NEMISH M.SHAH, MUMBAI V. ITO 20(2)(3), MUMBAI

ITA 6583/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3020 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 08-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR SONI
• Assessee Lawyers: R N VASANI
• Keywords: Business income; Rule of consistency

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6583/MUM/2013 ASSESSMENT YEAR 2010-11 MR. NEMISH M. SHAH, 3-A, SHIVKRUPA, OLD NAGARDAS ROAD, ANDHERI (EAST), MUMBAI-400069 / VS. ITO-20(2)(3), PIRAMAL CHAMBERS, 4 TH FLOOR, LALBAUG, MUMBAI-400012 ( !' # /ASSESSEE) ( $ / REVENUE) PAN. NO. ABAPS2178J !' # / ASSESSEE BY SHRI SUBHASH S SHETTY & SHRI R. N. VASANI, $ / REVENUE BY SHRI VIJAY KUMAR SONI $% & # ' / DATE OF HEARING : 26/10/2015 & # ' / DATE OF ORDER: 26/10/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 19/09/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED IN THIS APPEAL, PERTAINS TO TREATING THE GAINS FROM DELIVERY BASED SHARES AS SHORT TERM CAPI TAL GAINS, EARNED BY THE ASSESSEE, FROM INVESTMENT IN SHARES A S MR. NEMISH M. SHAH ITA NO.6583/MUM/2013 2 BUSINESS INCOME, WHERE THE PERIOD OF HOLDING IS LES S THAN 30 DAYS. 2. THE CRUX OF ARGUMENT ADVANCED BY SHRI SUBHASH S . SHETTY, ALONG WITH SHRI R. N. VASANI, ARE THAT THE ASSESSEE NEVER MADE INVESTMENT IN SHARES AS STOCK IN TRADE A ND THE ASSESSING OFFICER, IDENTICALLY, ACCEPTED THE TRANSA CTION AS SHORT TERM CAPITAL GAINS, THUS, THERE IS VIOLATION OF THE PRINCIPLE OF CONSISTENCY, IGNORING JUDICIAL PRONOUN CEMENTS. 2.1. ON THE OTHER HAND, SHRI VIJAY KUMAR SONI, LD. DR, STRONGLY DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER BY CONTENDING THAT FIRSTLY, EACH YEAR IS INDE PENDENT AND SECONDLY, THE ASSESSEE IS DOING REGULAR AND SYS TEMATIC BUSINESS IN SHARE TRADING, THEREFORE, THERE IS NO I NFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INC OME TAX (APPEALS). 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DERIVATIVES AND SPECULATION IN SHARES/SECURITIES. THE STAND OF THE ASSESSEE IS THAT THE APPELLANT CONSISTENTLY SHOWING SHARES AND SECURITIES AS INVESTMENT AND NOT STOCK I N TRADE IN THE BALANCE SHEET. DURING THE YEAR UNDER CONSIDERAT ION, THE ASSESSEE CLAIMED SHORT TERM CAPITAL GAIN AMOUNTING TO RS.46,89,274/- FROM SALE OF SHARES AND INCOME FROM BUSINESS IN DERIVATIVES WAS CLAIMED TO THE TUNE OF RS.9,88,988/-. DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE MR. NEMISH M. SHAH ITA NO.6583/MUM/2013 3 WAS ASKED TO FURNISH THE DETAILS AND FURTHER AS TO WHY THE SHORT TERM CAPITAL GAIN SHOULD NOT BE CONSIDERED AS BUSINESS INCOME. HOWEVER, THE LD. ASSESSING OFFICER TREATED THE INCOME OF CLAIMED SHORT TERM CAPITAL GAIN AS BUSINESS INCO ME AND FOUND THAT THERE WERE NUMEROUS TRANSACTIONS CARRIED OUT BY THE ASSESSEE. ON APPEAL, BEFORE THE LD. COMMISSIONE R OF INCOME TAX (APPEALS), THE STAND OF THE ASSESSING OF FICER WAS AFFIRMED, AGAINST WHICH THE ASSESSEE IS IN APPEAL B EFORE THIS TRIBUNAL. 2.3. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, WE HAVE PERUSED FROM TH E PAPER BOOK THAT THE ASSESSEE IS REGULARLY DEALING IN SHAR ES. THE DETAILS OF SHORT TERM CAPITAL GAINS FOR THE YEAR EN DING 31/03/2010 ARE AVAILABLE AS ANNEXURE-A TO THE ASSES SMENT ORDER, BEING A MATTER OF RECORD, NOT REPRODUCED IN THE ORDER. HOWEVER, IF THE DETAILS ARE ANALYZED, WE NOTE THAT IN THE CASE OF 31 INFOTECH, THE DATE OF PURCHASE IS 22/12/2009 AND THE SALE WAS MADE EITHER ON THE NEXT DAY OR WITHIN A VE RY SHORT SPAN OF TIME. IDENTICAL IS THE SITUATION FOR OTHER SHARES OF DIFFERENT COMPANIES. EVEN, THE SHARES OF ABB ARE CO NCERNED, THE DATE OF PURCHASE IS 11/11/2008, 17/11/2008, 18/11/2008, 20/11/2008, 15/12/2008, 19/01/2009, 27/01/2009, 05/02/2009 AND 10/02/2009. THE DATE OF SALE IS ALSO WITHIN A SHORT SPAN OF TIME. IDENTICAL IS T HE SITUATION MR. NEMISH M. SHAH ITA NO.6583/MUM/2013 4 FOR OTHER SHARES OF ALSTOM LTD., AMTEX AUTO L., APT EK, ASHAHI INDIA, ASTRA MICRO, BAG FILMS, BAJAJ AUTO, BHARTI S HIP, CORE PROJECTS, DCB, DECCAN CHR, DIS TV, ENT NET, ESCORTS LTD., ESSAR OIL LTD., EXIDE INDUS, GEODINFO SYS., GLENMAR K PHA, GODREJ INDUS, GUJ MIN DEVL. GUJARAT STATE FERT., HA NUNG, HIND OIL EXP., IDBI LTD, IFCI LTD. IID FORGINGS, IN DIA BULLS, INFINITE, IRB INFRA, JAYSHREE TEA, JINDAL COTEX LT D., KALIN RAIL N. KARUTURI.COM, MAN INFRA, MAX INDIA LTD., MAYTASINFRA, MBL INFRA, MIRC ELECTRO, MOUNT EVE MI, MSK PROJECTS, NATION PEROX, NDTV LTD, NOIDA TOL BR, NUC ELUE SOFE, NUTEK INDIA, ONMOBILE LTD, PAREKH ALUM, PIPAV AV SHIP, PROVOGUE IND, RELIANCE, RIIL, RENUKA SUGAR, R ICO AUTO IND., SSI LTD., S KUMARS NAT, SANDUR MAN, SASKEN C OMM, SATHAVAHANA, SATYAM COMP., SEJAL GLASS, SKUMARS CO, SOBHA, SPICE JET LTD, SREI INFRA, STRIDES ARCO, TAN TIACON, TATA NCD III, TEL EIGHTEEN, TELY TECHNO, UNICHEM LA B, USHER AGRO LTD., UTTAM GALVA, VARUN INDUST., WELSPUN INDI , ETC. 2.4. TOTALITY OF FACTS, CLEARLY INDICATE THAT THE ASSESSEE IS DOING SYSTEMATIC TRADING IN SHARES AND THE SALE WAS AFFECTED WITHIN A SHORT SPAN OF TIME. THEREFORE, IN OUR VIEW , THERE IS FREQUENT, PURCHASE AND SALE OF SHARES AND PRIMARILY THE MAIN SOURCE OF INCOME OF THE ASSESSEE IS INCOME FROM SAL E OF SHARES. IT IS ALSO NOTED THAT PERIOD OF HOLDING OF MAJORITY OF SHARES IS BETWEEN ONE TO SEVEN DAYS. THE NEXT MAJO R PORTION OF PURCHASE AND SALE OF SHARES IS THAT WHERE PERIOD OF HOLDING IS EIGHT TO TWENTY DAYS AND SMALL PORTION OF TOTAL TRANSACTION IS BETWEEN TWENTY ONE TO THIRTY DAYS. ALL THESE FAC TS ARE MR. NEMISH M. SHAH ITA NO.6583/MUM/2013 5 INDICATIVE THAT THE ASSESSEE IS DOING CONSTANT TRAD ING ACTIVITIES IN SHARES AS A BUSINESS. THE ANOTHER CON TENTION OF THE ASSESSEE IS THAT THE SHARES ARE DELIVERY BASED. WE FIND THAT THE ASSESSEE IS ENGAGED IN A SYSTEMATIC SHARE TRADING. IN FACT, THE MAJORITY OF THE TRANSACTIONS ARE WITHI N A PERIOD OF 30 DAYS, THEREFORE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) RIGHTLY CONCLUDED THAT IT HAS TO BE TREAT ED AS BUSINESS INCOME AND WHERE THE HOLDING PERIOD IS MOR E THAN 30 DAYS THAT IT WAS RIGHTLY TREATED AS CAPITAL GAIN . OUR VIEW IS FORTIFIED BY THE DECISION AND THE RATIO LAID DOW N BY HONBLE JURISDICTIONAL HIGH COURT IN CIT VS GOPAL PUROHIT 3 36 ITR 287 (BOM.), WHEREIN, IT WAS HELD THAT THE ASSESSEE COULD BE INVESTOR AND TRADER IN SHARES AT THE SAME TIME. 2.5. SO FAR AS, THE RELIANCE UPON THE DECISION IN DCIT VS E-CAP PARTNERS (2014) 64 SOT 192 (MUMBAI TRIB.) IS CONCERNED, IN THAT THE CASE, THE ASSESSEE MAINTAINE D TWO SEPARATE ACCOUNTS IN RESPECT OF PURCHASE OF SHARES I.E. TRADING ACCOUNT AND INVESTMENT ACCOUNT. THE FREQUE NCY AND VOLUME OF TRANSACTION CLEARLY INDICATES THAT THE AS SESSEE IS DOING A SYSTEMATIC ACTIVITY OF TRADING IN SHARES, T HUS, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN IN THE IMPUGNE D ORDER. 2.6. SO FAR AS, THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN EARLIER YEAR, IT WAS DECIDED IN FA VOUR OF THE ASSESSEE, IS CONCERNED, THERE IS UNCONOTROVERTED FI NDING IN THE IMPUGNED ORDER THAT LAST SCRUTINY ASSESSMENT WA S DONE FOR THE YEAR ENDING 31/03/2006, WHEREIN THE INCOME FROM CAPITAL GAIN WAS ONLY RS.5,10,307/- AND BUSINESS IN COME MR. NEMISH M. SHAH ITA NO.6583/MUM/2013 6 WAS RS.89,956/-, WHEREAS, THE ASSESSEE GRADUALLY IN CREASES ITS ACTIVITIES AS WELL AS QUANTUM OF TRANSACTIONS PHENOMENALLY, THE PRINCIPLE OF CONSISTENCY CANNOT B E APPLIED TO THE CHANGE IN FACTS. EVEN OTHERWISE, EACH YEAR I S INDEPENDENT AND EVEN IN A.Y. 2009-10, THE ASSESSEE EARNED SHORT TERM CAPITAL GAINS. THE STAND OF THE LD. COMM ISSIONER OF INCOME TAX (APPEALS) IS AFFIRMED. FINALLY, THE APPEAL OF THE ASSESSEE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 26/10/2015. SD/- SD/- ( RAJESH KUMAR ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER % MUMBAI; ( DATED : 26/10/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 1# ( *+ ) / THE CIT, MUMBAI. 4. 0 0 1# / CIT(A)- , MUMBAI 5. 3$4 .# , 0 *+' * 5 , % / DR, ITAT, MUMBAI 6. 6! 7% / GUARD FILE. / BY ORDER, /3+# .# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , % / ITAT, MUMBAI.