ALPESH M. KANUNGO, MUMBAI V. ASST CIT 15(3), MUMBAI

ITA 589/MUM/2012

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1414 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-08-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 30-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.589/M/2012 ASSESSMENT YEAR: 2007-08 SHRI ALPESH M. KANUNGO, D.C. BOTHRA & CO. CHARTERED ACCOUNTANTS, 297, TARDEO ROAD, WILLIE MANSION, NANACHOWK, 1 ST FLOOR, OPP. BANK OF INDIA, MUMBAI 400 007 PAN: AGEPK6649M VS. ASSTT. CIT 15(3), MATRU MANDIR, 1 ST FLOOR, TARDEO ROAD, MUMBAI 400 007 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI RAJKUMAR SINGH, A.R. REVENUE BY : SHRI ANOOP HIWASE, D.R. DATE OF HEARING : 20.08.2018 DATE OF PRONOUNCEMENT : 14.11.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 28.01.2010 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2007-08. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THAT ON FACTS & CIRCUMSTANCES OF THE CASE AND I N LAW, LD. A.O. AS WELL AS ID. C.I.T ( APPEALS) BOTH HAVE ERRED IN ASSESSING & CON FIRMING THE ASSESSMENT OF SHORT - TERM CAPITAL GAIN INCOME OF RS.22,10,146/- EARNED O N SALE OF THE EQUITY SHARES SUBJECTED TO S.T.T., UNDER THE INCOME HEAD OF BUSIN ESS AGAINST DISCLOSED AND RIGHTLY OFFERED TO TAX IN THE RETURN OF INCOME AS S.T.C.G. U/S. 111A UNDER INCOME HEAD OF CAPITAL GAIN, WITHOUT PROPERLY APPRECIATING THE VAR IOUS FACTS OF THE CASE AND ALSO SEVERAL JUDICIAL PRONOUNCEMENT RENDERED FROM TIME T O TIME IN THIS CONTEXT BY HON'BLE TRIBUNAL AND COURTS. ITA NO.589/M/2012 SHRI ALPESH M. KANUNGO 2 2. THAT WITHOUT PREJUDICE TO ABOVE APPEAL GROUND NO . 1, THE ID. A.O. AS WELL AS ID. C.I.T. (APPEALS) BOTH HAVE ERRED IN NOT ALLOWIN G THE REBATE CLAIM U/S. 88E OF THE I.T. ACT, 1961 DESPITE ASSESSING & CONFIRMING THE A SSESSMENT OF SHORT TERM CAPITAL GAIN INCOME ON SALE OF EQUITY SHARES SUBJECTED TO S TT AS INCOME FROM BUSINESS. 3. THE ISSUE RAISED IN THE FIRST GROUND OF APPEAL I S AGAINST THE ORDER OF LD. CIT(A) CONFIRMING THE ORDER OF AO TREA TING SHORT TERM CAPITAL GAIN OF RS.22,10,146/- AS INCOME FROM BUSINESS AND PROFESSION ON WHICH STT HAS BEEN DULY DEDUCTED. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A SA LARIED EMPLOYEE AND DURING THE YEAR DERIVED/EARNED INCOME BY WAY OF SHORT TERM CAPITAL GAIN OF RS.22,10,146/- AND RETUR NED THE SAME AS SHORT TERM CAPITAL GAIN. THE ASSESSEE HAS BEEN AN INVESTOR IN SHARES IN THE PRECEDING AND SUCCEEDING YEARS WHICH WERE ASSESSED UNDER SECTION 143(1) OF THE ACT AND IT IS ONLY DURING THE YEAR THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND AO TREATED THE SHORT TERM CAPITAL GAIN AS INCOME FR OM BUSINESS AND PROFESSION ON THE GROUND THAT SALE AND PURCHASE BY THE ASSESSEE IN SHARES CONSTITUTED TRADING ACTIVITY AND NOT INVESTMENTS. THE AO TREATED THE SAME AS BUSINESS I NCOME ON THE GROUND THAT THE FREQUENCY OF TRANSACTIONS, PERI OD OF HOLDING AND VARIOUS OTHER FACTORS UNEQUIVOCALLY PROVED THAT THE ACTIVITY OF THE ASSESSEE WAS NOT THAT OF INVESTMENT BUT OF T RADING IN NATURE AND ASSESSED THE SAME UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) AFF IRMED THE ORDER OF THE AO BY OBSERVING AND HOLDING AS UNDER: IT IS NOTED THAT IN THE INSTANT CASE THE FOLLOWING IMPORTANT FACTORS CLEARLY INDICATE THAT THE APPELLANT HAS ACTED AS A TRADER OF SHARES AND NOT AS INVESTOR AS CLAIMED BY HIM ITA NO.589/M/2012 SHRI ALPESH M. KANUNGO 3 1. THE ASSESSEE WAS ACTIVELY INVOLVED IN LARGE SCAL E TRANSACTIONS OF PURCHASE AND SALE OF SHARES ON REGULAR BASIS. 2. THE PAST HISTORY ALSO REVEALS THAT THE ASSESSEE DID NOT EARN SUBSTANTIAL DIVIDEND DURING THE EARLIER A.YS. 2004-05, 2005-06 AND 2006-07 ALSO AND DURING THESE YEARS ALSO APPELLANT HAD SHOWN ONLY SHORT TER M CAPITAL GAIN, WHICH SHOWS THAT THE ASSESSEE'S MOTIVE AND INTENTION WAS NOT OF INVESTMENT BUT TRADING. 3. DURING THE CURRENT YEAR ALSO, THOUGH ASSESSEE HA S EARNED DIVIDEND INCOME TO THE EXTENT OF RS. 10,100/- ONLY. 4. THE PERIOD OF HOLDING OF DIFFERENT SHARES IS OF FEW DAYS IN MOST OF THE SHARES AND IN SEVERAL CASES THE SHARES HAS ALSO BEEN SOLD ON THE SAME DATE OR AFTER A DAY OR TWO AND WITH A WEEK OR A FORTNIGHT. 5. AT ALL OCCASIONS, THE ASSESSEE HAD SOLD SHARES P URCHASED IN ONE LOT IN ONE GO, LIKE A NORMAL TRADER. 6. FURTHER THE TURNOVER IS VERY HIGH AS COMPARED TO THE SIZE OF INVESTMENT. A CUMULATIVE ANALYSIS OF ALL THESE FACTORS LEAVES N O DOUBT ABOUT THE INTENTION OF THE APPELLANT WHO IS A TRADER AND NOT INVESTOR IN SHARE S. ACCORDINGLY, IT IS HELD THAT THE AO HAS CORRECTLY ASSESSED THE INCOME FROM SHARES AS BUSINESS INCOME. 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD INCLUDING THE IMPUGNED ORDER AND DECISIONS R ELIED UPON BY THE AUTHORITIES BELOW, WE OBSERVE THAT ASSESSEE HAS BEEN CONSISTENTLY DOING THE PURCHASE AND SALE ACTIVITY I N THE EARLIER AS WELL AS IN THE SUBSEQUENT YEARS. THE LD. CIT(A) AFFIRMED THE ORDER OF AO ON THE GROUND THAT THE TRANSACTIONS OF SALE AND PURCHASE WERE ON REGULAR BASIS, OF LARGE SCALE, ABS ENCE OF PAST HISTORY INDICATING ANY SUBSTANTIAL DIVIDEND EARNIN GS OF THE ASSESSEE PROVED THAT MOTIVE AND INTENTION OF THE A SSESSEE WAS OF DOING BUSINESS OF TRADING AND NOT INVESTMENT. BESIDES THE SHORT PERIOD OF HOLDING RANGING FROM FEW DAYS TO FE W MONTHS ALSO REINFORCES THE INTENTION OF THE ASSESS. LASTLY LD. CIT(A) OBSERVED THAT TURNOVER IS VERY HIGH AS COMPARED TO THE SIZE OF INVESTMENTS AT THE YEAR END. THE ASSESSEES COUNSEL FURNISHED A COPY OF TRANSACTIONS OF SALE AND PURCHASE OF SHARES FILED A T PAGE NO.25 ITA NO.589/M/2012 SHRI ALPESH M. KANUNGO 4 & 26 OF THE PAPER BOOK WHICH REVEALED THAT THE TOT AL SALES DURING THE YEAR WERE RS.23,297,171/- WHEREAS THE TO TAL PURCHASES WERE RS.20,484,741/- MEANING THEREBY A SH ORT TERM CAPITAL GAIN OF RS.2,214,947/-. IN ALL THE ASSESSE E HAS ENTERED INTO 36 TRANSACTIONS IN 11 SHARES. WE ALSO FIND FR OM THE PERUSAL OF BALANCE SHEET PLACED AT PAGE NO.4 OF THE PAPER BOOK THAT ASSESSEE WAS THROUGHOUT SHOWING THE UNSOLD SHARES A T THE YEAR END UNDER THE HEAD SHARE INVESTMENTS WHICH WERE RS.1,21,476.70 AT THE YEAR END. THE ASSESSEE HAS T AKEN LOANS/DEPOSITS ONLY OF RS.2,32,200/- FROM THE FAMIL Y MEMBERS AND HAS A CAPITAL BALANCE OF RS.36,62,897.78. TAKI NG INTO CONSIDERATION THE TOTALITY OF FACTS , WE ARE NOT I N CONCURRENCE WITH THE CONCLUSION OF THE LOWER AUTHORITIES. IN AR RIVING AT THIS CONCLUSION WE ARE STRENGTHENED BY THE DECISION OF T HE OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GOPAL PURO HIT (2011) 336 ITR 287 (BOM.-HC) WHEREIN THE HONBLE COURT HAS HELD THAT DELIVERY BASED TRANSACTIONS ARE TO BE TREATED AS IN VESTMENT TRANSACTIONS AND PROFIT RAISING FROM IS TO BE TREAT ED AS SHORT TERM CAPITAL GAIN DEPENDING ON THE PERIOD OF HOLDIN G AND THERE OUGHT TO BE UNIFORMITY AND CONSISTENCY IN ASSESSING THE GAINS IN VARIOUS YEARS WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL. WE ARE, THEREFORE, NOT IN AGREEMENT WITH THE CONCLU SION DRAWN BY THE LD. CIT(A) ON THE ISSUE ESPECIALLY IN VIEW O F THE FACT THAT ASSESSEE IS A SALARIED EMPLOYEE AND IS DRAWING INCO ME BY WAY OF SALARY, DIVIDEND AND RENTAL INCOME. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH C OURT SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO TREAT THE SHORT TERM CAPITAL GAIN AS SUCH. GROUND NO.1 IS ALLOWED. ITA NO.589/M/2012 SHRI ALPESH M. KANUNGO 5 7. THE SECOND ISSUE RAISED BY THE ASSESSEE IS WITHO UT PREJUDICE TO GROUND NO.1, THEREFORE, REQUIRES NO AD JUDICATION. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.11.2018. SD/- SD/- (C.N. PRASAD) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14.11.2018. * 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.