ACIT 13(3), MUMBAI V. KIRIT L.LAPSIA, MUMBAI

ITA 3964/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100918 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 17-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R KIRTANE
• Keywords: Business income
• Section: 143(3)

Judgement Text

1 , INCOME TAX APPELLATE TRIBUNAL,MUMBAI A BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & PARTHASAR ATHY CHOUDHURY,JUDICIAL MEMBER /. ITA NO. 3964 /MUM/20 13 , / ASSESSMENT YEAR - 200 8 - 09 A.C.I.T - 13(3) ROOM NO.427, A A YAKAR BHAVAN M.K. ROAD MUMBAI - 400 0 20 . VS SHRI KIRIT L. LAPSIA 334, MULRATNA BU ILDING N.N. STREET , MUMBAI - 400 0 09 . PAN: A AA PL 7289 E ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : NONE / REVENU E BY : SHRI S. R. KIRTANE / DATE OF HEARING : 01 - 09 - 2015 / DATE OF PRONOUNCEMENT : 04 - 0 9 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT. 16.2.2013 OF CIT(A) - 24, MUMBAI, THE ASSESSING OFFICER(AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL : 1. (I) ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE INCOME OF RS.14,42,328/ - ON SALE OF SHARES AS SHORT TERM CAPITAL GAIN AS SHOWN BY THE ASSESSEE AS THE INCOME ON SALE OF SHAR ES WAS TREATED AS AGAINST BUSINESS INCOME TREATED BY THE AO . (II) THE LD. CIT(A) HAS FURTHER ERRED IN NOT APPRECIATING THE FACTORS LIKE VOLUME OF TRANSACTIONS, FREQUENCY, PERIOD OF HOLDING, AS CRITERION TO DETERMINE THE NATURE OF TRANSACTION. 2. THE APPEL LANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND, IF NECESSARY. ASSESSEE,AN INDIVIDUAL, IS A PARTNER IN A F IRM AND IS DERIVING INCOME FROM REMUNERATION AND INTEREST.HE HAD SHOWN INCOME UNDER THE HEADS LONG TERM CAPITAL GAIN(LT CG) AND SHORT TERM CAPITAL GAIN (STCG) OF RS.5.93 LACS AND RS.14.42 LACS RESPECTIVELY FOR THE YEAR UNDER APPEAL.IN ADDITION TO IT, HE HAD S HOWN INCOME FROM OT HER SOURCES, AMOUNTING TO RS.15.88 LACS. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT TREATING THE STCG UNDER THE HEAD CAPITAL GAINS.DURING THE ASSESSMENT PROCEEDINGS, THE AO HELD THAT THERE WERE NUMEROUS TRANSACTIONS OF SHARES IN LARGE QUANTITY .HE DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY THE CAPITAL GAINS EARNED DURING THE YEAR SHOULD NOT BE TREATED AS BUSINESS INCOME.IN HIS REPLY, THE ASSESSEE EXPLAINED THAT HE DID NOT POSSESS ANY SKILL TO DERIVE PROFITS ON SALE OF SHARES, THAT NO INFRASTRUCTU RE WAS EMPLOYED, THAT THE SHARES WERE TREATED AS INVESTMENT, THAT THE INVESTMENTS WERE MADE OUT OF HIS OWN FUNDS. HOWEVER, THE AO DID NOT AGREE WITH THE ASSESSEE AND HELD THAT HE WAS ENGAGED IN REAL, SUBSTANTIAL AND SYSTEMATIC BUSINESS ACTIVITY WITH A PURPO SE TO EARN INCOME, THAT THE REAL INTENTION OF THE ASSESSEE WAS TO MAXIMIZE HIS PROFIT, THAT THE ASSESSEE HAD EARNED D I V I D END INCOME OF RS.2.43 LACS, THAT TO REGULARLY MONITOR THE MOVEMENT OF SHARES AND TO MINIMIZE THE RISK THE ASSESSEE HAD ITA/ 3964 /M/ 13 - KIRIT L. 2 OPTED FOR PMS SC HEME, THAT THE PORTFOLIO MANAGERS ON HIS BEHALF HAD MADE INVESTMENT IN SHARES TO MAKE PROFIT.FINALLY, HE HELD THAT INCOME SHOWN AS STCG THROUGH PMS SCHEME OF RS.14.42 LACS WAS TO BE CONSIDERED AS BUSINESS INCOME. 3. AGGRIEVED BY THE ORDER OF THE AO , THE ASSE SSEE PREFERRED AN APPEAL BEFOR E THE FIRST APPELLATE AUTHORITY (F A A ).BEFORE HIM, HE E MADE ELABORATE SUBMISSIONS. A FTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASS ESSMENT ORDER, THE F AA HELD THAT SHARES WERE DISCLOSED AS INVESTMENT IN THE BALANCE SH EET OF THE ASSESSEE , THAT HIS CONDUCT IN DEALING THE SHARES SHOWED THAT HIS INTENTION WAS TO HOLD SHARES AS AN INVESTMENT AND NOT AS TRADING ASSETS,THAT ALL THE SHARES IN RESPECT OF WHICH ASSESSEE HAD CLAIMED STCG WERE HELD FOR A SUFFICIENTLY LONG PERIOD OF TIME, THAT OUT OF TOTAL TRANSACTIONS 86.8 6 % OF THE SHARES WERE HELD FOR MORE THAN 30 DAYS, THAT IN MORE THAN 60% OF THE CASES THE SHARES WERE HELD FOR MORE THAN 60 DAYS, THAT ONLY 13.14% OF THE CASES THE SHARES WERE HEL D BETWEEN 15 - 30 DAYS , THAT THE ASSES SEE HAD NOT TAKEN ANY LOAN F OR MAKING INVESTMENT IN SHARES, THAT THE ASSESSEE WAS ACTIVELY INVOLVED IN THE BUSINESS OTHER THAN THE ACTIVITY OF DEALING IN SHARES, THAT THE ASSESSEE HAD NOT ENGAGED ANY PORTFOLIO MANAGER FOR MANAGING HIS SHARES .H E FURTHER OBSE RVED THAT IN THE APPELLATE PROCEEDINGS FOR AY . 06 - 07 THE THEN F A A HAD ALLOWED THE CLAIM OF THE ASSESSEE OF STCG OF RS.35.11 LACS AND LTCG OF RS.19.52 LACS RESPECTIVELY AND HAD HELD HE WAS AN INVESTOR, THAT IN THE AY . 05 - 06 THE AO HAD HIMSELF TREATED THE ASSE SSEE AS AN INVESTOR IN SHARES AND HAD ALLOWED CLAIM OF CAPITAL GAINS OF RS.39.21 LACS,INCLUDING RS. 29.23 LACS OF STCG , THAT IN AY . 2003 - 04 ALSO THE ASSESSEE WAS TREATED AS INVESTOR IN SHARES, THAT ALL THESE ASSESSMENTS WERE COMPLETED U/S. 143(3) OF THE A CT.F INALLY , HE ALLOWED THE APPEAL FILED BY THE ASSESSEE . 4. BEFORE US, THE DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO. NOBODY APPEARED ON BEHALF OF THE ASSESSEE . ON A SPECIFIC QUERY BY THE BENCH THE DR CONCEDED THAT THE AO HAS NOT MENTIONED ANYTHING ABOUT THE FREQUENCY OF SHARES TRADED, VOLUMES OF SHARES TRANSACTIONS, BORROWING OF FUNDS FOR M AKING INVESTMENT IN SHARES ETC. WE FIND THAT THE AO HAD MADE GENERAL OBSERVATION WITHOUT GIVING ANY DETAILS.THE F A A HAS ANALYSED THE HOLDING PATTERN OF SH ARES AND OTHER RELEVANT FACTS WHILE DECIDING THE APPEAL. WE ARE OF THE OPINION THAT FACTORS - LIKE HOLDING PERIOD, INVEST MENT OF OWN FUND BY THE ASSESSEE ,TREATMENT GIVEN IN THE BOOKS OF ACCOUNT BY HIM AND THE ASSESSMENTS OF EARLIER YEARS - CUMULATIVELY PROVE TH AT ASSESSEE WAS AN INVESTOR AND NOT A TRADER. AS, THE ORDER OF THE F A A DOES NOT SUFFER FROM ANY LEGAL OF FACTUAL INFIRMITY ,THEREFORE, CONFIRMING HIS ORDER WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DI SMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH SEPTEMBER ,2015. 04 TH , 2015 SD/ - SD/ - ( / PARTHASARATHY CHOUDHURY) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 04 . 09 . 2 015 . . . JV. SR.PS. / COPY OF THE ORDER FORWARDED TO : ITA/ 3964 /M/ 13 - KIRIT L. 3 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.