NALIN V. SHAH, MUMBAI V. ACIT., CIR.-4(2), MUMBAI

ITA 4916/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79281 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-06-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 21-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMBIT MISHRA
• Assessee Lawyers: SANJUKTA CHOWDHARY
• Keywords: Business income; Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , ! BEFORE SHRI SANJAY ARORA, AM AND DR. S. T. M. PAVA LAN, JM ' # I.T.A. NO. 4916/MUM/2011 ( / ASSESSMENT YEAR: 2008-09) NALIN V. SHAH KARIM COURT, 3 RD PASTA LANE, COLABA, MUMBAI-400 005 # VS. ASST. CIT, CIRCLE-4(2), AAYKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 $ #'%' ./PAN/GIR NO. AADPS 1938 G ( $& /APPELLANT ) : ( '($& / RESPONDENT ) $&)* / APPELLANT BY : SHRI SANJUKTA CHOWDHARY & SHRI PRAMOD KUMAR PARIDA '($&)* / RESPONDENT BY : SHRI SAMBIT MISHRA + ,)- / DATE OF HEARING : 19.06.2014 DATE OF ORDER : 30.06.2014 '.# O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-8, MUMBAI (CIT(A) FOR SHO RT) DATED 24.05.2011, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2008-09 VIDE ORDER DATED 15.12.2010. 2. THE APPEAL RAISES TWO ISSUES, PER ITS TWO FACTUA L GROUNDS, WHICH WE SHALL TAKE UP IN SERIATIM; GROUND NO. 3 BEING NOT PRESSED BEFORE US, WHILE GROUND NO. 4 IS GENERAL IN NATURE, NOT WARRANTING ANY ADJUDICATION. 2 ITA NO. 4916/MUM/2011 (A.Y. 2008-09) NALIN V. SHAH VS. ASST. CIT 3. VIDE THE FIRST GROUND, THE ASSESSEE AGITATES THE DISALLOWANCE U/S.14A OF THE ACT, EFFECTED IN THE SUM OF RS.4,36,404/-. THE SAME, IT WAS ARGUED BEFORE US, IS NOT MAINTAINABLE IN-AS-MUCH AS THE ASSESSEE HAD EARNED A LOWER AMOUNT OF TAX-EXEMPT INCOME, SO THAT A DIRECTION TO RESTRICT THE SAME TH ERETO WAS PRAYED FOR. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE ASSESSEES CASE IS WHOLLY MISCONCEIVED. THE INCOME NOT FORMING PART OF THE TOTAL INCOME, VIZ. DIVIDEND (AT RS.19.95 LACS); LONG TERM CAPITAL GAINS (LTCG) ON SHARES (RS.104.16 LACS); OTHER LTCG (RS.3.51 LACS); OTHER DIVIDEND INCOME (RS.1.85 LACS), CREDITED TO THE ASSESSEES PROFIT & LOSS ACCOUNT FOR THE YEAR, ADDUCED BEFORE US BY THE LD. AUTHORIZED REPRESENTATIVE (AR), AS APPARENT, EXCEEDS THE DISALLOWANCE EFFECTE D U/S.14A BY FAR. FURTHER, THERE IS NO DIRECT CORRESPONDENCE BETWEEN THE INCURRING OF AN E XPENDITURE AND THE EARNING OF INCOME THERE-FROM, INCLUDING AS TO ITS TIME, SO THAT THE A RGUMENT IS MISCONSTRUED, AND TOWARD WHICH WE MAY REFER TO THE DECISION BY THE APEX COUR T IN CIT VS. RAJENDRA PRASAD MOODY [1978] 115 ITR 519 (SC) AND CHEMINVEST LTD. VS. ITO [2009] 121 ITD 318 (DEL)(SB). THE ARGUMENT ADVANCED BEFORE US IS, THUS, NOT APPLI CABLE EITHER ON FACTS OR IN LAW. IN FACT, BEING IMPRESSED BY THE ASSESSEES ARGUMENT THAT THE INDIRECT EXPENDITURE INCURRED BY IT; THE DISALLOWANCE HAVING BEEN EFFECTED BY THE ASSESS ING OFFICER (A.O.) ONLY WITH REFERENCE TO RULE 8D (2)(III), IS ITSELF BELOW THE DISALLOWANCE MADE, THE LD. CIT(A) RESTRICTED THE SAME TO RS.2,51,114/- (REFER PARA 1. 2 OF THE IMPUGNED ORDER). UNDER THE CIRCUMSTANCES, WE FIND NO INFIRMITY THEREIN, AND UP HOLD THE SAME. WE DECIDE ACCORDINGLY. 5. THE SECOND AND THE ONLY OTHER ISSUE ARISING IN T HE INSTANT APPEAL, PROJECTED PER HIS GROUND # 2 BY THE ASSESSEE, IS WITH REGARD TO THE A SSESSMENT OF THE INCOME RETURNED BY WAY OF SHORT TERM CAPITAL GAIN (STCG) AT RS.71,73,6 08/- BY THE A.O. AS BUSINESS INCOME, HAVING BEEN SINCE CONFIRMED BY THE FIRST APPELLATE AUTHORITY. 6. BEFORE US, THE ASSESSEES CASE WAS THAT THE IMPU GNED ORDER HAVING BEEN PASSED BY THE LD. CIT(A) ON THIS GROUND FOLLOWING THE DECISIO N BY THE FIRST APPELLATE AUTHORITY IN THE ASSESSEES OWN CASE FOR A PRECEDING YEAR (A.Y. 2006 -07), APPEAL BY THE ASSESSEE AGAINST WHICH STANDS SINCE DISPOSED OF BY THE TRIBUNAL, RES TORING THE MATTER BACK TO THE FILE OF THE 3 ITA NO. 4916/MUM/2011 (A.Y. 2008-09) NALIN V. SHAH VS. ASST. CIT A.O. FOR FRESH ADJUDICATION, A LIKE DIRECTION IN TH E INSTANT CASE BE MADE. THE LD. DR RELIED ON THE ASSESSMENT ORDER, CLAIMING NO INFIRMITY TO H AVE BEEN POINTED OUT THEREIN. 7.1 WE HAVE HEARD THE PARTIES, AND PERUSED THE MATE RIAL ON RECORD, INCLUDING THE ORDER BY THE TRIBUNAL IN THE ASSESSEES CASE FOR A.Y. 200 6-07 (IN ITA NOS. 2741 & 3856/MUM(B)/2009 DATED 28.03.2012/PB PGS.1-6). THE RELEVANT PART, BEARING ITS FINDINGS IN THE MATTER AND, THUS, CONSTITUTING THE OPERATING PART, IS CONTAINED AT PARAS 7 & 8 OF ITS ORDER, WHICH READS AS UNDER: 7. AFTER HEARING BOTH PARTIES AS WELL AS GOING THR OUGH THE RECORD OF THE CASE, WE ARE OF THE OPINION THAT WHETHER A STOCK IN VESTMENT IS INCOME FROM BUSINESS OR SHORT TERM CAPITAL GAINS DEPENDS ON FAC TS AND CIRCUMSTANCES OF EACH CASE WHICH CANNOT BE SUBJECTED TO A STRAIT JAC KET FORMULA. HOWEVER, IN OUR VIEW, THERE IS A LOT OF DIFFERENCE BETWEEN STOC K INVESTMENTS UNDERTAKEN BY ANY INVESTOR AS A BUSINESS OR OTHERWISE. NEEDLESS TO MENTION HERE, IF AN INVESTOR INVESTS IN THE STOCK MARKET AND WAITS FOR CONSIDERABLE TIME, IN THE ABSENCE OF DAILY STOCK TRANSACTIONS, THE SAME CAN B E SAFELY CALLED AS INCOME FROM SHORT TERM CAPITAL GAINS . ON THE OTHER HAND, IF AN INVESTOR HAS TO BE TREATED AS A STOCK TRADER, THEN IN SUCH A CAS E, HE IS BOUND TO ENTER INTO TRANSACTIONS OF THE SHARES FROM DAY-TO-DAY BASIS AM ONGST OTHER THINGS . 8. IF WE APPLY OUR ABOVE REASONING QUA THE FACTS OF THE INSTANT CASE, WE ARE OF THE OPINION THAT THE CRITERIA OF DETERMINATI ON OF STOCK GAINS, I.E., EXAMINATION OF FACTS BY TAKING INTO CONSIDERATION T HE HOLDING PERIOD OF THE SHARES HAS MISSED CONSIDERATION OF THE ASSESSING OF FICER AS WELL AS LEARNED CIT(A). THEREFORE TAKING CUE FROM THE ORDER DATED 3 1.01.2012 IN THE CASE OF MRS. ANAHAITA NITIN SHAH, AS WELL AS AFTER EXAMI NING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE INSTANT APPEAL, WE HEREBY RESTORE THE CASE BACK TO THE ASSESSING OFFICER TO PASS A FRESH ORDER AFTER G RANTING ADEQUATE OPPORTUNITY OF HEARING TO ASSESSEE. [EMPHASIS, OURS] VIDE PARA 7, THE TRIBUNAL ENLISTS THE PRIMARY DIFFE RENCE WITH REGARD TO THE INTENTION OR THE MOTIVATION THAT ATTENDS THE CASE OF AN INVES TOR VIS--VIS A TRADER. THE HOLDING PERIOD OF THE SHARES WAS, IN ITS VIEW, AN IMPORTANT INGREDIENT IN DETERMINING THE SAID MOTIVE OR INTENTION, EVEN AS THE MATTER HAS TO BE D ECIDED IN THE CONSPECTUS OF THE FACTS AND CIRCUMSTANCES OF EACH CASE. FINDING THE A.O. AS WELL AS THE FIRST APPELLATE AUTHORITY TO HAVE MISSED THE CONSIDERATION THEREOF, I.E., THE HO LDING PERIOD, IT RESTORED THE MATTER BACK 4 ITA NO. 4916/MUM/2011 (A.Y. 2008-09) NALIN V. SHAH VS. ASST. CIT TO THE FILE OF THE A.O. TO PASS A FRESH ORDER AFTER GRANTING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE VIDE PARA 8 OF ITS ORDER. COMING TO THE FACTS OF THE PRESENT CASE, WE FIND TH AT THE A.O., AFTER ENLISTING THE ASSESSEES CASE VIDE PARA 4.1 OF HIS ORDER; MAKES H IS OBSERVATIONS WITH REGARD TO THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE VIDE PARA 4.4 OF HIS ORDER, BEFORE DISCUSSING THE LAW IN THE MATTER IN CONSIDERABLE DETAIL, AND WITH REFERENCE TO THE DECISIONS BY THE HONBLE APEX COURT; FINALLY GOING ON TO HOLD THAT THE ASSES SEE WAS NOT AN INVESTOR AND THAT THE INCOME DISCLOSED BY HIM AS STCG IS IN FACT BUSINESS INCOME, ASSESSING IT AS SUCH. HIS OBSERVATIONS WITH REGARD TO THE TRANSACTIONS, READ AS UNDER: 4.4 THE ASSESSEE HAS TRANSACTED IN MORE THAN 70 SC RIPS AND ENTERED INTO MORE THAN 200 TRANSACTIONS. THE PERUSAL OF THE STAT EMENT OF SHORT TERM CAPITAL GAINS REVEAL THAT IN SOME OF THE SCRIPS ON WHICH THE ASSESSEE HAS EARNED SHORT TERM CAPITAL GAIN, THE TRANSACTION PER IOD IS AS LOW AS ONE DAY. 7.2 THE UNDERSTANDING OF LAW, AS BROUGHT OUT BY THE A.O. IN THE ASSESSMENT ORDER WITH REFERENCE TO A HOST OF DECISIONS, PRE-DOMINANTLY BY THE APEX COURT, IS IN ALIGNMENT WITH THAT EXPRESSED BY THE TRIBUNAL PER PARA 7 OF ITS OR DER (SUPRA) FOR A.Y. 2006-07, CLARIFYING THAT A DECISION HAD TO BE TAKEN IN THE CONSPECTUS O F THE FACTS OF THE CASE, AND NO STRAIT JACKET FORMULA OR PRESCRIPTION WOULD HOLD. QUA FACTS ALSO HE MAKES HIS OBSERVATIONS, INDICATING HIS EXAMINATION THEREOF, INCLUDING ON TH E ASPECT OF THE HOLDING PERIOD, WHICH HAD ESCAPED DUE CONSIDERATION BY THE REVENUE FOR TH E EARLIER ASSESSMENT YEAR, I.E., A.Y. 2006-07, LEADING TO A RESTORATION FOR ITS CONSIDERA TION. ACCORDINGLY, IN OUR VIEW, THE REASON/S THAT INFORMED THE TRIBUNALS FINAL DECISIO N IN THE ASSESSEES CASE FOR A.Y. 2006- 07 WOULD NOT OBTAIN ON FACTS FOR THE CURRENT YEAR, FOR US TO ACCEDE TO THE ASSESSEES PRAYER FOR A LIKE RESTORATION, AS WAS FOR THAT YEAR, BACK TO THE FILE OF THE ASSESSING AUTHORITY. WITH REGARD TO THE LAW, AS AFORE-NOTED, WE FIND THE OBSERVATIONS BY THE TRIBUNAL IN THE ASSESSEES CASE FOR A.Y. 2006-07 VIDE PARA 7 OF ITS ORDER TO BE CONSISTENT WITH THE DISCUSSION IN THE MATTER BY THE ASSESSING AUTHORITY VIDE THE ASSESSMENT ORDER FOR THE CURRENT YEAR. FURTHER ON, IT IS NOT NECESSARY, EVEN AS OBSERVED DURING HEARING, THAT AN INVESTOR IN A PARTICULAR YEAR WOULD BE NECESSARILY SO FOR THE SUBSEQUENT YEAR/S. AT THE SAME TIME, HOWEVER, THERE IS NO BAR ON ONE TO BE BO TH A TRADER AS WELL AS AN INVESTOR AT THE 5 ITA NO. 4916/MUM/2011 (A.Y. 2008-09) NALIN V. SHAH VS. ASST. CIT SAME TIME, I.E., DURING A PARTICULAR YEAR. THE MATT ER IS, IN OUR VIEW, WHOLLY FACTUAL, TO BE DECIDED HAVING REGARD TO THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS OBTAINING FOR THE YEAR UNDER REFERENCE. 7.3 IN VIEW OF THE FOREGOING, NO MEANINGFUL PURPOSE UNDER THE CIRCUMSTANCES WOULD BE SERVED IN RESTORING THE MATTER BACK TO THE FILE OF THE ASSESSING AUTHORITY. THE LD. CIT(A) HAVING NOT RENDERED ANY SPECIFIC DECISION/FI NDINGS WITH REFERENCE TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ONLY CONSIDER IT FIT AND PROPER THAT THE MATTER IS RESTORED BACK TO HIS FILE FOR DECIDING THE ASSESSEE S APPEAL AFRESH IN ACCORDANCE WITH LAW AFTER ALLOWING THE ASSESSEE A REASONABLE OPPORTUNIT Y OF BEING HEARD AND TO PRESENT ITS CASE BEFORE HIM. WE DECIDE ACCORDINGLY. 8. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. /0 -12 3/-) 4)5678 '8. 9 -) -:;! ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 19, 2014 ON THE CONCLUSION OF THE HEARING. SD/- SD/- (DR. S. T. M. PAVALAN) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER + <, MUMBAI; = DATED : 30.06.2014 # ROSHANI , SR. PS ! ' #$%& ' &$ # COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT 3. '' + >- ? @ / THE CIT(A) 4. '' + >- / CIT CONCERNED 5. AB C'-D2 ' D2 0 + <, / DR, ITAT, MUMBAI 6. C 3E , # GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , + <, / ITAT, MUMBAI