ITO, Jaipur V. SMT. RENUKA AJAY MAROO, Jaipur

ITA 577/JPR/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82869 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 12-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Opportunity of being heard

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 577/JP/2012 ASSTT. YEAR- 2008-09 PAN NO. AAJPM 6941 R THE I.T.O. SMT. RENUKA AJAY MAROO, WARD 4(2), JAIPUR. VRS. W/O- SHRI AJAY MAROO, SAHAYOG APARTMENT, VIDYADHAR NAGAR, JAIPUR. (APPELLANT) (RESPONDENT) DEPARTMENT BY :- SMT. NEENA JEPH. ASSESSEE BY :- SHRI P.C. PARWAL. DATE OF HEARING : 03/11/2014 DATE OF PRONOUNCEMENT : 31/12/2014 O R D E R PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 23/03/2012 OF THE LEARNED C.I.T.(A)-III, JAIPUR FOR THE A.Y. 2008-09. THE SOLE GROUND OF APPEAL IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(APPEALS) HAS ERRED IN HOLDING THAT THE P ROFIT EARNED ON TRANSACTIONS OF SHARES WAS CAPITAL GAIN INSTEAD O F BUSINESS INCOME WITHOUT CONSIDERING THE REGULARITY, VOLUME AN D FREQUENCY OF THE TRANSACTION WHICH INDICATED THAT THE MOTIVE O F THE ASSESSEE WAS NOT TO MAKE INVESTMENT BUT TO EARN BUSI NESS PROFIT FROM THESE TRANSACTIONS. ITA 577/JP/2012 ITO VS. RENUKA AJAY MAROO 2 2. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE A SSESSEE HAD SHOWN LONG TERM CAPITAL GAIN AT RS. 23,44,744/- AND CLAIMED AS EXEMPTED, THEREFORE, THE ASSESSING OFFICER GAVE REA SONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE, WHICH WAS R ESPONDED BY THE ASSESSEE. AFTER CONSIDERING THE ASSESSEES REPLY, I T HAS BEEN HELD THAT THE ASSESSEE INTENTIONALLY HAD BIFURCATED SHARE TRA NSACTION UNDER THE HEAD LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN TO CLAIM EXEMPTION U/S 10(38) OF THE INCOME TAX ACT, 1961 (HE REINAFTER REFERRED AS THE ACT). HE ANALYSED THE INVESTMENT MA DE IN THE SHARES ON THE BASIS OF EVIDENCE FURNISHED BY THE APPELLANT AND HELD THAT THE ASSESSEES BUSINESS WAS ADVENTUROUS IN NATURE OF TRA DE. THE ASSESSEE HAD NOT PRODUCED THE ORIGINAL PURCHASE VOUCHERS OF ANY OTHER INDEPENDENT EVIDENCE WHICH CAN SUPPORT AND AUTHENTIC ATE THE GIVEN DETAILS. THE ASSESSEE HAD BEEN REGULARLY PURCHASING SHARES FROM THE YEAR 2001 TO 2007. DURING THE YEAR THE ASSESSEE ALS O PURCHASED SHARES FROM TWO BROKERS. THE VOLUME OF TRANSACTIONS AND THE REGULARITY WITH WHICH THE TRANSACTIONS WERE MADE, SHOWED THAT THE ASSE SSEE WAS DOING BUSINESS OF SHARE TRADING AND IT WAS NOT A MER E INVESTMENT ON THE PART OF ASSESSEE. DESPITE THE SPECIFIC REQUIREM ENT, THE ASSESSEE HAD NOT PRODUCED THE COMPLETE BOOKS OF ACCOUNT AND VOUCHERS AND HAD NOT FILED THE COMPLETE DETAILS AS REQUIRED. HE FURTHER RELIED UPON ITA 577/JP/2012 ITO VS. RENUKA AJAY MAROO 3 THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F G. VENKATASWAMI NAIDU & CO. VS. COMMISSIONER OF INCOME TAX (1959) 35 ITR 594 AND ANALYZED THE CONCEPT OF BUSINESS OF THE ASSESSEE. TH E LEARNED ASSESSING OFFICER AFTER CONSIDERING THE VOLUME OF T RANSACTION, FREQUENCY OF TRANSACTIONS OF BOTH PURCHASE AND SALE , PROFIT ORIENTATION OF DEALINGS AND HE HELD THAT PROVISIONS OF SECTION 2(13), 14 OF THE ACT AND DECISION OF THE HON'BLE SUPREME COURT, PROFIT O F ASSESSEE FROM SHARE DEALINGS WAS INCOME UNDER THE HEAD PROFIT AND GAIN OF BUSINESS OR PROFESSION AND NOT UNDER THE HEAD CAPITAL GAINS. THE MOTIVE OF THESE TRANSACTIONS WAS ALSO BUSINESS. ACCORDINGLY, H E TREATED THE INCOME AT RS. 23,44,744/- AS INCOME FROM PROFIT AND GAIN OF BUSINESS OR PROFESSION. 2.1 WITHOUT PREJUDICE TO FINDING GIVEN BY THE LEARN ED ASSESSING OFFICER IN ASSESSMENT ORDER, HE HELD THAT THE ASSES SEE HAD FAILED TO SUBSTANTIATE THAT THE CONDITIONS MENTIONED IN SECTI ON 10(38) WERE FULFILLED. FOR EXEMPTION U/S 10(38), THE ASSET TRAN SFERRED SHOULD BE LONG TERM CAPITAL ASSET, BEING AN EQUITY SHARE AND THE TRANSACTION MUST BE CHARGEABLE TO SECURITIES TRANSACTION TAX. THE ASS ESSEE FAILED TO GIVE CLINCHING EVIDENCE THAT EACH TRANSFERRED SHARE WERE IDENTIFIED WITH NUMBER AND NAME OF SHARE/SCRIPT. CORRESPONDING PURC HASE AMOUNT AND DATE, MODE OF PAYMENT OF PURCHASE AMOUNT, NAME OF THE ITA 577/JP/2012 ITO VS. RENUKA AJAY MAROO 4 TRANSFEROR/TRANSFEREE WERE NOT DISCLOSED. THEREFORE, HE HELD THAT THE ASSESSEE INCOME WAS NOT EXEMPTED U/S 10(38) OF THE A CT. ACCORDINGLY, HE MADE THE ADDITION OF RS. 23,44,744/-. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A ), WHO HAD ALLOWED THE APPEAL BY CONSIDERING THE COORDINATE ITA T A BENCH, JAIPUR DECISION IN ASSESSEES OWN CASE IN ITA NO. 54 1/JP/2011 FOR A.Y. 2007-08 ORDER DATED 22/11/2011 WHEREIN THE COORDINA TE BENCH HAD CONSIDERED THE DECISION OF ITAT JAIPUR BENCH IN THE CASE OF ACIT VS. SMT. KAVITA AGARWAL ITA NO. 1103/JP/2010 FOR A.Y. 20 03-04 TO 2005- 06 ORDER DATED 23/09/2011. 4. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LEARNE D SR. D.R. VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFF ICER AND AT THE OUTSET, THE LEARNED AR FOR THE ASSESSEE SUBMITTED A S UNDER:- 1. THE ASSESSEE IS REGULAR INVESTOR IN SHARES/SEC URITIES FROM LAST NUMBER OF YEARS. IN THE BALANCE SHEET FILED WIT H THE RETURN, THE SHARES WERE REFLECTED UNDER THE HEADING INVESTME NT IN SHARES. THE POSITION OF INVESTMENT IN SHARES AS PER THE BALANCE SHEET/WEALTH TAX RETURNS RIGHT FROM A.Y. 2001-02 IS AS UNDER:- INVESTMENT IN SHARES HELD AS ON AMOUNT OF INVESTMENT IN SHARES 31-03-2001 49,52,750/- 31-03-2002 29,65,586/- 31-03-2003 29,93,548/- ITA 577/JP/2012 ITO VS. RENUKA AJAY MAROO 5 31-03-2004 30,50,000/- 31-03-2005 35,00,500/- 31-03-2006 98,50,000/- 31-03-2007 52,00,000/- 31-03-2008 7,14,979/- 2. THE ASSESSEE HAS BEEN REGULARLY DISPOSING ITS I NVESTMENT ON GETTING A FAVORABLE OPPORTUNITY AND MAKING INVES TMENT IN NEW SHARES WITH THE INTENSION OF GETTING THE DIVIDEND AND THE CAPITAL APPRECIATION. THE SHARES SOLD BY ASSESSEE DU RING THE YEAR WERE HELD BY HER FOR MORE THAN ONE YEAR. IN EAR LIER YEARS THE INCOME DECLARED BY HER UNDER THE HEAD CAPITAL G AIN ON SALE OF THE SHARES HAS BEEN FINALLY ASSESSED UNDER THE H EAD CAPITAL GAIN. IN A.Y. 2006-07, THE LD. CIT(A) IN PARA 8.2 OF HIS ORDER HAS ALSO HELD THAT SINCE THE HOLDING PERIOD OF SHAR ES IS MORE THAN ONE YEAR, THIS ITSELF IS AN INDICATOR OF THE I NTENTION OF THE ASSESSEE OF HOLDING THE SHARE AS INVESTOR. IN A.Y. 2007-08, HON'BLE ITAT VIDE ORDER DATED 22.11.2011 (P.B. PAGE 12-26) AFTER HOLDING THAT ASSESSEE IS AN INVESTOR IN SHARE S, DIRECTED TO ASSESS THE INCOME FROM SALE OF SHARES IN THE FOLLOWI NG MANNER:- I. WHERE HOLDING PERIOD IS MORE THAN ONE YEAR, THE SE TRANSACTIONS SHOULD BE TREATED AS SHARES HELD AS IN VESTMENT, II. WHERE HOLDING PERIOD IS MORE THAN 30 DAYS THE PROFIT AND LOSS ARISING FROM SUCH TRANSACTION IS TR EATED AS STCG OR STCL, III. IN CASE THE SHARES HAVE BEEN PURCHASED OR SOLD WITHIN 30 DAYS THEN THE PROFIT OR LOSS ARISING FROM SUCH TRAN SACTION IS TREATED AS BUSINESS INCOME. ITA 577/JP/2012 ITO VS. RENUKA AJAY MAROO 6 IV. WHERE PURCHASE AND SALE OF TRANSACTION ON THE S AME DAY, THESE SHOULD BE TREATED AS PROFIT OR LOSS FROM SPEC ULATIVE BUSINESS AND, 3. IN THE PRESENT CASE, THERE IS NO DISPUTE AS TO THE FACT THAT SHARES SOLD WERE HELD FOR MORE THAN 1 YEAR. THIS IS A LSO EVIDENT FROM THE FACT THAT THE INVESTMENT IN THE SHARES WHIC H WAS OF RS.52,00,000/- AS ON 31.03.2007 HAS REDUCED TO RS.7 ,14,979/- AS ON 31.03.2008. THE COMPLETE RECORDS AS TO THE DAT E OF ACQUISITION OF THE SHARES SOLD COULD NOT BE FURNISH ED AS THEY WERE DESTROYED IN THE FLOOD AT MUMBAI DATED 26-07-20 05. MOREOVER OF THE OBSERVATION OF THE AO THAT NAME OF THE TRANSFEROR/ TRANSFEREE WAS NOT DISCLOSED, MODE OF PA YMENT OF PURCHASE AMOUNT WAS NOT EXPLAINED OR THE SHARE TRAN SFERRED WERE NOT IDENTIFIED WITH THE CORRESPONDING PURCHASE AMOUNT AND DATE ARE IRRELEVANT IN AS MUCH AS ALL SHARES ARE SO LD THROUGH STOCK EXCHANGE, COPY OF SALES BILLS WERE FURNISHED AND THE PURCHASES WERE MADE IN EARLIER YEARS. IT IS NOT THE CASE OF THE AO THAT ANY INCOME FROM SHARES DECLARED BY ASSESSEE IS NOT FROM TRANSFER OF SHARES HELD FOR LONG TERM. IN THES E CIRCUMSTANCES ASSESSING THE LONG TERM CAPITAL GAIN FROM SALE OF SHARES AS BUSINESS INCOME IS NOT JUSTIFIED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE IS SUE BEFORE US IS SIMILAR AND IDENTICAL TO A.Y. 2007-08, WHICH HAS BE EN DECIDED BY THE COORDINATE BENCH VIDE ORDER DATED 22/11/2011 IN ITA NO. 541/JP/2011. BY RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINATE ITA 577/JP/2012 ITO VS. RENUKA AJAY MAROO 7 BENCH, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE RECORD AND TAKE DECISION AS PER COORDINATE BENCH DECISION IN A.Y. 2 007-08 IN IT RELIED UPON THE ORDER PASSED IN THE CASE OF SMT. KAVITA AG ARWAL (SUPRA). PARA 2.14 OF THE ORDER IN SMT. KAVITA AGARWALS CASE IS A S UNDER:- 2.14 WE HAVE ALSO CONSIDERED THE CASE LAWS ON WHICH ASSESSEES LEARNED AR HAS PLACED RELIANCE. WE ARE N OT HAVING BENEFIT OF THE D-MAT ACCOUNT OR THE BILLS OF THE BRO KERS. AFTER CONSIDERING THE ENTIRE FACTS, WE HOLD AS UNDER:- (I) THE SHARES WHICH HAVE BEEN HELD FOR MORE THAN A YEAR SHOULD BE TREATED AS SHARES HELD AS INVESTMENT . THE PROFIT ARISING FROM SALE OF SUCH SHARES IS TO BE CONSIDERE D AS CAPITAL GAIN. IT MEANS THAT LONG TERMS CAPITAL GAIN SHOWN BY THE ASSESSEE IS TO BE ACCEPTED. (II) IN RESPECT OF PURCHASE AND SALE OF THE TRANSA CTIONS ON THE SAME DAY, THE PROFIT AND GAINS ARISING FROM SUCH TRANSACTIONS IS TO BE CONSIDERED AS PROFIT OR LOSS FROM SPECULATIVE BUSINESS. (III) IN CASE THE SHARES HAVE BEEN HELD FOR MORE T HAN 30 DAYS THEN THE PROFIT AND LOSS ARISING FROM SALE OF SUCH SHARES IS TO BE CONSIDERED AS SHORT CAPITAL GAIN OR LOSS. HOWE VER, IN CASE THE SHARES HAVE BEEN PURCHASED OR SOLD WITHIN 30 DAY S THEN THE PROFIT OR LOSS ARISING FROM SUCH PURCHASE AND SALES OF SHARES IS TO BE CONSIDERED AS BUSINESS INCOME. (IV) THE SHARES WHICH ARE BEING SOLD ARE TO BE ASCERTAINED AS TO WHETHER SUCH SHARES WERE PURCHASED OR ALLOTTED IN PUBLIC ISSUE OR RECEIVED AS BONUS SHARE S OR RECEIVED ITA 577/JP/2012 ITO VS. RENUKA AJAY MAROO 8 SHARES ON ACCOUNT OF AMALGAMATION/MERGER SO THAT CO ST PRICE CAN BE ASCERTAINED. WE, THEREFORE, FEEL THAT THIS ISSUE HAS BEEN DECIDE D BY THE COORDINATE BENCH AND THEREFORE, WE DIRECT THE ASSESSING OFFICER TO RECOMPUTED THE PROFIT ARISING FROM PURCHASE AND SALES OF SHARE AS PER DIRECTION IN PARA 2.14 OF THE ORDER OF SMT. KAVITA AGARWALS CASE , REPRODUCED ABOVE, ACCORDINGLY THE ASSESSING OFFICER WILL RECOM PUTED THE INCOME. 6. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/12/2014. (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 31 ST DECEMBER, 2014 * RANJAN COPY FORWARDED TO :- 1. THE ITO, WARD 4(2), JAIPUR. 2. SMT. RENUKA AJAY MAROO, JAIPUR. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 577/JP/2012) BY ORDER, AR, ITAT, JAIPUR.