ACIT 20(3), MUMBAI V. SANJAY M JHAVERI, MUMBAI

ITA 4039/MUM/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9339 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 11-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 16-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: SHAILENDRA BARDIA
• Keywords: Business income; Earning of tax free income
• Section: 143(3); 14A; 68

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH , ! ' ' ' ' #$ , # ! BEFORE S/SH.JOGINDER SINGH, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.4039/MUM/2011, % % % % & & & & / ASSESSMENT YEAR-2007-08 ACIT 20(3), PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400012 % VS. SANJAY M. JHAVERI, 39, 7-A, NAVJIVAN SOC., LAMINGTON ROAD, MUMBAI-400002 PAN: AAJPJ6873B ( '( / APPELLANT) ( )*'( / RESPONDENT) )* +# )* +# )* +# )* +#. .. . /. C.O.NO.78/M/2012(ARISING OUT OF ITA NO.4039/M/2011, % %% % . . / A.Y.-2007-08 SANJAY M. JHAVERI, 39, 7-A, NAVJIVAN SOC., LAMINGTON ROAD, MUMBAI-400002 PAN: AAJPJ6873B % VS. ACIT 20(3), PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400012 ( '( / APPELLANT) ( )*'( / RESPONDENT) ! - . # / REVENUE BY : SHRI NEIL PHILIP % /0 % /0 % /0 % /0 . . . . # ## # / ASSESSEE BY :SHRI SHAILENDRA BARDIA % % % % - -- - 0 1 0 1 0 1 0 1 / DATE OF HEARING :04 -02-2015 2& - 0 1 / DATE OF PRONOUNCEMENT :04 -02-2015 % % % % , 1961 - -- - 254(1) # ## # 00 00 00 00 #3 #3 #3 #3 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M. # ! #$ # % : CHALLENGING THE ORDER DATED 09.03.2011 OF THE CIT(A )-31, MUMBAI, THE ASSESSING OFFICER (AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW AN D IN THE CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION MADE BY THE AO OF NET SHORT T ERM CAPITAL GAIN OF RS. 26,71,611/- AS ASSESSEE'S BUSINESS INCOME. 2. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW AN D IN THE CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS. 40,95,178/-. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(APPEA LS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUND OR TO SUBMIT ADDITIONAL NEW GROUND WHICH MAY BE NECESSARY. C.O. NO. 78/MUM/2012 ASSESSEE HAS FILED CROSS-OBJECTIONS WHEREIN FOLLOWI NG GROUNDS HAVE BEEN RAISED: 1. THAT THE LEARNED CIT (APPEAL) WAS NOT JUSTIFIED ON FACTS AND IN LAW IN TREATING NET GAIN ON SALE OF SHARES OF ANKUR DRUGS AND PHARMA LTD.AND SERI IN TERNATIONAL LTD. AS HIS INCOME FROM BUSINESS. 2.(I) THAT ON THE FACTS OF THE CASE, THE DIVIDEND I NCOME AS CLAIMED BY THE ASSESSEE IS TRUE AND CORRECT AND THERE IS NO JUSTIFICATION OF SETTING AS IDE THE SAME TO THE LEARNED ITO FOR RE-VERIFICATION AND DISALLOWANCE OF THE PROPORTIONATE EXPENSES. (II) THAT THE LEARNED CIT (APPEAL) WAS NOT JUSTIFIE D ON FACTS AND IN LAW IN GIVING DIRECTION IN ALIA OF THE DISALLOWANCE OF PROPORTIONATE EXPENSES IN RE SPECT OF THE DIVIDEND INCOME. 3. THAT THE CROSS OBJECTOR BE ALLOWED TO ADD, ALTER , AMEND, MODIFY OR WITHDRAW ANY OF THE GROUNDS OF CROSS-OBJECTION(S). ASSESSEE,AN INDIVIDUAL,DEALING IN PARTS OF COMPUTER S, FILED HIS RETURN OF INCOME ON 02.11.2007 DECLARING INCOME OF RS. 3.153 LAKHS.AO COMPLETED TH E ASSESSMENT U/S 143(3) OF THE ACT ON 30. 12.2009,DETERMINING THE INCOME OF THE ASSESSEE AT R S. 74.78 LAKHS. 2 ITA NO. 4039/M/2011 SANJAY M. JHAVERI 2 .FIRST GROUND OF APPEAL DEALS WITH ADDITION MADE BY THE AO UNDER THE HEAD 'SHORT TERM CAPITAL GAINS(STCG)OF RS. 26.71 LAKHS.DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT ASSESSEE HAS SHOWN STCG OF RS. 36.5 LAKHS ON SALE OF EQUITY SHARES. HE ASKED THE AO TO SHOW CAUSE AS TO WHY THE STCG SHOULD NOT BE TREATED AS BUSINESS INCO ME IN VIEW OF VARIOUS PARAMETERS PROVIDED IN CBDT INSTRUCTION NO. 1827 DATED 31.08.1999. THE AO OBSERVED THAT ASSESSEE HAD PURCHASED SHARES OF RS. 5.56 CRORES AND HAD SOLD THE SHARES W ORTH RS. 8.16 CRORES DURING THE YEAR UNDER CONSIDERATION,THAT THE ASSESSEE HAD EARNED A PROFIT OF RS. 32.15 LAKHS, THAT HE CLAIMED STCG FOR THE SAID TRANSACTION HAD PAID TAX @ 10%, THAT ASSES SEE HAD INDULGED IN PURCHASE/SALE OF SHARES AT LARGE SCALE,THAT THE PERIOD OF HOLDING OF THE SHARE S WAS 1- 215 DAYS, IT WAS A CASE WHERE INVESTMENTS WERE LIQUIDATED AT A SHORT SPAN OF TIME ,THAT PURCHASE AND SALE OF SHARES HAD BEEN MADE ON REGULAR AND CONTINUOUS BASIS, THAT SHARES W ERE PURCHASED OUT OF THE BORROWED FUNDS, THAT THERE WAS NO INTENTION OF THE ASSESSEE TO INVEST IN THE SHARES, THAT MOST OF THE SHARES WERE BOUGHT AND SOLD WITHIN THE PERIOD OF THREE MONTHS OF ITS P URCHASES, THAT THE GAIN ON SALE OF THESE SHARES WAS IN THE NATURE OF BUSINESS INCOME AND NOT THE ST CG. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM IT WAS ARGUED THAT THE A SSESSEE WAS DEALING IN SHARES FOR LAST COUPLE OF YEARS AND DURING THAT PERIOD THE INCOME FROM SHA RE TRANSACTIONS WAS TAXED UNDER THE HEAD 'STCG/LTCG DEPENDING UPON THE PERIOD OF HOLDING, TH AT THE PERIOD OF LIQUIDATION OF INVESTMENT WAS FROM 1-190 DAYS,THAT IN SOME CASE INVESTMENTS H AD BEEN HELD THROUGHOUT THE YEAR, THAT INVESTMENT TRANSACTION WERE NOT ON DAY TO DAY BASIS , THAT THEY WERE UNDERTAKEN OCCASIONALLY, THE INCOME ARISING FROM DAY TRADING HAD BEEN SHOWN UNDE R THE HEAD BUSINESS INCOME AND WAS ACCEPTED BY THE AO AS SUCH, THAT ASSESSEE HAD CLAIM ED THE SET OFF OF EARLIER YEARS CARRIED OUT FURTHER FURTHER STCL OF RS. 4.97 LAKHS, THAT AO HAD ALLOWED THE SAME, THE ASSESSEE HAD PAID STT OF RS.1.48 LAKHS, THAT THE SAID AMOUNT WAS NOT CLAI MED TAX PAYMENTS BY THE ASSESSEE FOR THE REASON THAT HE HAD SHOWN GAIN ON THE SALE OF INVEST MENT IN SHARES, THAT THE ASSESSEE HAD VALUED HIS INVESTMENT AT COST ONLY, THAT THE AO HAD DISREGARD THE CIRCULAR NO. 4 OF 2007 ISSUED BY THE CBDT ON 15.06.2007, THAT THE ASSESSEE COULD HAVE TWO POR TFOLIOS, INVESTMENT PORTFOLIO AND TRADING PORTFOLIO. IT WAS FURTHER ARGUED THAT THE PURCHASE AND SALE OF SHARES IN CASE OF THE ASSESSEE WAS OCCASIONAL AND AN INDEPENDENT ACTIVITY, THAT THE UN DERLYING MOTIVE WAS TO MAKE INVESTMENT, THAT THE ASSESSEE HAD MAINTAINED SEPARATE SET OF BOOKS O F ACCOUNTS,THAT HE WAS ENGAGED IN THE TRANSACTION OF PURCHASE AND SALE OF SHARES WHERE NO DELIVERY WAS TAKEN, THAT THE INCOME FROM SUCH TRANSACTION WAS OFFERED UNDER THE HEAD BUSINESS INC OME,THAT HE HAD LIQUIDATED THE INVESTMENT AFTER LAPSE OF REASONABLE TIME THAT MERELY ON THE BASIS O F TURNOVER IT COULD NOT BE CONCLUDED THAT THE ASSESSEE WAS DOING THE BUSINESS OF SHARES. 4. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ASSESSMENT ORDER,THE FAA HELD THAT THE AO HAD NOT APPRECIATED CERTAIN BASIC FACTS, THAT TH E SHARE TRANSACTION OR INVESTMENT IN SHARES WERE NOT THE PRIMARY SOURCE OF LIVELIHOOD/MAIN ACTIVITY OF THE ASSESSEE, THAT THE ASSESSEE WAS BASICALLY ENGAGED IN THE BUSINESS OF TRADING IN COMPUTERS,THA T IN EARLIER YEARS PURCHASE AND SALE OF SHARES WAS DISCLOSED IN HIS RETURNS OF INCOME AS STCG/LTCG , THAT THE ASSESSEE HAD CATEGORISED THE SHARE TRANSACTION AS BUSINESS TRANSACTION, INVESTME NT TRANSACTION,THAT THE TRANSACTIONS WERE NOT AS BUSINESS TRANSACTIONS,THAT SHARES WERE TAKEN BY PHY SICALLY DELIVERY,THAT HE HAD MAINTAINED PROPER BOOKS OF ACCOUNTS, THAT THE SHARES REMAINED UNSOLD AT THE END OF THE YEAR WERE CONSISTENTLY VALUED ON THEIR COST BASIS, HAT THE FINDING OF THE AO THAT THE ASSESSEE HAD USED BORROWED FUNDS FOR PURCHASING SHARE WAS INCORRECT,THAT HE HAD NOT CLAI MED ANY INTEREST EXPENDITURE AGAINST THE STCG, THAT THE ASSESSEE DEALT WITH SHARES OF 7 COMPANY ON LY, THAT EXCEPT THE OF SHARES OF M/S ANKUR DRUGS LTD.(ADL) AND SREI INTERNATIONAL LTD.(SIL) AL L OTHER SHARES WERE OCCASIONALLY PURCHASED AND SOLD BY HIM,THAT IT COULD NOT BE HELD THAT ASSE SSEE CONSISTENTLY AND REPEATEDLY ENGAGED IN THE BUSINESS OF PURCHASE/SALE OF THE SHARES, THAT THE A SSESSEE WAS CONSISTENTLY, FREQUENTLY AND REPEATEDLY CARRYING OUT PURCHASE AND SALES OF THE S HARES ADL AND SIL THROUGHOUT THE YEAR,THAT HE 3 ITA NO. 4039/M/2011 SANJAY M. JHAVERI TRADED IN THOSE TRANSACTION FOR MORE THAN 20-30 TIM ES,THAT THE ABOVE FACTS ESTABLISHED THAT HE WAS TRADER FOR THE SHARES OF ADL AND SIL,THAT THESE SHA RES WERE BOUGHT OUT AND SOLD FOR AND OVER AND ABOVE OTHER REPEATEDLY BY THE ASSESSEE THROUGHOUT T HE PREVIOUS YEAR, THAT HE HAD PURCHASED DIFFERENT LOTS OF SHARES OF ADL ON 35 TIMES/DAYS, T HAT HE SOLD THE SAME A LOTS OF 61 TIMES/DAYS FROM THE YEAR, THAT HE HAD PURCHASED THE SHARES OF SIL 21 TIMES AND SOLD ON 20 TIMES DURING THE YEAR UNDER CONSIDERATION, THAT THOSE TRANSACTIONS WERE MADE REPEATEDLY AND CONTINUOUSLY THROUGH -OUT THE YEAR UNDER APPEAL,THAT HE INCURRED LOSSES ALSO ON CERTAIN OCCASIONS,IT COULD NOT BE HELD THAT HE WAS ENGAGED IN INVESTMENT OF SHARES OF THOS E TWO COMPANIES, THAT HE WAS INTENTIONALLY BUYING AND SELLING THE SHARES OF THOSE COMPANIES AS PER THE MARKET MOVEMENT, THAT THE ASSESSEE WAS A TRADER AND NOT AN INVESTOR AS FAR AS SHARES O F THOSE TWO COMPANIES WERE CONCERNED.FINALLY, HE HELD THAT AO WAS NOT JUSTIFIED IN TREATING THE E NTIRE PROFIT ON SALE OF SHARES AS HIS BUSINESS INCOME EXCEPT IN RESPECT TO THE PROFITS AND GAINS R EALISED IN RESPECT OF SHARES OF ADL AND SIL. THE FAA PARTLY ALLOWED THE APPEAL FILED BY THE ASSE SSEE. 5 .BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR)RELIED UP ON THE ORDER OF THE AO.AUTHORISED REPRES -NTATIVE (AR)SUPPORTED THE ORDER OF THE FAA. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE FAA HAS ANALYSED THE SHARE TRANSACTIONS AT LENGTH IN LIGHT OF THE CBDT CIRCULAR AND HAS ARRIVED AT THE CONCLUSION THAT THE ASSESSEE WAS A INVESTOR FOR MOS T OF THE SHARE TRANSACTIONS.HE FOUND THAT EXCEPT FOR THE SHARES OF ADL AND SIL THE ASSESSEE HAD BEHA VED AS AN INVESTOR.HE FOUND THAT THE ASSESSEE HAD NOT BORROWED ANY MONEY FOR PURCHASING THE SHARE S,THAT EXCEPT FOR THE SHARES OF ADL AND SIL HE HAD HELD THE OTHER SHARES FOR A VERY LONG PERIOD ,THAT HE WAS ENGAGED IN THE BUSINESS OF COMPUTERS.NOT ONLY THIS UNSOLD SHARES WERE VALUED AT COST.CONSIDERING THESE FACTORS WE ARE OF THE OPINION THAT THE ASSESSEE COULD NOT BE TAXED UNDER THE HEAD BUSINESS INCOME FOR THE ENTIRE SHARE TRANSACTIONS.CBDT CIRCULAR HAS RECOGNISED THE PRINC IPLE THAT A PERSON CAN HAVE TWO PORTFOLIOS- HE CAN BE AN INVESTOR AND A TRADER AT THE SAME TIME.AF TER IN DEPTH ANALYSIS OF THE FACTS THE FAA HAD RIGHTLY HELD THAT FOR THE ASSESSEE WAS DOING BUSINE SS OF PURCHASE AND SALE OF SHARES OF ADL AND SIL,THAT IN OTHER CASES HE WAS ONLY INVESTOR.WE DO NOT FIND ANY INFIRMITY IN HIS ORDER. THEREFORE, UPHOLDING HIS ORDER WE DECIDE GROUND NO.1 AGAINST T HE AO. 6. NEXT GROUND OF APPEAL IS ABOUT ADDITION OF RS. 40 L AKHS U/S 68 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT ASSESSEE HAD TAKEN UNSECURED LOANS OF RS. 40.95 LAKHS. IN THIS REGARD THE AO OBSERVED THAT THE ASSE SSEE HAD FILED ONLY THE CONFIRMATION LETTERS AND SAME COULD NOT PROVE THE CREDITWORTHINESS OF THE PE RSONS ADVANCING LOANS.ACCORDINGLY, THE ENTIRE LOAN AMOUNT WAS ASSESSED AS HIS UNEXPALAINED CASH C REDIT (RS. 40,95,178) U/S.68 OF THE ACT. 7. DURING THE APPELLATE PROCEEDINGS,BEFORE THE FAA,THE ASSESSEE ARGUED THAT THE FINDING OF THE AO WERE MOSTLY INCORRECT,THAT THE ASSESSEE HAD ADVANCE D MONEY TO HIS WIFE AND HIS ASSOCIATE CONCERN, THAT SAME WERE RECOVERED BY THE END OF THE YEAR,THA T THEIR ACCOUNTS SHOWED DEBIT BALANCES,THAT ASSESSEE HAD TAKEN A LOAN OF RS.6.350 LAKHS AND 1.5 0 LAKHS FROM M/S MOHANLAL HANSRAJ AND M/S MEHTA CONSULTANCY RESPECTIVELY,THAT IN THE CASE OF M/S MOHANLAL HANSRAJ THERE WAS OPENING BALANCE OF RS. 1 LAKHS, THAT ASSESSEE HAD RECEIVED 2 LAKHS DURING THE RELEVANT YEAR, THAT IN CASE OF MEHTA CONSULTANCY CONCERNS ASSESSEE RECOVERY OF EAR LIER LOAN RS. 5 LAKHS AND THE REST OF FRESH LOAN WERE ONLY RS. 3 LAKHS, THAT ASSESSEE HAD FILED THE CONFIRMATION OF ALL THE CASH CREDITORS INCLUDING THE PARTIES MENTIONED ABOVE, THAT ALL THE RECEIPTS OF THE DEPOSITS/REPAYMENTS WERE BY ACCOUNT PAYEE CHEQUES, THAT THE COPIES OF THE BANK ACCOUNTS STATEMENTS WERE PROVIDED TO THE AO, THAT ALL THE CREDITORS WERE EXISTED IN INCOME-TAX-A SSESSEES, THAT THEIR RECEIPTS OF RETURNS FILED ALON G WITH THE PAN NUMBER WERE DULY MENTIONED IN THE CONF IRMATION LETTERS,THAT THE COPIES OF CONFIRMATION LETTER FROM CASH CREDITORS ALONG WITH THE RELEVANT PAGES OF BANK STATEMENTS OF THE ASSESSEE WERE FURNISHED. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER,THE FAA HELD THAT THE ASSESSEE HAD FURNISHED NECESSARY CONFIRMATIONS FROM ALL THE PARTIES WHICH WERE DULY SUPPORTED 4 ITA NO. 4039/M/2011 SANJAY M. JHAVERI BY THEIR RESPECTIVE BANK ACCOUNT STATEMENTS,COPIES OF THE ACKNOWLEDGEMENT OF RETURNS OF INCOME FILED,BA1ANCE-SHEETS ETC.,THAT AL L THE TRANSACTIONS WERE FOUND RECORDED IN THE CONTRA BANK ACCOUNT STATEMENTS OF THE ASSESSEE AS W ELL AS OF THE RESPECTIVE CREDITORS,THAT ALL THOSE PARTIES WERE FILING THEIR REGULAR RETURNS OF INCOME,THAT THE CONFIRMATIONS AND THE RELATED EVIDENCES FURNISHED BY THE ASSESSEE WERE NO T DISPROVED BY THE AO,THAT MOST OF THE CREDITS PERTAINED TO THE PRECEDING ASSESSMENT YEARS ,THAT THE ASSESSEE HAD DULY DISCHARGED HIS BURDEN AS REQUIRED U/S.68 OF THE ACT,THAT THE CONFI RMATIONS FILED BY THE ASSESSEE WERE NOT DISPROVED BY THE AO,THAT NO CONTRARY EVIDENCES WERE BROUGHT ON RECORD TO PROVE THAT THE CREDITORS WERE INGENUINE OR BOGUS,THAT THE ALL THE TRANSACTION WERE MADE THROUGH REGULAR BANKING CHANNELS. 8. BEFORE US,THE DR RELIED UPON THE ORDER OF THE AO AN D THE AR SUPPORTED THE ORDER OF THE FAA. WE HAVE PERUSED THE MATERIAL ON RECORD.WE FIND THAT THE FAA HAS GIVEN CATEGORICAL FINDING OF FACTS ABOUT FILING OF CONFIRMATION LETTERS OF THE CREDITORS,COPIES OF THEIR BANK ACCOUNTS, ACKNOWLE -DGMENTS OF RETURNS OF INCOME FILED BY THEM.IN OUR OPINION,THESE DOCUMENTS WERE SUFFICIENT TO PROVE THE GENUINENESS OF THE TRANSACTIONS AS WELL A S THE CREDITWORTHINESS OF THE LENDERS.IN OUR OPINION THE ASSESSEE HAD DISCHARGED THE ONUS CAST U PON HIM,BUT THE AO HAD NOT BROUGHT ANY EVIDENCE ON RECORD TO NEGATE THE EVIDENCES PRODUCED BY THE ASSESSEE.IN OUR OPINION,THE AO WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 68 FOR THE LOANS TAKEN IN EARLIER ASSESSMENT YEARS.CONSIDERING THE FACTS AND CIRCUMSTANCES OF TH E CASE,WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OF FACTUAL I NFIRMITY.THEREFORE,CONFIRMING THE SAME WE DECIDED GROUND NO.2 AGAINST THE AO. C.O. NO. 78/MUM/2012 9. FIRST GROUND RAISED IN THE CO IS ABOUT TREATING THE SHARE TRANSACTIONS INCOME,OF ADL AND SIL,AS BUSINESS INCOME.WHILE DECIDING THE APPEAL FILED BY THE AO ABOUT STCG WITH REGARD TO SHARES,WE HAVE DISCUSSED THE FACTS IN LENGTH.AS STATED EARLIE R THE FAA HAD HELD THAT THE TRANSACTIONS UNDERTAKEN BY THE ASSESSEE FOR THOSE TWO COMPANIES COULD NOT BE TAXED UNDER THE HEAD STCG.THE FAA HAS GIVEN FINDING OF FACT THAT THE ASSESSEE WAS BUYING AND SELLING SHARES OF ADL AND SIL IN A SYSTEMATIC AND ORGANISED MANNER,THAT HE TRADED IN SUCH TRANSACTION REGULARLY AND REPEATEDLY.IT IS ALSO CLEAR FROM THE ORDER OF THE FAA THAT THE ASSES SEE WAS A FREQUENT PURCHASER AND SELLER OF THE SHARES OF BOTH THE COMPANIES.THESE FACTS CLEARLY PR OVE THAT THE ASSESSEE COULD NOT BE TREATED AN INVESTOR AS FAR AS SHARE TRANSACTIONS OF THESE TWO COMPANIES ARE CONCERNED.THEREFORE,CONFIRMING THE WELL REASONED ORDER OF THE FAA,WE DECIDE FIRST GROUND AGAINST THE ASSESSEE. 10. SECOND GROUND OF APPEAL IS DIVIDEND INCOME.DURING T HE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD CLAIMED EXEMPTED DIVIDEND INC OME OF RS.2.30 LAKHS.HE DIRECTED THE ASSESSEE AS TO WHY DISALLOWANCE SHOULD NOT BE MADE U/S.14A OF THE ACT.THE ASSESSEE DID NOT RESPOND TO THE NOTICE ISSUED BY THE AO.THEREFORE,HE HELD THAT THE ENTIRE DIVIDEND INCOME HAD TO BE ASSESSED AS BUSINESS INCOME. 11. IN THE APPELLATE PROCEEDINGS,THE ASSESSEE ARGUED TH AT HE HAD NOT INCURRED ANY EXPENDITURE FOR EARNING DIVIDEND INCOME,THAT THERE WAS NO JUSTIFICA TION IN MAKING ANY DISALLOWANCE.HE FILED COPIES OF FINANCIAL STATEMENTS. AFTER CONSIDERING THE ORDERS OF THE AO AND THE SUBM ISSIONS MADE BY THE ASSESSEE,THE FAA HELD THAT THE INFERENCE OF THE AO TO TREAT ENTIRE DIVIDE ND INCOME AS BUSINESS INCOME WAS WITHOUT ANY BASIS,THAT THE ASSESSEE HAD CLAIMED VARIOUS EXPENSE S IN THE P & L A/C.,THAT CERTAIN EXPENSES WERE INCLUSIVE OF INCOME ON ACCOUNT OF SALE OF SHARE,THA T INCOME FROM SHARES HAD TO BE ASSESSED AS BUSINESS INCOME AS WELL AS INCOME FROM CAPITAL GAIN S.REFERRING TO THE DECISION OF GODREJ & BOYCE(43 DTR177)OF HONBLE MUMBAI HIGH COURT,HE HEL D THAT THE AO COULD DISALLOWANCE U/S. 14A OF THE ACT WITHOUT INVOKING THE PROVISIONS OF R ULE 8D.ACCORDINGLY,HE DIRECTED THE AO TO VERIFY THE CLAIM OF THE ASSESSEE ABOUT COMMON EXPEN SES INCURRED FOR EARNING EXEMPT INCOME AND 5 ITA NO. 4039/M/2011 SANJAY M. JHAVERI A MAKE A PROPORTIONATE DISALLOWANCE. 12. BEFORE US,THE AR STATED THAT THE ASSESSEE HAD NOT I NCURRED ANY EXPENDITURE.DR SUPPORTED THE ORDER OF THE FAA.WE HAVE PERUSED THE MATERIAL ON RE CORD AND HAVE HEARD THE RIVAL SUBMISSION. WE FIND THAT THE ASSESSEE HAD NOT FILED ANY DETAILS BEFORE THE AO AND THE FAA HAD ASKED THE AO TO MAKE VERIFICATION OF THE EXPENSES AND DECIDE THE ISSUE OF PROPORTIONATE DISALLOWANCE. IN OUR OPINION,THE ORDER OF THE FAA DOES NOT SUFFER FROM A NY LEGAL INFIRMITY.HE HAS DIRECTED THE AO TO VERIFY THE CLAIM MADE BY THE ASSESSEE ABOUT NOT INC URRING EXPENDITURE FOR EARNING EXEMPT INCOME AND THEN TAKE A DECISION.HIS ORDER IS LEGAL AND JUS TIFIABLE.SO,CONFIRMING THE SAME WE DECIDE GROUND NO.2 AGAINST THE ASSESSEE. AS A RESULT,APPEAL FILED BY THE AO AND THE CO FILED BY THE ASSESSEE STAND DISMISSED. 405 % /0 1 - 6 % /0 7 8 )* +# % 9 : 0 ; . ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH ,FEBRUARY,2015. #3 - 2& # < :% 4 41 , ,, , 201 5 - @ SD/- SD/- ( /JOGINDER SINGH) ( #$ / RAJENDRA) ! / JUDICIAL MEMBER # # # # ! ! ! ! / ACCOUNTANT MEMBER / MUMBAI, :% /DATE: 04.02.2015 SK #3 #3 #3 #3 - -- - )0A )0A )0A )0A B# B# B# B#A&0 A&0A&0 A&0 / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / '( 2. RESPONDENT / )*'( 3. THE CONCERNED CIT(A)/ C D , 4. THE CONCERNED CIT / C D 5. DR E BENCH, ITAT, MUMBAI / AE )0% , . . . 6. GUARD FILE/ 4 * A0 )0 //TRUE COPY// #3 % / BY ORDER, F / DY./ASST. REGISTRAR , /ITAT, MUMBAI