NILESH MAHENDRA GANDHI, MUMBAI V. DCIT WD 10(2), MUMBAI

ITA 5004/MUM/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48843 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 07-08-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ASHOK L SHARMA
• Keywords: Business income

Judgement Text

1 ITA NO 5004/MUM/2008 (ASST YEAR 2005-06 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI B BB B BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI R RR R V EASWAR, V EASWAR, V EASWAR, V EASWAR, PRESIDENT & PRESIDENT & PRESIDENT & PRESIDENT & SHRI T R SOOD, AM SHRI T R SOOD, AM SHRI T R SOOD, AM SHRI T R SOOD, AM ITA NO. ITA NO. ITA NO. ITA NO. 5004/MUM/2008 5004/MUM/2008 5004/MUM/2008 5004/MUM/2008 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2005 2005 2005 2005- -- -06 0606 06 ) )) ) NILESH MAHENDRA GANDHI 9/10 ANKUR PLOT NO.21 GARODIA NAGAR GHATKOPAR(EAST) MUMBAI 77 VS THE DY COMMR OF INCOME TAX WARD 10(2), MUMBAI ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AABPG7315B AABPG7315B AABPG7315B AABPG7315B A SSESSEE BY SHRI ASHOK L SHARMA REVENUE BY SHRI SURENDRA KUMAR PER PER PER PER T TT T R SOOD, AM R SOOD, AM R SOOD, AM R SOOD, AM IN THIS APPEAL, THE ONLY ISSUE RAISED BEFORE US IS WHETHER THE PROFIT EARNED ON SALE & PURCHASE OF SHARES IS TO BE TAXED AS BUSI NESS INCOME OR CAPITAL GAIN. 2 AFTER HEARING BOTH THE PARTIES, WE FIND THAT DURI NG THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD MADE FREQUENT AND VOLUMINOUS TRANSACTIONS IN SALE & PURCHASE OF S HARES. THE ASSESSEE HAS ONLY CAPITAL OF RS. 24.78 LACS AND HAD FURTHER BORROWED RS. 75.99 LACS FROM L&T FINANCE LTD FOR PURCHASING THE SHARES OF TCS. IT W AS ALSO NOTICED THAT IN 99% CASES, SHARES WERE RETAINED FOR LESS THAN A WEEK AN D ACCORDINGLY, THE ASSESSEE WAS DOING TRADING IN THE SHARES AND THE INCOME FROM SHARES WAS HELD TO BE BUSINESS INCOME. 3 BEFORE THE CIT(A), IT WAS MAINLY SUBMITTED THAT T HE ASSESSEE WAS DOING INVESTMENT IN SALE AND PURCHASE OF SHARES AS WELL AS FUTURE AND OPTION AND THE ASSESSEE HAS OFFERED RS. 4,89,891/- AS BUSINESS I NCOME AND IT WAS FURTHER 2 ITA NO 5004/MUM/2008 (ASST YEAR 2005-06 SUBMITTED THAT SHARES WERE DULY TRANSFERRED TO ASSE SSEES ACCOUNT AND THEREFORE IT SHOULD BE CONSTRUED AS TRANSACTION WITH THE INTE NTION OF INVESTMENT. IT WAS ALSO SUBMITTED THAT INVESTMENT IN THE SHARES OF MTN L WAS RETAINED FOR ALMOST 40 DAYS AND THEREFORE, ALL TRANSACTIONS SHOULD BE TREA TED AS INVESTMENT TRANSACTIONS. THE LD CIT(A) CONFIRMED THE ACTION OF THE AO BECAUSE OF THE REASONS GIVEN BY THE AO. 4 BEFORE US, THE LD COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF SUGAMCHAND C SHAH VS ACIT R EPORTED IN (2010) 37 DTR 345 (AHD) TRIB) AND IN THE CASE OF NAGINDAS P SHET H (HUF) IN ITA NO.961/MUM/2010 VIDE ORDER DATED 5.4.2011. HE SUBM ITTED THAT FREQUENT TRANSACTIONS WOULD NOT MAKE A SALE AND PURCHASE OF SHARES AS TRADING TRANSACTION. IN ANY CASE, AT BEST THE ASSESSEE COU LD BE HELD AS TRADER-CUM- INVESTOR. HE REFERRED TO PAGE 7A OF THE PAPER BOOK AND POINTED OUT THAT THE ASSESSEE HAD MADE INVESTMENTS IN 30400 SHARES OF MT NL WHICH WAS HELD FOR AROUND 40 DAYS AND AT LEAST THAT INVESTMENT SHOULD BE HELD TO BE FROM CAPITAL GAIN. 4.1 ON THE OTHER HAND, THE LD DR STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES. WE FIND THE DECISION IN THE CASE OF SUGAMCHAND C SHAH AND IN THE CASE OF NAGINDAS P SHETH (HUF) (SUPRA) HAVE BEEN RENDERED ON THEIR F ACTS. THE ISSUE WHETHER THE ASSESSEE IS A DEALER OR INVESTOR COULD ALWAYS BE DE TERMINED BY THE FACTS OF EACH CASE. IN THE CASE BEFORE US, IT IS NOT DENIED THAT THE ASSESSEE HAD BORROWED SIGNIFICANT AMOUNT THAT RS. 75.99 LACS FOR THE PURP OSE OF PURCHASE AND SALE OF 3 ITA NO 5004/MUM/2008 (ASST YEAR 2005-06 SHARES IN CONTRAST TO HIS OWN INVESTMENT IS ONLY R S. 24.78 LACS; BUT NORMALLY, NO INVESTOR WOULD BORROW FUNDS FOR MAKING INVESTMENTS. FURTHER, IT IS AN ADMITTED FACT THAT THE ASSESSEE HAD BEEN DEALING IN FUTURE A ND OPTIONAL ALSO. IN ANY CASE, THE AO HAS POINTED OUT THE INSTANTS WHERE SHARES HA VE BEEN SOLD EVEN ON THE SAME DATE, WHICH TRANSPIRED FROM THE FOLLOWING CHAR T: NAME OF THE SCRIP NAME OF THE SCRIP NAME OF THE SCRIP NAME OF THE SCRIP NO.OF NO.OF NO.OF NO.OF SHARES SHARES SHARES SHARES DATE OF PURCHASE DATE OF PURCHASE DATE OF PURCHASE DATE OF PURCHASE DATE OF SALE DATE OF SALE DATE OF SALE DATE OF SALE TATA CHEMICALS 16500 (IN 3 LOTS) 16.11.2004 19.11.2004 03.01.2005 17.11.2004 18.11.2004 03.12.2004 07.01.2004 USHA BELTRON 10,000 19.11.2004 08.12.2004 NAMTECH ELECT 25000 22.11.2004 24.11.2004 25.11.2004 TATA MOTORS 400 10.01.2005 10.01.2005 12.01.2005 MORARKA FINANCE 954 14,.01.2005 21.02.2005 SAIL 100 19.01.2005 21.02.2005 GUJARAT SIDDHI 400 10.02.2005 10.02.2005 PUBJAB TRACTOR 2000 30.11.2004 03.12.2004 BANK OF RAJASTHAN 100000 24.09.2004 26.09.2004 ITI LTD 10000 500 03.11.2004 10.11.2004 05.11.2004 12.11.2004 BANK OF PUNJAB 10000 08.11.2004 12.11.2004 SATNAM OVERSEAS 50000 08.11.2004 09.11.2004 & 10.11.2004 ANDHRA SUGAR 500 500 16.11.2004 03.12.2004 19.11.2004 09.12.2004 5.1 FROM THE ABOVE, IT IS CLEAR THAT THE SHARES HAV E BEEN PURCHASED AND THEN SOLD WITHIN A SHORT PERIOD I.E. WITHIN A DAY OR TWO AND IN SOME CASES WITHIN A WEEKS TIME. IN THE CASE OF TATA MOTORS AND GUJARA T SIDDHI SHARES HAVE BEEN PURCHASED AND THEN SOLD WITHIN THE SAME DAY. THIS CLEARLY SHOWS THAT INTENTION WAS TO TRADE IN SHARES AND NOT MAKING INVESTMENTS. EVEN IN THE CASE OF SHARES OF MTNL, THE FIRST LOT OF 30400 SHARES WERE PURCHAS ED ON 26.8.2004 AND WAS SOLD IN THE FIRST WEEK OF OCT 2004. THE NEXT LOT OF 4000 0 SHARES WAS PURCHASED ON 22.3.2005 AND SOLD ON 31.3.2005, AGAIN SOLD WITHIN SHORT PERIOD. THIS FACT CLEARLY SHOWS THAT THE ASSESSEE IS ONLY A TRADER IN SHARES AND HIS PROFITS HAVE BEEN 4 ITA NO 5004/MUM/2008 (ASST YEAR 2005-06 CORRECTLY SUBJECTED TO TAX AS BUSINESS INCOME. ACCO RDINGLY, WE CONFIRM THE ORDER OF THE LD CIT(A) ON THIS ISSUE. 6 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S DISMISSED. ORDER PRONOUNCED ON THE 13 TH , DAY OF MAY 2011. SD/- SD/- ( (( ( R V EASWAR R V EASWAR R V EASWAR R V EASWAR ) )) ) PRESIDENT ( (( ( T R SOOD T R SOOD T R SOOD T R SOOD ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 13 TH , MAY 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI