The ACIT. 3(1), Bhopal V. Shri Suraj Gangwani, Bhopal

ITA 38/IND/2011

• Counselvise Citation: 3822714 RSA 2011
• Duration Of Justice: 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 02-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 13-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: S S DESH
• Keywords: Business income

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 38/IND/2011 A.Y. 2006-07 ASSTT. COMMISSIONER OF INCOME TAX 3(1) INDORE ... APPELLANT VS SURAJ GANGWANI BHOPAL PAN AAZPG-0933D ... RESPONDENT APPELLANT BY : SHRI ARUN DEWAN RESPONDENT BY : SHRI S.S. DESHPANDE DATE OF HEARING : 19.12.2011 DATE OF PRONOUNCEMENT : 19.11.2011 O R D E R PER JOGINDER SINGH THE REVENUE IS AGGRIEVED BY THE ORDER OF THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) DATED 30.12.20 10 ON 2 THE GROUND THAT ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE LD. FIRST APPELLATE AUTHORITY ERRED IN HO LDING THAT THE INCOME DERIVED BY THE ASSESSEE FROM PURCHASE AND SA LE OF SHARES CANNOT BE TREATED AS BUSINESS INCOME RATHER THE SAME SHOULD BE TAXED AS SHORT TERM CAPITAL GAIN. 2. THE LEARNED SENIOR DR, SHRI ARUN DEWAN, SUPPORTED T HE ASSESSMENT ORDER WHEREAS THE LEARNED COUNSEL FOR TH E ASSESSEE DEFENDED THE IMPUGNED ORDER. WE HAVE CON SIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAI LABLE ON FILE. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND HIS MAIN SOURCE OF INCOME IS FROM RENTAL INCOME AS WELL AS INCOME FROM PARTNERSHIP FIRM I.E. M/S MOHANLAL & CO MPANY, IN WHICH THE ASSESSEE IS A PARTNER. THE ASSESSEE ALSO SHOWED INCOME FROM CAPITAL GAINS EARNED FROM TRANSACTION O F SECURITIES WHICH INCLUDES BOTH SHORT TERM AS WELL AS LONG TERM . THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY THE INCOME FROM SHORT TERM CAPITAL GAINS FROM SECURITY TRANSAC TION SHOULD NOT BE TREATED AS BUSINESS INCOME. IN REPLY, THE A SSESSEE CLAIMED THAT THE IMPUGNED INCOME WAS MAINLY FROM 3 SUBSCRIPTION TO INITIAL PUBLIC OFFER (IPOS) WHICH W ERE WITH THE MOTIVE OF INVESTMENT, CONSEQUENTLY, IT WAS CLAIMED THAT THERE WAS NO INTENTION BUT TO DO BUSINESS IN SECURITIES B Y FURTHER CLAIMING THAT THE MAIN SOURCE OF INCOME OF THE ASSE SSEE IS FROM PARTNERSHIP FIRM M/S MOHANLAL & COMPANY. THE TOTAL TURNOVER OF THE FIRM WAS CLAIMED TO BE RS.5,37,51,747/- RESU LTING INTO NET PROFIT OF THE FIRM TO THE TUNE OF RS.35,72,389/- WH EREAS THE PROFIT FROM SHARE WAS RS. 7,03,462/-. THE LEARNED ASSESSIN G OFFICER TREATED THE INCOME FROM SECURITY TRANSACTION AS BUS INESS INCOME. ON APPEAL, THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS) HELD AS UNDER :- I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE REPLY OF THE LD. AR FURNISHED BEFORE ME. ON PERUSA L OF THE REPLY FILED IT IS SEEN THAT THE APPELLANT HA S DISCLOSED SHORT TERM CAPITAL GAIN ON SALE OF SHARES WHICH IS HELD BY HIM IN THE NATURE OF INVESTMENT. THE APPELLANT HAS NOT ONLY EARNED INCOME ON PURCHASE AND SALE OF SHARES BUT INCOME BY WAY OF DIVIDEND ALSO ON SUCH INVESTMENTS. THE SHARES LYING WITH THE APPELLANT AT THE END OF THE YEAR IS VALUED AT COST. THE SHARES TRANSACTIONS ARE CARRIED OUT OF HIS OWN FUNDS AND NOT FROM BORROWED FUNDS. THERE IS NO OFFICE MAINTAINED OR STAFF APPOINTED FO R SUCH ACTIVITY BY THE APPELLANT. THE APPELLANT IS A LSO NOT SELLING THE SHARES IMMEDIATELY AFTER BUYING IT BUT HE IS HOLDING THEM AFTER TAKING THE DELIVERY OF SHA RES TO SAFEGUARD HIS INVESTMENTS. ALL THESE FACTS HAVE NOT BEEN DISPUTED BY THE A.O. IT IS ALSO PERTINENT TO 4 NOTE THAT MAIN COMPONENT OF INCOME RELATING TO THE SHARE TRANSACTIONS AMOUNTING TO RS.14,16,354/- IS FROM SHARES ALLOTTED IN THE IPO ONLY. IN THE CASE OF THE ASSESSEE IN THE PRECEDING YEARS THE ASSESSEE HAS CONSISTENTLY DECLARING GAINS/PROFIT ON THE SALE OF SHARES EITHER LONG TERM CAPITAL GAIN OR SHORT TERM CAPITAL GAIN AND THE SAME HAS BEEN ACCEPTED BY THE A.O. THUS, IN MY CONSIDERED VIEW, THE APPELLANT HAS DISCHARGED THE ONUS OF PROVING THAT IT IS MAKING INVESTMENT IN SHARES AND HAS RIGHTLY SHOWN INCOME ARISING OUT OF IT AS INCOME FROM SHORT TERM CAPITAL GAIN. THE A.O. HAS NOT ACCEPTED THE STAND OF THE APPELLANT DURING THE EYAR BUT HAS NOT BROUGHT ANY EVIDENCE OR FACTS ON RECORD TO SHOW THAT THE FACTS OF THE CURRENT YEAR ARE DIFFERENT FROM THE EARLIER YEA RS. THUS, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE INCOME DERIVED BY THE APPELLANT FROM THE PURCHASE AND SALE OF SHARES CANNOT BE TREATED AS BUSINESS INCOME AND THE SAME SHOULD BE TAXED AS SHORT TERM CAPITAL GAIN. 3. IF THE CONCLUSION DRAWN IN THE IMPUGNED ORDER IS ANALYSED, THERE IS AN UNCONTROVERTED FINDING THAT THE MAIN IN COME OF THE ASSESSEE IS FROM INCOME FROM PARTNERSHIP FIRM AND T HE ASSESSEE DISCLOSED SHORT TERM CAPITAL GAINS ON SALE OF SHARES WHICH IS IN THE NATURE OF INVESTMENT. THE MAJOR POR TION OF INCOME IS FROM IPOS AND THE ASSESSEE HAS NOT MAINTA INED ANY STAFF FOR EARNING THE INCOME FROM SECURITY TRANSACT IONS. THE ASSESSEE ALSO HOLDS SUCH SHARES AFTER TAKING DELIVE RY OF THESE SHARES TO SAFEGUARD HIS INVESTMENTS. ALL THESE FACT S HAVE NOT BEEN DISPUTED BY THE ASSESSING OFFICER. THE MAJOR P ORTION OF 5 INCOME OF RS. 14,16,354/- IS FROM SHARES ALLOTTED I N IPOS ONLY AND THE ASSESSEE DULY DECLARED THE GAINS/PROFITS ON THE SALE OF THE SHARES EITHER FROM LONG TERM CAPITAL GAIN OR SH ORT TERM CAPITAL GAIN WHICH WAS ACCEPTED BY THE ASSESSING OF FICER. IN VIEWE OF THESE FACTS IT IS CLEAR THAT THE ASSESSEE SHOWED THE INCOME ARISING OUT OF SUCH SECURITY TRANSACTION AS SHORT TERM CAPITAL GAINS. EVEN OTHERWISE, IN THE EARLIER ASSES SMENT YEARS THE CLAIM OF THE ASSESSEE WAS ALLOWED BY THE ASSESS ING OFFICER HIMSELF, CONSEQUENTLY, UNDER THE FACTS OF THE PRESE NT APPEAL, SUCH INCOME CANNOT BE TREATED AS BUSINESS INCOME, T HEREFORE, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER, IT IS A FFIRMED. ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE O F LEARNED REPRESENTATIVES FROM BOTH THE SIDES AT THE CONCLUSION OF THE HEARING. SD SD (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19.12.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE 6 DN/-