Shri Dipak Jashvantlal Panchal, Ahmedabad V. The Income tax Officer, Ward-2(3), Ahmedabad

ITA 3916/AHD/2004

• Counselvise Citation: 391620514 RSA 2004
• Duration Of Justice: 7 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-06-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 31-12-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DINVATIA
• Keywords: Business income
• Section: 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI G. C. GUPTA, VP AND SHRI A. MOHAN ALAN KAMONY, AM) ITA NO.3916/AHD/2004 A. Y.: 2001-02 SHRI DIPAK JASVANTLAL PANCHAL, 402-403, SHASHWAT, OPP. GUJARAT COLLEGE, ELLISBRIDGE, AHMEDABAD P.A. NO. ABOPP 7152P VS THE INCOME TAX OFFICER, WARD 2 (3), AHMEDABAD (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI S. N. DINVATIA, AR DEPARTMENT BY SHRI VINOD TANWANI, SR. DR DATE OF HEARING: 11-06-2012 DATE OF PRONOUNCEMENT: 22-06-2012 O R D E R PER A. MOHAN ALANKAMONY: 1. ON AN EARLIER OCCASION THIS APPEAL WAS HEARD AND ORDER WAS PASSED BY THE TRIBUNAL AHMEDABAD BENCHES C ON 30/ 11/2009. SUBSEQUENTLY THE ORDER WAS RECALLED BY ALLOWING ASS ESSEES MISC. APPLICATION NO.212/AHD/2011 IN ITA NO.3916/AHD/2004 VIDE ORDER DATED 30-03-2012 FOR THE LIMITED PURPOSE OF ADJUDIC ATING THE THIRD 2 GROUND OF THE ORIGINAL APPEAL BEFORE THE TRIBUNAL S INCE THAT GROUND WAS OMITTED TO BE ADJUDICATED IN THE FIRST INSTANCE BEFORE THE TRIBUNAL. 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUS INESS OF TRADING IN SHARES AND SECURITIES IN THE NAME OF HIS PROPRIETARY CONCERN M/S. GRACE INVESTMENTS. THE THIRD GROUNDS R AISED BY THE ASSESSEE BEING ELABORATE ARE LISTED HEREIN BELOW FO R OUR CONSIDERATION. 3.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN UPHOLDING THAT THE PROFIT OF RS.5,14,549/- ON SALE OF SHARES OF MNTL, L& T AND KARUR VYSYA BANK WAS A BUSINESS PROF IT OF M/S. GRACE INVESTMENT AND NOT THE STCG ON PERSONAL INVESTMENT ACCOUNT OF THE APPELLANT. 3.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) OUGHT NOT TO HAVE UPHELD THE STCG OF RS.5,14 ,549/- AS BUSINESS PROFIT OF M/S. GRACE INVESTMENT. 3.3 THE LD. CIT(A) HAS ERRED IN DISALLOWING THE SET OFF OF STCG OF RS.5,14,549/- AGAINST STCL BY HOLDING THE S AME AS BUSINESS PROFIT. 3.4 WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTER NATIVE, THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT EVEN THE P URCHASE AND SALE OF UNITS OF K.P. PRIMA FUND, STCL OF RS.929349 /- WHICH HAS BEEN DISALLOWED BY HIM WERE MADE THROUGH M/S. G RACE INVESTMENT SO THAT SUCH LOSS SHOULD HAVE BEEN HELD AS BUSINESS LOSS AND ELIGIBLE FOR SET OFF AGAINST OTHE R BUSINESS PROFIT INCLUDING RS.5,14,549 ASSESSED BY AO AS BUSI NESS PROFIT. 3.5 THE LD. CIT(A) OUGHT TO HAVE CONSIDERED AND DIS POSED OFF THE ROUND NO.3.4 RAISED BEFORE HIM. 3 3. UPHOLDING PROFIT OF RS.5,14,549/- ON PURCHASE A ND SALE OF SHARES TO BE BUSINESS INCOME BY THE LEARNED CIT(A): - THE ASSESSEE HAD PURCHASED SHARES OF MTNL, L&T AND KARU R VYSYA BANK AND SOLD THE SAME WITHIN A SPAN OF APPROX. 3 M ONTHS AND ABOVE AND MADE PROFIT OF RS.5,14,549/-. THE LEARNED AO HELD THE SAME TO BE GAIN ARISING OUT OF TRADING IN SHARES AN D ASSESSED TO TAX UNDER THE HEAD BUSINESS INCOME. THE ASSESSEE HOTLY CONTESTED THE SAME TO BE ASSESSED AS SHORT TERM CAPITAL GAIN BEFO RE THE LD. CIT(A). THE LEARNED CIT(A) AFTER CONSIDERING THE ISSUE HELD THE SAME IN FAVOUR OF THE REVENUE. HIS FINDINGS ARE EXTRACTED H EREIN BELOW FOR READY REFERENCE: 5.1 I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED COUNSEL AND I HAVE ALSO PERUSED THE DETAILS ON RECORD. THE CONTENTIONS OF THE LEARNED COUNSEL ARE NOT TENABLE. THERE IS NO DIFFERENCE IN THE NATURE OF TRANSACTIONS CARRIED OUT BY THE APPEL LANT IN HIS PROPRIETARY CONCERN M/S. GRACE INVESTMENT AND THE T RANSACTIONS IN THE SHARES OF MTNL, L & T AND KARUR VYSYA BANK I N QUESTION. THE MERE FACT THAT THE TRANSACTIONS IN TH ESE SHARES WERE CARRIED OUT IN A DIFFERENT CLIENT CODE IS NOT MATERIAL. THE TRANSACTIONS IN THESE SHARES ALSO WERE CARRIED OUT THROUGH THE SAME BROKERS. THE FACT THAT THE DELIVERY OF SHARES OF KARUR VYSYA BANK WAS ACTUALLY TAKEN DOES NOT MAKE A DIFFE RENCE BECAUSE IN THAT CASE THE TRANSACTIONS IN THIS SHARE TO THE EXTENT ITS DELIVERY WAS ACTUALLY TAKEN WOULD COME OUTSIDE THE PURVIEW OF SECTION 43(5) AND THE TRANSACTIONS WHICH HAVE BE EN CARRIED OUT WITHOUT EFFECTING ACTUAL DELIVERY OF SHARES WIL L HAVE TO BE TREATED AS SPECULATIVE TRANSACTIONS WITHIN THE MEAN ING OF SECTION 43(5). THE FACT THAT THE DELIVERY OF 150 SH ARES OF KARUR VYSYA BANK PURCHASED ON 31.7.2000 WAS ACTUALLY TAKE N, THEREFORE, IS NOT RELEVANT FOR DECIDING THE ISSUE A S TO WHETHER THE TRANSACTIONS IN THESE SHARES WERE CARRIED OUT A S INVESTMENT IN THE NAME OF THE INDIVIDUAL OR THESE WERE THE TRA NSACTIONS IN THE NATURE OF SHARE TRADING. FROM THE FACTS AND MAT ERIAL ON 4 RECORD, IT IS CONCLUSIVELY ESTABLISHED THAT THE PUR CHASES OF 30,405 SHARES OF MTNL ON 6.9.2000, 11.9.2000 AND 18 .9.2000, 1000 SHARES OF L & T ON 15.9.2000 AND 150 SHARES OF KARUR VYSYA BANK ON 31.7.2000 IN QUESTION WERE MADE FOR T HE PURPOSE OF SHARE TRADING AND NOT FOR THE PURPOSE OF MAKING INVESTMENT. IN THE CIRCUMSTANCES, THE PROFIT DERIVE D FROM TRANSACTIONS IN THESE CONSTITUTED THE BUSINESS PROF IT DERIVED FROM THE APPELLANTS SHARE TRADING BUSINESS IN HIS PROPRIETARY CONCERN M/S. GRACE INVESTMENT AND THAT IT IS NOT EL IGIBLE FOR SET OFF AGAINST THE SHORT TERM CAPITAL LOSS SUFFERED BY THE APPELLANT FROM TRANSACTIONS IN THE UNITS OF MUTUAL FUNDS IN V IEW OF THE RIDER IMPOSED U/S. 71(3). ACCORDINGLY, THE FINDINGS OF THE ASSESSING OFFICER THAT THE SHORT TERM CAPITAL GAIN EARNED FROM SALE OF SHARES OF MNTL, L & T AND KARUR VYSYA BANK CONSTITUTED BUSINESS PROFIT DERIVED BY THE APPELLAN T FROM HIS SHARE TRADING AND THAT SUCH PROFIT COULD NOT BE SET OFF AGAINST THE SHORT TERM CAPITAL LOSS INCURRED FROM TRANSACT IONS IN THE UNITS OF KOTHARI PIONEER MUTUAL FUND AND SUN & F C MUTUAL FUND ARE CONFIRMED. 4. THE LEARNED AR REITERATED THE SUBMISSIONS MA DE BEFORE THE FIRST APPELLATE AUTHORITY AND THE LD. DR RELIED ON THE OR DER OF THE REVENUE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD. WE HEREIN BELOW RECAPITULATE T HE TRANSACTIONS FOR BETTER UNDERSTANDING:- SR. NO. NAME OF THE COMPANY & NO. OF SHARES DATE OF PURCHASE PURCHASE VALUE DATE OF SALE SALE VALUE SHORT TERM CAPITAL GAIN EARNED 1 MTNL 20000 11/9/2000 28,20,356/- 2/11/2000 30,67,158/- 2,46,802/- 2 MTNL 5339 6/9/2000 7,52,689/- 7/11/2000 8,66,740/- 1,33,651/- 3 MTNL 2066 18/9/2000 2,91,347/- 7/11/2000 3,43,142/- 51,795/- 4 MTNL 1000 18/9/2000 1,41,018/- 17/11/2000 1,65,610/- 24,592/- 5 MTNL 2000 18/9/2000 2,82,035 24/11/2000 3,01,700/- 19,665/- 6 L&T 1000 15/9/2000 1,97,170/- 18/12/2000 2,06,860/- 9,690/- 7 KARUR VYSYA BANK 150 31/7/2000 27,141/ 15/2/2001 55,295/- 28,154/- TOTAL 5,14,549/- 5 ON PERUSING THESE TRANSACTIONS IT IS APPARENT THAT THE ASSESSEE WAS CONSTANTLY PURCHASING THE SHARES FORM THE MONTH OF JULY, 2002 TO SEPTEMBER, 2000 AND AFTER HOLDING THESE SHARES FOR COUPLE OF MONTHS SOLD THE SAME DURING THE MONTH OF NOVEMBER 2000, DE CEMBER, 2000 AND FEBRUARY, 2001. THUS, ON PERUSING THE NATURE OF THE TRANSACTIONS IT CAN BE OBSERVED THAT THE ASSESSEE WAS CONSISTENT LY PURCHASING THE SHARES AND HOLDING THE SAME WHICH CAN BE CONSTRUED TO BE IN THE NATURE OF INVESTMENTS MADE BY THE ASSESSEE. IN TRAD ING ACTIVITY THERE SHOULD BE CONSTANT PURCHASE AND SALES OF SHARES AND SECURITIES. IN THE INSTANT CASE SUCH CONSTANT PURCHASE AND SALES W ERE ABSENT. THE ASSESSEE HAD MADE INVESTMENT DURING PARTICULAR PERI OD OF TIME AND SUBSEQUENTLY SOLD THE SHARES AND SECURITIES IN ORDE R TO REALIZE GAIN. THUS, IT IS PURELY GAIN ON SALE OF INVESTMENTS AND WILL FALL UNDER THE HEAD SHORT TERM CAPITAL GAIN. THEREFORE, WE HEREBY HOLD THAT THE GAIN OF RS.5,14,549/- ENJOYED BY THE ASSESSEE TO BE ASSE SSED UNDER THE HEAD SHORT TERM CAPITAL GAIN. ACCORDINGLY, GROUND NO.3.1 IS HELD IN FAVOUR OF THE ASSESSEE. FURTHER, THE ASSESSEE HAD PURCHASED AND SOLD THESE SHARES THROUGH THE SOLE PROPRIETORSHIP C ONCERN M/S. GRACE INVESTMENT BELONG TO THE ASSESSEE. AS FAR AS THE IN COME TAX ACT IS CONCERNED, THERE IS NO DISTINCTION BETWEEN AN INDIV IDUAL AND THE SOLE PROPRIETORSHIP FIRM OF THE SAME INDIVIDUAL. BOTH AR E SAME ENTITY. THEREFORE, SET OFF OF GAINS AND LOSSES UNDER THE SA ME HEAD ARE ALLOWABLE WITH RESPECT TO AN INDIVIDUAL AND SOLE PR OPRIETORSHIP CONCERN OF THE SAME INDIVIDUAL. ACCORDINGLY, GROUNDS NO.3.2 AND 3.3 ARE DISPOSED OFF. GROUND NO.3.4 BEING ALTERNATE HAS BECOME REDUNDANT AND GROUND NO.3.5 BEING GENERAL IN NATURE DOES NOT SURVIVE FOR ADJUDICATION. 6 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22-06-2012 SD/- SD/- (G. C. GUPTA) VICE PRESIDENT (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 14-06-12/20-6-12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: