTMENT SEPARATELY AND THAT THERE WAS NO MIXING OF THE SAME IN HIS ACCOUNTS AT ANY TIME. 3. THE LEARNED C1T(A) FAILED TO FOLLOW THE JURISDICTION HIGH COURT DECISION IN GOPAL PUROHIT WHICH WAS SUBSEQUENTLY CONFIRMED BY THE HON. SUPREME COURT 2 ITA NO. 3776/MUM/2013 SHRI SHIVRAM KRISHNAN IYER WHILE MEREL} STATING THAT THE SAID CASE WAS DISTINGUISHABLE FROM THAT OF THE A PPELLANT. 4. THE LEARNED CIT(A) ERRED IN NOT DEALING WITH GROUND OF APPEAL NO.2 RAISED IN THE APPEAL MEMO BEFORE THE C1T(A). 5. IN VIEW OF THE ABOVE GROUNDS, YOUR APPELLANT PRAYS THAT THE ORDER OF THE LEARNED CIT(A) BE SET ASIDE AND THE ABOVE GROUNDS BE ALLOWED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER ( A.O. FOR SHORT) FOUND THAT THE ASSESSEE , APART FROM TRADING IN FUTURE AND OPTIONS (DERIVATIVES) HAD ALSO ENGAGED IN THE BUSINESS OF PURCHASE & SALE OF SHARES & SECURITIES. THE ASSES SEE HAD OFFERED THE INCOME FROM DERIVATIVES AS 'BUSINESS INCOME' BUT OFFERED THE GAIN ON SALE OF SHARES AS 'SHORT TERM CAPITAL GAINS'. THE A.O. HAD VERIFIED THE TRANSACTIONS CARRIED OUT AND FOUND THE QUANTUM AS WELL AS THE TURNOVER WAS SUBSTANTIAL. THE ASS ESSEE HAD BORROWED FUNDS AND MADE INVESTMENTS IN THE EARLIER YEARS. THE A.O. HAD ALSO NOTICED THAT CERTAIN SCRIPS WERE IMMEDIATELY SO L D WITHIN THE NEXT DAY WITHOUT HOLDING THE SAME AND THEREBY THE INTENTION OF THE ASSESSEE WAS PROVED TO BE A TRADER AND NOT AN INVESTOR THE ASSESSEE HAS BEEN EN GAGING FULL TIME IN PURCHASE & SALE OF SHARES AND IN VIEW OF THIS, HE TREATED THE ENTIRE PROFIT ARISING OUT OF THE PURCHASE AND SALES OF SHARES AS 'BUSINESS' OF THE ASSESSEE . 4. UPON THE ASSESSEES APPEAL, THE LD. CIT( A) CONFIRMED THE ASSESSING OFFICERS ACTION BY CONCLUDING AS UNDER: 9. ' THUS THE INTENTION CAN BE PROVED ONLY BY WAY OF CONDUCT OF THE APPELLANT AFTER THE PURCHASE. TO VERIFY THIS THE AR OF THE APPELLANT WAS SPECIFICALLY DIRECTED TO FURNISH THE SCRIP - WIS E PURCHASE & SALE DETAILS ALONG WITH THE HOLDING PERIOD, THE FREQUENCY OF PURCHASE AND SALE AND THE VOLUME TRADED. BUT THE AR INFORMED ME THAT HE IS NOT IN A POSITION TO FILE THE SAME. IN THE ABSENCE OF ANY SUCH DETAILS, IT IS NOT POSSIBLE FOR M E TO EXAMIN E THE NATURE OF THE TRANSACTIONS. HENCE I WAS PREVENTED FROM EXAMINING THE FACTUAL ASPECT OF THE TRANSACTIONS IN THIS CASE. HOWEVER, I FIND FROM THE ASSESSMENT ORDER, THE AO HAD CATEGORICALLY MENTIONED IN PARA 5 THAT THAT THE HOLDING PERIOD IN MANY OF THE SCRIPS WERE ONLY A FEW DAYS AND 3 ITA NO. 3776/MUM/2013 SHRI SHIVRAM KRISHNAN IYER IN SOME INSTANCES ON THE VERY NEXT DAY OF THE PURCHASES THE SCRIPS WERE SOLD. THE APPELLANT HAD BEEN FREQUENTLY TRADING ON FEW PARTICULAR SCRIPS AND THE VOLUME BEING SUBSTANTIAL, THE INTENTION WAS CLEAR THAT THE APPELLANT WA S INTO TRADING OF SHARES. HAD THE INTENTION BEEN FOR INVESTMENT, THE APPELLANT SHOULD HAVE HELD THE SHARES AT LEAST FOR A REASONABLE TIME. THE AR ALSO DID NOT BRING ANY EVIDENCE TO SHOW TO AVOID THE LOSS FROM A PARTICULAR SCRIP THEY WERE LIQUIDATED. 10. IN VIEW OF REPETITIVE SALE TRANSACTIONS CARRIED OUT BY THE APPELLANT, IT CANNOT BE SAID THAT HE IS AN INVESTOR. THE ORGANIZED AND SYSTEMATIC ACTIVITY CARRIED OUT AMOUNTS TO BUSINESS. HENCE I AM IN AGREEMENT WITH THE ASSESSING OFFICER THAT THE INTENTION OF TH E APPELLANT WAS TO TRADE. IN VIEW OF THIS I TREAT THE PROFIT ARISING OUT OF TRANSACTION OF PURCHASE AND SALE AS TRADING ACTIVITY. THE ADDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED. 5. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 6 . THE LD. COUNSEL OF THE ASSESSEE OF THE ASSESSEE STATED THAT THE ASSESSEE IS A REGULAR TRADER AS WELL AS INVESTOR. HE SUBMITTED THAT THE ASSESSEE IS MAINTAINING SEPARATE PORTFOLIOS FOR BOTH THE ACTIVITY. THE SYSTEM IS OPERATING SINCE A NUMBER OF YEARS . IN THIS REGARD, HE REFERRED TO HON'BLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS. IHP FINVEST LTD. [2016] 236 TAXMAN 64 (BOM) FOR THE PROPOSITION THAT THE ASSESSEE CAN KEEP SEPARATE PORTFOLIOS. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT IT WOULD B E BENEFICIAL FOR THE ASSESSEE TO TREAT THE ENTIRE ACTIVITY AS BUSINESS ACTIVITY , BUT THE ASSESSEE DOES NOT WANT TO DISTURB THE LONG STANDING SYSTEM. 7. PER CONTRA, THE LD. DE PARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT IT IS THE CASE OF THE LD. COUNSEL OF THE ASSESSEE THAT THE ASSESSEE HAS BEEN A REGULAR TRADER AS WELL AS INV ESTOR. THAT THIS SYSTEM IS IN V A GUE FOR A LONG TIME. THE ASSESSEE IS MAINTAINING 4 ITA NO. 3776/MUM/2013 SHRI SHIVRAM KRISHNAN IYER SEPARATE BOOKS FOR THE SAME. IN THIS REGARD, WE NOTE THAT THE HON'BLE BOMBAY HIGH COURT DECISION IN THE CASE OF IHP FINVEST LTD. (SUPRA) HAD HELD AS UNDER: WHERE ASSESSEE MAIN TAINED TWO SEPARATE ACCOUNTS IN RESPECT OF ITS DEALING IN MUTUAL FUNDS AND SHARES, I.E., ONE IN RESPECT OF ITS TRADING AND OTHER IN RESPECT OF ITS INVESTMENT, AND THERE WERE NO ALLEGATIONS OF SHIFTING OF SCRIPS FROM TRADING TO INVESTMENT OR VICE VERSA, ASS ESSEES CLAIM OF CAPITAL GAIN ON SALE OF SHARES HELD AS INVESTMENT WAS TO BE ALLOWED. 9. NOW EXAMINING THE PRESENT CASE, WE NOTE THAT IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS SHIFTED SCRIPS FROM TRADING TO INVESTMENT OR VICE VERSA. HENCE, O N THE TOUCH STONE OF THE ABOVE SAID HON'BLE JURISDICTIONAL HIGH COURT DECISION, THE ASSESSEE DESERVES TO SUCCEED. MOREOVER, AS ALREADY NOTED HEREINABOVE, THE ASSESSEE HAS BEEN FOLLOWING THIS SYSTEM FOR A LONG TIME AND IT HAS NOT BEEN DISTURBED. ACCORDINGLY , RESPECTFULLY FOLLOWING THE PRECEDENT FROM THE HON'BLE JURISDICTIONAL HIGH COURT DECISION, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 10. IN THE RESULT, THE ASSESSEES APPEAL STANDS ALLOWED. ORDER P RONOUNCED IN THE OPEN COURT ON 12.09.2018 SD/ - SD/ - ( AMARJIT SINGH ) (S HAMIM YAHYA) J UDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI ; DATED : 12.09.2018 ROSHANI , SR. PS 5 ITA NO. 3776/MUM/2013 SHRI SHIVRAM KRISHNAN IYER COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD F ILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI