RAJEEV NADKARNI, MUMBAI V. ASST CIT 11(3), MUMBAI

ITA 5684/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2566 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 29-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 09-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.5684/M/2011 ASSESSMENT YEAR: 2008-09 RAJEEV NADKARNI, 221, GAVTAN LANE 2, S.V. ROAD, OPP. ANDHERI POST OFFICE, MUMBAI - 400058 PAN: AAAPN 3548E VS. ASSISTANT COMMISSIONER OF INCOME TAX 11(3), MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VISHWAS MEHENDALE, A.R. REVENUE BY : SHRI LOVE KUMAR, D.R. DATE OF HEARING : 09.10.2015 DATE OF PRONOUNCEMENT : 30.10.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 30.06.2011 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2008-09. 2. THE SOLE ISSUE RAISED IN THIS APPEAL AS TO WHETH ER THE INCOME EARNED FROM THE SHARE TRANSACTIONS IS TO BE TAXED AS CAPITAL GA INS OR BUSINESS INCOME OF THE ASSESSEE. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) NOTED THAT DURING THE ASSESS MENT PROCEEDINGS, THE SHORT TERM CAPITAL GAINS WERE OF RS.5321625/- ON SALE OF SHARES. THE AO CALLED FOR ITA NO.5684/M/2011 RAJEEV NADKARNI 2 THE NECESSARY DETAILS. AFTER GOING THROUGH THE SAI D DETAILS, THE AO OBSERVED THAT THERE WAS REPETITION OF TRANSACTIONS IN RELATI ON TO SAME SCRIPS, THE VOLUME OF THE TRANSACTIONS WERE VERY HIGH AND THE HOLDING PERIOD WAS LESS. FURTHER, THE ASSESSEE HAD MADE INVESTMENTS OUT OF BORROWED F UNDS. HE, THEREFORE, CONCLUDED THAT THE ASSESSEE WAS IN FACT TRADING IN SHARES AND NOT AN INVESTOR. HE ACCORDINGLY TAXED THE CAPITAL GAINS CLAIMED BY T HE ASSESSEE AS BUSINESS INCOME OF THE ASSESSEE. THE ASSESSEE CARRIED THE M ATTER IN APPEAL BEFORE THE LD. CIT(A). 3. THE LD. CIT(A) ALSO DID NOT AGREE WITH THE CONTE NTIONS OF THE ASSESSEE AND UPHELD THE ORDER OF THE AO. THE ASSESSEE HAS, THUS, COME IN APPEAL BEFORE US. 4. THE LD. A.R., BEFORE US, HAS SUBMITTED THAT THE ASSESSEE IS A DOCTOR (DENTIST BY PROFESSION) AND HIS WIFE IS ALSO A DOCT OR. BOTH HUSBAND AND WIFE ARE RUNNING A CLINIC AT ANDHERI. APART FROM DOING THE PROFESSION OF THE DOCTOR, THE ASSESSEE IS ALSO USED TO INVEST IN SHARES AS AN INVESTOR. IN THE EARLIER YEARS, THE ASSESSEE HAS CONSISTENTLY BEEN TREATED AS INVES TOR AND THE INCOME EARNED FROM SHARE TRANSACTIONS HAS ALWAYS BEEN TREATED AS CAPITAL GAINS. THE AO DURING THE YEAR, HAD TREATED THE INCOME FROM SHARE TRANSACTIONS AS BUSINESS INCOME ON THE GROUND THAT THE ASSESSEE EARNED HUGE PROFIT IN COMPARISON TO EARLIER YEARS. THE LD. A.R. OF THE ASSESSEE HAS EX PLAINED THAT THE INVESTMENT PATTERN OF THE ASSESSEE IN RELATION TO ALL SCRIPS, EXCEPT ONE, HAS REMAINED THE SAME. ONE SCRIP NAMELY WALL CHAND WAS SHOWING EX CESSIVE RISE, HENCE THE ASSESSEE MADE INVESTMENTS IN VIEW OF GROWTH PATTERN IN THE SAID SCRIP AND EARNED HUGE PROFIT OF ABOUT RS.50 LAKHS. EXCEPT TH E SAID SCRIP OF WALL CHAND, THE ASSESSEE DID NOT EARN ANY MUCH CAPITAL GAINS IN RELATION TO OTHER SCRIPS. THE LD. A.R. HAS SUBMITTED THAT THOUGH THE RE WERE SOME REPETITIVE ITA NO.5684/M/2011 RAJEEV NADKARNI 3 TRANSACTIONS BUT THE SAID PATTERN WAS ADOPTED BY TH E ASSESSEE IN EARLIER YEARS ALSO. THE LD. A.R. OF THE ASSESSEE HAS INVITED OUR ATTENTION TO PAGE 10 OF THE PAPER BOOK WHICH IS A CHART SHOWING THE DETAILS OF THE INVESTMENT, CAPITAL GAINS EARNED ETC. FROM THE SAID CHART, WE FIND THAT OUT OF THE TOTAL SHORT TERM CAPITAL GAINS OF RS.5231625/-, THE GAINS OF ABOUT RS.50 LAK HS ARE SHARES TO BE OUT OF THE SHARE TRANSACTIONS RELATING TO THE SCRIP OF WA LL CHAND. FURTHER, WE FIND THAT THE INVESTMENT PATTERN AND THE INCOME EARNED D URING THE EARLIER ASSESSMENT YEARS IS ON SIMILAR PATTERN EXCEPT IN THE SCRIP OF WALL CHAND. THE LD. A.R. OF THE ASSESSEE HAS FURTHER STATED THAT THE INCOME EARNED BY THE ASSESSEE DURING THE YEAR FROM THE SCRIP OF WALL CHAND HAS BEEN IN VESTED BY THE ASSESSEE IN THE SHAPE OF FDR IN THE SUBSEQUENT YEAR. THE ASSES SEE DID NOT INDULGE IN ANY SHARE TRANSACTION DURING THE SUBSEQUENT ASSESSMENT YEAR 2009-10. EVEN DURING THE ASSESSMENT YEAR 2010-11, THE ASSESSEE HA D SHOWN CAPITAL GAINS OF RS.5.28 LAKHS ONLY, THE TRANSACTIONS RELATING TO WH ICH HAVE BEEN ACCEPTED AS INVESTMENT ACTIVITY OF THE ASSESSEE. THE LD. A.R. HAS RELIED UPON THE DECISIONS OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ASHOK WADIA (2014) 45 TAXMAN.COM 182 (DEL.) WHEREIN THE HONBLE DELHI HIGH COURT HAS HELD THAT THERE WAS NO BAR IN LAW IN LIQUIDATING THE INVESTME NTS BASED ON THE MARKET FACTORS. THE LD. A.R. HAS SUBMITTED THAT THE ASSES SEE WAS TEMPTED TO MAKE INVESTMENTS IN ONE SCRIP OF WALL CHAND AND HIS DE CISION TO SELL THE SHARES OF THE WALL CHAND TO EARN QUICK PROFIT WAS TEMPTED B Y THE MARKET CONDITIONS AND THE GROWTH IN THE SAID SCRIP. EXCEPT THE SAID SCRIP, THE ASSESSEE OTHERWISE HAD BEEN CONSISTENT IN MAKING HIS INVESTMENTS. HE HAS FURTHER RELIED UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. NEERAJ AMIDHAR SURTI (2012) 20 TAXMAN.COM 579 WHEREIN IN ALMOST SIMILAR CIRCUMSTANCES, IT WAS HELD THAT WHERE THE ASSESSEE AFTER THE SALE OF SHARES HAD MADE INVESTMENTS IN BONDS OF NABARD, IT INDICATED T HAT THE ASSESSEES ITA NO.5684/M/2011 RAJEEV NADKARNI 4 INTENTION WAS OF INVESTMENT AND NOT ADVENTURE IN TH E NATURE OF TRADE IN THE SHARE TRANSACTIONS. THE LD. D.R., ON THE OTHER HAND, HAS RELIED UPON T HE FINDINGS OF THE LOWER AUTHORITIES AND HAS STATED THAT THE ASSESSEE WAS TO BE TREATED AS A TRADER. 5. AFTER CONSIDERING THE OVERALL FACTS AND CIRCUMST ANCES, WE FIND THAT THE ASSESSEE IS NOT DEVOTING HIS FULL TIME TO THE SHARE TRANSACTIONS. THE ASSESSEE IS A DENTIST BY HIS PROFESSION AND IS RUNNING A CLINIC WITH HIS WIFE. HE HAS SHOWED INCOME FROM PROFESSION IN HIS RETURN OF INCO ME. THE ASSESSEE HAS GAINED A HUGE PROFIT RELATING TO ONE SCRIP ONLY. H E WAS TEMPTED BY THE UPWARD TREND OF THE MARKET IN RELATION TO THE SAID SCRIP. THE ASSESSEE HAS CONSISTENTLY BEEN TREATED AS AN INVESTOR IN EARLIER ASSESSMENT Y EARS. EXCEPT THE SAID ONE SCRIP OF WALL CHAND, THE INVESTMENT PATTERN OF TH E ASSESSEE HAS REMAINED THE SAME. ONLY BECAUSE THE ASSESSEE HAS GAINED HUGE PR OFITS IN ONE SCRIP THAT DOES NOT MAKE THE ASSESSEE A TRADER, ESPECIALLY WHEN THE ASSESSEE IN THE SUBSEQUENT YEAR DID NOT MAKE ANY TRANSACTION IN SHARES AND HAD INVESTED THE MONEY SO EARNED IN THE FDRS. WHEN THE ASSESSEE HAD CONSISTE NTLY BEEN AN INVESTOR, MERELY BECAUSE IN ONE YEAR THE ASSESSEE GOT A CHANC E TO MAKE PROFITS IN RELATION TO ONE SCRIP TEMPTED BY THE GROWTH IN THE SAID SCRIP, THAT ITSELF IS NOT SUFFICIENT TO HOLD THE ASSESSEE A TRADER. THE CASE LAWS RELIED UPON BY THE ASSESSEE IN THE CASES OF CIT VS. ASHOK WADIA (SUP RA) AND CIT VS. NEERAJ AMIDHAR SURTI (SUPRA) ARE SQUARELY APPLICABLE IN T HE CASE OF THE ASSESSEE. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION ON THE PAR T OF THE LOWER AUTHORITIES IN TREATING THE ASSESSEE AS A TRADER AND ASSESSING THE INCOME EARNED BY THE ASSESSEE ON SHARE TRANSACTIONS AS BUSINESS INCOME. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER AND DIRECT THE AO TO ASSESS THE INCO ME EARNED BY THE ASSESSEE FROM SHARE TRANSACTIONS AS CAPITAL GAINS. ITA NO.5684/M/2011 RAJEEV NADKARNI 5 6. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.10.2015. SD/- SD/- (R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.10.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.