ASPI PESI CHINOY, MUMBAI V. JT CIT RG 11(2), MUMBAI

ITA 5810/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9335 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 17-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJIV KHANDELWALA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A BENCH BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND SHRI SANJAY ARORA (ACCOUNTANT MEMBER) ITA NO.5810/MUM/2011 ASSESSMENT YEAR: 2008-2009 ASPI PESI CHINOY, FLAT NO.211, 21 ST FLOOR, JOLLY MAKERS APARTMENTS NO.319, CUFFEE PARADA, MUMBAI. PA NO.AAAPC 8659 H JCIT RANGE 11(2), MUMBAI. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI RAJIV KHANDELWALA RESPONDENT BY: SHRI MANOJ KUMAR DATE OF HEARING: 20.11.2012 DATE OF PRONOUNCEMENT: 23 . 11.2012 ORDER PER B.R.MITTAL, JM: THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT Y EAR 2008-09 AGAINST ORDER DATED 9.6.2011 OF LD CIT(A) -3, MUMBAI ON FOLLOWIN G GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND I N LAW , THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE FINDING OF THE A .O. TO THE EFFECT THAT THE L.T.C.G. OF RS.13,87,385/- PERTAINING J TO A.Y. 2008-09 IS THE UNDISCLOSED BUSINESS INCOME, AND NOT UNDISCLOSED LT CG . REASONS ASSIGNED BY THE CIT(A) FOR CONFIRMING THE FINDING O F THE A.O. ARE WRONG AND INSUFFICIENT. THE SAID LTCG HAD ADMITTEDLY ACCR UED WHEN AN INVESTMENT MADE IN KOTAK MAHINDRA FLEXI DEBT FUND O F FUNDS HAD BEEN SWITCHED TO KOTAK MAHINDRA BLENDED FUND OF FUNDS DI VIDEND AND THE LTCG ACCRUING THEREFROM HAD BEEN OVERLOOKED BY THE ASSESSEE , AS IT HAD NOT RESULTED IN AN ACTUAL RECEIPT IN THE BANK ACCOU NT. HOWEVER, THE SAME DID NOT RESULT IN ANY CHANGE IN THE TAX POSITION , AS THE ASSESSEE HAD CARRIED FORWARD LONG TERM CAPITAL LOSS IN EXCESS OF RS 160,00,000. 2. THE CIT(A) FAILED TO APPRECIATE THAT THE AO HAD TREATED THE SAID LTCG OF RS 13,87,385 AS UNDISCLOSED BUSINESS INCOME, AS THE AO HAD ALSO TREATED THE ASSESSEES INCOME FROM CAPITAL GAINS (I .E. LTCG OF RS 143,72,133 & THE STCG OF RS 25,44,110) AS INCOME FROM BUSINESS. THE CIT (A) HAS ALLOWED THE ASSEESES APPEAL RE THE LTCG OF RS 143,72,133 & THE STCG OF RS 25,44,110 AND HELD THAT THE SAME COULD NOT ITA NO.5810/MUM/2011 ASSESSMENT YEAR: 2008-2009 2 BE TREATED AS INCOME FROM BUSINESS. ON THIS BASIS , THE SAID FINDING OF THE AO REGARDING THE UNDISCLOSED LTCG OF RS 13,87,3 85 CONSTITUTING BUSINESS INCOME & NOT LTCG , HAD NECESSARILY ALSO T O BE REVERSED & THE APPEAL REGARDING THE SAME ALLOWED. THE CIT(A) HAS H OWEVER UPHELD THE FINDING OF THE AO THAT THE SAME CONSTITUTED UNDISCL OSED BUSINESS INCOME. 3. THE CIT(A) HAS FURTHER ERRED IN NOT CONSIDERING THE GROUND OF APPEAL PERTAINING TO CHARGE INTEREST ULS.234B AND 234C, TH OUGH WRITTEN SUBMISSIONS WERE FILED WHILE CONDUCTING APPEAL. NO REASONS HAVE BEEN ASSIGNED FOR NOT CONSIDERING THE SAME. 2. AT THE TIME OF HEARING, LD A.R. SUBMITTED THAT T HE ONLY ISSUE INVOLVED IN THIS APPEAL IS AS TO WHETHER THE SUM OF RS.13,87,385 IS TO BE TREATED AS LONG TERM CAPITAL GAIN OR BUSINESS INCOME, ON THE FACTS AND CIRCUM STANCES OF THE CASE. HE SUBMITTED THAT GROUND NO.2 AS SUCH NEED NOT BE SEPARATELY CON SIDERED AND SAME IS NOT PRESSED FOR AS THE ISSUE IS CONNECTED WITH THE ISSUE OF ADJ UDICATING THE SUM OF RS.13,87,385. 3. ON PERUSAL OF ORDER OF LD CIT(A), WE OBSERVE THA T LD CIT(A) HAD CONSIDERED THE SUM OF RS.25,44,110 AND OF RS.1,43,72,133 AS SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN RESPECTIVELY AS AGAINST BUSINESS INCOM E CONSIDERED BY THE AO. WE ENQUIRED FROM LD D.R. AS TO WHETHER DEPARTMENT HAS FILED ANY APPEAL BEFORE THE TRIBUNAL AGAINST IMPUGNED ORDER OF LD CIT(A). THEREFORE, ON 2.11.2012, THE MATTER WAS ADJOURNED AT THE REQUEST OF LD D.R. TO 20.11.2012 T O FIND OUT WHETHER DEPARTMENT HAS FILED ANY APPEAL OR NOT AND IF SO STATUS THEREOF. AT THE TIME OF HEARING ON 20.11.2012, LD D.R. STATED THAT DEPARTMENT HAS NOT FILED ANY APPEA L AGAINST THE IMPUGNED ORDER OF LD CIT(A). HENCE, WE PROCEED TO DECIDE THE APPEAL OF THE ASSESSEE. 4. THE RELEVANT FACTS ARE THAT ASSESSEE IS AN ADVOC ATE BY PROFESSION. IN THE RETURN FILED, ASSESSEE DECLARED INCOME FROM PROFESSION, IN COME FROM SHORT TERM CAPITAL GAIN AND INCOME FROM OTHER SOURCES. DURING THE COURSE O F ASSESSMENT, THE AO OBSERVED THAT ASSESSEE MADE INVESTMENT OF RS.50,00,000 IN KOTAK M AHINDRA DYNAMIC FUND OF FUNDS. THE ASSESSEE SWITCHED OVER THE SAID AMOUNT ON 28.11 .2006 WHICH RESULTED INTO GAIN OF RS. 19,01,818 AND LEFT TO BE DECLARED AS LONG TERM CAPITAL GAIN IN ASSESSMENT YEAR 2007- 08. ASSESSEE STATED DURING THE COURSE OF ASSESSMEN T PROCEEDINGS THAT THE SAID AMOUNT IS SWITCHED OVER TO KOTAK MAHINDRA FLEXI FUND OF FU NDS SERIES I AND THUS APPRECIATED TO RS.91,46,047.68 AND ASSESSEE SWITCHED OUT TO KOTAK BLENDED FUND OF FUNDS ON 28.11.2007 WHICH RESULTED INTO CAPITAL GAIN OF RS.1 3,87,385 RELEVANT TO ASSESSMENT YEAR ITA NO.5810/MUM/2011 ASSESSMENT YEAR: 2008-2009 3 2008-09. ASSESSEE DID NOT DECLARE SAID CAPITAL GAI N IN THE RETURN FILED. AO STATED THAT ASSESSEE FAILED TO DISCLOSE LONG TERM CAPITAL GAIN IN ASSESSMENT YEAR 2008-09 AND, ACCORDINGLY, TREATED THE SAME AS UNDISCLOSED INCOME OF THE ASSESSEE AND ADDED THE INCOME UNDER THE HEAD BUSINESS INCOME. BEING AGG RIEVED, ASSESSEE FILED APPEAL BEFORE LD CIT(A). LD CIT(A) CONFIRMED THE ACTION OF AO BY OBSERVING IN PARA 4.3 AS UNDER: 4.3 I HAVE CONSIDERED THE FACTS AND PERUSED THE MA TERIAL ON RECORD. SINCE THE AMOUNT OF RS.13,87,385 WAS NOT DECLARED B Y THE APPELLANT AND SAME IS ACCEPTED TO BE INCLUDED IN THE INCOME OF TH E APPELLANT. THEREFORE, THE AO WAS CORRECTLY ADDED IT AS UNDISCL OSED INCOME BUSINESS, HENCE THE ACTION OF THE AO IS UPHELD. THIS GROUND OF APPEAL IS THEREFORE DISMISSED. 5. HENCE, THIS APPEAL BY THE ASSESSEE. 6. AT THE TIME OF HEARING, LD A.R. REITERATED ABOVE FACTS AND FILED A FACT SHEET. HE SUBMITTED THAT SWITCH OVER MADE BY THE ASSESSEE FR OM ONE SCHEME OF KOTAK MAHINDRA FUND TO ANOTHER SCHEME OF KOTAK MAHINDRA FUND DID N OT RESULT ANY ACTUAL CASH RECEIPT/CREDIT IN THE BANK ACCOUNT AND, ACCORDINGLY , HAD ESCAPED THE ATTENTION OF ASSESSEE. HE SUBMITTED THAT THEY WERE NOT TRANSACT ED IN THE STOCK EXCHANGE AND, ACCORDINGLY, NO STT WAS PAID. HE SUBMITTED THAT SW ITCHED OVER TO KOTAK MAHINDRA FLEXI FUND OF FUNDS WAS MADE ON 28.6.2006 AND SAME WAS SW ITCHED OUT ON 28.11.2007. SINCE THE PERIOD OF HOLDING WAS ABOUT 17 MONTHS, TH E APPRECIATION IN THE UNITS IS TO BE CONSIDERED AS LONG TERM CAPITAL GAINS. HE FURTHER SUBMITTED THAT AO ALSO CONSIDERED THE SAID AMOUNT AS BUSINESS INCOME BECAUSE SHORT TERM C APITAL GAINS AS WELL AS LONG TERM CAPITAL GAINS SHOWN BY THE ASSESSEE WAS ALSO CONSID ERED BY HIM AS BUSINESS INCOME. HE SUBMITTED THAT LD CIT(A) ACCEPTED THE SAID STCG AND LTCG SHOWN BY THE ASSESSEE AS CAPITAL GAIN BY REVERSING THE ORDER OF AO AND DE PARTMENT HAS ACCEPTED THE SAME. HE SUBMITTED THAT THE SUM OF RS.13,87,385 SHOULD BE CO NSIDERED AS LTCG IN STEAD OF TREATING THE SAME AS BUSINESS INCOME. 7. ON THE OTHER HAND, LD D.R. RELIED ON ORDER OF AU THORITIES BELOW. HE SUBMITTED THAT ASSESSEE FAILED TO DISCLOSE THE GAIN IN THE RE TURN FILED AND DISCLOSED THE SAME WHEN AO POINTED OUT DURING THE COURSE OF ASSESSMENT PROC EEDINGS. HOWEVER, IN REPLY TO A QUERY, LD D.R. CONCEDED THAT THE SAID UNITS WERE HE LD BY THE ASSESSEE FOR A PERIOD OF 17 MONTHS AND THE INVESTMENT MADE BY THE ASSESSEE IN T HE SAID MUTUAL FUND HAS NOT BEEN ITA NO.5810/MUM/2011 ASSESSMENT YEAR: 2008-2009 4 CONSIDERED AS INVESTMENT BUT INCOME FROM UNDISCLOSE D SOURCE AS ASSESSEE DID NOT DISCLOSE IN THE RETURN FILED. AO HAS CONSIDERED ON LY THE APPRECIATION AS UNDISCLOSED INCOME TO BE ASSESSED AS BUSINESS INCOME. 8 WE OBSERVE THAT THE SAID UNITS WERE HELD BY THE A SSESSEE FOR A PERIOD OF MORE THAN 12 MONTHS AND INVESTMENT TOWARDS PURCHASE OF U NITS HAS BEEN ACCEPTED. ONLY APPRECIATION IN VALUE HAS BEEN CONSIDERED AS UNDISC LOSED INCOME. HAD ASSESSEE DECLARED IT IN RETURN FILED, THE SAME WOULD HAVE BE EN LTCG ON THE FACTS OF THE CASE. CONSIDERING THAT INVESTMENT OF PRINCIPAL AMOUNT HAS NOT BEEN DISPUTED BY THE DEPARTMENT , WE ARE OF THE CONSIDERED VIEW THAT THE APPRECIATION IN THE INVESTMENT IS TO BE CONSIDERED AS LONG TERM CAPITAL GAIN AND NOT AS BUSINESS INCOME. THEREFORE, WE ALLOW GROUND OF APPEAL TAKEN BY ASSESSEE BY REVERSI NG THE ORDERS OF AUTHORITIES BELOW. 9. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOW ED. PRONOUNCED IN THE OPEN COURT ON 23 RD NOVEMBER, 2012 SD/- (SANJAY ARORA) ACCOUNTANT MEMBER SD/- (B.R. MITTAL) JUDICIAL MEMBER MUMBAI, DATED 23 RD NOVEMBER, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),3, MUMBAI 4. COMMISSIONER OF INCOME TAX, 11 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH A MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI