RAJESH N. SHAH, MUMBAI V. JCIT 21(1), NAVI MUMBAI

ITA 5039/MUM/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59919 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 15-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 03-09-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Keywords: Sale consideration of property below Jantri Value; Business income; Fair market value
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE APPELLATE APPELLATE APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI B.R.MITTAL, JUDICIAL MEMBER SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NO.5039/MUM/2009 A.Y 2005-06 SHRI RAJESH N. SHAH, HIRA ANAND, 1 ST FLOOR, NORTH SOUTH ROAD NO.2, JUHU SCHEME, VILE PARLE, MUMBAI 400 056. PAN: AAPPS 5020 B VS. JT. COMMISSIONER OF I.T. 21(1), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIL THAKRAR. RESPONDENT BY : SHRI C.G.K.NAIR. DATE OF HEARING: 15-03-2012. DATE OF PRONOUNCEMENT: 28-03-2012. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GR OUNDS: 1. THE LD. CIT(A) IS ERRED A SUM OF RS.6,43,500/- U/S. 50C OF THE INCOME TAX ACT, 1961 INSTATE OF RS.1,00,000/- WHICH WAS THE CORRECT VALUE AND CONSIDERATION OF OPEN PARKING SOL D BY THE APPELLANT. 2. THE LD. CIT(A) HAS TREATED THE INVESTMENT INCOME AS BUSINESS INCOME BASED ONLY ON THE SURMISES AND PRESUMPTION. THE LD. CIT(A) HAS NOT GIVEN ANY FINDING, WHICH MAY REALLY SHOW THAT THE APPELLANT HAS NOT EARNED ANY SHORT TERM CAPITAL GAIN BUT TRADED IN SHARE & SECURITIES. 2. GROUND NO.1 : AFTER HEARING BOTH THE PARTIES, WE FIND THAT DURI NG THE ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAS SOLD A GARAGE FOR A SUM OF RS.1,00,000/-. FROM THE COPY OF THE AGREEMENT FOR SALE DATED 28-3-2005 IT WAS NOTED THAT THE REGISTRA R HAD ADOPTED THE ITA NO.5039 OF 2009 SH RI RAJESH N. SHAH. 2 SALE VALUE AT RS.6,53,500/- AND STAMP DUTY WAS PAID AT RS.6740/-. THEREFORE, ACCORDING TO THE AO THE SALE CONSIDERATI ON WAS SHOWN LESS BY RS.5,43,500/-. IN RESPONSE TO A QUERY IT WAS MAI NLY STATED THAT THE VALUATION WAS DONE BY THE REGISTRAR ON THE BASIS TH AT IT WAS A CLOSED GARAGE WHEREAS ASSESSEE WAS OWNING ONLY A SPACE FOR PARKING. HOWEVER, AO DID NOT ACCEPT THIS SUBMISSION AND BROU GHT TO TAX THE UNDERSTATED CONSIDERATION OF RS.5,43,500/-. 3. ON APPEAL, ACTION OF THE AO WAS CONFIRMED BY THE LD. CIT(A). 4. BEFORE US LD. COUNSEL OF THE ASSESSEE POINTED OU T THAT ASSESSEE HAS SIMPLY SOLD A PARKING SPACE AND IF AO WANTED TO ENHANCE THE VALUE HE SHOULD HAVE GOT THE SAME VERIFIED FROM THE DVO. 5. ON THE OTHER HAND, LD. DR SUBMITTED THAT ASSESSE E HAS NOT RAISED ANY OBJECTION REGARDING VALUATION BEFORE THE REGISTRAR, THEREFORE, AO WAS RIGHT IN ADOPTING THE SALE VALUE ADOPTED BY THE REGISTRAR. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND THAT BEFORE THE AO ASSESSEE HAS SUBMITTED THE FOLLOWING REPLY: WITH REGARDS TO THE LONG TERM CAPITAL GAIN OF RS. 1,00,000/- OUT OF SALE OF GARAGE WHEREBY THE REGISTRATION DOCUMENT SAYS TH E VALUE AT RS. 6,43,500/- FOR WHICH WE WOULD LIKE TO STATE THAT TH E VALUATION MADE BY THE STAMP AUTHORITY WAS ON THE BASIS OF THE GARAGE I.E., A CLOSED GARAGE WHEREAS THE ASSESSEE WAS OWNING AN OPEN SPACE FOR C AR PARKING IN THE SOCIETY WHICH THEY WERE CALLING AS STILT GARAGE. AS SUCH THERE IS A GROSS ERROR IN MAKING VALUATION OF THE PREMISES AS GARAGE WHEREAS IT WAS NOT A GARAGE BUT A STILT WITH REGARDS TO THE LONG TERM CAPITAL GAIN OF RS. 1,00,000/- OUT OF SALE OF GARAGE WHEREBY THE REGIST RATION DOCUMENT SAYS THE VALUE AT RS. 6,43,500/- FOR WHICH WE WOULD LIKE TO STATE THAT THE VALUATION MADE BY THE STAMP AUTHORITY WAS ON TH E BASIS OF THE GARAGE I.E., A CLOSED GARAGE WHEREAS THE ASSESSEE W AS OWNING AN OPEN SPACE FOR CAR PARKING IN THE SOCIETY WHICH THEY WER E CALLING AS STILT ITA NO.5039 OF 2009 SH RI RAJESH N. SHAH. 3 GARAGE. AS SUCH THERE IS A GROSS ERROR IN MAKING VA LUATION OF THE PREMISES AS GARAGE WHEREAS IT WAS NOT A GARAGE BUT A STILT CAR PARKING AREA. SO WE FEEL THAT THE VALUATION CANNOT BE ON SU CH A HIGH RATE FOR STILT CAR PARKING AREA WHICH IF REQUIRED CAN BE REV ALUED . THUS, IT IS CLEAR THAT ASSESSEE HAS SPECIFICALLY RE QUESTED THE AO THAT IF THERE WAS ANY DOUBT THEN FAIR MARKET VALUE SHOULD H AVE BEEN ASCERTAINED FROM THE VALUATION OFFICER. THEREFORE, IN THE INTERESTS OF JUSTICE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO REFE R THE ISSUE REGARDING THE VALUATION TO THE DVO AND THEREAFTER DECIDED THE ISSUE IN ACCORDANCE WITH THE LAW. 7. GROUND NO.2 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURIN G THE ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAD DECLARED INCOME FROM SHORT TERM CAPITAL GAINS ON ACCOUNT OF SALE/PURCHASE OF SHARES AS UNDER: PROFIT ON SALE OF SHARES 30/09/2004 64,939 PROFIT ON SALE OF SHARES 31/03/2005 13,78,726 TOTAL SHORT TERM CAPITAL GAINS 14,43,665 EXPENSES INCURRED BROKERAGE 25,105 STT 10,210 DEMAT CHARGES 2,106 37,421 TAXABLE CAPITAL GAINS 14,06,244 THE AO EXAMINED THE ISSUE IN DETAIL AND WAS OF THE OPINION THAT SINCE ASSESSEE HAD DONE HIGH VOLUME OF TRANSACTIONS AMOUN TING TO 171 TRANSACTIONS AND ASSESSEE HAS FURTHER INVESTED LARG E SUMS IN THE ITA NO.5039 OF 2009 SH RI RAJESH N. SHAH. 4 BUSINESS OF SHARES, THEREFORE, INCOME FROM SALE PUR CHASE OF SHARES WAS HELD TO BE INCOME FROM BUSINESS. 8. ON APPEAL, THE ACTION OF THE AO WAS CONFIRMED BY THE LD. CIT(A). 9. BEFORE US IT WAS MAINLY ARGUED THAT ASSESSEE WAS AN INVESTOR AND SIMILAR TRANSACTIONS HAVE BEEN ACCEPTED IN EARL IER YEARS BY THE DEPARTMENT. THE ASSESSEE HAS MADE INVESTMENTS OUT O F HIS OWN CAPITAL WITHOUT ANY BORROWINGS AND ASSESSEE IS NOT HAVING A NY SEPARATE BUSINESS INFRASTRUCTURE FOR SHARE BUSINESS AND NO E XPENDITURE HAS BEEN CLAIMED IN RESPECT OF SHARE BUSINESS. IT WAS FURTHE R ARGUED THAT THE AO HAS MISCONSTRUED THE NUMBER OF TRANSACTIONS BECAUSE FEW SHARES WERE CARRIED FROM THE LAST YEAR AND WERE SOLD IN THE PRE SENT YEAR AND ONLY FEW SHARES WERE PURCHASED DURING THE YEAR. IN THIS REGARD HE REFERRED TO PAGES 1 TO 3 OF THE PAPER BOOK, WHICH IS A COPY OF THE TRANSACTIONS. IT WAS ALSO ARGUED THAT FOR EXAMPLE NIRLON LTD.S S HARES WERE PURCHASED ON 22-1-2004 AND, IN FACT, IT WAS ONLY A ONE TRANSACTION WHICH HAS BEEN SPLIT BY TRADING PLATFORM INTO VARIO US TRANSACTIONS. 10. ON THE OTHER HAND, LD. DR STRONGLY SUPPORTED TH E ORDER OF THE AO AND THE CIT(A). 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY AND FIND THAT SHARES OF NIRLON LTD. HAVE BEEN PURCHASED ON 22-01- 2004. ON THE SAME DATE THERE ARE 15 TRANSACTIONS FOR PURCHASE OF THESE SHARES. IN OUR OPINION, THIS TRANSACTION HAS TO BE CONSTRUED A S ONLY ONE TRANSACTION AND NOT AS 15, BECAUSE SOMETIMES WHEN C LIENT PLACES AN ITA NO.5039 OF 2009 SH RI RAJESH N. SHAH. 5 ORDER IT IS SPLIT INTO VARIOUS QUANTITIES BY THE EL ECTRONIC PLATFORM OF THE STOCK EXCHANGE. FURTHER, THESE SHARES HAVE BEEN SOL D IN THE MONTH OF NOVEMBER/DECEMBER, 2004 I.E. ALMOST AFTER 10/11 MON THS. SIMILAR IS THE POSITION OF OTHER SHARES. IN FACT, THE WHOLE ST ATEMENT SHOWS THAT THE ASSESSEE HAS DEALT IN 15/20 SCRIPS DURING THE Y EAR AND, THEREFORE, IT DOES NOT SEEMS TO BE A CASE OF TRADING OF SHARES. M OREOVER, ASSESSEE HAS NOT USED ANY BORROWED FUNDS AND DID NOT HAVE A SEPARATE PLATFORM FOR TRADING IN SHARES. IN FACT, ASSESSEE IS MAINLY ENGAGED IN THE BUSINESS OF CHEMICAL LICENSES ETC. WHICH IS THE MAI N BUSINESS AND IT SEEMS ASSESSEE HAS SIMPLY MADE FEW INVESTMENTS IN S HARES. THERE ARE NO REPETITIVE TRANSACTIONS. THEREFORE, IN OUR VIEW, IT CANNOT BE SAID THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF S HARES. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO TREAT THE PROFIT EARNED FROM SHARES AS CAPITAL GAINS ONLY. 12. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 7/3/2012. SD/- SD/- (B.R.MITTAL) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 27/3/2012. P/-*