VIKAS WADHWA HUF, MUMBAI V. ITO 19(1)(2), MUMBAI

ITA 447/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8130 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 18-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 20-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VISHWAS V MEHANDALE
• Keywords: Business income

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE HONBLE S/SHRI D. MANMOHAN , VICE-PRESIDENT AND B.R.BASKARAN (AM) , . , . . , ./I.T.A. NO.447/MUM/2012 ( ! ' / ASSESSMENT YEAR : 2006-07) MS VIKAS WADHWA HUF 1 HARI KUNJ 633, P D HINDUJA MARG, KHAR (W), MUMBAI-400052 / VS. INCOME TAX OFFICER 19(1)(2), MUMBAI. ( #$ / APPELLANT) .. ( %&#$ / RESPONDENT) # ./ '( ./ PAN/GIRNO.:AABHV2728K #$ ) / APPELLANT BY : SHRI VISHWAS V MEHANDALE %&#$ * ) /RESPONDENT BY: SHRI SUNIL KUMAR SINGH + , * -. / DATE OF HEARING : 20.8.2014 / '! * -. /DATE OF PRONOUNCEMENT : 26. 9.2014. / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 22.11.2011 PASSED BY LD CIT(A)-22, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2006-07. THE ASSESSEE IS AGGRIEVED BY THE DEC ISION OF LD CIT(A) IN CONFIRMING THE ASSESSMENT OF SHORT TERM CAPITAL GAIN (STCG) AS BUSINESS INCOME OF THE ASSESSEE. 2. THE FACTS RELATING TO THE ABOVE SAID ISSUE ARE S TATED IN BRIEF. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED TH AT THE ASSESSEE HAS DECLARED STCG OF RS.7,48,099/-. IT IS SEEN THAT TH E ASSESSEE HAD SET OFF OF CAPITAL LOSS OF RS.38,331/- AGAINST THE STCG. SI NCE SUCH KIND OF SET OFF OF LOSS IS NOT ALLOWABLE UNDER THE ACT, THE AO RE-WORKED TH E AMOUNT OF STCG DECLARED BY THE ASSESSEE AT RS.7,86,431/- BY DISALLOWING TH E SET OFF OF LONG TERM CAPITAL I.T.A. NO.447/MUM/2012 2 LOSS. HOWEVER, ON PERUSAL OF THE SHARE TRANSACTION S CARRIED OUT BY THE ASSESSEE, THE AO NOTICED THAT THE ASSESSEE HAS BEEN DEALING I N PURCHASE AND SALE OF SHARES FREQUENTLY, I.E, LIKE BUSINESS LIKE ACTIVITI ES. THE AO NOTICED THAT 49 TRANSACTIONS OF SALES AND PURCHASES HAVE BEEN COMPL ETED WITHIN A PERIOD OF ONE MONTH, 42 TRANSACTIONS OF PURCHASES AND SALES WERE COMPLETED WITHIN A PERIOD THREE MONTHS AND 22 TRANSACTIONS OF SALES AND PURCH ASES WERE DONE ON THE VERY SAME DAY. THE VALUE OF SHARES PURCHASED AND SOLD D URING THE YEAR WAS RS.1.93 CRORES AND RS.2 CRORES RESPECTIVELY. ACCORDINGLY, THE AO BY PLACING THE RELIANCE ON VARIOUS CASE LAWS AND CIRCULAR ISSUED BY THE CBD T CAME TO THE CONCLUSION THAT THE ASSESSEE WAS INDULGING IN PURCHASE AND SAL E OF SHARES AS ITS TRADING ACTIVITY AND HENCE IT CANNOT BE CONSIDERED AS AN IN VESTOR. ACCORDINGLY THE AO HELD THAT THE SHORT TERM CAPITAL GAIN OF RS.7,86,43 1/- IS ASSESSABLE AS INCOME FROM BUSINESS. ACCORDINGLY, THE AO ASSESSED THE AM OUNT OF RS.7,86,431/- AS BUSINESS INCOME OF THE ASSESSEE. THE LD. CIT(A) AL SO CONFIRMED THE ACTION OF THE AO AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEF ORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THE QUESTION WHETHER THE SHARE TRANSACTIONS UNDERTAKEN BY AN ASS ESSEE SHOULD BE TREATED AS AN INVESTMENT ACTIVITY OR TRADING ACTIVITY STILL RE MAINS TO BE A HIGHLY DEBATABLE ISSUE. THE COURTS AND THE CBDT THROUGH ITS CIRCULA RS HAVE PRESCRIBED CERTAIN CRITERIA TO BE CONSIDERED TO ANSWER THE ABOVE SAID QUESTION. HOWEVER, THE ABOVE SAID QUESTION IS REQUIRED TO BE ANSWERED ON THE BAS IS OF FACTS AND CIRCUMSTANCES PREVAILING IN EACH CASE BY CONSIDERING VARIOUS CRIT ERIA. THE MOST IMPORTANT FACTOR IS WHAT WAS THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF SHARES AND THE SAID INTENTION HAS TO BE GATHERED FR OM THE CONDUCT OF THE ASSESSEE. 4. IN THE INSTANT CASE, THE ASSESSEE HAS GIVEN POINT WISE CLARIFICATION TO THE ASSESSING OFFICER AND THE SAME HAS BEEN EXTRACTED I N PAGES 3 & 4 OF THE ASSESSMENT ORDER. HOWEVER, THE AO HAS CONSIDERED T HE FOLLOWING FACTS ONLY TO DECIDE ABOUT THE INTENTION OF THE ASSESSEE., VIZ., (A) THE VOLUME OF PURCHASE AND SALE TRANSACTIONS, WHICH WAS RS.1.93 CRORES AND RS.2.00 CRORES RESPECTIVELY. I.T.A. NO.447/MUM/2012 3 (B) ANALYSIS OF NUMBER OF TRANSACTIONS, I.E., THE RE WERE 189 TRANSACTIONS. OUT OF THE ABOVE 22 WERE SPECULATIVE, 49 WERE EFFEC TED WITHIN A MONTH AND 42 WERE EFFECTED WITHIN THREE MONTHS. THE LD CIT(A) ALSO MADE DIFFERENT KIND OF ANALYSIS, WHICH IS EXTRACTED BELOW, FOR THE SAKE OF CONVENIENCE:- .ON PERUSAL OF THE DATA FURNISHED BY THE APPELLAN T IT IS NOTICED THAT IN 48 TRANSACTIONS SCRIPS HAVE BEEN HELD FOR LESS THAN 10 DAYS AND ONLY IN 27 TRANSACTIONS THE SCRIPS ARE HELD FOR MORE THAN 180 DAYS. 25% OF THE TOTAL SHORT TERM CAPITAL GAIN HAS BEEN EARNED FROM THE SC RIPS WHICH HAVE HELD FOR LESS THAN 10 DAYS WHILE ONLY 14% SHORT TERM CAP ITAL GAIN IS EARNED FROM THE SCRIPS HELD FOR MORE THAN 180 DAYS. THE V OLUME AND FREQUENCY IS QUITE HIGH LOOKING INTO THE FACT THAT 189 TRANSA CTIONS HAVE BEEN MADE AT REGULAR INTERVALS, THE RATIO BETWEEN PURCHASE AND S ALE BEING RS.1.93 CRORES AND RS.2 CRORES IS ALSO QUITE HIGH. 5. THUS, IT IS SEEN THAT BOTH THE TAX AUTHORITIE S HAVE ARRIVED AT THE CONCLUSION ON DIFFERENT PARAMETERS. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.1.30 LAKHS AS AGAINST THE SHO RT TERM CAPITAL GAIN WAS ONLY RS.7.86 LAKHS. ACCORDING TO LD A.R THE ABOVE SAID DIVIDEND INCOME IS VERY MUCH COMPARABLE AND PROVES THE INTENTION OF THE ASSESSEE . WE NOTICE THAT THE LD CIT(A) HAS REJECTED THE SAID CLAIM BY HOLDING THAT THE SAID DIVIDEND INCOME WORKS OUT TO ONLY 1.4%. HOWEVER, ACCORDING TO THE LD A.R, THE PROFIT REALIZED ON SALES SHOULD HAVE ALSO BEEN TAKEN INTO ACCOUNT TO C OMPUTE THE RATE OF RETURN. BOTH OF THEM HAVE NOT ADDRESSED THE POINT WISE CLAR IFICATION GIVEN BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. BEFORE US, THE LD A.R SUBMITTED THAT THE CLAIM OF SHORT TERM CAPITAL GAINS WAS ACCEPTED IN T HE EARLIER YEARS AND ALSO IN THE SUBSEQUENT YEARS. THIS FACT WAS ALSO NOT CONSI DERED BY THE TAX AUTHORITIES. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT T HE TAX AUTHORITIES HAVE DECIDED THE CONDUCT AND INTENTION OF THE ASSESSEE WITHOUT C ONSIDERING ALL THE CONTENTIONS OF THE ASSESSEE. ACCORDINGLY, IN OUR VIEW, THIS IS SUE REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THIS ISSUE AFRESH BY DULY ADDRESSING THE POINT WISE CLARIFICATIONS FURNISHED BY THE ASSESSEE BEFORE HIM. AFTER AFFORDING NECESSARY OPP ORTUNITY OF BEING HEARD, THE AO MAY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. I.T.A. NO.447/MUM/2012 4 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPE N COURT ON 26TH SEPT, 2014 . / '! + 0 1 2 326TH SEPT, 2014 * 8, 9 SD SD ( . / D. MANMOHAN ) ( . . ,/ B.R. BASKARAN) / VICE- PRESIDENT / ACCOUNTANT MEMBER + , MUMBAI:26TH SEPT ,2014. . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. #$ / THE APPELLANT 2. %&#$ / THE RESPONDENT. 3. + :- ( ) / THE CIT(A)- CONCERNED 4. + :- / CIT CONCERNED 5. 6. ;<8 %- = , . = ! , + , / DR, ITAT, MUMBAI CONCERNED 8 , / GUARD FILE. > + / BY ORDER, TRUE COPY ' (ASSTT. REGISTRAR) . = ! , + , /ITAT, MUMBAI