ITO 16(2)(1), MUMBAI V. PINAL J MEHTA, MUMBAI

ITA 5988/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100816 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 10-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Business income
• Section: 143(3)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C , BENCH , , BEFORE S/SH. RAJENDRA,ACCOU NTANT MEMBER & PAWAN SINGH /. ITA NO. 5988 /MUM/20 1 3 , / ASSESSMENT YEAR - 10 - 11 INCOME TAX OFFICER - 16(2)(1) ROOM NO.221, MATRU MANDIR, TARDEO ROAD MUMBAI - 200 007. VS MISS PINAL J. MEHTA FLAT NO.9A, SHANAZ - 90 NA PEANSEA ROAD MUMBAI - 400 006 PAN: AACPS 8289 D ( / ASSESSEE ) ( / RESPONDENT ) /ASSESSEE BY :SHRI HARI S. RAHEJA - AR / REVENUE BY :SHRI SATYA PAL KUMAR - DR / DATE OF HEARING : 17 - 0 8 - 2015 / DATE OF PRONOUNCEMENT : 17 - 0 8 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT. 26/7/2013 OF CIT(A) - 27, MUMBAI THE ASSESSING OFFICER(AO) , HAS RAISED FOLLOWING GROUNDS OF A PPEAL: 1.WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN TREATING THE BUSINESS INCOME OF RS.34,29,512/ - AS INCOME FROM SHORT TERM CAPITAL GAIN WITHOUT APPRECIATING THE FACT THAT THE ASS ESSEE HAD SYSTEMATIC AND FREQUENT TRADING IN SHARES TO EARN PROFIT. 2. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND/S WHICH MAY BE NECESSARY. 2. THE ASSESSEE, AN INDIVIDUAL , FILED HER RETURN OF INCOME ON 23.6.2010 DECLARING TOTAL INCOME AT RS.51,360/ - . THE AO COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT ON 18.2.2013 DETERMINING THE INCOME OF THE ASSESSEE AT RS.35.30 LACS. THE EFFECTIVE GROUND OF APPEAL IS ABOUT TREATING THE BUSINESS INCOME AS INCOME FROM S HORT TERM CAPITA L GAIN (STCG). DURING THE ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAD SHOWN STCG OF RS.34.29 LACS, THAT SHE HAD ENTERED INTO 136 TRANSACTIONS IN RESPECT OF THE SHARES. HE DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY THE STCG ON SALE OF SHARES SHOULD NOT BE TREATED AS BUSINESS INCOME. VIDE ITS REPLY D ATED 27.12.2012 THE ASSESSEE CONTENDED THAT THE STCG COULD NOT BE TREATED AS BUSINESS INCOME, THAT INVESTMENT IN SHARES WAS THE MAIN ACTIVITY OF THE ASSESSEE , THAT SHE WAS INVESTING HER SURPLUS MON EY IN SHARES, IN THE BALANCE SHEET ALSO , THE INVESTMENT WAS SHOWN UNDER THE HEAD INVESTMENT IN SHARES, THAT SHE WAS MAKING INVESTMENT THROUGH BROKER, THAT SHE HAD NOT INCURRED ANY EXPENSES IN THAT REGARD EXCEPT DEMAT CHARGES, THAT THE SHARES WERE NOT VAL UED AS STOCK - IN - TRADE BUT WERE SHOWN AT COST ONLY IN THE BALANCE SHEET. THE ASSESSEE REFERRED TO THE CBDT C IR.NO.4/2007 DT.15.6.2007 AND THE CASE OF GOPAL PUROHIT (ITA/1121 OF 2009 OF HONBLE BOMBAY HIGH COURT) AND JANAK S. RANGWALA (11 SOT 627). 5988/13; PINAL JM 2 AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE THE AO HELD THAT THE FREQUENCY OF TRANSACTION PROVED THE INTENTION OF THE ASSESSEE , THAT HER INTENTION WAS TO MAKE PROFIT AND NOT TO EARN DIVIDEND , THAT SHE WAS DEALING IN SALE AND PURCHASE OF SHARES WITH HIGH FR EQUENCY AND IN LARGE VOLUME, THAT SHE HAD INDULGED IN SPECULATION . C ONSIDERING THE TOTALITY OF THE FACT THE AO HELD THAT STCG OF RS.34.92 LACS WAS TO BE TREATED AS PROFIT FROM BUSINESS. FINALLY , HE ADDED RS.34,29,512/ - TO THE INCOME OF THE ASSESSEE . 3. AGG RIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE A UTHORITY (FAA). BEFORE HIM, IT WAS ARGUED THAT THE ASSESSEE HAD NOT CLAIMED ANY EXPENSES FOR EARNING STCG , THAT SURPLUS MONEY WAS INVESTED IN SHARES. THE ASSESSEE RELIED UPON THE CASE OF JANAK S. RANGWALA (SUPRA ) AND GOPAL PUROHIT (SUPRA). AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER THE FAA ANALYSED THE NUMBER OF DAYS IN WHICH TRANSACTION HAD TAKEN PLACE PER MONTH DURING THE YEAR UNDER CONSIDERATION. HE CALLED FOR THE DETAILS OF STCG /STCL , LTCG/LTCL FROM THE ASSESSEE FOR THE LAST 5 - 6 YEARS. AFTER CONSIDERING THE ABOVE DATA HE HELD THAT THE ASSESSEE HAD CONSISTENTLY SHOWN STCG/STCL AS WELL LTCG/LTCL IN ALL THE YEARS, THAT LTCG EARNED BY THE ASSESSEE F ROM 2005 - 06 TO 2011 - 12 WAS OVER RS.70.00 LACS, THAT THE AMOUNT OF LTCG SUGGESTED THAT THE ASSESSEE HAD BEEN A LONG TIME INVESTOR IN SHARES, THAT THE CASE WAS COVERED BY THE CBDT INSTRUCTION NO.4 OF 2007, HE REFERRED TO THE RATIO OF THE CASE OF GOPAL PUROHIT (SUPRA).FINALLY, HE ALLOWED THE APPEAL FILED BY THE ASSESSEE . 4. BEFORE US, THE DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO. THE AUTHORISED REPRESENTATIVE (AR) CONTENDED THAT IN THE EARLIER YEARS AND IN THE SUBSEQUENT Y EARS THE AO HAD ACCEPTED THE LTCG AND STCG PERTAINING TO THE SHARE TRANSACTIONS, THAT THERE WAS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE EARLIER AND SUBSEQUENT YEARS AS COMPARED TO THE YEAR UNDER APPEAL, THAT IN EARLIER YEARS THE AO HAD PASSED THE ORDER UNDER SEC.143(3) OF THE ACT, THAT THE ASSESSEE HAD NOT INCURRED ANY EXPENDITURE OR HAD NOT TAKEN ANY LOAN, THAT THE AO HAD ACCEPTED THE C L AIM OF LTCG OF RS.4.94 LACS . 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US .WE FIND THAT IN THE EARLIER YEARS THE INCOME FROM SALE OF SHARES HAD BEEN ASSESSED UNDER THE HEAD STCG/LTCG, THAT IN THE AY. 20 04 - 05 THE AO HAD ASSESSED AND ALLOWED THE CLAIM OF LTCG OF RS. 17.14 LACS TO BE CARRIED FORWARD, THAT HE HAD ASSESSED THE STCG OF RS,13.15 LACS ON SALE OF SHARES, THAT FOR THE ASSESSMENT YEAR 20 05 - 06 THE AO HAD ALLOWED THE CLAIM OF STCG OF RS.1.25 LACS WHILE PASSING THE ORDER U/S. 143(3) OF THE ACT, THAT FOR THE ASSESSMENT YEAR 20 09 - 10 HE HAD ACCEPTED THE SHORT TERM LOSS OF RS.37.86 LACS A ND LONG TERM GAIN OF RS.34.55 LACS, THAT EXCEPT FOR THE YEAR UNDER APPEAL THE CLAIM MADE BY THE ASSESSEE OF LONG TERM GAIN/SHORT TERM GAIN WAS ACCEPTED, THAT T HE AO HAD NEVER TREATED THE GAIN FR O M SHARE TRANSACTION UNDER THE HEAD BUSINESS INCOME , THAT THE A SSESSEE HAD NOT INCURRED ANY EXPENDITURE LIKE INTEREST EXPENDITURE, SALARY ETC. THOUGH THE AO HAS MENTIONED ABOUT HIGH VOLUMES AND REPETITIVE NATURE OF THE TRANSACTIONS , BUT, HE HAS NOT CORRO BORATED HIS STAND WITH FIGURES. HE HAS MADE GENERAL OBSERVATION, BU T HAS NOT GIVEN ANY CONCRETE FIGURE TO SHOW THAT THE ASSESSEE WAS CARRYING OUT BUSINESS OF SALE AND PURCHASE OF SHARES DURING THE YEAR UNDER APPEAL. ON THE OTHER HAND THE FAA HAS ANALYSED THE TREND OF TRANSACTIONS. WE WOULD LIKE TO REPRODUCE THE RELEVANT P ORTION OF THE ORDER OF THE FAA . NO. OF DAYS TRANSACTED PER MONTH 5988/13; PINAL JM 3 MONTH ACQUISITION TRANSFER TOTAL APRIL 2009 12 8 20 MAY 2009 8 3 11 JUNE 2009 7 3 10 JULY 2009 3 6 9 AUGUST 2009 10 7 17 SEPTEMBER 2009 14 3 17 OCTOBER 2009 7 1 8 NOVEMBER 2009 0 3 3 DECEMBER 2009 6 2 8 JANUARY, 2010 12 8 20 FEBRUARY, 2010 9 5 14 MARCH, 2010 12 7 19 TOTAL 156 HE HAD ALSO ANALYSED THE SHORT TERM AND LONG TERM CAPITALGAINS/LOSSES FROM AY 2005 - 06 T O 2011 - 12 SR.NO. PARTICULARS A.Y. 2005 - 06 A.Y. 2006 - 07 A.Y. 200 7 - 08 A.Y. 2008 - 09 A.Y. 2009 - 10 A.Y. 2010 - 11 A.Y. 2011 - 12 1. STCG /(STCL) EARNED 129606 587738 309825 1177484 - 3786788 3429512 - 278324 2. LTCG/(LTCL)EARNED 592926 1816904 217076 288464 3455807 494024 383251 CONSIDERING THE FINDING OF THE FACTS GIVEN BY THE FAA WE ARE OF THE OPINION THAT THERE IS NO NEED TO INTERFERE WITH THE ORDER OF THE FAA. THEREFORE, CONSIDERING PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE WE DECIDE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STAND DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH , AUGUST ,2015. 17 TH , 2015 SD/ - SD/ - ( / PAWAN SINGH ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 17 .0 8 .2015 . . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 5988/13; PINAL JM 4 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.