SMT Priti Anuj Badjate, Nagpur V. Commissioner of Income-Tax-1, Nagpur

ITA 51/NAG/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3872 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 07-05-2010
• Court: TRIBUNAL
• Keywords: Business income; Salary income; Question of law
• Section: 143(3); 263

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR , BENCH , ( E - COURT), MUMBAI , BEFORE SHRI R.K.GUPTA , J M & SHRI D.KARUNA KAR RAO , A M ITA NO. 51 / N AG / 20 10 ( ASSESSMENT YEAR :200 5 - 200 6 ) SMT. PRITI ANUJ BADJATE, 3 - C/2, SHANTINIKETAN, DHARAMPETH EXT., NAGPUR. VS. CIT(A) - I, AAYAKAR BHAVAN, CIVIL LINES, NAGPUR PAN/GIR NO. : A BRPB 9026 D ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. MUKESH AGRAWAL /REVENUE BY : MR. PRAKASH MANE DATE OF HEARING : 6 TH MARCH ., 201 3 DATE OF PRONOUNCEMENT : 03/04/ 201 3 O R D E R P ER SHRI R.K.G UPTA, JM : TH E ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE ITAT NAGPUR BENCH, NAGPUR, AGAINST THE ORDER DATED 24 - 3 - 2010 PASSED BY THE LEANED CIT - I , NAGPUR (MAHARASHT RA) UNDER SECTION 263, RELA TING TO THE ASSESSMENT YEAR 200 5 - 0 6 , WHICH HAS BEEN HEARD THROUGH E - COURT, MUMBAI. 2 . THE ASSESSEE IS OBJECTING IN TREATING THE CAPITAL GAIN ON SALE OF SHARES AS BUSINESS INCOME WHILE PASSING OF THE ORDER UNDER SECTION 263. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT IN THIS CASE WAS COMPLETED UNDER SECTION 143(3) ON 27 - 12 - 2007. THE AO ACCEPTED THE ITA NO. 51 /20 10 2 CAPITAL GAIN ON ACCOUNT OF SALE OF SHARES. THE AO HAS ALSO MENTIONED IN ITS ORDER , THAT THE B OOKS OF ACCOUNTS WERE EXAMINED AND AFTER DISCUSSING THE CASE WITH THE COUNSEL OF THE ASSESSEE, ASSESSMENT WAS COMPLETED. THEREAFTER THE CIT ISSUED SHOW CAUSE NOTICE UNDER SECTION 263 OBSERVING THAT THE AO HAS BLINDLY ACCEPTED THE SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN AS SHO WN BY THE ASSESSEE WITHOUT TAKING INTO CONSIDERATION THE FACT THAT THE ONLY ACTIVITY CARRIED ON BY THE ASSESSEE DURING THE YEAR WAS PURCHASE AND SALE OF SHARES AND THE MOTIVE OF ASSESSEE WAS TO MAKE PROFIT BY SALE OF SHARES RATHER THAN MAKE INVESTMENT IN S HARES. ACCORDINGLY, HE ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE. DETAILED REPLY WAS FILED ON BEHALF OF THE ASSESSEE. IT WAS EXPLAINED THAT THE ASSESSEE HAS BEEN INVESTING SHARES SINCE LONG I.E. FROM ASSESSMENT YEAR 1996 ONWARDS. DETAILS OF PURCHASE AND SAL E OF SHARES FROM ASSESSMENT YEAR 2002 - 03 TO 2008 - 09 WERE ALSO FILED. IT WAS ALSO EXPLAINED THAT IN THE PAST AS WELL AS IN SUBSEQUENT YEAR THE CLAIM OF THE ASSESSEE ON ACCOUNT OF PURCHASE AND SALE OF SHARES HAVE BEEN ACCEPTED AND THE CAPITAL GAIN EITHER ON SHORT TERM CAPITAL GAIN OR LONG TERM CAPITAL GAIN, HAS BEEN ACCEPTED. HOWEVER, LEARNED CIT WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. LEARNED CIT MENTIONED IN HIS ORDER THAT THE AO WENT WRONG IN ACCEPTING THE ASSESSEES STAND WITH REGARD TO PR OFIT FROM SALE AS CAPITAL GAIN. THEREAFTER THE CIT DISCUSSED THE ISSUE ON MERIT AND FOUND THAT THE ASSESSEE IS MAKING PURCHASE AND SALE OF SHARES DURING THE YEAR UNDER CONSIDERATION AND ALSO BY OBSERVING THAT THE DECISION OF THE HON BLE ITA NO. 51 /20 10 3 BOMBAY HIGH COURT I N THE CASE OF CIT VS. GOPAL PUROHIT, 228 CTR 582 , IS NOT APPLICABLE FOR THE REASON THAT HON BLE HIGH COURT HELD THAT NO SUBSTANTIAL QUESTION OF LAW FOR CONSIDERATION, HENCE, NO RATIO IS LAID DOWN IN THIS CASE . IT IS ALSO MENTIONED IN HIS ORDER THAT THE DEP ARTMENT IS GOING TO FILE SLP BEFORE THE HON BLE SUPREME COURT AGAINST THE ORDER OF THE HON BLE HIGH COURT. BY OBSERVING THESE OBSERVATIONS, THE LEARNED CIT HELD THAT THE CAPITAL GAIN SHOWN BY THE ASSESSEE ON ACCOUNT OF SALE OF SHARES TO BE ASSESSED UNDER T HE HEAD BUSINESS INCOME. ACCORDINGLY, THE ORDER OF THE AO WAS SET ASIDE AND THE ASSESSMENT WAS ENHANCED. AGAINST THIS ORDER, ASSESSEE IS IN APPEAL HERE BEFORE THE TRIBUNAL. 4 . LEARNED COUNSEL OF THE ASSESSEE REITERATED HIS CONTENTIONS RAISED BEFORE THE LE ARNED CIT IN RESPONSE TO SHOW CAUSE NOTICE UNDER SECTION 263. IT WAS FURTHER SUBMITTED THAT ALL THE S HARES WERE PURCHASED ON DELIVERY BASIS AND THROUGH D - MAT ACCOUNT. ALL THE PURCHASES OF SALES AND SHARES WERE AFFECTED THROUGH BSE/NSE AND STT HAS BEEN PAID . IT WAS FURTHER SUBMITTED THAT WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) FOR ASSESSMENT YEAR 2003 - 04 & 2005 - 06, THE AO HAS ACCEPTED THE CLAIM OF THE ASSESSEE ON ACCOUNT OF CAPITAL GAIN TO ARRIVE AT SALE OF SHARES. THE ATTENTION OF THE BENCH WAS DRAWN ON PAGE S 8 & 12 WHERE RESPECTIVE ORDERS OF THE ASSESSMENTS ARE PLACED. IT WAS ALSO SUBMITTED THAT EVEN IN SUBSEQUENT I.E. ASSESSMENT YEAR 2009 - 10 & 2010 - 11, THE CLAIM OF THE ASSESSEE SHOWING THE CAPITAL GAIN ON ACCOUNT OF SALE OF SHARES HAS BEEN ITA NO. 51 /20 10 4 AC CEPTED BY THE AO WHILE PASSING ASSESSMENT UNDER SECTION 143(3). IT WAS FURTHER SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT (SUPRA) AND VARIOUS OTHER DECISIONS OF THE TRIBUNAL. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS NOT PURCHASED SHARES AFTER BO RROWING AS THE ASSESSEE IS DEALING SHARES SHOWING UNDER INVESTMENT PORTFOLIO FROM HIS OWN SOURCES. THEREFORE, LEARNED CIT WAS NOT CORRECT IN HOLDING THAT THE PROFIT ON ACCOUNT OF SALE OF SHARES IS ASSESSABLE UNDER THE HEAD BUSINESS INCOME AND NOT UNDER THE HEAD CAPITAL GAIN. 5 . ON THE OTHER HAND, THE LEARNED COUNSEL OF THE ASSESSEE PLACED RELIANCE ON THE ORDER OF THE CIT . 6 . AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT LEARNED CIT WAS NOT JUSTIFIED IN TREATING THE CAPITAL GAIN SHOWN BY THE ASSESSEE, WHICH WAS ASSESSED BY THE AO AS CAPITAL GAIN WHILE COMP L ETING THE ASSESSMENT UNDER SECTION 143(3) IN THE YEAR UNDER CONSIDERATION. UNDISPUTEDLY, THE ASSESSEE IS MAKING INVESTMENT IN PURCHASE OF SHARES SINCE LONG. THE PURCHASE OF SHARE IS SHOWN UNDER THE PORTFOLIO OF THE INVESTMENT IN THE BOOKS OF ACCOUNT. REGULAR BOOKS OF ACCOUNTS ARE MAINTAINED AND THEY ARE AUDITED ALSO. WHATEVER THE PROFIT EITHER UND ER SHORT TERM CAPITAL GAIN OR LONG TERM CAPITAL GAIN HAS ACCEPTED IN PAST AS WELL AS IN SUBSEQUENT YEARS WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3). THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CI T VS V A TRIVEDI 172 ITR 95 (BOM ) HAS ALLOWED THE ITA NO. 51 /20 10 5 ISSUE IN FAVOUR OF THE ASSESSEE BY PASSING A SPEAKING ORDER. IT HAS BEEN OBSERVED BY THE HONBLE BOMBAY HIGH COURT IN THE AFORESAID CASE THAT THE ASSESSEE WAS IN THE EMPLOYMENT AND DERIVED SALARY INCOME. OUT OF THE SURPLUS FUND, HE INVESTED INTO THE SHARE S AND THE UNITS AND THOSE SHARES AND UNITS HAS DULY BEEN SHOWN BY THE ASSESSEE AS INVESTMENT IN HIS BALANCE SHEET IN THE EARLIER YEAR AS WELL AS DURING THE YEAR. IN THE EARLIER YEAR ALSO, THE ASSESSEE DERIVED THE INCOME ON THE SALE OF THE SHARES, WHICH HAS BEEN RETURNED BY THE ASSESSEE AS CAPITAL GAIN AND REVENUE HAS DULY ACCEPTED THE SAME. THE ASSESSEE WAS NOT HOLDING THE SHARES OF THE UNITS AS A STOCK IN TRADE. THIS FACT IS ALSO NOT DENIED BY THE REVENUE. THE PERIOD OF HOLDING ITSELF HAS BEEN TREATED BY T HE LEGISLATURE TO BE A RELEVANT CONSIDERATION FOR DETERMINING WHETHER THE CAPITAL GAIN DERIVED IS A LONG TERM CAPITAL GAIN OR A SHORT TERM CAPITAL GAIN. THERE IS NO PROVISION UNDER THE INCOME - TAX ACT WHICH HAS PROVIDED THAT IN CASE THE ASSESSEE IS HOLDING THE SHARES FOR A LESSER PERIOD THAN THE ONE PRESCRIBED, IT WILL BE REGARDED TO BE THE BUSINESS INCOME. DIVIDING THE CAPITAL GAIN INTO TWO PARTS I.E. THE SHORT TERM GAIN OR THE LONG TERM GAIN ITSELF PROVE THAT THE PERIOD OF THE HOLDING CANNOT BE THE CRITERI A FOR DETERMINING WHETHER THE PROFIT DERIVED BY THE ASSESSEE IS A LONG TERM CAPITAL GAIN OR SHORT TERM CAPITAL GAIN. THEREAFTER THE HON BLE HIGH COURT HAS HELD THAT THE PROFIT SHOWN BY THE ASSESSEE HAS TO BE ASSESSED AS CAPITAL GAIN. 7 . SIMILAR FACTS ARE INVOLVED IN THE PRESENT CASE AS THE ASSESSEE SHOWN THE PURCHASE OF SHARES UNDER THE HEAD INVESTMENT PORTFOLIO. ITA NO. 51 /20 10 6 PURCHASES HAVE BEEN MADE THROUGH D - MAT ACCOUNT ON DELIVERY BASIS. THE PURCHASE AND SALE OF SHARES HAS BEEN AFFECTED THROUGH BSE OR NSE, AS THE C ASE MAY BE AND STT HAS DULY BEEN PAID BY THE ASSESSEE ON THE TRANSACTIONS FOR PURCHASE AND SALE OF SHARES. THIS IS ALSO NOT A CASE OF THE LEARNED CIT THAT THE ASSESSEE IS SHOWING PURCHASE OF SHARES UNDER THE STOCK - IN - TRADE. THEREFORE, IF ONLY BUSINESS OF I NVESTMENT IN SHARES IS SHOWN BY THE ASSESSEE , IT CANNOT BE HELD THAT THE PROFIT OF THE ACCOUNT OF SALE OF SHARES HAS TO BE ASSESSED UNDER THE HEAD BUSINESS INCOME. 8 . IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE AO WAS CORRE CT IN ACCEPTING THE CLAIM OF THE ASSESSEE AS CAPITAL GAIN ON SALE OF SHARES AND, THEREFORE, LEARNED CIT(A) WAS NOT JUSTIFIED IN ENHANCING THE INCOME OF THE ASSESSEE BY TAKING THE CAPITAL GAIN ON SALE OF SHARES AS BUSINESS INCOME. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORE THE ORDER OF THE AO PASSED ORIGINALLY. 9 . RESULTANTLY , APPEAL OF THE ASSESSEE I S ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF AP R .201 3 . 201 3 SD/ - SD/ - ( ) ( D.KARUNAKAR RAO ) ( ) ( R.K.GUPTA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 0 3 / 0 4 / 201 3 . /PKM , PS ITA NO. 51 /20 10 7 COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI / NAGPUR . 4. / CIT 5. / DR, ITAT, MUMBAI / NAGPUR . 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI