ACIT, Noida V. Smt. Rita Dewan, Noida

ITA 5405/DEL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74113 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 12-12-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 01-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.5405,5406&5407/DEL/201- ASSESSMENT YEAR : 2005-06, 06-07 & 2007-08 ACIT, SMT. RITA DEWAN, 2ND FLOOR, 127-SECTGOR-29, SHOPPING COMPLEX, NOIDA. SECTOR-20, NOIDA. V. (APPELLANT) (RESPONDENT) APPELLANT BY : MS. MEENAKSHI VOHRA, SR. DR. RESPONDENT BY : SHRI SANJEEV JAIN, C.A. ORDER PER TS KAPOOR, AM: THESE ARE THREE APPEALS FILED BY THE REVENUE AGAINST T HE SEPARATE ORDERS OF CIT(A) ALL DATED 24.9.2010. THE CO MMON GRIEVANCE RAISED BY REVENUE IN ALL THESE APPEALS IS THE ACTION OF LD CIT(A) IN HOLDING THE PROFIT ON TRANSACTIONS OF SHARES AS SHORT T ERM CAPITAL GAIN AS AGAINST THE ASSESSING OFFICERS HOLDING THE SAME TO BE BUSINESS INCOME. THE ASSESSING OFFICER HELD THE INCOME OF ASSESSEE A S BUSINESS INCOME BY HOLDING SIMILAR OBSERVATIONS IN ALL THE THRE E YEARS. FOR THE SAKE OF CONVENIENCE, THE OBSERVATIONS OF THE ASSESSING OFF ICER IN ASSESSMENT YEAR 2005-06 ARE REPRODUCED BELOW:- AS PER CIRCULAR NO.4/2007 DATED 15.6.2007 DISTINCTIO N BETWEEN THE SHARES HELD AS STOCK IN TRADE AND SHARES HELD AS INVESTMENT , FOLLOWING FACTS ARE TO BE CONSIDERED. ITA NO5405 TO 5407/DEL/2010 2 1. PURCHASE AND SALE OF SHARES WILL NOT ITSELF BE DECISIVE O F NATURE OF TRANSACTION. 2. MAGNITUDE OF THE TRANSACTION IS ALSO FACTOR WHICH CAN DECIDED THE NATURE OF TRANSACTION I.E. WHETHER IT HAS STOCK IN TRA DE OR IT IS AN INVESTMENT. 3. IMPORTANT PRINCIPLE TO DECIDE THE NATURE OF TRANSACT ION IN SHARERS IS MOTIVE BEHIND THE PURCHASE, IF MOTIVE IS TO EARN PR OFIT, IT WOULD LEAD TO INFERENCE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS REQUIRED VIDE NOTE SHEET ENTRY DATED 5.10.2006AND WA S REQUIRED TO FURNISH THE DETAILS OF TRANSACTIONS INVESTMENT IN LAST 2 YEARS IN RESPECT OF STOCK, BUT NO REPLY TO THIS QUERY WAS GIVEN . THE ASSESSEE WAS ALSO ASKED FOR JUSTIFICATION FOR NOT GETTING ACCOUN TS AUDITED NO REPLY TO THIS QUERY HAS ALSO BEEN GIVEN. AS PER STATEMENT OF AFFAIRS FILED BY THE ASSESSEE, THE TOT AL INVESTMENT IN SECURITIES AS ON 31.3.2004 WAS ` .20,31,218/- WHILE AS ON 31.3.2005 IT WAS ` .80,43,133/- AND MONEY PARKED WITH THE BROKERS I.E. M/S QUANTUM SECURITIES PVT. LTD. WAS ` .35,56,868/- ON 31.3.2004 AND ` .6,48,494/- AS ON 31.3.2005. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAS STATED THAT NO TRANSACTION S OF SHARES WAS MADE THROUGH HER DEMAT ACCOUNT, BUT MONE Y WAS PARKED WITH HER BROKER M/S QUANTUM SECURITIES PVT. LT D. WHO HAS ISSUED CONTRACT NOTE FOR SALE AND PURCHASE OF SHARES MADE ON BEHALF ASSESSEE. IT IS CLEAR FROM THESE CONTRACT NOTE THAT THE A SSESSEE HAS NEVER GET SHARES IN HER DEMAT ACCOUNT AND ONLY SETTLEM ENT HAS BEEN MADE THROUGH THIS CONTRACT NOTE. ON GOING THROU GH THE COPY OF ACCOUNT OF M/S QUANTUM SECURITIES PVT. LTD. IT HAS FOU ND THAT ASSESSEE HAS PARKED ` .35,65,868/- WITH BROKER M/S QUANTUM SECURITIES PVT. LTD. AND AFTERWARDS NEITHER ANY AMOUN T HAS BEEN ITA NO5405 TO 5407/DEL/2010 3 DEPOSITED WITH THE BROKER NOR ANY WITHDRAWAL HAS BEEN MADE FROM THIS ACCOUNT. ON GOING THROUGH THIS AMOUNT, IT APPEA RS THAT NUMEROUS TRANSACTION HAS BEEN MADE BY THE ASSESSEE WITHOUT OPERATION OF DEMAT A/C AND SHE HAS NEVER DEPOSITED ANY MONEY NOR ANY MONEY HAS BEEN WITHDRAWN WHICH CLEARLY SHOWS THAT THE INTENTION OF THE ASSESSEE TO PARK THE MONEY WITH THE B ROKER WAS NOT TO MAKE INVESTMENT IN SECURITIES/STOCK BUT TO EARN PROF IT AND IT WAS NEVER INVESTMENT OF THE ASSESSEE IN STOCK. 2. ON APPEAL BEFORE LD CIT(A), THE LD CIT(A) TREATE D THE INCOME OF THE ASSESSEE AS SHORT TERM CAPITAL GAIN BY HOLDING AS UNDE R:- HAVING CAREFULLY CONSIDERED EACH AND EVERY RELEVANT ASPECT OF THIS CASE AND THE RIVAL CONTENTIONS, I HOLD THAT THE ASSESSING OFFICER WAS NOT CORRECT IN MAKING INFERENCE THAT THE INTENTION OF THE ASSESSEE WAS TO DO BUSINESS IN SHARE MARKET. THIS CONCLUSION OF MIN E IS BASED ON FOLLOWING IMPORTANT FACTS/ARGUMENTS ARISING OU T OF FACTS ON RECORD. I) THE ASSESSEE IS A FULL TIME EMPLOYEE WITH A COMPANY FROM FINANCIAL YEAR 2006-07 ONWARDS. THERE IS NOTHING ON R ECORD TO SHOW THAT SHE HAS EXPERTISE IN SHARE MARKET. II) THE SEQUENCE OF EVIDENCE SUPPORTS HER VIEW THAT AS HER DAUGHTER GIFTED A LARGE CHUNK OF FUNDS, SHE UTILIZED IT FOR INVESTMENT IN SHARES. III) USING THE DEMAT A/C OF THE BROKER AND ALSO PARKING OF SHARES/FUNDS WITH THE BROKER CAN INDICATE THAT THE APP ELLANT IS BANKING ON EXPERTISE OF THE BROKER AND PURCHASE OF SAL E OF SHARES WAS DONE ACCORDING TO THE ADVICE OBTAINED. THE ASSESSEES JUSTIFICATION OF USING DEMAT A/C OF BROKER IS AL SO ITA NO5405 TO 5407/DEL/2010 4 SATISFACTORY. IN FACT, IN LATER YEARS, THE ASSESSEE HAS GOT A DEMAT A/C IN HER NAME IN THE VICINITY OF THE BROKER S OFFICE FOR OPERATION CONVENIENCE. IV) SUCH INVESTMENT IN SHARES AND CONSEQUENT LONG TERM/SHORT TERM CAPITAL GAIN OR LOSS HAVE BEEN ACCEPTED IN EARLI ER YEARS. V) THE ASSESSEE HAS ALWAYS SHOWN THE STOCK OF SHARES AS INVESTMENT AND NOT IN STOCK. VI) IN CASES OF MANY SHARES, JUST BECAUSE SHARES HAVE BEEN SOLD BEFORE COMPLETION OF A YEAR, CANNOT BE TAKEN AS A BA SIS TO PENALIZE THE ASSESSEE WITH THE VIEW THAT IT WAS A BUSINE SS TRANSACTION, WHEN THE ASSESSEE IS DULY SHOWING IT AS SHORT TERM CAPITAL GAIN. VII) LONG TERM CAPITAL GAIN/LOSS HAS BEEN ACCEPTED ON SIMILA R PURCHASE AND SALE. VIII) THE ASSESSEE HAD NEVER USED ANY BORROWED FUNDS. IX) THE ASSESSEE HAS NOT CLAIMED ANY EXPENSES OUT OF SUCH GAIN ARISING FROM PURCHASE AND SALE OF SHARES. X) IN MOST OF THE INSTANCES, THE SHARES HAVE BEEN HELD FOR SUFFICIENCY LONG TIME, WHICH IMPLIES THAT THE PURCHAS E OF SHARES WAS MADE WITH AN INTENTION TO INVEST AND GAIN. 6.1. IN VIEW OF THE ABOVE VARIOUS FACTUAL INFERENCES, I AG REE WITH THE APPELLANTS CONTENTION THAT THERE IS NOTHING TO I NDICATE THAT HER INTENTION WAS TO DO BUSINESS IN SHARES. ON THE O THER HAND, ALL THE FACTS SUPPORT HER CONTENTION THAT SHE IS MAKING INVESTMENT IN SHARES. 6.2. THEREFORE, I HOLD THAT THE ASSESSING OFFICER WAS NOT C ORRECT IN TAXING THE SHORT TERM CAPITAL GAIN AS A BUSINESS INCOME. THE ASSESSING OFFICER IS DIRECTED TO ACCEPT THE COMPUTATION AS SHOWN BY THE ASSESSEE IN HER RETURN. ITA NO5405 TO 5407/DEL/2010 5 3. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 4. AT THE OUTSET, THE LD DR INVITED OUR ATTENTION TO PARA 6 OF ASSESSMENT ORDER AND ARGUED THAT ASSESSEE HAD NO DEMAT A/C AND SHE HAD USED DEMAT A/C OF HER BROKER ONLY AND MOREOVE R THE FREQUENCY OF TRANSACTION WAS QUITE HIGH AND IN THIS R ESPECT OUR ATTENTION WAS INVITED TO PAPER BOOK PAGE 11. IT WAS F URTHER SUBMITTED THAT ASSESSEE DID NOT WITHDRAW ANY MONEY FROM THE BROKE R AND AGAIN INVESTED THE SALE PROCEEDS OF SHARES IN PURCHASE OF ANOTH ER SHARES AND THEREFORE THE INTENTION OF ASSESSEE WAS TO EARN BUSINESS IN COME AND NOT CAPITAL APPRECIATION. RELIANCE IN THIS RESPECT W AS PLACED ON A NUMBER OF JUDICIAL PRONOUNCEMENTS DETAILED AS UNDER:- 1. CIT V. KARAM CHAND THAPAR AND BROTHERS PRIVATE LIMITED. 176 ITR 535 (SC). 2. CIT V. NEW ERA AGENCIES (P) LTD. 68 ITR 585 3. CIT V. AMALGAMATION 108 ITR 895. 4. CIT V. SATLUJ COTTON MILLS 100 ITR 706. 5. ON THE STRENGTH OF THESE JUDGMENTS THE LD DR ARGUED THAT AS HAD IN THESE CASES THE ASSESSEE WAS ALSO INDULGING INTO BUSIN ESS ACTIVITIES. 6. THE LD AR, ON THE OTHER HAND, SUBMITTED THAT ASSESSEE WAS A SENIOR CITIZEN AND WIFE OF A RETIRED COLONEL AND HER ONLY GIRL CHILD WAS LIVING IN USA SINCE 1991 AND THE CHILD WITH A VIEW T O SECURE FINANCIAL SECURITY OF MOTHER HAD GIFTED AN AMOUNT OF ` .48,77,278/- WHICH WAS DIRECTLY SENT BY HER TO THE BROKER AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO PAPER BOOK PAGE 13 WHERE A COPY OF LETTE R WRITTEN BY DAUGHTER OF ASSESSEE IN FAVOUR OF BROKER WAS PLACED. O N THE STRENGTH ITA NO5405 TO 5407/DEL/2010 6 OF THIS LETTER IT WAS ARGUED THAT LETTER CLEARLY INSTR UCTED THE BROKER THAT MONEY WAS FOR INVESTMENT IN SHARES. HE FURTHER ARGUED THAT DURING PRECEDING YEAR THE CLAIM OF THE ASSESSEE REGARDING SHOR T TERM CAPITAL GAIN WAS NOT DOUBTED AND WAS ACCEPTED AND EVEN IN SUC CEEDING YEARS THE CLAIM WAS ACCEPTED AND MOREOVER IN FEW TRANSACTI ONS OF SHARES IN WHICH PERIOD OF MORE THAN ONE YEAR HAD PASSED BETWEEN PURCHASE AND SALE, THE DEPARTMENT HAD ACCEPTED THE PROFIT TO BE A LONG TERM CAPITAL GAIN.. THEREFORE, ON THE BASIS OF CONTINUITY ALSO THE ASSESSEE WAS ELIGIBLE FOR TREATING THE GAIN AS SHORT TERM CAPITAL GAIN. CONTINUING HIS ARGUMENTS THE LD AR SUBMITTED THAT THE VERY FACT THAT ASSESSEE DID NOT WITHDRAWN ANY MONEY FROM BROKERS ACCOUNT ITSELF PROVES THAT THE AMOUNT WAS INVESTED WITH A VIEW TO MAXIMIZE HER WEA LTH AND MOREOVER AT THE AGE OF 58 NOBODY WILL DO BUSINESS OF SU CH NATURE. HE FURTHER STRESSED THAT ASSESSEE HAD NO INFRASTRUCTURE FOR TRADING IN SHARES AND SHE HAD NO KNOWLEDGE ABOUT THE SHARES AND MO RE OVER IT WAS CONTENDED THAT ASSESSEE HAD NOT USED ANY BORROWED FUN DS AND HAD USED ONLY HER OWN FUNDS. THEREFORE, IT WAS ARGUED THAT THE LD CIT(A) HAS RIGHTLY CONCLUDED IN FAVOUR OF ASSESSEE. RELI ANCE IN THIS RESPECT WAS PLACED AS UNDER:- 1. 28 CTR 582 (BOMBAY HIGH COURT) IN THE CASE OF GOPAL PUROHIT WITH THE PROPOSITION THAT WHERE THE ASSESSEE WAS ENGAGED IN DELIVERY BASED TRANSACTIONS, THE SAME HAS TO BE TAKEN AS TRANSACTION OF INVESTMENTS. 2. 327 ITR 445 IN THE CASE OF ROHIT ANAND WITH THE PROP OSITION THAT WHERE THE ASSESSEES INTENTION WAS ONLY FINANCIAL SECURITY AND MAXIMIZATION OF WEALTH THERE CANNOT BE SAID TO BE AN INTENTION OF TRADING IN SHARES AND THEN THE SAME CANNOT BE TREATED AS BUSINESS INCOME. ITA NO5405 TO 5407/DEL/2010 7 3. 11 SOT 627 (MUM. ITAT) IN THE CASE OF JANAK S., RANG WALA WITH THE PROPOSITION THAT WHERE AN ASSESSEE HAD EARNED A SHO RT TERM CAPITAL GAIN OF ` .1.47 CRORES IN RESPECT OF TRANSACTION IN SHARES HELD AS INVESTMENT THEN SUCH TRANSACTION ARISE DUE TO O NLY CAPITAL GAIN NOTWITHSTANDING VOLUME AND MAGNITUDE OF TRANSACTIONS. 4. (13 TTJ 88 (BOM.) IN THE CASE OF BHARAT KUNVERJI KEN IA WHEREIN IT WAS HELD THAT WHERE THE ASSESSEE WAS SHOWING SHARES AS INVESTMENTS AND THE SAME STOOD ACCEPTED AS INVESTMENT IN EARLIER YEARS THEN MERELY BECAUSE VOLUME/FREQUENCY O F TRANSACTION WAS MORE, IT CANNOT BE SAID THAT ASSESSEE WA S A TRADER IN SHARES. 7. RELIANCE WAS ALSO PLACED ON THE CASE LAW OF RADHA S WAMI SATSANG 193 ITR 321 WITH THE PROPOSITION THAT PRINCIP LE OF UNIFORMITY AND CONTINUITY SHOULD BE APPLIED WHEN FACTS AND CIRC UMSTANCES ARE SAME. ON THE BASIS OF THESE JUDGMENTS, THE LD AR SUBMITTE D THAT ASSESSEE HAD BEEN DECLARING THE INVESTMENTS AT COST AND WA S DECLARING AS INVESTMENT AND NOT AS STOCK IN TRADE AND H AD USED THE FUNDS ONLY ON DELIVERY BASED TRANSACTIONS AND NO BORRO WED FUNDS WERE USED. THEREFORE, ALL THE JUDGMENTS ARE IN FAVOUR OF A SSESSEE. IN VIEW OF THE ABOVE, IT WAS SUBMITTED THAT LD CIT(A) HAS RIGHTL Y ALLOWED THE RELIEF. 8. THE LD DR IN HER REJOINDER SUBMITTED THAT IN SUCCE EDING YEAR THE ASSESSMENTS WERE COMPLETED U/S 143(1) OF THE ACT WHEREIN NO SCRUTINY WAS DONE, THEREFORE, ASSESSEE CANNOT CLAIM THE BENEFIT O F CONTINUITY. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT LD ITA NO5405 TO 5407/DEL/2010 8 CIT(A) HAS VERY ELABORATELY DEALT WITH THE APPEALS OF ASSESSEE AND HAS EXAMINED ALL THE OBJECTIONS RAISED BY THE ASSESSING OFFIC ER AND HAS RIGHTLY HELD THE INCOME AS SHORT TERM CAPITAL GAIN IN STEAD OF BUSINESS INCOME AND WE DO NOT FIND ANY INFIRMITY IN THE SAME. THE CASE LAW RELIED UPON BY LD DR DO NOT HAVE SIMILAR FACTS AND C IRCUMSTANCES. THE CONTENTION OF LD DR THAT IN SUCCEEDING YEARS ASSESSMEN TS WERE COMPLETED U/S 143(1) THEREFORE ASSESSEE CANNOT CLAIM THE BENEFIT OF CONTINUITY ALSO DOES NOT CARRY MUCH FORCE AS FOR ALL PRACTICAL PURPOSES. ASSESSMENTS U/S 143(1) REMAINS ASSESSMENT AND MOREOVER OTHERWI SE ALSO ASSESSEE HAS STRONG CASE IN HER FAVOUR AS SHE HAD BEEN CLASSIFYING THE COST OF SHARES AS INVESTMENT AND NOT AS STOCK IN TRADE WHICH IS IMPORTANT INDICATION OF INTENTION OF THE ASSESSEE. 10. IN VIEW OF THE ABOVE, THE APPEALS FILED BY THE R EVENUE ARE DISMISSED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 7TH DAY O F FEBRUARY, 2014. SD/- SD/- (I.C. SUDHIR) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 07.02.2014. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER ITA NO5405 TO 5407/DEL/2010 9 (ITAT, NEW DELHI). DATE OF HEARING 12.12.2013 DATE OF DICTATION 31.1.2014 DATE OF TYPING 31.1.2014 DATE OF ORDER SIGNED BY BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET & SENT TO THE BENCH CONCERNED.