ACIT 19(2), MUMBAI V. RONNIE HOSI MEHTA, MUMBAI

ITA 640/MUM/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9418 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 16-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 01-02-2012
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Assessee Lawyers: S C TIWARI; PRIYANKA J MARU
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D , MUMBAI BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A.NO. 640/M/2012 (ASSESSMENT YEAR: 2008 - 2009 ) ACIT - 19(2), R.NO.315, 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI 400 012. VS. SHRI RONNIE HOSI MEHTA, 2 ND FLOOR, AARTI APARTMENT, VALLABHBHAI PATERI ROAD, SANTACRUZ (W), MUMBAI - 54. PAN:AAFPM9310C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AKHILENDRA YADAV, DR RESPONDENT BY : SHRI S.C. TIWARI & MS. PRIYANKA J. MARU DATE OF HEARING: 16.02.2015 DATE OF ORDER: 25 .2.2015 O R D E R PER D. KARUNAKARA RAO, AM : THIS APPEAL FILED BY THE REVENUE ON 1.2.2012 IS AGAINST THE ORDER OF THE CIT (A) - 30, MUMBAI DATED 21.11.2011 FOR THE ASSESSMENT YEAR 2008 - 2009. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO TREA T THE SHORT TERM CAPITAL GAIN DECLARED BY THE ASSESSEE AT RS. 33,17,908/ - AS SUCH AND NOT AS BUSINESS INCOME AFTER HOLDING THAT 50% OF THE TRANSACTIONS RELATE TO A PERIOD EXCEEDING MORE THAN 180 DAYS AND FREQUENTLY OF TRANSACTION IS ALSO NOT MUCH. 2. ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS FAILED TO APPRECIATE THE FACT THAT ONLY 12% OF THE SALE TRANSACTIONS RELATE TO SHARES WHERE PERIOD OF HOLDING IS MORE THAN 180 DAYS AS SHOWN IN THE TABLE OF PERIOD OF HOLDING AND T HE MAGNITUDE OF TRANSACTION IS ALSO HUGE WHICH CLEARLY ESTABLISH THAT THE MOTIVE FOR TRANSACTION WAS TO EARN PROFIT BY PURSUING AN ADVENTURE IN THE NATURE OF TRADE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) FAILED TO A PPRECIATE THE FACT THAT THE DECISION IN THE CASE OF GOPAL PUROHIT [122 TTJ (MUM) 87] HAS NOT BEEN ACCEPTED BY THE DEPARTMENT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) FAILED TO APPRECIATE THE GUIDELINES LAID DOWN IN C BDT CIRCULAR NO.4/2007 DATED 15.6.2007. 2 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF ESTATE AGENCIES AND BROKERAGE. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 36 ,85,500/ - . ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 1,55,87,790/ - . DURING THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTICED THAT THE ASSESSEE CLAIMED SHORT TERM CAPITAL GAIN OF RS. 33,17,908/ - AND T HE ASSESSEE WAS ASKED TO EXPLAIN WHY THE INCOME DERIVED FROM SHORT TERM CAPITAL GAINS SHOULD NOT BE TREATED AS INCOME FROM THE BUSINESS OF SHARE TRADING. IN RESPONSE, ASSESSEE SUBMITTED HIS EXPLANATION VIDE LETTER DATED 9.12.2010. NOT SATISFIED WITH THE SAID EXPLANATION OF THE ASSESSEE , ASSESSING OFFICER TREATED THE SAID SHORT TERM CAPITAL GAIN OF RS.33,17,908/ - AS BUSINESS INCOME AND MADE DISALLOWANCE. WHILE MAKING THE SAID DISALLOWANCE, ASSESSING OFFICER RELIED ON THE JUDGMENT OF THE APEX COURT IN THE CASE OF G. VENKATASWAMI NAIDU & CO. VS. CIT [1959] 35 ITR 594 (SC) AND ALSO THE CBDT CIRCULAR NO.4/2007, DATED 15.6.2007. AGGRIEVED WITH THE SAID DECISION OF THE ASSESSING OFFICER, ASSESSEE FILED AN APPEAL BEFORE THE CIT (A). 3. DURING THE PROCEEDINGS BEF ORE THE FIRST APPELLATE AUTHORITY, ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND RELIED ON VARIOUS DECISIONS OF THE ITAT AS WELL AS THE JUDGMENTS OF THE HIGHER JUDICIARY. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT ( A) ALLOWED THE APPEAL AND DIRECTED THE ASSESSING OFFICER TO TREAT THE SAID SUM OF RS. 33,17,908/ - AS SHORT TERM CAPITAL GAIN ONLY. PARA 3 AND ITS SUB - PARAS OF THE CIT (A)S ORDER ARE RELEVANT IN THIS REGARD. AGGRIEVED WITH THE SAID DECISION OF THE CIT (A ), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 4. DURING THE PROCEEDINGS BEFORE US, LD DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 5. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF TH E CIT (A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON PERUSAL OF THE SAID ORDER OF THE CIT (A) IN GENERAL AND PARA 3 AND ITS SUB - PARAS IN PARTICULAR, WE FIND THE 3 SAME ARE RELEVANT . CONSIDERING THE SIGNIFICANCE , THE SAID PARAS 3 TO 3.2 OF THE CIT (A)S ORDER ARE EXTRACTED AS UNDER: 3 . I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND THE SUBM ISSIONS OF THE APPELLANT . AT THE OUTSET THE LEARNED AR OF THE APPELLANT HAS SUBMITTED THAT IN THE CASE OF THE APPELLANT THERE IS NO INVOLVEMENT OF ANY BORROWED CAPITAL AND THEREFORE THE VOLUME OF TRANSACTIONS IN SHARES IS WELL WITHIN THE FINANCIAL CAPACITY OF THE APPELLANT . FURTHER, IT IS ALSO SUBMITTED THAT IN THE CASE OF THE APPELLANT THERE ARE NO REPETITIVE TRANSACTIONS. IT IS NOT THE CASE OF THE AO THAT THE APPELLANT HAS PURCHASED AND SOLD SHARES AGAIN AND AGAIN DURING THE YEAR . IT IS ALSO SUBMITTED THA T IN THE BOOKS OF ACCOUNTS OF THE APPELLANT SHARES HAVE BEEN SHOWN AS INVESTMENT AND NOT AS STOCK IN TRADE. THE LD. AR HAS ALSO SUBMITTED THAT AS REGARDS PERIOD OF HOLDING THE AO HAS CONFINED HIMSELF TO SHORT TERM CAPITAL GAINS OF THE APPELLANT AND HE HAS NOT TAKEN THE OVERALL VIEW OF THE SHAREHOLDING OF THE APPELLANT . MOREOVER HE HAS NOT APPRECIATED THAT EVEN AMONG THE TRANSACTIONS OF SHORT - TERM CAPITAL GAINS MORE THAN 50% TRANSACTIONS RELATE TO A PERIOD EXCEEDING 180 DAYS WHICH FACT WOULD NEGATE THE ASSESSING OFFICER'S FINDINGS OF THE APPELLANT BEING A TRADER. THE LD . AR HAS RELIED UPON THE DECISION OF THE ITAT MUMBAI 'B' BENCH IN THE CASE OF NAISHADH V . VACHHARAJANI IN ITA NO . 6429/MUM/2009 . THE LD . AR HAS ALSO EMPHASIZED THAT MERE VOLUME OF TRANSACT ION TRANSACTED BY AN ASSESSEE WOULD NOT ALTER THE NATURE OF TRANSACTION. IT IS AN ESTABLISHED PRINCIPLE THAT INCOME HAS TO BE COMPUTED WITH REGARD TO THE TRANSACTION. THE TRANSACTION AS A WHOLE HAS TO BE TAKEN IN CONSIDERATION AND THE MAGNITUDE OF THE TRAN SACTION DOES NOT ALTER THE NATURE OF TRANSACTION. RELIANCE HAS BEEN PLACED IN THE CASE OF JANAK S.RANGWALA V. ACIT 11 SOT 627 . THE APPELL ANT HAS ALSO RELIED UPON THE CASE LAW OF GOPAL PUROHIT 122 TT J (MUM) 87 WHEREIN IT IS HELD THAT UNLESS THERE IS SUBSTAN TIAL CHANGE IN THE FACTS OF THE CASE THE VIEW TAKEN IN EARLIER YEAR HAS T O BE RESPECTED. THE MAIN GROUND OF THE ASSESSING OFFICER OF TREATING THE APPELLANT'S INCOME ARISING ON SALE OF SHARES AS BUSINESS INCOME IS : 1. VOLUME OF TRANSACTION IN SHARES . 2. PERIOD OF HOLDING . 3. FREQUENCY OF TRANSACTION . HOWEVER, AS NOTED IN THE PRECEDING PARAS THAT VOLUME OF TRANSACTIONS ALONE IS NOT A DETERMINING FACTOR UNLESS THE APPELLANT HAS ENGAGED HIMSELF IN REPETITIVE BUYING AND SELLING OF SHARES . AS REGARDS THE PER IOD OF HOLDING THE AR OF THE APPELLANT HAS STATED THAT EVEN IN THE TRANSACTION OF SHORT TERM CAPITAL GAINS MORE THAN 50% OF THE TRANSACTION RELATES TO A PERIOD EXCEEDING MORE THAN 180 DAYS . SIMILARLY FREQUENCY OF TRANSACTION IS ALSO NOT MUCH . FURTHER I N T HE CASE OF APP ELLANT THERE ARE NO LOANS AND MAJORITY OF THE SHARES ARE DELIVERY BASED. 3.2. IN VIEW OF THE ABOVE DISCUSSION I AM OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING THE SHORT TERM CAPITAL GAINS OF RS . 33 ,17,908/ - AS BUSINESS INCOME OF THE APPELLANT . THE AO IS DIRECTED TO TREAT THE SAME AS SHORT TERM CAPITAL GAINS ONLY AND NOT AS BUSINESS INCOME. THE GROUNDS OF APPEAL ARE ALLOWED. 7. FROM THE ABOVE ITS IS CLEAR THAT THE ASSESSEE HAS NOT USED ANY BORROWED FUNDS A ND THE TRANSACTIONS DONE BY HIM ARE WITHIN THE ASSESSEES FINANCIAL CAPACITY. THE ENTRIES IN THE BOOKS OF ACCOUNT REVEAL THAT THE SHARES ARE SHOWN AS INVESTMENTS. ASSESSING OFFICER HAS NOT BROUGHT ANY CASE OF REPETITIVE TRANSACTIONS TOO. THE DECISION O F THE ITAT IN THE CASE OF NAISHADH V . VACHHARAJANI IS RELEVANT FOR THE PROPOSITION THAT THE TRANSACTION AS A WHOLE HAS TO BE TAKEN IN CONSIDERATION AND 4 THE MAGNITUDE OF THE TRANSACTION DOES NOT ALTER THE NATURE OF TRANSACTION. CONSIDERING THE SAME, WE ARE OF THE OPINION THAT THE CIT (A) HAS RIGHTLY ADJUDICATED THE ISSUE IN DIRECTING THE ASSESSING OFFICER TO TREAT THE SAID AMOUNT OF RS. 33,17,908/ - AS SHORT TERM CAPITAL GAINS ONLY AND NOT AS THE BUSINESS INCOME. THEREFORE, THE DECISION OF THE CIT (A) IS FAIR AND REASONABLE AND WE FIND NO INFIRMITY IN THE ORDER OF THE CIT (A). ACCORDINGLY, GROUND NOS.1 TO 4 RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN CO URT ON 2 5 T H FEBRUARY, 2015. S D / - S D / - (H.L. KARWA) (D. KARUNAKARA RAO) PRESIDENT ACCOUNTANT MEMBER DATE: 2 5 .2.2015 AT :MUMBAI OKK COPY TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR D, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI