DCIT 15(1), MUMBAI V. AMRITA TALWAR, MUMBAI

ITA 5364/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0307 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 25-08-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AJAY PRATAP SINGH
• Assessee Lawyers: S C TIWARI
• Keywords: Business income; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

P A G E | 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI G.S.PANNU , AM AND SHRI RAVISH SOOD,JM ./ I.T.A. NO.5364/MUM/2014 ( / ASSESSMENT YEAR: 2010 - 11 ) DCIT - 15(1), ROOM NO. 104, MATRU MANDIR, MUMBAI - 400 007 / VS. SMT. AMRITA P. TALWAR FLAT NO. 20, MATRU CHAYA, 70 MARINE LINES, MUMBAI 400 020 ./ ./ PAN/GIR NO. ADLPT7551R ( / APPELLANT ) : ( / RESPONDENT ) ./ I.T.A. NO. 5200/MUM/2014 ( / ASSESSMENT YEAR: 2010 - 11 ) SMT. AMRITA P. TALWAR FLAT NO. 20, MATRU CHAYA, 70 MARINE LINES, MUMBAI 400 020 / VS. ASST. COMMISSIONER OF INCOME TAX 15(1), 1 ST FLOOR, MATRU MANDIR, TARDEO, MUMBAI - 400007 ./ ./ PAN/GIR NO. ADLPT7551R ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI AJAY PRATAP SINGH / RESPONDENT BY : SHRI. S.C. TIWARI & MS. RUTUJA N. PAWAR / DATE OF HEARING : 30/05 /2017 / DATE OF PRONOUNCEMENT : 14 /06 /2017 P A G E | 2 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER : THAT THESE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE ARE DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 26, MUMBAI, DATED 09.06.2 0 14 , WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O U/S 143(3) OF THE INCOME - TAX ACT, 1961 (FOR SHORT ACT) . WE FIRST TAKE UP THE APPEAL OF THE REVENUE , WHEREIN THE ORDER OF THE CIT(A) HAD BEEN ASSAILED BY RAISING THE FOLLOWING GROUND OF APPEAL: - 1. ON THE FACTS AN D CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAVING HELD THE INTENTION OF THE ASSESSEE AS THAT OF TRADER ERRED IN HOLDING THAT MERELY BECAUSE IN SOME SCRIPS LONG TERM CAPITAL GAIN IS SHOWN, THAT TOO MERELY FOR A PERIOD OF 1 YEAR OR SO THOSE SCRIPS SHOULD BE TAKEN OUT OF BUSINESS OF THE ASSESSEE. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE WHO IS A DERMATOLOGIST BY PROFESSION HAD FILED HER RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1,79,73,930/ - ON 31.03.2012, WHICH WAS PROCESSED AS SUCH UNDER SECTIO N 143(1) OF THE ACT . THE CASE OF THE ASSESSEE WAS THEREAFTER TAKEN UP FOR SCRUTINY PROCEEDINGS UNDER SECTION 143(2). 3. THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O OBSERVED THAT THE ASSESSEE HAD REFLECTED A L ONG TERM CAPITAL LOSS (LTCL) OF (RS. 47,63,844) AND A S HORT TERM CAPITAL GAIN (STCG) OF RS. 2,07,71,688/ - ON SALE OF SHARES IN HER RETURN OF INCOME. THE A.O. BEING OF THE VIEW THAT THE ASSESSEE WAS A TRADER OF SHARES AND NOT AN P A G E | 3 INVESTOR, THEREFORE CALLED UPON T HE ASSESSEE TO SHOW CAUSE AS TO WHY THE INCOME FROM THE SHARE TRANSACTIONS MAY NOT BE ASSESSED AS HER BUSINESS INCOME. THE ASSESSEE TO SUPPORT HER CLAIM THAT THE PROFIT/LOSS OF THE SHARES HAD RIGHTLY BEEN SHOWN UNDER THE HEAD CAPITAL GAINS IN THE RETURN OF INCOME, THEREIN SUBMITTED THAT SHE WAS A DERMATOLOGIST BY PROFESSION AND NOT IN THE BUSINESS OF PURCHASE/SALE OF SHARES. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT SHE HAD MADE INVESTMENT IN SCRIPS WHICH HA D A GROWTH IN INTRINSIC VALUE , YEAR AFTER YEAR, AND HAD CONSISTENTLY BEEN REFLECTED BY HER AS SUCH IN THE BALANCE SHEETS SINCE INCEPTION. THE ASSESSEE FURTHER EXPLAINING THE FACTORS WHICH WERE RESPONSIBLE FOR SALE OF CERTAIN SCRIPS WITHIN A SHORT PERIOD, T HEREIN SUBMITTED THAT THE SAME WAS ON ACCOUNT OF CHANGE IN GOVERNMENT POLICY, CHANGE IN MANAGEMENT AND CHANGE IN GLOBAL TRADING, AND THUS WERE SOLD NOT WITH ANY PREDETERMINED INTENT TO MAKE PROFIT BY TRADING IN SHARES, BUT ON ACCOUNT OF THE AFOREMENTIONED EXTERNAL FACTORS WHICH WOULD HAVE PERSUADED ANY INVESTOR TO HAVE ADOPTED A SIMILAR APPROACH. THE ASSESSEE IN ORDER TO DRIVE HOME HER CONTENTION THAT THE SALE OF THE SHARES HAD RIGHTLY BEEN REFLECTED UNDER THE HEAD C APITAL GAINS, THEREIN RELIED ON CBDT C IRCULAR NO. 4/2017, DATED 15.06.2007 , WHICH CATEGORICALLY DIFFERENTIATED BETWEEN A C APITAL ASSET AND A TRADING ASSET . THE ASSESSEE FURTHER IN SUPPORT OF HER CONTENTION THAT SHE WAS HOLDING THE SHARES AS AN INVESTOR AND NOT AS A TRADER, THEREIN SUBMITTE D BEFORE THE A.O THAT DURING THE YEAR UNDER CONSIDERATION SHE HAD CARRIED OUT SALE OF ONLY 4 SCRIPS , THE PROFIT FROM WHICH WAS BOOKED UNDER THE HEAD STCG . THE ASSESSEE FURTHER SUBMITTED BEFORE THE A.O THAT DURING THE YEAR UNDER CONSIDERATION THE TOTAL CONTRACT NOTE S FOR BOTH PURCHASE AND SALE OF SHARES WERE ONLY 18, VIZ. SEVEN CONTRACT NOTES OF PURCHASE AND ELEVEN FOR SALE , WHICH FURTHER SUPPORTED HER CLAIM THAT SHE WAS NOT REGULARLY DOING PURCHASE AND SALE OF SHARES. THE ASSESSEE TAKING P A G E | 4 SUPPORT OF THE FACT THAT HER DIVIDEND INCOME FROM THE INVESTMENT S MADE IN SHARES HAD GRADUALLY INCREASED TO AN AMOUNT OF RS. 24,61,941/ - DURING THE YEAR UNDER CONSIDERATION , VIZ. A.Y. 2010 - 11 , AS IN COMPARISON TO THE PRECEDING YEAR S , THE REIN AVERRED THAT HER INTENTION TO INVEST AND HOLD THE SHARES AS AN INVESTMENT AND EARN DIVIDEND FROM THE SAME , THUS COULD SAFELY BE GATHERED FROM THE SAID FACT ITSELF. THE ASSESSEE SUBMITTED BEFORE THE A.O. THAT SHE WAS CONSISTENTLY SHOWING THE PURCHASE OF SHARES AS AN INVESTMENT , AND PROFIT ON SALE OF SAME WAS OFFERED FOR TAX UNDER THE HEAD CAPITAL GAINS . THE ASSESSEE FURTHER TAKING SUPPORT OF THE FACT THAT AS THE STCG OF RS.47,63,844/ - FROM THE SALE OF SCRIPS SHOWN BY HER IN THE RETURN OF INCOME FOR THE IMMEDIATELY PRECEDING YEAR, VIZ. A.Y. 2009 - 10 , WAS ACCEPTED BY THE A.O. IN THE ASSESSMENT FRAMED U/S 143(3) , THEREFORE AN INCONSISTENT VIEW ARRIVED AT BY HIM UNDER THE S AME SET OF FACTS DURING THE YEAR UNDER CONSIDERATION , THUS COULD NOT BE SUSTAIN ED IN THE EYES OF LAW. 4. THE ASSESSEE FURTHER TO FORTIFY HER CONTENTION THAT THE SALE OF SHARES HAD RIGHTLY BEEN REFLECTED BY HER UNDER THE HEAD C APITAL GAINS, THEREIN RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. GOPAL PUROHIT (2011) 336 ITR 0287 (BOM). THE ASSESSEE IN ORDER TO IMPRESS UPON THE A.O. THAT THE CASE OF THE ASSESSEE WAS FACTUALLY IDENTICAL WITH TH E FACT S IN THE CASE OF GOPAL PUROHIT (SUPRA), THEREIN SUBMITTED A C HART REVEALING THE COMMON FACTS AS UNDER : - COMPARATIVE FACTS OF THE CASE SR. NO. PARTICULARS GOPAL PUROHIT AMRITA PANKAJ TALWAR 1 BORROWED FUNDS RS.3.39 CRORES (PAGE NO. 5 OF THE ORDER) NO INTEREST BEARING BORROWED FUND FROM P A G E | 5 OUTSIDERS. THE LOAN TAKEN FROM PANKAJ TALWAR (HUSBAND OF THE ASSESSEE) DURING THE EARLIER YEAR. 2 INFRASTRUCTURE MINIMUM, IN THE FORM OF OFFICE, EMPLOYEES, EQUIPMENTS, ETC. RESIDENCE IS USED FOR ACTIVITY AND PART TIME CLINIC PREMISES FOR PROFESSION . 3 DIVIDEND RS.15 LACS (PAGE NO. 5 OF THE ORDER) RS. 24.62 LACS DURING THE YEAR UNDER CONSIDERATION 4 ASSESSMENT ORDER 143(3) ACCEPTED AS INVESTMENT IN A.Y. 2001 - 02, 2003 - 04, 2004 - 05 ACCEPTED AS INVESTMENT IN A.Y. 2005 - 06 AND A.Y. 2009 - 10 5 TYPE OF TRANSACTIONS CARRYING BOTH DELIVERY BASED TRANSACTIONS AND NON - DELIVERY BASED TRANSACTIONS CARRYING DELIVERY BASED TRANSACTIONS ONLY. 6 SHOWN AS INVESTMENT IN BALANCE SHEET YES YES 7 TRADER OR INVESTOR SAME PERSON COULD BE BOTH INVESTOR AND TRADER (PAGE NO. 9 PARA 5.11) SHE IS ONLY AN INVESTOR AND HAS NOT DONE ANY SHARE TRADING ACTIVITY. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT THE SPECIAL LEAVE PETITION ( SLP ) FILED BY THE DEPARTMENT AGAINST TH E JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF GOPAL PUROHIT (SUPRA) HAD BEEN DISMISSED BY THE HONBLE SUPREME COURT VIDE ITS ORDER DATED 15.11.2010 IN CIT VS. GOPAL PUROHIT (2011) 334 ITR (ST) 308 . THUS ON THE BASIS OF THE AFORESAID AVERMENTS IT WAS SUBMITTED BY THE ASSESSEE THAT THE PROFIT ON THE SALE OF THE SHARE S HAD RIGHTLY BEEN REFLECTED BY HER UNDER THE HEAD C APITAL GAIN IN THE RETURN OF INCOME. P A G E | 6 5. THE AFORESAID CONTENTIONS OF THE ASSESSEE HOWEVER DID NOT FIND FAVOR WITH THE A .O, WHO OBSERVED THAT ON IDENTICAL FACTS IN A.YS. 2005 - 06, 2006 - 07, 2007 - 08 AND 2008 - 09, THE CLAIM OF THE ASSESSEE THAT THE PROFIT ON SALE OF SHARES WAS LIABLE TO BE ASSESSED UNDER THE HEAD STCG WAS REJECTED BY HIS PREDECES S OR AND WAS ASSESSED AS BUSINESS INCOME , WHICH THEREAFTER WAS UPHELD BY THE CIT(A ) . THE A.O THUS HOLDING A CONVICTION THAT THERE WAS NO REASON FOR HIM TO DEVIATE FROM THE VIEW TAKEN IN THE PRECEDING YEARS, THEREIN HELD THAT AS THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION TOO WAS CA RRYING ON THE BUSINESS OF SHARE TRADING IN A SYSTEMAT IC AND ORGANIZED MANNER, WITH THE PURPOSE OF EARNING PROFIT, THEREFORE THE PROFIT OF RS. 2,07,71,688/ - ON THE SALE OF SHARES WAS LIABLE TO BE ASSESSED UNDER THE HEAD BUSINESS INCOME. THE A.O FURTHER OBS ERVING THAT THE ASSESSEE HAD NOT ALLOCATED ANY EXPENSES AS REGARDS THE DIVIDEND INCOME OF RS.24,61,914/ - EARNED BY HER DURING THE YEAR , THERE FORE CARRIED OUT A DISALLOWANCE OF RS. 8,76,258/ - UNDER SECTION 14A R.W.R. 8D. - 6. THAT THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE A.O , THEREIN CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THAT THE CIT(A) AFTER PERUSING THE VIEW TAKEN BY HIS PREDECESSOR S WHILE DISPOSING OF THE APPEALS OF THE ASSESSEE FOR A.Y S . 2005 - 06 , 2006 - 07 AND 2007 - 08, THEREIN OB SERVED THAT THOUGH THE PROFIT ON THE SALE OF SHARES REFLECTED BY THE ASSESSEE UNDER THE HEAD LTCG WAS CONSISTENTLY ACCEPTED AS SUCH, BUT HOWEVER THE SAME SHOWN UNDER THE HEAD STCG WAS HELD TO BE ASSESSED AS BUSINESS INCOME. THE CIT(A) HOWEVER BEING OF TH E VIEW THAT THE FACTS INVOLVED IN THE YEAR UNDER CONSIDERATION, VIZ. A.Y. 2010 - 11 WERE SUBSTANTIALLY DISTINGUISHABLE AS AGAINST THOSE INVOLVED IN THE AFOREMENTIONED PRECEDING YEARS, THUS DID NOT SUBSCRIBE TO THE AFORESAID VIEW OF HIS PREDECESSORS BY OBSER VING AS UNDER: - P A G E | 7 FURTHER FROM FACTS IT CANNOT BE SAID THAT IN THIS YEAR, THE ASSESSEE WAS ACTIVELY INVOLVED IN LARGE SCALE TRANSACTIONS WITH HIGH FREQUENCY OF PURCHASE AND SALE OF SHARES OF VARIOUS COMPANIES ON REGULAR BASIS DURING THE CURRENT YEAR SINCE THE HOLDING PERIODS ARE SUBSTANTIALLY LONGER THAN THAT IN EARLIER YEARS. THE ASSESSEE HAS ALSO EARNED SUBSTANTIAL DIVIDEND EXCEEDING RS.24.61 LACS DURING THE YEAR WHICH IS ABOUT 1.5% OF INVESTMENTS. THE TURNOVER RS.7.61 CRORES ALSO CANNOT BE SAID TO BE HI GH AS COMPARES TO THE SIZE OF INVESTMENTS RS.15.66 CRORES ON 31.03.2010 AND RS. 15.58 CRORES ON 31.03.2009 RATHER IT IS LESS (ONLY ABOUT 50%) THAN THE INVESTMENT WHEREAS IN OTHER YEARS, THE SALES EXCEEDED THE INVESTMENTS. THE CIT(A) THEREAFTER TESTING THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION, IN THE BACKDROP OF THE PARAMETERS LAID DOWN BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF GOPAL PUROHIT (SUPRA) , THEREIN HELD THAT THE INCOME FROM DELIVERY BASED SHARE TRANSACTION S OF THE ASSESSEE COULD NOT BE ASSESSED AS BUSINESS INCOME, BUT RATHER WAS ASSESSABLE UNDER THE HEAD C APITAL GAINS. THE CIT(A) FURTHER DELIBERATING ON THE DISALLOWANCE OF RS. 8,76,258/ - MADE BY THE A.O. UNDER SEC. 14A R.W. RULE 8D , THEREIN BE ING OF THE VI EW THAT AS THE ASSESSEE HAD NOT MAINTAINED ANY SEPARATE ACCOUNT S FOR HER PROFESSIONAL INCOME AND THE EXEMPT INCOME, THEREFORE THE A.O HAD RIGHTLY INVOKED RULE 8D(II) AND MADE DISALLOWANCE IN THE HANDS OF THE ASSESSEE. 7. THAT THE REVENUE HAD ASSAILED BEFORE US THE ORDER OF THE CIT(A) , ON THE GROUND THAT HE HAD ERRED IN SETTING ASIDE THE ASSESSMENT OF THE PROFIT ON THE SALE OF SHARES UNDER THE HEAD BUSINESS INCOME, AND HOLDING THAT THE SAME WAS RIGHTLY REFLECTED BY THE ASSESSE E IN HER RETURN OF INCOME UNDER THE HEAD STCG . P A G E | 8 8. THAT AT THE VERY OUTSET OF THE HEARING OF THE APPEAL THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R.) FOR THE ASSESSEE SUBMITTED THAT THE RELIANCE PLACED BY THE LOWER AUTHORITIES ON THE FACT THAT THAT THE PROFIT ON THE SALE OF SHARES WAS ASSESSED IN THE HANDS OF THE ASSESSEE FOR A.YS. 2005 - 06, 2006 - 07, 2007 - 08 AND 2008 - 09 UNDER THE HEAD BUSINESS INCOME, WHICH THEREAFTER WAS UPHELD BY THE CIT(A), DID NOT HOLD THE GROUND ANY MORE , AS THE SAID RESPECTIVE ORDERS OF THE CIT(A) HAD BEEN SET ASIDE BY THE TRIBUNAL VIDE ITS CONSOLIDATE ORDER DATED 04.11.2015 . THE LD. A.R PLACED ON RECORD THE COPY OF THE ORDER OF THE TRIBUNAL AND SUBMITTED THAT THE TRIBUNAL IN ITS SAID ORDER HAD DIRECTED THE A.O. TO ASSESS THE PROFIT ON THE SALE OF SHARES UNDER THE HEAD STCG, BY OBSERVING AS UNDER: - WE HAVE EARLIER NOTICED THAT THE DECISION TAKEN BY THE ASSESSING OFFICER IN A.Y. 2006 - 07 WAS FOLLOWED IN OTHER YEARS. IN ASSESSMENT YEAR, THE ASSESSING OFFICER HAS CONSIDERED FOLLO WING POINTS TO HOLD THAT THE ASSESSEE HAS DEALT IN THE SHARES AS A TRADER: - (A) THE HOLDING PERIOD IN MAJORITY OF SHARES WAS LESS THAN A MONTH. (B) VOLUME OF TRANSACTION S IS HIGH. HOWEVER A CRITICAL ANALYSIS OF THE TRANSACTIONS OF THE ASSESSEE WOULD SHOW THAT THE ASSESSEE HAS DEALT WITH 24 SCRIPS, 27 SCRIPS, 26 SCRIPS AND 17 SCRIPS RESPECTIVELY IN THE YEARS RELEVANT TO THE ASSESSMENT YEARS 2005 - 06, 2006 - 07, 2008 - 09 AND 2009 - 10. WE HAVE EARLIER NOTICE D THAT THE ASSESSEE HAS PURCHASED EACH SHARES IN HIGH QUANTITIES AND HENCE THE VOLUME OF TRANSACTIONS WAS SEEN AT HIGHER FIGURE. WITH REGARD TO HOLDING PERIOD, WE HAVE SEEN THAT THE ASSESSEE HAS HELD SHARES IN VARYING PERIODS RANGING FROM ONE WEEK TO NINE MONTHS. HENCE THE AVERAGE HOLDING PERIOD WAS REASONABLY GOOD. THE REPETITION OF TRANSACTIONS WERE VERY MINIMAL, I.E, UPTO A MAXIMUM OF FOUR TRANSACTIONS ONLY. THE ASSESSEE HAS NOT BORROWED P A G E | 9 FUNDS FOR PURCHASING THE SHARES. THE ASSESSEE HAS HELD MAJOR SHARES FOR MORE THAN ONE YEAR AND HAS DECLARED LONG TERM CAPITAL G AINS. WE NOTICE THAT THE A SSESSING O FFICER HAS IGNORED ALL OTHER FACTORS, WHICH ARE IN FAVOUR OF THE ASSESSEE AND HAS DECIDED THE ISSUE AGAINST THE ASSESSEE BY CONSIDERING ONLY TWO FACTORS. WE HAVE SEEN THAT EVEN THE TWO FACTORS THAT WERE CONSIDERED BY THE ASSESSING OFFICER WORKS OUT IN FAVOUR OF THE ASSESSEE ONLY. HENCE, IN OUR VIEW, THE DECISION TAKEN BY THE ASSESSING OFFICER IN A.Y 2006 - 07 IS NOT CORRECT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND HENCE THE ASSESSMENT ORDERS PASSED IN OTHER YEARS BY FOLLOWING THE DECISION RENDERED IN A.Y 2006 - 07 WOULD CONSEQUENT L Y RENDERED INCORRECT. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE CONTENTIONS OF LD. A.R. THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ASSESSING THE GAINS ARISI NG ON SALE OF SHARES AS BUSINESS INCOME OF THE ASSESSEE. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING TO ASSESS THE LONG TERM CAPITAL GAINS UNDER THE HEAD CAPITAL GAINS ONLY. IN RESPECT OF SHORT TE RM CAPITAL GAINS, WE SET ASIDE HIS ORDER FOR THE REASONS DISCUSSED IN THE PREVIOUS PARAGRAPH AND DIRECT THE ASSESSING OFFICER TO ASSESS THE SAME UNDER THE HEAD CAPITAL GAINS ONLY FOR ALL THE YEARS UNDER CONSIDERATION. THE LD. A.R. THUS RELYING ON THE ORDE R OF THE TRIBUNAL THEREIN SUBMITTED THAT THE CIT(A) IN THE PRESENT CASE HAD RIGHTLY HELD THAT THE PROFIT ON THE SALE OF THE SHARES WAS LIABLE TO BE ASSESSED UNDER THE HEAD STCG , AND NOT AS BUSINESS INCOME. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDER OF THE A.O AND SUBMITTED THAT THE PROFIT ON THE SALE OF SHARES HAD RIGHTLY BEEN ASSESSED BY THE A.O UNDER THE HEAD BUSINESS INCOME. IT WAS P A G E | 10 THUS SUBMITTED BY THE LD. D.R THAT THE ORDER OF THE CIT(A) ON THE ISSUE UNDER CONSIDERATION MAY BE SET ASIDE AND THAT OF THE A.O BE RESTORED. 9. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVE S FOR BOTH THE PARTIES, PERUSED THE ORDER S OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE AFORESAID ORDER OF THE TRIBUNAL , DATED 04.11.2015 , PASSED IN THE CASE OF THE ASSESSEE FOR THE AFOREMENTIONED PRECEDING YEARS , VIZ. A.YS. 2005 - 06 , 2006 - 07, 2007 - 08 AND 2008 - 09 . WE FURTHER FIND THAT THE CIT( A) ON THE BASIS OF A WELL REASONED ORDER HAD RIGHTLY CONCLUDED THAT IN THE BACKDROP OF THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, THE PROFIT ON THE SALE OF THE SHARES HAD RIGHTLY BEEN REFLECTED BY THE ASSESSEE UNDER TH E HEAD STCG. WE FURTHER FIND OURSELVES TO BE IN AGREEMENT WITH THE VIEW TAKEN BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE, AND IN THE ABSENCE OF ANY PERVERSITY OR DISTINGUISHABLE FACT HAVING BEEN BROUGHT TO OUR NOTICE IN RESPECT OF THE ORDER OF THE CIT(A) F OR THE YEAR UNDER CONSIDERATION, THEREIN FIND NO REASON TO TAKE A DIFFERENT VIEW . WE THUS IN LIGHT OF OUR AFORESAID OBSERVATIONS UPHOLD THE ORDER OF THE CIT(A) IN RESPECT OF THE ISSUE UNDER CONSIDERATION. THE APPEAL FILED BY THE RE VENUE IS THUS DISMISSED . ITA NO. 5200/MUM/2014 10. WE NOW TAKE UP THE APPEAL OF THE ASSESSEE, WHEREIN THE LATTER HAD ASSAILED THE ORDER OF THE CIT(A) ON THE FOLLOWING GROUNDS : - 1 I. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF DISALLOWANCE UNDER SECTION 14A R.W.R. 8D OF INCOME TAX ACT,1961 AMOUNTING OF RS.8,76,258/ - AS EXPENSES INCURRED IN EARNING P A G E | 11 EXEMPT INCOME. YOUR APPELLANT SUBMITS THAT SHE HAD NOT INCURRED ANY EXPENSE IN EARNING EXEMPT INCOME AND THE DISALLOWANCE U/S 14A OUGHT TO BE DELETED. II. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO CONSIDER, THAT THE LEARNED A.O HAD NOT PROVIDED ANY EXPLA NATION OR JUSTIFICATION FOR THE NON - SATISFACTION OF THE CLAIM OF THE APPELLANT IN NOT INCURRING ANY EXPENDITURE IN RELATION TO EARNING EXEMPT INCOME. III. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO CONSIDER THE SUBMISSIONS MADE BEFORE HIM DURING THE COURSE OF APPELLATE PROCEEDINGS. 2. WITHOUT PREJUDICE TO THE ABOVE, THE DISALLOWANCE OF RS.8,76,258/ - IS EXCESSIVE AND UNREASONABLE AND BE KEPT AT MINIMUM. 3. THE APPELLANT RESERVES THE RIGHT TO ADD, AMEND, OR ALTER ANY GROUND OR GROUNDS OF APPEAL ON OR BEFORE THE HEARING OF THE APPEAL. THE LD. A.R. HAD ASSAILED THE SUSTAINING OF THE DISALLOWANCE OF RS.8,76,258/ - (SUPRA) U/S 14A R.W. RULE 8D(II) BY THE CIT(A) . IT WAS SUBMITTED BY THE LD. A.R. THAT AS THE ASSESSEE HAD NOT INCURRED ANY EXPENSES ON EARNING OF EXEMPT INCOME, THEREFORE NO DISALLOWANCE UNDER SECTION 14A WAS CALLED FOR IN HER HANDS. THE LD. A.R. TAKING US THROUGH THE ORDER OF THE A.O. THEREIN SUBMITTED THAT DESPITE THE FACT THAT THE ASSES SEE HAD CLAIMED THAT NO EXPENDITURE HAD BEEN INCURRED IN RELATION TO THE EARNING OF THE EXEMPT INCOME, THE A.O. HOWEVER WITHOUT PROVIDING ANY EXPLANATION OR JUSTIFICATION FOR NOT ACCEPTING THE P A G E | 12 SAID CLAIM OF THE ASSESSEE HAD MADE THE AFORESAID DISALLOWANCE OF RS.8,76,258/ - UNDER SECTION 14A R.W.R. 8D(II) IN THE HANDS OF THE ASSESSEE. THE LD. A.R. IN ORDER TO DRIVE HOME HIS CONTENTION THAT THAT BEFORE THE A.O TAKES RECOURSE TO DETERMINATION OF EXPENDITURE UNDER RULE 8D, HE REMAIN S UNDER A STATUTORY OBLIGATION TO RECORD HIS SATISFACTION THAT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, AS PLACED BEFORE HIM, IT IS NOT POSSIBLE FOR HIM TO GENERATE THE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE , THEREIN RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CHEM I NVEST LTD. VS. CIT (2015) 378 ITR 0033 (DEL) AND THE JUDGMENT OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CA N A RA BANK VS. ACIT (2015) 228 T AXMAN 0212 (KAR) . THE LD. A. R. FURTHER RELIED ON THE RECENT JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF GODREJ & BOY CE MANU FACTURING CO. LTD. VS. DCIT & A NR. (CIVIL APPEAL NO.7020 OF 2011 ; DATED . 08 . 05 . 2017) . IT W AS THUS SUBMITTED BY THE LD. A.R . THAT AS THE A.O. IN THE PRESENT CASE HAD CARRIED OUT THE DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D(II) , WITHOUT ARRIVING AT A SATISFACTION AS REGARDS THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE ON THE BASIS OF THE ACCOUNTS OF THE ASSESSEE , AS WERE PLACED BEFORE HIM, THEREFORE THE SAME WAS NOT SUSTAINABLE IN THE EYES OF LAW AND WAS LIABLE TO BE VACATED. 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND FIND OURSELVES TO BE IN AGREEMENT WITH THE CONTENTION OF THE ASSESSEE THAT THE VERY PROCESS OF DETERMINATION OF THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME WOULD BE TRIGGERED , ONLY IF THE A.O. RETURNS A FINDING THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. WE ARE OF THE CONSIDERED VIEW THAT IT IS ONLY IF THE A.O. IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE HAD BEEN INCURRED IN RELATION TO THE EXEMPT INCOME, P A G E | 13 THEREIN ONLY AFTER RECORDING CO GENT REASONS AS REGARDS THE SAM E , THAT THE A.O. CAN THEREIN EMBARK UPON THE DETERMINATION OF THE AMOUNT OF EXPENDITURE IN ACCORDANCE WITH THE METHOD PRESCRIBED IN SECTION 14A R.W. RULE 8D. WE ARE OF THE CONSIDERED VIEW THAT OUR AFORESAID VIEW STANDS FORTIFIED BY THE RECENT JUDGMENT OF T HE HONBLE SUPREME COURT IN THE CASE OF : GODREJ & BOYCE MANUFACTURING COMPANY LIMITED (SUPRA) , WHEREIN THE HONBLE APEX COURT HAD HELD AS UNDER: - WHETHER SUCH DETERMINATION IS TO BE MADE ON APPLICATION OF THE FORMULA PRESCRIBED UNDER RULE 8D OR IN THE BEST JUDGMENT OF THE ASSESSING OFFICER, WHAT THE LAW POSTULATES IS THE REQUIREMENT OF A SATISFACTION IN THE ASSESSING OFFICER THAT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, AS PLACED BEFORE HIM, IT IS NOT POSSIBLE TO GENERATE THE REQUISITE SATISFACTIO N WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF TH E ASSESSEE. IT IS ONLY THEREAFTER THAT THE PROVISIONS OF SECTION 14A ( 2) AND (3) READ WITH RULE 8D OF THE RULES OR A BEST JUDGMENT DETERMINATION, AS EARLIER PREVAILING, WOULD BECOME APPLICABLE. WE ARE OF THE CONS IDERED VIEW THAT IN THE PRESENT CASE IT CAN SAFELY BE CONCLUDED THAT THE A.O HAD FAILED TO ARRIVE AT A SATISFACTION THAT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, AS PLACE D BEFORE HIM, IT WAS NOT POSSIBLE FOR HIM GENERATE THE REQUISITE SATISFA CTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE HAD BEEN INCURRED BY HER IN RESPECT OF THE EXEMPT INCOME. W E THEREFORE IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS ARE THUS UNABLE TO PERSUADE OURSELVES TO UPHOLD THE D ISALLOWANCE OF RS.8,76,258/ - MADE BY THE A.O UNDER SECTION 14A R.W.R. 8D(II) , WHICH THEREAFTER HAD BEEN SUSTAINED BY THE CIT(A). WE THUS SET ASIDE THE ORDER OF THE CIT(A) ON THE ISSUE UNDER CONSIDERATION AND DELETE THE ADDITION OF RS. 8,76,258/ - . P A G E | 14 11. THE APPEAL OF THE ASSESSEE IS ALLOWED . 12. THAT IN TERMS OF OUR AFORESAID OBSERVATIONS THE APPEAL OF THE ASSESSEE IS ALLOWED, WHILE FOR THE APPEAL OF THE REVENUE IS DISMISSED . ORD ER PRONOUNCED IN THE OPEN COURT ON 14 /06/2017 SD/ - SD/ - (G.S. PANNU ) (RAVISH SOOD) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 14 .06 .2017 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / D.R, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI P A G E | 15