SWATI RAJEEV NADKARNI, MUMBAI V. ASST CIT 11(3), MUMBAI

ITA 4340/MUM/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3264 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 27-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 26-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SARAVANAN
• Assessee Lawyers: VISHWAS V MEHENDALE
• Keywords: Business income
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI RAJESH KUMAR, AM ./ I.T.A. NO 4340/MUM/2012 ( / ASSESSMENT YEAR: 2008-09) SWATI RAJEEV NADKARNI 221, GAVTAN LANE 2, S.V. ROAD, OPP. ANDHERI POST OFFICE, MUMBAI-400 058. / VS. ASST. COMMISSIONER OF INCOME TAX 11 (3), MUMBAI. ./ ./PAN/GIR NO. AAAPN 3547M ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI VISHWAS V. MEHENDALE / RESPONDENT BY : SHRI J. SARAVANAN / DATE OF HEARING : 16/12/2015 !'# / DATE OF PRONOUNCEMENT : 18/01/2016 $% / O R D E R PER RAJESH KUMAR, A. M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 04-06-2012 OF COMMISSIONER OF INCOME TAX (APPEALS)-2, MUMBAI (HER EINAFTER CALLED AS THE CIT(A)) FOR ASSESSMENT YEAR 2008-09. THE ASSESSEE H AS RAISED THE FOLLOWING GROUNDS OF APPEAL: 2 ITA NO. 4340/MUM/2012 (A.Y. 2008-09) SWATI RAJEEV NADKARNI, VS. THE ASST. CIT 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, HON. CIT-A-2 ERRED IN TREATING APPELLANTS INCOME FROM CAPITAL G AINS AS BUSINESS INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, HON. CIT-A-2 ERRED IN MISUNDERSTANDING AND MISINTERPRETING THE F ACTS OF APPELLANTS CASE AND THEREBY ERRED IN HOLDING THAT, THE APPELLANTS INCOME FROM CAPITAL GAINS IS BUSINESS INCOME. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE A LADY DEN TAL DOCTOR ENGAGED IN THE PRACTICE AS DENTAL DOCTOR IN PARTNERSHIP WITH HER H USBAND FILED HER RETURN OF INCOME ON 31.07.2008 DECLARING AN INCOME OF RS. 27,85,570/ - COMPRISING INCOME FROM BUSINESS AND CAPITAL GAIN ON SALE OF EQUITY SHARES. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES U/S 143 (2) AND 142(1) OF THE ACT WERE ISSUED AND SERVED ON THE ASSESSEE. 4. DURING THE COURSE OF SCRUTINY PROCEEDINGS , THE AO FOUND THAT THE ASSESSEE HAD HUGE INCOME FROM SHORT TERM CAPITAL GAIN OF RS . 25,52,383/- AND LONG TERM GAIN OF RS. 1,01,948/- FROM SHARES FROM THE SALE OF SHARES. THE TOTAL SALES OF SHARES WERE RS. 1,14,98,224/- AND PURCHASES WERE RS. 91,41 ,284/- DURING THE YEAR. THE AO FRAMED THE ASSESSMENT ORDER U/S 143(3) OF THE A CT VIDE ORDER DATED 20.12.2010 BY TREATING RS. 26,54,331/- AS INCOME FROM BUSINESS AS AGAINST THE STCG RS.25,52,383/- AND LONG TERM CAPITAL GAIN RS.1,01,9 48/- BY THE ASSESSEE BY HOLDING 3 ITA NO. 4340/MUM/2012 (A.Y. 2008-09) SWATI RAJEEV NADKARNI, VS. THE ASST. CIT THAT THE ASSESSEE WAS DOING TRADING ACTIVITY AND N OT INVESTMENTS AS THE VOLUME OF TRANSACTIONS WERE VERY HIGH. 5. AT THE OUTSET, THE LD AR FOR THE ASSESSEE SUBMIT TED BEFORE US THAT THE CASE OF THE ASSESSEE WAS COVERED IN HER FAVOUR BY THE ORDER OF TRIBUNAL IN ITA NO 5684/MUM/2011 AY 2008-09 IN THE CASE OF THE ASSESSE ES HUSBAND WHICH WAS RENDERED UNDER IDENTICAL FACTS. THE LD COUNSEL FURT HER SUBMITTED THAT THE FACTS OF THE ASSESSEE WERE SIMILAR TO THAT OF HER HUSBAND CASE A S BOTH OF THEM WERE ENGAGED IN PRACTICE UNDER PARTNERSHIP AND WERE DOING FULL TIME PRACTICE OF DENTISTRY BY SIMULTANEOUSLY DOING THE INVESTMENT IN SHARES. THE LD COUNSEL SUBMITTED THAT THE ASSESSEE HAD EARNED SHORT TERM CAPITAL GAIN FROM ON E SHARE NAMELY WALCHAND AMOUNTING TO RS. 27,03,437/- WHICH WERE SOLD ON 7 TH AUGUST, 8 TH OCTOBER, 13 TH NOVEMBER AND 15 TH NOVEMBER,2007. ULTIMATELY THE LD. AR PRAYED THAT T HE APPEAL OF THE ASSESSEE BE ALLOWED IN VIEWS OF THE DECISION OF THE COORDINATE BENCH (SUPRA) IN THE CASE OF ASSESSEES HUSBAND. THE DR ON THE OT HER HAND RELIED ON THE ORDERS OF AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORDS. WE FIND THAT THE ASSESSEEE A DENTAL DOCTOR BY PROFE SSION WAS ENGAGED IN PRACTICE IN PARTNERSHIP WITH HER HUSBAND AND WERE ENGAGED IN FU LL TIME PRACTICE. FROM THE 4 ITA NO. 4340/MUM/2012 (A.Y. 2008-09) SWATI RAJEEV NADKARNI, VS. THE ASST. CIT PAPER BOOK PAGE NO. 8 WE NOTE THAT THE ASSESSEE HAD MADE SUBSTANTIAL GAIN FROM ONE SHARE NAMELY WALCHAND AND HAD EARNED MEAGER G AIN FROM OTHERS AND INCURRED SHORT TERM LOSSES IN MOST OF THE TRANSACTI ONS. FROM THE PAGE NO 6 WE FIND THAT THE ASSESSEE HAD BORROWED FROM FAMILY MEMBERS RS. 18,04,000/- FOR THE PURPOSE OF INVESTMENT IN SHARES. WE FIND MERIT IN T HE CASE OF THE ASSESSEE WHOSE MAIN AND FULL TIME JOB IS TO DO PRACTICE AND NOT SH ARE TRADING. THE ASSESEE HAD MADE SUBSTANTIAL GAINS FROM ONE SHARE AND IF WE LOO K AT THE OVERALL SHARE TRANSACTIONS, WE CAN VERY SAFELY COME TO THE CONCLU SION THAT ASSESEE WAS NOT A TRADER IN SHARES. WE ALSO FIND THAT FACTS WERE SIMI LAR IN THE CASE OF HER HUSBAND IN ITA NO 5684/MUM/2011 AY 2008-09 .THE RELEVANT PARA 5 OF THE SAID DECISION IS EXTRACTED BELOW:- AFTER CONSIDERING THE OVERALL FACTS AND CIRCUMSTANC ES, WE FIND THAT THE ASSESSEE IS NOT DEVOTING HIS FULL TIME TO THE SHARE TRANSACTIONS. THE ASSESSEE IS A DENTIST BY HIS PROF ESSION AND IS RUNNING A CLINIC WITH HIS WIFE. HE HAS SHOWED INCOM E FROM PROFESSION IN HIS RETURN OF INCOME. THE ASSESSEE HA S GAINED A HUGE PROFIT RELATING TO ONE SCRIP ONLY. HE WAS TEMPTED B Y THE UPWARD TREND OF THE MARKET IN RELATION TO THE SAID SCRIP. THE ASSESEE HAS CONSISTENTLY BEEN TREATED AS AN INVESTOR IN EARLIER ASSESSMENT YEARS. EXCEPT THE SAID ONE SCRIP OF WALL CHAND, T HE INVESTMENT PATTERN OF THE ASSESEE HAS REMAINED THE SAME. ONLY BECAUSE THE ASSESSEE HAS GAINED HUGE PROFITS IN ONE SCRIP THAT DOES NOT MAKE THE ASSESSEE A TRADER, ESPECIALLY WHEN THE ASSESEE IN THE SUBSEQUENT YEAR DID NOT MAKE ANY TRANSACTION IN SHA RES AND HAD 5 ITA NO. 4340/MUM/2012 (A.Y. 2008-09) SWATI RAJEEV NADKARNI, VS. THE ASST. CIT INVESTED THE MONEY SO EARNED IN THE FDRS. WHEN THE ASESSEE HAD CONSISTENTLY BEEN AN INVESTOR, MERELY BECAUSE IN ON E YEAR THE ASSESEE GOT A CHANCE TO MAKE PROFITS IN RELATION TO ONCE SCRIP TEMPTED BY THE GROWTH IN SAID SCRIP, THAT ITSELF IS NOT SUFFICIENT TO HOLD THE ASSESEE A TRADER. THE CASE LAWS RELIED UPO N BY THE ASSESEE IN THE CASES OF CIT VS. ASHOK WADIA (SUPRA) AND CIT VS. NEERAJ AMIDHAR SURTI (SUPRA) ARE SQUARELY APPLICAB LE IN THE CASE OF THE ASSESSEE. WE, THEREFORE, DO NOT FIND ANY JUS TIFICATION ON THE PART OF THE LOWER AUTHORITIES IN TREATING THE ASSES SEE AS A TRADER AND ASSESSING THE INCOME EARNED BY THE ASSESSEE ON SHARE TRANSACTIONS AS BUSINESS INCOME. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER AND DIRECT THE AO TO ASSESS THE INCO ME EARNED BY THE ASSESSEE FROM SHARE TRANSACTIONS AS CAPITAL GAI NS. 7. THE CASE OF THE ASSESSEE IS FULLY COVERED BY THE DE CISION OF THE CO- ORDINATE BENCH AND WE, THEREFORE, BY FOLLOWING THE SAME SET ASIDE THE IMPUGNED ORDER AND DIRECT THE AO TO ASSESS THE INCOME EARNED FROM SHARE TRANSACTIONS AS CAPITAL GAIN. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JANUARY, 2016. SD/- SD/- (SAKTIJIT DEY) (RAJESH KUMA R) &' $ / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER ( ) MUMBAI; *$ DATED :18.01.2016 PS. ASHWINI GAJAKOSH 6 ITA NO. 4340/MUM/2012 (A.Y. 2008-09) SWATI RAJEEV NADKARNI, VS. THE ASST. CIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. ./0 ''12 , 12# , ( ) / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, ( ) / ITAT, MUMBAI