ACIT 25(2), MUMBAI V. PRAKASH SEVANTILAL DOSHI, MUMBAI

ITA 4710/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78769 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-03-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 10-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Assessee Lawyers: RAVINDRA SABNIS
• Keywords: Business income; Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI R.C SHARMA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 4710/MUM/2011 ASSESSMENT YEAR: 2008-09 ACIT 25(2) BLDG NO. C-11, IST FLOOR, R. NO. 108, PRATYAKSHAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (E) MUMBAI-400 051 VS. SHRI PRAKASH SEVANTILAL DOSHI A/502, MARBAL ARCH. 5 TH FLOOR TPS ROAD, BORIVALI (W) MUMBAI- 400 092 (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :-ABQPD 4239 H ASSESSEE BY : SHRI RAVINDRA SABNIS REVENUE BY : SHRI M. L. PERUMAL DATE OF HEARING : 13.03.2014 DATE OF PRONOUNCEMENT : 22.04.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD.CIT(A)-35, MUMBAI DATED 23.03.2011 FOR THE ASSES SMENT YEAR 2008-09. 2. IN THIS APPEAL, THE REVENUE HAS AGITATED THE DEC ISION OF THE LD.CIT(A) IN DIRECTING THE AO TO ACCEPT THE CLAIM OF THE ASSESSE E SHOWING A SHORT TERM CAPITAL GAIN AT RS.48,94,887/- OUT OF PURCHASE AND SALE OF SHARES AS AGAINST THE AO TREATING THE SAME AS BUSINESS INCOME. 3. BRIEFLY STATED, THE ASSESSEE, AN INDIVIDUAL WHIL E DECLARING A TOTAL INCOME AT RS.49,14,746/-, HAD SHOWN A SHORT TERM CAPITAL GAIN OF RS.48,94,887/- AND A LONG TERM CAPITAL GAIN OF RS.1,43,400/- ON SALE OF SHARE S WHEREIN THE LONG TERM CAPITAL GAIN WAS CLAIMED AS EXEMPT U/S 10(38). THE ASSESSEE DECLARED THE SAID SHORT TERM CAPITAL GAIN OF RS.48,94,887/- AFTER CLAIMING DEMAT CHARGES OF RS.1,26,758/-. IN THE ASSESSMENT FRAMED U/S 143(3), THE AO TREATED THE IN COME OF SHORT TERM CAPITAL GAIN AS INCOME FROM BUSINESS. THE AO, AFTER CONSIDERING THE REGULARITY, VOLUME AND THE TURNOVER, PERIOD OF HOLDING OF SHARES, ARRIVED AT T HE CONCLUSION THAT THE SAID INCOME ITA NO. 4710/MUM/2011 SHRI PRAKASH SEVANTILAL DOSHI ASSESSMENT YEAR: 2008-09 2 HAD TO BE TREATED AS BUSINESS INCOME. ON APPEAL, TH E LD.CIT(A) DIRECTED THE AO TO TREAT THE SAID INCOME AS SHORT TERM CAPITAL GAIN AS CLAIMED BY THE ASSESSEE. AGGRIEVED BY THE IMPUGNED ORDER THE ASSESSEE IS IN APPEAL BEFORE US. 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, THE SHARES IN RESPECT OF WHICH THE ASSESSEE HAS CLAIMED THE SH ORT TERM CAPITAL GAIN AS APPEARING IN THE ORDERS OF THE AUTHORITIES BELOW IS EXTRACTED HEREUNDER:- PERIOD NO. OF TRANSACTIONS PURCHASE VALUE IN RS. SALES VALUE IN RS. GAIN/(LOSS) IN RS. 0-1 MONTHS 57 15909742 15527641 (382101) 1-2 MONTHS 42 16671385 13154564 (3516821) 2-3 MONTHS 14 159651 193976 34325 3-4 MONTHS 6 76097 97357 21260 4-5 MONTHS 15 1576369 1710514 134145 5-6 MONTHS 8 942496 1016050 73554 6-7 MONTHS 10 1081801 1373636 291835 7-8 MONTHS 15 1768725 2807016 1038291 8-9 MONTHS 3 90760 104175 13415 9-10 MONTHS 4 189086 217705 28619 10-11 MONTHS 12 1869100 9125944 7256844 11-12 MONTHS 3 31250 46894 15644 MORE THAN ONE YEAR (WRONGLY INCLUDED UNDER SHORT TERM CAPITAL GAIN) 4 27873 40507 12634 5021645 IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS ONLY O NE ACTIVITY OF DEALING IN SHARES I.E., DELIVERY BASED AND ACCORDINGLY THE ASSESSEE HAS TRE ATED THE SAME UNDER THE HEAD CAPITAL GAINS. THERE ARE NO TRANSACTIONS OF PURCHAS E AND SALE OF SHARES WHERE NO DELIVERY HAS BEEN TAKEN OR GIVEN. IT IS ALSO PERTIN ENT TO MENTION THAT THE ASSESSEE HAS TRANSFERRED ALL THE SHARES IN RESPECT OF WHICH THE CAPITAL GAIN IS ADMITTED IN THE NAME OF THE ASSESSEE AS PER THE DEMAT ACCOUNT AND P AID SIT AT THE RATE APPLICABLE TO THE INVESTMENT. IT IS ALSO OBSERVED THAT THE ASS ESSEE HAS INVESTED MAINLY HIS SURPLUS FUNDS IN SHARES IN THE PAST MANY YEARS AND THE INVESTMENT IN SHARES HAS BEEN CONSISTENTLY SHOWN AS INVESTMENT IN THE BALANC E SHEET FILED WITH THE RETURN OF INCOME AND PROFIT OF SALE OF SHARES HAS BEEN ADMITT ED UNDER THE HEAD CAPITAL GAINS. FOR THE ASSESSMENT YEAR 2006-07 AND 2007-08, THE AS SESSEE HAS DECLARED THE PROFIT ITA NO. 4710/MUM/2011 SHRI PRAKASH SEVANTILAL DOSHI ASSESSMENT YEAR: 2008-09 3 ON SALE OF SHARES UNDER THE HEAD SHORT TERM/LONG TE RM CAPITAL GAIN, WHICH HAVE BEEN ADMITTED BY THE DEPARTMENT. DURING THE YEAR UNDER C ONSIDERATION ALSO THERE IS NO DISPUTE THAT THE SHARES ARE SHOWN AS INVESTMENT IN BALANCE SHEET AT COST FROM YEAR TO YEAR. THIS INDICATES THAT THE ASSESSEE HAS NOT F OLLOWED THE METHOD OF STOCK VALUATION OF LOWER COST OR MARKET VALUE. AS PER THE SAID METHOD, VALUE OF THE INVESTMENT AS ON 31.03.2008 HAS BEEN RS.97,96,853/- AS AGAINST THIS THE ASSESSEE HAS SHOWN THE INVESTMENT IN SHARES AT RS.1,42,79,51 5/- AS OBSERVED BY THE LD.CIT(A). THOUGH THE SAID METHOD MAY RESULT IN SUB STANTIAL LOSS TO THE ASSESSEE, THE ASSESSEE HAS NOT CLAIMED SUCH LOSS BY ADOPTING SUCH VALUATION. FURTHER, THE ASSESSEE HAS PAID STT AT THE RATE APPLICABLE TO THE INVESTOR WHICH IS ALSO NOT DISPUTED BY THE REVENUE. THE LD.CIT(A), IN HIS FIND INGS HAS FURTHER OBSERVED THAT THE ASSESSEE HAS NOT SOLD MOST OF THE SHARES WITHIN VER Y FEW DAYS AND MANY SHARES HAVE BEEN HELD BY THE ASSESSEE FOR MORE THAN SIXTY DAYS. CONSIDERING THE FACTS IN TOTO, IT IS VERY CLEAR THAT THE INTENTION OF THE AS SESSEE IS ONLY TO BE AN INVESTOR AND NOT INTENDED DO ANY BUSINESS ACTIVITY. IN THIS CONN ECTION, THE LD.CIT(A) HAS CORRECTLY RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASES OF JANAK S. RANGWALLA VS. ACIT (11 SOT 627), DCIT VS. SMK SHARES AND STOCK BROKING PVT. LTD. IN ITA NO. 799MUM/2009 DATED 24.11.2010 FOR A.Y. 05-06 FOR ARRIVING AT CONCLUSION THAT FREQUENCY AND MAGNITUDE OF TRANSACTIONS ALONE CANNO T BE THE CRITERIA FOR DETERMINING THE HEAD OF INCOME. THE LD.CIT(A) HAS A LSO RELIED ON THE DECISIONS OF THE TRIBUNAL IN THE CASE OF GOPAL PUROHIT VS. JCIT (29 SOT 179) , WHICH HAS BEEN AFFIRMED BY THE HONBLE BOMBAY HIGH COURT IN RESPEC T OF THE PRINCIPLE OF CONSISTENCY TO BE FOLLOWED IN THE CASE OF THE ASSESSEE. CONSIDE RING THE ENTIRETY OF FACTS AND THE POSITION OF LAW, WE ARE OF THE CONSIDERED OPINION T HAT THE LD.CIT(A) IS JUSTIFIED IN DIRECTING THE AO TO ACCEPT THE CLAIM OF THE ASSESSE E SHOWING PROFIT ON SALE OF SHARES UNDER THE HEAD SHORT TERM CAPITAL GAIN AND THUS THE SAME IS UPHELD. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF APRIL, 2014. SD/- SD/- (R.C. SHARMA) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 22.04.2014. *SRIVASTAVA ITA NO. 4710/MUM/2011 SHRI PRAKASH SEVANTILAL DOSHI ASSESSMENT YEAR: 2008-09 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.