DINESH KUMAR AGARWAL, Jaipur V. ACIT, Jaipur

ITA 489/JPR/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5652 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 03-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI D DHK
• Keywords: Business income; Search and seizure; Accommodation entries
• Section: 43(5)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 489/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 SHRI DINESH KUMAR AGARWAL 1057, PANO KA DARIBA SUBHASH CHOWK, JAIPUR CUKE VS. THE ACIT CIRCLE- 1 , JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: ABHPA 4416 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: NONE (DATE WAS NOTED) JKTLO DH VKSJ LS@ REVENUE BY: SMT. POONAM RAI, DCIT-DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 16/01/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 19 /01/2017 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)I, JAIPUR DATED 6-02-2013 FOR THE ASSESSMENT YEAR 2008-09 RAISING FOLLOWING GROUNDS OF APPEAL. 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACT IN UPHOLDING AOS ORDER OF INVOKING THE PROVISION OF S ECTION 145(3) IN SPITE OF FACT THAT REGULAR AND PROPER BOO KS OF ACCOUNTS ARE MAINTAINED BY THE APPELLANT DULY AUDIT ED UNDER FACTS AND CIRCUMSTANCES OF THE CASE, HE OUGHT TO HA VE ASSESSED THE INCOME AS PER STATEMENT OF ACCOUNTS SU BMITTED. ITA NO.489/JP/2013 SHRI DINESH KUMAR AGARWAL VS. ACIT,CIRCLE-1,JAIPUR 2 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACT IN UPHOLDING AOS ORDER BY TREATING SHORT TERM CAPITAL GAIN AS BUSINESS INCOME AS ASSESSEE HAS PURCHASE AND SALE S HARES AND HAS GAIN AS SHORT TERM CAPITAL GAIN OF RS. 11,5 5,663/- BUT AO HAS TREATED THE SAME AS BUSINESS INCOME INSTEAD OF SHORT TERM CAPITAL GAIN WHICH IS WRONG AND UNJUSTIFIED DE SERVES TO BE DELETED. 2.1 NONE APPEARED ON BEHALF OF THE ASSESSEE IN SPIT E OF NOTING THE DATE FIXED FOR HEAING ON 16-01-2017. CONSEQUENTLY THE BE NCH IS LEFT WITH NO ALTERNATIVE BUT TO DECIDE THE APPEAL ON MERITS, EX PARTE QUA THE ASSESSEE, AFTER HEARING LD. DR AND AFTER PERUSAL OF THE MATER IALS AVAILABLE ON RECORD. 3.1 APROPOS GROUND NO. 1 AND 2 OF THE ASSESSEE, TH E FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- GROUND NO.1 4.3 I HAVE CAREFULLY PERUSED THE ORDER OF THE AO AND THE SUBMISSIONS OF THE A.R. IT IS A FACT THAT P URCHASES FROM M/S. CENTURY GEMS, M/S. ANSHU GEMS & M/S. VIJA Y GEMS COULD NOT BE VERIFIED AND TO THAT EXTENT THE A SSESSEE FAILED TO DISCHARGE ITS ONUS OF GETTING THE PURCHAS ES VERIFIED. THE HON'BLE ITAT JAIPUR BENCH HAS CONSISTENTLY HEL D IN THE CASE OF GEMS AND JEWELLERY TRADERS OF JAIPUR THAT U N- VERIFIABILITY OF PURCHASES ARE A SUFFICIENT GROUND FOR INVOKING THE PROVISIONS OF SECTION 145(3). THEREFORE, THE DE CISION OF THE AO TO REJECT THE BOOKS OF ACCOUNTS OF THE ASSES SEE BY INVOKING THE PROVISIONS OF SECTION 145(3) IS UPHELD . ITA NO.489/JP/2013 SHRI DINESH KUMAR AGARWAL VS. ACIT,CIRCLE-1,JAIPUR 3 GROUND NO. 2 6.3 I HAVE CAREFULLY PERUSED THE ORDER OF THE AO AN D THE SUBMISSIONS OF THE AR. AS PER THE DETAILS NOTE D BY THE AO ON PAGE 9 OF HER ORDER, IT IS SEEN THAT THE APPE LLANT SOLD AND PURCHASED SHARES OF ICICI BANK AND RELIANCE POW ER ON THE SAME DATE RESULTING IN PROFITS. SINCE THE TRAN SACTIONS ARE INTRA-DAY THEY ARE CLEARLY SPECULATIVE AS PER THE P ROVISIONS OF SECTION 43(5) WHICH IS QUOTED BELOW FOR QUESTION CL ARITY: SPECULATIVE TRANSACTION MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY CO MMODITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULT IMATELY SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OR TR ANSFER OF THE COMMODITY OR SCRIPS. THE AR OF THE APPELLANT HAS NOT GIVEN ANY REASON AS TO WHY INTRA-DAY TRANSACTIONS ARE NOT TO BE TREATED AS SPECULATIVE TRANSACTIONS CONSIDERING THAT THE SCRIP S COULD NOT HAVE BEEN DELIVERED ON THE SAME DATE OF PURCHASE AN D SALE. THE ARGUMENTS FURNISHED ARE, THEREFORE, NOT RELEVAN T TO THE FACTS OF THE CASE OF THE APPELLANT. IT IS, THEREFO RE, HELD THAT THE INTRA-DAY TRANSACTIONS IN SCRIPS WERE SPECULATI VE TRANSACTIONS AS DEFINED BY SECTION 43(5) AND SO THE INCOME FROM THESE SPECULATIVE TRANSACTIONS IS REQUIRED TO BE TAXED AS BUSINESS INCOME UNDER EXPLANATION 2 TO SECTION 28. THEREFORE, THE DECISION OF THE AO TO TREAT RS. 11,5 5,663/- AS BUSINESS INCOME U/S 43(5) IS CONFIRMED . 3.2 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 3.3 I HAVE HEARD THE LD. DR AND PERUSED THE MATERIA LS AVAILABLE ON RECORD. AS REGARDS GROUND NO. 1 OF THE ASSESSEE, IT IS NOTICED THAT THE ASSESSEE FIRM DERIVED INCOME FROM MANUFACTURING AND TRADING OF GEM ITA NO.489/JP/2013 SHRI DINESH KUMAR AGARWAL VS. ACIT,CIRCLE-1,JAIPUR 4 STONES AND JEWELLERY, CAPITAL GAINS AND OTHER SOURC E. IT IS FURTHER NOTED THAT THE ASSESSEE HAD SHOWN PURCHASES FROM M/S. CEN TURY GEMS, M/S. ANSHU GEMS AND M/S. VIJAY GEMS. HOWEVER, THE INVEST IGATION WING OF THE DEPARTMENT DURING SEARCH AND SEIZURE PROCEEDING S IN CERTAIN CASES FOUND THAT M/S. CENTURY GEMS, M/S. ANSHU GEMS AND M /S. VIJAY GEMS WERE INDULGING IN PROVIDING ENTRIES LIKE ISSUING SA LE BILLS WITHOUT ACTUAL DELIVERY OF GODS. BESIDES THIS, THE BCTT WING OF TH E INCOME-TAX DEPARTMENT CONDUCTED SURVEYS IN VARIOUS CASES IN TH E YEAR 2007-08. DURING THE COURSE OF SURVEY, IT WAS FOUND THAT VARI OUS PERSONS WERE INDULGING IN THE PRACTICE OF ISSUING BOGUS BILLS IN THE TRADE OF GEMS AND JEWELLERY AND THEY HAD ADMITTED IN THEIR RESPECTIVE STATEMENTS RECORDED ON OATH THAT THEY WERE MERELY ISSUING BILLS AND NO REAL SALE AND PURCHASES WERE BEING MADE BY THEM AND THUS THEY WERE NOT DOIN G ANY BUSINESS ACTIVITIES AND WERE MERELY PROVIDING ACCOMMODATION ENTRIES. THE AO REQUIRED THE ASSESSEE TO GET THESE PURCHASES VERIFI ED BY ISSUING SHOW CAUSE NOTICE ON 25-11-2010 BUT THE ASSESSEE FAILED JUSTIFY IT. SUMMONS WAS ISSUED TO THE ABOVE PARTIES BUT THEY REMAINED U NSERVED. ACCORDING TO THE AO, THE PURCHASES MADE BY THE ASSESSEE FROM M/S . CENTURY GEMS, M/S. ANSHU GEMS AND M/S. VIJAY GEMS WERE UNVERIFIAB LE. IN THIS ITA NO.489/JP/2013 SHRI DINESH KUMAR AGARWAL VS. ACIT,CIRCLE-1,JAIPUR 5 SITUATION, THE AO REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T WHICH HAS BEEN SUSTAINED BY THE LD. CIT(A) IN FIRST APPEAL. AS REG ARDS THE GROUND NO. 2 OF THE ASSESSEE, THE LD. CIT(A) NOTED FROM THE ORDE R OF THE AO THAT THE ASSESSEE HAD SHOWN SHORT TERM CAPITAL GAIN OF RS. 1 1,55,563/- AND THE DETAILS OF WHICH IS NOTED ON PAGE 9 OF ASSESSMENT O RDER AS UNDER:- NAME OF SCRIP OPENING STOCK QTY. PURCHASE DATE OF PURCHASE TOTAL AMOUNT QTY. SOLD CO. PER SHARE TOTAL AMOUNT DATE OF PURCHASE ICICI BANK NIL 11200 19-03-08 8571959 11200 - 8991810 19-03-08 RELIANCE POWER NIL 2000 25-03-08 9522190 2000 - 9697911 25-03-08 RELIANCE POWER NIL 42816 18-03-08 14512609 42816 - 15025543 18-03 -08 IT IS SEEN THAT THE ABOVE TRANSACTIONS WERE INTRA-D AY IN NATURE AND WERE HIT BY PROVISIONS OF SECTION 43(5). A SHOW CAUSE NOTICE DATED 20-10-2010 WAS ISSUED TO THE ASSESSEE BY THE AO AS TO WHY THE TRANSACTIONS SHOULD NOT BE TREATED AS SPECULATIVE TRANSACTIONS AND INCO ME BE CONSEQUENTLY TREATED AS BUSINESS INCOME. THE ASSESSEE FILED BY T HE REPLY DATED 29-11- 2010 BUT THE SAME WAS NOT FOUND TO BE APPLICABLE BY THE AO AS THE PROVISION OF THE SECTION CLEARLY STATES THAT INTRA- DAY DELIVERY BASED TRANSACTIONS ARE TO BE CONSIDERED AS SPECULATIVE TR ANSACTIONS AND NEED TO BE TAXED AT NORMAL RATES RATHER THAN SUBSIDIZED RAT E OF TAX AS APPLICABLE ON STCG EARNED ON EQUITY SHARES. THE AO TOOK THE SUPP ORT OF CBDT ITA NO.489/JP/2013 SHRI DINESH KUMAR AGARWAL VS. ACIT,CIRCLE-1,JAIPUR 6 CIRCULAR NOS. 1857 DATED 31-08-1989 AND NO.04/2007 DATED 16-06-2007. THE AO ALSO RELIED ON FOLLOWING CASE LAWS TO THIS E FFECT. (I) RAJPUTANA TEXTILE (AGENCIES) LTD. VS. CIT (1961 ) 42 ITR 743 (SC) (II) W.L. KNOPP VS. CIT 16 ITR 398 (MAD) (III) RAJA BAHADUR VISHESHWAR SINGH VS. CIT 41 ITR 685 (IV) BHARAT DEVELOPMENT (P) LTD. VS. CIT (1980) 4 T AXMAN 58 (DEL.) CONCLUSIVELY, THE AO TREATED THE INCOME OF SHORT TE RM CAPITAL GAIN OF RS. 11,55,563/- AS INCOME FROM BUSINESS OR PROFESSION . IN FIRST APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO TREATING RS. 11,55,663/- AS BUSINESS INCOME U/S 43(5) OF THE ACT. NOW THE ASSE SSEE IS IN APPEAL BEFORE THIS BENCH AGAINST THE ORDER OF THE LD. CIT( A) DATED 6-02-2013 ON BOTH THE ISSUES (SUPRA). IT IS ALSO NOTED THAT DURI NG THE COURSE OF HEARING NONE APPEARED ON BEHALF OF THE ASSESSEE ON DATE OF HEARING FIXED FOR 16-01-2017 IN SPITE OF NOTING THE DATE OF HEARING. HENCE, IN VIEW OF THE ABOVE FACTS, CIRCUMSTANCES OF THE CASE AND THE MATE RIALS AVAILABLE ON RECORD, I CONCUR WITH THE FINDINGS OF THE LD. CIT(A ). THUS THE APPEAL OF THE ASSESSEE ON BOTH THE GROUNDS (SUPRA) IS DISMISS ED. ITA NO.489/JP/2013 SHRI DINESH KUMAR AGARWAL VS. ACIT,CIRCLE-1,JAIPUR 7 4.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 /01/ 2017. SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 19 /01/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-SHRI DINESH KUMAR AGARWAL, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE-1, JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 489/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR