NARESH JAYANTILAL SHAH, MUMBAI V. DCIT 14(2), MUMBAI

ITA 6208/MUM/2013

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9683 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 23-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C S SHARMA
• Keywords: Business income; Opportunity of being heard; Question of law; Speculation loss; Futures and options; Audi alteram partem

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI BEFORE HONBLE SHRI SANDEEP GOSAIN , JM & HONBLE SHRI RAJESH KUMAR, AM ITA NO. 6208/MUM/2013 ( ASSESSMENT YEAR : 2009 - 2010 ) IN THE MATTER OF: - SHRI NARESH JAYANTILAL SHAH 167, RADHA GULLY SWADES HI MARKET KALBADEVI ROAD MUMBAI 400 002 VS. DCIT - 14(2) MUMBAI PAN/GIR NO. AADPS0903R ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY SHRI VIJAY MEHTA REVENUE BY SHRI C.S. SHARMA DATE OF HEARING 06 / 05/2 01 9 DATE OF PRONOUNCEMENT 24 / 06 /201 9 / O R D E R SANDEEP GOSAIN (JM) : THIS APPEAL IN ITA NO. 6208/MUM/2013 FOR A.Y. 2009 - 10 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 25, MUMBAI IN APPEAL NO. CIT(A) - 25/IT - 47/DC - 14(2)/12 - 13 DATED 06/09/2013 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) R.W.S. 142(2A) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 2 ACT) DATED 11/06/2012 BY THE LD. DY. COMMISSIONER OF INCOME TAX - 14(2), MUMBAI (HEREINAFTER REFERRED TO AS LD. AO). 2. THE FOL LOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE: - 1. UNDER THE CIRCUMSTANCES AND FACTS OF MY CASE, THE LD. CIT(APPEAL) ERRED IN CONFIRMING : A. THE TREATMENT OF SALE OF SHARES AS 'BUSINESS INCOME' AS AGAINST STCG DECLARED BY THE APPELLANT. B. INTEREST IN COME OF RS 4,20,234 AS INCOME FROM OTHER SOURCESAND DISA LLOWING VARIOUS EXPENSES CLAIMED. C. ADDITION OF RS 3,07,556 ON ACCOUNT OF ALLEGED LOW WITHDRAWALS . D. THE DIRECTION FOR SPECIAL AUDIT U/S 142(2A) OF THE ACT. 2. ORDER UNDER APPEAL IS NOT ONLY BAD IN LAW AND INVALID, BUT ALSO AGAINST THE PRINCIPALS OF NATURAL LAW OF EQUITY AND JUSTICE. 3. THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND, ALTER / DELETE AND /OR MODIFY THE ABOVE GROUND ON OR BEFORE THE FINAL DATE OF HEARING. 3. THE BRIEF FACTS OF THE CAS E ARE THAT ASSESSEE IS A PROPRIETOR OF M/S. AJIT ENTERPRISES. HOWEVER, NO BUSINESS WAS CARRIED OUT IN THE ABOVE PROPRIETARY CONCERN. ASSESSEE DECLARED INCOME FROM F & O TRANSACTIONS, SPECULATION LOSS, SHORT TERM CAPITAL GAIN AND INTEREST INCOME. THE RETURN OF INCOME WAS E - FILED BY THE ASSESSEE ON 29/09/2009 OF RS.2,68,67,060/ - . THE RETURN WAS PROCESSED U/S.143(1) OF THE ACT. HOWEVER, LATER ON, THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICES AND AFTER PROVIDING OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE, THE AO REFERRED THE CASE FOR SPECIAL AUDIT U/S.142(2A) OF THE ACT AND AFTER RECEIVING THE REPORT OF THE SPECIAL AUDITOR AND PROVIDING OPPORTUNITY TO THE ASSESSEE, THE ORDER OF ASSESSMENT DATED 11/06/2012 WAS PASSED. ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 3 4. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) AFTER HEARING BOTH THE PARTIES , PARTLY ALLOWED THE GROUNDS MENTIONED BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. A T THE OUTSET, THE LD. AR DRAWN OUR ATTENTION TO THE APPLICATION DATED 06/09/2018, SEEKING PERMISSION TO FILE ADDITIONAL GROUND OF APPEAL. IT WAS SUBMITTED BY THE LD. AR THAT ALTHOUGH THE ASSESSEE HAS CHALLENGED VIDE GROUND NO.1(D), THE DIRECTION GIVEN BY T HE AO FOR SPECIAL AUDIT U/S.142(2A) OF THE ACT AND THUS CHALLENGED THE ASSESSMENT ORDER PASSED PURSUANT THERETO. IT WAS FURTHER SUBMITTED THAT ALTHOUGH THE AFORESAID GROUND IS SUFFICIENT TO CHALLENGE THE VALIDITY OF THE ASSESSMENT ORDER, B UT OUT OF ABUNDAN T PRECAUTION, THE ASSESSEE SEEKS TO FILE ADDITIONAL GROUND OF APPEAL WHICH SPECIFICALLY BRINGS OUT THE ISSUE AND IN THIS RESPECT ASSESSEE HAD RELIED UPON JUDGMENTS IN THE CASE OF NATIONAL THERMAL POWER CORPORATION VS. CIT 229 ITR 383(SC) AND UNION OF INDI A VS. BRITISH INDIA CORPORATION LTD., 268 ITR 481 (SC). 6. ON THE OTHER HAND, THE LD. DR CONTESTED THE SAID APPLICATION AND SUBMITTED THAT ADDITIONAL GROUND RAISED BY THE ASSESSEE IS NOT SUSTAINABLE. 7 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERI AL AVAILABLE ON RECORD. FROM THE RECORD WE NOTICED THAT ALTHOUGH THE ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 4 ASSESSEE HAS CHALLENGED VIDE GROUND NO.1(D), THE DIRECTION GIVEN BY THE AO FOR SPECIAL AUDIT U/S.142(2A) OF THE ACT AND IN THIS WAY CHALLENGED THE ASSESSMENT ORDER PASSED PURSUANT THERETO . BY VIRTUE OF ADDITIONAL GROUND, THE ASSESSEE SPECIFICALLY SEEKS TO CHALLENGE THE ORDER OF AO PASSED U/S.142(2A) OF THE ACT. TO OUR MIND, THE SAID ADDITIONAL GROUND RAISED BY THE ASSESSEE IS CLARIFICATORY IN NATURE AND INVOLVES PURELY QUESTION OF LAW AND THIS GROUND WAS ALSO RAISED BY HIM BEFORE THE CIT(A) AND THUS, IN THIS WAY THE NECESSARY FACTS REQUIRED FOR ADJUDICATION OF THE SAID ADDITIONAL GROUND OF APPEAL ARE ALREADY ON RECORD AND NO NEW FACTS ARE REQUIRED TO BE BROUGHT ON RECORD, THEREFORE, CONSIDE RING THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CORPORATION VS. CIT (229 ITR 383) (SC) SUPRA AND UNION OF INDIA VS. BRITISH INDIA CORPORATION LTD., (268 ITR 481 (SC) SUPRA, WE ALLOW THE APPLICATION FILED OF THE ASS ESSEE FOR FILING OF ADDITIONAL GROUND OF APPEAL AND ADMIT THE ADDITIONAL GROUND FOR ADJUDICATING THE SAME ON MERITS. SINCE THE ADDITIONAL GROUND RAISED BY THE ASSESSEE GOES TO THE ROOT OF THE CASE AND LEGAL IN QUESTION, THEREFORE, WE HAVE DECIDED TO DISPO SE THE SAID GROUND FIRSTLY. 8. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN SHARE TRADING AND F & O TRANSACTIONS. THE ASSESSEE HAD DECLARED SHORT TERM CAPITAL GAIN OF RS.1,39,91,448/ - CALCULATED AS SALES ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 5 PURCHASES=GAINS. HOWEVER, ACCOR DING TO THE AO NEITHER THE NAMES OF THE SHARES AND QUANTITIES, NOR THE DATES OF PURCHASES, COSTS, DATES OF SALES, AMOUNT OF SALES AND PROFIT / GAINS WERE GIVEN, THEREFORE, ACCORDING TO THE AO THE ASSESSEE HAD SIMPLY GAVE THE FIGURES OF DEBIT / CREDIT BALAN CES IN NAME OF THREE BROKERS AND AFTER REDUCING THE SAME FROM THE AMOUNT OF STOCK SOLD, ARRIVED AT A FIGURE OF 1,53,80,700/ - . IN THIS RESPECT, ACCORDING TO THE LD. AO, ASSESSEE WAS REPEATEDLY REQUESTED TO GIVE THE DETAILS OF THE STCG IN THE REQUIRED FORMAT AS WELL AS OF SHARE TRANSACTIONS MENTIONED IN THE AIR INFORMATION CONTAINING 1133 ENTRIES AND ALSO TO EXPLAIN THE SOURCE OF PURCHASES OF THESE SHARES WITH DOCUMENTARY EVIDENCES. ACCORDING TO THE AO, SINCE ASSESSEE FAILED TO EXPLAIN THE TRANSACTIONS, INCOM E EARNED ON IT AND ALSO SOURCE OF PURCHASE OF SAID SHARES THEREFORE , AFTER SEEKING REPLY OF THE ASSESSEE, THE MATTER WAS REFERRED TO SPECIAL AUDIT U/S 142(2A). 9. ON THE CONTRARY, LD. AR APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ORDER PASSED BY THE AO FOR REFERRING THE MATTER TO THE SPECIAL AUDIT U/S.142(2A) OF THE ACT IS NOT SUSTAINABLE IN THE EYES OF THE LAW. IT WAS SUBMITTED THAT AIR INFORMATION GIVEN BY THE AO WAS INADEQUATE. THE ASSESSEE HAD REPEATEDLY COMMUNICATED TO THE AO AND ASSESSEE HAD SOUGHT THE COMPLETE COMMUNICATION BUT THE SAME WAS NOT SUPPLIED BY THE AO, HOWEVER, COMPLETE BREAK - UP WAS SUPPLIED BY THE AO TO THE SPECIAL AUDITOR BASED ON WHICH ONE TO ONE RECONCILIATION ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 6 WAS MADE AND VERIFIED. IT WAS SUBMITTED THAT THE SPECIAL AUDIT OR HAD GIVEN DETAILED NOTE ON THIS ASPECT. ACCORDING TO THE LD. AR, THERE WAS NO COMPLEXITY IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE BUT WHILE VIOLATING PROVISIONS OF SECTION 142(2A), THE AO HAD WRONGLY REFERRED THE MATTER TO THE SPECIAL AUDITOR. IT WAS FU RTHER SUBMITTED THAT THERE WAS NO ALLEGATION OF COMPLEXITY IN THE SHOW - CAUSE NOTICE AS ISSUED BY THE LD. AO AND IN THIS RESPECT, NO SPECIFIC COMPLEXITY IN THE BOOKS HAS BEEN POINTED OUT IN THE FINAL ORDER DIRECTIN G FOR SPECIAL AUDIT. IT WAS SUBMITTED THAT THE AO AS A MATTER OF FACT HAD NEVER VERIFIED THE BOOKS OF ACCOUNTS AND HENCE, HE COULD NOT HAVE COME TO ANY CONCLUSION ABOUT THE COMPLEXITY IN THE BOOKS OF ACCOUNTS. 10. THE LD. AR FURTHER SUBMITTED THAT NOTICE FOR SPECIAL AUDIT CAN BE ISSUED BY THE AO ONLY AFTER CONSIDERING THE NATURE AND COMPLEXITY OF THE ACCOUNT BUT IN THE PRESENT CASE, THE AO AT ANY STAGE OF PROCEEDINGS HAD EVER CONSIDERED THE NATURE AND COMPLEXITY OF THE ACCOUNTS. IN THIS RESPECT, THE LD. AR RELIED UPON THE JUDGMENT OF SWADESHI COT TON MILLS CO LTD., VS CIT(1988) 171 ITR 634 (ALL) AND SAHARA INDIA(FIRM) VS. CIT (2008 - TIOL - 73 - SC - IT - LB). IT WAS SUBMITTED THAT FOR REFERRING THE MATTER FOR SPECIAL AUDIT, THERE ARE TWIN CONDITIONS I.E. ONE AO SHOULD CONSIDER THE NATURE AND COMPLEXITY HAVIN G REGARD TO THE ACCOUNT OF THE ASSESSEE AND SECOND THE MATTER CAN BE REFERRED ONLY IF IT IS IN THE INTEREST OF REVENUE. ACCORDING TO THE LD. AR BOTH THE TWIN ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 7 CONDITIONS HAVE NOT BEEN SPECIFIED BY THE AO AS AO HAS NOT FOUND ANY OPINION BEFORE REFERRING THE MATTER FOR SPECIAL AUDIT. IT WAS SUBMITTED THAT THE AO IN A CASUAL MANNER HAD REFERRED THE MATTER FOR SPECIAL AUDIT IN CONTRAVENTION TO THE PROVISION OF SECTION 142(2A) OF THE INCOME TAX ACT WHEREAS ON THE CONTRARY, THE LD. DR SUBMITTED THAT VIDE LETTER DA TED 30/11/2011, THE ASSESSEE WAS REQUESTED TO EXPLAIN THE TRANSACTIONS OF THE SHARES MENTIONED IN THE AIR INFORMATION. IT WAS ALSO SUBMITTED THAT THE COPIES AND DETAILS OF AIR INFORMATION AVAILABLE WITH THE AO WAS A LREADY GIVEN TO THE ASSESSEE WITH A REQUE ST TO EXPLAIN THE SOURCE OF INVESTMENT / PURCHASES. HOWEVER, EVEN INSPITE OF RECEIPT OF ALL THE DOCUMENTS, THE ASSESSEE COULD NOT EXPLAIN AND ONLY STATED VIDE LETTER DATED 08/12/2011 THAT THE TRANSACTIONS OF THE ABOVE SHARES ARE VOLUMINOUS , THEREFORE, THE SAME CANNOT BE EXPLAINED, THUS, IN VIEW OF THAT AND HAVING REGARD TO THE NATURE AND COMPLEXITY OF THE ACCOUNTS AND IN THE INTEREST OF REVENUE, THE REQUIRED SHOW - CAUSE NOTICE WAS ISSUED TO THE ASSESSEE AND AFTER PROVIDING ADEQUATE OPPORTUNITY OF HEARING , T HE ORDER U/S.142 (2A) OF THE INCOME FOR REFERRING THE MATTER TO SPECIAL AUDITOR WAS PASSED. 11 . WE HAVE HEARD BOTH THE COUNSEL AND ALSO PERUSED THE JUDGMENTS CITED BY THE PARTIES AND THE ORDERS PASSED BY THE LOWER AUTHORITIES. FROM THE RECORD WE FIND THAT F ROM THE AIR INFORMATION, THE AO SOUGHT EXPLANATION AFTER SUPPLYING REQUISITE DOCUMENTS TO THE ASSESSEE WITH ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 8 REGARD TO THE VOLUMINOUS TRANSACTIONS IN SHARES AS MENTIONED IN THE AIR INFORMATION. IN THIS RESPECT, COPIES OF THE TRANSACTION OF SHARES AS MENTION ED IN THE AIR INFORMATION AS AVAILABLE WITH THE AO WAS GIVEN BY THE AO TO THE ASSESSEE FOR EXPLAINING THE SOURCES OF INVESTMENT / PURCHASES. HOWEVER, VIDE LETTER DATED 08/12/2011, THE ASSESSEE STATED THAT THE TRANSACTIONS OF ABOVE SHARES CANNOT BE EXPLAINE D AS THEY ARE VOLUMINOUS. AS PER SECTION 142(2A) OF THE ACT, THE MATTER CAN BE REFERRED TO THE SPECIAL AUDITOR BY THE AO. IN THIS RESPECT, WE REPRODUCE PROVISIONS OF SECTION 142(2A) OF THE INCOME TAX ACT: - IF, AT ANY STAGE OF THE PROCEEDINGS BEFORE HIM, T HE ASSESSING] OFFICER, HAVING REGARD TO THE NATURE AND COMPLEXITY OF THE ACCOUNTS OF THE ASSESSEE AND THE INTERESTS OF THE REVENUE, IS OF THE OPINION THAT IT IS NECESSARY SO TO DO, HE MAY, WITH THE PREVIOUS APPROVAL OF THE CHIEF COMMISSIONER OR COMMISSIO NER], DIRECT THE ASSESSEE TO GET THE ACCOUNTS AUDITED BY AN ACCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB - SECTION (2) OF SECTION 288, NOMINATED BY TH E CHIEF COMMISSIONER OR COMMISSIONER] IN THIS BEHALF AND TO FURNISH A REPORT OF SUCH AUDIT IN THE PRE SCRIBED FORM DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT AND SETTING FORTH SUCH PARTICULARS AS MAY BE PRESCRIBED AND SUCH OTHER PARTICULARS AS THE ASSESSING] OFFICER MAY REQUIRE. [PROVIDED THAT THE ASSESSING OFFICER SHALL NOT DIRECT THE ASSESSEE TO GET THE ACCOUNTS SO AUDITED UNLESS THE ASSESSEE HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD] 12. FROM THE ABOVE PROVISIONS OF SECTION 142(2A)OF THE INCOME TAX ACT, WE NOTICE THAT AT ANY STAGE OF PROCEEDINGS BEFORE THE AO, THE AO HAVING REGARD TO T HE NATURE AND COMPLEXITY OF THE ACCOUNTS OF THE ASSESSEE AND IN THE INTEREST OF REVENUE HE IS OF THE OPINION THAT IT IS NECESSARY SO TO DO, THEN WITH THE PREVIOUS APPROVAL OF THE CHIEF COMMISSIONER OR COMMISSIONER HE MAY DIRECT THE ASSESSEE TO GET THESE ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 9 AC COUNTS AUDITED BY THE CHARTERED ACCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB - SECTION(2) OF SECTION 288 NOMINATED BY THE CHIEF COMMISSIONER OR COMMISSIONER IN THIS BEHALF AND TO FURNISH A REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM AND VERIFIED BY SUC H ACCOUNTANT AND SETTING FORTH SUCH PARTICULARS AS MAY BE PRESCRIBED AND SUCH OTHER PARTICULARS AS THE AO MAY REQUIRE. IN THIS RESPECT, WE NOTICED THAT AIR DATA CONSISTING OF 1133 ENTRIES PERTAINING TO SHARE TRANSACTION S RUNNING 66 PAGES INVOLVING 115 CROR ES APPROXIMATELY WHICH REMAIN UNVERIFIED BY THE AO . THUS, THE AO SOUGHT EXPLANATION FROM THE ASSESSEE BUT THE ASSESSEE MADE EXCUSE BY MENTIONING REPLY CANNOT BE GIVEN IN WRITING IN VIEW OF NUMBER OF DAYS ARE REQUIRED TO BE REDUCED IN WRITING . THUS, LOO KING AT THE NATURE OF REPLY, THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY HIS CASE SHOULD NOT BE REFERRED TO SPECIAL AUDIT U/S.142(2A). HOWEVER, AT THE SAME TIME, THE ASSESSEE OBJECTED TO IT AND SAID THAT THERE IS NO COMPLEXITY IN HIS CASE. TH E AO AFTER CONSIDERING THE NATURE AND VOLUME OF TRANSACTIONS INVOLVED AND ALSO SUBSTANTIAL AMOUNT WHICH REMAIN UNVERIFIED, THUS REACHED TO THE CONCLUSION THAT IT IS A CASE OF COMPLEXITY IF INVOLVED AND PASSED ORDER DATED 22.12.11, WHICH IS REPRODUCED BELOW : - ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 10 ORDER U/S 142(2A) OF THE INCOME TAX ACT. 1961 1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS FOUND THAT AIR DATA CONSISTS OF 1 133 ENTRIES PERTAINING TO SHARE TRANSACTIONS WHICH ARE RUNNING INTO 66 PAGES INVOLVING APPROXIMATELY RS.115 CRORES AMO UNT WHICH REMAINING UNVERIFIED SO FAR . HAVING REGARD TO THE NATURE AND VOLUME OF TRANSACTIONS INVOLVED AND ALSO SUBSTANTIAL AMOUNT REMAINING UNVER IFIED, IT IS THE CASE WHERE COMPL EXITY IS DEFINITELY INVOLVED. ALSO THE FACT THAT THE ASSESSEE'S NON - COOPERAT ION ATTITUDE HAS COMPOUNDED TO THE COMPLEXITY TO THE ACCOUNT OF THE ASSESSEE. OPPORTUNITY WAS ALREADY GIVEN TO THE ASSESSEE ON 13/12/2011 AND IN THIS REGARD HAS BEEN CONSIDERED. THE ASSESSEE HAS OBJECTED FOR SPECIAL AUDIT FOR THE REASON THAT THERE IS NO COMPLEXITY INVOLVED. THE ASSESSEE'S SUBMISSION IS CONSIDERED. THE CONDUCT OF THE ASSESSEE IS TOTALLY CONTRARY, THE ASSESSEE IS ADDING TO COMPLEXITY BY HIS NON CO - OPERATIVE ATTITUDE. THE MATTER OF FACTS IS THAT THERE ARE AS MANY AS 1133 AIR ENTRIE S INVOLVED PERTAINING TO SHARE TRANSACTIONS RUNNING 66 PAGES INVOLVING 115 CRORES APPROXIMATELY AND DETERMINING O F CORRECT INCOME HAS BECOME VERY DIFFICULT PARTICULARLY BY NON - COOPERATIVE ATTITUDE OF THE ASSESSEE. IN FACT THE ASSESSEE HIMSELF HAS NOT GIVE N NECESSARY CO - OPERATION TO GET THE TRANSACTIONS VERIFIED ON ONE OR THE OTHER REASON. UNDJER THE CIRCUMSTANCES, I HAVE NO OTHER ALTERNATIVE BUT TO GET BOOKS OF ACCOUNTS AUDITED U/S.1 42(2A). IN VIEW OF THE ABOVE REASONS, I AM OF THE OPINION THAT IT IS FIT C ASE FOR SPECIAL AUDIT. ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 11 3. CONSIDERING THE NATURE OF THE ACCOUNTS, THEIR COMPLEXITY AND IN THE INTEREST OF REVENUE, I AM OF THE OPINION THAT IT IS NECESSARY TO GET THESE ACCOUNT AUDITED BY A CHARTERED ACCOUNTANT APPOINTED BY THE COMMISSIONER OF INCOME - TAX. 4. IN VIEW OF THE ABOVE FACTS, I HEREBY DIRECT SHRI NARESH JAYANTILAL SHAH TO GET HIS ACCOUNTS AUDITED BY M/S BHUTA SHAH & CO., CHARTERED ACCOUNTANTS HAVING THEI|R OFFICE AT 901, REGENT CHAMBERS, NARIMAN POINT, MUMBAI - 400 021 WHO HAVE BEEN NOMINATED BY TH E COMMISSIONER OF INCOME - TAX - 14, MUMBAI VIDE LETTER NO. CLT.14/SPECIAL AUDU/2010 - 11 DATED 22''' DECEMBER, 2011 AND FURNISH A REPORT OF SUCH AUDIT DULY SIGNED AND VERIFIED BY THE SAID M/S BHUTA SHAH & CO., CHARTERED ACCOUNTANTS IN THE PRESCRIBED PROFORMA BEING FORM NO. 6B OF |THE INCOME - TAX RULES, 1962. THE ASSESSEE IS ALSO DIRECTED TO GIV E NECESSARY CO - OPERATION TO THE AUDITOR M/S. BHUTA SHAH & CO., CHARTERED ACCOUNTANTS AND GET THEIR ACCOUNTS AUDITED ON THE TERMS OF REFERENCE SEPARATELY ATTACHED AS PER ANNEXURE 'A' AND SUBMIT A REPORT OF THE SAID M/S BHUTA SHAH & CO., CHARTERED ACCOUNTANTS, ON THE ISSUES STATED IN THE TERMS OF REFERENCE. THE REPORT OF SUCH AUDIT MAY BE FURNISHE D WITHIN 120 DAYS OF THE RECEIPT OF THIS ORDER BY THE ASSESSEE. THE EXPENSES O F, AND INCIDENTAL TO THE AUDIT WILL BE PAID TO M/S BHUTA SHAH & CO., CHARTERED ACCOUNTANTS BY TH E DEPARTMENT AS PER RULE14(B) OF I.T. RULES 1962, THE SAID FIRM SIMPLY MAINTAIN TIME SHEET AND SUBMIT THE SAME TO COMMISSIONER OF INCOME TAX - 14 ALONG WITH THE BILL. 5. THIS ORDER HAS BEEN PASSED AFTER OBTAINING NECESSARY APPROVAL FROM THE COMMISSIONER OF INCOME TAX - 14, MUMBAI, ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 12 AS REQUIRED UNDER THE PROVISIONS OF SECTION 142(2A) OF INCOME TAX ACT, 1961. 13. ACCORDING TO THE AO, THE ASSESSEES NON - COOPERATION AT TITUDE HAD ALSO COMPOUNDED TO THE COMPLEXITY TO THE ACCOUNTS OF THE ASSESSEE. THE AO SPECIFICALLY MENTIONED T O THE ACCOUNTS OF THE ASSESSEE IN HIS ORDER DATED 22/12/2011 BEFORE REACHING TO ANY CONCLUSION, THE AO HAD PROVIDED OPPORTUNITY TO THE ASSESSEE ON 13/12/2011 AND ONLY AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CATEGORICALLY HELD THAT THE CONDUCT OF THE ASSESSEE HAD ADDED TO THE COMPLEXITY ON ACCOUNT OF NON - COOPERATION ATTITUDE OF THE ASSESSEE . THIS FACT WAS NOT DISPUTED THAT THERE ARE AS MANY AS 1133 AIR ENTRIES INVOLVED PERTAINING TO SHARE TRANSACTIONS RUNNING 66 PAGES INVOLVING 115 CRORES APPROXIMATELY AND THUS, IN THIS WAY DETERMINATION OF THE CORRECT INCOME HAD BECOME VERY DIFFICULT FOR THE AO PARTICULARLY BY NON - COOPERATIVE ATTITUDE OF TH E ASSESSEE. IN THOSE FACTS, THE AO HAD NO OTHER ALTERNATIVE BUT TO GET BOOKS OF ACCOUNTS AUDITED AND U/S.142(2A) OF THE ACT, C ONSIDERING THE NATURE OF ACCOUNTS AND THE COMPLEXITY AND IN THE INTEREST OF REVENUE. 14. I N OUR VIEW, THE AO IS INVESTIGATOR AND AS WELL AS ADJUDICATOR AND THUS , IF HE GETS GOOD AND SPECIALIZED ASSISTANCE OF SPECIAL AUDITORS IN INVESTIGATION THEN THE AO WOULD DEFINITELY BE IN A POSITION TO ADJUDICATE THE CONTROVERSY IN QUESTION IN A BETTER WAY AND WOULD EVEN OTHERWISE, ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 13 THE REPORT SU BMITTED BY THE SPECIAL AUDITOR IS IN A WAY FACILITATES THE AO TO REACH TO A LO GICAL CONCLUSION. ALTHOUGH LD D. AR RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SAHARA INDIA (FIRM) VS. CIT 300 ITR 403 BUT, THE HONBLE SUPREME COURT IN THE SAID CASE, HAD CATEGORICALLY HELD THAT THE SPECIAL AUDIT IS MORE OR LESS IN THE NATURE OF INVESTIGATION AND IN SOME CASES IT MAY EVEN TURN OUT TO BE STIGMATIC . HOWEVER, I N THE PRESENT CASE, THE ASSESSEE HAS NOT BEEN ABLE TO DEMONSTRATE AS TO IN WHAT M ANNER THE INVESTIGATION IN THE PRESENT CASE HAS TURNED OUT T O BE STIGMATIC WHEREAS THE AO HAD PROVIDE D FULL OPPORTUNITY OF HEARING TO THE ASSESSEE AND SOUGHT EXPLANATION WHICH SHOWS THAT THE AO HAD MADE HONEST ATTEMPT TO INVESTIGATE WHILE ADHERING THE PRIN CIPLE OF AUDI ALTERAM PARTEM . 15. ON THE PERUSAL OF THE SPECIAL AUDIT REPORT, WE FIND THAT THE AUDITORS HAVE GIVEN A REPORT IN FOUR PARTS; PART I: PREAMBLE PART II) AUDIT REPORT IN FORM 6B, PART III) DIRECTION GIVEN BY CIT AND PART IV) ENCLOSURES. IN PAR T - 1, THE SPECIAL AUDITOR HAS GIVEN THE QUANTIFICATION OF INCOME TO BE TAXED, CALCULATION OF DIFFERENTIAL TAX, SCOPE OF AUDIT - ETC. IN PART - 11, IT HAS GIVEN THE SPECIAL AUDIT REPORT CONTAINING DETAILED ANALYSIS OF THE TRANSACTIONS OF THE ASSESSEE , ALONG WITH AUDIT REPORT IN FORM 6B. IN PART - II I , IT HAS GIVEN ANSWERS TO SPECIFIC DIRECTIONS GIVEN BY THE CIT, AND FINALLY IN PART - IV, IT HAS ENCLOSED THE BALANCE SHEET, P&L ACCOUNT, ALL ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 14 THE ANNEXURE, COMPUTATION OF INCOME ETC. THE ASSESSEE SEEMS TO HAVE RAISED CONC ERNS OVER THE EXPRESSING OF OPINION BY SPECIAL AUDITORS IN PART - 1 & PART - II, AND ALLEGED RELIANCE BY THE AO THEREON . 16. THE SPECIAL AUDITOR HAS BROUGHT OUT ALL FACTS OF THE TRANSACTIONS OF THE ASSESSEE ON RECORD, WHICH WERE UTMOST NECESSARY FOR THE PURPO SE OF ASSESSMENT. WE ALSO FIND THAT THE SPECIAL AUDITOR HAS GIVEN POINT - WISE ANSWERS TO SPEC IFIC POINTS CONTA INED IN THE SCOPE OF WORK IN PART - I II OF ITS REPORT, MERELY BECAUSE IT ALSO EXPRESSED ITS OPINION BASED ON SPECIFIC FACTS REVEALED DURING THE SPE CI AL AUDIT, ON THIS REASON, THE SAID SPECIAL AUDIT REPORT CANNOT BE FAULTED. . IT WAS ENTIRELY FOR THE AO TO ACCEPT OR REJECT SUCH OPINION ON THE GIVEN FACTS. IN THIS CONTEXT, IT IS ALSO NOTEWORTHY THAT THE AO, AFTER REFERRING THE FINDINGS OF SPECIAL AUDIT R EPORT IN PARA 5 (PAGE NO. 3), WENT DEEP INTO THE FAC T S TO DISCUSS THE SAME AT LENGTH IN PARAS 6 TO 8 (PAGE 5 TO 17) OF THE ASSESSMENT ORDER, BEFORE REACHING AT A CONCLUSION TO TREAT THE ACTIVITY OF ASSESSEE AS 'ADVENTURE IN THE NATURE OF TRADE' . IN THESE C IRCUMSTANCES, IT CANNOT BE SAID THAT THE OPINION EXPRESSED BY SPECIAL AUDITOR IN ITS REPORT WAS THE SOLE FACTOR INFLUENCING THE JUDGMENT OF THE AO . IN OUR VIEW, THE PERUSAL OF THE S ECTION 142(2A) OF THE ACT WOULD SHOW THAT THE TWIN CONDITIONS OF NATURE AN D COMPLEXITY O F ACCOUNT AND INTEREST OF REVENUE ARE PRE - REQUISITE FOR EXERCISE OF POWER U/S.142(2A) OF THE A CT. THE OBJECT BEHIND THIS IS THAT THE ASSESSING OFFICER WHILE FRAMING THE CORRECT AND PROPER ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 15 ASSESSMENT , BASED ON THE ACCOUNTS MAINTAINED BY TH E ASSESSEE , IF FINDS THE ACCOUNTS OF THE ASSESSEE TO BE COMPLEX, THEN IN ORDER TO PROTECT THE INTEREST OF THE REVENUE, CAN HAD RECOURSE TO THE SAID PROVISION . THE WORD COMPLEXITY USED IN SECTION 142(2A)IS NOT DEFINED OR EXPLAINED IN THE ACT . AS OBSERVED I N SWADESHI COTTON MILLS CO LTD., VS CIT(1988) 171 ITR 634 (ALL) IT HAS BEEN HELD THAT COMPLEX IS A NEBULOUS WORD. ITS DICTIONARY MEANING IS THE STATE OR QUALITY OF BEING INTEGRATED OR DIFFICULT TO UNDERSTAND. HOWEVER, ALL THAT IS DIFFICULT TO UNDERSTAND S HOULD NOT BE REGARDED AS COMPLEX. WHAT IS COMPLEX IS ONE MAY BE SIMPLE TO ANOTHER. IT DEPENDS UPON ONES LEVEL OF UNDERSTANDING OR COMPREHENSION. SOMETIMES WHAT APPEARS TO BE COMPLEX ON THE FACE OF IT MAY NOT BE REALLY SO EVEN TRIES TO UNDERSTAND IT CAREFU LLY. 17. IN THE PRESENT CASE , ALL HONEST EFFORTS WERE MADE BY THE AO TO SEEK EXPLANATION FROM THE ASSESSEE , BUT THE ASSESSEE FAILED TO EXPLAIN AS 1133 ENTRIES OF SHARE TRANSACTIONS WITH DOCUMENTARY EVIDENCES AND ALSO FAILED TO EXPLAIN THE TRANSACTION, INC OME ASSESSED ON IT AND ALSO SOURCE OF THE SAID SHARES. THEREFORE, IN VIEW OF NATURE / VOLUME AND THE COMPLEXITY OF TRANSACTIONS INVOLVED IN MULTIPLE ACCOUNTS, CONTRA ENTRIES, INTER ACCOUNT SETTLEMENT AND TRANSFER OF FUNDS, INVESTMENTS AND BANK ACCOUNTS ETC ., THE AO REFERRED THE CASE OF THE ASSESSEE TO SPECIAL AUDIT U/S.142(2A) OF THE ACT. IT IS IMPORTANT TO MENTION HERE THAT THE AO HAD GIVEN A SPECIFIC DIRECTION TO THE SPECIAL AUDITORS TO FURNISH REPORT IN 120 DAYS AND ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 16 EXPENSES OF, AND INCIDENTAL TO THE AUD IT WERE PAID TO THE SAID SPECIAL AUDITORS BY THE DEPARTMENT (REVENUE) AS PER RULE 14(B) OF THE INCOME TAX RULES, 1962. THUS, IN THIS WAY ALSO , THERE IS NO MONETARY LOSS TO THE ASSESSEE ON ACCOUNT OF REFERENCE OF MATTER TO THE SPECIAL AUDITOR. THUS, THE JUD GMENTS RELIED UPON BY THE LD. AR IN THE CASE OF SAHARA INDIA(FIRM) VS. CIT (2008 - TIOL - 73 - SC - IT - LB) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. EVEN OTHERWISE, THE ORDER OF THE SPECIAL AUDITOR IS ONLY A STEP TOWARDS ASSESSMENT AND BEING IN THE NATUR E OF AN ENQUIRY BEFORE THE ASSESSMENT AND IS AL SO PURELY AN ADMINISTRATIVE ACT. IN THE PRESENT CASE, BEFORE PASSING THE ORDER U/S.142(2A), ADEQUATE OPPORTUNITY WAS GIVEN TO THE ASSESSEE AND AO HAD PARTICIPATED IN THE PROCEEDINGS BY SEEKING EXPLANATIONS AND REPLIES WITH REGARD TO THE TRANSACTIONS INVOLVED IN MULTIPLE ACCOUNTS, CONTRA ENTRIES, INTER ACCOUNT SETTLEMENT AND TRANSFER OF FUNDS, INVESTMENTS AND BANK ACCOUNTS ETC., THEREAFTER, NECESSARY ORDERS PASSED. THUS, THE JUDGMENTS CITED BY THE LD. AR IN THE CASE OF WEST BENGAL STATE CO - OPERATIVE BANK LTD., VS. JCIT (267 ITR 345) AND DELHI DEVELOPMENT AUTHORITY AND ANOTHER VS. UNION OF INDIA AND ANOTHER (350 ITR 432) AND RPS ASSOCIATES VS. DIT (IT) (280 CTR 582) ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. WHEREAS THE HONBLE DELHI HIGH COURT IN THE CASE OF DLF LTD. AND ANOTHER VRS. ADDITIONAL COMMISSIONER OF INCOME TAX AND ANOTHER' - 2014 (4) TMI 78 HAD HELD THAT THE POWERS UNDER SECTION 142(2A) HAVE TO BE ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 17 EXERCISED IN TERMS OF THE LEGISLATIVE PROVIS IONS. THE OBJECT AND PURPOSE BEHIND THE LEGISLATION IS TO FACILITATE INVESTIGATION AND PROPER DETERMINATION OF THE TAX LIABILITY. THE IMPORTANCE AND RELEVANCY OF THE LEGISLATION CANNOT BE UNDERESTIMATED AND IT IS A POWER AVAILABLE WITH THE ASSESSING OFFICE R TO AID AND ASSIST HIM. ACCOUNTS SHOULD BE ACCURATE AND PROVIDE REAL TIME RECORD OF THE FINANCIAL TRANSACTIONS OF THE ASSESSEE. IT IS ALSO A FACT THAT THE BUSINESS TRANSACTIONS HAVE BECOME MORE COMPLICATED AND ACCOUNTING ENTRIES MORE COMPLEX THAN EVER BEF ORE. THIS MAY BE ONE OF THE CAUSE WHY POSSIBLY FRAUDS COULD NOT BE DETECTED IN SOME CASES. INDEED SUCH CASES HAVE MADE THE AUDIT WORK MORE COMPREHENSIVE, INTRUSIVE AND INVESTIGATIVE. ETHICAL MANAGEMENTS MAY AT TIMES REGARD SUCH ENQUIRIES AS AN UNWARRANTED INTRUSION OR A HOUNDING APPROACH. SECTION 142() DOES NOT PERMIT FISHING OR ROVING INQUIRY APPROACH OR A WITCH HUNT BUT IS REGULATED PROVISION WHICH ACCEPTS THE NEED AND NECESSITY OF THE ASSESSING OFFICER TO TAKE HELP OF AN EXPERT ACCOUNTANT, I.E., A CHARTE RED ACCOUNTANT, A PERSON WHO IS ACADEMICALLY QUALIFIED AND HAS PRACTICAL EXPERIENCE TO UNDERSTAND ACCOUNTS AND UNEARTH TAX EVASION OR FURNISHING OF INACCURATE PARTICULARS ETC., THE PROVISION BALANCES THE RIGHT OF THE REVENUE WITH THE INCONVENIENCE WHICH TH E ASSESSEE MAY FACE. ASSESSING OFFICERS ARE NOT CHARTERED ACCOUNTANTANS AND WHEN REQUIRED AND PERMISSIBLE, THEY CAN TAKE HELP AND ASSISTANCE FROM THE QUALIFIED ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 18 SPECIALISTS TO COMPLED THE ASSESSMENT AND DETERMINE THE TAXABLE INCOME OF THE ASSESSEE. THE PU RPOSE OF INVESTIGATION BY THE AO IS SEARCH FOR TRUTH AND UNEARTH TAX EVASION. 18. THUS, WE FIND THAT CIT(A) HAS RIGHTLY DISMISSED THIS GROUND BY CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE. THUS, IN OUR VIEW, NO INTERFERENCE IS REQUIRE D IN THE ORDER PASSED BY THE LD. CIT(A). THEREFORE, TAKING INTO ACCOUNT THE ABOVE JUDICIAL PRECEDENTS, WE DISMISS THE GROUNDS RAISED BY THE ASSESSEE. 19 . GROUND NO.1(A) : - THIS GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF CIT(A) I N TRE ATING THE SALE OF SHARES AS BUSINESS INCOME AS AGAINST STCG WAS DECLARED BY THE ASSESSEE. 20 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD, ORDERS PASSED BY THE LOWER AUTHORIES AND THE JUDGMENTS CITED BY THE PARTY. WE FIND TH AT THE LD. CIT(A) HAS DEALT IN PARA 5 OF ITS ORDER, THE OPERATIVE PORTION IS CONTAINED IN 5.1 TO 5.4, WHICH ARE REPRODUCED HEREINBELOW: - 5.1. THE AO HAS COVERED THE ISSUE IN PARA 3 TO 8 OF THE ASSESSMENT ORDER. THE AO HAS DISCUSSED VARIOUS FACTS BROUGHT O UT BY THE SPECIAL AUDITOR, AND ALSO RELIED UPON CERTAIN JUDICIAL PRONOUNCEMENTS. THE AO REACHED AT A CONCLUSION THAT THE ASSESSOR'S DEALING IN S HARES THOU GH HIS PMS AGENCIES IS ADVENTURE IN THE NATURE OF TRADE AND THEREFORE, ALL THE ACCRUALS FROM THE PMS A CCOUNTS AMOUNTING TO RS. 1,39,91,448 / - ARE BROUGHT TO TAX UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS OR PROFESSION' AND TAXED ACCORDINGLY. ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 19 5.2. THE APPELLANT FURTHER SUBMITTED DURING APPELLATE PROCEEDINGS THAT THE EXPRESS PROVISIONS U/S 111 A SAYS THAT IF TRANSACTIONS OF SALE OF EQUITY OR UNITS ARE CHARGEABLE TO SIT AND DONE THROUGH STOCK EXCHANGE, THEN INCOME SHALL BE CHARGEABLE TO STCG, LIABLE TO 15% TAX. IT SEEMS THAT THERE WAS AN INTENTION OF THE PARLIAMENT TO COLLECT HUGE TAX BY WAY OF S'LT AND THER EBY TO REDUCE THE LITIGATION ON ACCOUNT OF SUCH TRANSACTIONS; HENCE THE INCOME FROM SHARES SHOULD BE TREATED AS STCG. 5.3. I HAVE PERUSED THE ASSESSMENT ORDER, SPECIAL AUDIT REPORT, DETAILED GROUNDS OF APPEAL, WRITTEN SUBMISSIONS OF THE APPELLANT, FACTS A ND CIRCUMSTANCES OF THE CASE. I FIND THAT THE APPELLANT HAS TRANSACTED IN SHARES OF ONLY ONE COMPANY I.E. M/S AKRUTI CITY LTD. WITH THREE SHARE BROKERS VIZ. M/S ASHIKA STOCK BROKING LTD. (MUMBAI), M/S SHRIRAM INSIGHT SHAREBROKER LTD. (KOLKATA) AND M/S CENT RUM BROKING PVT. LTD, (MUMBAI). WHILE THE AO HAS TREATED THE TRANSACTIONS 'UNDER PMS' WITH THE BROKERS, THE APPELLANT HAS DENIED THE SAID FACT IN GROUNDS OF APPEAL STATING THAT THESE WERE TRANSACTIONS WITH REGISTERED BROKERS AND NOT IN THE NATURE OF' PMS T RANSACTIONS. IN MY OPINION, THE SAID FACT BROUGHT OUT BY APPELLANT DOES NOT IN ANY WAY MAKE HIS CASE STRONGER, IF NOT WORSE, RATHER, IN A RECENT JUDGMENT IN CASE THE OF SALIL SHAH FAMILY PVT. TRUST VS. ACTT (VFA NO, 2445/MUM/2012), IT WAS HELD BY HON'BLE M UMBAI TRIBUNAL 'E' BENCH THAT 'CONSIDERING THE NATURE OF TRANSACTION THROUGH PORTFOLIO MANAGEMENT SERVICES PROVIDERS, THE TRANSACTIONS HAVE RESULTED INTO CAPITAL GAIN OF ASSESSEE '. THOUGH THE SA ID JUDGMENT WAS DISTINGUISHABLE ON FACTS AS IN THAT CASE, THE RE WERE NO BORROWED FUNDS. IN THE PRESENT CASE OF THE APPELLANT, IN VIEW OF THE EXPLANATION SUBMITTED BY HIM THAT HIS TRANSACTIONS WERE NOT COVERED UNDER PMS SCHEME WITH SAID THE THREE BROKERS, THE OTHER FACTS OF CASE NEED TO BE ANALYZED. 5.4 IT IS AN UND ISPUTED FACT THAT THE APPELLANT HAS DEALT WITH THESE THREE BROKERS ONLY IN ONE S CRIP I.E. M/S AKRUTI CITY LTD. AS MENTIONED IN THE SPECIAL AUDIT REPORT, THERE WERE 41 AIR 'ENTRIES AMOUNTING TO RS. 5.76 CRORES, 914 AIR ENTR IES AMOUNTING TO RS. 47.50 CRORE S AND 1 78 AIR ENTRIES AMOUNTING TO RS. 50.90 CRORES WITH THE THREE BROKERS RESPECTIVELY. IN TOTAL THERE WERE AS MANY AS 1133 RECONCILED T RANSACTIONS AGGREGATING TO A HUG E AMOUNT RS. 104.16 CRORES, AND GENERATING PROFIT OF RS. 1,39.91, 448/ - TO THE APPELLANT. THE APPELLANT MADE BO RROWINGS OF MORE THAN RS. 8.10 C ROR E ? DURING THE YEAR, INCLUDING RS. 4.60 CRORES FROM TOP OFFICIALS AND GROUP CONCERN OF M/S AK RUTI I CITY LTD. AND HENCE THE FUNDS INVESTED WERE NOT APPELLANT'S OWN FUNDS. NO DIVIDEND INCOME WAS RECEIVED ON THE SAID SHARES OF M/S AKRUTI CITY LTD. THE PERIOD HOLDING WAS MOSTLY WITHIN A WEEK, WHICH, DOES NOT POINT TO INVESTMENT OBJECTIVE. BESIDES, THE ASSESSE E HAD DONE BUSINESS IN FUTURES & OPTIONS AND EARNED PROFIT OF RS. 1.07 CRORES (SHOWN AS BUSINESS INC OME), AND SPECULATION LOSS IN SHARES OF RS. ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 20 37.43 CRORES (WRONGLY CLAIMED AS SET - OFF AGAINST I & O INCOME DISALLOWED IN ASSESSMENT ORDER), WHICH SHOWS THAT THE APPELLANT WAS A HABITUAL TRADER/SPECULATOR IN SHARES. LOOKING AT THE AFORESAID FACTS OF THE PR ESENT CASE, I HAVE NO HESITATION IN HOLDING THAT THE INTENTION OF THE APPELLANT AT THE TIME OF EFFECTING THE SAID TRANSACTIONS WAS NOT TO EARN DIVIDEND INCOME OR CAPITAL APPRECIATION, BUT TO INDULGE IN ADVENTURE IN THE NATURE OF TRADE. HENCE, I UPHOLD THE ACTION OF THE AO IN TREATING THE STCG OF RS. 1,39,91,448 / - AS BUSINESS INCOME. THEREFORE, GROUND NOS. 3 & 4 ARE DISMISSED. 21 . AFTER CAREFULLY GONE THROUGH THE ORDERS PASSED IN THE PRESENT CASE AND CONSIDERING THE JUDGMENTS CITED BY BOTH THE PARTIES, WE FIND THAT AS PER THE FACTS OF THE CASE, THE ASSESSEE WAS DEALING IN SHARES ONLY WITH ONE COMPANY IE., AKRUTI CITY LTD., WITH THREE SHARE BROKERS I.E., ASHIKA STOCK BROKING LTD., SHRIRAM INSIGHT SHAREBROKER LTD., AND CENTRUM BROKING PVT. LTD., ALTHOUGH THE AO HAD TREATED THE TRANSACTIONS UNDER PMS WITH THE BROKERS. HOWEVER, AS PER THE FACTS, THE ASSESSEE HAS DEALT WITH THESE THREE BROKERS ONLY IN ONE SCRIP. AS MENTIONED IN THE SPECIAL AUDIT REPORT, THERE WERE 41 AIR ENTRIES AMOUNTING TO RS.5.76 CRORES, 914 A IR ENTRIES AMOUNTING TO RS.47.50 CRORES AND 178 AIR ENTRIES AMOUNTING TO RS.50.90 CRORES WITH THE THREE BROKERS RESPECTIVELY. IN TOTAL AS MENTIONED THERE WERE 1133 RECONCILED TRANSACTIONS AGGREGATING TO A HUGE AMOUNT OF RS.104.46 CRORES AND GENERATING PROF IT OF RS.1,39,91,448/ - TO THE ASSESSEE. THE ASSESSEE MADE BORROWINGS OF MORE THAN RS.8.10 CRORES DURING THE YEAR UNDER CONSIDERATION INCLUDING RS.4.60 CRORES FROM TOP OFFICIALS AND GROUP CONCERN OF M/S. AKRUTI CITY LTD., HENCE THE FUNDS ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 21 INVESTED WERE NOT A SSESSEES OWN FUNDS. NO DIVIDEND INCOME WAS RECEIVED ON THE SAID SHARES OF M/S. AKRUTI CITY LTD., THE PERIOD HOLDING WAS MOSTLY WITHIN A WEEK, WHICH DOES NOT POINT TO INVESTMENT OBJECTIVE. THUS, CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE C ASE, THE ASSESSEE HAD NOT DONE BUSINESS IN FUTURES AND OPTIONS AND EARNED PROFIT OF RS.1.07 CRORES (SHOWN AS BUSINESS INCOME) AND SPECULATION LOSS IN SHARES OF RS.37.43 CRORES (WRONGLY CLAIMED AS SET - OFF AGAINST F & O). THUS, CONSIDERING THE ENTIRE FACTS, THE LD. CIT(A) HAD RIGHTLY CONCLUDED THAT THE INTENTION OF THE ASSESSEE AT THE TIME OF TRANSACTION WAS NOT TO EARN DIVIDEND INCOME OF CAPITAL APPRECIATION, BUT TO INDULGE IN ADVENTURE IN THE NATURE OF TRADE. THUS, HE HAS RIGHTLY UPHELD THE ACTION OF THE AO IN TREATING THE SHORT TERM CAPITAL GAIN AS BUSINESS INCOME. AS N O NEW FACTS HAVE BEEN BROUGHT ON RECORD, THEREFORE, IN OUR VIEW, NO INTERFERENCE IS REQUIRED IN THE ORDER PASSED BY THE LD. CIT(A). THUS, WE DISMISS THIS GROUND RAISED BY THE ASSESSEE. 22 . G ROUND NO.1(B): - THIS GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF CIT(A) IN CONFIRMING THE INTEREST INCOME AS INCOME FROM OTHER SOURCES AND DISALLOWING VARIOUS EXPENSES AS CLAIMED BY THE ASSESSEE. 23 . WE HAVE HEARD BOTH THE COUNSELS A T LENGTH AND PERUSED THE MATERIALS PLACED ON RECORD. SINCE, WE HAVE UPHELD THE FINDING OF CIT(A) ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 22 BY HOLDING THAT ASSESSEE IS NOT IN THE BUSINESS OF MONEY LENDING SO AS TO PERSUADE THE INTEREST INCOME, THEREFORE, THE INTEREST INCOME WAS RIGHTLY TAXED IN THE HANDS OF THE ASSESSEE U/S.56 OF THE INCOME TAX ACT. THUS, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) WHILE DECIDING THIS GROUND. AS N O NEW FACTS ARE REQUIRED TO BE BROUGHT ON RECORD, THEREFORE, IN OUR VIEW, NO INTERFERENCE IS REQUIRED IN T HE ORDER PASSED BY THE LD. CIT(A). THUS, WE DISMISS THIS GROUND RAISED BY THE ASSESSEE. 24 . GROUND NO.1(C): - THIS GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF CIT(A) IN CONFIRMING THE ADDITIONS ON ACCOUNT OF ALLEGED LOW WITHDRAWALS. T HIS GROUND HAS BEEN DISMISSED BY THE LD. CIT(A) IN PARA 10 OF HIS ORDER. THE OPERATIVE PORTION IS CONTAINED IN PARA 10.1 TO 10.3, THE SAME ARE REPRODUCED BELOW: - 10.1. THE AO HAS COVERED THE ISSUE IN PARA 14 OF THE ASSESSMENT ORDER. THE AO STATED THAT THE ASSESSEE STAYED IN POSH LOCALITY AT MALABAR HILL WITH FOUR FAMILY MEMBERS. THE SAID WITHDRAWA L OF THE FAMILY IS RS. 4,12,444/ - WHICH IS APPROXIMATELY RS. 35.000. - PER MONTH. THIS WITHDRAWAL IS TOO LOW FOR A FAMILY OF FOUR, INCLUDING SCHOOL/ COLLEGE GOING CHILDREN AND STAYING IN A POSH LOCALITY OF MALABAR HILL. SCHOOL/ COLLEGE FEES OF TWO CHILDREN ITSELF WOULD BE RS. 10,000 / - PER MONTH. ON BEING ASKED ABOUT THE LOW WITHDRAWALS, THE ASSESSEE DID NOT GIVE ANY EXPLANATION AND MERELY GAVE THE DETAILS OF WITHDRA WALS MADE BY THE FAMILY MEMBERS AGGREGATING TO RS. 4 , 12 , 444 / - . BEING NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE, THE AO ESTIMATED THE WITHDRAWAL FOR HOUSE HOLD EXPENSES AT RS. 60,000 / - PER MONTH, I.E. RS. 7,20,000/ - FOR THE YEAR. ACCORDINGLY, THE AO MADE ADDITION OF DI FFERENCE AMOUNT OF RS. 3,07,556/ - 10.2 DURING APPELLATE PROCEEDINGS, THE APPELLANT STATED THAT THE ADDITION ON ACCOUNT OF ALLEGED LOW WITHDRAWALS IS BASED ONLY ON SUSPICION, ASSUMPTION AND SURMISES AND WITHOUT ANY EVIDENCES. HE STATED THAT THE TOTAL WITHDRAWALS ARE RS. 4,12,4447 - DURING FY 2007 - 08 ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 23 I.E. 6 YEARS, AND THE WITHDRAWALS WERE SUFFICIENT TO SATISFY HIS FAMILY OF 4 MEMBERS. HE ALSO STATED THAT HE IS OF A JAIN FAMILY, AND ALL THE HOUSEHOLD WITHDRAWALS ARE MADE BY CHEQU ES AND THERE IS NO REASON TO INCREASE THE WITHDRAWALS ON ACCOUNT OF LOW WITHDRAWALS. 10.3. O N PERUSAL OF FACTS AND CIRCUMSTANCES OF THE CASE, I DO NOT FIND ANY INFIRMITY IN THE ACTION OF AO IN ESTIMATING THE MONTHLY WITHDRAWAL OF APPELLANT AT RS. 60,000 / - PER MONTH. THE BALANCE SHEET OF THE APPELLANT REVEALS THAT HIS CAPITAL HAS INCREASED SUBSTANTIALLY FROM RS. 1.45 CRORES TO RS. 3.71 CRORES DURING THE YEAR, I.E. NET INCREASE OF RS. 2 . 26 CRORES IN THE YEAR. THE FACT THAT THE APPELLANT LIVED WI TH HIS FAMILY IN A POSH LOCALITY IN MUMBAI, AND THAT HE HAD GOOD FINANCIAL RESOURCES AND PROFITABILITY DURING THE YEAR, DO NOT JUSTIFY THE FAMILY WITHDRAWAL AT JUST RS. 35,000 / - PER MONTH. I FIND THE ESTIMATE MADE BY AO AT RS. 60,000/ - PER MONTH TO BE JUST AND REASONABLE IN THE PRESENT CASE, AND THEREFORE, THE ADDITION OF RS.3,07,556/ - IS CONFIRMED. THEREFORE, GROUND NO.9 IS DISMISSED. 25 . AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AND HEARING BOTH THE COUNSELS AT LENGTH, WE FIND THAT ACCORDIN G TO THE ASSESSEE THE TOTAL WITHDRAWALS OF RS.4,12,444/ - DURING THE FY 2007 - 08 I.E., BEFORE SIX YEARS AND THE WITHDRAWALS WERE SUFFICIENT TO SATISFY HIS FAMILY OF FOUR MEMBERS. HOWEVER, ON PERUSAL OF THE FACTS OF THE CASE, IT WAS NOTICED THAT THE BALANCE S HEET OF THE ASSESSEE REVEALS THAT HIS CAPITAL HAS INCREASED SUBSTANTIALLY FROM RS.1.45 CRORES TO 3.71 CRORES DURING THE YEAR I.E., NET INCREASE OF 2.26 CRORES IN THE YEAR . THE TOTAL WITHDRAWAL OF ASSESSEE IS RS.4,12,444/ - WHICH IS APPROXIMATELY RS.35,000/ - PER MONTH AND ASSESSEE WAS LIVING IN A POSH LOCALITY AT MALABAR HILL AT MUMBAI AND THAT HE HAS GOOD FINANCIAL RESOURCES AND PROFITABILITY DURING THE YEAR HAD BEEN JUSTIFIED AND THEREFORE, IN THESE CIRCUMSTANCES, THE ESTIMATION OF EXPENSES MADE BY THE AO O F RS.60,000/ - PER MONTH WERE REASONABLE IN ITA NO. 6208/MUM/2013 SHRI NARESH JAYANTILAL SHAH 24 THE PRESENT CASE. THEREFORE, WE FIND NO REASON TO INTERFERE IN THE ORDER PASSED BY THE CIT(A). THUS, WE DISMISS THE GROUNDS RAISED BY THE ASSESSEE. 26 . ALL OTHER GROUNDS RAISED BY ASSESSEE ARE GENERAL IN NATURE AN D DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. 27 . IN THE RESULT, THE APPEAL FILED BY ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH JUNE 201 9 SD/ - ( RAJESH KUMAR ) SD/ - ( SANDEEP GOSAIN ) ACC OUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 24 /06 /201 9 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR ) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//