ACIT CIR 15(3), MUMBAI V. SAUMIK KETAN DOSHI, MUMBAI

ITA 3826/MUM/2011

• Counselvise Citation: 382619914 RSA 2011
• Duration Of Justice: 3 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 05-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 11-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: V H JARIWALA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E , MUMBAI BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 3826/M/2011 ASSESSMENT YEAR: 2007 - 08 DY. COMMISSIONER OF INCOME TAX, CIR. 15(3), MATRU MANDIR, 1 ST F LR., TARDEO RD., MUMBAI 400 00 7 VS. SHRI SAUMIK KETAN DOSHI, 501, VALLABH APTS., JOSHI LANE, GHATKOPAR (E), MUMBAI 400 077 PAN: AHZPD 3725F (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHR I V.H. JARIWALA, A.R. REVENUE BY : SHRI NEIL PHILIP, D.R. DATE OF HEARING : 19.03. 201 5 DATE OF PRONOUNCEMENT : 17.04. 2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE ORDER OF T HE COMMISSIONER OF INC O ME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] DATED 18.02.2011 RELEVANT TO ASSESSMENT YEAR 2007 - 08. 2. THE SOLE ISSUE RAISED IN THIS APPEAL IS AS TO WHETHER THE INCOME GENERATED FROM THE SALE AND PURCHASE OF SHARES BY T HE ASSESSEE IS TO BE TREATED AS SHORT TERM CAPITAL GAINS AS CLAIMED BY THE ASSESSEE OR AS BUSINESS INCOME AS WAS ASSESSED BY THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO). THE ASSESSEE DURING THE YEAR HAD PURCHASED SHARES OF TWO COMPANIES AND SOLD THE SAME DURING THE YEAR UNDER CONSIDERATION ITSELF AND EARNED GAINS OF ITA NO.3826/M/2011 SHRI SAUMIK KETAN DOSHI 2 RS.72 , 33 , 034/ - WHICH WAS OFFERED BY THE ASSESSEE AS SHORT TERM CAPITAL GAINS. THE AO, HOWEVER, TREATED THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES BY THE ASSESSEE AS BUSINESS ACTIVITY AND THEREFORE ASSESSED THE ABOVE STATED GAINS AS BUSINESS INCOME OF THE ASSESSEE. 3. IN APPEAL, THE LD. CIT(A) ACCEPTED THE CLAIM OF THE ASSESSEE AND DIRECTED THE AO TO TREAT THE INCOME FROM PURCHASE AND SALE OF SHARES AS SHORT TERM CAPITAL GA INS OBSERVING AS UNDER: 3.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND ALSO GONE THROUGH THE ORDER OF THE AO. IN THE DETAILED ORDER, THE AO HAS HELD THAT THE APPELLANT WAS ENGAGED IN THE SYSTEMATIC BUSINESS ACTIVITY AND ACCORDINGLY THE INC OME ACCRUED TO HIM ON SALE OF SHARES WAS AN ACTIVITY CONDUCTED FOR EARNING OF PROFIT AND THUS TO BE TREATED AS BUSINESS INCOME. ON THE CONTRARY, THE APPELLANT DURING THE PROCEEDINGS HAS SUBMITTED THAT ONLY TWO SCRIPTS ON ONE SINGLE DAY I.E. ON 04.10.20 06 WERE PURCHASED AND SOLD ON DIFFERENT DATES IN THE YEAR. APPELLANT HAS FURTHER SUBMITTED THAT THE FREQUENCY, QUANTITY AND VOLUME OF PURCHASE & SALE WAS NOT MUCH AND SYSTEMATIC WHICH CAN BE CALLED AS CONTINUOUS BUSINE SS ACTIVITY. IT IS ALSO SUBMITTED THA T APPELLANT SINCE MANY YEARS IS ENGAGED IN INVESTMENT IN SHARES OF COMP ANIES AND SUCH SCRIPTS WERE SHOW N UNDER 'INVESTMENT' IN THE BALANCE - SHEET AT THE END OF THE YEAR . FURTHER , NO LOAN WAS TAKEN AND INTEREST WAS PAID FOR SUCH PURCHASE OF SHARES BY HIM, T HEREFORE, FROM ANY STRETCH OF IMAGINATION, TWO - THREE STRAY TRANSACTIONS OF SHARES IN ONE DAY CANNOT HE TREATED AS SYSTEMATIC BUSINESS ACTIVITY. THE APPELLANT HAS RELIED UPON THE JUDGEMENT OF HON. MUM BAI HIGH C OURT IN THE CASE OF CIT VS GOPAL P UROHI T REPORT ED IN 228 CTR 582. RELIANCE IS ALSO PLACED ON THE DECISION IN THE CASE OF SARANATH INFRASTRUCTURE 120 TTJ 216 (LUCK). KEEPING IN VIEW THE FACTS THAT T HE APPELLANT WAS SHOWING CONSTANTLY THE INVESTMENT IN THE BALANCE - SHEET IN HIS INDIVIDUAL CAPACITY AND MOR EOVER NO LOAN WAS TAKEN FOR PURCHASE OF SUCH S HARES, IN MY OPINION, THE INCOME ON SUCH TRANSACTION OF SHARES HAS WRONGLY BEEN TREATED AS BUSINESS INCOME BY THE AO IN THE ORDER. THE AO IS DIRECTED TO DELETE THE ADDITION AS BUSINESS INCOME AND TAX THE INCOME AS SHORT TERM CAPITAL GAIN OF RS.72,33,034/ - SHOWN BY THE APPELLANT IN THE RETURN OF INCOME. THE GROUND OF APPEAL IS ALLOWED. 4. AGAINST THE ORDER OF THE LD. CIT(A) THE REVENUE HAS COME IN APPEAL BEFORE US. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE LD. REPRESENTATIVES OF THE PARTIES. ADMITTEDLY, THE ASSESSEE HAD PURCHASED THE SCRIPTS OF TWO COMPANIES ONLY THAT TOO ON A SINGLE DAY I.E. ON 04.10.2006. THE ABOVE PURCHASED SHARES WERE SOLD BY THE ASSESSEE ON 4 - 5 DIFFERENT DATES. EXCEPT THE ITA NO.3826/M/2011 SHRI SAUMIK KETAN DOSHI 3 ABOVE T RANSACTIONS, THE ASSESSEE DID NOT CARRY OUT ANY OTHER SHARE TRANSACTION DURING THE YEAR. THERE WAS NO CHURNING OF THE PORTFOLIOS I.E. NO REPEATED SALE AND PURCHASE OF THE SAME SCRIPT. NO LOAN WAS TAKEN FOR THE PURCHASE OF THE SHARES. THE SHARES WERE SHO WN AS INVESTMENT IN THE BALANCE SHEET OF THE ASSESSEE. THE LD. CIT(A), AFTER APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, HAS HELD THAT FROM ANY STRETCH OF IMAGINATION, 2 - 3 STRAY TRANSACTIONS OF SHARES DONE BY THE ASSESSEE CANNOT BE TREATED AS SYSTEMATIC BUSINESS ACTIVITY. THE LD. CIT(A), AFTER RELYING UPON THE VARIOUS JUDICIAL DECISIONS ON THE ISSUE, HAS GIVEN A WELL REASONED FINDING THAT ACTIVITY OF THE ASSESSEE IN SHARES TRANSACTIONS CANNOT BE TREATED AS BUSINESS ACTIVITY. WE DO NOT FIND A NY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS THEREFORE UPHELD. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.04. 201 5 . SD/ - SD/ - ( R.C. SHA RMA ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 17.04.2015 . * KISHORE , SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.