ITO 32(2)(3), MUMBAI V. MUKUND T PARMAR, MUMBAI

ITA 4936/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0095 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 01-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T A KHANDR
• Keywords: Business income

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -CBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./4936/MUM/2016, / ASSESSMENT YEAR: 2011-12 INCOME TAX OFFICER-32(2)(3) ROOM NO.305, 3RD FLOOR, C-11 PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX,BANDRA (E), MUMBAI-400 051. VS. SHRI MUKUND T. PARMAR FLAT NO.903/A-WING, AJMERA PRISTINE BUILDING NO.70, YOGI NAGAR, EKSAR ROAD, BORIVALI (W),MUMBAI-400 092. PAN:AAAPP 9619 E ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: SHRI T.A. KHAN-DR /ASSESSEE BY: NONE / DATE OF HEARING: 08/02/2018 / DATE OF PRONOUNCEMENT: 01.03.2018 PER RAJENDRA, AM - CHALLENGING THE ORDERS DATED 05/05/2016 OF THE CIT( A)-44,MUMBAI,THE ASSESSING OFFICER (AO) HAS FILED THE PRESENT APPEAL. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT HOLDING THE BUS INESS INCOME AS INCOME FROM CAPITAL GAINS.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUN D THAT IN YEAR UNDER CONSIDERATION THE ASSESSEE HAD SHOWN LONG-TERM CAPITAL GAIN(LTCG) OF RS. 12.15 CRORES AND SHORT-TERM CAPITAL GAIN (STCG) OF RS. 72.79 LAKHS, THAT HE ALS O CLAIMED LTCG OF RS. 8.21 LAKHS ON SALE OF RESIDENTIAL FLAT, THAT HE CLAIMED LTCG OF RS.12. 15 CRORES AS EXEMPT U/S.10 (38) OF THE ACT. 2.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS,THE AO DIRECTED THE ASSESSEE TO SUBMIT THE DETAILS OF PERIOD OF HOLDING OF THE SHARES AS WELL AS THE DETAILS OF PURCHASE AND SALE OF SHARES.AFTER ANALYSING THE FACTS,HE DIRECTED THE AS SESSEE TO SHOW CAUSE AS TO WHY INCOME FROM THE SALE OF SHARES NOT BE TREATED AS BUSINESS INCOM E. 2.2. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,HE OBSERVED THAT THE CONTENTION OF THE ASSESSEE AS AN INVESTOR COULD NOT BE ACCEPTED,THAT THE HOLDING PERIOD OF THE SHARES WAS NOT ASCERTAINED IN THE ABSENCE OF ANY DETAIL/CONTRACT N OTES, THAT 96% OF STCG AND BY THE ASSESSEE WAS FROM THE SALE OF SHARES OF CORE PROJECT, THE LT CG (EXCEPT FOR THE SALE OF PROPERTY) WAS ALSO DERIVED FROM THE SALE OF SHARES OF CORE PROJEC T ONLY,THAT ASSESSEE WAS MORE THAN A NORMAL INVESTOR, THAT HE WAS A TRADER AND STOCKIST/ DEALER WHO WAS SELLING THE SHARES IN THE MARKET WITH THE COMPLETE KNOWLEDGE,THAT THE CLAIM M ADE BY HIM OF LTCG AND STCG WAS NOT PROPER.FINALLY,THE AO COMPUTED NET PROFIT OF RS .12,08,22,057/- AS INCOME FROM 4936/M/16-MUKUND T.PARMAR 2 BUSINESS.AFTER DISALLOWING EXPENSES OF RS. 1.11 LA KHS,HE DETERMINED THE BUSINESS INCOME OF THE ASSESSEE AT RS.12.09 CRORES. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA) AND MADE ELABORATE SUBMIS SIONS. HE ALSO RELIED UPON CERTAIN CASE LAWS AND CIRCULAR ISSUED BY THE CENTRAL BOARD OF DI RECT TAXES ON 29/02/2016 (CIRCULAR NUMBER 6/2016). AFTER CONSIDERING THE AVAILABLE MAT ERIAL, THE FAA HELD THAT THE AO HAD MADE THE ADDITION TO THE TOTAL INCOME OF THE ASSESS EE BY TREATING INCOME FROM SALE OF SHARES AS BUSINESS INCOME PRIMARILY BECAUSE SIMILAR VIEWS WAS TAKEN BY THE THEN AO IN THE ASSESSMENT FOR THE IMMEDIATELY PRECEDING YEAR,THAT ON THE SAME FACTS THE APPEAL FILED BY THE ASSESSEE WAS ALLOWED BY HIS PREDECESSOR,THAT THE AS SESSEE HAD CONSISTENTLY SHOWN THE SHARES, WHICH LED TO CAPITAL GAIN,AS INVESTMENT IN HIS BALA NCE SHEET, THAT THE QUESTION OF TREATMENT OF INCOME ARISING OUT OF SALE OF SHARES HAD BEEN CONCL USIVELY DECIDED BY THE CBDT IN ITS CIRCULAR NO.6,DATED 29/02/2016,THAT THE ASSESSEE HA D OPTED TO TREAT THE SHARES AS INVESTMENT RATHER THAN AS STOCK IN TRADE, THAT HE HAD BEEN SHO WING THE INCOME ARISING OUT OF THE SALE OF SHARES WHICH WERE NOT IN THE NATURE OF F & O SEGMEN T, AS INCOME UNDER THE HEAD CAPITAL GAINS,THAT HE WAS CONSISTENTLY FOLLOWING THE PRACTI CE OF SHOWING INCOME ARISING OUT OF SALE OF SHARES IN THE F AND O SEGMENT AS BUSINESS INCOME,TH AT THE INCOME ARISING OUT OF SALE OF SHARES, WHICH HAD BEEN TREATED BY THE AO AS BUSINES S INCOME,HAD TO BE TREATED AS INCOME FROM CAPITAL GAINS.FINALLY,HE ALLOWED THE APPEAL FI LED BY THE ASSESSEE. 4. DURING THE COURSE OF HEARING BEFORE US,THE DEPARTME NTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO AND STATED THAT THE ASSESSEE WAS CA RRYING OUT SYSTEMATIC BUSINESS ACTIVITIES,THAT HE WAS NOT AN INVESTOR, THAT PATTER N OF HOLDING AND SELLING THE SHARES PROVED THAT HE WAS A TRADER OF SHARES.AS STATED EARLIER, NONE A PPEARED ON BEHALF OF THE ASSESSEE. 5. WE HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD AN D HEARD THE DR. WE FIND THAT THE AO HAD HELD THAT INCOME ARISING FROM SALE OF SHARES WA S TO BE TREATED AS BUSINESS INCOME,THAT THE ASSESSEE HAD SHOWN INCOME UNDER THE HEADS LTCG AND STCG ON SALE OF SHARES, THAT IT HAD ALSO SHOWN BUSINESS INCOME FOR THE F AND O SEGMENT, THAT HE WAS NOT SHOWING THE SHARES AS STOCK IN TRADE, THAT THE SHARES WERE TREATED AS INV ESTMENT IN THE BALANCE SHEET, THAT HE WAS FOLLOWING THE SAID PRACTICE CONSISTENTLY OVER THE Y EARS.NO AUTHORITY IS REQUIRED TO STATE THAT AN ASSESSEE CAN BE A TRADER AND AN INVESTOR FOR THE SA ME ASSESSMENT YEAR.THE CBDT CIRCULAR, REFERRED TO BY THE FAA,HAS RECOGNISED THE PRINCIPLE OF HOLDING TWO PORTFOLIOS BY AN ASSESSEE. CONSIDERING THE ABOVE,WE ARE OF THE OPINION THAT TH E ORDER OF THE FAA DOES NOT SUFFER FROM 4936/M/16-MUKUND T.PARMAR 3 ANY LEGAL OR FACTUAL INFIRMITY.THEREFORE, CONFIRMIN G THE SAME WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSE D. . ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST MARCH, 2018. 1 , 2018 SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 01.03.2018. JV.SR.PS . / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR C BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.