DCIT CIR 15(1), MUMBAI V. VIPUL C SHAH HUF, MUMBAI

ITA 5223/MUM/2011

• Counselvise Citation: 522319914 RSA 2011
• Duration Of Justice: 4 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 08-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 08-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R M MADAV DR
• Keywords: Business income
• Section: 143(3); 43(5)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.5223/MUM/2011 ASSESSMENT YEAR: 2007-08 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-15(1), ROOM NO.104, MATRU MANDIR, 1 ST FLOOR, TARDEO ROAD, MUMBAI-400007 / VS. SHRI VIPUL C SHAH, HUF, 15/7, NAVJEEVAN SOCIETY, LAMINGTON ROAD, MUMBAI-400008 ( / REVENUE) ( !' # /ASSESSEE) PAN. NO. AAEHV6186J / REVENUE BY SHRI R.M.MADAV -DR !' # / ASSESSEE BY NONE $ % & # ' / DATE OF HEARING : 21/09/2015 & # ' / DATE OF ORDER: 06/10/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 29/04/2011 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY ISSUE RAISED IN THIS APPEAL PERTAINS TO HO LDING THAT DELIVERY TO AND FROM THE MAIN BROKER, IN THE INSTAN T CASE, TAKES THE PRESENT CASE OUT OF PREVIEW OF SECTION 43 (5) OF THE VIPUL C SHAH ITA NO.5223/MUM/2011 2 INCOME TAX ACT, 1961 (HEREINAFTER THE ACT), THE MAI N BROKER BEING AGENT OF THE ASSESSEE AND DIRECTING THE ASSES SING OFFICER TO TREAT THE PROFIT OF RS.49,99,782/-, EARN ED BY THE ASSESSEE, AS SHORT TERM CAPITAL GAIN AND NOT SPECUL ATION INCOME OR BUSINESS INCOME IGNORING THE FACT THAT NO DEMAT ACCOUNT OF ANY PERSON WAS PRODUCED BY THE ASSESSEE IN SUPPORT OF DELIVERY OF SHARES. 2. DURING HEARING OF THIS APPEAL, NONE WAS PRESENT FOR THE ASSESSEE, IN SPITE OF THE FACT THAT ON EARLIER DATES, NOBODY APPEARED FOR THE ASSESSEE AS SEVERAL NOTICES OF HEA RING WERE ISSUED TO THE ASSESSEE. THE DEPARTMENT HAS ALSO NOT E EFFECTED SERVICE TO THE ASSESSEE IN SPITE OF THE DI RECTION OF THE BENCH TO EFFECT SERVICE THROUGH DR. IN THESE SITUA TIONS, WE HAVE NO OPTION BUT TO PROCEED EX-PARTY QUA THE ASSE SSEE AND TEND TO DISPOSE OFF THE APPEAL ON THE BASIS OF MATE RIAL AVAILABLE ON RECORD. THE LD. DR RELIED UPON THE CON CLUSION ARRIVED AT IN THE ASSESSMENT ORDER. 2.1. WE HAVE CONSIDERED THE SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRI EF, ARE THAT THE ASSESSEE HUF CAME INTO EXISTENCE ON 01/04/2003 AND SHRI VIPUL CHANDRAKANT SHAH WAS APPOINTED AS KARTA, BEING HEAD OF THE FAMILY. THE HUF DID NOT CARRY OUT ANY B USINESS ACTIVITY UPTO 31/03/2006 EXCEPT INVESTMENT IN SAVIN G ACCOUNT. THE ASSESSEE OPEN A DEMAT ACCOUNT NO. 1039 5676 WITH RELIGARE SECURITIES LTD. ON 25/04/2006. THE AS SESSEE HUF MADE INVESTMENT IN STOCK EXCHANGE FROM AUGUST, 2006 ONWARDS THROUGH STOCK EXCHANGE BROKER, WHO WAS AUTH ORIZED VIPUL C SHAH ITA NO.5223/MUM/2011 3 TO MAINTAIN THE INVESTMENT IN BROKERS POOL OR BENEF ICIARY ACCOUNT TO MAINTAIN THE LIQUIDITY WITH HUF AND TO C ARRY OUT HIGHER AMOUNT INVESTMENT ACTIVITY. THE BROKER IS P ROVIDING CREDIT AGAINST THE HOLDING OF INVESTMENT IN POOL OR BENEFICIARY ACCOUNT. THE ASSESSEE EARNED SHORT TERM CAPITAL GAI N OF RS.49,99,789/- AND INCOME OF RS.1,00,457/- AS INCOM E FROM OTHER SOURCES. THUS, THE INCOME OF RS.51,00,239/- W AS DECLARED ON 31/08/2007 IN ITS RETURN. THE ASSESSING OFFICER COMPLETED ASSESSMENT ON 30/10/2009 U/S 143(3) OF TH E ACT, CONSIDERING SHORT TERM CAPITAL GAIN OF RS.49,99,782 /- AS BUSINESS INCOME AND MADE ADDITION FOR DEMAT CHARGES , PAID OF RS.250 IN BUSINESS INCOME. 2.2. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INC OME TAX (APPEALS), FACTS AND THE SUBMISSIONS WERE CONSI DERED AND AFTER CONSIDERING VARIOUS JUDICIAL PRONOUNCEMEN TS SUCH AS CIT VS ALL INDIA TEA AND TRADING COMPANY LTD. 11 7 ITR 525 (CAL.), CIT VS CHHOTANAGPUR GENERAL TRADING COM PANY LTD. 79 ITR 161 (CAL.), CIT VS ADITYA MILLS LTD. 20 9 ITR 933 (RAJ.), AND SMT. JAYSHREE ROY CHOUDHARY VS ACIT 92 ITD 400(KOL.) FOUND THAT NOTHING ADVERSE WAS POINTED BY THE ASSESSING OFFICER IN THE TRANSACTIONS CARRIED OUT B Y THE ASSESSEE, THEREFORE, HELD THAT DELIVERY TO AND FROM THE MAIN BROKER TAKES THE PRESENT CASE OUT OF THE PREVIEW OF SECTION 43(5) OF THE ACT AS THE MAIN BROKER IS THE AGENT OF THE ASSESSEE, CONSEQUENTLY, THE AMOUNT OF RS.49,99,782/ - WAS HELD TO BE SHORT TERM CAPITAL GAIN AND NOT BUSINESS INCOME. VIPUL C SHAH ITA NO.5223/MUM/2011 4 THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE TH IS TRIBUNAL. 2.3. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, THE UNDISPUTED FACT, OO ZING OUT FROM RECORD, IS THAT THE ASSESSEE HAS DEALT IN SCRI PT IN NORMAL SEGMENT (N) AND NOT DERIVATIVE SEGMENT AS WAS REFLE CTED FROM THE BILLS AND CONTRACTS OF THE ASSESSEE PLACE BEFOR E THE ASSESSING OFFICER. THE TRANSACTIONS ARE DULY CONFIR MED AS PER BILLS/LEDGER ACCOUNT WITH THE SUB-BROKER I.E. M/S A LLIANCE INTERMEDIATES & NETWORK PVT. LTD. AND ALL THE PAYME NTS ARE DULY RECORDED. THE SUB-BROKER DULY CONFIRMED THAT THE DELIVERY OF SHARES WERE TAKEN BY THE ASSESSEE IN HI S DEMAT ACCOUNT BUT REMAINED WITH THE SUB-BROKER. UNDISPUT EDLY, THE DELIVERY IS THROUGH DEMAT ACCOUNT. SO FAR AS, S ECTION 43(5) OF THE ACT IS CONCERNED, IT DEALS WITH SPECUL ATIVE TRANSACTION WHICH SPECIFICALLY SAYS THAT SPECULATI VE TRANSACTIONS WHICH IS SETTLED OTHERWISE THAN BY AC TUALLY DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPTS. IT HAS BEEN FURTHER EXPLAINED THROUGH CLAUSES (B) AND (C) TO TH E PROVISO. EVEN OTHERWISE, NOTHING IS SUGGESTED IN THE PROVIS IONS OF SECTION 43(5) OF THE ACT THAT THE WORDS ACTUALLY D ELIVERY OR TRANSFER OF COMMODITY OR SCRIPTS IS RESTRICTED TO THE DELIVERY OR TRANSFER TO THE ASSESSEE HIMSELF, IT COULD BE TH ROUGH THE AGENT. IF THE CONTRACT OF SALE AND PURCHASE OF SHA RES IS VIPUL C SHAH ITA NO.5223/MUM/2011 5 SETTLED BY WAY OF ACCEPTING ACTUAL DELIVERY OR TRAN SFER OF GOODS OR SCRIPTS BY THE AGENT, THEN IT COULD BE CON STRUED THAT THE CONTRACT FOR SALE AND PURCHASE OF GOODS OR SHAR ES HAS BEEN SETTLED NOT OTHERWISE THAN BY THE ACTUAL DELIV ERY OR TRANSFER OF COMMODITY OR SCRIPTS. HONBLE RAJASTHAN HIGH COURT IN ADITYA MILLS (SUPRA) HELD THAT THE WORD A CTUAL DELIVERY IS NOT RESTRICTED TO THE DELIVERY TO THE ASSESSEE. THE REASONS FOR KEEPING THE SHARES WITH THE MAIN BROKER IS PLAUSIBLE AND TRANSFER OF SHARES IN THE ASSESSEES MAIN BROKER ACCOUNT IS NOT IN DISPUTE. NSCCL CLEARS AND SETTLES TRADES AS PER THE WELL DEFINED SETTLEMENT CYCLES. A LL THE SECURITIES ARE BEING TRADED AND SETTLED UNDER T+2 R OLLING SETTLEMENT. NSCCL NOTIFIES THE RELEVANT TRADE DETA ILS TO THE CLEARING MEMBERS/CUSTODIANS ON THE TRADE DAY (T), W HICH ARE AFFIRMED ON T+1 TO NSCCL. BASED ON ITS, NSCCL NETS THE PROVISIONS OF COUNTERPARTIES TO DETERMINE THEIR OBL IGATIONS. A CLEARING MEMBER HAS TO PAY-IN/PAY-OUT FUNDS AND/OR SECURITIES. BECAUSE OF THE SETTLEMENT CYCLE, THE D ELIVERY IN RESPECT OF TRANSACTION CANNOT BE DISPUTED. DUE TO T HIS ELECTRONIC SETTLEMENT, SYSTEM IN DEMAT FORM, THE TR ADES IN THE EXCHANGES HAS GONE FROM FEW HUNDRED CRORES PER DAY TO LACS OF CRORES PER DAY. EVEN OTHERWISE, NOTHING ADVERSE HAS BEEN POINTED OUT IN THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE, BY THE ASSESSING OFFICER. IN VIEW OF THESE FACTS, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMIS SIONER OF INCOME TAX (APPEALS), BECAUSE DELIVERY WAS TAKEN BY BROKDER ON BEHALF OF THE ASSESSEE. IT IS AFFIRMED. VIPUL C SHAH ITA NO.5223/MUM/2011 6 FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. DR AT THE CONCLUSION OF THE HEARING ON 21/09/2015. SD/ - (RAMIT KOCHAR) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ % MUMBAI; ) DATED : 06/10/2015 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,-. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. 1 1 $ 2# ( +, ) / THE CIT, MUMBAI. 4. 1 1 $ 2# / CIT(A)- , MUMBAI 5. 45 /# , 1 +,' + 6 , $ % / DR, ITAT, MUMBAI 6. 7! % / GUARD FILE. / BY ORDER, 04,# /# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ % / ITAT, MUMBAI